DPC Holdings Ltd. Q2 FY2026 earnings call

• Overall Company Performance

  • Reported record revenue and adjusted EBITDA for Q2 2026, the first quarterly results as a publicly listed company following its IPO
  • Total revenue grew 34% year-over-year to $269 million, with ~4 percentage points of growth coming from metal cost inflation pass-through
  • Adjusted EBITDA grew 33% year-over-year to $48 million, with results ahead of internal and market expectations
  • Adjusted EBITDA margin was 17.8%, broadly in line with the prior year and up from Q1 2026; 60 basis points of dilution came from elevated hafnium cost pass-through, which has no impact on absolute EBITDA
  • Reported adjusted net income of $5.6 million, compared to a $10.8 million loss in the prior year quarter, with adjusted EPS of $0.05
  • Ended the quarter with $118 million in transaction-adjusted net cash, fueled by IPO and private placement proceeds

• End Market Growth

  • Aerospace end market revenue grew 47% year-over-year, driven by growing global passenger travel, large aircraft manufacturer backlogs, and aging global fleets driving aftermarket demand
  • Industrial Gas Turbine (IGT) end market revenue grew 42% year-over-year, reflecting growing global electricity demand and the role of gas turbines in grid reliability for renewable energy integration
  • Transportation end market revenue was flat year-over-year

• Strategic Customer Partnerships

  • Signed the fourth long-term strategic customer partnership with a large aerospace OEM in Q2 2026
  • These partnerships provide dedicated capacity for OEMs in exchange for long-term agreements, committed volumes, improved margins, and often OEM capital contributions, while giving DPC clear long-term revenue visibility
  • The four existing partnerships (2 aerospace, 2 IGT) have contract terms ranging from 5 to 15 years, are all margin accretive, and are expected to generate over $200 million in annual revenue at full ramp by 2029
  • The fourth partnership underpins construction of a new greenfield super alloy facility in Alabama, with full revenue ramp starting in 2029
  • The company maintains an active pipeline of additional potential partnerships, targeting a cadence of one new partnership per year

• Market Position and Value Creation Model

  • DPC is a specialist manufacturer of precision castings and super alloys for mission-critical aerospace engine and IGT hot zone applications, with high barriers to entry and customer switching costs
  • Long-term value creation is driven by top-line growth from strong market demand, margin expansion from operating leverage and value-based pricing, strong cash generation, and continued capacity investment complemented by bolt-on acquisitions
  • The company is vertically integrating super alloy production to reduce lead times and internalize additional margin

1. Engine Products Europe: Gross segment revenue grew 49% year-over-year, driven by strong IGT end market demand (IGT accounts for ~75% of the division's revenue). EBITDA increased 54%, with margin improving 80 basis points to 24.2%. This segment contributes approximately 45% of total company revenue.
2. Engine Products North America: Gross segment revenue grew 29% year-over-year to $97 million, with strong growth in the aerospace end market (aerospace accounts for 88% of the division's revenue). EBITDA margin grew 340 basis points to 22.6%. This segment contributes approximately 36% of total company revenue.
3. Turbo Wheels: Accounts for 19% of total company revenue and 3% of total company EBITDA. Gross segment revenue increased 2% year-over-year; excluding the Evostud business (held for sale), revenue increased 8% due to market share gains. Adjusted EBITDA fell to $2 million, almost entirely due to poor performance from Evostud. Excluding Evostud, EBITDA fell $0.6 million with an 8% EBITDA margin.

• Management is initiating full-year 2026 guidance for the first time as a public company
• Full-year 2026 revenue is guided between $1.0 billion and $1.04 billion
• Full-year 2026 adjusted EBITDA is guided between $182 million and $187 million
• Excluding the impact of year-over-year metal cost inflation pass-through, the full-year adjusted EBITDA margin is expected to be ~19%
• Management expects ongoing end market growth driven by strong long-term structural demand: 3-4% annual global air travel growth for the next 20 years, growing global electricity demand requiring gas turbine capacity for renewable integration, and strong ongoing aftermarket demand for existing installed fleets
• CapEx is expected to remain at elevated levels through the current capacity expansion phase across all divisions
• Management expects margin progression in the second half of 2026 driven by volume growth, incremental price increases from expiring long-term agreements, and operational efficiencies

• Elevated commodity price volatility, particularly for hafnium (a critical input for DPC's super alloys driven by growing demand from AI chip manufacturing and nuclear applications), has resulted in larger than expected price increases that dilute reported EBITDA margins even though absolute EBITDA is not impacted
• Hafnium is a byproduct of zirconium production, so additional refining capacity cannot be easily brought online to offset pricing pressure
• The company is in a heavy investment phase for capacity expansion, which means elevated capital expenditure and working capital requirements that suppress near-term free cash flow
• Capacity expansion projects across Europe, North America, and Mexico require multi-year ramp and qualification timelines, meaning full revenue and margin benefits from new capacity will not be realized until 2028-2029

Q: What explains the current difference in incremental margin drop-through between Engine Products Europe and North America, and what should we expect for the second half of 2026? / A: Europe is predominantly IGT-focused, while North America is predominantly aerospace-focused. Most IGT long-term agreements have already been renegotiated to current market pricing, while several aerospace agreements in Europe are still set for renegotiation over the next 18 months. There are no fundamental structural differences between the two segments, and both have equal opportunity for further margin growth through volume, pricing, and efficiency gains.

Q: What magnitude of price increases have you secured on renegotiated LTAs, and how much LTA expiration is coming over the next few years? / A: DPC has secured double-digit price increases on all recently renewed LTAs, compared to older agreements signed when the company had less pricing power. All IGT LTAs have been renewed, while the next set of expiring LTAs are large aerospace agreements up for renewal in the next 12 to 18 months, with continued constrained industry supply supporting further strong pricing outcomes. Management does not publicly quantify the total dollar volume of upcoming expirations amid active negotiations.

Q: How will you deploy the excess capital raised from the IPO above your original target? / A: The primary focus remains organic investment in capacity expansion and working capital to support existing growth plans. The second priority is small, digestible bolt-on acquisitions that fit DPC's core casting and super alloy focus, particularly acquisitions that strengthen vertical integration of the supply chain (such as adding in-house tooling manufacturing to reduce current long lead times for outsourced tooling).

Q: How is DPC de-risking its new entry into the aerospace aftermarket blades and vanes market, and what is the expected ramp timeline? / A: DPC has already developed core capability for large IGT blade manufacturing over the past several years, and is leveraging that expertise to enter aerospace airfoil production. A dedicated project management organization oversees end-to-end delivery of the new capacity, and the company has already started development work on existing equipment in Oxford. Equipment installation will be completed in 2027, with initial revenue ramping in 2027, further growth in 2028, and full production starting in 2029. There is currently a well-documented industry-wide supply shortfall for aerospace airfoils, creating significant opportunity for DPC's new capacity.