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Loar Holdings Inc. (LOAR)·Q3 2024 Earnings Summary

Executive Summary

  • Record quarter with net sales growth across commercial and defense end-markets; adjusted EBITDA and margin expanded, with management raising FY2024 adjusted EBITDA and issuing initial FY2025 guidance that targets double-digit pro forma sales growth and further margin improvement .
  • Mix shift and OEM strike-related delays are expected to weigh on Q4 margin versus YTD; management quantified ~$3 million of commercial OEM revenues pushed into Q1 due to customer “stop shipment” letters, and guided to ~36% adjusted EBITDA margin for FY2024 .
  • FY2024 guidance was revised: higher net sales and adjusted EBITDA, but lower net income and adjusted EPS driven by higher interest expense from the Applied Avionics acquisition; initial FY2025 guide implies ~150 bps margin expansion to ~37.5% .
  • Commercial aftermarket bookings remain strong (up 19% YoY and 16% sequential in Q3), and defense sales rose 25% YoY; management highlighted backlog visibility and expects FY2025 operating cash flow minus capex to exceed 125% of net income .

What Went Well and What Went Wrong

What Went Well

  • Strong demand across all end-markets drove record net sales and adjusted EBITDA; adjusted EBITDA margin expanded to 36.8% from 34.9% YoY . “We again achieved record net sales and Adjusted EBITDA” (Dirkson Charles) .
  • Commercial aftermarket strength: up 19% YoY and 16% sequential, with improved pricing and visibility from a 90-day lead-time strategy; management described the backdrop as “blue skies” for aftermarket .
  • Defense momentum: sales up 25% YoY on strong demand, new product launches, and increased market share; management sees high-double-digit defense growth in FY2025 .

What Went Wrong

  • Q4 margin deceleration expected due to mix (higher defense weight vs. higher-margin commercial) and OEM strikes pushing ~$3 million of revenues into Q1; FY2024 adjusted EPS and net income guidance lowered despite higher sales and adjusted EBITDA .
  • Higher interest expense from the Applied Avionics acquisition increased FY2024 interest outlook to ~$54 million (from $42 million), pressuring net income and diluted EPS guidance .
  • Continued integration and infrastructure costs as a new public company were a partial offset to margin gains; management noted build-out to support reporting, governance, and control needs .

Financial Results

MetricQ1 2024Q2 2024Q3 2024
Net Sales ($USD Millions)$91.844 $97.015 $103.519
Net Income ($USD Millions)$2.249 $7.641 $8.656
Diluted EPS ($USD)— (pre-IPO; no EPS reported)$0.09 $0.09
Adjusted EPS ($USD)—$0.13 $0.15
Adjusted EBITDA ($USD Millions)$33.030 $35.031 $38.096
Adjusted EBITDA Margin %36.0% 36.1% 36.8%
Net Income Margin %2.4% 7.9% 8.4%
Segment Breakdown ($USD Millions)Q3 2023Q2 2024Q3 2024
Commercial OEM$14.574 $14.299 $15.824
Commercial Aftermarket$23.886 $26.894 $29.058
Total Commercial$57.890 $68.356 $74.914
Defense (Total)$15.222 $20.877 $21.962
Other (Total)$9.695 $7.782 $6.643
Total Net Sales$82.807 $97.015 $103.519
KPIs and Growth DriversQ3 2024
Net organic sales growth YoY (%)16.5%
Commercial aftermarket sales growth YoY (%)19%
Commercial aftermarket sequential growth (%)16%
Defense sales growth YoY (%)25%
Gross profit margin change YoY (bps)+200 bps
Adjusted EBITDA Margin (%)36.8%

