Loar (LOAR) Q2 2025 Earnings Call Transcript

Image source: The Motley Fool. DATEWednesday, August 13, 2025 at 10:30 a.m. ETCALL PARTICIPANTSFounder, Chief Executive Officer, and Co-Chairman — Dirkson CharlesPresident and Co-Chairman — Brett MilgrimChief Financial Officer — Glenn D'AlessandroChief Operating Officer — Ian McKillopNeed a quote from a Motley Fool analyst? Email [email protected]TAKEAWAYSRecord Quarterly Sales-- Sales reached $123 million in Q2 2025, up 13% year-over-year on a pro forma basis, driven by growth in commercial aftermarket, commercial OEM, and defense segments.Commercial Aftermarket Revenue-- Increased 13% in Q2 2025 versus Q2 2024, with sustained demand and strong bookings explicitly cited.Commercial OEM Sales-- Rose 14% in Q2 2025, primarily due to higher sales across key platforms.Defense Sales-- Defense sales grew 19% in Q2 2025 versus Q2 2024, attributed to strong demand and new product launches.Net Organic Sales Growth-- Net organic sales increased 11.3% over the prior period.Gross Profit Margin-- Gross profit margin for Q2 2025 increased by 480 basis points as compared to the prior year period, reflecting execution of strategic value drivers and a favorable sales mix.Adjusted EBITDA-- Adjusted EBITDA increased $12 million in Q2 2025 versus Q2 2024; adjusted EBITDA margin reached a record 38.3%, Adjusted EBITDA margin was up 220 basis points from Q2 2024, despite public company cost headwinds.Net Income-- Net income increased by $9 million in Q2 2025 versus Q2 2024, driven by higher operating income and lower interest expense.Cash Flow Conversion-- Year-to-date cash flow conversion percentage was 148% in calendar year 2025, with guidance above 125% for calendar year 2025 and management referencing cash generation as a strategic focus.Updated 2025 Revenue Guidance-- Net sales guidance raised to $486 million to $494 million for calendar year 2025, previously $482 million to $490 million.2025 Adjusted EBITDA Guidance-- Adjusted EBITDA guidance increased to $184 million to $187 million for calendar year 2025, up from $182 million to $185 million.2025 Adjusted EBITDA Margin Guidance-- Now approximately 38% adjusted EBITDA margin (non-GAAP) for calendar year 2025, a 170 basis point increase in adjusted EBITDA margin over 2024.2025 Net Income Guidance-- Guided to net income of $65 million to $70 million.2025 Adjusted EPS Guidance-- Increased to $0.83 to $0.88 adjusted EPS, described as up 16% from previous guidance by CEO Dirkson Charles.CapEx Expectations-- Projected CapEx of approximately $14 million, or 2%-3% of sales.Interest Expense-- Full-year 2025 interest expense guided to $26 million, reflecting a $2 million reduction in full-year interest expense.Effective Tax Rate-- Estimated at 25%.Beadlight Acquisition-- Expected to add mid-single-digit millions ($2 million in revenue), with nearly breakeven EBITDA contribution; major operational and financial synergies anticipated in 2026 and beyond.OEM Platform Mix-- Sales concentrated in Airbus A320 and Boeing 737 platforms.Production Exit Rates-- Anticipated monthly ship set demand for Airbus A320 at year-end CY2025: 53 per month, 33 per month for Boeing 737 MAX family exiting calendar year 2025.Diversification-- No single product comprises more than 3% of annual net revenue; portfolio exceeds 20,000 unique parts.Engine Exposure-- Engine products account for about 7% of revenue.New Product Pipeline-- Robust pipeline totals more than $500 million in sales potential over the next five years; 2025 contribution is expected at the low end of the 1%-3% annual organic growth target range.Pending LMB Fans and Motors Acquisition-- Awaiting regulatory approval, with a likely decision in September; not included in current guidance.Pricing Strategy-- Management affirmed achievement of price gains above cost inflation each year, supporting margin improvements.SUMMARYLoar Holdings(LOAR -2.14%) delivered record quarterly financial results, Increased guidance for revenue, adjusted EBITDA, and adjusted EPS for CY2025, and reported continued improvement in gross profit margin and adjusted EBITDA margin despite new public company costs. Management confirmed strong momentum across all market segments and cited no signs of demand weakness or material impact from tariffs, and updates on its new product pipeline. The call indicated defense sales strength at high double-digit rates, with management guiding defense end market sales to increase between 17% and 20%, a significant multi-year opportunity pipeline, and a tone of confidence in 2026 and beyond.CEO Dirkson Charles emphasized, "We have exceeded every performance metric that we measure, including record sales, adjusted EBITDA, and adjusted EBITDA margins." directly noting record results in sales, adjusted EBITDA, and margin achievement.Management stated the updated 2025 guidance "is in excess of what we told you thirteen weeks ago," highlighting operational outperformance and execution of value drivers.Beadlight's contribution is projected as "mid-single-digit millions" in revenue, but management called its longer-term synergy with existing businesses "significantly accretive" for calendar year 2026 and beyond.The pipeline for new product introductions was described by CEO Dirkson Charles as "over $500 million of sales over the next five years," with growth rates expected to strengthen in 2026 and 2027 as certification delays are resolved.Brett Milgrim revealed that the LMB Fans and Motors acquisition is in a "holding pattern" pending regulatory approval, explicitly stating, "the earliest we will hear something is September." with no forecasted benefit to 2025 results.Chief Operating Officer Ian McKillop clarified, "Engines are roughly 7% of our overall revenue, and they grew in line with our commercial aftermarket and OE growth rates." (as discussed on the Q2 2025 earnings call) confirming no sector weakness in this category.INDUSTRY GLOSSARYOEM (Original Equipment Manufacturer): Refers to manufacturers who produce new aircraft for delivery to airlines or operators, as opposed to aftermarket or replacement products.BFE (Buyer-Furnished Equipment): Equipment purchased directly by airlines and supplied to the aircraft manufacturer for installation on new aircraft.SFE (Supplier-Furnished Equipment): Equipment provided by the manufacturer or supplier as part of the aircraft's original build specification and delivered installed on the aircraft.Sole Source/Sole Sourcing: A procurement scenario where a customer, such as an airline, can obtain a specific part or product only from one supplier, often due to proprietary design or certification exclusivity.Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, and other specific adjustments, used as a measure of core operating profitability.Full Conference Call TranscriptDirkson Charles: Thanks, Ian. So I have a confession to make. But before I tell you what that is, let me share one last school day moment we had during our IPO roadshow. Regarding giving guidance, we call it the Heather Rule. So look, everyone we met during the roadshow told us when you give guidance, ensure that you will achieve it. Do not be overly aggressive, be clear, keep it simple, all good advice.One person we met, Heather, gave us the same advice, but there was something about how she said it that in the elevator ride after the meeting, we drew straws to see who would deliver the message if ever we were not meeting or exceeding what we guided to. Heather, your message resonated. And for the record, Ian drew the short straw. Fortunately for Ian, we once again are delivering great news. We have exceeded every performance metric that we measure that demonstrates the strength of the aerospace component cash compounder that we are building, including record sales, adjusted EBITDA, adjusted EBITDA margins, and tremendous growth across all our market sectors. So hi Heather. Now for the confession.We usually start our earnings call two minutes late because most of you call in late. For the record, it has gotten worse, so here's my confession. I'm stalling to make sure that when we start, I have most folks on the line, especially since the number of callers has more than tripled since our last call. So let's get started. We're good? I'm Dirkson, founder, CEO, and co-chairman of Loar. As always, we keep our remarks brief. So let's start by reminding you who we are. Loar is a family of companies, with a very, very simple approach to creating shareholder value.First, we believe that by providing our business units with an entrepreneurial and collaborative environment to advance their brands, we will generate above-market growth rates. Since our inception in 2012 through the end of calendar year 2024, we have grown sales and adjusted EBITDA at a compound annual growth rate of 37% and 45%, respectively. Over the long term, we expect to increase sales organically in double-digit percentages, with the last three years 2022, 2023, and 2024 achieving organic sales growth of 18%, 14%, and 15%, respectively, with adjusted EBITDA growing at a faster rate. We execute along four value streams.We identify pain points within the aerospace industry and look to solve those problems by organically launching new products, which we believe over the long term will create one to three percentage points of top-line growth annually. We track the pipeline of new product introductions monthly. It represents a list of opportunities across our portfolio of companies that are derived from listening to our customers to identify their pain points to determine how we can help. It is created from the sharing of ideas, best practices, and customer synergies across the group through the high degree of collaboration that we foster across our business units. This list currently represents over $500 million of sales over the next five years.So let's do some simple math. Let's assume that the opportunity is equal-weighted by year. So in other words, we have a pipeline of $100 million of new product launches in calendar year 2020. All we need to do to be successful is deliver $5 million to $15 million of such opportunities to achieve our 1% to 3% annual growth rate. Here is the beauty of the list, though. It is a living, breathing entity