Financial Data and Key Metrics Changes - Total sales increased by 15% compared to the prior year, achieving record sales in calendar year 2024 [26][32] - Adjusted EBITDA reached a record $146 million in calendar year 2024, up $34 million from 2023 [32] - Gross profit margin for the full year of 2024 was 34.4%, reflecting continued execution of productivity and pricing initiatives [32] Business Line Data and Key Metrics Changes - Commercial aftermarket sales increased by 15% in calendar year 2024, driven by strong demand for commercial air travel [26] - Defense sales grew by 39%, attributed to strong demand across multiple platforms and increased market share from new product launches [27] - The aftermarket business now represents approximately 55% of overall sales, up from 52% a year ago [18] Market Data and Key Metrics Changes - Defense segment has grown from about 20% of the business a year ago to approximately 24% today [17] - The non-aviation segment has decreased from 12% to about 7% as the company focuses on aerospace and defense [18] Company Strategy and Development Direction - The company aims to improve margins by 660 basis points by the end of calendar 2025 through strategic initiatives [12] - Focus on developing talent and enhancing productivity across all business units [13] - The company is committed to maintaining a diverse portfolio across various segments of the aerospace and defense industry [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting or exceeding guidance for calendar year 2025, with expectations for strong demand across all end markets [35] - The company anticipates commercial OEM and aftermarket to grow in high single digits, while defense markets are expected to grow in high double digits [37] - Management noted that geopolitical uncertainties and supply chain constraints present opportunities for growth [36] Other Important Information - The acquisition of LMB Fans and Motors is expected to close by the beginning of the third quarter of 2025, enhancing the company's portfolio [20][41] - Free cash flow conversion was over 200% for calendar year 2024, indicating strong operational efficiency [32] Q&A Session Summary Question: Insights on aftermarket guidance and backlog - Management indicated strong bookings and a robust backlog in the aftermarket, with lead times shorter than in defense markets [48] Question: Profitability and margin expansion contributors - Management confirmed that Applied Avionics is accretive and highlighted confidence in achieving margin improvements through pricing and operational leverage [52][54] Question: Update on PMA parts pipeline and growth expectations - Management acknowledged progress in getting parts qualified and anticipated adoption in the latter part of the year [62] Question: Dynamics of ordering patterns and inventory levels - Management noted variability in ordering patterns, with some parts seeing higher orders than expected, indicating less inventory in the supply chain [74] Question: M&A pipeline expectations - Management expressed optimism about the M&A pipeline, expecting to continue executing one to two deals per year [82] Question: Impact of tariffs and input costs - Management stated that tariffs are not expected to have a material impact this year, with strategies in place to pass on cost increases [92][94]
Loar Holdings Inc.(LOAR) - 2024 Q4 - Earnings Call Transcript