TAT Technologies Q4 2024 Earnings Call Transcript

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Provided by Quartr
March 27, 2025
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Matt Chesler
Partner at FNK IR

Good day, ladies and gentlemen. Thank you for standing by. Welcome to TAT Technologies, fourth quarter two thousand and twenty four earnings conference call. Please note that today's conference call may be recorded. I will be your host, Matt Chesler, from The US based investor team.

Matt Chesler
Partner at FNK IR

Joining me today are, Yigal Zamir, our president and CEO, and Ehud Ben Yair, our CFO. Before getting started, we would like to draw your attention to the fact that certain matters discussed on this call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the Federal securities laws. These forward looking statements are based on management's current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or applied by these forward looking statements. The forward looking statements are made as of the date of this call and, except as required by law, TAT Technologies assumes no obligation to update or revise them.

Matt Chesler
Partner at FNK IR

Investors are cautioned not to place undue reliance on these forward looking statements. For a more detailed discussion of how these and other risks and uncertainties could cause TAT Technologies' actual results to differ materially from those indicated in these forward looking statements, please see our annual report on Form 20 F for the fiscal year ended 12/31/2024, and other filings we make with the SEC. The financial measures discussed today include non GAAP measures. We believe investors focus on non GAAP financial measures in comparing results between periods and among our peer companies that publish similar non GAAP measures. Please see today's press release, our earnings release and the Investors section of our website at www.tattechnologies.com for a reconciliation of non GAAP financial measures to GAAP measures.

Matt Chesler
Partner at FNK IR

Non GAAP financial information should not be considered in isolation from or as a substitute for or superior to GAAP financial information, but is included because management believes it is meaningful information about the financial performance of our business and is useful to investors for informational and comparative purposes. The non GAAP financial measures that the company uses have limitations and may differ from those used by other companies. With all that, we would now like to turn the call over to Yigal.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Thank you, and good morning, everybody, and thanks for joining us for our fourth quarter and annual results call. 2024 was another solid year of fast growth, increasing profitability and strong execution of our strategic business plan. We are very proud in the result. We delivered 34% increase in revenue to more than $150,000,000 in revenue and grew net. It income by 139 percent comparing to 2023.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

The fourth quarter was just as strong with revenue increasing by $0.29 to $41,000,000 compared to Q4 of twenty twenty three. In terms of profitability and margin, we also increased this year with gross margin increasing from $19,700,000 in 2023 to 21.7% this year. And as you saw, more than 23% in Q4 and adjusted EBITDA margin increasing from 9.7% in 2023 to 12.2% in 2024. Major efforts have been made and are still ongoing to continue and improve profitability in 2025, and we expect the trend to continue a lot of emphasis improving our profitability, not just going to top line. This year, we launch our new capabilities, especially our APUs, one hundred and thirty one and five hundred.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Those new capabilities open us to new substantial markets. A lot has been done during 2024 to build ourselves towards this Blue Ocean market, and it was reflected in our results, revenue increase and other things. With it came with a lot of investment in inventory, and we are well positioned going into 2025 to continue and enjoying this very large market. Another thing is that during the year in 2024, we focused on expanding our trading and leasing capability, which allow us to enjoy a built in advantage by using our in house MRO capability to purchase systems and components in the market, overhaul them and trade or lease them to our customers, especially in periods where the industry is challenged with also helps us centralize our supply chain. And we aim to continue growing this activity and strengthening it during 2025, and we are enjoying very high profitability on it.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Our backlog and LTA value at the end of twenty twenty four increased to $429,000,000 comparing to the $4.00 $6,000,000 at the end of twenty twenty three. And we are very pleased with it because despite of on top of the growth that we were able to show in revenue in 2024, we booked more new orders and we won new business. So we are ready, and it's a good reflection of the potential growth in 2025, '20 '20 '6. Supply chain continues to be a challenge in the industry, especially with parts and materials availability and longer than normal lead times. In order to overcome the challenges and be ready for the expected growth in 2025, but also in order to provide great service to our customers and have assets ready for trading, we implemented a strategic sourcing plan, which reflects in our inventory, you can see in the inventory, the balance of the inventory at the end of the year, the growth, most of it, if not all of it, is strategic decisions that we made to get ready with parts, materials and full components like engines or landing gears available on the shelf so we can support 2025 business and continuous growth.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

