How is the M&A pipeline looking, and is the company still tracking towards its historical pace of around 5 acquisitions per year?

The pipeline remains very active, with 4 acquisitions announced year-to-date. While the average is 5-6 per year, the actual number varies annually. The company has ample capacity for sourcing and integration, supported by the Arcline partnership. “We've announced 3 since the IPO, but remember, we did one back in January as well, Micro-Tronics, so 4 so far this year have been announced. And the pipeline remains as active as ever.”

Can you provide financials for Omnetics and MagCanica, specifically if their combined EBITDA is around $75 million, and elaborate on what made Omnetics attractive and how Arcline assisted?

Arxis does not disclose specific financials for individual acquisitions but categorizes them as small, medium, and large. Omnetics was attractive due to its proprietary technology, end-market mix alignment, and long-term design-in model. Arcline's parallel diligence and financing during the IPO process were critical for securing Omnetics, which required public equity as consideration. “Omnetics is a business I've admired for about 20 years because it fits the Arxis business model extremely well. It has proprietary technology, deep engineering capability and highly differentiated products that are designed into platforms for decades.”

Has becoming a public company increased M&A conversations or provided new opportunities?

Becoming public has not changed the pipeline size but provided a crucial currency (public equity) to acquire Omnetics, which was a requirement for the deal. The Arcline partnership was essential for managing the IPO and the Omnetics deal simultaneously. “It maybe not expanding the pipeline, but it gave us a currency that we were able to use to acquire Omnetics, which was essential.”

ARXS

Arxis (ARXS) Q2 FY26 earnings call: guidance and Q&A

Q: What are the underlying drivers of the 21% organic growth, particularly the contribution from new business wins, and why is the full-year outlook not higher given strong Q1/Q2 performance?

Organic growth is driven by mid-single-digit new business, mid-single-digit pricing, and low double-digit market growth. Full-year guidance is based on 95% secured revenue from 6,000 monthly purchase orders, providing high confidence in the current outlook. “The new business remains at mid-single digit. The price that we're gaining remains at mid-single digits. So all of the delta that you're seeing is in the base business or the market growth rate, which is now coming in at low double-digit growth rate.”

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Jul 30, 2026

Source: earnings call transcript

Executive summary

Arxis Q2 FY26 — Strong Organic Growth and Strategic Acquisitions Drive Raised Outlook

Arxis delivered an outstanding second quarter, driven by robust organic growth across all end markets and strong execution of its acquisition strategy. The company raised its full-year guidance, reflecting increased confidence from secured revenue and continued operational improvements. The unique Arcline partnership continues to enhance Arxis's capacity for strategic M&A, while its decentralized operating model fosters consistent performance and margin expansion.

Highlights

Second quarter sales increased 25% year-over-year to $501 million.
Adjusted EBITDA grew 38% year-over-year to $211 million, with margins expanding 390 basis points to 42.2%.
Organic growth reached 21% year-over-year, significantly exceeding prior guidance and driven by broad-based market strength.
Full-year guidance for sales and adjusted EBITDA was raised, with organic growth now expected at approximately 20%.
Announced three additional acquisitions (Omnetics, MagCanica, Blue Line) post-IPO, expanding technology portfolio and demonstrating repeatable acquisition strategy.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year sales	$1.96 billion to $1.98 billion high materiality	FY26	High
Full-year organic growth	approximately 20% high materiality	FY26	High
Full-year adjusted EBITDA	$790 million to $800 million high materiality	FY26	High
Full-year adjusted EBITDA margins	40.4% high materiality	FY26	High
Full-year free cash flow conversion	very much in line with our internal targets medium materiality	FY26	High
Full-year capital expenditure	roughly $60 million low materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Mechanical Components Achieved 20% organic growth over the last year with the same number of people, demonstrating strong operating leverage and effectiveness of decentralized structure. H1 FY26 Margin: 40.1%Conversion Margin: 67%	—	20%	—	42.5%
Electronic Components Grew double digits in Q2 FY26, contributing to broad-based performance.	—	double-digit	—	—
All 3 End Markets Each end market delivered strong double-digit organic growth, contributing to broad-based company performance.	—	double-digit	—	—

ARXS operating KPIs by quarter

ARXS operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Factories	72 We have 72 independent focused factories across our 46 business units. Source: earnings call transcript	<70 Remember, we run 48 individual business units across nearly 70 factories, and we have general managers that are carefully looking at their own secured revenue and their capacity needs and their CapEx needs. Source: earnings call transcript	—
Business units	46 We have 72 independent focused factories across our 46 business units. Source: earnings call transcript	48 Remember, we run 48 individual business units across nearly 70 factories, and we have general managers that are carefully looking at their own secured revenue and their capacity needs and their CapEx needs. Source: earnings call transcript	+4.3%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Secured revenue for 2026 95% Q2 FY26

Percentage of full-year revenue guidance, based on firm demand and hard backlog.

