Title

Presentation

Loar Holdings Inc. beats earnings expectations. Reported EPS is $0.34, expectations were $0.15.

Operator: Ladies and gentlemen, thank you for your interest in Loar Holdings Inc. conference call. Please continue to stand by. The presentation will begin momentarily. Greetings, and welcome to the Loar Holdings Inc. 2026 Q1 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ian McKillop, Director of Investor Relations. You may begin.

Ian McKillop: Thank you, Barak. Good morning, everyone, and welcome to the Loar Holdings Inc. 2026 Q1 Earnings Conference Call. Presenting on the call this morning are Loar Holdings Inc.’s Chief Executive Officer and Executive Co-Chairman, Dirkson R. Charles; Executive Co-Chairman, Brett N. Milgrim; Treasurer and Chief Financial Officer, Glenn D’Alessandro; as well as myself, Ian McKillop, the Director of Investor Relations. Please visit our website at loargroup.com to obtain a slide deck and call replay information. Before we begin, we would like to remind you that statements made during this call that are not historical in fact are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to our website and latest filings with the SEC, available through the Investor Relations section of our website or at sec.gov.

We would also like to advise you that during the call, we will be referring to adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted earnings per share, each of which is a non-GAAP financial measure. Please see the tables and related footnotes in the earnings presentation for the most directly comparable GAAP measures and applicable reconciliations. To begin today, I will now turn the call over to Dirkson.

Dirkson R. Charles: Thanks, Ian. Good morning, everyone. I am Dirkson, Founder, CEO, and Executive Co-Chairman of Loar Holdings Inc. As you all know, Loar Holdings Inc. was founded with the mission and vision to build an aerospace industrial cash compounder wrapped in a culture that all our mates can be proud of. Thirteen weeks ago, I shared with all of you how excited I was about what we would accomplish in 2026. I stated that we planned on achieving record financial results through consistent and resilient performance. The results for 2026 Q1 are all quarterly records for sales, adjusted EBITDA, and adjusted EBITDA margins. More importantly, our cash conversion coverage to net income was 230%. Our strong Q1 provides a resilient foundation for 2026, positioning us to break all our annual records.

Strengthened orders from our customers resulting in a book-to-bill ratio of greater than 1.2 times, the tremendous progress we have made towards launching new business, and continuing to successfully execute on our value drivers also strengthens our confidence in achieving a record-breaking 2026. But first, let us take a moment to check two of the boxes we shared with you during our IPO process. Two years ago, we said in a short period of time, we would achieve 40% adjusted EBITDA margins. In a word, check. We also stated that we had a balanced and resilient portfolio of products, platforms, and end markets which would allow us to perform in spite of most headwinds in the industry. Again, check. During the first quarter, we had reduced sales in our defense end market, which we have always said can fluctuate unexpectedly.

The year-over-year decline reflects a deviation from our customers’ normal ordering pattern for the F-18 brakes and RC-135 autothrottle. These proprietary products supplied exclusively by us are shipped at the discretion of our customers and are significantly sensitive to the ebb and flow of the defense end market. Q1 highlighted reduced demand for these proprietary products. However, if history provides any indication, we expect our customers to return to the habitual, albeit somewhat unpredictable, ordering patterns for the remainder of 2026. I will emphasize that despite the Q1 decline in sales, our book-to-bill ratio in the defense end market was the highest of our end markets during 2026, and we ended the quarter with record backlog for our defense products.

With that said, the Q1 defense sales results were more than offset by the strength in our commercial OE and aftermarket end markets. This quarter allows us to demonstrate what we always say: we realize financial success in all the end markets we support. We do not take a razor–razor blade approach in our business model and take into account the totality of all the sectors we supply. So during a quarter when our highest growth end market was commercial OE, we achieved record adjusted EBITDA margins. Once again, I love it when the numbers prove what we say. In addition, I am happy to say that collaboration across our business units continues to drive increasing opportunities for top line growth. As a result, our new business pipeline is at a record high of approximately $700 million.

