NASDAQ:TATT TAT Technologies Q1 2025 Earnings Report $27.20 +0.70 (+2.64%) Closing price 06/6/2025 04:00 PM EasternExtended Trading$27.60 +0.40 (+1.45%) As of 06/6/2025 07:26 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast TAT Technologies EPS ResultsActual EPS$0.34Consensus EPS $0.30Beat/MissBeat by +$0.04One Year Ago EPSN/ATAT Technologies Revenue ResultsActual Revenue$42.14 millionExpected Revenue$41.70 millionBeat/MissBeat by +$442.00 thousandYoY Revenue GrowthN/ATAT Technologies Announcement DetailsQuarterQ1 2025Date5/19/2025TimeAfter Market ClosesConference Call DateTuesday, May 20, 2025Conference Call Time8:30AM ETUpcoming EarningsTAT Technologies' Q2 2025 earnings is scheduled for Tuesday, August 26, 2025, with a conference call scheduled on Wednesday, August 27, 2025 at 5:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by TAT Technologies Q1 2025 Earnings Call TranscriptProvided by QuartrMay 20, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Eran YungerGroup Director - IR & ESG at TAT Technologies00:00:00Firm supporting Iran Younger, TAT's internal head of investor relations. Hosting today's call is Ygal Zamir, our President and CEO and Ehud Benyere, our CFO. Before getting started, we'd like to draw your attention to the fact that certain matters discussed on this call today 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 implied by these forward looking statements. Eran YungerGroup Director - IR & ESG at TAT Technologies00:00:45The forward looking statements are made as of the date of this call and except as required by law, T Technologies assumes no obligation to update or revise them. 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's 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 may 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. Eran YungerGroup Director - IR & ESG at TAT Technologies00:01:37Please see yesterday evening's Form six ks, our earnings release and the Investors section of our website at tattechnologies.com for a reconciliation of non GAAP financial measures to GAAP measures. 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 provides 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 we have, that we use have limitations and may differ from those used Now with all of that said, I would like to turn the call over to Ygal. Igal ZamirCEO & President at TAT Technologies00:02:29Good morning, everybody, and thanks for joining us for the first quarter earnings calls. I really appreciate your interest and the support as we review the company's performance and discuss our strategic direction moving forward. As you probably see, we started 2025 on a strong note, delivering another quarter of double digit revenue growth with the profitability growing even faster than revenue, reinforcing the the momentum we established last year or, actually, I would say in the last three years. Our focus on customer operation excellence, market expansion, and strategic growth continue to drive results that are ahead of the industry average. We expect to continue and outpace the industry for the foreseeable future. Igal ZamirCEO & President at TAT Technologies00:03:15First quarter revenue increased by 23.6% to $42,100,000, up from $34,100,000 in the same period last year. This growth was fueled by strong demand across our core businesses line along with the Gentlemen, I just want to check that you still hear me. We have a Ehud Ben-YairChief Financial Officer at TAT Technologies00:03:53Yeah. We heard you, but there was a little pause. Eran YungerGroup Director - IR & ESG at TAT Technologies00:03:56You're back online now, Miguel. So please speak. Igal ZamirCEO & President at TAT Technologies00:04:01I apologize for this. We had, like, a power shutdown here. Our gross profit increased from 40.9% to $10,000,000, which with the with the gross margin expanding for by by 290 basis points to 23.6% comparing to the 20.7% in the first quarter of twenty twenty four. This improvement reflect our ongoing efforts to optimize cost structure, improve operational efficiencies, and enhance product mix. We we spent a lot of time talking about it in the previous calls. Igal ZamirCEO & President at TAT Technologies00:04:41We are continuing to invest a lot of efforts and energy in improving our internal efficiencies and cost structure, which reflects in the in the results. Adjusted EBITDA increased by 56.2% to $5,700,000, translating to an adjusted EBITDA margin of 13.6%, a notable improvement from our 10.8% in the same period last year. This improvement is a is a testament of our by a disciplined expense management. Our backlog and long term agreement rose to $439,000,000 during during the first quarter, providing us with strong visibility. It also provide us with an important runway for continued growth amid the rapidly evolving aviation market landscape in both commercial and government end markets. Igal ZamirCEO & President at TAT Technologies00:05:36The aviation sector is currently navigating several macroeconomic headwinds, including policy changing, the proposed tariffs, and border economic uncertainties, all of which have the potential to impact supply chain and and customer purchasing behavior. Long term, our robust backlog position as well as our as our demonstrated ability to outperform the industry. And, you know, while in parallel, we expect we can anticipate some near term volatility, particularly in the MRO intake. So bottom line, when we look at the outlook, given the given the backlog, given the the value of the long term agreement that we are signing and increasing all the time, we have a very positive outlook on the long term. Short term, given all the macroeconomic factors, we can expect both volatility from the industry. Igal ZamirCEO & President at TAT Technologies00:06:34The expansion of our APU will continue to grow our addressable market. We are now authorized on the a p one one hundred and thirty one APU, the three three one five hundred, which serves the Boeing seven seven seven and Boeing seven thirty seven and and Airbus three twenty. Now only a year ago, we secured our first customer for these engines. And since then, we have onboarded several additional customers, both new and long term and long standing. We are well positioned as a trusted and reliable partner for serving various Honeywell APUs with top tier quality and exceptional Our pipeline of opportunities for APU work continues to expand, and we are participating in multiple discussions to expand our APU work. Igal ZamirCEO & President at TAT Technologies00:07:22To meet this growing demand, we strategically increased our inventory levels during the quarter. While supply chain issues persist, maintaining a higher inventory level position up to meet timeliness, reliability. This approach is not just a safeguard. It's a strategic decision and strategic asset that we believe that we have enabling us to maintain our competitive advantage and continue to market growth. As a result, we recorded a net cash outflow in the quarter. Igal ZamirCEO & President at TAT Technologies00:07:57However, we are confident that this investment will drive revenue growth and enhance customers' satisfaction in the coming quarters, positioning us for continued success. Our growth strategy is based on growing our MRO and OEM business as well as our trading division. This diversified approach provides us with the agility and operational flexibility needed to navigate periods of economical uncertainty. Given the ongoing tariffs uncertainty, our supply chain team is working closely with our suppliers and customers to align expectation, adjust planning, and maintain a high service level that our partners rely on. In summary, we are concluding a strong quarter and are optimistic about our prospect for the remainder of 2025. Igal ZamirCEO & President at TAT Technologies00:08:46In short term, we will continue to navigate the variety of industry wide challenges. The supply chain remains challenged. Economic uncertainty sometimes cause customers to slow down maintenance plans. To date, we have weathered these challenges challenges successfully. Long term, my optimism has increased even even though my short term outlook is somewhat cautious. Igal ZamirCEO & President at TAT Technologies00:09:13We see encouraging demand for our products and services, strong interest from both new and existing customers, and the potential to achieve long term growth rates that significantly significantly outpace the the broader industry, all while continuing to expand margin. And thank you very much. And with that, I will turn to our CFO, Eldon Yair, to provide further insights into our financial performance and business outlook. Ehud Ben-YairChief Financial Officer at TAT Technologies00:09:42Thank you, Igal. Good morning, everybody. I will quickly review the results of the