Arxis (ARXS) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• Head of FP and A and Investor Relations – Bryan Wendlandt
• President and Chief Executive Officer – Kevin S. Perhamus
• Chief Financial Officer – Azad Badakhsh

TAKEAWAYS

• Revenue — $564 million, representing 36% growth driven by strong demand across the industrial, aerospace, and defense sectors.
• Organic Revenue Growth — 29%, reflecting mid single digit new business, high single digit pricing, and mid teens growth from higher production on existing platforms.
• Adjusted EBITDA — $256 million, an increase of 67% supported by operating leverage from higher sales volumes.
• Adjusted EBITDA Margin — 45.4%, expanding 840 basis points due to pricing realization and cost optimization initiatives.
• M&A Activity — Six acquisitions completed year to date, including Schatz Bearings and StrataEdge in September.
• Acquisition Investment — $151 million, representing the combined purchase price for Schatz and StrataEdge at a valuation below 10 times estimated 2027 adjusted EBITDA.
• Free Cash Flow — $150 million, an increase of 117% reflecting higher earnings and improved net working capital dynamics.
• Net Leverage — 1.6x, down from 1.8x at the end of the second quarter as a result of debt paydown and earnings growth.
• Full-Year 2026 Revenue Guidance — $2.05 billion to $2.07 billion, representing approximately 29% growth at the midpoint.
• Full-Year 2026 Adjusted EBITDA Guidance — $855 million to $865 million, an increase of $65 million at the midpoint compared to prior guidance.
• Full-Year 2026 Organic Growth Outlook — 22%, with management anticipating 20% or greater growth across each of the three primary end markets.
• Fiscal Year 2027 Revenue Guidance — $2.4 billion to $2.5 billion, representing projected organic growth of 10% to 15%.
• Fiscal Year 2027 Adjusted EBITDA Guidance — $1.01 billion to $1.06 billion, with projected margins between 42.1% and 42.4%.
• Pricing Contribution — High single digit levels in the third quarter, which outperformed the company’s long-term target of mid single digit pricing.
• M&A Margin Dilution — 40 basis points in the third quarter, with an expected increase to 100 basis points of dilution in the fourth quarter as new acquisitions fully contribute.
• Operational Free Cash Flow Framework — EBITDA less capital expenditures and changes in net working capital, which each typically contribute 3% of revenue.
• New Business Generation — Mid single digit growth, consistently contributing to the organic revenue layer cake through the Edge platform.
• Incremental EBITDA Conversion — 50%, representing the long-term target for converting organic revenue growth into earnings.
• Acquisition Revenue Contribution — $60 million, representing the incremental top-line impact expected in 2026 from the Omnetics, Schatz, and StrataEdge transactions.
• Segment Performance — Electronic Components and Mechanical Components segments delivered similar levels of organic growth during the quarter.

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RISKS

• Badakhsh warned that acquisition-related dilution is expected to increase to approximately 100 basis points in the fourth quarter as the company integrates three recently completed transactions.

SUMMARY

Arxis, Inc. (ARXS +1.37%) reported third quarter results that significantly exceeded its long-term growth algorithm, primarily driven by concurrent production ramps across multiple aerospace and defense platforms. Management raised its full-year 2026 financial guidance and introduced a fiscal year 2027 outlook that anticipates organic growth of 10% to 15%, which remains above historical targets. The company continues to execute a disciplined acquisition strategy, completing six transactions year to date while reducing its net leverage ratio to 1.6x. Operational focus remains on the decentralized ArcSys Edge structure and the VPC framework to drive pricing and productivity across its electronic and mechanical component segments.

• CEO Perhamus noted that the company identifies opportunities to grow with customers as they increase production, a process termed ramp capture.
• The company maintains a proprietary business model where components are designed into the bill of materials, often as the sole qualified part for decades; Perhamus stated, “Qualifying a part for these environments is demanding and expensive, so once designed in, our parts remain in place for decades.”
• Management stated that the company prefers to operate on a purchase order basis rather than long-term framework agreements to maintain better pricing control and visibility.
• The M&A pipeline remains full, with the company tracking over 1,000 targets in its proprietary system to identify businesses that meet its specific margin and technology scorecards.
• Schatz Bearings will be integrated into the existing bearings business group alongside Kamatics to leverage geographical proximity and fill specific product gaps in the aerospace portfolio.

INDUSTRY GLOSSARY

• VPC: Value Prioritization and Control, a management framework used to drive pricing and productivity.
• Ramp Capture: The realization of revenue growth as customers increase production rates on platforms where the company’s components are already designed in.
• Ceramic Packages: Specialized housings for high-frequency and high-power electronics that manage heat and maintain electrical performance in extreme environments.
• RF and Microwave: Radio frequency and microwave components used in communications, radar, and electronic warfare systems.
• Bill of Materials: A comprehensive list of parts, items, assemblies, and other materials required to create a specific product.

Full Conference Call Transcript

Operator: Good morning, and thank you for standing by. Welcome to the ArcSys Third Quarter 26 Earnings Conference Call. At this time, participants are in a listen only mode. After the speakers’ presentation, there will be a Q&A session. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to Bryan Wendlandt, Head of FP and A and Investor Relations. Please go ahead.

Bryan Wendlandt: Good morning, and welcome to the ArcSys Third Quarter 26 Results Conference Call. Joining me today are Kevin S. Perhamus, President and Chief Executive Officer and Azad Badakhsh, Chief Financial Officer of ArcSys. Before we begin, I would like to remind everyone that today’s discussion will contain forward looking statements relating to future events and expectations. Actual results may differ materially from those projected due to a number of risks and uncertainties. Please refer to our most recent SEC filings and today’s earnings materials for a discussion of factors that could cause actual results to differ materially from those forward looking statements. During today’s call, we may also referen

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