Today, Ian will take you behind the curtain of our new business pipeline so you can get a greater appreciation for why we believe we will grow our new business sales organically at the higher end of our long-term growth of 1% to 3% each year for the next few years. With that said, Loar Holdings Inc. is a family of companies with a simple approach to creating shareholder value. First, we believe that providing our business units with an entrepreneurial and collaborative environment to advance their brands will generate above-market growth rates. Since our inception in 2012 through the end of calendar year 2025, we have grown sales and adjusted EBITDA at a compound annual growth rate of over 30% and 40%, respectively. Second, we execute along four value streams.

We identify pain points within the aerospace industry and look to solve those problems through organically launching new products. In calendar year 2026, we expect that new product growth will be the number one driver of our organic growth as we qualify new parts in the first half of the year, fueling increased sales starting in 2026. We focus on optimizing the way we manufacture, go to market, and manage our companies to enhance productivity. Each year we identify initiatives that allow us to continually improve our performance. Historically, we focus on one or two major efforts that are expected to expand margins. We continuously investigate ways to improve how we mine, collect, gather, and utilize data, enhancing our management ERP and other systems and processes which allows us to efficiently leverage such data and drive financial and operational efficiencies.

Year over year, we achieved more price than our cost of inflation. Executing this strategy results in continuously improving margins on an annual basis, except for the occasional temporary dilution due to acquiring a business with dilutive margin. Lastly, and more importantly than anything else, we are committed to developing and improving the talent of all our mates because our success is solely a result of their dedication and commitment. So thank you to all my mates. With that, let me turn it over to Brett to walk you through the key characteristics of our portfolio.

Brett N. Milgrim: Thanks, Dirkson. As you can see on Slide 6, a key driver of our consistent performance is Loar Holdings Inc.’s diverse portfolio of products that cover essentially all end markets, platforms, and customers and is also balanced across the OE–aftermarket spectrum. Said another way, we have content on virtually anything that flies today and that is by design, as opposed to relying on any particular platform, end market, or type of product that may produce short- or intermediate-term benefits at the expense of the long-term consistency and growth we strive to produce. Our portfolio is designed to be balanced, resilient, and have wide exposure across a very large and overall growing aerospace and defense market.

Our performance really starts with the proprietary nature of our products, which creates high barriers to entry and attractive margins in addition to forming embedded customer relationships that foster cross-selling opportunities and other revenue synergies for both new businesses we acquire as well as our organic new business pipeline. Effectively, proprietary products not only produce great margins, as you can see by our results, but they position us to capture the 20-, 30-, 40-, or even 50-year annuity that any one particular platform may provide whether that is a commercial aircraft, military aircraft, or general aviation aircraft and whether that aircraft is coming off the production line or well into its aftermarket cycle. Our proprietary product portfolio is not only growing as a percentage of our total portfolio, but it is also growing in the aggregate as we have a demonstrated 14-year history now of supplementing our organic growth with M&A activity.

I will repeat something I mentioned last time, which is that we continue to have a large pipeline of opportunities, but it is still an M&A market that requires an appropriate amount of discipline to ensure we continue adding high-quality, proprietary products that meet the return thresholds we seek from the businesses we acquire. That discipline is something we continue to be very focused on and is evident in our two most recent acquisitions, LMB and Harper Engineering, both of which exemplify the types of businesses we like and both of which are off to a great start. From looking at the chart on page 7 and from past experience in the aerospace and defense market, I do also want to add that we think we have created a very powerful, very differentiated, unique business model that will generate and sustain exceptional financial performance over the long term.

Adding to that, we will remain an active acquirer of assets, and given the market size and opportunity set, have very high confidence that our cadence of one to two deals a year over the past 14 years will continue for the upcoming decade and beyond and continue to expand our breadth and capabilities and generate the outsized and consistent long-term returns we have seen in our first 14 years.

