TAT Technologies Q1 Earnings Call Highlights

Key Points

• Revenue dipped slightly in Q1 2026 to $41.1 million from $42.1 million a year earlier, but management said the decline was due to supply chain timing issues rather than weaker demand. TAT still expects meaningful full-year revenue and EBITDA growth.
• Backlog and demand hit record levels, with backlog and long-term agreements rising to about $580 million from $550 million at year-end 2025. CEO Igal Zamir said customer demand “has never been stronger,” especially in APU, landing gear and heat exchangers.
• Supply chain constraints remain the main near-term headwind, particularly for APU and landing gear work that is near completion but waiting on parts. Management expects APU issues to ease by the second half of the year, while landing gear availability still needs monitoring.

TAT Technologies NASDAQ: TATT said first-quarter 2026 revenue slipped slightly from a year earlier as supply chain disruptions delayed the completion and delivery of some aerospace maintenance work, but management said demand remains at record levels and reaffirmed its expectation for meaningful full-year growth in revenue and EBITDA.

President and CEO Igal Zamir said the company entered 2026 with a “robust operational foundation” and record customer demand. He said backlog and long-term agreements reached approximately $580 million at the end of the first quarter, up from $550 million at the end of 2025, reflecting new contract wins and strong intake in maintenance, repair and overhaul, or MRO.

“Demand for our services has never been stronger,” Zamir said. He added that the company’s long-term agreements and backlog reached an all-time high during the quarter.

Supply Chain Delays Shift Revenue Into Future Periods

Management said the primary issue in the quarter was not demand, but the availability of components from certain original equipment manufacturer partners. Zamir said the company ended the quarter with approximately $15.5 million of auxiliary power unit, or APU, and landing gear open work orders in its shops. A material portion of that work was near completion but could not be released because required parts were unavailable, he said.

“The associated work remains under contract,” Zamir said. “Volumes are shifted into future periods rather than being lost.”

He described the constrained APU components as standard commodity-level parts needed for final assembly after overhaul, rather than technically complex engine components. TAT has maintained a strategic inventory of critical APU parts, but the recent shortage has involved smaller parts required to complete final assembly. Zamir said the company has seen improvement in parts flow in recent weeks, though normalization is expected to be gradual rather than immediate.

During the question-and-answer session, Zamir said the APU recovery should take “a few months” and that he did not expect a “zero-one” event in which all parts arrive at once. CFO Ehud Ben-Yair said the APU issue is expected to be resolved by the second half of the year. On landing gear, however, Ben-Yair said the supply chain situation was not yet improving and required continued monitoring.

First-Quarter Financial Results

Ben-Yair said first-quarter revenue was $41.1 million, compared with $42.1 million in the first quarter of 2025. He said the year-over-year decline reflected supply chain timing issues rather than weaker demand.

Gross profit increased 0.8% year over year to $10 million, while gross margin expanded to 24.4% from 23.6% in the prior-year quarter. Ben-Yair attributed the improvement to operating efficiencies, cost structure improvements and cost management.

Operating income was $3 million, or 7.3% of revenue, compared with $4.2 million, or 9.9% of revenue, in the first quarter of 2025. Ben-Yair said operating expenses rose because of planned investments in next-generation research and development, organizational and executive additions tied to M&A efforts, strengthening of the sales team and finance infrastructure enhancements to support SOX compliance and regulatory requirements.

Net income was $3.4 million, compared with $3.8 million a year earlier. Diluted earnings per share were $0.26, down from $0.34 in the first quarter of 2025. Adjusted EBITDA was $4.9 million, or 11.8% of revenue, compared with $5.7 million, or 13.6% of revenue, in the prior-year period.

Operating cash flow was positive at $1.9 million, compared with a negative $5 million in the first quarter of 2025. TAT ended the quarter with $51.2 million in cash and $11.2 million in total debt. Ben-Yair said the company’s debt-to-EBITDA ratio was 0.45, based on the last four quarters of EBITDA, and shareholders’ equity was $180.5 million, representing 77.5% of total assets.

Segment Trends Remain Mixed but Demand Strong

Zamir said the heat exchangers business continued to see growing demand across both OEM and MRO markets. He noted that the business achieved an operational milestone in the quarter by delivering more than 97% of customer orders on time.

In APUs, intake reached a record level, Zamir said. TAT won new business, added customers and saw increased flow from newer engine platforms. The company exited the quarter with more contracted work than it had at the start of the period, resulting in a higher-than-usual book-to-bill level.

Landing gear demand remains intact, but Zamir said components availability continues to limit the business. He said TAT is in ongoing discussions with OEM partners and has established new processes intended to increase transparency and move toward resolution.

The trading and leasing business delivered 29% year-over-year growth. Zamir said demand remains high, though the business can vary from quarter to quarter based on the timing of asset transactions.

M&A Remains a Strategic Priority

Management said acquisitions remain a key priority. Zamir said TAT has spent the past nine months building a team with industry relationships and operating experience to source and execute transactions. The company is now actively engaged with potential acquisition targets, private equity firms and advisers, he said.

Ben-Yair said TAT is focused on disciplined, accretive bolt-on deals involving OEM or MRO businesses near its current areas of operation. He said the company wants to complete at least one acquisition this year, but emphasized that management is “not in a rush” and will seek the right target at the right price.

Asked whether supply chain disruptions could lead to vertical integration opportunities or acquisitions involving parts manufacturer approval, or PMA, capabilities, Zamir said TAT is looking at several ideas, though nothing is currently expected to mature in the next quarter or two. He said PMA capabilities could be relevant in some cases depending on product type and existing OEM relationships.

Outlook

Zamir said TAT’s confidence for the balance of 2026 rests on record demand, intact customer relationships and a stronger operational and strategic foundation than a year earlier. He said supplier indications point toward normalization, and management continues to believe 2026 will be a year of meaningful revenue and EBITDA growth.

Ben-Yair said gross margin is expected to improve in 2026, though he did not provide a specific percentage target. He cited ongoing cost-efficiency initiatives and said higher revenue should support further margin improvement.

“When parts flow, we are ready,” Zamir said. “And the backlog tells you exactly what is waiting on the other side.”

About TAT Technologies NASDAQ: TATT

TAT Technologies Ltd. is a global provider of environmental control and thermal management solutions for the aerospace industry. The company specializes in the design, manufacturing and support of aircraft environmental control systems (ECS), heat exchangers and related components. Its product portfolio serves commercial and military airframers, engine manufacturers and airlines, offering critical systems that regulate cabin pressure, temperature and ventilation on fixed-wing and rotary aircraft.

Key offerings include air cycle machines, preconditioned air units, steam/water separators and specialty heat exchangers engineered to meet stringent aerospace standards.

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