Loar Holdings Inc. (LOAR) Q3 2026 Earnings Call Transcript

Operator: Greetings, and welcome to the Loar Holdings Third Quarter 26 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. It is now my pleasure to introduce Ian McKillop, Director of Investor Relations. You may begin.

Ian McKillop: Thank you, Diego. Good morning, everyone, and welcome to the Loar Holdings Q3 26 Earnings Conference Call. Presenting on the call this morning are Loar'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, 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 the call which 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 the company's latest filing with the SEC available through the Investor Relations section of our website or at sec.gov. We would like to also advise you that during the call, we may be referring to adjusted EBITDA margin and adjusted earnings per share. Each of which is a non GAAP financial measure. Please see the tables and related footnotes in the earnings release for our presentation of 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 to my mates. All our partners participating on this call. Let's all turn to Slide 4. Now, I have said this before, and I will say it again. Loar is building an aerospace industrial cash compounder fueled by a culture of growth respect collaboration and entrepreneurship. Full stop. Each day, 1.8 thousand of my mates and I show up ready to create a significantly larger cash compound all while preserving our foundational principles and culture. We know that we will wake up 5 years from now as a much larger company with even stronger cash-compounding characteristics. Today, nothing at all has changed in the macro. That suggests a deviation from historical growth expectations. And the breadcrumbs we leave each quarter prove we are right on the road to achieving our goals. This quarter, we achieved record sales, adjusted EBITDA, adjusted EBITDA margins, and more notably, generated record free cash flow at a growth rate of 46% over the prior year's third quarter. We grew sales organically by approximately 16% during the quarter driven by excellent execution across all our value drivers combined with the benefits realized from our latest new business wins. In fact, this quarter is the 17th sequential quarter of record adjusted EBITDA demonstrating our consistent performance. If you turn to Slide 5, you will see that we have grown each quarter in 2026 at rates higher than our growth rate since our founding in 2012. As a reminder, we have grown Loar since our founding at 30%+ and 40%+ for sales and adjusted EBITDA, respectively. While we have propped such results, we know that we are really just getting started. But again, what really makes this quarter noteworthy is the strength of our cash flows. In fact, year-to-date 2026, we have converted operating cash flows minus capital expenditures at approximately 200% of net income. Turning to our end markets, please turn to Slide 6. Commercial OE growth continued to climb and is up 20% in the quarter versus last year's Q3. We continue to benefit from an improved supply chain and increased demand for power parts. In addition, we have also realized additional value from the shipment of products related to our new business wins. As we noted last quarter, 2/3 of the business we converted to wins were for original equipment. This is now the 3rd quarter in a row where the commercial OE end market grew the fastest. Once again, that did not stop us from achieving record results. Commercial aftermarket was up low double digit percentages again this quarter, in line with our expectations. Given that our portfolio consists of proprietary products, we have tremendous visibility of the demand for our parts and a strong presence in the commercial aftermarket. We expect to be able to deliver such performance for the foreseeable future as the age of the active fleet during 2026 is still 17% or put it this way, 2 years older than what it was pre COVID. Despite airlines attempting to manage their capacity in light of higher fuel costs. Last quarter, we said that we expected to see increasing demand for our defense end market products we were not surprised that in Q3, we had the highest growth in any quarter this year, within this end market. The geopolitical uncertainty in the world the increasing goals of European nations to increase their military arsenal, and technology as a percentage of their GDP and the US needing to replenish their stockpiles has resulted in increased military funding across the globe. With that said, we continue to anticipate quarterly sales to this end market to be choppy. As always, consistent execution of our value drivers continues to stimulate Loar's growth and create shareholder value. We continue to emphasize collaboration, entrepreneurship enabling above market growth rates. Being an engineered solutions provider to our customers through launching new products, optimizing manufacturing and productivity to increase performance, achieving price over inflation to improve margins annually. This consistent performance we have demonstrated since we founded Loar in 2020. We have also initiated guidance for 2027 above our organic growth rates and expect sales at the high end of $755 million and adjusted EBITDA of $317 million in 2027. I will address that later. At this moment, I will now turn the call over to Brett to walk you through our key characteristics of our portfolio and the current state of our M&A pipeline.