first quarter of twenty twenty five. So revenue went up to $42,100,000 compared to 34.1. It's an increase of 24% year over year. Ehud Ben-YairChief Financial Officer at TAT Technologies00:10:02Gross profit landed at $10,000,000 compared to $7,100,000 It's a 41% increase compared to the previous period. And also, the gross margin went up to 23.6 compared to 20.7. It's two ninety bit bit points compared to the previous quarter. Operating profit at $4,200,000 compared to 2.2. It's a 89% increase, and the operating margin is already at 9.9% compared to 6.5% in the previous period. Ehud Ben-YairChief Financial Officer at TAT Technologies00:10:40Also, the adjusted EBITDA went up to $5,700,000 compared to $3,700,000. It's a 56% increase, and the EBITDA margin went up to 13.6% compared to 10.8% in the previous period. Net profits landed at $3,800,000 compared to $2,100,000. Several insights to to take in consideration when analyzing the results of the quarter. The that, again, we're improving our margins all over the place, Especially in this quarter, OEM revenue and margin went up up compared to previous period on behalf of the MRO work as will still suffer a lot of supply chain issues in the market, which led, in some cases, to a reduced in the a slight reducing the profitability. Ehud Ben-YairChief Financial Officer at TAT Technologies00:11:41Nonetheless, on the overall company size, we're continuing to improving our margin. The second thing that impacts the net profit, and we mentioned it in the previous quarters already, is the tax expenses. At this stage, we are all the tax expenses are accounting expenses. These are noncash expenses, mainly reduction of tax assets. As mentioned before, we're expecting to be tax profitable and start paying taxes both in Israel and in The US at the end of twenty twenty five. Ehud Ben-YairChief Financial Officer at TAT Technologies00:12:21In terms of the strategic growth engines and the product mix of of the quarter, So the heat exchange product line went up to $18,400,000 compared to 14.2. It's a 30% increase year over year. The APU segment also from 9,200,000 to $12,300,000. It's a 34% increase. The trading and leasing, as mentioned before, are it's it's down by 27% to $2,100,000. Ehud Ben-YairChief Financial Officer at TAT Technologies00:12:57We mentioned in the past that trading and leasing are, in some cases, opportunistic and, in some cases, really based on the specific need of the customers, and it can vary between quarter to quarter. In this quarter, a certain a certain deal was postponed to q two, and that this is the reason that you see the reduction in the trading and listen in q one of twenty twenty five. And the lending gear, as, again, as mentioned in the past, started ticking up at the end of q four and continues the trend in q one of twenty twenty five, landed at $3,300,000 compared to 1.5 in the previous quarter. It's a 127% increase. So just to quickly review the the two wheels trending, you will see that, again, we continue the con continue to grow the margin. Ehud Ben-YairChief Financial Officer at TAT Technologies00:13:59Just looking at the first quarter of twenty twenty three, revenue were at $25,200,000. Now we are already at $42,100,000. The gross profit also started at $4,300,000 in the first quarter of twenty twenty three and moved up to $7,100,000 in q one of twenty twenty four, and we are already at $10,000,000 in the first quarter of twenty twenty five. Same trend goes with the operating income that went up from almost $1,000,000 in q one of twenty twenty three to $2,200,000 in q one of twenty twenty four and $4,200,000 in q one of twenty twenty five. We're almost doubling our operating core operating income year after year. Ehud Ben-YairChief Financial Officer at TAT Technologies00:14:50With regards to the backlog, as Sigal already mentioned, we continue to increase our backlog. We saw a very strong trend in q one of twenty twenty five. We secured backlog and orders, and the LTA is worth of $52,000,000 this quarter, which led to an increase in the total backlog value to $439,000,000 With regards to the mix of the product, it remained pretty much the same as in previous quarter, more than 50%. Actually, 54% of the of the backlog and orders is 54% is heat exchanger, sorry, and APU is 27%, and the remaining most of the remaining is lending year, which is 13%. And by this, I return the call to Igal. Igal ZamirCEO & President at TAT Technologies00:15:44So as as we stated before, when we look forward strategically, you know, we have the the same growth engines that we discussed in the past. We and this is why I said it earlier that we are extremely optimistic about the long term outlook for the company. We they starting with the APUs, over $2,000,000,000 addressable market. We are proving more and more our ability to provide great service and fast turnaround time and competitive pricing to customers, and we're basically just starting to scratch the the surface of this huge addressable market. And we and with the amount of of interest that we are getting and the active and the active RFPs that we are participating in, we we believe that that's a substantial growth engine for the next few years for the coming few years. Igal ZamirCEO & President at TAT Technologies00:16:36Lending gear, MRO cycle, as anticipated, they would stated it. We already see it. It's coming. We see a very nice growth in lending your work and expecting it to continue. The the thermal solution MRO, We we TAT is the leading player in the industry, one of the the largest players in especially on the MRO side. Igal ZamirCEO & President at TAT Technologies00:17:01We are cost effective. We are providing amazing service to our customers way better than most of the competitors, and we expect to continue and grow this business as as a as a result. Thermal solution OEMs, the outlook for the new for new aircraft, the fleet conversions, all the next generation Evotals, and whatever represents a long term strategic opportunity for t for TAT. And the trading and leasing, while, you know, trading and leasing, and I would touch on it, has two components. We have the leasing activity, which is more stable month by month with major demand for for our products on the leasing side, provides a general steady flow of revenue and profitability. Igal ZamirCEO & President at TAT Technologies00:17:46And and then you have the trading side that is more based on availability of of of components, engines, gears, and such, and specific demands from from airlines. So while it's not as consistent as our ongoing business, it is growing, and there is a lot of demand. And as we increase the the amount of assets that that can afford ourselves to keep for these deals, we will be exposed to more and more deals and growing business with a very nice margin. Ehud Ben-YairChief Financial Officer at TAT Technologies00:18:24Just before going to the q and a, there were we were detected some some technical issues during the call. So if some of the audience someone from the audience didn't hear something well, we would be happy to repeat whatever was missing during the during the during the pitch. Okay. Now move to Matt for the q and a session. Eran YungerGroup Director - IR & ESG at TAT Technologies00:19:00Okay. Thank you very much. We're now going to, move to the q and a session. To ask a question, please use the q and a widget at the bottom of your screens. Just note, if we do 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. Eran YungerGroup Director - IR & ESG at TAT Technologies00:19:22But, you know, with we've already see that some questions are coming in. And with that, let's pause for a moment to to build the queue further. The first question is from Josh Sullivan at Benchmark. Thank you, Josh. He's congratulating us on the quarter. Eran YungerGroup Director - IR & ESG at TAT Technologies00:19:46And then can you explore backward incremental sequentially this quarter a little bit further? Provide some color on the increase. Was it driven by, you know, repeat customers versus new relationships? And then how are new AP relationships and orders evolving? Yigal, did that come through to you? Eran YungerGroup Director - IR & ESG at TAT Technologies00:20:28Yo, we're not hearing your answer. You may be on mute. Igal ZamirCEO & President at TAT Technologies00:20:40Benjamin, can you hear me now? Eran YungerGroup Director - IR & ESG at TAT Technologies00:20:42Now we can hear you. Please please proceed, Yuval. First of all, we Igal ZamirCEO & President at TAT Technologies00:20:48really apologize for all of we have some kind just just one second, Matt. We We really apologize for all of this. We have a major issue some kind of an issue here with the with the network. So I wonders of technology. I recon I reconnected via via hotspot to my iPhone. Igal