Ian McKillop: We include this slide each quarter because it captures the breadth of Loar Holdings Inc. More than 25 thousand unique part numbers across the group. But the real key takeaway here is not any one single product; it is the set of capabilities behind them. We are not simply a collection of businesses that manufacture a wide range of components; we are an integrated platform that combines engineering, design, qualification, and production expertise across disciplines to deliver tailored customer-specific solutions. Those capabilities show up most clearly in our organic new business pipeline. Before we get into the specific opportunities, let me define for you what we mean by new business at Loar Holdings Inc. We see it coming through two primary channels.

First, new products or technologies for new or existing customers. Think clean-sheet designs and meaningful product enhancements. Second, existing products expanded to new customers. Think market share gains and new platform wins. Across the group, our organic pipeline now totals approximately $700 million of revenue potential expected to convert over the next five years, up roughly $100 million from what we shared with you in February. As the chart shows, slightly more than half of these opportunities are tied to the commercial end market, with general aviation and defense each representing roughly a quarter. The slide includes examples of the product families that we are pursuing today, but our development and growth efforts extend well beyond what is shown.

Simply, every Loar Holdings Inc. business is actively engaged in capturing new organic opportunities. Expect this pipeline to continue to expand as we add capabilities, broaden customer relationships, and support additional platforms, and importantly, it does not take a large capture rate for this to be meaningful. Converting less than 15% of the current pipeline over time would be sufficient to support our targeted 3% annual growth from new business. I will now pass it 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 Beadlight in Q3 2025, LMB Fans and Motors in Q4 2025, and Harper Engineering in Q1 2026. We achieved record sales during 2026 Q1. In total, our sales increased to $156 million, which is an 11% increase as compared to the prior year. This increase was driven by strong performances in commercial OEM and commercial aftermarket, partially offset by slightly lower defense sales. Our commercial aftermarket sales saw an increase of 11% in Q1 2026 versus Q1 2025.

This is primarily driven by the continued strength in demand for commercial air travel and an aging commercial fleet. Our total commercial OEM sales saw an increase of 18% in Q1 2026 versus Q1 2025. This increase was driven by higher sales across a significant portion of the platforms we supply along with the continuing improvement in the production environment for commercial OEMs. Defense sales saw a decrease of 2% in Q1 2026 as compared to the prior year. As Dirkson said in so many words, defense sales are lumpy given the nature of the ordering patterns of our end customers for our products. Let me recap our financial highlights for 2026 Q1. Our net organic sales increased by 11% versus the prior-year quarter. Our gross profit margin for Q1 2026 decreased by 130 basis points as compared to the prior year.

This decrease was primarily due to the higher non-cash amortization of acquired intangible assets and the non-recurring non-cash recognition of an inventory step-up adjustment, both related to the LMB and Harper Engineering acquisitions. The total of these two non-cash items was $11 million. Excluding these two adjustments, our gross profit would have increased to 57.6% as a result of our operating leverage, the execution of our strategic value drivers, as well as a favorable sales mix. Our decrease in net income of $4 million in Q1 2026 is primarily due to higher interest as well as the two non-cash items discussed above. We have added a new metric this quarter: adjusted net income. Adjusted net income excludes the non-cash amortization of acquired intangible assets and certain other non-recurring charges.

We believe this metric provides a more consistent view of our earnings. Adjusted net income increased $5 million, or 20%, in Q1 2026. This increase is due to our strong financial performance during the quarter, partially offset by higher interest expense. Adjusted EBITDA was up $20 million in Q1 2026 versus the prior-year quarter. This is primarily due to our operating leverage and the execution of our strategic value drivers. Again, in Q1 2026, we achieved a record 40.5% adjusted EBITDA margin. This is an increase of 290 basis points from Q1 2025. From 2020 through 2026, we will have increased our EBITDA margins by 910 basis points. We have achieved this growth through operating leverage, winning new profitable business, executing on productivity initiatives, and value-based pricing, all while fully absorbing the negative impact of costs related to Sarbanes–Oxley compliance and additional organizational expenses to support being a public company.

