TAT Technologies Ltd. Q4 FY2024 earnings call

• 2024 was a strong year with 34% revenue growth, 139% net income growth, and Q4 2024 revenue up 29%.
• Gross margin increased from 19.7% in 2023 to 21.7% in 2024, and adjusted EBITDA margin rose from 9.7% in 2023 to 12.2% in 2024.
• Launched new APU capabilities (131 and 500) opening new markets.
• Expanded trading and leasing capability, leveraging in-house MRO to purchase and overhaul components.
• Backlog increased to $429 million at year-end 2024 from $406 million in 2023.
• Implemented strategic sourcing plan for inventory to address supply chain challenges.

In 2024, TAT Technologies achieved a 34% revenue increase to over $150 million, with Q4 2024 revenue up 29% to $41 million. Key product segments: Heat exchangers saw Q4 2024 revenue of $16.6 million (up from $13.3 million in Q4 2023) and full-year 2024 revenue of $63.2 million (up from $33.1 million in 2022). APU segment had Q4 2024 revenue of $30 million (up from $9.2 million in Q4 2023) and full-year 2024 revenue of $43.3 million (up from $18.7 million in 2022). Trading and leasing saw Q4 2024 revenue of $3.3 million (up from $2.2 million in Q4 2023) and full-year 2024 revenue of $13.9 million (up from $6.2 million in 2022). Landing gears have a cycle expected to peak in 2026-2028, with growth starting in 2024.

• Expect another strong year in 2025 with focus on improving customer performance, increasing profitability margin, and growing top line.
• Aim for EBITDA margin above 15% as part of efforts to improve profitability and efficiency.
• APU and landing gear segments expected to drive growth, with landing gear cycle peaking in 2026-2028.

• Supply chain challenges with parts and materials availability and long lead times.
• Uncertainty in gaining new contracts, especially as a newcomer in APU segments.
• Potential fluctuations in MRO demand due to airline budgetary decisions.

Q: Given the ongoing unstable supply chain, can you highlight what you're seeing from suppliers compared to previous quarters?

A: Supply chain behavior hasn't changed drastically. Materials are more stable but still not back to pre-COVID levels; parts from OEMs for engines or landing gears still face long lead times and unpredictable deliveries.

Q: What's the book-to-bill ratio and time to convert backlog to revenue?

A: Book-to-bill ratio is over one; on OEM side, contracts are long-term with actual POs for next 12-18 months, while MRO contracts are 3-5 years with 40% of revenue from non-contractual customers.

Q: Are you still on track to exceed 15% EBITDA margin in 2025?

A: Focus is on profitability improvement and efficiency, with trends pointing to EBITDA margin moving towards above 15% as a goal.

Q: What's your long-term revenue structure outlook?

A: Expect growth in all segments (heat exchangers, APU, leasing, etc.), with APU expected to be a strong growth engine, and landing gear cycle peaking in 2026-2028.

Q: Do you plan to get new authorization for other regional jets?

A: Not currently on the road map for 2025; focus is on increasing capacity to meet existing demand.

Q: Comment on pricing trends for services?

A: Contractual customers have predetermined pricing tied to indexes; non-contractual customers involve market and competitive considerations to maintain profitability while staying competitive.