As an outcome of this strategic and the implementing of this strategy, we basically yield the profits that we generated throughout the year and reinvested it to do two things. First of all, to support the working capital, but also to support the inventory build up. And it reflects in a negative operation cash flow for the year, but something that we did as a strategic decision in order to be ready for this year. So at the end of the day, bottom line, we are summoning a meaningful year with growth rate that is much higher than the industry, profitable and expanding our margin, while there are certainty challenges ahead of us mainly gaining new contracts as a new player in the one hundred and thirty one and five hundred APUs and overcoming the supply chain, we are looking forward to another strong year in 2025 with focus on improving performance to our customers, increasing profitability margin and growing the top line. With that, I will pass the speaking to Erud Ben Yair, our CFO, to review the financial report.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

Thank you, Regal. Good morning, everybody, and thank you for joining us today. As Igor started, we completed a very successful year. We'll elaborate a little bit about the numbers and the stability elements, both for q four of twenty four compared to q four of twenty three and also for the full year's 2023 versus 2024. So revenue in q four went up to $41,000,000 compared to thirty eight point eight.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

It's an increase of 29% quarter to quarter. Gross margin in Q4 of twenty four went up to 23.2% compared to twenty one point nine in Q4 of twenty three. And the adjusted EBITDA went up by almost 60% from 3.4 in Q4 of twenty '3 million dollars to $5,400,000 in Q4 of twenty four. Earning per share on a fully diluted basis went up to 32¢ per share. It's a 658 percent increase compared to q four of twenty three.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

Looking at the year to year results, so the year the full year of 2024 ended with $152,100,000 of revenue compared to 113.8 in 2023, which is an increase of 34%. The gross margin went up from 19.7 in 2023 to 21.7% of revenue, which represents $33,000,000 of gross margin. The operating profit went up as well, almost double itself or even double itself, from $6,100,000 to $12,500,000, and the adjusted EBITDA went up from $11,100,000 in 2023 to $18,600,000 in 2024, representing a 67 percent increase in the adjusted EBITDA. Net profits also more than doubled, 100% increase between the year of 2023. They were $4,700,000 compared to 11.2.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

And in the year of, for the full year of 2024, the earnings per share on a fully diluted basis was a dollar per share representing 95% increase compared to the year of 2023. One of the things that we're very proud of them and we're elaborating them quarter after quarter is not is that the fact that the company is growing its revenue quarter after quarter, but we're more proud with the fact that we're improving our gross margin, operating margin, and, obviously, net profit and adjusted EBITDA. So all profitability elements went up quarter after quarter. So gross margin went up for 21.9 in q four of twenty twenty three and gradually went up up to 23.2 in q four in of 2024. And the same with all other, operating margin, net profits, and adjusted EBITDA.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

Again, I must emphasize even though we're presenting quarter after quarter, I believe that in order to better analyze the company, you need to look at more of four quarter results rather than trying to analyze and understand exactly what happens every quarter. Any small deal of 2 or $3,000,000 can make a change in the in the quarter, both revenue and profitability. Another analysis that we are showing every quarter is the revenue per product line. So you can see that well, really emphasizing about our four major product line, which are heat exchangers, APU, the trading and leasing, and the lending gears. So heat exchangers, both OEM and MRO went up from $13,300,000 in q four of twenty twenty three up to $16,600,000 in q four of twenty four.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