Let me now turn the call back over to Dirkson to share our revised outlook for 2026.

Dirkson R. Charles: Thanks, Glenn. Based on what we have said today, it should come as no surprise that, in spite of the temporary—and again I say temporary—uncertainty that may be created by the geopolitical challenges the world is facing today, we are increasing our guidance for 2026. But before I share the details, let us take a moment to remind everyone that we operate with the tailwinds of a secular growth industry which captures the increasing human need to travel, move products from point A to point B, and to defend our American liberties driving secular demand. These things have been proven to be true since the beginning of aviation and will continue to be so for the foreseeable future. As a result, Loar Holdings Inc.

will continue to grow at an above-average industry rate. Here is what we are currently experiencing by end market in 2026. Demand in the commercial aftermarket remains strong as reflected by a book-to-bill of greater than one in 2026. To date, our customers have maintained moderate reaction to the temporary impact of higher fuel costs. In fact, our challenge is ensuring that we continue to increase our capacity to keep up with the secular growth in this end market. We do recognize that airlines are rationalizing their capacity given the elevated cost of fuel, which will result in a temporary reduction in unit demand. However, that rationalization typically takes a few quarters before it will impact any of the demand for our products. Given our portfolio of proprietary products, and execution of our value drivers, we fully expect to mitigate any financial impact and anticipate continued growth of 10% plus organically for the foreseeable future, as we continue to expect the age of the active fleet not to peak until the end of the decade.

Looking at the commercial original equipment end market, our customers continue to report significant backlog supporting multi-year deliveries. Both Airbus and Boeing have approximately 9 thousand and 7 aircraft in backlog respectively. This represents over ten years of production at today’s stated rates. As the supply chain continues to improve capacity and quality, we expect sales for our proprietary products that align and fit on these aircraft to generate increased sales for us as production ramps. This is clearly reflected in the growth in this end market at 18%. The defense market has been heavily influenced by the current geopolitical environment. As I have stated before, European nations have increased their military spending to the highest percentage of GDP in decades.

In addition, the U.S. defense budget has seen considerable growth. While the timing of orders and sales can fluctuate significantly, over the long term we are well positioned to benefit from these upward trends going forward. Given our balanced portfolio of approximately 50% aftermarket, the broad spectrum of our products across all end markets, combined with executing all our value drivers, let me say it again: we expect to continue to grow sales at 10% plus organically and adjusted EBITDA at 15% plus annually into the foreseeable future. Now, we are excited to share our upward revision to our 2026 outlook. As each of our end markets are experiencing strong demand tailwinds, our focus is on executing our value drivers to continue to position Loar Holdings Inc.

to at least triple adjusted EBITDA every five years, including acquisitions, as we have done consistently since our inception except during COVID. As always, our view is on a pro forma basis, assuming we owned all of our business units since the beginning of 2025. With that said, we still expect commercial OE and aftermarket growth to be low double digits in 2026 for all the reasons I highlighted earlier, while our defense end market sales will be up mid-single digits in 2026, driven by a record backlog of orders at the end of Q1. These market assumptions, along with the strong performance of our two most recent additions to our family of companies, LMB and Harper, and our continued execution of our value drivers, allow us to increase our guidance by $5 million of sales and $4 million of adjusted EBITDA.

And of course, we expect to meet or exceed this increased guidance for calendar year 2026. Our increased range for net sales is now between $645 million and $655 million; adjusted EBITDA between $257 million and $262 million with adjusted EBITDA margin of approximately 40%. GAAP net income will be in the range of $53 million to $57 million reflecting the non-cash acquisition-related charges that Glenn referred to earlier. Adjusted EPS will be between $1.26 and $1.30 per share. In addition, capital expenditures will be in line with our historical rate of 3% at around $19 million. There is no change to our full-year interest expense, effective tax rate, depreciation, or fully diluted share count. Amortization is up $5 million to reflect non-cash related charges, while non-cash stock-based compensation is up $1 million to $18 million.

