Summary of Loar Holdings Q2 2026 Earnings Call

1Key Financial Results and Metrics:

Sales: Achieved record sales of $172 million, a 17% increase year-over-year.

Adjusted EBITDA: Increased by $20 million to $69 million, with adjusted EBITDA margins rising to 40.5% from 38.3% in Q2 2025.

Net Income: Flat compared to Q2 2025, impacted by higher interest expenses and noncash amortization. Adjusted net income rose 35% to $35 million.

Cash Flow: Operating cash flow minus capital expenditures is 1.9x net income, with free cash flow at nearly 200% of reported net income.

Guidance Update: Adjusted EBITDA guidance for 2026 raised to $265-$270 million, with net sales guidance of $665-$675 million.

2Strategic Updates and Business Highlights:

New Business Pipeline: Converted approximately 25% of the new business pipeline into wins, with a total organic revenue potential of $750 million over the next five years.

End Market Performance:

Commercial OEM sales grew 28%, driven by demand for Boeing 787, A320, and 737 platforms.

Commercial aftermarket sales increased by 12%.

Defense sales rose 8%, but expected to remain choppy due to the nature of government ordering patterns.

M&A Activity: Continued focus on acquiring businesses with similar characteristics to existing portfolio; recent acquisitions (Beadlight, LMB, Harper Engineering) performing ahead of expectations.

3Forward Guidance and Outlook:

Growth Expectations: Anticipate high double-digit growth in commercial OEM, low double-digit in commercial aftermarket, and mid-single-digit in defense sales for 2026.

Long-term Confidence: Confidence in achieving double-digit organic growth rates driven by new business conversions and a diversified product portfolio.

4Bad News, Challenges, or Points of Concern:

Flat Net Income: Despite revenue growth, net income remained flat due to increased interest expenses and amortization costs.

Choppy Defense Market: Sales in the defense sector are expected to be inconsistent, creating uncertainty in revenue forecasting.

Supply Chain Investments: Need to invest in specific areas (Fans & Motors, Restraints, Brakes) to meet rising demand, indicating potential operational challenges.

5Notable Q&A Insights:

New Product Innovation: Management highlighted an inflection point in new product development, with a renewed focus on certification and customer engagement leading to increased wins.

Market Dynamics: Concerns about inventory destocking in the aftermarket were addressed, with management indicating that any such risks appear to be behind them.

Competitive Position: Management expressed confidence in their unique business model and proprietary products, which they believe will drive consistent long-term growth despite competitive pressures.

Acquisition Performance: Recent acquisitions are exceeding expectations, with Harper Engineering anticipated to achieve EBITDA targets faster than initially projected due to strong demand for its products. Overall, Loar Holdings reported strong financial performance in Q2 2026, with significant growth across key segments, although challenges remain in the defense market and net income performance. The company is optimistic about future growth driven by strategic initiatives and a robust pipeline of new business opportunities.