Notes: Q1 2024 EPS not reported due to IPO timing; see Q1 8-K tables for common unit metrics .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)FY 2024$374–$378 $390–$394 Raised
Net Income ($M)FY 2024$28.4–$29.6 $19.0–$20.0 Lowered
Adjusted EBITDA ($M)FY 2024$134–$136 $141–$143 Raised
Adjusted EBITDA Margin (%)FY 2024~36% ~36% Maintained
Adjusted EPS ($)FY 2024$0.44–$0.46 $0.35–$0.37 Lowered
Diluted EPS ($)FY 2024—$0.20–$0.22 New detail
Interest Expense ($M)FY 2024~$42 ~$54 Raised
Capex ($M)FY 2024~$11 ~$9 Lowered
Effective Tax Rate (%)FY 2024~30% ~30% Maintained
D&A ($M)FY 2024~$40 ~$43 Raised
Stock-based Comp ($M)FY 2024~$10 ~$11 Raised
Fully Diluted Shares (M)FY 2024~91 ~91 Maintained
Net Sales ($M)FY 2025—$470–$480 New
Adjusted EBITDA ($M)FY 2025—$176–$180 New
Adjusted EBITDA Margin (%)FY 2025—~37.5% New
Net Income ($M)FY 2025—$33–$37 New
Adjusted EPS ($)FY 2025—$0.45–$0.50 New
Diluted EPS ($)FY 2025—$0.35–$0.40 New
Interest Expense ($M)FY 2025—~$60 New
Capex ($M)FY 2025—~$14 New
Effective Tax Rate (%)FY 2025—~30% New
D&A ($M)FY 2025—~$51 New
Stock-based Comp ($M)FY 2025—~$15 New
OCF – Capex (% of Net Income)FY 2025—>125% New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q3 2024)Trend
Commercial aftermarket demand and pricingBacklog +25% YoY; outlook low double-digit growth De-stocking ended; strong bookings; book-to-bill ~1.1–1.2; pricing and visibility improved via 90-day lead times Bookings strong; +19% YoY, +16% QoQ; continued value driver execution Strengthening
OEM supply chain and productionImproving supply chain enabling deliveries Improvement aiding deliveries across platforms; caution on MAX rates; strong Airbus/other OEMs Improvement continued; OEM strike letters pushed ~$3M revenue to Q1; modest OE impact vs aftermarket Mixed: improving but near-term disruptions
Defense demand and lumpinessAftermarket-driven growth; new products +57% YoY; noted lower margins vs commercial +25% YoY; strong backlog; expect choppy early FY2025, stronger 2H Strong but lumpy
M&A strategy and Applied AvionicsIPO; acquisition drumbeat mentioned Announced acquisition; disciplined returns; proprietary/aftermarket-heavy asset; path to doubling EBITDA in 3–5 years Closed; ~$360M term loan; 50% EBITDA margin cited; complementary portfolio Accretive, focus continues
PMA pipelineNot detailedMultiple PMAs pending; approvals incremental to outlook Not specifically updated in Q3; value drivers continue Potential upside ahead
LTAs and pricingNot detailedExpect pricing uplift as LTAs roll and reflect inflation Pricing leverage sustained via value drivers Positive
Working capital and FCF conversionPro forma net leverage 1.6x after IPO Operational visibility, backlog strength FY2025 OCF – capex >125% of net income; modest WC use expected Improving conversion

Management Commentary

  • “We again achieved record net sales and Adjusted EBITDA, driven by strong demand in both our commercial and defense end-markets” (CEO Dirkson Charles) .
  • “Adjusted EBITDA margins remained strong at 36.8% due to a favorable sales mix [and] operating leverage” (CFO Glenn D’Alessandro) .
  • “Commercial aftermarket really, really feels good to us” and the 90-day lead-time strategy “worked wonders” by improving visibility and pricing (CEO) .
  • Initial FY2025: “Net sales between $470 million to $480 million; adjusted EBITDA between $176 million and $180 million… adjusted EBITDA margin approximately 37.5%” (CEO) .
  • “Operating cash flow minus capital expenditures [in 2025] to be greater than 125% of our net income” (CEO) .

Q&A Highlights

  • 2025 guidance risk/opportunity: Management framed guidance as initial and achievable despite OEM challenges; aftermarket “cautiously optimistic,” defense strong with backlog; minimal risk from Boeing OE given ~$6M annual OE exposure .
  • Aftermarket outperformance: Broad-based platform strength; market share gains and new products; management declined to quantify Applied Avionics contribution in pro forma view .
  • FY2025 growth arithmetic: Expect ~14% pro forma total growth; commercial OE/aftermarket high-single-digit, defense high-double-digit; non-aviation down YoY .
  • Q4 margin deceleration: Mix shift towards defense and OEM delays (Boeing/Textron strike “love letters”) pushing ~$3M to Q1; customer requests to move aftermarket shipments into January .

Estimates Context

  • Wall Street consensus estimates (S&P Global) for Q3 2024 EPS and revenue were unavailable at the time of this analysis due to SPGI request limits. As a result, we cannot provide a quantitative vs-consensus comparison for Q3 2024 in this report. Values that compare to estimates are therefore not included.

Key Takeaways for Investors

  • Operating momentum: Sustained demand across commercial and defense end-markets with record sales and margin expansion; adjusted EBITDA grew ~32% YoY and margin reached 36.8% .
  • Aftermarket remains a pillar: 90-day lead-time strategy is boosting visibility and pricing; aftermarket up 19% YoY and 16% QoQ in Q3, with strong bookings/backlog support .
  • Near-term margin watch: Q4 margin to decelerate vs YTD on mix and OEM strike effects; management quantified ~$3M revenue shift to Q1 .
  • FY2024 reset reflects higher financing costs: Sales and adjusted EBITDA raised, but net income and adjusted EPS lowered on increased interest expense tied to the Applied Avionics deal .
  • FY2025 setup: Initial guide calls for ~$470–$480M sales, ~$176–$180M adjusted EBITDA, ~37.5% margin and OCF – capex >125% of net income, signaling strong conversion and continued execution of value drivers .
  • M&A discipline continues: Applied Avionics integration aligns with proprietary, aftermarket-rich portfolio and cross-selling potential; management targets doubling deal EBITDA within 3–5 years .
  • Trading lens: Narrative hinges on aftermarket durability and defense backlog conversion vs. OEM cadence; watch Q4 mix/margin, booking trends, and confirmation of FY2025 margin target trajectory .