Loar Holdings Inc. (LOAR) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings report shows strong financial performance with a 15% sales increase, record EBITDA margins, and significant growth in defense sales. Despite some margin dilution and defense market volatility, the overall outlook is optimistic with strong aftermarket and new product growth. The Q&A section provided additional insights into growth drivers and production rates, further supporting a positive sentiment. However, management's lack of clarity on certain topics and conservative guidance tempers the sentiment slightly, leading to a positive rather than strong positive rating.
Key Financial Performance
Sales Sales increased to $127 million in Q3 2025, a 15% increase compared to the prior year. This was driven by strong performances in commercial aftermarket, commercial OEM, and defense.
Commercial Aftermarket Sales Increased by 19% in Q3 2025 versus Q3 2024, primarily due to continued strength in demand for commercial air travel and an aging commercial fleet.
Commercial OEM Sales Increased by 11% in Q3 2025 compared to the prior year period, driven by higher sales across a significant portion of the platforms supplied and an improving production environment for commercial OEMs.
Defense Sales Increased by 70% in Q3 2025 compared to the prior year, driven by strong demand across multiple platforms and an increase in market share due to new product launches.
Gross Profit Margin Increased by 380 basis points in Q3 2025 compared to the prior year period, primarily due to operating leverage, execution of strategic value drivers, and a favorable sales mix.
Net Income Increased by $19 million in Q3 2025, primarily due to a tax benefit from the enactment of the One Big Beautiful Bill Act, higher operating income, and lower interest.
Adjusted EBITDA Increased by $11 million in Q3 2025 compared to Q3 2024. Adjusted EBITDA margins reached a record 38.7%, driven by operating leverage, execution of strategic value drivers, and a favorable sales mix, partially offset by additional costs of being a public company.
EBITDA Margins Increased by 190 basis points year-over-year to a record 38.7% in Q3 2025, achieved through operating leverage, winning new profitable business, productivity initiatives, and value-based pricing, despite costs related to Sarbanes-Oxley compliance and margin dilution from the Beadlight acquisition.
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Operating Highlights
New Product Growth: Expected to contribute closer to 3% annual top-line growth over the next two years through qualifying new parts, selling existing products to new customers, and solving customer pain points.
Pipeline Growth: The pipeline of opportunities has grown by $100 million since the last call, now representing over $600 million in sales over the next five years.
Commercial Aftermarket Sales: Increased by 19% in Q3 2025 compared to Q3 2024, driven by strong demand for commercial air travel and an aging fleet.
Commercial OEM Sales: Increased by 11% in Q3 2025 compared to Q3 2024, supported by higher sales across platforms and an improving production environment.
Defense Sales: Increased by 70% in Q3 2025 compared to Q3 2024, driven by strong demand and new product launches.
Gross Profit Margin: Increased by 380 basis points in Q3 2025 compared to the prior year, driven by operating leverage, strategic value drivers, and favorable sales mix.
Adjusted EBITDA Margin: Achieved a record 38.7% in Q3 2025, reflecting operating leverage, productivity initiatives, and value-based pricing.
2026 Outlook: Net sales projected between $540 million to $550 million, adjusted EBITDA between $209 million and $214 million, and adjusted EBITDA margin of approximately 39%.
Acquisition Strategy: Plans to complete 1-2 acquisitions annually, with a pending acquisition of LMB Fans & Motors not yet included in the 2026 forecast.
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Risk or Challenges
Supply Chain Challenges: The company has adjusted its assumptions for monthly production rates of Boeing 737 MAX and A320 aircraft by 15%-20% below OEM projections to account for potential supply chain disruptions and destocking issues.
Public Company Costs: The company has incurred additional costs related to being a public company, including Sarbanes-Oxley compliance and organizational costs for reporting, governance, and control needs. While these costs are not expected to materially increase, they have impacted margins.
Defense Market Volatility: Growth in the defense end market is described as 'choppy,' with expectations of mid-single-digit growth in 2026 following a strong year. This volatility could impact financial predictability.
Aging Commercial Fleet: While the aging commercial fleet presents opportunities, it also poses risks related to increased maintenance demands and potential operational inefficiencies.
Acquisition-Related Margin Dilution: Recent acquisitions, such as Beadlight, have temporarily diluted margins, which could continue with future acquisitions.
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Guidance & Outlook
Organic Sales Growth: Over the long term, the company expects to increase sales organically at double-digit percentages. For the next two years, new product growth is expected to contribute closer to 3% annually to top-line growth.
Sales Pipeline: The sales pipeline has grown by $100 million since the last call and represents over $600 million in sales over the next 5 years.
Margin Improvement: The company plans to enhance data management, ERP systems, and processes to improve cash flow and productivity. Margins are expected to improve year-over-year, with temporary dilution possible due to acquisitions or public company costs.
2025 Financial Outlook: Net sales are expected to increase by $1 million, adjusted EBITDA by $1 million, net income by $5 million, diluted EPS by $0.05, and adjusted EPS by $0.10 compared to prior guidance. Commercial aftermarket growth outlook has been raised to low double digits from high single digits.