Please note that all the amounts I have just outlined for you relating to calendar year 2026 performance assume no additional acquisitions. However, as we have noted and as Brett has said just earlier, our drumbeat is to complete one or two acquisitions each year. We just cannot predict the timing of such acquisitions. With that, Brock, let us open for questions.

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Operator: Thank you. We will now open the call for questions. Our first question today comes from Kristine T. Liwag of Morgan Stanley. Please proceed with your question.

Kristine T. Liwag: Hey, good morning, Dirkson, Glenn, and Ian. I just wanted to follow up on your discussion of the $700 million revenue potential over the next five years, up $100 million from February. I recognize you tend to be conservative, but it seems like a 15% conversion over this timeline seems conservative and fairly reasonable for you to hit your 3% targeted annual growth from new business. When you look at your capabilities, what is a reasonable conversion of this opportunity? How much of these existing opportunities do you have line of sight on regarding the customer wanting you as a supplier, like some sort of pull mechanism? And is 50% a reasonable number? Any color you could provide there would be helpful.

Dirkson R. Charles: Hi. Good morning, Kristine, and thanks for the question. We have line of sight on all $700 million. I would describe it as more pull than push because we have a customer attached to it. We have plans to either certify the part or the part is already certified, and we have had conversations not just with engineering, but also operations in terms of how we have operationalized the design—typical for these products. The reason that we say 15% is because we guide to 1% to 3% annual growth from new business, and 15% conversion would take us to the 3%. Should we do better? We should. However, things in this industry often move to the right for timing reasons—an FAA delay, for example, which has happened twice since we have been public and has slowed down certification of some of our products.

Timing can move to the right, but the opportunity set will not change. Could we win 50%? Why not? But it may not happen within the exact time window we lay out. The great news about the pipeline is it is a living, breathing entity and it continues to grow—from $600 million to $700 million and beyond. That is probably the most powerful news.

Kristine T. Liwag: Thanks, Dirkson. As a follow-up, what are the milestones to watch? Is the gating factor FAA approval of your offering, or some sort of contracting mechanism from the customer? And once you get that approval, when does revenue begin—immediately, as a run rate for the following year, or phased in over time?

Dirkson R. Charles: Great question. I will give you a couple of examples. On FAA approvals: for brakes, we have 11 platforms that we are looking to certify. We have done seven. There are another four that we expect to complete within the next 12 to 18 months. The available market for those 11 platforms is hundreds of millions of dollars. We will not win all of that, but for brakes, FAA certification is a gating item. Another example: we are collaborating across five of our business units for an opportunity that a customer brought us because it is a big pain point for them. We have the capability across those five business units to solve this in a way no one else has; others would have to go to outside suppliers. We have been working on this for the last three months.

The customer would like it done by year-end, but for a number of reasons unrelated to certification, things can move to the right—this industry can move slowly, especially around engineering. So the best way to measure success is our organic growth. Over the next couple of years, the biggest driver will be new business. As we get into the second half of the year, into 2027 and beyond, we expect our organic growth to ramp. That is how you can judge it.

Operator: Thank you. The next question is from John Gordon of Citi. Please proceed with your question.

John Gordon: Hey, thanks for taking my question. I wanted to ask about the portfolio mix. There is a concern out there that some of the higher-margin aftermarket companies are over-earning, and perhaps that margin profile is at risk if there is a slight shock to aftermarket demand and traffic growth. I know you do not hold that view, but I wanted to give you an opportunity to address that.