APU segment went up from $9,200,000 in q four of twenty three to $30,000,000. It's an increase of 42% in the revenue of this segment. Trading and and leasing leasing also went up for $2,200,000 in q four of twenty three up to $3,300,000 in q four of twenty four with an uptick of 5.7 that we reported in q three of twenty twenty four. And the lending here is, is already at the level of $2,800,000 with expecting revenue to grow, dramatically in 2025. Looking looking at the year by year numbers of the of the major product line, you can see that heat exchange activity went up from $33,100,000 in 02/2022 to $63,200,000 at the year of 2024.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

APU with a dramatic increase from $18,700,000 in 2022 up to $43,300,000 in 2024. And, obviously, as Igor said, we just started scratching the surface of the new APU engines, the capabilities that we have, and we expected to see another ramp up in 2025. And the trading and leasing went up from $6,200,000 to 13.9. Lending yield is pretty stable. And as we explained, there's a cycle in this, in the Lending yield activity that we are, presenting, the cycle, the another cycle of four to five years started in Q4 of twenty twenty four and expected to ramp up during '25 and '26 to a much higher numbers.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

So again, we're very proud with increasing all the, not only the revenue, but also all the profitability elements. So revenue is going up, gross profit and margin are going up. And you can see the table, it's steady growth quarter after quarter. The same with the operating margin and the net income. Two things that I'm asking investors to be aware of that impact the net income of the company is one is the, is the interest expenses that we are paying.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

We are currently sitting on almost $20,000,000 of loans. Some of them long term, some of them short terms with interest rate of anywhere between 7.8% to 8.3% of interest. This is resulting in almost $2,000,000 interest expenses in the year of 2024 and expected to continue this way for the year 2025. And the second element is tax expenses, which are going to go up in 2025. The company is not going to pay taxes in 2025, but we're going to work all the tax expenses, which are mainly due to changes in the in the tax assets and liability on our balance sheet.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

And we're expecting to start paying taxes by the end of twenty five, starting 2026. In terms of the business breakdown, so again, the company is really focusing its activity on the commercial aviation side of the business, less on the military. The military revenues in 2024 were 18%

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

out of the total revenue and

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

commercial were 82%. In terms of, the two major side of business, which are OEM and MRO. So OEM were 27% in q four and MRO of 73%. But looking at the full year, OEM were 32% and MRO of 68, which is very, very steady if you're looking also backwards to the years of 2023 and 2022. In terms of the geographical distribution of the revenue, North America America obviously continue to be very strong.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

70% of our revenues are coming from US customers, 11% out of Europe, and the rest is the the rest of the world are the rest. And the last slide is about the, is about the backlog. So you can see on the left side that, backlog is steadily going up from $400,000,000 in 2022 to $429,000,000 at the end of twenty twenty four. Fifty '1 percent of it are the heat exchangers, long term agreement, APU agreements, which are usually for anywhere between three to five three to five fields out 28% of the of the backlog and 14% of the backlog, are again lending, contracts. As we as we said before and in the past, we are going to participate in bids on large bids on the new APU segment on the year of 2025 and on.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

And once we start winning those contract, you will see another jump in the another step jump in the backlog number. And by this, I'm returning the call to Miguel Zamir, our CEO.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

So thank you, Eyal. So just to summarize, '24 was another strong year. And, when we look at our going into 'twenty five and 'twenty six, we still enjoy the same strong demand that we've been seeing in the last two years. Industry is still recovering, and I'm not sure that in some cases, we don't see the light at the end of the tunnel in terms of when the industry is going to catch up with the demand. So they're increasing demands.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

We have a large increase in our MRO orders. We already have a good visibility to this year and starting to see increasing, book of orders also already for '26. The two new engines and, I would mention, bidding on a new contract. It's a major growth engine for the company, the trading and leasing activities, which we plan to continue and expand, and the strategic deals that we have signed and the opportunities that we have for growth in the lending yield. So basically, it's the same landscape of growth engines that we discussed in the previous quarters, and we are very optimistic about it and the opportunities for growth moving forward.

