Q3 2025 Loar Holdings Inc Earnings Call
Today's conference call will start momentarily. We thank you for your patience.
Greetings, and welcome to lore Holdings. Third quarter, 2025 results conference call.
At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Ian mckillips. Thank you. You may begin.
Thank you rob. Good morning, everyone. And and as Rob said, welcome to the lore Holdings Q3 2025 earnings.
Presenting on the call this morning, our Lord's Chief Executive Officer and Executive Co-Chairman, Dirk.
Executive co-chairman, Brett, mgram treasure, and Chief Financial Officer Glend, delsandro, as well as my myself, Ian mckillop, the director of investor relations. Please visit our website at lure, group.com to obtain, a slide deck, and call replay information.
Before we begin we'd like to remind you that statements made during this call which are not historical in fact or forward-looking statements further information about important factors that could cause actual results to differ materially from those expressed or implied on the forward-looking statements, please refer to our latest filings with the SEC available through the investor relations section of our website.
Also, as a reminder, during the call, we will be referring to adjusted. I adjusted out margin adjusted earnings per share and free cash flow conversion. Each of, which is a non-gaap financial measure. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable, gaap measures and applicable. Reconciliations
To begin the prepared remarks, this morning I'll pass it over to Dirksen.
Thanks Ian.
So my my mates and and Laura and I we get up every day to create shareholder value over the long term.
When we went public, we added a plethora of new partners to join our journey in building our Aerospace and defense cash, compounder.
Uh, I got up this morning thinking about 1 such partner who we know is totally totally aligned in our approach of building our business over years and decades as opposed to a quarter at a time.
He was the one that told us we are boring.
I did not name him on the call. So it was interesting when we spoke to him after the call.
He said.
Dirksen.
Brett.
Was I not the 1 that called you boring? First, of course, the answer was yes.
He then reminded us about the importance of intellectual property.
How could we quote him without saying, who he was?
It is his IP after all.
We're going to be boring today.
We're going to name the whole of the patent over the adjective that truly describes us.
He has been with us since we went public which is going on 2 years now and along the way he has continued to invest more in US.
So before he named him to respect his IP, let's remind everyone. What it means to be boring. It means
We're about to tell you that we beat, we're raising our guidance but more importantly we generated strong cash flows. In addition to telling you we continue to improve our margins while achieving record sales, adjusted ibadan, adjusted, ibadan, margins.
During the quarter, we're then going to give you guidance in 2026 that we're doing with the Heather rule in mind given that we do not want to sacrifice Ian, which means, we're only going to tell you what we believe we can meet or beat.
I'm going to get started with my remarks but first,
Let me name the person that called us forward.
His name is Steve.
Good morning, Steve. Good morning, all. We're about to be super boring. So, here goes
I'm Dirksen founder CEO and co-chairman of law.
As always, we'll keep our remarks brief. So, let's start by reminding you Who We Are.
Lord, the family of companies has a very simple approach to creating shareholder value.
First, we believe that providing our business units with an entrepreneur and collaborative environment to advance their brands will generate above market growth rates.
Since our Inception in 2012, through the end of County year 2024, we have grown sales and adjusted ibida at a compound annual growth rate of 37% and 47%. 45% respectively.
Over the long term we expect to increase sales organically at Double Digit percentage with the last 3 years, 22 223 and 24 achieving organic sales growth of 1814 and 15% respectively.
With adjusted EBA dog growing. At a faster rate.
We execute a long, 4 value streams. First we identify pain points within the Aerospace industry and look to solve those problems through organically launching, new products, which we believe over the long term will create 1 to 3 percentage points of Topline growth annually.
Over the next 2 years, we expect that new product growth will be closer to 3% than 1%. As we qualify new parts, sell existing products to new customers and just dive deeper into our mission of solving our customers pain points.
as you all know, we tracked this pipeline of opportunities, monthly, it represents a lift, a list of opportunities across our portfolio of
That are derived from listening to our customers to identify their pain points, to determine how we can help.
It is Created from sharing ideas. Best practices customer synergies across the group to the high degree of collaboration that we Foster across our business units.
This list, as you can see, has grown by a 100 million dollars since our last call and represents over 600 million in sales over the next 5 years.
As you can see, the beauty of the list is that it is a living, breathing entity that continuously grows.
We also focus on optimizing the way we manufacture, go to market and manage.
To enhance productivity each year will identify initiatives that will allow us to continually improve our performance with a focus on 1 or 2 major initiatives each year, that it will improve margins.
