LOAR Q2 2025: Aftermarket +10%; L&B Acquisition Expected in Q3
- Robust aftermarket performance: Management highlighted that their commercial aftermarket, including the engine segment (7% of revenue), is growing in line with overall low double-digit rates, which underscores a resilient and steady revenue stream amid market variability.
- Significant accretion from strategic acquisitions: The acquisition of Beadlight was described as “significantly accretive,” bought at an attractive valuation with an impressive pipeline that is expected to boost margins and earnings in 2026 and beyond.
- Strong future growth via proprietary pipeline: Executives emphasized an expanding pipeline of sole source, proprietary products and improvements in new product certifications, positioning the company for enhanced organic growth (from 1% to 3% in 2025 with stronger rates anticipated in later years).
- Regulatory and Integration Risk: The pending L and B acquisition remains in a holding pattern with regulators, with uncertainty around its approval timing, which could delay integration and the realization of expected synergies.
- Questionable Near-Term Performance of Acquisitions: Despite expectations for future accretion, the recent acquisition of Beadlight currently contributes only mid single-digit revenue with near-breakeven EBITDA. This low immediate profitability raises concerns about its near-term financial impact.
- Demand Volatility in the OEM Segment: The Q&A highlighted that while commercial aftermarket demand is steady, the commercial OEM side is subject to choppy growth due to OEMs managing stock and inventory, potentially leading to erratic revenue patterns.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Sales ($USD Millions) | FY 2025 | $480 million to $490 million | $486 million to $494 million | raised |
Adjusted EBITDA ($USD Millions) | FY 2025 | $182 million to $185 million | $184 million to $187 million | raised |
Adjusted EBITDA Margin (%) | FY 2025 | 37.5% | 38% | raised |
Net Income ($USD Millions) | FY 2025 | $59 million to $64 million | $65 million to $70 million | raised |
Adjusted EPS ($USD) | FY 2025 | $0.71 to $0.76 | $0.83 to $0.88 | raised |
Capital Expenditures ($USD Millions) | FY 2025 | $14 million | $14 million | no change |
Interest Expense ($USD Millions) | FY 2025 | $28 million | $26 million | lowered |
Effective Tax Rate (%) | FY 2025 | 30% | 25% | lowered |
Depreciation and Amortization ($USD Millions) | FY 2025 | $51 million | Unchanged ($51 million) | no change |
Non-Cash Stock-Based Compensation ($USD Millions) | FY 2025 | $50 million | Unchanged ($50 million) | no change |
Fully Diluted Share Count (Shares) | FY 2025 | 97 million shares | Unchanged (97 million shares) | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Commercial aftermarket demand | Consistently strong demand with double‐digit sequential and year‐over‐year increases, strong bookings and stable market share noted across Q1 2025 ( ), Q4 2024 ( ), and Q3 2024 ( ). | Strong demand reiterated with a 13% increase over Q2 2024, consistent pricing dynamics, and no sign of degradation ( ). | Consistent performance with steady positive sentiment. |
Defense segment performance | Volatile, “lumpy” but high growth – with 33% organic growth in Q1 2025 ( ), 39% increase in Q4 2024 ( ), and 25% increase in Q3 2024 ( ) – driven by strong demand across platforms. | Described as volatile or “lumpy” with 19% growth over Q2 2024 and emphasis on strong demand and market share gains from new products ( ). | Continues to be volatile but remains robust; sentiment remains positive albeit with acknowledgment of inherent variability. |
Strategic acquisitions | Regular discussion of an active M&A pipeline with multiple acquisitions such as Applied Avionics in Q3 2024 ( ), active M&A discussions in Q1 2025 ( ), and a steady pace in Q4 2024 with acquisitions like LMB Fans and Motors ( ). | Emphasis on the strategic acquisition of Beadlight for its niche products and aftermarket exposure, with focus on synergy and integration without major risk concerns ( ). | Consistent focus on acquisitions with a refined narrative on synergy and confidence in integration. |