ZamirCEO & President at TAT Technologies00:21:06I hope that I hope that you can hear us well now. And, Matt, please repeat the question. Eran YungerGroup Director - IR & ESG at TAT Technologies00:21:12Great. Let's let's go forward. So the first question was from Josh Sullivan at Benchmark. Josh is asking if we could go into further detail on the the incremental black backlog sequentially this quarter, talking about some of the, you know, the reasons for the increase sequentially, whether it was driven by repeat customers versus new relationships, and then, you know, how are AP relationships and orders evolving? Igal ZamirCEO & President at TAT Technologies00:21:40So two things. First of all, it's a combination, of existing customers and new customers. We won, and we stated it in the past. You know, when we when we win, we we come with the official announcement only when we have substantial wins, but we we are all the time winning more and more business that is less meaningful for a stand alone, you know, PR. But what we are adding new customers about the and it's both on the both on the a it's across the business lines. Igal ZamirCEO & President at TAT Technologies00:22:10It's APUs, gear, and thermal components. So in in reality, it's a combination between between new and existing and between the various business line. Nothing nothing unique that stands out more than more than others. Eran YungerGroup Director - IR & ESG at TAT Technologies00:22:32Great. Let's let's shift over to profitability. Josh is asking about, the margin improvement. How much of that, that that that improvement in margins is pricing versus, you know, operational actions that you've taken to drive efficiencies throughout the organization? Igal ZamirCEO & President at TAT Technologies00:22:50I I I don't think that it has anything to do with pricing. It's mostly operational it's mostly mostly operational efficiencies. And, obviously, there is always a some level of mix of products that we don't control. It is what it is, whatever we get. But we have we have major initiatives around improving profitability, which we and and, you know, and we stated in we stated in the past that we believe that the company like TAT needs to be at 25% gross margin, at least at 25% gross margin and 15% EBITDA. Igal ZamirCEO & President at TAT Technologies00:23:21And this is where definitely where we want to be in the future, and we are very committed to to getting there and investing a lot of time and energy in it. So, again, it's mostly operational efficiencies nothing to do with pricing changes. Eran YungerGroup Director - IR & ESG at TAT Technologies00:23:41Okay. Great. Here's an additional question around, you know, supply chain. You know, what's your from where you're sitting, what are you seeing in terms of the supply chain at this point? And what what are you what are you doing to to manage that with your customers? Igal ZamirCEO & President at TAT Technologies00:24:03So first of all, supply chain, it it's it's an ever evolving situation. You know? It's a on a very high level macro trend, I personally believe that the industry is in a recovery mode. But still, every time suppliers we wake up to surprises from suppliers, business lines that were already stabilized, we thought that everything is okay. And all of a sudden, deliveries are being pushed sometimes in months with no expectation, with no advanced warning. Igal ZamirCEO & President at TAT Technologies00:24:35So the overall trend is I think that the overall trend is positive, the industry is on a recovery mode. But it's it's still extremely volatile and ups and downs and and it's not consistent across business lines. So the only thing that we can do, and this is why and we are doing it strategically, is to increase inventories. And you see it in our numbers. We I believe that the companies that will be able to overcome the supply chain challenges first will enjoy the growth. Igal ZamirCEO & President at TAT Technologies00:25:11I think that part of the reason that we are growing is that we are providing great service to our customers across the business line. When you think about turnaround times that we are demonstrating to our customers on the MRO side, way better than what we hear that competitors are providing. This is a critical strategic advantage for the growth of the company. It comes with the cost of inventory and turning cash into inventory versus cash in the bank. But that's what we are doing, and we plan to continue until such day in the future where the where the industry would really be more stabilized. Eran YungerGroup Director - IR & ESG at TAT Technologies00:25:49We we did have an an investor question asking about your current capacity and how that serves your medium term out growth outlook. But I but I think you just addressed that in your your most recent response. So let me Yeah. Igal ZamirCEO & President at TAT Technologies00:26:03Maybe Matt, but just just to add to it, and we we spoke about it in the past. From a technology standpoint, equipment, and everything else, we are well positioned to more than double the capacity. So, obviously, the bottleneck is supply chain and having the parts. We are overcoming it by strategic purchase of inventory where needed. From facility standpoint, equipment, and everything else, we are we with all the investments that we have done over the last five years, we are well positioned to I would if I have to guess, at least double the capacity. Eran YungerGroup Director - IR & ESG at TAT Technologies00:26:36Okay. Let's let's shift to taxes. We we have a question from Sergey Guineev from Freedom, and he's asking how should we think about your tax provision, for the second quarter and the remaining part of the year as you've started to recognize noncash items in q one. Is is that clear, Ehud? Ehud Ben-YairChief Financial Officer at TAT Technologies00:27:04Yes. That's clear. Thank you for the question. I think what the what we're going to see until the end of the year is the the average tax expenses that you see right now out of the net profit will continue to stay around the same level. There's a mix of different taxes between Israel and the in in The US, but we believe that the profitability between Israel and The US going to continue the same until the end of the year. Ehud Ben-YairChief Financial Officer at TAT Technologies00:27:33So can assume the same, the same tax rate for the following, quarters. As I mentioned before, and I'm emphasizing it again, these are just these are noncash tax expenses, until q three. And by q four, it's gonna be it's gonna become tax expenses, which are which are followed by cash. Eran YungerGroup Director - IR & ESG at TAT Technologies00:27:56K. Sergey is also following up with a question around our our opportunity with defense customers in light of the current budgetary landscape, you know, particularly in The United States. So can you comment on the opportunities for growth within, within the government and defense market? Igal ZamirCEO & President at TAT Technologies00:28:23I think that by the way, I I we had an internal meeting with asking ourselves the same the same questions. The opportunities it's a good point. The the opportunities are definitely definitely there, and the budgets are in place. I we don't see any quick turnaround here from, you know, strategic decisions in the government side into immediate buying decisions. There are there are solicitation that the that are being opened by the by the air force or navy or or army in The US from time to time. Igal ZamirCEO & President at TAT Technologies00:29:03It's more based on schedule in our case for TAT, so I'm not expecting any immediate reaction or substantial growth. Having said this, we are we have our defense sales team dedicated to to selling to the to The US Armed Forces and, you know, hoping being in close contact with the with the buying offices and looking forward to to RFPs to solicitations to get open so we can so we can bid on them. I I believe that strategically strategically, this this segment is growing and needs to continue and grow. Nothing special that can be reported short term. Eran YungerGroup Director - IR & ESG at TAT Technologies00:29:51Okay. There's another growth oriented question here. You know, one is around you know you know, we highlighted a few logos in the the global logistics sector with the FedEx's, UBS UPS's, and DHL's of the world as as as customers. And so, you know, there's a specific question around, you know, APU revenue opportunity with these customers. But, you know, there's also a question in here around, you know, in general, the pipeline for APU one thirty one. Eran YungerGroup Director - IR & ESG at TAT Technologies00:30:20You know, perhaps, if you can talk to those opportunities. Igal ZamirCEO & President at TAT Technologies00:30:30First