Good day, ladies and gentlemen. Thank you for standing by, and welcome to the TAT Technologies Third Quarter 2024 Earnings Conference Call. Please note that today's conference may be recorded. Hello. My name is Matt Chesler, and I am a partner with FNK IR, a US-based Investor Relations firm supporting Eran Yunger, TAT's Internal Head of Investor Relations. Hosting today's call is Yigal Zamir, our President and CEO, and Ehud Ben Yair, our CFO. Before getting started, we'd like to draw your attention to the fact that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws. These forward-looking statements are based on management's current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by these forward-looking statements. The forward-looking statements are made as of the date of this call and, except as required by law, TAT Technologies assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion of how these and other risks and uncertainties could cause TAT Technologies' actual results to differ materially from those indicated in these forward-looking statements, please see our annual report on Form 20-F for the fiscal year ended December 31, 2023, and other filings we make with the SEC. The financial measures discussed today include non-GAAP measures. We believe investors focus on non-GAAP financial measures in comparing results between periods and among peer companies that publish similar non-GAAP financial measures. Please see today's press release, our earnings release, and the Investors section of our website at tat-technologies.com for a reconciliation of non-GAAP financial measures to GAAP results. Non-GAAP financial information should not be considered in isolation from or as a substitute for or superior to GAAP financial information, but is included because management believes it provides meaningful information about the financial performance of our business and is used by investors for information and comparative purposes. With that, I'd now like to turn the call over to Yigal.

Hi, good morning, everybody. First of all, I have to say that we are excited to be here today. It's TAT's first live earning call, and it's another milestone in the evolution of the company and in development, especially after the progress the company have made over the last few years. So, I'm really excited to be here in front of you today and looking forward to meeting you also in-person in the future conferences or other events. I'll start by saying that we are very pleased with the results of the third quarter. Company executed really well and we -- as you can see in the graph, we recorded another record quarter in revenues and profitability. We onboarded new customers. We continue working on improving our efficiencies and continuing to establish the infrastructure that TAT needs to continue supporting the growth for the coming few years. So, all in all, we are very pleased with the results. If you look at the data, and Ehud, our CFO, will present all the financials in few minutes, revenue, in comparison to last year, increasing 35%, net income increasing 33%, very pleased with the EBITDA results, increasing 70%, way more than -- almost double than the revenue, which speaks about the improvement in our operational efficiencies and enjoying the growth. We showed a $6.5 million positive swing in cash flow comparing to the same period last year -- I mean, the cash flow from operations. And despite the fact that our revenue is growing, our backlog is also continuing to grow, which means bottom line is that we are receiving more POs and more orders and we are securing more business to -- for the future than what we are selling. And basically, all the signs are positive signs when we look…

Thank you, Yigal. Happy to be here, happy to present another quarter, very good results. I will go through the numbers, and we'll give you some -- also some key indicators. So, looking at the Q3 of '24 compared to Q3 of '23, revenues went up to $40.5 million compared to $29.9 million in the same period last year. That's an increase of 35%. The thing that will follow us through the whole presentation is that not only the company is growing its revenue, but we are also quarter after quarter, improving our profitability. So, you can see here that the gross margin went up to 21% compared to 19.4%. The operating margin, which almost doubled compared to the previous period, went up from 5.9% to 8.5%. The adjusted EBITDA, again, the same trend, went up by 70% from 10.1% out of revenue into 12.6% in Q3 of '24. And net profit also increased by 33% from $2.2 million to $2.9 million in this quarter. Same trend, if we're looking at the nine months period of time, so revenue went up to $111.1 million compared to $82 million in the same period last year. Gross margin went up from 18.9% out of revenue into 21.2% out of revenue, an increase of 230 basis points. Operating margin, the same, doubled compared to -- almost doubled, 2% -- almost doubled from $4.2 million to $8.4 million and moving up from 9.5% out of revenue to 14%. The same goes with the adjusted EBITDA that went up from 9.3% to 11.8%, and the net profit from $4.3 million to $7.6 million, representing a 77% increase compared to the previous periods. Looking at the last four, five quarters, again, you can see that constantly, all of the parameters are growing up. So again, we…

So, bottom line, just to summarize this short presentation, we are optimistic about the future. The industry trend is going in the right direction. Demand is high. We are well positioned with the right products, with the right capabilities. I think that we are doing -- company is doing a good job overcoming supply chain challenges. It's never perfect, but we are probably doing what we need to do in order to be ready for next year. And we have a lot of capabilities that we can leverage in the coming few years. So, looking forward optimistically into '25 and '26. And that's it basically for today from our end. We'll go to the Q&A session now.

