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    LOAR
    Earnings call· Mar 2026(Q1 FY26)

    Loar Holdings Q1 FY26 earnings call LOAR

    May 7, 2026 Source

    Executive summary

    Loar Holdings Q1 FY26 — Record Performance and Upward Guidance Revision

    Loar Holdings delivered record Q1 FY26 financial results, driven by robust commercial OEM and aftermarket growth that offset a temporary decline in defense sales. The company achieved its 40% adjusted EBITDA margin target ahead of schedule and raised its full-year guidance, confident in its diversified portfolio and proprietary products to sustain organic growth and margin expansion. Management emphasized its disciplined M&A strategy and the significant potential of its growing new business pipeline.

    Highlights

    5

    • Achieved record Q1 sales of $156 million, an 11% increase year-over-year.

    • Reported record Q1 adjusted EBITDA margins of 40.5%, an increase of 290 basis points from Q1 FY25.

    • Cash conversion coverage to net income was 230% in Q1 FY26.

    • Book-to-bill ratio greater than 1.2x in Q1 FY26, with record backlog for defense products.

    • New business pipeline reached a record high of approximately $700 million in revenue potential over the next 5 years.

    Concerns

    3

    • Defense sales decreased by 2% in Q1 FY26 due to temporary fluctuations in customer ordering patterns.

    • Gross profit margin decreased by 130 basis points in Q1 FY26 due to $11 million in higher noncash amortization and inventory step-up from recent acquisitions.

    • Net income decreased by $4 million in Q1 FY26, primarily due to higher interest expense and noncash acquisition-related items.

    Guidance & targets

    16
    CategoryTargetConfidence
    Net sales
    $645 million to $655 million
    high materiality
    High
    Adjusted EBITDA
    $257 million to $262 million
    high materiality
    High
    Adjusted EBITDA margin
    approximately 40%
    high materiality
    High
    GAAP net income
    $53 million to $57 million
    medium materiality
    High
    Adjusted EPS
    $1.26 to $1.30 per share
    high materiality
    High
    Capital expenditures
    around $19 million
    medium materiality
    High
    Amortization
    up $5 million
    low materiality
    High
    Noncash stock-based compensation
    $18 million
    low materiality
    High
    Commercial OE and aftermarket growth
    low double digits
    medium materiality
    High
    Defense end market sales growth
    mid-single digits
    medium materiality
    High
    Organic sales growth
    10%-plus annually
    high materiality
    High
    Adjusted EBITDA growth
    15%-plus annually
    high materiality
    High
    Adjusted EBITDA tripling
    every 5 years
    high materiality
    High
    Acquisition cadence
    1 or 2 acquisitions each year
    medium materiality
    High
    New product growth
    #1 driver of organic growth
    medium materiality
    High
    New business sales organic growth
    higher end of 1% to 3% each year
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Commercial Aftermarket
    Sales increased by 11% in Q1 FY26 versus Q1 FY25, driven by continued strength in demand for commercial air travel and an aging commercial fleet.
    		—11%——
    Commercial OEM
    Sales increased by 18% in Q1 FY26 versus Q1 FY25, driven by higher sales across a significant portion of platforms and improving production environment for commercial OEMs.
    		—18%——
    Defense
    Sales decreased by 2% in Q1 FY26 compared to the prior year, primarily due to the lumpy ordering patterns of end customers for proprietary products like F-18 brakes and RC-135 Auto Throttle.
    		—-2%——

    Operational metrics

    12
    Cash conversion coverage to net income
    230%
    Q1 FY26

    Reported as a record for the quarter.

    Sales compound annual growth rate
    over 30%
    2012-2025

    Since inception through end of calendar year 2025.

    Adjusted EBITDA compound annual growth rate
    over 40%
    2012-2025

    Since inception through end of calendar year 2025.

    Gross profit margin (adjusted)
    57.6%
    Q1 FY26

    Excluding $11 million in noncash amortization and inventory step-up adjustments.