of all, when it comes to UPS, FedEx, and and and DHL, we they are existing customers. We we have great relationship with the with the three entities, and we have some opportunities to grow within their product lines. It depends on when they they their existing contracts will come to term, and and then they will open them to RFPs. And we are definitely in a great position to to secure more business from them based on the based on success over the last few years. I we are not well, when when you look at the overall potential for the APUs, the commercial the commercial market is the biggest opportunity. Igal ZamirCEO & President at TAT Technologies00:31:13And, basically, today, any airline in the almost any airline in the world is a potential customer for TAT. Airlines are typically on a three to five years agreements. And when when the agreement comes to term, unless if unless if they have a major, major problem, they don't change vendors in the middle of a term even if they are struggling. They get to the to the end They open RFPs. Igal ZamirCEO & President at TAT Technologies00:31:39We are participating a lot of in a lot of RFPs. And and I believe, you know, if you remember, in 2024, we deliberately decided to wait with participating in RFPs because we didn't feel confident enough to to secure long term. And at the end of twenty four, we we we mentioned in in conference calls that we feel more confident with the with the with the fact that we are gaining experience and improving the operations and efficiency and being ready. We in 2025, we are going to participate in our in large RFPs, which we do. There is a very nice funnel of opportunities, and I believe that it's just going to grow. Igal ZamirCEO & President at TAT Technologies00:32:21I call it a positive snowball effect. You start slow and small, and and then you gain and you win. And with the wins, you become more the the awareness to the company is becoming, and we are positioning ourselves. I think that we are slowly, but surely positioning ourselves as a key player in this in this segment, which will bring more and more customers to consider us as a in a serious way as their future vendor. And and the numbers are huge. Igal ZamirCEO & President at TAT Technologies00:32:49We are talking about one thirty one engine. We are talking about more than, I don't know, between 16 to to 18,000 engines that are flying today that are in use today around the world. So Eran YungerGroup Director - IR & ESG at TAT Technologies00:33:04Great. I appreciate. I think that that answered that. On the landing gear opportunity, Josh Sullivan is asking, where we're at in that cycle. How should we expect it to ramp up? Eran YungerGroup Director - IR & ESG at TAT Technologies00:33:15You know? Or what what early signs should we look for either externally or internally to to evaluate your performance? Igal ZamirCEO & President at TAT Technologies00:33:23Well, you're all you're already seeing the the results in the lending gear increased. It's more than doubled, and we just started. The the big cycle starts starts this year and will peak in the next three years, twenty six to twenty eight. You know, if you look at announcements made by the OEM, there is not enough capacity to support in the industry to support '26 to '28 demand. So when they are combining all the vendors that like us, that have the ability to support, where there is a lack of capacity. Igal ZamirCEO & President at TAT Technologies00:33:59So we hope that we hope and believe that we are going to see a very nice increase. Eran YungerGroup Director - IR & ESG at TAT Technologies00:34:08Next question, is from an investor. When do you expect the redomicile process to be completed? Igal ZamirCEO & President at TAT Technologies00:34:17What? Can you please repeat the question? Eran YungerGroup Director - IR & ESG at TAT Technologies00:34:19When do you expect the redomicile process to complete? Perhaps that's not a great Igal ZamirCEO & President at TAT Technologies00:34:25question. We we need a clarification on the on the on the on the question. Eran YungerGroup Director - IR & ESG at TAT Technologies00:34:31Okay. Okay. Igal ZamirCEO & President at TAT Technologies00:34:34Well, let's let's see if we an operational from an op again, just maybe from an operational standpoint, we are based in The US. The management in The US, our headquarters in Charlotte. We operate like most of the customers and most of the the vast majority of the employees are in The US. So if the from from if you look at the if you're leaving the registration aside, if you just look from operation and management standpoint, we are a US company today. I don't know if that was the question or whether there was another question. Igal ZamirCEO & President at TAT Technologies00:35:06Obviously, we have a very strong business in Israel that is doing great, and we are definitely planning on to to continue and develop it. But the company is based in The US, And I don't know if it answered the question or not. Eran YungerGroup Director - IR & ESG at TAT Technologies00:35:20Yeah. Let me prompt others to submit questions. We will now pause to evaluate the queue. Gal and Ehud, I believe we are at a a good point here for me to turn the call back over to you. Igal ZamirCEO & President at TAT Technologies00:36:03So maybe just to summarize, we are really pleased with the results. Another another quarter of continuing of improvement in all aspects of the business. And, you know, we when we look at the strategically, when we look at the company long term, we are very optimistic about all the opportunities and and the growing in demand and the amount of of RFPs and and bids that we are participating in and the opportunity to continue to grow the company. We I'm I'm really proud in our team and the ability to overcome all you know, many of the supply chain challenges and others. Are not using it as an excuse, but rather we are using it as a springboard to to show the industry and our customers that we are providing better service and much, much faster turnaround times, which which really helps our customers. Igal ZamirCEO & President at TAT Technologies00:37:01So the outlook is the outlook is strong on a strategic base. Obviously, we we did a great job in q one overcoming the the short term headwinds and and some short term challenges and concerns in the industry, and and we continue to do it. So all in all all in all, the company is in the in the right direction and executing our plans. And, you know, wanted to use the opportunity and just thank everybody for joining us today and for showing confidence in us and in the company. And we appreciate the partnership and looking forward to to continue in working together. Eran YungerGroup Director - IR & ESG at TAT Technologies00:37:42Thank you, Yigal. This concludes the earnings call. You may now disconnect your lines. Thank you. Ehud Ben-YairChief Financial Officer at TAT Technologies00:37:47Thank you.Read moreParticipantsExecutivesEran YungerGroup Director - IR & ESGIgal ZamirCEO & PresidentEhud Ben-YairChief Financial OfficerPowered by Key Takeaways Revenue and Profitability: Q1 revenue grew 23.6% YoY to $42.1 M with gross margin expanding 290 bps to 23.6%, and adjusted EBITDA up 56.2% to $5.7 M (13.6% margin), reflecting disciplined expense management. Backlog Visibility: Total backlog and long-term agreements increased to $439 M in Q1, including $52 M of new LTAs, providing strong revenue visibility despite macroeconomic headwinds. Operational Excellence: Strategic inventory build-up and ongoing cost-structure optimizations have enhanced turnaround times and service reliability, helping TAT outpace industry averages amid supply-chain volatility. APU Expansion: Authorization on Honeywell APU models (1–131, 3–150, 3–500) and customer onboarding have positioned TAT to tap into a $2 B+ addressable market, with multiple active RFPs underway. Diversified Growth Engines: The company continues to expand its MRO, OEM, and trading & leasing divisions, leveraging a balanced portfolio to navigate economic uncertainties while pursuing high-margin opportunities. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallTAT Technologies Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K) TAT Technologies Earnings HeadlinesTruist Securities Initiates Coverage of TAT Technologies (TATT) with Buy RecommendationJune 5 at 6:27 AM | msn.comTAT Technologies Completes $42.3 Million Public OfferingJune 3, 2025 | tipranks.comThe DOJ Just Paved the Way for Account SeizuresWashington is running out of money…And guess where they'll look next? When governments go broke, they take from the people. It's happened before, and it's happening again. The Department of Justice just admitted that cash isn't legally YOUR property.June 7, 2025 | Priority Gold (Ad)TAT Technologies' (NASDAQ:TATT) Promising Earnings May Rest On Soft FoundationsMay 30, 2025 | finance.yahoo.comTAT Technologies Ltd. (TATT): A Bull Case TheoryMay 30, 2025 | msn.comTAT Technologies Announces Pricing of Public Offering of Ordinary Shares and Secondary Offering by Selling ShareholdersMay 29, 2025 | prnewswire.comSee More TAT Technologies Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like TAT Technologies? Sign up for Earnings360's daily newsletter to receive timely earnings updates on TAT Technologies and other key companies, straight to your email. Email Address About TAT TechnologiesTAT Technologies (NASDAQ:TATT), together with its subsidiaries, provides solutions and services to the commercial and military aerospace, and ground defense industries in the United States, Israel, and internationally. The company operates through four segments: Original Equipment Manufacturing (OEM) of Heat Transfer Solutions and Aviation Accessories; Maintenance, Repair, and Overhaul (MRO) Services for Heat Transfer Components and OEM of Heat Transfer Solutions; MRO Services for Aviation Components; and Overhaul and Coating of Jet Engine Components. It designs, develops, and manufactures a range of heat transfer solutions, such as pre-cooler and oil/fuel hydraulic heat exchangers used in mechanical and electronic systems in commercial, military, and business aircraft; environmental control and power electronics cooling systems for use in aircraft and ground applications; and a range of other mechanical aircraft accessories and systems, such as pumps, valves, and turbine power units. The company provides MRO services for heat transfer components, as well as for manufacturing heat transfer solutions; and aviation components. In addition, it engages in the operation of a repair station, which provides heat transfer MRO services for airlines, air cargo carriers, maintenance service centers, and the military; and the overhaul and coating of jet engine components, including turbine vanes and blades, fan blades, variable inlet guide vanes, and afterburner flaps. The company was formerly known as Galagraph Ltd. and changed its name to TAT Technologies Ltd. in May 1992. TAT Technologies Ltd. was founded in 1969 and is headquartered in Netanya, Israel.View TAT Technologies ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Broadcom Slides on Solid Earnings, AI Outlook Still StrongRed Robin's Comeback: Q1 Earnings Spark Investor HopesOllie’s Q1 Earnings: The Good, the Bad, and What’s NextBroadcom Earnings Preview: AVGO Stock Near Record HighsUlta’s Beautiful Q1 Earnings Report Points to More Gains Aheade.l.f. 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PresentationSkip to Participants Eran YungerGroup Director - IR & ESG at TAT Technologies00:00:00Firm supporting Iran Younger, TAT's internal head of investor relations. Hosting today's call is Ygal Zamir, our President and CEO and Ehud Benyere, our CFO. Before getting started, we'd like to draw your attention to the fact that certain matters discussed on this call today 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 implied by these forward looking statements. Eran YungerGroup Director - IR & ESG at TAT Technologies00:00:45The forward looking statements are made as of the date of this call and except as required by law, T Technologies assumes no obligation to update or revise them. 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's 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 may 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. Eran YungerGroup Director - IR & ESG at TAT Technologies00:01:37Please see yesterday evening's Form six ks, our earnings release and the Investors section of our website at tattechnologies.com for a reconciliation of non GAAP financial measures to GAAP measures. 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 provides 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 we have, that we use have limitations and may differ from those used Now with all of that said, I would like to turn the call over to Ygal. Igal ZamirCEO & President at TAT Technologies00:02:29Good morning, everybody, and thanks for joining us for the first quarter earnings calls. I really appreciate your interest and the support as we review the company's performance and discuss our strategic direction moving forward. As you probably see, we started 2025 on a strong note, delivering another quarter of double digit revenue growth with the profitability growing even faster than revenue, reinforcing the the momentum we established last year or, actually, I would say in the last three years. Our focus on customer operation excellence, market expansion, and strategic growth continue to drive results that are ahead of the industry average. We expect to continue and outpace the industry for the foreseeable future. Igal ZamirCEO & President at TAT Technologies00:03:15First quarter revenue increased by 23.6% to $42,100,000, up from $34,100,000 in the same period last year. This growth was fueled by strong demand across our core businesses line along with the Gentlemen, I just want to check that you still hear me. We have a Ehud Ben-YairChief Financial Officer at TAT Technologies00:03:53Yeah. We heard you, but there was a little pause. Eran YungerGroup Director - IR & ESG at TAT Technologies00:03:56You're back online now, Miguel. So please speak. Igal ZamirCEO & President at TAT Technologies00:04:01I apologize for this. We had, like, a power shutdown here. Our gross profit increased from 40.9% to $10,000,000, which with the with the gross margin expanding for by by 290 basis points to 23.6% comparing to the 20.7% in the first quarter of twenty twenty four. This improvement reflect our ongoing efforts to optimize cost structure, improve operational efficiencies, and enhance product mix. We we spent a lot of time talking about it in the previous calls. Igal ZamirCEO & President at TAT Technologies00:04:41We are continuing to invest a lot of efforts and energy in improving our internal efficiencies and cost structure, which reflects in the in the results. Adjusted EBITDA increased by 56.2% to $5,700,000, translating to an adjusted EBITDA margin of 13.6%, a notable improvement from our 10.8% in the same period last year. This improvement is a is a testament of our by a disciplined expense management. Our backlog and long term agreement rose to $439,000,000 during during the first quarter, providing us with strong visibility. It also provide us with an important runway for continued growth amid the rapidly evolving aviation market landscape in both commercial and government end markets. Igal ZamirCEO & President at TAT Technologies00:05:36The aviation sector is currently navigating several macroeconomic headwinds, including policy changing, the proposed tariffs, and border economic uncertainties, all of which have the potential to impact supply chain and and customer purchasing behavior. Long term, our robust backlog position as well as our as our demonstrated ability to outperform the industry. And, you know, while in parallel, we expect we can anticipate some near term volatility, particularly in the MRO intake. So bottom line, when we look at the outlook, given the given the backlog, given the the value of the long term agreement that we are signing and increasing all the time, we have a very positive outlook on the long term. Short term, given all the macroeconomic factors, we can expect both volatility from the industry. Igal ZamirCEO & President at TAT Technologies00:06:34The expansion of our APU will continue to grow our addressable market. We are now authorized on the a p one one hundred and thirty one APU, the three three one five hundred, which serves the Boeing seven seven seven and Boeing seven thirty seven and and Airbus three twenty. Now only a year ago, we secured our first customer for these engines. And since then, we have onboarded several additional customers, both new and long term and long standing. We are well positioned as a trusted and reliable partner for serving various Honeywell APUs with top tier quality and exceptional Our pipeline of opportunities for APU work continues to expand, and we are participating in multiple discussions to expand our APU work. Igal ZamirCEO & President at TAT Technologies00:07:22To meet this growing demand, we strategically increased our inventory levels during the quarter. While supply chain issues persist, maintaining a higher inventory level position up to meet timeliness, reliability. This approach is not just a safeguard. It's a strategic decision and strategic asset that we believe that we have enabling us to maintain our competitive advantage and continue to market growth. As a result, we recorded a net cash outflow in the quarter. Igal ZamirCEO & President at TAT Technologies00:07:57However, we are confident that this investment will drive revenue growth and enhance customers' satisfaction in the coming quarters, positioning us for continued success. Our growth strategy is based on growing our MRO and OEM business as well as our trading division. This diversified approach provides us with the agility and operational flexibility needed to navigate periods of economical uncertainty. Given the ongoing tariffs uncertainty, our supply chain team is working closely with our suppliers and customers to align expectation, adjust planning, and maintain a high service level that our partners rely on. In summary, we are concluding a strong quarter and are optimistic about our prospect for the remainder of 2025. Igal ZamirCEO & President at TAT Technologies00:08:46In short term, we will continue to navigate the variety of industry wide challenges. The supply chain remains challenged. Economic uncertainty sometimes cause customers to slow down maintenance plans. To date, we have weathered these challenges challenges successfully. Long term, my optimism has increased even even though my short term outlook is somewhat cautious. Igal ZamirCEO & President at TAT Technologies00:09:13We see encouraging demand for our products and services, strong interest from both new and existing customers, and the potential to achieve long term growth rates that significantly significantly outpace the the broader industry, all while continuing to expand margin. And thank you very much. And with that, I will turn to our CFO, Eldon Yair, to provide further insights into our financial performance and business outlook. Ehud Ben-YairChief Financial Officer at TAT Technologies00:09:42Thank you, Igal. Good morning, everybody. I will quickly review the results of the first quarter of twenty twenty five. So revenue went up to $42,100,000 compared to 34.1. It's an increase of 24% year over year. Ehud Ben-YairChief Financial Officer at TAT Technologies00:10:02Gross profit landed at $10,000,000 compared to $7,100,000 It's a 41% increase compared to the previous period. And also, the gross margin went up to 23.6 compared to 20.7. It's two ninety bit bit points compared to the previous quarter. Operating profit at $4,200,000 compared to 2.2. It's a 89% increase, and the operating margin is already at 9.9% compared to 6.5% in the previous period. Ehud Ben-YairChief Financial Officer at TAT Technologies00:10:40Also, the adjusted EBITDA went up to $5,700,000 compared to $3,700,000. It's a 56% increase, and the EBITDA margin went up to 13.6% compared to 10.8% in the previous period. Net profits landed at $3,800,000 compared to $2,100,000. Several insights to to take in consideration when analyzing the results of the quarter. The that, again, we're improving our margins all over the place, Especially in this quarter, OEM revenue and margin went up up compared to previous period on behalf of the MRO work as will still suffer a lot of supply chain issues in the market, which led, in some cases, to a reduced in the a slight reducing the profitability. Ehud Ben-YairChief Financial Officer at TAT Technologies00:11:41Nonetheless, on the overall company size, we're continuing to improving our margin. The second thing that impacts the net profit, and we mentioned it in the previous quarters already, is the tax expenses. At this stage, we are all the tax expenses are accounting expenses. These are noncash expenses, mainly reduction of tax assets. As mentioned before, we're expecting to be tax profitable and start paying taxes both in Israel and in The US at the end of twenty twenty five. Ehud Ben-YairChief Financial Officer at TAT Technologies00:12:21In terms of the strategic growth engines and the product mix of of the quarter, So the heat exchange product line went up to $18,400,000 compared to 14.2. It's a 30% increase year over year. The APU segment also from 9,200,000 to $12,300,000. It's a 34% increase. The trading and leasing, as mentioned before, are it's it's down by 27% to $2,100,000. Ehud Ben-YairChief Financial Officer at TAT Technologies00:12:57We mentioned in the past that trading and leasing are, in some cases, opportunistic and, in some cases, really based on the specific need of the customers, and it can vary between quarter to quarter. In this quarter, a certain a certain deal was postponed to q two, and that this is the reason that you see the reduction in the trading and listen in q one of twenty twenty five. And the lending gear, as, again, as mentioned in the past, started ticking up at the end of q four and continues the trend in q one of twenty twenty five, landed at $3,300,000 compared to 1.5 in the previous quarter. It's a 127% increase. So just to quickly review the the two wheels trending, you will see that, again, we continue the con continue to grow the margin. Ehud Ben-YairChief Financial Officer at TAT Technologies00:13:59Just looking at the first quarter of twenty twenty three, revenue were at $25,200,000. Now we are already at $42,100,000. The gross profit also started at $4,300,000 in the first quarter of twenty twenty three and moved up to $7,100,000 in q one of twenty twenty four, and we are already at $10,000,000 in the first quarter of twenty twenty five. Same trend goes with the operating income that went up from almost $1,000,000 in q one of twenty twenty three to $2,200,000 in q one of twenty twenty four and $4,200,000 in q one of twenty twenty five. We're almost doubling our operating core operating income year after year. Ehud Ben-YairChief Financial Officer at TAT Technologies00:14:50With regards to the backlog, as Sigal already mentioned, we continue to increase our backlog. We saw a very strong trend in q one of twenty twenty five. We secured backlog and orders, and the LTA is worth of $52,000,000 this quarter, which led to an increase in the total backlog value to $439,000,000 With regards to the mix of the product, it remained pretty much the same as in previous quarter, more than 50%. Actually, 54% of the of the backlog and orders is 54% is heat exchanger, sorry, and APU is 27%, and the remaining most of the remaining is lending year, which is 13%. And by this, I return the call to Igal. Igal ZamirCEO & President at TAT Technologies00:15:44So as as we stated before, when we look forward strategically, you know, we have the the same growth engines that we discussed in the past. We and this is why I said it earlier that we are extremely optimistic about the long term outlook for the company. We they starting with the APUs, over $2,000,000,000 addressable market. We are proving more and more our ability to provide great service and fast turnaround time and competitive pricing to customers, and we're basically just starting to scratch the the surface of this huge addressable market. And we and with the amount of of interest that we are getting and the active and the active RFPs that we are participating in, we we believe that that's a substantial growth engine for the next few years for the coming few years. Igal ZamirCEO & President at TAT Technologies00:16:36Lending gear, MRO cycle, as anticipated, they would stated it. We already see it. It's coming. We see a very nice growth in lending your work and expecting it to continue. The the thermal solution MRO, We we TAT is the leading player in the industry, one of the the largest players in especially on the MRO side. Igal ZamirCEO & President at TAT Technologies00:17:01We are cost effective. We are providing amazing service to our customers way better than most of the competitors, and we expect to continue and grow this business as as a as a result. Thermal solution OEMs, the outlook for the new for new aircraft, the fleet conversions, all the next generation Evotals, and whatever represents a long term strategic opportunity for t for TAT. And the trading and leasing, while, you know, trading and leasing, and I would touch on it, has two components. We have the leasing activity, which is more stable month by month with major demand for for our products on the leasing side, provides a general steady flow of revenue and profitability. Igal ZamirCEO & President at TAT Technologies00:17:46And and then you have the trading side that is more based on availability of of of components, engines, gears, and such, and specific demands from from airlines. So while it's not as consistent as our ongoing business, it is growing, and there is a lot of demand. And as we increase the the amount of assets that that can afford ourselves to keep for these deals, we will be exposed to more and more deals and growing business with a very nice margin. Ehud Ben-YairChief Financial Officer at TAT Technologies00:18:24Just before going to the q and a, there were we were detected some some technical issues during the call. So if some of the audience someone from the audience didn't hear something well, we would be happy to repeat whatever