Thank you, Yigal. We're now going to open up to the Q&A session. As a reminder, there are two ways to ask a question from the Zoom webcast. The first is to use the Raise Your Hand icon, which is at the bottom of your screen. Clicking this will alert us that you'll want to be called on to ask a live question, and then you'll be placed in a queue when called on. And then just note, you're going to be on mute until you are called on. The second way to participate is to use the Q&A widget, which I know a number of you have already done, and that'll allow you to type in and text your question in and I'll read that out. We'll take questions from there as well, but just note if we run into a time constraint, somebody from the IR team will get back to you, if your question is not asked on today's call. With that, we'll now begin and pause for a moment to build -- to further build the queue. Let us begin with a submitted question from [Sergey Muscaro] (ph). It is on margins. Does the gross margin have further upside potential? How should we think about gross margins going forward?

What we are saying in the last few months is that when we are comparing ourselves to competitors, unfortunately, most of our direct competitors are not publicly traded, so you can still not see the data online, but we've been exposed to financial reports of what we consider to be best-in-class companies in our field and we are saying that we want to be above 25% in gross margin. I'm not making here a looking-forward statement or guaranteeing that by when it will happen, but we are working very hard and we are considering 25% gross margin as a threshold that the company needs to meet and realistically should meet it.

There was an additional question that Sergey had. When should we expect 131 sales to start ramping up?

So, this year -- the way that we are looking at 131 and also the 331-500, the APUs that are serving the Boeing 737, Airbus 320 family and the Boeing 777, we gained full capability and FAA approval to start providing services about a year ago. We made a strategic decision to start with our one-off deals. Basically, we're doing one engine at a time and not to pursue a large contract to start with. A few reasons for it. First of all, we need to gain operational efficiencies and expertise of how to perform the work on this engine, basically learning how to crawl and then to walk and then to run, but more important than this, we needed to build the financial model that will enable us to build on large contracts. You need to remember that most of the airlines when we bid, the vast majority of the contracts are with a fixed price. So, you take an engine to the pieces, you have hundreds and hundreds of different parts. Some of them needs to be replaced, some of them needs to be repaired, some of them you can buy from the market, some of them you need to buy from the OEM. It's a very complex statistical model that you need to develop, and it only comes with experience. So, we said this year, we are going to chase the one-off engine. It will help us to build the statistical model. It will help us to better understand how it works with these engines before we go and commit to a five- to 10-years fixed price contract. So, having said all of this, we are getting the engines, we are doing the work, we are developing the -- we are doing what we said that we will do. We have a very large opportunity funnel going into next year in '26. We probably have more RFPs in the making than what TAT ever saw. There is a huge demand from engine in the market, not too many competitors that can even offer the support to airlines around the world. And so, very large opportunity funnel and we will update and inform the market when we actually secure these contracts.

The next -- there's a next question from [Robert Marson] (ph) on EBITDA margin targets that I want to combine with a separate EBITDA question that was emailed in directly. And it is that, can you share some longer-term EBITDA margin targets as you scale your revenue up to $300 million run rate? And also, what are some of the main levers of EBITDA margin expansion that you expect to pull on over the coming years as you scale the business?

