TAT Technologies Q2 Earnings Call Highlights

TAT Technologies (NASDAQ:TATT) reported record second-quarter results for 2026 as improving supply-chain conditions helped the aviation aftermarket company convert previously constrained demand into revenue. Management said the company ended June with a record $650 million backlog and long-term agreements, while expanding its relationship with Honeywell Aerospace.

Second-quarter revenue rose nearly 23% year over year to $52.9 million from $43.1 million. Gross profit increased 23% to $13.3 million, with gross margin remaining above 25%. Operating income reached $5.6 million, or 10.6% of revenue, compared with $4.4 million, or 10.3% of revenue, a year earlier.

Net income was $8.1 million, or $0.61 per diluted share, compared with $3.4 million, or $0.30 per share, in the prior-year period. The quarter included a one-time gross gain of approximately $4.3 million from the sale of a minority interest in an unconsolidated entity, along with a $900,000 tax-related charge. Excluding the gain from the minority-interest sale, net income was $4.6 million, or $0.35 per diluted share.

Record backlog and Honeywell expansion

President and CEO Igal Zamir said the quarter represented “an important inflection point” for the company, citing strong commercial-aviation fundamentals, high aircraft utilization and longer aircraft service lives.

TAT expanded its strategic relationship with Honeywell Aerospace during the quarter. The company became Honeywell’s sole global authorized distributor of spare parts for the 331-200/250 auxiliary power unit, or APU, platform. TAT also extended its MRO license for that platform through 2036 and acquired three Honeywell Aerospace 131-9A APUs for its trading and leasing operations.

Zamir said the agreement adds a distribution capability that TAT previously did not have on the 331-200/250 platform. The company had historically provided MRO and service support for the platform, but can now offer parts, repairs and return services across the lifecycle.

The executive said the extended agreement provides long-term visibility for an important OEM relationship and supports TAT’s position as an aftermarket partner to airlines, OEMs and MRO providers.

Supply constraints persist in some areas

Management said supply-chain conditions improved significantly in the second quarter, particularly following a specific first-quarter disruption involving a major OEM. However, the company said conditions have not fully normalized, especially for OEM-supplied components and landing gear.

Chief Financial Officer Ehud Ben-Yair said supply-chain inefficiencies raised procurement costs in certain product lines and limited the company’s potential operating leverage. The stronger Israeli shekel also created more than $600,000 in foreign-exchange losses during the quarter.

Landing gear, which represents about 5% of total revenue, remains affected by supply constraints. Zamir said lead times for some landing-gear parts have extended beyond 12 months, while the availability of used serviceable material has tightened as airlines keep older fleets in operation longer.

“We don’t see the recovery as we reported in the last few quarters,” Zamir said regarding the landing-gear supply chain, adding that the company has limited visibility into when the trend will stabilize.

TAT has responded by increasing inventory buffers and, when necessary, purchasing components at higher costs to protect customer delivery schedules. Management expects inventory requirements to become more efficient as supply conditions improve, but said working capital will remain elevated in the near term.

Cash flow, balance sheet and M plans

Adjusted EBITDA, excluding the one-time gain, was $7.4 million, or 14% of revenue, compared with $6.1 million, also 14% of revenue, in the year-earlier quarter.

Cash used in operating activities was $0.6 million, compared with positive operating cash flow of $7 million in the second quarter of 2025. Ben-Yair attributed the change to strategic inventory investments, including inventory for the Honeywell distribution agreement, as well as revenue that had not been collected by quarter-end. He said the company expects some of those collections during the third quarter.

TAT ended the quarter with net cash of $43 million. The company also recently secured a new five-year, $100 million revolving credit facility with U.S.-based banks.

Management said acquisitions remain a central part of TAT’s long-term growth strategy. The company is evaluating a pipeline of potential targets that could expand MRO capabilities, thermal-systems operations, platform coverage and geographic reach. Ben-Yair said TAT intends to remain disciplined on valuations and maintain what he characterized as healthy leverage.

First-half results and outlook

For the first six months of 2026, revenue rose 10.4% to $94.1 million. Gross profit increased 12.4% to $23.4 million, producing a 24.8% gross margin. Operating income was flat at $8.6 million.

First-half net income increased 58.1% to $11.5 million, including the $3.4 million net benefit from the one-time transaction. Excluding that benefit, net income would have increased approximately 11% to $8.1 million. Adjusted EBITDA, excluding the one-time gain, rose 4.1% to $12.3 million, or a 13.1% margin.

Management said heat-exchanger revenue grew 7.8% in the second quarter, while the APU business benefited from supply-chain recovery and new long-term contract wins. Trading and leasing revenue increased 17%, and the additional 131-9A APUs are expected to support future leasing activity.

Zamir said TAT entered the second half with stronger momentum, improving supply-chain conditions and greater visibility from its record backlog. Management expects growth to be steady rather than driven by an unusual quarterly backlog release, noting that much of the backlog consists of multiyear agreements.

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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