was missing during the during the during the pitch. Okay. Now move to Matt for the q and a session. Eran YungerGroup Director - IR & ESG at TAT Technologies00:19:00Okay. Thank you very much. We're now going to, move to the q and a session. To ask a question, please use the q and a widget at the bottom of your screens. Just note, if we do 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. Eran YungerGroup Director - IR & ESG at TAT Technologies00:19:22But, you know, with we've already see that some questions are coming in. And with that, let's pause for a moment to to build the queue further. The first question is from Josh Sullivan at Benchmark. Thank you, Josh. He's congratulating us on the quarter. Eran YungerGroup Director - IR & ESG at TAT Technologies00:19:46And then can you explore backward incremental sequentially this quarter a little bit further? Provide some color on the increase. Was it driven by, you know, repeat customers versus new relationships? And then how are new AP relationships and orders evolving? Yigal, did that come through to you? Eran YungerGroup Director - IR & ESG at TAT Technologies00:20:28Yo, we're not hearing your answer. You may be on mute. Igal ZamirCEO & President at TAT Technologies00:20:40Benjamin, can you hear me now? Eran YungerGroup Director - IR & ESG at TAT Technologies00:20:42Now we can hear you. Please please proceed, Yuval. First of all, we Igal ZamirCEO & President at TAT Technologies00:20:48really apologize for all of we have some kind just just one second, Matt. We We really apologize for all of this. We have a major issue some kind of an issue here with the with the network. So I wonders of technology. I recon I reconnected via via hotspot to my iPhone. Igal ZamirCEO & President at TAT Technologies00:21:06I hope that I hope that you can hear us well now. And, Matt, please repeat the question. Eran YungerGroup Director - IR & ESG at TAT Technologies00:21:12Great. Let's let's go forward. So the first question was from Josh Sullivan at Benchmark. Josh is asking if we could go into further detail on the the incremental black backlog sequentially this quarter, talking about some of the, you know, the reasons for the increase sequentially, whether it was driven by repeat customers versus new relationships, and then, you know, how are AP relationships and orders evolving? Igal ZamirCEO & President at TAT Technologies00:21:40So two things. First of all, it's a combination, of existing customers and new customers. We won, and we stated it in the past. You know, when we when we win, we we come with the official announcement only when we have substantial wins, but we we are all the time winning more and more business that is less meaningful for a stand alone, you know, PR. But what we are adding new customers about the and it's both on the both on the a it's across the business lines. Igal ZamirCEO & President at TAT Technologies00:22:10It's APUs, gear, and thermal components. So in in reality, it's a combination between between new and existing and between the various business line. Nothing nothing unique that stands out more than more than others. Eran YungerGroup Director - IR & ESG at TAT Technologies00:22:32Great. Let's let's shift over to profitability. Josh is asking about, the margin improvement. How much of that, that that that improvement in margins is pricing versus, you know, operational actions that you've taken to drive efficiencies throughout the organization? Igal ZamirCEO & President at TAT Technologies00:22:50I I I don't think that it has anything to do with pricing. It's mostly operational it's mostly mostly operational efficiencies. And, obviously, there is always a some level of mix of products that we don't control. It is what it is, whatever we get. But we have we have major initiatives around improving profitability, which we and and, you know, and we stated in we stated in the past that we believe that the company like TAT needs to be at 25% gross margin, at least at 25% gross margin and 15% EBITDA. Igal ZamirCEO & President at TAT Technologies00:23:21And this is where definitely where we want to be in the future, and we are very committed to to getting there and investing a lot of time and energy in it. So, again, it's mostly operational efficiencies nothing to do with pricing changes. Eran YungerGroup Director - IR & ESG at TAT Technologies00:23:41Okay. Great. Here's an additional question around, you know, supply chain. You know, what's your from where you're sitting, what are you seeing in terms of the supply chain at this point? And what what are you what are you doing to to manage that with your customers? Igal ZamirCEO & President at TAT Technologies00:24:03So first of all, supply chain, it it's it's an ever evolving situation. You know? It's a on a very high level macro trend, I personally believe that the industry is in a recovery mode. But still, every time suppliers we wake up to surprises from suppliers, business lines that were already stabilized, we thought that everything is okay. And all of a sudden, deliveries are being pushed sometimes in months with no expectation, with no advanced warning. Igal ZamirCEO & President at TAT Technologies00:24:35So the overall trend is I think that the overall trend is positive, the industry is on a recovery mode. But it's it's still extremely volatile and ups and downs and and it's not consistent across business lines. So the only thing that we can do, and this is why and we are doing it strategically, is to increase inventories. And you see it in our numbers. We I believe that the companies that will be able to overcome the supply chain challenges first will enjoy the growth. Igal ZamirCEO & President at TAT Technologies00:25:11I think that part of the reason that we are growing is that we are providing great service to our customers across the business line. When you think about turnaround times that we are demonstrating to our customers on the MRO side, way better than what we hear that competitors are providing. This is a critical strategic advantage for the growth of the company. It comes with the cost of inventory and turning cash into inventory versus cash in the bank. But that's what we are doing, and we plan to continue until such day in the future where the where the industry would really be more stabilized. Eran YungerGroup Director - IR & ESG at TAT Technologies00:25:49We we did have an an investor question asking about your current capacity and how that serves your medium term out growth outlook. But I but I think you just addressed that in your your most recent response. So let me Yeah. Igal ZamirCEO & President at TAT Technologies00:26:03Maybe Matt, but just just to add to it, and we we spoke about it in the past. From a technology standpoint, equipment, and everything else, we are well positioned to more than double the capacity. So, obviously, the bottleneck is supply chain and having the parts. We are overcoming it by strategic purchase of inventory where needed. From facility standpoint, equipment, and everything else, we are we with all the investments that we have done over the last five years, we are well positioned to I would if I have to guess, at least double the capacity. Eran YungerGroup Director - IR & ESG at TAT Technologies00:26:36Okay. Let's let's shift to taxes. We we have a question from Sergey Guineev from Freedom, and he's asking how should we think about your tax provision, for the second quarter and the remaining part of the year as you've started to recognize noncash items in q one. Is is that clear, Ehud? Ehud Ben-YairChief Financial Officer at TAT Technologies00:27:04Yes. That's clear. Thank you for the question. I think what the what we're going to see until the end of the year is the the average tax expenses that you see right now out of the net profit will continue to stay around the same level. There's a mix of different taxes between Israel and the in in The US, but we believe that the profitability between Israel and The US going to continue the same until the end of the year. Ehud Ben-YairChief Financial Officer at TAT Technologies00:27:33So can assume the same, the same tax rate for the following, quarters. As I mentioned before, and I'm emphasizing it again, these are just these are noncash tax expenses, until q three. And by q four, it's gonna be it's gonna become tax expenses, which are which are followed by cash. Eran YungerGroup Director - IR & ESG at TAT Technologies00:27:56K. Sergey is also following up with a question around our our opportunity with defense customers in light of the current budgetary landscape, you know, particularly in The United States. So can you comment on the opportunities for growth within, within the government and defense market? Igal ZamirCEO & President at TAT Technologies00:28:23I think that by the way, I I we had an internal meeting with asking ourselves the same the same questions. The opportunities it's a good point. The the opportunities are definitely definitely there, and the budgets are in place. I we don't see any quick turnaround here from, you know, strategic decisions in the government side into immediate buying decisions. There are there are solicitation that the that are being opened by the by the air force or navy or or army in The US from time to time. Igal ZamirCEO & President at TAT Technologies00:29:03It's more based on schedule in our case for TAT, so I'm not expecting any immediate reaction or substantial growth. Having said this, we are we have our defense sales team dedicated to to selling to the to The US Armed Forces and, you know, hoping being in close contact with the with the buying offices and looking forward to to RFPs to solicitations to get open so we can so we can bid on them. I I believe that strategically strategically, this this segment is growing and needs to continue and grow. Nothing special that can be reported short term. Eran YungerGroup Director - IR & ESG at TAT Technologies00:29:51Okay. There's another growth oriented question here. You know, one is around you know you know, we highlighted a few logos in the the global logistics sector with the FedEx's, UBS UPS's, and DHL's of the world as as as customers. And so, you know, there's a specific question around, you know, APU revenue opportunity with these customers. But, you know, there's also a question in here around, you know, in general, the pipeline for APU one thirty one. Eran YungerGroup Director - IR & ESG at TAT Technologies00:30:20You know, perhaps, if you can talk to those opportunities. Igal ZamirCEO & President at TAT Technologies00:30:30First of all, when it comes to UPS, FedEx, and and and DHL, we they are existing customers. We we have great relationship with the with the three entities, and we have some opportunities to grow within their product lines. It depends on when they they their existing contracts will come to term, and and then they will open them to RFPs. And we are definitely in a great position to to secure more business from them based on the based on success over the last few years. I we are not well, when when you look at the overall potential for the APUs, the commercial the commercial market is the biggest opportunity. Igal ZamirCEO & President at TAT Technologies00:31:13And, basically, today, any airline in the almost any airline in the world is a potential customer for TAT. Airlines are typically on a three to five years agreements. And when when the agreement comes to term, unless if unless if they have a major, major problem, they don't change vendors in the middle of a term even if they are struggling. They get to the to the end They open RFPs. Igal ZamirCEO & President at TAT Technologies00:31:39We are participating a lot of in a lot of RFPs. And and I believe, you know, if you remember, in 2024, we deliberately decided to wait with participating in RFPs because we didn't feel confident enough to to secure long term. And at the end of twenty four, we we we mentioned in in conference calls that we feel more confident with the with the with the fact that we are gaining experience and improving the operations and efficiency and being ready. We in 2025, we are going to participate in our in large RFPs, which we do. There is a very nice funnel of opportunities, and I believe that it's just going to grow. Igal ZamirCEO & President at TAT Technologies00:32:21I call it a positive snowball effect. You start slow and small, and and then you gain and you win. And with the wins, you become more the the awareness to the company is becoming, and we are positioning ourselves. I think that we are slowly, but surely positioning ourselves as a key player in this in this segment, which will bring more and more customers to consider us as a in a serious way as their future vendor. And and the numbers are huge. Igal ZamirCEO & President at TAT Technologies00:32:49We are talking about one thirty one engine. We are talking about more than, I don't know, between 16 to to 18,000 engines that are flying today that are in use today around the world. So Eran YungerGroup Director - IR & ESG at TAT Technologies00:33:04Great. I appreciate. I think that that answered that. On the landing gear opportunity, Josh Sullivan is asking, where we're at in that cycle. How should we expect it to ramp up? Eran YungerGroup Director - IR & ESG at TAT Technologies00:33:15You know? Or what what early signs should we look for either externally or internally to to evaluate your performance? Igal ZamirCEO & President at TAT Technologies00:33:23Well, you're all you're already seeing the the results in the lending gear increased. It's more than doubled, and we just started. The the big cycle starts starts this year and will peak in the next three years, twenty six to twenty eight. You know, if you look at announcements made by the OEM, there is not enough capacity to support in the industry to support '26 to '28 demand. So when they are combining all the vendors that like us, that have the ability to support, where there is a lack of capacity. Igal ZamirCEO & President at TAT Technologies00:33:59So we hope that we hope and believe that we are going to see a very nice increase. Eran YungerGroup Director - IR & ESG at TAT Technologies00:34:08Next question, is from an investor. When do you expect the redomicile process to be completed? Igal ZamirCEO & President at TAT Technologies00:34:17What? Can you please repeat the question? Eran YungerGroup Director - IR & ESG at TAT Technologies00:34:19When do you expect the redomicile process to complete? Perhaps that's not a great Igal ZamirCEO & President at TAT Technologies00:34:25question. We we need a clarification on the on the on the on the question. Eran YungerGroup Director - IR & ESG at TAT Technologies00:34:31Okay. Okay. Igal ZamirCEO & President at TAT Technologies00:34:34Well, let's let's see if we an operational from an op again, just maybe from an operational standpoint, we are based in The US. The management in The US, our headquarters in Charlotte. We operate like most of the customers and most of the the vast majority of the employees are in The US. So if the from from if you look at the if you're leaving the registration aside, if you just look from operation and management standpoint, we are a US company today. I don't know if that was the question or whether there was another question. Igal ZamirCEO & President at TAT Technologies00:35:06Obviously, we have a very strong business in Israel that is doing great, and we are definitely planning on to to continue and develop it. But the company is based in The US, And I don't know if it answered the question or not. Eran YungerGroup Director - IR & ESG at TAT Technologies00:35:20Yeah. Let me prompt others to submit questions. We will now pause to evaluate the queue. Gal and Ehud, I believe we are at a a good point here for me to turn the call back over to you. Igal ZamirCEO & President at TAT Technologies00:36:03So maybe just to summarize, we are really pleased with the results. Another another quarter of continuing of improvement in all aspects of the business. And, you know, we when we look at the strategically, when we look at the company long term, we are very optimistic about all the opportunities and and the growing in demand and the amount of of RFPs and and bids that we are participating in and the opportunity to continue to grow the company. We I'm I'm really proud in our team and the ability to overcome all you know, many of the supply chain challenges and others. Are not using it as an excuse, but rather we are using it as a springboard to to show the industry and our customers that we are providing better service and much, much faster turnaround times, which which really helps our customers. Igal ZamirCEO & President at TAT Technologies00:37:01So the outlook is the outlook is strong on a strategic base. Obviously, we we did a great job in q one overcoming the the short term headwinds and and some short term challenges and concerns in the industry, and and we continue to do it. So all in all all in all, the company is in the in the right direction and executing our plans. And, you know, wanted to use the opportunity and just thank everybody for joining us today and for showing confidence in us and in the company. And we appreciate the partnership and looking forward to to continue in working together. Eran YungerGroup Director - IR & ESG at TAT Technologies00:37:42Thank you, Yigal. This concludes the earnings call. You may now disconnect your lines. Thank you. Ehud Ben-YairChief Financial Officer at TAT Technologies00:37:47Thank you.Read moreParticipantsExecutivesEran YungerGroup Director - IR & ESGIgal ZamirCEO & PresidentEhud Ben-YairChief Financial OfficerPowered by