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Loar Holdings Inc. (LOAR)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered record net sales of $97.0M (+31.1% y/y) and Adjusted EBITDA of $35.0M (+26.3% y/y); diluted EPS was $0.09 and Adjusted EPS $0.13 .
  • Mix-driven margin dynamics: Adjusted EBITDA margin was 36.1% (down ~140 bps y/y) on higher defense mix (22% of sales vs 18% y/y), acquisition dilution and public-company infrastructure costs, partly offset by pricing and operating leverage .
  • Guidance raised across the board: FY24 net sales to $374–$378M (from $370–$374M), net income to $28.4–$29.6M, Adjusted EBITDA to $134–$136M, net income margin to ~8%, and Adjusted EPS to $0.44–$0.46; capex ~$11M, tax rate ~30%, D&A ~$40M, SBC ~$10M, interest expense ~$42M, diluted shares ~91M .
  • Commercial aftermarket momentum is a core narrative: backlog set new records; book-to-bill “well above 1,” roughly 1.1–1.2; pricing/lead-time changes (90-day for best price) improved visibility to 3–5 months and shop load leveling .
  • Potential stock reaction catalysts: visible aftermarket strength and broad-based demand, plus an active M&A pipeline (Applied Avionics acquisition announced; ~16x EV/EBITDA with tax benefits and path to double EBITDA in 3–5 years) .

What Went Well and What Went Wrong

What Went Well

  • Record quarterly net sales ($97.0M) and Adjusted EBITDA ($35.0M), with organic net sales growth of 17.0% to $86.6M; CEO: “continued our record setting pace” .
  • Aftermarket strength and improved visibility: backlog at new highs and book-to-bill well above 1; switch to 90-day lead-time model improved pricing “stickiness,” visibility (3–5 months), and shop-level load .
  • Guidance raised on strong demand across end-markets; management confidence anchored in commercial aftermarket tailwinds, defense demand, and execution on value drivers .

What Went Wrong

  • Margins compressed: Adjusted EBITDA margin fell to 36.1% (from 37.5% y/y) on higher lower-margin defense sales, acquisition dilution, and public company infrastructure costs .
  • Boeing 737 MAX outlook cautious: CEO does not expect OEM-stated production rates; noted recent Boeing-related order push-outs, tempering near-term OEM assumptions .
  • Productivity initiatives slower to realize benefits: facility move (CA to OH) taking longer, with associated synergies now expected in 2025 rather than 2024 .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Net Sales ($USD Millions)$73.989 $91.844 $97.015
Diluted EPS ($)n/a (pre-IPO) n/a (pre-IPO) $0.09
Net Income ($USD Millions)$0.623 $2.249 $7.641
Net Income Margin (%)0.8% 2.4% 7.9%
Operating Income ($USD Millions)$17.628 $21.357 $22.188
Adjusted EBITDA ($USD Millions)$27.736 $33.030 $35.031
Adjusted EBITDA Margin (%)37.5% 36.0% 36.1%

Segment/end-market breakdown (quarterly):

End-MarketQ2 2023 OEM ($M)Q2 2023 Aftermarket ($M)Q2 2023 Total ($M)Q2 2024 OEM ($M)Q2 2024 Aftermarket ($M)Q2 2024 Total ($M)
Commercial Aerospace$13.702 $20.211 $33.913 $14.299 $26.894 $41.193
Business Jet & GA$10.430 $6.308 $16.738 $17.438 $9.725 $27.163
Defense$7.150 $5.996 $13.146 $8.855 $12.022 $20.877
Other$5.066 $5.126 $10.192 $3.451 $4.331 $7.782
Total$36.348 $37.641 $73.989 $44.043 $52.972 $97.015

Key operational data (select):

  • Gross Profit ($M): $37.472 in Q2 2023; $44.433 in Q1 2024; $47.526 in Q2 2024 .
  • CFO commentary: Defense +57%, commercial aftermarket +19%, commercial OEM +11% y/y in Q2; margin mix headwind mitigated by pricing/operating leverage .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)FY 2024$370–$374 $374–$378 Raised
Net Income ($M)FY 2024$25.7–$27.1 $28.4–$29.6 Raised
Adjusted EBITDA ($M)FY 2024$132–$134 $134–$136 Raised
Net Income Margin (%)FY 2024~7% ~8% Raised
Adjusted EPS ($)FY 2024$0.41–$0.43 $0.44–$0.46 Raised
Adjusted EBITDA Margin (%)FY 2024~36% ~36% Maintained
Interest Expense ($M)FY 2024~$42 ~$42 Maintained
Capex ($M)FY 2024~$11 ~$11 Maintained
Effective Tax Rate (%)FY 2024~30 ~30 Maintained
D&A ($M)FY 2024~$40 ~$40 Maintained
Stock-Based Compensation ($M)FY 2024~$9 ~$10 Raised
Diluted Shares (M)FY 2024~91 ~91 Maintained