2026 Financial Outlook: Net sales are projected between $540 million to $550 million, adjusted EBITDA between $209 million and $214 million, adjusted EBITDA margin of approximately 39%, and net income between $80 million and $85 million. Adjusted EPS is expected to range from $0.98 to $1.03 per share. Capital expenditures are projected at $17 million, with operating cash flow minus capital expenditures expected to exceed 125% of net income.
Commercial OEM and Aftermarket Growth: For 2026, commercial OEM and aftermarket growth is expected to be in the low double digits, driven by strong backlogs at aircraft producers and secular growth in air travel.
Defense Market Growth: Defense end markets are expected to grow mid-single digits in 2026, with growth described as choppy over the long term.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you provide more color on the operating and integration playbook 30, 60, 90 days after a deal?
A:It varies by business. For Beadlight, the focus is on listening and observing first, then helping where needed. Beadlight has been integrated with Schroth to create customer synergies, particularly in the top-line synergies with shared customers.
Q:What are the underlying production rates for your commercial aerospace OE outlook for next year?
A:The production rates are 38 for Boeing MAX and 54 for Airbus A320 family. These numbers vary by part and are based on customer expectations and pipeline data.
Q:What about the production rates for wide-bodies?
A:The discount for wide-bodies is about 10% compared to 15%-20% for narrow-bodies. The company is being conservative in its guidance, given the early stage of forecasting for the next 13 months.
Q:Why is there a deceleration in defense growth despite superb performance this year?
A:The deceleration is due to normalization of the market. Ground vehicles were strong in 2025, but the backlog at the time of budgeting did not support continued high growth. However, recent improved bookings for ground vehicle products could change the outlook.
Q:What is driving the new product growth closer to 3% versus the historical 1%-3%?
A:Growth is driven by certification on PMA brake applications and the cockpit door barrier for Airbus narrow-body aircraft. These developments are expected to contribute significantly to growth in the coming years.
Q:What is driving the aftermarket growth this year?
A:Aftermarket growth is volume-driven, not price-driven, and is strong across all product offerings. The company sees no signs of slowing down in commercial aftermarket growth.
Q:What is the outlook for aftermarket growth in 2026?
A:The outlook remains strong with contributions from new business, volume, and price. There is no expected slowdown in volume or risk of long-term destocking. However, there is some noise from customers managing balance sheets and working capital, affecting delivery timing.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on new product growth areas beyond brakes and cockpit door barriers, citing competitive concerns. Additionally, the response to wide-body production rates lacked clarity, with vague language about discounts and conservatism in forecasting.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Act income
Avionics Beadlight
Beadlight record
Beadlight view
Beautiful Bill
Big Beautiful
Bill Act
CEO Executive
Chairman mate
Commercial OEM
DAlessandro McKillop
Difficulty autothrottle
Difficulty productivity
Difficulty tax
ERP system
Holdings Chief
IP cash
IP news
OEM defense
President CEO
Sarbanes Oxley
Technical Difficulty
cash flow
driver sale
flow addition
following
leverage value
list
partner
reduction
sale mix
set
year way
LOAR Transcript
Loar Holdings Inc. (LOAR) Q3 2025 Earnings Call Transcript
Positive11-12
The earnings report shows strong financial performance with a 15% sales increase, record EBITDA margins, and significant growth in defense sales. Despite some margin dilution and defense market volatility, the overall outlook is optimistic with strong aftermarket and new product growth. The Q&A section provided additional insights into growth drivers and production rates, further supporting a positive sentiment. However, management's lack of clarity on certain topics and conservative guidance tempers the sentiment slightly, leading to a positive rather than strong positive rating.
Loar Holdings Inc. (LOAR) Q2 2025 Earnings Conference Call Transcript
Positive8-13
The earnings call summary indicates strong financial performance, with significant sales and margin increases, and optimistic guidance. The Q&A section reinforces this positive outlook, despite some uncertainty regarding the LMB acquisition timeline and Beadlight's immediate contribution. The company's strategic acquisitions and robust cash flow conversion further support a positive sentiment. While management provided limited specific guidance, the overall tone was optimistic, and no major risks were highlighted. Given these factors, a positive stock price movement of 2% to 8% is anticipated over the next two weeks.
Loar Holdings Inc. (LOAR) Q1 2025 Earnings Call Transcript
Unknown5-13
The earnings call reveals mixed signals. Strong financial performance with increased sales and margins, alongside optimistic guidance, suggests a positive outlook. However, risks such as competitive pressures, regulatory issues, and potential acquisition challenges temper enthusiasm. The Q&A indicates strong demand and pricing power but reveals cautious guidance due to defense sales variability. The absence of a share repurchase program and management's unclear responses to procurement changes further contribute to uncertainty. Given these factors, the stock price is likely to remain stable, resulting in a neutral prediction over the next two weeks.
Loar Holdings Inc. (NYSE:LOAR) Q4 2024 Earnings Call Transcript
Positive4-2
The earnings call revealed strong financial performance with an increase in EPS, net income, sales, and gross profit margin. The company also demonstrated resilience in defense sales growth and a high free cash flow conversion rate. Despite regulatory issues and supply chain challenges, management expressed confidence in guidance and capacity investments. The Q&A section highlighted a strong aftermarket outlook and a robust M&A pipeline. However, the absence of a shareholder return plan and some regulatory risks slightly temper the overall positive sentiment.
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