Matt Chesler
Partner at FNK IR

Okay. Thank you, Igal.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Yeah.

Matt Chesler
Partner at FNK IR

We're now gonna open up, to the q and a session, first with some instructions. As a reminder, there are two ways to ask a question from the Zoom webcast. The first is to use the raise your hand icon, which is at the bottom of your screen. Clicking on this will alert me that you'll want to be called on to ask a live question and you'll be placed in a queue when called on. Just note, you're going to be on mute until you're called on.

Matt Chesler
Partner at FNK IR

The second way to participate in q and a is to use the q and a widget, which will allow you to type in and text the question in. We'll take questions from there as well. But just note, if we run into a time constraint, someone from, the IR team will get back to you if your question is not asked on today's call. With that, we'd now like to begin and pause for a moment to build the queue. I will now take the first question.

Matt Chesler
Partner at FNK IR

First question is gonna be from, Josh Sullivan, at the Benchmark Company. Josh, go ahead. Josh, be sure to take your line off the mute if you've not already done so. Josh, I believe you're still on mute.

Josh Sullivan
Managing Director & Equity Research Analyst at The Benchmark Company LLC

How about now? Can you

Matt Chesler
Partner at FNK IR

No, you're good.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Okay. Good morning. Good morning. Thank you.

Josh Sullivan
Managing Director & Equity Research Analyst at The Benchmark Company LLC

Yes, just as congratulations on the result. As far as the investment in inventory, just given the ongoing unstable nature of the supply chain, can you just highlight what you're seeing from suppliers at this point maybe versus the previous quarter?

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

So I think that we didn't see any big change in the supply chain behavior over the last two quarters. And without going to too many details, in some product lines, and I mentioned it in previous calls, we are fully recovered and the supply chain is recovered. And over there, like, you know, internally, and we don't go into these details, we take a very strategic approach. So anywhere where the supply chain already stabilized and especially more on the material side, the raw material side, it's way more stable than what it was during the COVID years. Over there, we didn't increase.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

We are keeping on the opposite. Despite the fact that we are increasing revenue, we are not increasing purchasing and inventory, in some cases, even went down. We are just increasing the inventory turns. I think that the key challenges is on the parts delivery. When we need to buy parts from the OEMs in order to perform the work, whether it's APUs on learning gears, over there, we, there are still major challenges, with very long lead times and unpredictable deliveries.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

And over there, we made a strategic decision to invest a lot in order to be ready for the growth. So if I have to split between materials parts and components, materials is pretty stable. Still, the lead times are still not back to where they used to be before COVID, but getting there. In over there, we are not increasing. On the opposite, increasing.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

On the parts, OEM parts to support engines or landing gears, still pretty much a challenge with very long lead time and lack of consistency, if you will, in the in the deliveries.

Josh Sullivan
Managing Director & Equity Research Analyst at The Benchmark Company LLC

Got it. And then just looking at the launch and the new APU capabilities here in 2025, what is the demand side of that equation look like? Or how should we think about how you guys are going after some of those programs? I mean, are you looking at the larger ones? Do you think we'll see smaller ones and more incrementally?

Josh Sullivan
Managing Director & Equity Research Analyst at The Benchmark Company LLC

Just trying to understand how we might visually see the APU opportunity evolve over '25.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

So I'll say I said the following. You know, I'll split the answer into two sections. First of all, there is a there are plenty of challenges that airlines are experiencing around the world with the availability of of these engines. With the supply chain challenges and with the ramp up that is required by the industry and many competitors still many of our competitors still are struggling to ramp up the rate required. So there's a lot of demand.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

I would say we see a lot of interest in either already being in active RFPs or planning to open RFPs and or planning to figure out solutions to how to overcome the challenges that airlines have, despite of the fact that they are locked into existing contracts. So there is a lot of demand and plenty of activity around the way we see a very large funnel of opportunities. We are a newcomer into these engines, and we are going to win on RFPs. But I think that going after very large RFPs at this point will, we are trying, but I don't know that I can say, yes, we are going to win major, major, very large RFPs. Being a newcomer and, into into this game, I think we are going to more focus on, small to medium sized RFPs, from airlines.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

And actually, it's not just in the future. We are already doing it, and we are now in active process on several of them. So if you think about it, small airlines to medium sized airlines are more on the sweet spot for us for this year, I would say.

