Loar Holdings Inc. Q1 FY2026 earnings call

• Dirksen mentioned Q1 2026 achieved quarterly records for sales, adjusted EBITDA, and margins, with cash conversion coverage to net income at 230%. Book-to-bill ratio >1 for 2 times. New business pipeline at record high of ~$700 million. Law has a mission to build an aerospace industrial cash compounder with a balanced portfolio. - Brett discussed the diverse portfolio covering all end markets, platforms, and customers, with proprietary products creating high barriers and attractive margins. The portfolio has over 25,000 unique part numbers and capabilities in integrated solutions. - Glenn discussed sales by end markets, financial highlights including net organic sales increase, gross profit margin impact from acquisitions, adjusted net income increase, and adjusted EBITDA growth and margin achievement.

In Q1 2026, total sales increased to $156 million, an 11% year-over-year increase. Defense sales decreased by 2%, while commercial OEM sales increased by 18% and commercial aftermarket sales increased by 11%. Adjusted EBITDA was up $20 million, achieving a record 40.5% margin. Proprietary products create high barriers to entry and attractive margins. The portfolio has over 25,000 unique part numbers, with capabilities in engineering, design, qualification, and production. Organic new business pipeline is approximately $700 million, with over half tied to commercial end market, and general aviation and defense each at roughly a quarter.

Revised 2026 outlook: increased guidance by $5 million in sales and $4 million in adjusted EBITDA. Net sales range $645 - $655 million, adjusted EBITDA $257 - $262 million with ~40% margin, GAAP net income $53 - $57 million, adjusted EPS $1.26 - $1.30 per share. Capital expenditures in line with historical rate of ~3% at ~$19 million. Assumes no additional acquisitions but expects one or two per year.

Defense sales can fluctuate unexpectedly due to customers' ordering patterns for proprietary products. Geopolitical challenges and temporary impact of higher fuel costs on airlines' capacity rationalization could potentially affect demand, though the company expects to mitigate financial impact through value drivers. M&A market requires discipline to ensure adding high-quality proprietary products meeting return thresholds.

Q: Christine LeWag asked about the $700 million revenue potential, line of sight on opportunities, and gating factors.

A: Dirksen said all $700 million has line of sight, more pull than push, with clear customer attachments, but timing can be affected by things like FAA certification.

Q: John Godden asked about portfolio mix and defense outlook.

A: Dirksen said no razor-razor blade approach, defense demand driven by geopolitical trends with varied timing.

Q: Noah Popovic asked about margins and customer feedback on geopolitics.

A: Dirksen said margins come from operating leverage, price over inflation, and productivity, with customers being rational about geopolitics.

Q: Sheila Kahayu asked about M&A pipeline and aftermarket visibility.

A: Dirksen said M&A pipeline is large and active but requires discipline, and aftermarket has half backlog and half book and ship with good visibility.

Q: Ken Hebert asked about aftermarket backlog and new business phasing.

A: Dirksen said aftermarket has half backlog, new business expected 1-3% growth with two-thirds OE providing recurring revenues.