Loar Holdings Inc. Q2 FY2025 earnings call

• Loar has a simple approach to creating shareholder value, believing in providing an entrepreneurial and collaborative environment for business units to generate above - market growth rates. Since inception in 2012 through 2024, sales and adjusted EBITDA have grown at CAGRs of 37% and 45% respectively. - The company has a pipeline of over $500 million of new product launches over the next 5 years, with a list of $100 million of new product launches in 2026. - Focuses on optimizing manufacturing, go - to - market, and company management to enhance productivity, with annual initiatives to improve margins and achieve more price than cost of inflation. - Committed to developing and improving employee talent. - Cash flow conversion percentage in the first 2 quarters of 2025 was 175% and 125% respectively, and year - to - date was 148%, with an expectation of being greater than 125% for 2025. - Acquisition of Beadlight, a U.K. business making lighting products for premium seat applications, with significant growth potential in the future once Loar's value drivers are applied.

In Q2 '25, Loar achieved record sales of $123 million, a 13% increase compared to the prior year. This growth was driven by strong performances in commercial aftermarket, commercial OEM, and defense. Net organic sales increased 11.3% over the prior period. Gross profit margin for Q2 '25 increased by 480 basis points. Adjusted EBITDA was up $12 million in Q2 '25 versus Q2 '24, with adjusted EBITDA margins reaching a record 38.3% in Q2 '25. Commercial aftermarket sales saw a 13% increase in Q2 '25 versus Q2 '24, commercial OEM sales increased by 14%, and defense sales were up 19% due to strong demand across multiple platforms and new product launches.

• For calendar year 2025, net sales are expected to be between $486 million to $494 million, up from $482 million to $490 million. - Adjusted EBITDA is between $184 million and $187 million, up from $182 million to $185 million, with an adjusted EBITDA margin of approximately 38%, a 170 basis point improvement over 2024. - Net income is between $65 million and $70 million, adjusted EPS between $0.83 and $0.88, up 16% from previous guidance. - CapEx of approximately $14 million, around 2% - 3% of sales. - Interest expense reduced to $26 million, effective tax rate of 25%. - Beadlight is expected to have mid - single - digit millions of sales in 2025 with slightly above breakeven EBITDA margins, and be accretive to results in 2026.

Q: Sheila Kahyaoglu asked about the guidance, contribution of the new acquisition in the $5 million range, the status of LMB still pending acquisition, and potential for future transactions.

A: Brett N. Milgrim said regarding LMB, they are still in a holding pattern with regulators, waiting for regulatory approval, with earliest hearing in September. Dirkson R. Charles talked about Beadlight being mid - single - digit million of top line sales and excited about its potential in 2026 and beyond.

Q: Kenneth George Herbert asked about the timing of new business opportunities from the pipeline and potential headwinds to aftermarket business.

A: Dirkson R. Charles said new product introduction in 2025 is closer to the lower end of the 1% - 3% guide due to delayed certifications, with greater rate in 2026 and '27. He also said the portfolio is sole source and proprietary, seeing consistent demand in commercial aftermarket with choppiness on OE side.

Q: Kristine T. Liwag asked about Beadlight's valuation, accretion in 2026, and portfolio's sole source and proprietary nature.

A: Dirkson R. Charles said 100% proprietary, Beadlight would be accretive without Loar's help, and price paid for Beadlight is seen as favorable for future, with significant accretion expected when applying Loar's value drivers.