Brett N. Milgrim: Thanks, Dirkson. In order to drive consistent and predictable performance, we have created a diverse portfolio of products that covers essentially all end markets platforms and customers with an uncompromising emphasis on offerings and high service levels for both OEM and aftermarket customers as they continue to look for reliable supply chain partners. We have purposely created this model in order to position Loar to benefit from the long term secular growth nature of the industry. Without some of the short term market fluctuations that can arise if a company is overweight to a particular end market technology, or product category. This disciplined and balanced strategy has served us well and resulted in an exceptional and consistent financial performance. In fact, despite varying conditions in each of our end markets, since becoming a public entity, we have posted double digit organic growth and improving margins each and every quarter. Furthermore, and as an example to this specific point, look no further than the last 2 years of more. In 2025, our military business was our fastest growing segment and overall margins for Loar went up. In 2026, commercial OEM was our fastest growing segment, and our overall margins went up. While no 1 can definitively predict how each of our end markets may grow in the future, I can confidently say we fully expect overall margins to continue improving and expect continued consistent organic growth irrespective of what end market leads the way. Our portfolio is designed to be balanced resilient and have wide exposure across a very large and overall growing aerospace and defense market. The same disciplined and consistent approach to market also applies to our M&A strategy. Our demonstrated track record of acquiring 1 to 2 new brands per year over the last 14+ years is still our best indicator of future activity. With the key ingredient being that we maintain our rigor in evaluating and acquiring businesses that have similar characteristics as our existing portfolio. Proprietary offerings within niche categories of aerospace and defense that have high barriers to entry and an OEM aftermarket balance. While this continues to be an M&A market, that requires an appropriate amount of discipline, I am very encouraged about some of the new opportunities we are currently evaluating as there remains a breadth and depth to the different types of businesses we are seeing across all our end markets. Coupled with our organic growth opportunities, and current portfolio of businesses, we feel confident that our ability to generate outsized and consistent long term returns is still in the early innings of Loar's history. Turning to our expansive product portfolio, As a reminder, we go to market with more than 25 thousand unique parts. No single part accounts for more than 3% of our annual revenue. More importantly than the sheer size of our portfolio, is our integrated platform. It combines engineering, design, qualification, and production expertise across disciplines to deliver tailored solutions. And to adapt quickly as our customers' requirements evolve. We continue to expand our capabilities and product portfolio through organic new product development. Over the past 2 quarters, we have shared exciting news about our new business pipeline, including visibility into $200 million in revenue generation over the next 5 years. I am happy to report that the team remains focused on bringing home wins and expanding our overall opportunity set. We will continue to share updates on these efforts at a similar cadence. You can expect an update on our pipeline when we announce Q1 27 earnings, followed by updates on our wins in the following quarter. I will now pass the call to Glenn to go through the financials.