Over the next couple of years, we are looking to enhance the way we, mine collect gather and utilize data. This means enhancing our management Erp and other systems and processes to improve our leverage of data to drive the improvement in our cash flows.
In addition across our portfolio of companies will achieve more price than our cost of inflation each year. The result is a continuous Improvement in margins year over year with on occasion, a temporary dilution as a result of acquiring business with diluted margins or incurring costs as a result of being a public company.
All of which we have experienced over the years but regardless of these temporary headwinds, we continue to improve our margins.
Most importantly, we are committed to developing and improving the talent of all our mates.
because our success is solely a result of their dedication and commitment.
For your commitment and hard work.
I will now turn it over to Brett to walk you through the key characteristics of our portfolio.
Thanks Dirksen. Um, everybody. I think is seen this slide. We've had in all our presentation, so I don't want to belabor it, but the reason this slide is in there is really just to remind people that we have a very consistent and very attractive business model, uh, as highlighted, by all the boxes on the bottom of the page, um, that, uh, we apply all our parts to, and those parts, um, cut across a very Broad and very diverse set of end, markets, customers, and virtually any platform that you can think of that flies.
And the way that ultimately manifests itself is in the strong performance that we've had, um, that is consistent.
Reliable. And dare. I even say boring.
Excellent.
Thank you, Brett.
Over the last 13 years, we brought together a unique set of capabilities and products that are highlighted. Here we go to market with more than 20,000 Unique Products, none of which makes more than 3% of our annual revenue, whether its sensors or switches water purification systems, deicing Technologies, human interface devices
Auto throttle systems, or 1 of our many other products. We are an essential supplier across the Aerospace and defense industry.
Our customers have come to depend on our highly proprietary products quality, on-time performance, and Engineering capabilities, to ensure, they are able to maximize their production and aircraft operations. I'll now pass it over to Glenn to walk through the financials.
Thank you, Ian.
Good morning, everyone.
Let me start by discussing sales by our end markets.
This comparison will be in a ProForm of basis, as of each of our businesses were owned as of the first day of the earliest period presented. This Market discussion includes the acquisition of Applied avionics and Q3 2424 and B light in Q3 255.
We achieved record sales during Q3 2025. In total, our sales increased to $127 million, which is a 15% increase compared to the prior year.
This increase was driven by strong performance in commercial. Aftermarket commercial OEM and defense.
Our commercial lab, the market sales saw an increase of 19% in, Q3 255 versus Q3 24. This is primarily driven by the continued strength and demand for commercial air travel, and an aging commercial Fleet. We continue to see strong commercial aftermarket bookings.
Our total commercial oen sales increased by 11% in Q3 25 as compared to the prior year period.
This increase was driven by higher sales across a significant portion of the platforms. We Supply along with an improvement production, environment for commercial oems,
The increase of 70%. In our defense sales was primarily due to strong demand across multiple platforms and an increase in market shares as a result of new product launches.
Defense sales will continue to be lumpy given the nature of the ordering patterns of our end customers for our products.
Let me recap, our financial highlights for the third quarter of 25 our net organic sales, increased 11.1% over the prior year.
Our gross profit margin for Q3 255. Increased by 380 basis points as compared to the prior year period.
This increase was primarily due to our operating, leverage the execution of our strategic value drivers, as well as a favorable sales mix.
Our increase in net income of 19 million dollars in q3.25.
Is primarily due to a tax benefit as a result of the enactment of the 1, big beautiful, bill act, higher operating income, and lower interest.
Adjusted ibida was up 11 million in Q3 25 versus 2324 adjusted ibida. Margins were a record 38.7% due to our operating leverage, the execution of our strategic value drivers and a favorable sales mix. This was partially offset by additional costs with being a public company, including sarbane Oxley compliance and additional organizational costs to support our reporting governance and control needs. We did not see a material in increase in these types of costs going forward. We believe the Run rate of these costs is fully reflected in our Q3 25 results.
From 2020 through 2025, we will have increased our ibida margins by 710 basis points.
We have achieved this growth through the following operating Leverage.
Winning new profitable business.
Executing on productivity initiatives and from value-based pricing.
in Q3 25, our margins grew by 190 basis points from the prior year to a record 38.7%
This was achieved even with the negative impact of costs related to sarbane Oxley.
Um, from being a public company as well as the dilution of margins, for my most recent acquisition Speedlight.