    Adjusted net income growth
    20%YoY
    Q1 FY26

    Increased $5 million in Q1 FY26 versus Q1 FY25.

    Adjusted EBITDA growth
    $20 millionYoY
    Q1 FY26

    Increased in Q1 FY26 versus prior year quarter.

    EBITDA margin increase
    910 basis points
    2020-2026

    Cumulative increase from 2020 through 2026.

    New business pipeline revenue potential
    $700 millionup $100 million from February
    next 5 years

    Organic pipeline expected to convert over the next 5 years.

    New business pipeline conversion rate for 3% annual growth
    less than 15%
    over time

    Sufficient to support targeted 3% annual growth from new business.

    Proprietary products as percentage of business
    90%
    current

    Highlights high barriers to entry and pricing power.

    Corporate team headcount
    38
    current

    Expected to be around 45 when the company is twice its current size, demonstrating operating leverage.

    Revenue from conflict area
    approximately 2.5%
    current

    No impact on sales or orders in Q1 FY26 from this region.

    Industry KPIs

    4
    MetricValueDetails
    Book to bill ratiogreater than 1.2x
    Total company backlogapproximately 9,000 aircraftaircraft
    Program segment backlogrecord high
    Aftermarket services split11%%

    Orderbook & backlog

    6
    Company-wide book-to-bill ratiogreater than 1.2xQ1 FY26
    Defense end market book-to-bill ratiohighest of our end marketsQ1 FY26
    Defense products backlogrecord highend of Q1 FY26
    Commercial aftermarket book-to-bill ratiogreater than 1Q1 FY26
    Airbus aircraft backlogapproximately 9,000 aircraftcurrent

    Represents over 10 years of production at today's stated rates.

    Boeing aircraft backlogapproximately 7,000 aircraftcurrent

    Represents over 10 years of production at today's stated rates.

    Deals & partnerships

    3
    LMBAcquisition of LMB Fans & Motors

    Acquired in Q4 FY25, contributed to Q1 FY26 results.

    Harper EngineeringAcquisition of Harper Engineering

    Acquired in Q1 FY26, contributed to Q1 FY26 results.

    BeadlightAcquisition of Beadlight

    Acquired in Q3 FY25, contributed to Q1 FY26 results.

    Risks & headwinds

    6
    Defense sales fluctuationQ1 FY26

    2% decrease in Q1 FY26 sales

    Mitigation: Expect customers to return to habitual ordering patterns for proprietary products for the remainder of 2026; record defense backlog provides future visibility.

    Noncash acquisition-related chargesQ1 FY26

    $11 million impact on gross profit

    Mitigation: These are nonrecurring and noncash items (amortization of acquired intangibles, inventory step-up) related to LMB and Harper Engineering acquisitions.

    Higher interest expenseQ1 FY26

    Contributed to $4 million decrease in net income in Q1 FY26

    Mitigation: Partially offset by strong financial performance; no change to full-year interest expense guidance.

    Geopolitical challengescurrent

    Temporary uncertainty

    Mitigation: Company expects to mitigate any financial impact due to proprietary products and ability to flex value drivers; only ~2.5% of revenue from conflict area with no Q1 impact.

    Higher fuel costs and airline capacity rationalizationlagged impact (few quarters)

    Temporary reduction in unit demand

    Mitigation: Proprietary products and execution of value drivers are expected to mitigate financial impact; continued organic growth of 10%+ anticipated as active fleet age not peaking until end of decade.

    Industry slowness and engineering delaysmedium-term (5-7 years)

    New business opportunities can 'move to the right'

    Mitigation: The opportunity set remains, and the pipeline continues to grow; company maintains conservative conversion estimates due to timing uncertainties.