Glenn D'Alessandro: Thank you, Brett. Good morning, everyone. Let me recap our financial highlights for the third quarter of 26. Our net organic sales increased 16% over the prior year quarter. Our gross profit margin increased 150 basis points as compared to the prior year quarter. This increase was due to the execution of our strategic value drivers as well as operating leverage. This was partially offset by higher non cash amortization of acquired intangible assets related to the LMB and Harper Engineering acquisitions. Net income decreased $8 million versus Q3 25. The higher operating income generated by the increased revenues was offset by higher interest higher amortization of acquired intangible assets and higher income tax expense in 2026 because of a tax benefit recognized in Q3 25 related to tax law changes. Adjusted net income decreased $3 million versus Q3 25 This primarily relates to higher interest expense, and a higher income tax expense because of the tax benefit recognized in Q3. 25. Adjusted EBITDA was up $23 million versus Q3 25. Adjusted EBITDA margins were 40.8% during Q3 26 compared to 38.7% for Q3 25. This increase is primarily due to our operating leverage and the execution of our strategic value drivers. This slide highlights the consistent margin improvement we have delivered over the past several years. Since 2020, our margins have increased from 30.9% to an estimated 42% for 2027, or 1.1 thousand basis points. Our margin expansion strategy is built on 4 primary levers. First, operating leverage. As we continue to grow revenue, we benefit from leveraging our fixed cost base across a larger business, allowing more of each incremental dollar of revenue to flow to the bottom line. Second, winning profitable new business by converting our organic new business pipeline into sales that continue to increase margins. This is true even though a majority of the new business sales will start out as original equipment. Third, executing on productivity initiatives. Across the organization, we are driving operational efficiencies through automation, process improvements, and using technology that help reduce costs while supporting scale. Fourth, value based pricing. We continue to align pricing with the value we provide in enabling margin improvement while maintaining strong customer relationships. These benefits are partially offset by 2 factors. The first is the initial margin profile of acquisitions where a newly acquired business may begin below our target adjusted EBITDA margin before integration synergies are realized. The second is ongoing cost associated with maintaining a public company infrastructure. If you recall back to our IPO, we expected to achieve 39% adjusted EBITDA margins by 2026, We will have exceeded that forecast for 2026 and will continue to increase margins into the foreseeable future as can be seen by the 42% adjusted EBITDA margin we expect to achieve in 2027. Our outlook continues to be supported by healthy demand across each of our end markets. Starting with commercial OEM, we are assuming growth in the high double digit range approximately 19% to 22% which represents an acceleration from the 17% to 20% growth we previously anticipated. This reflects continued strength in production rates ongoing recovery across commercial aerospace supply chain. In commercial aftermarket, we are expecting low double digit growth. We continue to see strong demand driven by elevated aircraft utilization, aging fleets and sustained maintenance activity across the global aviation market. In defense, we are assuming mid single digit growth. We continue to benefit from healthy program activity and long term spending priorities across key platforms. This slide compares our previous 2026 outlook with our revised expectations. Beginning with net sales, we have increased our revenue outlook to a range of $669 million to $679 million up from the prior range of $665 million to $675 million Adjusted EBITDA has also increased to a range of $270 million to $275 million compared to our prior outlook of $265 million to $270 million. Importantly, we are maintaining our expectation of approximately 40% adjusted EBITDA margin demonstrating our ability to convert revenue growth into earnings while sustaining strong profitability. Below the EBITDA line, we are also raising our expectations for net income, diluted EPS and adjusted EPS. Net income is now expected to be between $60 million and $64 million while adjusted EPS is expected to range from $1.36 to $1.40 per share. Overall, the revised outlook reflects better than anticipated operating performance favorable market conditions and continued execution against our strategic value drivers. This slide outlines the primary assumptions embedded in our 2026 guidance. For capital expenditures, we expect to invest approximately $20 million supporting both growth initiatives and ongoing operational improvements. We anticipate full year interest expense of approximately $80 million Our effective tax rate is expected to be approximately 25% for the year. Depreciation is expected to be approximately $15 million while amortization is expected to be $65 million We also anticipate approximately $8 million of non cash stock based compensation expense. Finally, our diluted share count is expected to be approximately 97 million shares which serves as the basis for our earnings per share calculations. Overall, our outlook reflects continued strength across our end markets, improving financial expectations and disciplined execution. Let me now turn the call back over to Dirkson to share our outlook for 2027.