New business bookings growth in line with overall organic growth rate YTD through June

Supports new business growth target and confidence in faster-than-market growth.

Deals & partnerships

Omnetics Acquisition of a company with industry-leading miniature interconnect technology.

Expands capabilities in harsh environment electronic interconnects. Acquisition was enabled by Arxis's public equity and Arcline's support during the IPO process.

MagCanica Acquisition of a company with proprietary torque sensing technology.

Enhances position in high-precision sensing applications and creates new opportunities across aerospace and defense.

Blue Line Acquisition of a company expanding proprietary sensing technologies.

Expands offering in high reliability precision position sensing and motion control systems.

Micro-Tronics Acquisition of a company (announced in January).

One of four acquisitions announced year-to-date, contributing to Q2 sales.

Olden Steels Acquisition of a company.

Contributed 4% to Q2 FY26 sales growth alongside Micro-Tronics and MagCanica.

Capital programs

Growth Capital Expenditure underway $60 million

Period spend: FY26

Benefit:keep up with growth rate

Represents approximately 3% of revenue, allocated across 48 business units and nearly 70 factories to incrementally increase capacity.

What to watch in Q3 FY26

FY26 Organic Growth

Next quarter

Current 21% (Q2 FY26), 20% (FY26 guidance)

Target Sustained at 20% or higher

Why it matters

Organic growth significantly exceeds historical algorithm and peer performance, critical for valuation.

On revenue, we now expect a range of $1.96 billion to $1.98 billion, an increase of $100 million at the midpoint versus our prior guidance. At the midpoint, that represents 24% year-over-year growth, including approximately 20% organic growth, which is an increase of 5 percentage points compared to our prior guidance.

Find out whether ARXS delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the underlying drivers of the 21% organic growth, particularly the contribution from new business wins, and why is the full-year outlook not higher given strong Q1/Q2 performance?

Organic growth is driven by mid-single-digit new business, mid-single-digit pricing, and low double-digit market growth. Full-year guidance is based on 95% secured revenue from 6,000 monthly purchase orders, providing high confidence in the current outlook.

“The new business remains at mid-single digit. The price that we're gaining remains at mid-single digits. So all of the delta that you're seeing is in the base business or the market growth rate, which is now coming in at low double-digit growth rate.”

asked by Kristine Liwag · answered by Kevin Perhamus

2 min read 5 chapters

Detailed narrative

Business Model & Playbook

Arxis operates as an engineered components company, developing proprietary products that are deeply embedded in customer platforms for decades. This model is supported by proprietary technologies, broad diversification across end markets, and long platform life cycles, ensuring consistent performance. The 'Arxis Edge' playbook emphasizes a decentralized operating structure for quick decision-making, a systematic new business engine for identifying opportunities, and a repeatable acquisition engine.

Acquisition Strategy & Arcline Partnership

The company has executed over 35 acquisitions in the past six years, with four announced year-to-date in 2026 (Micro-Tronics, Omnetics, MagCanica, Blue Line). The Arcline partnership is crucial, expanding Arxis's capacity to identify, diligence, and finance acquisitions while Arxis's internal teams focus on integration and value creation.

This partnership was particularly instrumental in the Omnetics acquisition, which required public equity as consideration, a capability enabled by Arxis's recent IPO.

Financial Strength & Capital Structure

Arxis significantly strengthened its balance sheet post-IPO. In April, $946 million of Term Loan B was repaid using IPO proceeds, reducing annual interest expense by over $70 million. An additional 25 basis point repricing in June further cut annual cash interest by $5 million.

As of June 30, net leverage was below 2x, and the company maintained $1.1 billion in available liquidity, positioning it well for continued disciplined acquisition strategy.

Organic Growth Drivers

The 21% organic growth in Q2 FY26 was broad-based across all three end markets and both segments. It was driven by a 'VPC algorithm' consisting of mid-single-digit growth from new business wins, mid-single-digit growth from pricing, and low double-digit growth from underlying market expansion. This diversified growth, coupled with 95% secured revenue for the year, provides strong visibility and confidence in the updated full-year guidance.

Mechanical Segment Performance

The Mechanical Components segment demonstrated exceptional performance, achieving a 40.1% margin in the first half of FY26 and a 42.5% margin in Q2 FY26. This was attributed to strong operating leverage from revenue growth, continued operational improvements, and cost optimization initiatives.

The segment achieved 20% organic growth over the last year with the same headcount, showcasing the effectiveness of decentralization and empowerment in driving a 67% conversion margin.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.