    What to watch in Q2 FY26

    5

    Defense sales ordering patterns

    remainder of 2026
    Current2% decrease in Q1 FY26
    TargetReturn to habitual ordering patterns

    Why it matters

    Defense sales are a significant part of the portfolio, and normalization of ordering patterns is key to achieving full-year guidance.

    However, if history provides any indication, we expect our customers to return to the habitual, albeit somewhat unpredictable ordering patterns for the remainder of 2026.

    Q&A highlights

    5

    Given the $700 million new business pipeline, what is a reasonable conversion rate beyond the conservative 15% for 3% annual growth, and what are the gating factors (FAA approval, customer contracting) and revenue flow timing?

    Management confirmed line of sight on all $700 million, describing it as more 'pull' than 'push' with customer attachment. While 50% conversion is possible, timing is the main uncertainty due to factors like FAA shutdowns or industry slowness. Organic growth, particularly ramping in H2 2026 and beyond, will be the key measure of success.

    “The reason that we say 15%, right, because we guide to 1% to 3%, that would take us to the 3%. Should we do better? I'll say this. Just between you and I, we should, right? But with that said, here's what happens in this industry. Things just move to the right for no other reason than just timing.”

    asked by Kristine Liwag · answered by Dirkson Charles

    2 min read6 chapters

    Detailed Narrative

    01

    Record Q1 Performance & IPO Milestones

    Loar Holdings reported record Q1 FY26 results across sales, adjusted EBITDA, and adjusted EBITDA margins, with sales reaching $156 million, an 11% increase year-over-year. The company achieved a 40.5% adjusted EBITDA margin, surpassing its IPO target of 40% ahead of schedule. This performance, coupled with a 230% cash conversion coverage to net income, demonstrates the resilience and consistent execution of its diversified portfolio, validating key promises made during its IPO two years prior.

    02

    New Business Pipeline & Organic Growth Drivers

    The company's new business pipeline has grown to a record $700 million in revenue potential over the next five years, an increase of $100 million since February. This pipeline is primarily composed of commercial opportunities (over 50%), with general aviation and defense each representing approximately a quarter. Management expects new product growth to be the primary driver of organic growth in calendar year 2026, with increased sales anticipated in the second half of the year as new parts are qualified in the first half.

    03

    Value Drivers & Margin Expansion

    Loar attributes its consistent performance and margin expansion to four key value streams: organically launching new products, optimizing manufacturing and go-to-market strategies, leveraging data for efficiency, and maintaining price over inflation. The company's culture emphasizes continuous improvement and productivity, ensuring that margin expansion is driven by operational efficiencies and strategic pricing, even when absorbing public company costs.

    04

    Portfolio Diversity & Proprietary Products

    Loar's portfolio is designed for balance and resilience, covering all end markets, platforms, and customers, with an even split between OE and aftermarket. The proprietary nature of 90% of its products creates high barriers to entry, attractive margins, and embedded customer relationships, positioning the company to capture long-term annuity streams from commercial, military, and general aviation aircraft throughout their lifecycle.

    05

    M&A Strategy & Market Opportunity

    The company remains an active acquirer, with a large and active M&A pipeline. Management emphasizes a disciplined approach to ensure new acquisitions possess high-quality proprietary products and meet stringent return thresholds. Loar expects to continue its historical cadence of 1 to 2 deals per year for the upcoming decade and beyond, leveraging the vast aerospace and defense market to expand capabilities and sustain outsized long-term returns.

    06

    End Market Dynamics & Outlook

    Strong demand tailwinds are observed in commercial aftermarket and OEM sectors, with commercial aftermarket sales up 11% and commercial OEM sales up 18% in Q1 FY26. While defense sales saw a temporary 2% decrease in Q1 due to ordering patterns, the defense end market's book-to-bill was the highest, and a record backlog was achieved. Loar anticipates continued organic sales growth of 10%+ and adjusted EBITDA growth of 15%+ annually, driven by secular industry tailwinds and its balanced portfolio.

    AI-generated summary of the company’s earnings call. Not investment advice.