Josh Sullivan
Managing Director & Equity Research Analyst at The Benchmark Company LLC

Yeah. And then the comments on the landing gear cycle, how should we think about that? And when do you think we really see that starting to engage?

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

So you saw the beginning in Q4, and we expect it to continue this year. The full, you know, the peak, the peak is expected in '26 to '28. But we are expecting substantial growth this year and that will get to maximum demand next year and again '26 to '28.

Josh Sullivan
Managing Director & Equity Research Analyst at The Benchmark Company LLC

Percent. And then just kind of more of a general question. Obviously, you guys have great penetrating story here, but what's your sense of the overall MRO market, just given some of the macro comments out there?

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

So I think that since the industry is still in recovery and with all the supply chain challenges, we see a very strong demand. I think that it will take time before MRO will catch up. And if you look at what the larger companies and the industries are publishing, they are talking about catching up at the end of this year sometime in '26. So while maybe there is a little bit of concern on the airline side that we are hearing, maybe a little bit of softening on the flight side, but there is so much catch up to do and that for the foreseeing future, we don't see any decrease in demand on the opposite. Perfect.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

Thank you for the time.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Thank you. We're going to move to

Matt Chesler
Partner at FNK IR

the next question. The next question is from Sergey Glynianov. Sergey, the line is open.

Analyst

Yeah. Hello, everyone. And first of all, I want to say, congratulations for another successful quarter. So I have a couple of questions and first of all. What's the book to bill ratio is now and what the time period does it take to convert all backlog to revenue?

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

So the book to bill ratio is over one, obviously, because you see that not only that we increased revenue, we increased the backlog more. And you have to remember that when we operate, as time goes by, we are eating from the backlog and the value of the long term agreement, but we are replacing it with more new orders and new contracts in a larger amount than what we were able to translate into revenues, which is a great indicator for the future growth that we are expecting to see. On the OEM side, regarding the second question, on the OEM side, these are very long term, we are under long term contracts. And what you see or what we recognize in the POs, it's either the value of the contract for the coming few years or when the OEM is actually giving us the POs, the actual POs for the coming twelve to eighteen months, we replace the contract value into the actual POs. So on the OEM side, the next twelve to eighteen months is already covered with actual POs, which is part of the number.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

And then for the coming few years, it's based on the aircraft manufacturer production plan on them. And that's, give or take, 30% of the business 32% of the business last year. On the MRO side, typically, contracts are between three to five years. And so we take the airline historical data of how much replacement and how much overall spend they have per year times the contract remaining contract time, and that's what we book. And we need to remember that give or take 40%, it depends, it's changing, but about 40% of the revenue comes from non contractual customers.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

And, so that's the last portion because when we actually get the PO from a noncontractual customer or we get an actual asset for repair on the aftermarket side and the RO side, then obviously, we add the value, the expected value, into the into the calculation. So let's call it 40% is very short term. We got something. We have to produce it in the coming few months. The other 60% based on contract, it's typically three to five years, contract on the MRO and way longer contracts on the on the OEM with actual POs for the coming twelve to eighteen months.

Analyst

Okay. Got it. Thanks. And the next one is, APU projections pretty clear. But what is about the thermal solutions?

Analyst

What revenue growth rate do you expect next two to three years maybe?