that grows each year. Look, we also focus on optimizing the way we manufacture, go to market, and manage our companies to enhance productivity.Each year we'll identify initiatives that will allow us to continually improve our performance with a focus on one or two major initiatives each year that will improve margins. In addition, across our portfolio companies, we will achieve more price than our cost of inflation each year. The result is a continuous improvement in margins year over year, with on occasion a temporary dilution as a result of acquiring a business with diluted margins or incurring costs as a result of being a public company. All of which we have experienced over the years, but regardless of these temporary headwinds, we continue to improve our margins.Most importantly, we are committed to developing and improving the talent of our employees because our success is solely a result of their dedication and commitment. So again, as always, to all my mates, a big thank you for your commitment and hard work. Before I turn the call over to Brett, I wanted to highlight one metric that we measure relative to the quality of the cash flow that we generate. It is our cash flow conversion percentage. As shown on Slide six, in 2025, the total of our flow from operations minus capital expenditures when divided by net income was 175% and 125%, respectively. Year to date, our conversion percentage was 148%.While there's no real seasonality in our business when it comes to cash flow, we do pay our bonuses and make our first installments to the IRS related to our annual income tax payment requirements in the second calendar quarter. As we said last quarter, we expect our cash flow conversion percentage to be greater than 125% for calendar year 2025. Look at this chart. Think of this guide as a heathen home. I will now turn it over to Brett to walk you through the key characteristics of our portfolio and discuss our most recent addition to our family of companies.Brett Milgrim: Thanks, Dirkson. I think this is a slide most of you have seen before. It's basically a graphical representation of how our business has been constructed. As you know, we have constructed more on two basic tenets. First, we want to be a balanced company that participates in the annuity stream that any platform can provide, starting from initial production all the way through the aftermarket life cycle of the aircraft flying.And whether that's a commercial aircraft, a business jet, we just want to participate in that a general aviation aircraft or something in the military, annuity both in the new production side or the OEM piece of the business and the aftermarket piece of the business for its life cycle. Second, we do that around a business model that looks like this. It starts with being solely focused on the aerospace and defense industry and is centered around proprietary products. Those products oftentimes participate in niche markets that have significant aftermarket exposure that provides us cross-selling opportunities that we can bring to all our customers so we can bring a suite of products to solve our customers' pain points.All these characteristics meet our most recent acquisition, which we're very excited about, called Beadlight. Beadlight is a business located in the UK that is a relatively new business making lighting products for premium seat applications, particularly in the commercial OE and aftermarket business segments. The business has had a lot of growth recently, starting from a new where they've been able to recently win some new programs, gain some market share, and start a path of real cash flow generation that we'll talk about in a little bit. Where we think the growth over the next several years is going to be very, very significant.Ian McKillop: So we move on to our products. As we shared with you in previous calls, this graphic represents the many products that we go to market with. The acquisition of Beadlight brings with it a suite of niche products and capabilities. You can find Beadlight's bespoke lighting and interior components across premium areas of the cabin and commercial airlines around the globe. And as a reminder, at Loar, we go to market with an average of more than 20,000 unique parts, of which no one product makes up more than 3% of our annual net revenue.Our customers have come to depend on our high proprietary products, quality, on-time performance, engineering capabilities to ensure that they are able to maximize their production and aircraft operations. If we move on to OEM bill rates, as many of you know, narrow-body aircraft demand is at an all-time high, with Boeing and Airbus working to increase production to meet the market. The A320 and 737 platforms are also two largest platforms by net sales at 76%, respectively. As such, we wanted to update provide an update with our present forecast for demand exiting 2025. Before I do, I remind you of something that we've said before. We make things for a living.This is our way of saying that over the long term, beyond thirteen-week quarters, demand will follow airframe build rates. However, quarter