Dirkson R. Charles: Thanks for the question, John. We do not take a razor–razor blade approach to any of our product lines. We have roughly 25 thousand part numbers, and none get that treatment. We believe we should get paid for what we supply—OE, aftermarket, military—across all of them we make good money; some better than good. I hope this quarter helps people see that, given that commercial OE was our largest growth sector and we still had record margins. I do not care where the growth comes from—aftermarket, defense, or commercial OE—we are going to make good margins regardless of which grows faster. Operating leverage, price over inflation, and focusing on the right parts with the right pricing will continue to drive margins higher.

John Gordon: Very helpful. And if we could spend a moment on defense: there is a lot of activity globally. Are you seeing clear signs of that picking up, and what might that mean for the portfolio if this activity continues—or if it stops?

Ian McKillop: You are marrying up demand signals—we see the same thing. There is a lot of conflict, a lot of aircraft flying. Then you have inventory levels and our ability to meet that demand over time. Operations in the Middle East and globally will drive demand for our parts. The trouble is saying whether that hits Q1, Q2, Q3, or Q4—it is challenging to time. For example, the F-18 brakes did not repeat orders this year as they did last year; the military often buys in bulk and burns down inventory, then comes back. Conflict breeds demand, but timing varies.

Dirkson R. Charles: To add to that, we are currently working on a number of military opportunities that are not yet in our backlog. That gives us great comfort that, as we think about 2026 and beyond, the military end market will be very strong.

John Gordon: Understood. One more: you have bizjet/general aviation exposure and commercial aftermarket exposure. Any differences in demand signals between those two given macro volatility?

Dirkson R. Charles: We do not see anything zigging or zagging differently. General aviation is typically most sensitive to the economy, but it has remained fairly strong for the parts we are shipping. No significant weakness in backlog there.

Operator: The next question is from Analyst at Goldman Sachs Asset Management. Please proceed with your question.

Analyst: Hey, good morning everyone. Can we talk more about these margins? It is a pretty big year-over-year and sequential lift. That is despite folding in some newly acquired revenue—although LMB is high margin, maybe that is part of it. How did you get margins there? Was anything favorable in the quarter? The guidance for the rest of the year implies you are kind of flat or maybe down a little. Is that right? And beyond this year, Dirkson, you talked about the algorithm of top-line organic 10%, EBITDA organic 15%. From where margins are today, that implies close to 200 basis points of annual expansion. You have done that in the past, but it is not what consensus has. I just wanted to make sure I understood that.

Dirkson R. Charles: Thanks for the question. You are right that LMB started out with very good margins that were accretive. Harper, on the other hand, was significantly dilutive at the outset. Margin growth is coming from price over inflation and operating leverage. We have 38 people on the corporate team; when we are twice the size, we may have maybe 45. We take costs seriously—you must add value. Productivity initiatives are continual and must show up in margin; we define productivity as the improvement in margin excluding the effects of price and inflation. If it does not show up in margin, we do not believe it. Also, about 90% of what we do is proprietary. That gives us the ability to flex our value drivers and continue to grow 10% top line and 15% EBITDA organically. We are highly confident margins are going up from here. I am not going to commit to 200 basis points per year.

Analyst: Appreciate that. You alluded to it earlier, but could you elaborate on what you are hearing from customers regarding geopolitics and higher crude? It sounds like changes by airlines so far are small. Why do you think that is, and what is the threshold for them to take further action?

Dirkson R. Charles: Conversations with customers have been rational. Everyone is trying to judge how long the conflict lasts. The current view is that it should not be many months. Approximately 2.5% of our revenue comes from the area where the conflict is. In Q1, we saw no impact in sales or orders. If we wake up in 13 weeks and we are still in this malaise, my answer may change slightly, but that would be followed by the fact that we have proprietary products our customers need and we can flex our value drivers to continue to grow 10% top line and 15% EBITDA.

Operator: The next question is from Analyst at Jefferies. Please proceed with your question.

