Loar Holdings (LOAR) Q2 FY26 earnings call: guidance and Q&A

Is the new product innovation and share expansion part of the growth engine inflecting, and what are the drivers?

Dirkson confirmed an inflection point, citing progress in certifications, reallocation of $30M-$40M/year in engineering costs to high-probability projects, and wins in various product categories. He clarified that the company expects to win on items in the new business pipeline, not just track a 'win rate,' and that they haven't 'lost' the remaining pipeline opportunities.

“We are at an inflection point. We have a number of certified platforms, engage with customers around those. We intend to continue to increase the certification success there over the next 6 to 9 months, and we'll continue to have what I would describe as even more wins as we move forward.”

asked by John Godyn · answered by Dirkson Charles

Given strong H1 performance, why wasn't guidance raised more, and are there any specific risk factors for the back half?

Dirkson stated that risks are removed from guidance, and the company expects to meet or beat the high end. He noted that the guidance increase is tied to new business success, which has a learning curve. The primary risk identified is keeping up with demand, requiring investment in areas like fans and motors and brakes, where demand is stronger than anticipated.

“The things that are on our mind, we removed from our guidance... Our expectation is that we will meet or beat the guidance that we're sharing... The increase is related to the success that we're seeing in new business. That usually has a learning curve. Should be cautious, right, in terms of how that ramps and how you perform in your first set of parts we produce.”

asked by John Godyn · answered by Dirkson Charles

Are there specific trends in commercial transport vs. business jet aftermarket, and is there a destocking risk for 2027?

Dirkson saw no specific call-outs for different aftermarket segments. He observed customers being prudent in ordering, leading to later orders at higher prices. He believes destocking risk is 'behind us,' with inventory levels moving from 5-7 months to 3-5 months. He expects stronger commercial aftermarket growth in 2027, despite lapping strong 2026 numbers (12-13% growth this year vs. 19% last year).

“I would describe it this way. March of this year. If folks were holding somewhere between 5 and 7 months' worth of inventory on their shelf to support their production. It's probably now 3 to 5 in terms of the order impact and going back to people ordering 6 instead of 8. That's what I've seen. So I think we have seen whatever destocking to use your terminology risk is really sitting behind us.”

asked by Ken Herbert · answered by Dirkson Charles

Loar's 12% organic growth is lower than some peers; will the $200M secured orders help narrow this gap?

Dirkson acknowledged peer performance but emphasized Loar's consistent long-term approach and that they are lapping significant prior organic growth. He stated that new business will be the highest driver of growth going forward, expecting to be closer to the 3% end of their 1-3% organic growth target for new business, potentially even 4-5%.

“As we look forward, given the efforts and the relationships we've built with our customers going forward, we believe new business will be the highest rank in terms of driving growth. Then it would be secular growth and then price in that order going forward.”

asked by Kristine Liwag · answered by Dirkson Charles

Are the $200M secured organic revenue orders under long-term agreements (LTAs) or purchase order (PO)-to-PO?

Dirkson confirmed they are PO-to-PO, but with certification and sole-source status (or second source with PMA for carbon brakes), implying high certainty. He expressed 99.9999% certainty in achieving the $200M unless a 'black Swan' event occurs.

“So actually, none of them are under LTA. It's PO-to-PO, which is what we want. It's -- we're certified, we're sole source... when we say $200 million, it like saying that we're going to meet or exceed our guidance. We are 99.9999% sure, right? Unless it's a black Swan brand that we will achieve that.”

asked by Kristine Liwag · answered by Dirkson Charles

What is the framework for free cash conversion for the rest of the year and long-term?

Dirkson suggested that the first half's cash conversion performance would resemble the second half, potentially stronger in the back half due to bonus and tax payments typically occurring in H1. He emphasized the company's consistent ability to 'print money.'

“The way I would think about it sitting your seat is that first half looks like the second half. That's what I would say. Maybe a little bit stronger in the back half because I think as we've said previously, first half of the year, we're usually paying bonuses and taxes at a higher rate than we do in the back half.”

asked by Unknown Analyst · answered by Dirkson Charles

How are the integrations of Beadlight, LMB, and Harper progressing, and are their 2026 revenue contributions higher than initially expected?

Dirkson confirmed that all three acquisitions are performing ahead of expectations. He highlighted synergies with Beadlight, strong demand for LMB leading to expansion plans, and Harper Engineering potentially doubling its EBITDA faster than other acquisitions due to increased demand for its products on platforms like the 787.

“So the answer to your question on all 3 is yes, all higher, all doing extremely well... Harper will probably achieve in how we say we want to double EBITDA in 3 to 5 years. Harper will probably achieve it faster than all of those businesses I just described.”

asked by Unknown Analyst · answered by Dirkson Charles