to quarter, week to week, and even day to day, every one of our eighteen businesses is managing unique material, labor, inventory, and technological challenges that impact production. This is just the nature of being a manufacturing organization. To demonstrate the variability in monthly demand we see for our parts, for the 737 and A320 family original equipment, we've delivered anywhere from 10 shift sets to 60 shift sets of parts per month. This has nothing to do with the overall demand as more than three-quarters of the backlog of 15,000 aircraft are for these two platforms.It's just because we make parts for a living. That said, we see the Airbus A320 ship sets demand exiting the year at 53 per month while the 737 max family is at 33 per month. I'll now pass the call over to Glenn.Glenn D'Alessandro: Thank you, Ian. Good morning, everyone. Let me start by discussing sales by our end markets. This comparison will be on a pro forma basis as if each of our businesses were owned as of the first day of the earliest period presented. This market discussion includes the acquisition of Applied Avionics in Q3 2024. We achieved record sales during Q2 2025. In total, our sales increased to $123 million, which is a 13% increase as compared to the prior year. This increase was driven by strong performances in commercial aftermarket, commercial OEM, and defense. Our commercial aftermarket sales saw an increase of 13% in Q2 2025 versus Q2 2024.This is primarily driven by the continued strength in demand for commercial air travel. We continue to see strong commercial aftermarket bookings. Our total commercial OEM sales increased by 14% in Q2 2025 as compared to the prior year period. This increase was driven by higher sales across a significant portion of the platforms we supply. The increase of 19% in our defense sales was primarily due to strong demand across multiple platforms and an increase in market share as a result of new product launches. Defense sales continue to be lumpy given the nature of the ordering patterns of our end customers for our products. Let me recap our financial highlights for 2025.Our net organic sales increased 11.3% over the prior period. Our gross profit margin for Q2 2025 increased by 480 basis points as compared to the prior year period. This increase was primarily due to the execution of our strategic value drivers, operating leverage, as well as a favorable sales mix. Our increase in net income of $9 million in Q2 2025 versus Q2 2024 is primarily due to higher operating income and lower interest. Adjusted EBITDA was up $12 million in Q2 2025 versus Q2 2024. Adjusted EBITDA margins were a record 38.3% in Q2 2025 due to the execution of our strategic value drivers, operating leverage, and a favorable sales mix.This was partially offset by additional costs associated with being a public company, including Sarbanes-Oxley compliance, and additional organizational costs to support our reporting, governance, and control needs. We do not see a material increase in these types of costs going forward. We believe the run rate of these costs is fully reflected in our Q2 2025 results. From 2020 through 2025, we will have increased our EBITDA margin by 710 basis points. We achieved this growth through the following: operating leverage, winning new profitable business, executing on productivity initiatives, and from value-based pricing. In Q2 2025, our margins grew 220 basis points from Q2 2024 to a record 38.3%.This was achieved even with the negative impact of costs related to Sarbanes-Oxley compliance and additional organizational costs to support being a public company. And before I turn it back over to Dirkson, I wanted to mention I had a different take on that Heather rule. I'm pretty sure she looked directly at me when she was sharing her advice. I'm pretty sure that stare lasted for at least thirty minutes. And now I'd like to turn it back to Dirkson to share our outlook for 2025.Dirkson Charles: We look. We are excited to share our most recent view for calendar 2025. This view is in excess of what we told you thirteen weeks ago, and our confidence rests in the great strides we have made executing on our value drivers in the first half of 2025. And the strength of our proprietary portfolio. Primarily, we are ahead of our plan on our value pricing and product productivity initiatives. In addition, we have seen no degradation in demand in any of our end markets and expect no meaningful impact to our results as a result of the current tariff environment.The one end market dynamic of note is what Ian discussed previously regarding the volatility we are seeing in the demand for OE commercial product. As the OEMs and Tier 1s manage the growth in OE production, they're going through the growing pains of managing inventory levels and supply chain choppiness. This will result in choppy growth rates over a thirteen-week period. Thus, in spite of the strong organic OE commercial growth we have experienced in the current quarter, we will hold our organic growth to this end market at high single digits for 2025. Again, think of it as a Heather moment.Regards