Dirkson R. Charles: Thanks, Glenn. We are currently living in an environment with geopolitical challenges across the globe. Rising interest rates, and airlines carefully managing their capacity given sustained higher oil prices. We have taken all of these macro dynamics into consideration for our 2027 guidance. We therefore have planned for a flat to up 2% increase in available seat miles with regards to commercial aftermarket. volume growth in 2027. But as you all know, we have multiple levers of organic growth. In 2027, the drivers of our growth algorithm are ranked in this order. New business, price, and then volume. Given our new business wins and the characteristics of our portfolio, we enter 2027 with an extremely high conviction that we will have at least low double digit percentage commercial aftermarket growth. With regards to our other end markets, given the demand signals, our record backlog, the improvements in the supply chain, the success of our new business conversion, and the diverse and proprietary nature of our portfolio, we expect commercial OEM and our defense end markets to also be up low double digit percentage in 2027. As always, this view is on a pro forma basis assuming we have owned all our business units since the beginning of 2026. This results in initial guidance for calendar 2027 as follows: sales between $745 million and $755 million adjusted EBITDA between $312 million and $317 million with adjusted EBITDA margin of approximately 42%. GAAP net income in the range of $91 million to $95 million adjusted EPS between $1.64 and $1.68. Capital expenditures will be slightly above our historical rate of 3% at around 4% of sales or approximately $30 million This is driven by investment to meet the increased demand, the robust demand we are seeing for our products, with most noteworthy seat belt restraints, fans and motors, carbon brakes, and C-track fittings. Interest expense will be approximately $83 million with an effective tax rate of 25%, depreciation of $15 million and amortization of approximately $67 million while noncash stock comp of $18 million Diluted share count of 98 million So please note, that all the amounts I have just outlined for you relating to calendar year 2027 performance assume no additional acquisitions. However, as we have noted previously, our drumbeat is to complete 1 or 2 acquisitions each year. But we cannot predict the timing of such acquisitions. With that, operator, let's open the line for questions.

Operator: Thank you. We will now begin our question and answer session. And your first question comes from John Godyn with Citi. Please state your question.

John Godyn: I wanted to just start with the 2027 outlook. You guys gave a lot of detail, Dirkson, there is a lot of commentary there. I think that to sort of state the obvious on the market, people feel like they are lacking visibility. You are expressing a view on commercial aftermarket and defense that has a lot of visibility, and you have a great sort of track record and you have offered some bridge. But I was just hoping maybe you could just dialogue with us a bit more about the conviction on aftermarket and defense specifically. I think we get the drivers on commercial OEM, but on aftermarket and defense specifically in a complex macro and geopolitical backdrop.

Dirkson R. Charles: Good morning, John, and thanks for the question. Look, we start when we look at looking out 12 months, 18 months, 24 months, we start with the metrics that are in front of us, right? Let's start with a few of those. Our book to bill across all our end markets was north of 1.1. I will leave it at that. In some cases, significantly north. So let's start with that. that is the robust demand we are seeing. We are starting with a metric, with metrics that tell us that our backlog across all our end markets are at record highs. Now I appreciate the question, given the. What I would call the noise in the macro. But appreciate this because we have been saying this since I do not know, the last 14 years. We have built Loar to be a solutions provider. We. And the reason that we shared so much detail over the last few quarters about new business is because we are winning converting to wins really good content, proprietary, business for us. that is driving some of that backlog and some of that wins that is above and beyond the macro that everybody is focused on. So the conviction I will say it to you this way. You guys have noticed now for 3 years, We know this of ourselves. I will say this. That when we give an initial guidance, for the upcoming year, we are doing that with a conviction level where I sleep very comfortably at night. We expect to meet or beat mostly beat, what we are sharing with folks. So, across all those end markets, today, given the metrics that I have just shared with you, we see low double digit growth As I said, with commercial aftermarket, we are looking at seeing available seat miles continue to grow as it has this year, which is flattish. that is what we are projecting. Will we do better? Hopefully. In commercial OE, you ask about commercial OE because I think folks hear us there. Given bill rates at the Boeing and Airbus and etcetera of the world's forecasted always take a 10% to 15% discount to that. So that is what is in the in the guide. So, high conviction, John. Hope we answered your question. That was that was great color.