We are excited to share our most recent view for calendar year 25. This view is in excess of what we told you 13 weeks ago.
Our confidence rests in the great strides we have ever made. We've made executing on our value drivers in the first 9 months of 25 and the strength of our proprietary portfolio.
Primarily we are head of our plan on value pricing and productivity initiatives. In addition, we have seen material reduction. We have not seen any material reduction in demand on any of our end markets and expect, no meaningful impact. On our end markets, as a result of the Tariff environment
the 1 in m 1 in Market, to note is total commercial aftermarket
Given the strength we have seen in the first 9 months of 25. We are increasing our Outlook to low double-digit growth from high single-digit growth.
Commercial OEM and defense are in line with our prior Outlook.
We these Market assumptions along with our continued, exe execution of our value drivers will allow us to exceed the following
Metrics for calendar year, 25 versus our previous Outlook.
Net sales were up 1 million.
Adjusted IBA does of 1 million.
Net income is up 5 million diluted earnings per share is up by cents, adjusted earnings per share is up 10 cents.
We see a further reduction in our interest expense of $1 million.
All other assumptions are consistent with our previous Outlook.
Let me now. Turn the core call back over to Dirksen to share our outlook for 26.
Thanks man.
Uh look, we are extremely excited to share our initial. Let's say it again. Initial view for calendar year 2026.
Um but as a reminder, um we can share such a detailed forecast. Um so early in the year because of the substantial proprietary content of our product and serve service portfolio,
Combined with our record backlog, as of the end of the third quarter of 2025.
Both of which allows for tremendous visibility into 2026.
This view is on a performer basis. Assuming we own all of our business units since the beginning of 20225. So with that said,
We expect commercial OEM and aftermarket growth. Will be low double digits in 2026.
With the strong backlogs at the commercial. Aircraft producers, including Boeing Airbus, embryo, Gulf, Stream, service Diamond, just to name a few of the manufacturers that we have content on. We see another year of double-digit growth with regards to our assumptions about monthly production rates for the Boeing 737 Max and 8320. Family of aircraft, we have assumed that monthly production will average 38 and 54 during 2026 respectively.
This is between a 15 to 20% reduction from the OEM Skyline projections that they all talk about. Um, this is how we adjust for any supply chain challenges, destocking, uh, that inevitable part of the complicated, ecosystem of making parts for aircraft. So let's meet and exceed, um, commercial aftermarket growth again.
Will be driven by the continuing secular growth rate of air. Travel combined, with an old older inservice Fleet as OEM production continues to not meet demand for aircraft.
It is noteworthy that the average a of the passenger Fleet worldwide is a record 14 plus years currently. Given that Airlines have learned to affordably maintain aircraft for longer combined.
um years, uh
You know, that with the production of aircraft not covering retirements and this plus recycler growth that the aftermarket will stay strong for quite a period of time.
Uh, we also see strength in general aviation with Q3 2025 departure setting, a record at over 1 million. Um, how do we say it? Uh, we love the aftermarket while our defense and markets will be up mid single digits. As we come off a fantastic year of growth. As we've always said, growth in the defense and Market will be choppy.
So up down, up down over the long term.
Lots of cash. That's how we think about it.
these Market assumptions along with our continued execution, of our value drivers,
Will allow us to meet or exceed, the following for calendar year 2026.
Net sales between 540 to 550 million.
Adjusted ibida between 209 and 214 million.
Adjusted ibid down margin, uh, of approximately 39% once again demonstrating our abilities to continually improve margins.
Net income between 80 and 85 million. Adjusted EB, EPS between 98 cents and a dollar 3 per share. In addition, we expect
Capital expenditures of approximately 17 million.
fully an interest expense, 25 million
Uh, effective tax rate will be approximately 25%.
Depreciation: Ammonia, $15 million; non-cash stock-based comp of $17 million; with the Fed fully diluted share count of 97 million shares.
Please note that all of the amounts have just outlined for you relating to calendar year 2026 performance as soon. No additional acquisition.
And does not include the previously announced pending acquisition of lmbb fans and Motors. However, as we've noted previously, our drum beat is to complete 1 or 2 Acquisitions each year.
But we just cannot predict the timing of such acquisition.
1 last metric, I will share.
Um, related to Kalia 2026.
We expect operating cash flow, minus Capital expenditures to be greater than 125% of our net income assuming no additional acquisition.
With that operator. Let's open up the line for questions.