to commercial aftermarket, we expect low double-digit growth while our defense end market sales will be up high double digits, again, think between 17% and 20%. These market assumptions along with our continued execution of our value drivers will allow us to meet or exceed the following calendar year 2025. Net sales between $486 million to $494 million, up from $482 million to $490 million. Adjusted EBITDA between $184 million and $187 million, up from $182 million to $185 million. Adjusted EBITDA margin of approximately 38%, which is a 170 basis point improvement over 2024. Net income between $65 million and $70 million.EPS between adjusted EPS between 83 and 88 cents, which is up 16% from our previous guidance. And as always, in addition, CapEx of approximately $14 million, so dollars around 2% to 3% of sales as we typically expect. A reduction of $2 million of full-year interest expense to $26 million and an effective tax rate of 25%. Depreciation and amortization, non-cash stock-based comp, and our fully diluted share count all remain unchanged. Now, with that said, our updated guidance does not include any benefit from our most recently announced pending addition to our family of companies, LMB Fans and Motors.And to be clear, our guide includes any impact we see today related to the current tariff environment, which has been mostly just noise. It also includes the benefit of five months of ownership of Beadlight. For the full year of 2025, we expect and again for the full year of 2025, we expect Beadlight to do mid-single-digit millions of sales. With slightly above breakeven EBITDA margin. What we are excited about is the contribution to our results in calendar year 2026 and beyond. Given that Beadlight's current rich pipeline of opportunities and recent program wins have been significant.Once we bake our low value drivers into Beadlight's DNA, we expect to see a tremendous increase in such opportunities primarily due to the top-line synergy that is created with the customers that we'll be able to introduce Beadlight to. Especially the customers of Schroth, our seat belt restraint business. We expect Beadlight will be accretive to our results in 2026. With that operator, let's open the line for questions.Operator: Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to remove yourself from the queue.Sheila Kahyaoglu: Good morning, guys, and thank you for the time. Dirkson, I also have a confession to make. I might change my name to Heather after this call because she sounds like a pretty cool girl.Dirkson Charles: Yeah. Oh, she is. Yeah. Yeah. Or with the contribution of the new acquisition in the $5 million range. How do we think about where LMB is in terms of that process still pending? And is it still expected to close in Q3? Then how do you think about potential for future transactions from here?Brett Milgrim: Yeah. Hi, Sheila. This is Brett. Actually, I'll answer the LMB question. As it relates to LMB, we are still in, I'll call a holding pattern with the regulators. We are waiting for regulatory approval, which we're still optimistic about. We have had a lot of contact over the last several weeks with a number of the French authorities answering some follow-up questions. Having them speak to some of the management at LMB. As you may remember, we overwhelmingly had approval by the work council there for the acquisition. The management team's excited about our upcoming ownership.And we still think we are the best buyer for the asset given our plans to grow the business, to keep it where it's currently located, and to support the employees. All benefiting the French economy and the French military. That being said, as you know, most folks particularly those in the government go on holiday in August. So I think the earliest we will hear something is September. So hopefully, we can get that in before the end of the third quarter. But it's obviously taking a bit more time than we had hoped. So no promises, but we're still optimistic.Dirkson Charles: And Sheila, I'll take the other part of your question regards to Beadlight. As I said earlier, Beadlight is roughly mid-single-digit millions of top-line sales. And it's a business that started recently so much younger than most of the businesses that we own. But is run by a dynamic team with a great leader Gina Hames. Hopefully, you'll get to meet her one day. Who has created a pipeline of opportunities that is I use this word to describe it, incredible. And that's without having the support of what we will bring in terms of the breadth of the additional customers that we'll get to put Beadlight in front of.As we think about the guide, given we only gonna own them for five months or so and they are new for us, we thought about it thinking about Heather. Okay, so you appreciate what that means now. And we have included sales approximately $2 million and, you know, barely any profit in the guidance we have there. The way to think about the improvement in our guide, it's all gonna use this term, organic, and we're hopeful that the time we meet again in thirteen weeks or so, and we've gotten our hands around