TAT Technologies Ltd. Q4 FY2025 earnings call

• 2025 was a strong year with record revenue, portability, and growth in long-term agreements despite industry challenges like tariffs and supply chain constraints.
• Strengthened the organization by investing in team and operational capabilities, and transitioned from a controlled to widely held public company.
• TAT operates as a diversified multi-product aviation platform outpacing the broader maintenance, repair, and market.
• In 2026, starts from a position of strength with right team, capability, financial position, and expanding backlog.
• APU business had strong growth, made progress on strategic contracts, and had strong underlying demand fundamentals.
• Heat exchangers continued to generate consistent recurring demand, supported by new aircraft platforms and fleet convergence programs.
• Landing gear segment showed growth as aviation industry entered major MRO maintenance cycle, with in-house capabilities providing advantage.
• Trading and leasing services helped customers manage supply chain constraints, with APU leasing pool benefiting from in-house maintenance capabilities.
• Generated positive operational cash flow, raised capital in public market, expanded credit facility, and had clear objective to pursue strategic acquisitions and invest in organic growth.

In 2025, TAT Technologies had strong financial performance. Fourth quarter revenue was $46.5 million, up 13% from the same period last year. Full-year revenue grew over 17%. The MRO side of the business grew to 71.4% of total revenue in 2025 compared to 68.6% in 2024. Gross profit for the fourth quarter increased 23.6% with gross margin expanding to 25.2%. Operating income for the quarter was $4.9 million, up 20.2% year-over-year. Full-year operating income was $18.8 million, up 50.4%. Net income for the quarter was $4.7 million, up from $3.6 million a year ago. Full-year net income was $16.8 million, up 50.6%. Adjusted EBITDA for the quarter increased 24% to $6.9 million with an adjusted EBITDA margin of 14.8%. Full-year adjusted EBITDA was $25.5 million, 14.3% of revenue. Cash flow from operations in the quarter was $5.6 million positive and $50 million positive for the full year. Balance sheet showed cash at $51.6 million and loans at $11.7 million. APU business had strong growth, heat exchangers remained largest and most stable, landing gear showed growth despite supply chain challenges, and trading and leasing services was an important strategic component.

• Believes 2026 will be another strong year supported by new long-term agreements and pipeline opportunities, with record backlog and sustained demand for aviation MRO services.
• Expect some operational challenges in first part of 2026 related to ongoing supply chain environment, but confident in overall trajectory based on increased backlog and intake levels.
• M&A is a clear strategic priority in 2026, with balance sheet and cash position providing financial capacity to act, focusing on accretive bolt-on acquisitions to expand addressable market and deepen customer value.

• Supply chain constraints remain a primary challenge affecting the MRO ecosystem, with normal fluctuation in maintenance intake due to parts availability issues. For example, in fourth quarter 2025 and first quarter 2026, parts availability delays from a major supplier slowed certain APUs and landing gear services turnaround time. Teams are working to address issues but overall supply chain performance not yet broadly recovered.

Q: Regarding the supply chain dynamic and backlog increase, was the backlog increase largely a function of deferred revenue from supply chain disruptions or notable long-term contract wins?

A: The vast majority of the increase in Q4 comes from new contracts that were signed, long-term agreements. A small portion is backlog of MRO, but mostly from new contracts and OEM POs.

Q: About the turnaround time in the context of supply chain disruptions, are there significant extensions?

A: Potentially, supply chain challenges can definitely impact turnaround time as there are hundreds of different parts per engine, and one repair part issue can hold up the engine.

Q: Impact of higher oil prices and extended Mideast conflict on MRO activity?

A: So far, don't see any impact on MRO activity, and Israeli team is continuing to operate nonstop despite challenges.

Q: Bid environment for APU customer engagements this year versus last year?

A: Airlines typically have contracts for components and rarely break contracts in the middle of the term. RFPs come on a steady pace, with some opportunities for new RFPs and existing wins like a recent RFP win.

Q: Margins once supply chain constraints are resolved?

A: Aspire to be like best-in-class companies in the industry with EBITDA in the range of 20% or more, with supply chain challenges and lack of teardowns currently impacting margin, but see opportunities for improvement as industry stabilizes and old aircraft retirement increases engine availability.

Q: Defense products and services orders, ability to catch new orders for new platforms?

A: Defense is a small portion of overall revenue. See substantial increase in MRO and new orders for defense systems, but still a small portion of the portfolio. Actively working on M&A, hired VP of corporate development, developed strategy, and are actively looking for opportunities