Commercial OEM demand volatility | Previously addressed with higher-than-expected production rates for Boeing and steady production for Airbus in Q1 2025 ( ), with “choppy” ordering patterns and inventory variability in Q4 2024 ( ), and production delays noted in Q3 2024 due to external disruptions ( ). | Highlighted volatility and production delays as OEMs and Tier 1s experience supply chain and inventory “growing pains,” with monthly delivery variability (10 to 60 shipsets) and organic growth maintained at high single digits ( ). | Continues to be a challenge with operational variability; sentiment has become more focused on managing these disruptions. |
Margin dynamics | Discussions in Q1 2025 emphasized strategic initiatives driving 160–370 basis point improvements ( ), Q4 2024 highlighted a 250 bps increase and expected future gains ( ), and Q3 2024 cited operating leverage and price increases contributing to margin improvements ( ). | Focus on productivity initiatives, value-based pricing, and favorable sales mix driving record adjusted EBITDA margins (+220 bps improvement) and effective handling of cost pressures ( ). | Consistent positive improvement though tempered by product mix effects; overall sentiment remains optimistic. |
Evolving product pipeline | Previously, Q1 2025 focused on innovative product launches such as the secondary cockpit barrier ( ), Q4 2024 discussed progress on PMA parts and customer agreements ( ), and Q3 2024 highlighted new product initiatives as well as the Applied Avionics acquisition ( ). | Emphasizes a living pipeline worth over $500 million in opportunities over five years, with clear targets for 2026 and certification challenges noted; also leverages synergy from the Beadlight acquisition ( ). | Continued strong emphasis on innovation with added forward-looking detail on certification delays and growth targets. |
Regulatory, tariff, and input cost challenges | In Q1 2025, challenges were discussed around changes in defense procurement and tariffs being “noisy” ( ); Q4 2024 addressed regulatory review for LMB and managed tariff impacts through inventory and pass-through strategies ( ); Q3 2024 had no mention. | Mentions regulatory delays on LMB (awaited French approval), describes tariffs as “mostly just noise,” and highlights strategies to offset input cost pressures by achieving pricing above inflation ( ). | Remains a moderate concern with consistent recognition and management approaches; Q2 adds emphasis on regulatory waiting periods. |
Operational and supply chain capacity challenges | Q1 2025 did not specifically mention these challenges; Q4 2024 discussed capacity constraints and variable supply chain conditions ( ); Q3 2024 noted OEM strikes and supply bottlenecks impacting production and revenue timing ( ). | Detailed discussion of variability in shipset deliveries due to inherent manufacturing challenges, with OEMs and Tier 1s facing “growing pains” in inventory and supply chain management ( ). | Increased focus compared to Q1 and consistent with Q3 and Q4; sentiment emphasizes active management of capacity constraints. |
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Acquisition Timing
Q: L and B closing in Q3?
A: Management explained that they are still awaiting regulatory approval for L and B, with early feedback expected in September, keeping optimism for a Q3 close, and they continue to pursue similar proprietary opportunities. -
Beadlight Accretion
Q: How is Beadlight accretive?
A: Management noted that Beadlight, acquired at £25M/$33M, generates mid single-digit millions in revenue with near breakeven margins and, with value-driver enhancements, will be significantly accretive in 2026. -
Pipeline Timing
Q: When will product pipeline boost growth?
A: Management mentioned that new product introductions are contributing at the low end of the 1%–3% guidance in 2025, with more robust impacts expected in 2026-2027 as certifications and program wins materialize. -
Aftermarket Dynamics
Q: Are airlines’ efficiencies hurting aftermarket growth?
A: Management reassured that even though airlines are optimizing inventories on OEM parts, the inherently sole source, proprietary nature of their aftermarket business keeps demand consistently strong. -
Engine Exposure
Q: How significant are engines in aftermarket revenue?
A: Management clarified that engines account for about 7% of overall revenue and have grown steadily in line with the broader aftermarket segment, contributing solid low double-digit growth.
Research analysts covering Loar Holdings.