Loar Holdings Inc (LOAR) Q2 2025 Earnings Call Highlights: Record Sales and Strategic ...

Revenue: Record sales of $123 million in Q2 2025, a 13% increase compared to the prior year. Commercial Aftermarket Sales: Increased by 13% in Q2 2025 versus Q2 2024. Commercial OEM Sales: Increased by 14% in Q2 2025 compared to the prior year period. Defense Sales: Increased by 19% due to strong demand and new product launches. Gross Profit Margin: Increased by 480 basis points in Q2 2025 compared to the prior year period. Net Income: Increased by $9 million in Q2 2025 versus Q2 2024. Adjusted EBITDA: Increased by $12 million in Q2 2025 versus Q2 2024. Adjusted EBITDA Margin: Record 38.3% in Q2 2025. Cash Flow Conversion Percentage: 175% in Q1 2025 and 125% in Q2 2025, with a year-to-date conversion of 148%. 2025 Guidance: Net sales between $486 million to $494 million; Adjusted EBITDA between $184 million and $187 million; Adjusted EBITDA margin of approximately 38%. EPS Guidance: Adjusted EPS between $0.83 and $0.88, up 16% from previous guidance. CapEx: Approximately $14 million for 2025. Interest Expense: Reduction of $2 million to $26 million for the full year. Effective Tax Rate: 25% for 2025.

Warning! GuruFocus has detected 3 Warning Sign with LOAR.

Release Date: August 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Loar Holdings Inc (NYSE:LOAR) reported record sales and adjusted EBITDA for Q2 2025, demonstrating strong performance across all market sectors. The company achieved a 13% increase in total sales compared to the prior year, driven by strong performances in commercial aftermarket, commercial OEM, and defense sectors. Loar Holdings Inc (NYSE:LOAR) has a robust pipeline of new product introductions, representing over $500 million in sales opportunities over the next five years. The acquisition of Beadlight is expected to be accretive to results in 2026, with significant growth potential due to recent program wins and synergies with existing businesses. The company has improved its gross profit margin by 480 basis points in Q2 2025 compared to the prior year, due to strategic value drivers and favorable sales mix.

Negative Points

Loar Holdings Inc (NYSE:LOAR) faces choppy growth rates in the OEM commercial sector due to inventory management and supply chain challenges. The acquisition of Beadlight, while promising, currently contributes only mid-single-digit millions in sales with nearly breakeven EBITDA margins. The company incurs additional costs associated with being a public company, including Sarbanes-Oxley compliance and organizational costs. There is potential volatility in demand for OE commercial products as OEMs and Tier 1 suppliers manage growth in production. The acquisition of LMB Fans & Motors is pending regulatory approval, causing delays and uncertainty in closing the transaction.

Story Continues

Q & A Highlights

Q: Can you provide an update on the status of the LMB acquisition and potential future transactions? A: Brett Milgrim, Executive Co-Chairman, stated that they are awaiting regulatory approval for the LMB acquisition, which is expected by September. The management team at LMB is excited about the acquisition, and Loar Holdings remains optimistic about closing the deal by the end of Q3. Future transactions are being considered, with a focus on strategic growth and supporting the French economy and military.

Q: How does the acquisition of Beadlight fit into Loar Holdings' strategy, and what are the expectations for its financial performance? A: Dirkson Charles, CEO, explained that Beadlight is expected to contribute mid-single-digit millions in sales for 2025, with significant growth anticipated in 2026. The acquisition aligns with Loar's strategy of expanding its proprietary product offerings and leveraging synergies with existing businesses, particularly in the aerospace lighting market.

Q: What is the outlook for new business opportunities and their impact on growth in 2025 and beyond? A: Dirkson Charles noted that new product introductions are expected to contribute to the lower end of the 1% to 3% growth range in 2025, with more significant contributions anticipated in 2026 and 2027. This is due to delayed certifications and recent market entries, with expectations for higher growth rates as certifications progress.

Q: How is Loar Holdings addressing potential headwinds in the commercial aftermarket due to airlines optimizing their maintenance spending? A: Dirkson Charles emphasized that Loar's portfolio is largely proprietary and sole-sourced, making it less susceptible to such headwinds. The company has not observed any significant changes in demand dynamics for the commercial aftermarket, with consistent demand expected to continue.

Q: Can you provide more details on the valuation and strategic fit of the Beadlight acquisition? A: Dirkson Charles explained that Beadlight was acquired for GBP25 million, and despite its current breakeven EBITDA, it is expected to be significantly accretive by 2026. The acquisition was a proprietary deal, and Loar Holdings sees it as a strategic fit due to its proprietary products and synergies with existing businesses.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments