[Management View]
TAT Technologies reported robust year-over-year revenue growth of 23.6% in Q1 2025, driven by strong demand across core business lines, including heat exchangers, APUs, and landing gear. Management emphasized operational efficiencies as the primary driver of margin improvements, with gross margin expanding by 290 basis points to 23.6%. Strategic priorities include growing the MRO and OEM businesses, expanding APU capabilities, and leveraging inventory as a strategic asset to mitigate supply chain volatility.

[Outlook]
Management remains optimistic about long-term growth prospects, citing a $439 million backlog and increasing participation in RFPs across multiple segments. Near-term challenges include macroeconomic headwinds, supply chain disruptions, and customer maintenance delays. The landing gear market is expected to peak between 2026 and 2028, while APU opportunities are expanding with multi-year agreements and new customer onboarding.

[Financial Performance]
- Revenue: $42.1M (+23.6% YoY)
- Gross Profit: $10M (+41% YoY), Gross Margin: 23.6% (+290 bps YoY)
- Operating Profit: $4.2M (+89% YoY), Operating Margin: 9.9%
- Adjusted EBITDA: $5.7M (+56.2% YoY), EBITDA Margin: 13.6%
- Net Profit: $3.8M (+81% YoY)
- Backlog: $439M (+$52M in new orders)

[Quarterly Comparison]
| Metric | Q1 2023 | Q1 2024 | Q1 2025 |
|-----------------------|---------|---------|---------|
| Revenue | $25.2M | $34.1M | $42.1M |
| Gross Profit | $4.3M | $7.1M | $10M |
| Operating Profit | $1M | $2.2M | $4.2M |
| Adjusted EBITDA | $2.5M | $3.7M | $5.7M |

[Q&A Highlights]

Question 1: Can you elaborate on the incremental backlog growth this quarter? Was it driven by repeat customers or new relationships?
Answer: The backlog growth was a combination of existing and new customers across business lines, including APUs, landing gear, and thermal components. No single segment dominated the growth, and new customer wins were consistent across the portfolio.

Question 2: What drove the margin improvement this quarter—pricing or operational efficiencies?
Answer: Margin improvements were primarily due to operational efficiencies, not pricing changes. Management reiterated its goal of achieving a 25% gross margin and 15% EBITDA margin through disciplined cost management and efficiency initiatives.

Question 3: How are you managing supply chain challenges, and what trends are you observing?
Answer: Supply chain volatility persists, with unexpected delays from suppliers. Management is strategically increasing inventory levels to ensure reliability and timeliness, which has been critical for maintaining competitive turnaround times and customer satisfaction.

Question 4: What is your current capacity, and how does it align with medium-term growth?
Answer: TAT Technologies is well-positioned to more than double its capacity from a technology and facility standpoint. The main bottleneck remains supply chain constraints, which are being mitigated through strategic inventory purchases.

Question 5: How should we think about tax provisions for the remainder of the year?
Answer: Non-cash tax expenses will remain consistent through Q3 2025. Cash tax payments are expected to begin in Q4 2025, with a similar tax rate anticipated for the upcoming quarters.

Question 6: What opportunities exist in the defense market given the current budgetary landscape?
Answer: While defense budgets are in place, immediate growth is not expected. TAT Technologies has a dedicated defense sales team actively pursuing RFPs and solicitations, with long-term strategic growth anticipated in this segment.

Question 7: What is the revenue opportunity for APU customers like FedEx, UPS, and DHL?
Answer: These customers are on multi-year agreements, and TAT Technologies is well-positioned to secure additional business as contracts come to term. The commercial APU market represents a significant growth opportunity, with active participation in large RFPs expected to drive incremental momentum.

Question 8: How should we evaluate the landing gear market cycle and its ramp-up?
Answer: The landing gear market is entering a multi-year upcycle, with demand expected to peak between 2026 and 2028. Early signs of growth are evident, with landing gear revenue more than doubling this quarter.

[Sentiment Analysis]
Management conveyed a cautiously optimistic tone, emphasizing long-term growth potential despite near-term challenges. Analysts focused on operational efficiencies, backlog growth, and strategic positioning, reflecting confidence in the company's ability to navigate industry headwinds.

[Risks and Concerns]
- Persistent supply chain disruptions impacting MRO profitability.
- Macroeconomic uncertainties, including tariffs and policy changes.
- Volatility in customer maintenance schedules and defense market timelines.

[Final Takeaway]
TAT Technologies delivered strong Q1 2025 results, showcasing robust revenue and margin growth despite ongoing supply chain challenges. Strategic investments in inventory and operational efficiencies have positioned the company for sustained long-term growth. While near-term volatility remains a concern, the company's diversified portfolio, expanding backlog, and proactive measures provide a solid foundation for continued success. Investors should monitor developments in the landing gear and APU markets, as well as progress in defense opportunities, for future growth catalysts.