Thank you.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad and Confirmation tone will indicate your line is in the question queue. You may press star 2. If you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keys 1 moment, please while we pull for questions.
Our first question comes from, Christine leag with Morgan Stanley. Please proceed with your question.
Hey um. Good morning everyone.
Morning morning.
You know, congratulations on your record margin in the quarter despite, you know, the, the 2 head ones that you called out. Um, including the dilution from the recent deal. I, I guess you know, can can you provide more color now with what the operating and integration Playbook looks like 30 60, 90 days after a deal, are there some teristics operationally that you you could call out? And where do you usually find low-hanging fruits?
So, uh, good morning Christine. Um,
So it it varies by the business that we acquire, write some businesses require, I'll I'll put it this way. A lot of handhold holding others just um, require strategic Direction. Um, specifically to, uh, be like our, our recent acquisition, um, great business, great, great team, great leader, uh, in in Jena. Um, it was, it's more about in this case, the first 30 60 days, which is always the case I should start there. Um, is listen and observe first, we don't believe that we're smarter than the the folks that have been running the business for years, right? So we listen and watch and learn first and help wherever they come to us, uh, initially and B light's case it's more about Topline synergies, right? Um, we have embedded, uh, be like with our short business. So Gina actually reports the uh, president at Short
Istic way.
A short. As you know, we make uh seat belts and restraints for effectively the same customers that uh bead light is selling to. So in the case of bead light, it's more about uh the Synergy with customers and focusing in that manner, which we have started, but really have a tremendous Runway ahead of us in terms of opportunity.
Great. That makes sense. Um, and then with your commercial Aerospace, OE outlook for next year, uh, Dirksen, uh, can you provide some color regarding the underlying production rates that underpin those assumptions?
Uh, yeah, that that I think what I outlined was the production numbers that we, that we have dealing with, for 38, and 54, that's Boeing and Airbus respect respectively. Um, that's what we're looking at. Now, I will tell you that varies tremendously by part. That's the net, net. Net of everything that we've seen and touched across the group. Um, so we can have a track liner at 1 number and we can have a water purification system at another. Uh, number just driven by, what's in the pipeline, what customers are expecting those types of things. But on the average, we're looking at 38 for the Max and 54 for the A320 family.
And for the wide bodies too.
For the for the wide bodies, the I would say this way, the discount isn't as great. I think we discounted the uh 15 to 20 20% uh on the narrow bodies on the wide bodies. Versus Skyline is about and 10%. Um, and just keeping in mind,
The way we think about it is really going back to our our rule of Engagement when we give guidance, which is the Heather we want to make sure especially at this early stage. I mean we're in November predicting what's going to happen to the end of 2026 which is you know 13 plus months away. Um we just want to be conservative. So
Great, thank you very much.
Our next question comes from Sheila, Kaya glue with Jeffries. Please, proceed with your question.
Good morning guys, and congrats on a great quarter. Um,
Maybe if I could ask on uh the same light as Christine but just focusing on defense, you know, your defense growth has been superb this year and your guidance is for about 5%. Why the deceleration and maybe can you talk about? Yeah. What's driving the diesel? Whether domestic or International
Um, so first, first of all, um, I'll describe it this way. Lessons Learned been doing this for 3 decades and, uh, when you have a defense Market that 1 year is up, you know, as as we have this thing that says somewhere between 16 and 20%
If usually it's time for it to be I'll use this be rationalized right? It should be a a mid single digit growth rate on under the defense side but I'll give you a little bit of um specifics.
um,
ground Vehicles were strong in 2025.
I will tell you as we put together a budget which is the month or so ago. Now uh we looked at terms of uh our product on ground vehicles and we said to ourselves that that should slow down
Um, we didn't have the backlog at the time.
To support it. But what I would tell you, uh, today, Sheila is if we were building that forecast today, I'd probably come up with a different result, but since that time, we've seen improved. Bookings for ground Vehicle Products.
Okay, got it. So just uh, normalization of the market and being conservative.
Correct.
Cool. And then darken up the beginning. You gave some introductory comments that said new product growth now could be 3% versus your, I think, 1 to 3 historically. Can you talk about some of the areas where you're making particular headway? Whether it's an end market, a certain OEM, or, you know, is it a synergy with Speedlight as you pointed to? Where are you seeing that new product growth coming from?
Um, so this was a little sensitive.