Note: Q1 call cited pro forma annual interest expense of ~$26M post-IPO and rate reduction, while full-year guidance maintains ~$42M (timing and pro forma vs GAAP full-year basis) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q1 2024)Current Period (Q2 2024)Trend
Commercial aftermarket demand/backlogBacklog up 25% y/y; low double-digit aftermarket growth outlook; destocking affected Q1 Backlog at new record; book-to-bill ~1.1–1.2; pricing/lead-time changes expanded 3–5 month visibility Strengthening
OEM production cadence (Boeing/Airbus/others)Supply chain improved enabling deliveries; OEM sales up 29% y/y in Q1 Caution on Boeing MAX rates; recent order push-outs; Airbus strong; “other” OEMs (Embraer, etc.) driving double-digit OEM growth Mixed (Airbus/others strong; MAX caution)
Defense momentum+8% y/y; new product launches gained share +57% y/y in Q2; higher mix compresses margins vs commercial Stronger; margin mix headwind
Pricing & LTAsStrategy to achieve more price than inflation; disciplined LTA repricing expected; impacts more in 2025 than 2024 Positive pricing setup
R&D/new productsTarget 1–3 pts annual organic growth from new products; R&D ~2–3% of sales Tracking to 1–3 pts in 2024; pipeline includes cockpit door barrier; disciplined R&D tied to returns On plan
Productivity initiativesIdentified annual margin initiatives Facility move (CA→OH) benefits delayed, expected in 2025 Benefits pushed to 2025
Regulatory/FAA PMA approvalsStrategic focus on PMA to bolster aftermarket PMA approvals pending; incremental to 2024; expected to drive 2025 2025 driver
M&A pipelineOngoing acquisition strategy; IPO enhanced flexibility Applied Avionics announced; ~16x with tax benefits; path to double EBITDA in 3–5 years Active, accretive profile

Management Commentary

  • CEO: “In the second quarter we continued our record setting pace in net sales and Adjusted EBITDA… de-stocking give way to exceptional commercial aftermarket growth” .
  • CFO: “Adjusted EBITDA margins remained strong at 36%, but were lower… result of the sales mix… temporary dilution from one of the acquisitions… and continued build-out of our infrastructure” .
  • CEO on guidance: “We expect net sales between $374 million to $378 million… Adjusted EBITDA between $134 million and $136 million… net income between $28.4 million and $29.6 million… Adjusted EPS between $0.44 and $0.46” .
  • CEO on Boeing/Airbus/OEMs: “We don’t believe what the OEM says… MAX… significantly less… we have… Boeing related order push-outs… Airbus… stronger… ‘other’ OEMs… are killing it” .
  • Executive Co-Chair on Applied Avionics: “Active M&A market… Applied… ~16x with tax benefits… we need a path to doubling EBITDA in 3–5 years… we think we can do even better” .

Q&A Highlights

  • Aftermarket outlook/book-to-bill: Backlog at new highs; book-to-bill “well above 1” (~1.1–1.2); quoting activity up y/y; management sees “blue skies” into H2 and early 2025 .
  • Pricing/lead times: Move to 90-day lead times for best price improved visibility (3–5 months), pricing stickiness, and operations (level loading) .
  • OEM rate expectations: Management plans below OEM-stated MAX rates; noted Boeing-related push-outs; Airbus and “other” OEMs robust .
  • PMA pipeline: Multiple FAA applications pending; incremental to 2024 outlook; expected to drive 2025 .
  • LTAs repricing: LTAs ~10% of revenue (mostly military); expect price realization impacting 2025 .
  • Productivity initiative timing: CA→OH facility move benefits delayed to 2025; return-focused capex prioritized .

Estimates Context

  • S&P Global consensus estimates (EPS, revenue, EBITDA) for current/next quarter were unavailable at time of query due to data limits; estimate comparison vs Wall Street consensus is therefore not provided. Values retrieved from S&P Global.*
  • Implication: With FY24 guidance raised (sales, net income, Adjusted EBITDA, Adjusted EPS), sell-side models likely need upward revisions to match the revised ranges and reflect stronger aftermarket and defense contributions .

Key Takeaways for Investors

  • Aftermarket is the core growth engine: backlog at records, book-to-bill >1, pricing/lead-time changes expand visibility and operational efficiency—supporting sustained top-line momentum .
  • Mixed margin backdrop near term: defense-heavy mix and post-IPO costs compress margins modestly; pricing and operating leverage partially offset; margin uplift likely as integration synergies and productivity initiatives mature into 2025 .
  • OEM outlook conservative on MAX; Airbus/“other” OEMs are strong—portfolio diversity mitigates single-platform risk and supports balanced growth .
  • Raised FY24 guidance is a positive inflection: higher sales, net income, Adjusted EBITDA, EPS, and net income margin signal confidence in end-market demand and execution .
  • M&A remains a lever: Applied Avionics aligns with proprietary/aftermarket-rich profile; disciplined returns (doubling EBITDA in 3–5 years) suggest potential for accretive growth beyond organic drivers .
  • 2025 setup: pricing actions on LTAs, PMA approvals, and delayed productivity benefits should support margin expansion and EPS trajectory into 2025 .
  • Liquidity and capital structure improved post-IPO; despite a full-year interest expense of ~$42M, prior pro forma metrics show structural benefits from deleveraging and lower rates, aiding medium-term FCF .