Loar Q2 Earnings Call Highlights

Key Points

• Record quarter: Loar’s second-quarter sales rose 17% year over year to $172 million, while adjusted EBITDA margin expanded 220 basis points to a record 40.5%. Commercial OEM sales led growth, increasing 28%, supported by stronger Boeing and Airbus demand.
• Raised 2026 outlook: The company now expects $665 million-$675 million in sales, $265 million-$270 million in adjusted EBITDA and adjusted EPS of $1.32-$1.36, with no additional acquisitions assumed.
• Strong growth pipeline: Loar’s organic business pipeline reached approximately $750 million over the next five years, including $200 million of opportunities already secured through certifications, qualifications or purchase orders. Recent acquisitions Beadlight, LMB and Harper are performing ahead of expectations.

Loar NYSE: LOAR reported record second-quarter sales, adjusted EBITDA and adjusted EBITDA margin, while raising its full-year 2026 outlook as commercial aerospace demand and organic business wins supported growth.

Chief Executive Officer and Executive Co-Chairman Dirkson Charles said the quarter marked the company’s 16th consecutive quarter of sequential adjusted EBITDA growth. He attributed the results to collaboration across business units, focused resource allocation and demand across commercial OEM, commercial aftermarket and defense markets.

Second-quarter sales rose 17% year over year to $172 million on a pro forma basis that includes Beadlight, LMB Fans & Motors and Harper Engineering. Net organic sales increased 12% from the prior-year quarter, according to Treasurer and Chief Financial Officer Glenn D’Alessandro.

Commercial OEM Leads End-Market Growth

Commercial OEM sales increased 28% from the second quarter of 2025, making it the company’s fastest-growing end market for the second consecutive quarter. Charles said improved supply-chain conditions had unlocked demand for Loar’s components, with the Boeing 787, Airbus A320 family and Boeing 737 family among the platforms showing the largest sales increases.

Commercial aftermarket sales increased 12%, driven primarily by secular growth in air travel, D’Alessandro said. Charles said customers have been ordering more conservatively than earlier in the supply-chain disruption cycle, but he did not express concern about an inventory-related downturn. He said inventory levels in the supply chain had declined and that Loar expects stronger commercial aftermarket growth in 2027 than in 2026.

Defense sales increased 8% from the prior-year period. Management said the defense business remains subject to uneven government ordering patterns, particularly against a strong comparison in the prior year, but it sees no change in the underlying health of the market.

For the full year, Loar expects commercial OEM revenue to rise by a high-double-digit percentage, commercial aftermarket sales to grow by a low-double-digit percentage, and defense revenue to increase by a mid-single-digit percentage. The outlook is on a pro forma basis, assuming all business units had been owned since the start of 2025.

Margins Improve Despite Acquisition Amortization

Adjusted EBITDA increased by $20 million year over year, while adjusted EBITDA margin expanded 220 basis points to 40.5%, from 38.3% a year earlier. D’Alessandro cited operating leverage and execution of the company’s strategic initiatives, including productivity efforts, new-business wins and value-based pricing.

Gross profit margin declined 60 basis points, largely due to higher non-cash amortization associated with acquired intangible assets from LMB and Harper Engineering. Excluding that non-cash effect, gross margin would have increased 100 basis points from the prior-year quarter, D’Alessandro said.

GAAP net income was flat from the second quarter of 2025, as higher operating income was offset by increased interest expense and amortization. Adjusted net income rose $9 million, or 35%, year over year.

Charles also emphasized cash generation, saying year-to-date operating cash flow less capital expenditures was 1.9 times reported net income. He said the first-half cash-flow trend should continue in the second half, potentially improving as bonus and tax payments become less of a factor.

Organic Pipeline Reaches $750 Million

Loar said its organic business pipeline now represents about $750 million in potential revenue expected to convert over the next five years, up about $50 million from the amount discussed in May. The company said it has secured initial orders representing approximately $200 million in cumulative organic revenue over that same five-year period.

Director of Investor Relations Ian McKillop said the wins include newly certified or qualified products for OEM and aftermarket applications, such as brakes, fluid sensors, switches and seating restraints. The $200 million of opportunities have moved into Loar’s base business after certification or qualification, management said.

Charles said Loar has shifted engineering resources toward projects with clearer customer demand and a higher likelihood of profitable commercialization. The company spends approximately $30 million to $40 million annually on engineering, he said.

Management said the $200 million of identified revenue is not primarily governed by long-term agreements, but is supported by purchase orders, certifications and, in many cases, sole-source positions. Charles said the company expects new business to become a more significant long-term growth contributor than it was historically.

Guidance Raised; Acquisitions Performing Ahead of Expectations

Loar raised its 2026 guidance, now forecasting:

• Net sales of $665 million to $675 million.
• Adjusted EBITDA of $265 million to $270 million.
• Adjusted EBITDA margin of approximately 40%.
• GAAP net income of $56 million to $60 million.
• Adjusted earnings per share of $1.32 to $1.36, up from prior guidance of $1.26 to $1.30.
• Capital expenditures of about $20 million, or roughly 3% of sales.

The guidance assumes no additional acquisitions. Charles said management expects to meet or exceed its updated outlook, while noting that the company must continue investing in capacity to meet demand in areas including fans and motors, restraints and brakes.

Executive Co-Chairman Brett Milgrim said Loar continues to pursue one to two acquisitions annually, maintaining its focus on proprietary aerospace and defense businesses with high barriers to entry and balanced OEM and aftermarket exposure. Since becoming public about two years ago, Loar has announced four acquisitions and invested more than $1.1 billion in mergers and acquisitions.

Management said Beadlight, LMB and Harper are all performing ahead of expectations. Charles said LMB’s demand profile may require further investment to expand capacity beyond Europe, while Harper is benefiting from demand tied to the Boeing 787 and could reach Loar’s targeted EBITDA growth objectives faster than expected.

About Loar (NYSE:LOAR)

Loar Holdings Inc, through its subsidiaries, designs, manufactures, and markets aerospace and defense components for aircraft, and aerospace and defense systems in the United States and internationally. It offers products in various categories, which include airframe components, structural components, avionics, composites, braking system components, de-ice and ice protection, electro-mechanical, engineered materials, flight controls, fluid and motion controls, environmental, metal forming, molded components, and restraints and safety devices.

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