Loar Holdings Inc. Q4 FY2025 earnings call

• Dirksen noted that LOR was founded 14 years ago with a mission to build an aerospace industrial cash compounder. In 2025, it achieved predictable and consistent financial performance exceeding key annual goals. End markets have strong tailwinds; the commercial aftermarket has an aging fleet and reduced retirements, leading to greater demand for parts. Original equipment manufacturers have record backlogs and are increasing production. The defense market is influenced by geopolitical factors with European nations increasing military spending. LOR has a balanced portfolio (50% OE, ~50% aftermarket) and expects to continue growing sales at 10%+ organically and adjusted EBITDA at 15%+ annually. It has been growing inorganically, welcoming new companies like LMB and Harper, which add capabilities. In 2026, new product growth is expected to be a major driver of organic growth with a pipeline of over $600 million in sales over the next five years. It focuses on optimizing manufacturing, go - to - market, and data utilization, and is committed to developing talent. - Brett discussed the diverse portfolio covering all in markets, platforms, and customers, balanced across OE and aftermarket. Proprietary products are growing in aggregate. M&A has been active with 1 - 2 deals a year, and 2026 is expected to be active. New acquisitions LMB and Harper are described; LMB brings engineered cooling devices and serves the European defense market, while Harper serves the commercial market with an excellent relationship with Boeing. - Glenn discussed sales by end markets on a pro forma basis, and the financial highlights for Q4 2025 and the full year 2025, including sales growth, gross profit margin changes, net income, adjusted EBITDA, and free cash flow conversion.

In 2025, LOR achieved record sales, adjusted EBITDA, adjusted EBITDA margins, and free cash flow. Total sales reached $500 million, a 15% year - over - year increase. Q4 sales were also a record, up 17% from the prior year. Commercial aftermarket sales saw a 19% rise in 2025 compared to 2024 and 34% in Q4 2025 versus Q4 2024. Commercial OEM sales grew 11% in 2025 versus 2024 and 8% in Q4 2025 vs Q4 2024. Defense sales increased 19% in 2025 vs 2024 and 14% in Q4 2025 vs Q4 2024. For the full year 2025, sales grew 23.2% or 12.7% excluding acquisition sales. The gross profit margin for the full year was 52.7%, an increase of 330 basis points from the prior year. The adjusted EBITDA was a record $189 million in 2025, up $43 million from 2024. Adjusted EBITDA margins rose by 180 basis points. The free cash flow conversion for 2025 was 138%, and 160% when excluding a one - time $10 million tax benefit.

• LOR has an upward - revised 2026 outlook: Net sales are projected to be between $640 and $650 million. Adjusted EBITDA is expected to be between $253 and $258 million. The adjusted EBITDA margin is approximately 40%. Net income is between $59 and $63 million. Adjusted EPS is between $0.76 and $0.80 per share (reduction due to incremental non - cash depreciation, amortization, and interest from acquisitions). Capital expenditures are in line with the historical rate at $19 million. Interest expense has increased to $80 million. Acquisitions of LMB and Harper are expected to meet the investment hurdle of doubling adjusted EBITDA in 3 - 5 years and be accretive to earnings in 2027. It assumes no additional acquisitions but expects 1 - 2 M&A deals a year.

Q: John Godden of Citi inquired about the revised adjusted EPS lower and what was driving it, as well as the M&A pipeline.

A: Dirksen stated that the lower adjusted EPS was due to transaction expenses, non - cash write - ups of assets and amortization of intangibles, and additional interest. Regarding the M&A pipeline, the short answer was yes and yes, with more deal flow, active sellers, but discipline would be maintained.

Q: Christine Lewag of Morgan Stanley asked about the building blocks of organic growth, expansion of international capabilities, and defense growth.

A: Dirksen said new product introduction was a major driver of organic growth. LOR saw more opportunities to expand internationally, especially in Europe. Defense growth was lumpy but LOR was well - positioned.

Q: Sheila Kayalu of Jefferies asked about 100% proprietary products and accretion on EPS for acquisitions, and parsing commercial aftermarket growth.

A: Dirksen said 99.9% of products were proprietary. Acquisitions were expected to be accretive within a year. Commercial aftermarket growth in Q4 was due to strong demand, with no pull forward or special distribution agreements.

Q: Ken Herbert of RBC Capital Markets asked about new business being the largest contributor to commercial market growth and risk around commercial aftermarket vs OE growth.

A: Dirksen said new business was a big driver. On risk, OE build rates were discounted, and the aftermarket was expected to have double - digit growth in the long term though may be choppy quarter - to - quarter.