Beadlight, which we just closed two weeks ago. That we'll be able to share even more progress around Beadlight.So, but we're excited to include them in the Yeah. Well, what we can say is 2026 is gonna be a very exciting year where I can set the expectation that the price that we pay for Beadlight will look very, very attractive relative to the '26 earnings, given what we know is in the pipeline and given what we know are some of the new program wins that they've had, which again, to Dirkson's point are not inconsequential given this is a relatively new entrant into the lighting marketplace. They've done a great job.They've gotten and developed great customer relationships that have some real synergy, particularly with our Schroth business because they both have seating customers as well as airline customers that overlap. So this is a really good strategic fit for us as well as one that will starting I think next year have real significant financial performance.Sheila Kahyaoglu: Okay. That's really helpful color. Can I ask one more if that's possible?Dirkson Charles: Go for it. Absolutely.Sheila Kahyaoglu: Okay. Commercial aftermarket, I think, grew 12.5% organically or on a pro forma basis. We've heard a lot of folks talk about the differences between engine and airframe. Any thoughts you have there on what you're seeing in your business? I know the portfolio is well-rounded, but any exposure you have to engine in your commercial aftermarket.Ian McKillop: Yeah. I'll say this. So just to give a little bit more information in the detail, and this is Ian, by the way. Engines are roughly 7% of our overall revenue. And they grew in line with our commercial aftermarket and OE growth rates. So low double digits. So no big degradation or deviation between engines and the broader aftermarket in our portfolio.Dirkson Charles: And I'll take a little step beyond. We haven't seen any changes in terms of the demand dynamics relative to commercial aftermarket. Still consistently strong, we're still taking use this term, market share with our new product introductions. And the pricing dynamics have been pretty good.Sheila Kahyaoglu: Great. Thank you.Operator: Thank you. Our next question has come from the line of Ken Herbert with RBC Capital Markets. Please proceed with your question.Ken Herbert: Yeah. Hey, good morning, everybody. Thanks for squeezing me in here. Hey, I just Dirkson, I wanted to follow-up on that, your last commentary on the new business opportunities in the pipeline. How do we think about that from a timing standpoint? I can appreciate sort of the five to 15 gets you to the one to 3%. Are you seeing more than that maybe in this in 2025, or is that more 2026-2027 as you convert some of the new opportunities in the pipeline into actual revenues?Dirkson Charles: So I'll answer it this way. Kenneth. Thanks for the question, by the way. 2025, new product introduction is probably closer to the low end of that one to three guide. I'll say it that way. And that's due to a number of things including a number of certifications that we've seen delayed that we see growing nicely in 2026 and 2027. Some of our new entrants into market have been most recent. So we'll see the benefit of that in 2026 and 2027.As I think about 2026 and 2027, I would expect would be closer to the higher end of the guide that we typically give 1% to 3% in those years and since in terms of the growth rate because we're actually seeing a lot of improvement in terms of the FAA actually moving now on some of our certifications that we've talked about in the past. And we're going through flight tests, and pretty close to getting a lot of the platforms certified that we've been focused on. So great question. Greater rates in 2026 and 2027 than 2025. In terms of growth.Ken Herbert: Perfect. Thanks, Dirkson. And if I could, as a follow-up, you know, there's a growing narrative that aftermarket sales could see incremental pressure as a lot of the airlines are able to sort of bring more savings out of either their maintenance spending or maybe more particular, through parts inventory. And I think we can all appreciate, you know, airlines have built up significant sort of buffer stocks as a result of just supply chain disruptions over the last few years. How much of a headwind do you think sort of better efficiency out of the airlines could be to your aftermarket business not so much in 2025, but maybe in 2026 and 2027?And is that a longer-term thematic risk you view, to the end market, or where do you think we stand, from that standpoint?Dirkson Charles: So I think that the portfolio that we have is likely a lot different than some of the other companies that you're probably thinking about this question for. And I hate using this word, the lawyers are telling me, you know, keep it to a minimum. I'll use it this one time. Sole source, proprietary, it's very difficult for an airline to manage when the way you describe it without having an alternative. Right? So what we're seeing is consistent demand. Right? I don't want to give quarterly guidance and I don't want to give guides beyond what we've done. But