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Loar posted record Q1 2026 results, with sales of $156 million, record adjusted EBITDA margin of 40.5%, and cash conversion coverage to net income of 230%. Commercial aerospace strength more than offset a 2% decline in defense sales.
The company raised full-year 2026 guidance on expectations for continued demand and execution, now forecasting $645 million to $655 million in sales and $257 million to $262 million in adjusted EBITDA. Management also said commercial OE and aftermarket sales should grow in the low double digits, while defense sales are expected to rise mid-single digits.
Loar’s growth pipeline continues to expand, with roughly $700 million of organic new business opportunities expected to convert over the next five years, up about $100 million from February. Management said less than 15% pipeline conversion would be enough to support its 3% annual growth target from new business.
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Loar (NYSE:LOAR) reported record first-quarter 2026 sales, adjusted EBITDA and adjusted EBITDA margin, while raising its full-year outlook as strength in commercial aerospace offset softer defense sales.
Chief Executive Officer and Executive Co-chairman Dirkson Charles said the quarter provided “a resilient foundation for 2026,” pointing to record quarterly results and cash conversion coverage to net income of 230%. He also said the company’s book-to-bill ratio was greater than 1x in the quarter, with strong customer orders supporting management’s confidence in the year ahead.
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Treasurer and Chief Financial Officer Glenn D’Alessandro said total sales rose to $156 million in the first quarter, an 11% increase from the prior year on a pro forma basis. He said net organic sales also increased 11% from the prior-year quarter.
Loar’s commercial businesses drove the quarter’s growth. D’Alessandro said commercial aftermarket sales increased 11% from the prior year, supported by continued demand for commercial air travel and an aging commercial fleet. Commercial OEM sales rose 18%, reflecting higher sales across many of the platforms Loar supplies and continued improvement in the commercial OEM production environment.
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Defense sales declined 2% year over year. Charles said the decrease reflected changes in customer ordering patterns for F-18 brakes and the RC-135 autothrottle, both proprietary products supplied exclusively by Loar. He said defense ordering can fluctuate unexpectedly and described the shortfall as tied to timing rather than a change in the company’s long-term position.
“If history provides any indication, we expect our customers to return to their habitual, albeit somewhat unpredictable ordering patterns for the remainder of 2026,” Charles said.
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Despite the decline in defense revenue, Charles said the defense end market had Loar’s highest book-to-bill ratio during the quarter and ended with record backlog for defense products.
Adjusted EBITDA increased by $20 million from the prior-year quarter, which D’Alessandro attributed primarily to operating leverage and execution of the company’s strategic value drivers. Adjusted EBITDA margin reached a record 40.5%, up 290 basis points from the first quarter of 2025.
D’Alessandro said gross profit margin decreased by 130 basis points from the prior year, primarily due to higher non-cash amortization of acquired intangible assets and a non-recurring, non-cash inventory step-up adjustment related to the acquisitions of LMB Fans & Motors and Harper Engineering. He said those two items totaled $11 million. Excluding them, gross profit margin would have been 57.6%.
Net income decreased by $4 million in the quarter, mainly due to higher interest expense and the non-cash acquisition-related items. Loar also introduced adjusted net income as a new metric, which excludes non-cash amortization of acquired intangible assets and certain non-recurring charges. D’Alessandro said adjusted net income increased by $5 million, or 20%, from the prior-year quarter.
Ian McKillop, director of investor relations, said Loar’s organic new business pipeline now totals approximately $700 million of potential revenue expected to convert over the next five years, up about $100 million from the figure shared in February. Slightly more than half of the opportunities are tied to the commercial end market, with general aviation and defense each representing roughly a quarter.
McKillop said Loar defines new business in two primary ways: new products or technologies for new or existing customers, and existing products expanded to new customers through market share gains or platform wins. He said converting less than 15% of the current pipeline over time would be enough to support Loar’s targeted 3% annual growth from new business.
During the question-and-answer session, Charles said the company has line of sight on all $700 million and described the opportunities as more “pull than push,” with customers attached to the pipeline. He added that timing remains difficult to predict because certification and customer processes can move to the right.
Loar raised its full-year 2026 outlook, citing demand across its end markets, performance from LMB Fans & Motors and Harper Engineering, and continued execution of internal initiatives. Charles said the updated outlook assumes no additional acquisitions.
Adjusted EBITDA: $257 million to $262 million
Adjusted EBITDA margin: approximately 40%
GAAP net income: $53 million to $57 million
Capital expenditures: approximately $19 million
Charles said Loar still expects low-double-digit growth in commercial OE and commercial aftermarket sales in 2026, while defense sales are expected to increase by mid-single digits, supported by record backlog at the end of the first quarter.
Management also reiterated its longer-term target of growing sales organically at 10% or more and adjusted EBITDA at 15% or more annually. Charles said the company expects new product growth to be the leading driver of organic growth in 2026, with new part qualifications in the first half of the year expected to support increased sales beginning in the second half.
On commercial aftermarket demand, Charles said customers have so far had a moderate reaction to higher fuel costs. He acknowledged that airlines are rationalizing capacity, which could create a temporary reduction in unit demand after a lag, but said Loar expects to mitigate any financial impact through its proprietary product portfolio and internal value drivers.
Management also discussed the company’s acquisition strategy. Executive Co-chairman Brett Milgrim said Loar continues to have a large M&A pipeline but remains disciplined in seeking proprietary aerospace businesses that meet its return thresholds. He said the company remains confident in maintaining its historical cadence of one to two acquisitions per year over the long term.
In response to analyst questions about margins, Charles said Loar does not rely on a “razor blade” model and aims to generate attractive economics across OE, aftermarket and defense products. He cited price over inflation, productivity initiatives, operating leverage and proprietary content as factors supporting margin performance.
“I personally don’t care where the growth comes from,” Charles said. “I know everybody’s focused on aftermarket, which we love, and it’s half of our business, but I don’t care if it’s defense, I don’t care if it’s OE Commercial, we’re gonna make good money.”
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.
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The article "Loar Q1 Earnings Call Highlights" was originally published by MarketBeat.
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