John Godyn: And if I can ask 1 more for Brett. Brett, when you were talking about the M&A pipeline, I recall specific comment about how the breadth and depth of different types of businesses what was interesting to you. I. Maybe you could just expand on what that meant.

Brett N. Milgrim: Yeah. I guess I would say it this way. Certainly, the earlier part of the year going in. Into last year, lot of focus on defense, lot of businesses available for sale or for discussion. On the defense sector. And I would say more Recently over the last quarter or 2, seeing more and more opportunities across all the other end markets. And so I am very encouraged by that. I am very encouraged by a lot of discussions we are having. And the types of businesses that we may have the opportunity to make part of the family. so to speak. So, stay tuned.

John Godyn: Okay. All right. Thank you.

Dirkson R. Charles: Thanks, John.

Operator: Your next question comes from Kenneth Herbert with RBC Capital Markets. Please state your question.

Ken Herbert: Yes. Hey, good morning, everybody. Maybe again, just to stick on the 2027 outlook, As we look at the roughly 200-basis-point improvement in EBITDA margins implied in the outlook, As you talk about operating leverage, the new business productivity, some of the key initiatives you have outlined, how do you think the margin progression and the key drivers change in 2027 relative to what you have seen over the past few years? Or is it largely consistent when we think about the relative importance of what is behind the margin expansion?

Dirkson R. Charles: Thanks for the question, Ken, and good morning. it is fairly consistent to what we have seen over the last few years. I mean, our DNA is the wake up every day and get more price and inflation, checked. To be a little bit more productive, tomorrow than today, and so on. I would say the 1 standout in 2027 and probably 2028, is again, the new business. You know, we have shared with folks that we do not enter into a new business. You do not win new business if it is not going to make money for us, if I can say it that way. Margins on a new business because we are shipping some of those now, is actually exceeding what we were thinking. So really feel comfortable about that. So that is the 1 little difference because the new business ramp is a lot faster, than it has been in the prior. but so far, so good. Thanks, Dirkson.

Ken Herbert: And if I could just drill down on that a bit. Obviously, you have you have increased sort of the opportunity or the revenue contribution from the new business over the last few years, where are you seeing sort of increased opportunity today on new business? I know you focus more on OE as you think about the flywheel and getting in on the ground floor, so to speak. But are you seeing greater opportunities present themselves today on new business? I mean, how much could this backlog expand over the next 6 to 12 months as we think about just continued supply chain disruptions and challenges across the industry?

Dirkson R. Charles: I will give you a short answer, then I am going give you a long answer. Short answer to your question, are we seeing more? Absolutely. Every day, we see more. Met a customer 2 weeks ago having dinner at 1 of the conferences we frequent. Kenneth. And that has now turned out to be an opportunity I did not even dream about. All because all because we have capabilities of data we did not have 3 or 4 years ago. So every day, the opportunity set is growing. Now my mates have convinced me that we should not share the new business pipeline every quarter. But I will say this to you. I will say this to you. it is higher this quarter than it was last. And that is just something we see naturally going because every time we have 1 of our mates get in front of a customer, they are sharing the capabilities across the total group. Not just what they are sitting there in front of them for. And I will tell you in more than half of those meetings, we walk away in opportunities that we did not know previously exist. that is just the collaboration that we have across the group. We think is actually 1 of our superpowers. So yeah, it is it is it is building. it is getting better. it is getting stronger and looking forward to sharing. What did we commit to Q1. In Q1, what that looks like. So no, it is growing and it is more and more opportunities, Kenneth. Thanks for that question. Thanks, Dirkson.

Operator: Your next question comes from Kristine Liwag with Morgan Stanley. Please state your question.