I really, really have not seen any change on the commercial aftermarket in terms of the strength of demand.Where we're seeing the choppiness is on the OE side, which is why we want to spend time on this call. Sharing that information. We've seen companies do the following. Truly, truly manage hard their stock. Inventory on the commercial OE side because as they now convince themselves that Boeing has gotten their act together, Airbus is gonna continue to get better, they don't need to keep the extra stock around. The supply chain is getting a little bit better. And all of those things. So there may be some choppiness on the commercial OE side. I don't see it on the commercial aftermarket at this point.Ken Herbert: Great. Thank you very much, Dirkson. Have a good results.Dirkson Charles: Thank you, sir. Thanks.Operator: Thank you. Our next question has come from the line of Kristine Liwag with Morgan Stanley. Please proceed with your question.Kristine Liwag: Hey, good morning, everyone. Just a few questions on Beadlight. It looks like you paid £25 million or $33 million for this. So with mid-single-digit revenue and almost breakeven EBITDA, it does seem a little steep on valuation. Can you provide more color on how much of the accretion on 2026 is from orders that you already received that you alluded to? Versus from the lower toolbox? And also as a follow-up on that on Beadlight, is this BFE, SFE? And how much of the portfolio is full source and proprietary?Dirkson Charles: 100% proprietary. And the way to think about sole source once your light is on, you're on. Okay? I'll say it that way. In terms of accretion, without our help without us doing anything. Beadlight would be accretive. Which is why I said it in the way I did. Right? With us getting putting our value drivers around Beadlight and supporting the team that's there. We believe it'll be, you know, Ian told me not to use this word, but I'm gonna use it anyway. Significantly, accretive. No. And this is about the one thing you said Kristine.Look, we look at businesses that we acquire not in terms of what's in the rearview mirror, but what we can do with it. Right? And I will tell you the £25 million and you are correct. That's what we paid. We'll look back two years, three years from now and go, my god. We got that cheap. That's how we look at businesses when we acquire it. No difference than applied avionics. Right? Applied Avionics, when we bought it, was doing $40 million of revenue. Right? Everybody knows that. I can say it.And if you look at this quarter, you go through the 10-Q, they did over $15 million this quarter alone and we've owned that business for eleven months. Right? So for us, price is future-driven. Not in the rearview mirror. So Beadlight, I can say this now because we already purchased the business and the former owners are probably listening, but we bought it cheap.Kristine Liwag: No. That's great to know. Significant, accretion is the name of the game. So there's an guess a follow-up on that broadly on M&A. So can you talk about the bidding process of this? How competitive was this? How many more assets like this is there in your pipeline?Brett Milgrim: Kristine, this is Brett. Hi. I can tell you this was a proprietary process for us. We were introduced to the owner a while ago, had a bunch of discussions and actually at the air show, we're able to kinda shake hands, to go through our proprietary diligence process and understand the business better and get to the deal that we did. So those are the kinds of deals we'd like to do. I can tell you that the list of opportunities remains very robust. Some of which are just like that, meaning proprietary discussions that we're having with owners.And as I think we've talked about oftentimes, the gestation period for a lot of these opportunities, particularly given the nature of the owners, who are oftentimes owner-operators or it's a family-owned business. And legacy and how you're going to treat their employees and what they want to do in the future matters to their decision-making. That often takes a while for them to either get comfortable or come to the reconciliation that they're ready to sell. And those lists are ever-increasing for us because there are hundreds and hundreds and hundreds of companies that fit that description. That also fit our business model.So we will, as I've often said, we will never get to all the opportunities that we have in any reasonable investment period. The harder thing to forecast is when are they executable.Kristine Liwag: Yeah. Super helpful. Well, I'll keep it to those two. Thank you very much.Ian McKillop: Thank you.Operator: Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to management for any closing comments.Dirkson Charles: A big thank you to everyone that has taken the time to hear our story today. Believe me when I say we continue to be excited about building our aerospace and defense cash compounder that we call Loar. Looking forward to speaking to you all in thirteen weeks. Please call in on time. Thank you.Operator: Thank you. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.