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

You know, on the thermal solutions, first of all, we expect to continue going. We have a huge advantage of the thermal solution. I believe that we are, we've been a very long term partner of the large OEM. We are tier one to Boeing. We are tier one to Textron on most of their fleet.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

We are tier one to Embraer. We also produce thermal components to system manufacturers. We are under very long contracts. And as long as the as the OEM continue to recover their production, we expect to see more and more POs. We already see an increase for this year from the OEMs.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

That's on that side. On the aftermarket side, the TAT is one of the leading companies in the industry globally, if not the largest. We had great performance. We made huge huge improvements over the last two or three years. We made huge investments in the capacity and production line, dramatically increasing our capabilities in our facility in Tulsa, Oklahoma.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

And as time goes by, we win more and more business. And we are very competitive, and we are very happy with our growth expecting to continue.

Analyst

Yeah. Sounds great. And, I think the statement on the last call, was about, the margin above 15%. Are you still on the track of exceeding 15% EBITDA margin in 2025?

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

So we are not providing forecast, but you can see that I'm very consistent. And thank you for reminding me. I definitely, internally, as I said last time, I believe that the company in our type of business, and if I'm looking at our competitors, best in class needs to be, what I consider to be best in class needs to be above 25% gross margin and above 15% EBITDA. And you can see the solid trends in this direction continuing. We are investing.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Actually, when you look at if you were here with us internally, you're looking at our focus for this year, we placed profitability improvement and continuing the improvement in efficiency and reducing cost at the higher priority than just increasing the top line. We really want to make a lot of effort to get to the point that we have a strong engine that generates good results with very high margins. So we know that when we increase the revenue, we are going to enjoy it. So, definitely in the right direction and hoping to get there as fast as possible.

Analyst

Yeah. Sounds great. And, the next one, what is your long term revenue structure outlook, breaking it down into thermal APU, lending gear, etcetera? It's really interesting because, we see that APU share is increasing. And now, you mentioned that, lending your revenue, will slow down after twenty twenty eight if I, as far as I understood.

Analyst

Yeah. So just put a little bit, colors about about that. Thank you.

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

So I think that for the year of, for the coming years, we will see we're expecting to see a growth in all of the, in all of the segments. Heat exchanges, APU, lending gear, and also the trading and the leasing. We believe that the APU will be a stronger growth engines than than the other given the new contract and the size of the market. But, as I said before, we're expecting growth in all of the segments in the coming years.

Analyst

Okay. Thank you. And the last one is, a little bit about, Lending LendingJu. Yeah. EJET one hundred and seventy five is, quite popular and, that's great.

Analyst

So you are service that provide landing gear. And moreover, we saw a big deal purchasing by American Airlines of new ones that may bring a lot of work ahead for the TAT. But anyway, do you plan to get new authorization of another business or regional jets?

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

I'm not

Ehud Ben-Yair
Ehud Ben-Yair
Chief Financial Officer at TAT Technologies

sure that Are we expecting to get any other authorization on top of the ejets? That's

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

It's not some okay, it's not something that currently is on the in our roadmap for this year. So right now, in the order for this year, we really focus on increasing the capacity to meet the demand on the existing platforms.

Analyst

Okay. Got it. And that's all from me. Thanks a lot and wish all the best to you.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Thank you. Thank you very much. Thank you, Sergei.

Matt Chesler
Partner at FNK IR

Thank you, Sergei. And then now we're going to move to take a question that was typed in. This one is from Jonathan Sigman. First congratulating us on the continued positive results during these challenging supply conditions. He's asking for us to comment on pricing trends that our customers are paying for our services.

Matt Chesler
Partner at FNK IR

You know, is it increasing, changing year over year?