Kristine Liwag: Congrats on a great strong operating quarter. Dirkson and Brett, you guys have consistently pointed to a cadence of 1 to 2 acquisitions per year. You have been very clear that this environment could be lumpy. But can you give us more color on the supply of the businesses meet your criteria and how the competition for those assets have been evolving. And also, I guess, when you look at that parent disconnect, between public market valuations and private seller expectations, How are you assessing pricing? And what is the likelihood of converting your pipeline into deals?

Brett N. Milgrim: Yes. there is a few questions in there. I guess I would said for a while now, Kristine, that to your first part of the question, supply of available assets and businesses that make up the supply chain, that potentially fit our business model is for all practical purposes. Larger than we will ever get to. So the set of. The opportunity set is enormous. And as it relates to the competitive dynamic, quite candidly, and it may be a little counterintuitive, we have not seen a change all that much even in the last several years as there is been more activity in the capital markets, more public names out there, etcetera, etcetera. Part of the reason is there is an enormous amount of nuance to understanding truly what is proprietary, truly what opportunities lie within a business and how you make it better. Both from a growth perspective and an operational and execution perspective. And there is only a handful of folks who can we think, do that effectively. We are 1 of them. I think a lot of you out there know the usual suspects, so we will not go through all them. Specifically. And so we see a very consistent set of competitors, if you will, for those assets that come to an auction or some type of competitive process with more than 1 bidder. Now that being said, a lot of our transactions are proprietary in nature. After relationships that we have built over months or even years or in several cases, decades. So our mix of M&A opportunities comes from competitive auctions, comes from intermediaries, like your bank, or banks like you, comes from proprietary relationships, and a whole array of other sources, not the least of which is the 1.8 thousand teammates we have at Loar all of whom think about m and a, help in the m and a process, help evaluate not only assets but strategies, that we wanna go after and make you know, the opportunity set even greater for us. And so for all those reasons, we are really encouraged about what is in the pipeline. And I guess I will say it this way, as it relates to what opportunities we can convert and presumably what you mean is the relatively near term I will use these 2 words. Stay tuned. Are optimistic. Well, sounds great. Sounds like great news. We will stay tuned indeed.

Kristine Liwag: And if I could squeeze another question in. With airline profitability under pressure, pressure, are you seeing greater customer willingness to adopt more PMA parts today? And then also when you look at the company's ability to convert some of your PMA opportunities into certified parts Are you accelerating some of that investment in house so you can convert more of that $750 million new business pipeline, which I know is not all PMA but could be converted to revenue sooner? Not to want to leave you with this, but it sounds like there is an opportunity for you guys.

Ian McKillop: Yeah. Kristine, it is a great question. This is Ian. Where I would say, you will you will find us investing and Dirkson alluded to this in when he was going over our CapEx spending for next year is we are we are investing heavily on our capabilities on the brake side, which as you know is a PMA leg to the stool, if you will. So we are seeing a lot of willingness to adopt PMA in that side of the house. I do not know that it is gonna be you know, exponentially more than what we have seen historically across airlines you know, given lessors and the different things that are at play in commercial aerospace. But I definitely can say we are we are, investing in that area and where we can capitalize on opportunities, we are gonna we are gonna add to that group.

Brett N. Milgrim: And what we do see, and it is not necessarily specific to PMA, but more and more as our relationships grow, as our business continues to have transparency by being a public entity and we become a valued supplier to our customers, the more open minded they are to us bringing opportunities to make their business better, be it PMA, be it a new product introduction, be it a new category that we can service them, etcetera, etcetera, etcetera. Those opportunities are continuing to grow, and why we always come back to. We are just at the early innings of our new business pipeline opportunity set. And overall place in the supply chain. So we are very, very optimistic about that.

Kristine Liwag: Brett. Thank you very much. Thank you.

Operator: And your next question comes from Sheila Kahyaoglu with Jefferies. Please state your question.