Analyst: Hi, this is Jack Ewell on for Sheila. Following up on margins: in a higher-for-longer fuel environment where we potentially see a lagging volume headwind, you are noting that you will be able to offset any of that through your value drivers. Can you talk about what drives Loar Holdings Inc.’s pricing power—whether that is through contracts or otherwise?

Dirkson R. Charles: A quick example: for the F-18 brakes referenced earlier, we do the needling and the heat treat for the brakes that do not have our name on them. If we moved that equipment across the street, our customer would have to re-certify that brake and aircraft. When we say proprietary, we mean there is nowhere else for you to go—certainly not within 12 months. We will flex our value drivers to offset any reduction. The reduction people are talking about now is low single digits, consistent with capacity reductions. Where we may see more flex is at a distributor or two who may reduce inventory for cash flow reasons; when they return to ordering, it will be at higher prices. Quarterly noise does not change the 5-year trajectory: a bigger, better business with greater proprietary content and more new business.

Analyst: Very helpful. And a quick follow-up: you have a disciplined M&A approach targeting one or two acquisitions a year and looking for high-IP suppliers that can double EBITDA within three to five years. Can you talk about the M&A pipeline now and Loar Holdings Inc.’s appetite in the medium term?

Brett N. Milgrim: The appetite is high and the pipeline remains large and very active. As I mentioned in my discussion around the slides, while the pipeline is large and active, it requires discipline. Over the last year or two, there has been a lot of capital markets activity around aerospace that filters through the supply chain, particularly to potential sellers. We are seeing a wider array of businesses with a more disparate range of quality. You have to be careful to ensure the businesses you buy can generate the returns you referenced, have the proprietary content we like, and the requisite dynamics to generate the growth and financial performance you have seen from us over the last 14 years. The challenge is not a dearth of opportunities—there are too many. We must prioritize the things we like, that are a good fit, and, most importantly, that we can execute on.

Operator: The next question is from Ken Herbert of RBC Capital Markets. Please proceed with your question.

Ken Herbert: Good morning, Dirksen and team. To level set us on the aerospace aftermarket, how much of your business is backlog-driven versus book-and-ship? As you head into the second or third quarter, how much visibility do you have, and what percentage of the aftermarket mix is basically book-and-ship?

Dirkson R. Charles: Great question. For aftermarket products, we typically enter a month with about half in backlog and the other half book-and-ship. We are very good at forecasting the book-and-ship because we are the exclusive provider for many parts. We can start a quarter and know pretty closely where we are going to be. For OE and defense, lead times are longer and we have quarters of visibility ahead. So, roughly 50% in backlog when we start a month for aftermarket.

Ken Herbert: Thanks. And on the new business opportunity—the $700 million—your estimates seem conservative given wins and momentum. How should we think about phasing this in for 2026 versus potential upside in 2027 and 2028?

Dirkson R. Charles: We are comfortable reiterating that new business will be 1% to 3% of annual growth, and over the next few years closer to 3%. The number 4 is closer to 3 than 1—so could it be 3% plus? Yes. Two-thirds of that $700 million is OE and one-third is aftermarket. The two-thirds OE is what excites me most because it means repetitive future aftermarket sales for decades. When we win, it is not “win and ship and that is it.” It is “win, ship, and then replace and repair,” creating the annuity stream we seek. The same discipline we use in acquisitions we also use in our new business pipeline—we have choice, and we target great margins, long-term growth, and positioning as supplier of choice. We are conservative mainly because timing—like acquisitions—is the hardest thing to predict. So we will stick with 1% to 3%, closer to 3%, at this time.

Operator: There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Dirkson R. Charles: Thank you, everyone, for taking the time to hear our story today. Hopefully, we have clarified some of the things on your mind. We are excited about what we are going to accomplish in 2026 and beyond. We are building that aerospace and defense cash compounder that we dreamed of 14 years ago, and I am looking forward to speaking to you in 13 weeks. Thank you.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.

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