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

So, is it, you know, as a general thing, we have two types of customers. We have the contractual customers, and over there, pricing, our pricing escalations are predetermined with formulas typically, tied to indexes, material indexes and labor indexes. So per the indexes, the prices are changing on an annual basis. And obviously, they were adjusted also going into '25 according to the relevant, indexes. And then we have the non contractual customers where it's a little bit more tricky.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

There are market considerations and competitive considerations. And, obviously, we want to make sure that the prices are going to enable us to maintain the possibility. On the other hand, we also want to make sure that we are not going to be disadvantaged being more expensive than competition. So, obviously, it's a more per case per case discussion. But I think that we are positioned well from the pricing, from 2025 pricing to continue and enjoy the margin that we saw last year.

Matt Chesler
Partner at FNK IR

There are no more questions in the queue. With that, I'd like to turn the call back over to Yigal for closing remarks.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Okay. So, one second. So, you know, we it is a summary of everything. We are very proud in the results, and we are well positioned to continue and to grow the company in 2025. The demand is strong.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

We see a lot of interest in, coming our way from new customers. The agreements that we have signed with Alagio OEMs are continuing to drive our growth. And all in all, I didn't mention the leasing and trading that is growing, especially in times where the industry is struggling. So all in all, we we are very optimistic about the the the potential to continue to grow the business. You know, I'd like to say that while, as I would said before, we, in the type of business that we are and in the last up until now, in the last two years, we've been every quarter focusing on the quarter and it was really quarter to quarter discussion.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

But I think that we need to start looking at the business more on an annual year to year growth. You see it from 23% to 24%. There may be changes and fluctuations from quarter to quarter. We are the unpredictability on the MRO side of the business. We don't have a good control on what will come and when will come.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

Even the airline don't know. Most of the maintenance that we do is not predetermined with exception of the lending deal, which is known in advance and planned months and months in advance. On all the other product lines, the maintenance is per condition. So as long as the unit is working well on wing, they are not dismantling and sending it to overall. So there are fluctuations.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

There are also budgetary decisions that airlines are making. Sometimes they want to be more profitable and cut cost on a certain quarter, so they don't send their components for maintenance. The following quarter, they can bombard you with all the units that they were accumulating for many months. So we can see variation between the quarters. But when we look at the full year and expectation for 2025 comparing to 2024, we are well positioned for another very strong year.

Igal Zamir
Igal Zamir
CEO & President at TAT Technologies

I'd like to use this opportunity and thank the participation in this call for taking the time to join us today and for the trust and partnership with our company. And looking forward to talk to you in future and see you in conferences and answer any questions that you have.

Executives
    • Igal Zamir
      Igal Zamir
      CEO & President
    • Ehud Ben-Yair
      Ehud Ben-Yair
      Chief Financial Officer
Analysts
    • Matt Chesler
      Partner at FNK IR
    • Josh Sullivan
      Managing Director & Equity Research Analyst at The Benchmark Company LLC
    • Analyst
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Key Takeaways

  • Revenue Growth: Delivered 34% annual revenue increase to $152.1 million and 139% net income growth for 2024, with Q4 revenue up 29% to $41 million while gross margin rose to 21.7% (23.2% in Q4) and adjusted EBITDA margin to 12.2%.
  • New APU Capabilities: Launched two APU platforms (131 & 500) in 2024, unlocking substantial new markets and contributing to a year-end backlog of $429 million, setting the stage for further contract wins in 2025.
  • Trading & Leasing Expansion: Grew in-house MRO-based trading and leasing operations to leverage market dislocations, achieving high profitability and centralizing the supply chain through strategic overhaul programs.
  • Strategic Inventory Build-Up: Implemented a strategic sourcing plan to counter ongoing supply-chain constraints by increasing inventory of parts, materials and complete components, causing temporary negative operating cash flow in preparation for 2025.
  • Strong Backlog & Cyclic Upside: Backlog and long-term agreement value rose to $429 million, with 51% heat exchangers, 28% APU and 14% landing gear, and landing-gear demand is expected to ramp through 2025–28.
AI Generated. May Contain Errors.
Earnings Conference Call
TAT Technologies Q4 2024
00:00 / 00:00

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