Sheila Kahyaoglu: Thank you and good morning, guys. Appreciate you guys putting yourself there with the 0% to 2% capacity growth assumption for 2027. You know, Perhaps if you could just add some detail around what you are seeing in that outcome as it relates to oil price and just thoughts on broader macro if you could perhaps comment on your platform exposure and whether you are expecting any bifurcation between any of your new gen aircraft versus content on your old gen. Please.

Dirkson R. Charles: Let me take good morning, Sheila. Good day. Good day. Morning. You too. Same here. Look. Let's start with what I said about ASM growth, right? What we have seen this year, and I know you know the statistics probably better than I do, is flat to down. ASM growth as airlines have managed to take out unprofitable routes etcetera. So the way we kind of think about forecasting into the future given where oil prices is today, is we assume more of the same. Right? that is the assumption. that is not the expectation, but the assumption. And more of the same to us would be flattish And if you wanna give a range down 1%, up 2%, somewhere within there, that is how we built our forecast. Now with that said, and hopefully you heard the answer to some of my questions before, I am not seeing that in our demand. Right? I am not seeing that in the bookings that we have. I am not seeing that when I sit down with a customer, and we are talking about capacity, and what the capacity expectations on our side of the table has to be to meet their goals over the next year, 2 or 3 years. That I am not seeing. But what we do when we build a forecast, we wanna make sure we get in front of our partners. Everybody on this call and all the investors in law, and make sure that when we say we are going to hit a number, we are going to hit a number. So keep that in mind. Now with regards to our product offering, we do not see any I will say it this way, any changes between new aircraft, old aircraft, old engine, new engine for the parts that we are making today. They carry Ford from legacy right through to the future. We are not, as you know, making engines. We are not making wings. The things that actually move the needle when it comes to fuel efficiency and those things. We are making switches and push buttons and you know, latching mechanisms. Right? And what the opportunity set is, is a little bit of improvement. Showing up on time with a body product, and you get to stay on that platform, and a new gen. So that is how we think about the products that we offer to our customers. So hopefully, in there somewhere, Sheila, I answered your question.

Sheila Kahyaoglu: that is it. Thank you, Dirkson. Maybe can I ask another 1? I guess on 2-part on M&A, what is holding you back the most, I guess? Is it just. I know you stick to your knitting when comes to M&A, the margin profile, the valuation. So what is holding you back? And as you think about the past year, you had LMB in December, Harper in January. How has perhaps like no new M&A coming in here this year changed the way you run the business for the better, whether it is the new pipeline or focus on productivity?

Brett N. Milgrim: Well, there is there is no change in how we run the business. that is for sure. And for those of us who have actually done M&A, you would know that it is lumpy. it is unpredictable. And I could give you several examples, which I will not on this public forum, but several examples of things that we are very close to. And for the intricacies and personalities and nuances that go into M&A, which is not as simple as buying a public stock or not. Sometimes things work out. Sometimes things do not. And to your point earlier, we remain very, very disciplined. So what you are gonna see is never a linear straight line of a pace or a cadence of M&A you are measuring things in quarters as opposed to years or multi years. And so you will wake up you know, at some point in the future and say, wait a minute. You did a flurry of deals out of. Are you doing too many? You know, how can you do that? And the point I am trying to make is it is unpredictable and it is lumpy. And that is the nature of the M&A business for those people who are disciplined about it and will only execute on transactions that will increase the equity value of the company. that is the best way I can answer. Okay, that is super helpful.

Sheila Kahyaoglu: Thank you. Thanks, Sheila.

Operator: Thank you. And there are no further questions at this time. I will now turn it back to Dirkson R. Charles for closing remarks.

Dirkson R. Charles: Thank you. So look, first of all, a big thank you to all my mates who are the heart and soul of Loar. And to everyone that has taken the time to hear our story today. We continue to be excited about building our aerospace and defense cash compounder we call Loar. And looking forward to speaking to you all in February. Thank you very much.

Operator: Thank you. This concludes today's conference. All parties may disconnect.