Loar (NYSE:LOAR) executives used the company’s fourth-quarter and full-year 2025 earnings call to highlight record annual results, strong commercial aftermarket demand tied to an aging global fleet, and an upward revision to 2026 guidance that incorporates recent acquisitions LMB Fans & Motors and Harper Engineering.
Record 2025 results and end-market performance
Founder and CEO Dirkson Charles said Loar “exceed[ed] all our key annual financial goals” in 2025, with annual records in sales, adjusted EBITDA, adjusted EBITDA margins, and free cash flow.
By end market, D’Alessandro cited the following growth rates:
- Commercial aftermarket: up 19% for 2025 and up 34% in Q4, driven by strength in air travel demand and an aging fleet.
- Commercial OEM: up 11% for 2025 and up 8% in Q4, driven by higher sales across platforms and an improving production environment.
- Defense: up 19% for 2025 and up 14% in Q4, attributed to demand across multiple platforms and market share gains tied to new product launches. Management emphasized defense ordering patterns can make results “lumpy.”
Margins, earnings, and cash flow highlights
D’Alessandro said fourth-quarter gross margin increased 320 basis points year over year, primarily due to operating leverage, execution on the company’s “strategic value drivers,” and favorable sales mix. He attributed a $9 million year-over-year increase in Q4 net income primarily to lower interest expense. Adjusted EBITDA rose $10 million year over year in the quarter, with adjusted EBITDA margin of 38.7%, partially offset by additional public company costs such as Sarbanes-Oxley compliance and reporting-related organizational expense.
For the full year, D’Alessandro reported gross margin of 52.7%, up 330 basis points year over year, and said net income increased $50 million versus 2024 due to lower interest expense and higher operating income. Adjusted EBITDA reached a record $189 million, up $43 million, and adjusted EBITDA margin expanded 180 basis points. He added the company does not expect public-company cost increases going forward and believes the run rate is reflected in 2025 results.
Free cash flow conversion (defined as operating cash flow less capex) was 138% in 2025, and 160% excluding what management described as a one-time $10 million tax benefit from the “One Big Beautiful Bill Act.”
Drivers: aging fleets, OEM production ramp, and a large new-product pipeline
Charles pointed to multiple tailwinds supporting demand. In commercial aftermarket, he said the average age of the in-service fleet has increased from roughly 11 years pre-COVID to 14+ years today, and that aircraft retirements have fallen from a historical 2.5% annual rate to 1.5% in 2025, trends he said should support aftermarket demand into the 2030s.
On the OEM side, Charles said Airbus and Boeing plan to produce approximately 1,900 and 1,300 aircraft, respectively, over the next two years, representing a compound annual growth rate increase of about 15% over 2025 production rates. Loar expects proprietary products on those platforms to benefit as production ramps.
Management repeatedly emphasized new product introductions as a key growth driver. Charles said the company tracks a monthly pipeline of opportunities and described the pipeline as representing over $600 million in sales over the next five years, excluding potential top-line synergies expected from adding capabilities through LMB and Harper. In the Q&A, executives said they expect new product introduction to be the largest contributor to organic growth in 2026 and beyond.
M&A strategy and the additions of LMB and Harper
Executive Co-Chairman Brett Milgrim emphasized Loar’s diversified portfolio—balanced across OEM and aftermarket exposure—and said no single SKU accounts for more than 3% of overall revenue, with more than 25,000 SKUs in total. He also said Loar has invested over $1.1 billion in M&A since going public less than two years ago, calling acquisitions the company’s largest use of free cash flow and saying Loar has doubled the size of the business in two years as a public company, including the latest announced deals.
Milgrim said LMB, acquired in late December, is based in southern France and makes engineered cooling devices—customized fans, motors, and systems used in niche military applications. He described LMB’s portfolio as 100% proprietary and said it provides exposure to European defense markets, with an opportunity to expand in the U.S. market where LMB currently has limited penetration. He also said the business is margin accretive to Loar.
Milgrim described Harper as an interior securing components business focused on latching mechanisms and said the company has an established relationship with Boeing. Charles added that Harper is “99.9% proprietary,” and defined “proprietary” as being the primary source for a part—where the customer cannot go elsewhere for that part. Charles said Loar’s overall proprietary portfolio has increased from 85% at the time of its S-1 filing to 89% based on a recent internal calculation.
In Q&A, management said the M&A environment has become more active, with more willing sellers, but stressed discipline on valuation and asset quality. Asked whether the historical “one to two deals per year” pace could increase, executives said it could, depending on opportunities and returns.
2026 outlook raised; EPS shaped by acquisition accounting
Charles said Loar was issuing an upward revision to its 2026 outlook. On a pro forma basis and including LMB and Harper, the company guided for:
- Net sales: $640 million to $650 million
- Adjusted EBITDA: $253 million to $258 million
- Adjusted EBITDA margin: approximately 40%
- Net income: $59 million to $63 million
- Adjusted EPS: $0.76 to $0.80
Charles said adjusted EPS guidance was lower than the prior guide because it now reflects incremental non-cash depreciation and amortization associated with the LMB and Harper acquisitions, plus interest expense tied to funding those transactions. In response to an analyst question, management also noted one-time transaction expenses (accounting and legal fees) and required purchase accounting write-ups and amortization of intangibles as contributors, with the largest driver described as non-cash items.
Additional 2026 guide details included capital expenditures of about $19 million (roughly 3% of sales), interest expense of $80 million, an effective tax rate of 25%, depreciation and amortization of $75 million, non-cash stock-based compensation of about $17 million, and a share count of 97 million. Charles said the outlook assumes no additional acquisitions, though management reiterated an intention to pursue one or two deals annually while noting timing is unpredictable.
On end-market expectations for 2026, Charles said commercial OEM and aftermarket growth is expected to be “low double digits,” while defense sales are expected to be up “mid-single digits” after a strong 2025. He also said the company discounted Boeing and Airbus build-rate assumptions by 10% to 20% when setting its OEM outlook.
About Loar (NYSE:LOAR)
Loar Holdings Inc, through its subsidiaries, designs, manufactures, and markets aerospace and defense components for aircraft, and aerospace and defense systems in the United States and internationally. It offers products in various categories, which include airframe components, structural components, avionics, composites, braking system components, de-ice and ice protection, electro-mechanical, engineered materials, flight controls, fluid and motion controls, environmental, metal forming, molded components, and restraints and safety devices.