Um, because you're not the only 1 listening and and uh, I don't want to uh, share uh, information that would make it harder to compete in the market. Get people focused. But I know there's 2, things that we talked about, quite a bit happy to, um, to share because that those are, these are 2 of the reasons why it is improving, and we do see it. So 1 is on breaks.
Um we've gotten 5 done this year, most of those within the last 3 or 4 months.
And in the pipeline, but for the government shutting down, we probably have a little bit ahead. Uh, we have another 4 or so, uh, uh, certifications to get
that's what that's 1 of the reasons that, uh, we're going to see higher growth rates over the next couple of years because we're now getting into that into that business.
um, so that I can talk to um the other 1, I can I can speak to is as we think about
So that that 1's aftermarket, I'll I'll give you 1 that's OE. Um as we think about
The cockpit door barrier. I think we've told folks that we've got that certified. This year, we started producing in May.
um, and on the a plus platform, we're going to see more of that content growth next year and in the years to come because we're, uh, exclusive and, and the majority of the Airbus narrow body, uh, aircraft
Those two alone, those two alone.
Would get us. Uh, as I said, I didn't say 3%. I said closer to 3 than 1. Those 2 alone gets us closer to 3 than 1.
Got it. Okay. Great, thank you so much. And also as Steve said, I don't know why anybody would listen to a boring call like this. So exactly you could you could share with us all you want. Thank you.
Our next question comes from Ken Herbert with RBC Capital markets. Please proceed with your question.
Morning Ken. Yeah. Hi good. Hey Dirksen, uh, Brett and Glenn good morning and Ian. Um maybe just to start. You did not drop slightly the, the aftermarket expectations for this year. I'm curious. If you can talk about the what, what specifically, driving that, or how we think about sort of volume versus price, in the aftermarket growth this year.
Um, it's a it's all across, uh, products. I can't think of anyone that stood out in terms of uh, driving the aftermarket growth change. So it's really of course all the products and its volume driven, not not price. Um, we we are just seeing, uh,
Well, I I I guess I'll put it this way when we get when we put together a guide.
As we always do, we think of it in such a way that makes sure we meet or exceed. I think you know that.
Um so it's actually was not surprising to us. That it's it's low double digit growth just like we starting out this year thinking it's low double digit growth commercial after the market. I got to tell you is extremely extremely strong.
Um, I know some folks, we talked to uh, worry about it. Slowing down. I got to I got to tell you Ken. Don't see it. So, um, so going back to your question. Volume driven, not price. And it's across all all of our uh, product offers
That's great. Thanks derkson. And as we think about the initial outlook for 26 again, up sort of low double, um, similar contributions as we think about the volume and, and price, mix in 26, on the aftermarket and and then under that, I guess, as we think about 26, are you seeing any acceleration or deceleration? Um, underpinning that by End Market, um, from 25 to 26.
Um, no, but you know, I don't see anything. Uh
So I I guess I should say this way, right? So across all the end markets, I see this.
I see over the last 3 years or so that as we think about the mix of what drove growth.
That I would put it in this way. Um volume price and then new business. That's probably the last 3 years.
The next 2 or 3 years. I I would I would I would rank it this way, new business volume and then and and then price.
Um, so so that, so that, so the, uh, answer your question. Um,
Don't see any slowdown on volume. Don't see any risk in terms of any long-term the stocking. Now with that said, I know we're talking about 26 but it does remind me as we think about
I hate guiding for 13 weeks, which is what you guys Force us to do when we get to this point in the year. And we're talking about the end of 2025, I will tell you uh, Ken I am seeing more
Noise.
From customers. By the way, we love them.
Cosmetically managing their balance sheets and managing working capital, and there's a lot of push pull within a a system as to the timing of deliveries. It's all timing. Um, it's all proprietary products. All those things. I, I would say that about 2025, but in terms of 2026, uh, fairly strong cost, all the enmarket talked about military just trying to normalize. Uh, what we think about 20 2026 should look like
Great. Thank you all the details.
Um if if that's the last question operator. Yes it is. Would you like to do a closing comments?
Uh yeah, I can close it up real quick. First of all, um,
uh, big, thank you to everyone that has taken the time to hear our story again today.
Uh, believe me, believe me. When I say, we continue to be excited about building our Aerospace.
Cash, compounder, uh, we call it law. Um,
Looking forward to speaking to you all again in late February 2026, just to give you a date this time. Uh, thank you, thank you very much. And by the way, thank you, everyone for calling, in on time. Love you guys. Thank you.
This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.