Yeah. So, I should have probably mentioned it earlier when I mentioned the above 25% gross margin is a number where we want to see the company. I should have mentioned that we want to also be above 15% EBITDA. So, the specific answer is above 15% EBITDA as a company goal that we want to achieve, and we believe that it's achievable. In terms of how to get there, there are a few aspects. First of all, we invested a lot in establishing the infrastructure for growth. I mean, the manpower, the executive team, the group office that we established in Charlotte over the last three years. So, major investments in the organization and to developing the infrastructure to support the growth. Most of these investments in human capital were already made and we are today well-positioned to support a much larger company. So, the size will bring better margins. The second factor is the efficiency -- operational efficiencies, huge opportunities to gain operational efficiencies. As prices stabilize, as supply chain stabilize, and we can go back to sourcing the right parts in the right price. These days, we are searching for parts and, in many cases, we buy the parts in a higher price than what we should in normal times, because the supply chain is disrupted and we don't have access to the right parts in the right prices. The trend is positive. It will stabilize. It's just a matter of time. As the industry stabilizes and the supply chain is getting more back to normal, if you will, we will have -- we will see the benefits coming on the operational efficiency. Another factor is the employee utilization and efficiency. We hired lots of new employees to our shops. It takes time to learn how to do the work efficiently. We are not going to give up on quality or any other regulatory demand. So, there is a very long learning process. It takes many, many months to certify a new -- a good technician, a good engine technician to be certified to perform the work on our -- on a specific engine takes up to six months, then it takes a few more months until they learn how to do it efficiently. So, with time and with experience, we gain more and more benefits and it should reflect on the profitability.

Just a reminder for our participants, to ask a question, please either Raise Your Hand or submit a question via text and we'll read it out. The next question is from [Eran Frenkel] (ph), regarding heat exchangers. Can you elaborate on the backlog such as the type of aircraft and platforms, and also elegant type of heat exchange? And while you're at it, is heat exchange production in the U.S. or still in Israel?

Okay. So, first of all, heat exchangers, we have OEM production, where we are a Tier-1 supplier to Boeing, to Textron, to Embraer, and to several other system manufacturers, and we have the MRO, the aftermarket work. Heat exchange production, the OEM production is split between Israel and our facility in Tulsa. And the MRO -- or the vast majority of the MRO work is being done in the U.S. On the OEM, as I mentioned, we serve -- we work with Boeing, so you can see TAT products on many of the Boeing aircraft, 737s, 777 and such, Textron Aircraft and Embraer Aircraft. On the MRO, on the aftermarket side, I believe the TAT is -- probably we have the largest capability range in the industry. We serve many different types of aircraft, Airbus, Boeing and many others. By the way, commercial and military -- also on the OEM, I forgot to mention, it's commercial and military. And we have the capability to support and to repair and to overall units -- all the units that we are producing as OEM obviously, but also many other units that we don't have -- where we are not the OEM producer, but we are one of the industry leaders in the -- on the overall side. I hope that answered all the questions.

Okay. Then moving on. Can you clarify the comments you made about the seasonality in the business? What type of seasonality do you typically expect? Did we see it last year and what did we see this year?

Yeah. Well, I don't think that we can talk about any -- about the last year or the three years before that is anything normal. It was completely crazy. Last year, we had a huge backlog of work that we couldn't keep out and we were struggling to find materials and parts and whatever. Getting out of COVID, the industry was in such a big mess that the issue was not revenue. The issue was how to find the parts and how to find the employees and make sure that we have what it takes to catch up with the customer demand. But if you look at the comments -- by the way, there is no big drama in aerospace. I've been in TAT for nine years. We never saw any big spikes or dips. But traditionally, split it into two sections. So, first of all, cargo, which is a -- substantial portion of TAT business is cargo operators. They tend to minimize repairs during the top season before the holidays. They try to keep their fleet flying during the holidays. They do more repairs in the summer. Obviously, when they have failure, they have to repair. But the general thing, when it comes to plan, the maintenance, they try to minimize it during the fourth quarter and do more of it in the summer. And when it comes to commercial airline on the MRO side, just because of the volume of traffic during the summer months and the high temperature, you tend to see a little bit more demand for repairs. OEM is stable. I don't know that we have any seasonality on the OEM. On the military side as well, we don't have any seasonality. So typically, if we look previous year before COVID -- we cannot draw any conclusion from the last two years, but if you look historically, fourth quarter tends to be more flat comparing to the previous quarter and not expecting any big spike, positive spike, if you will, but also not expecting any decline or anything.

And then, there is an additional question from Robert Marson around United States. Can you talk about any efforts to domicile in the U.S. and to get more American investors into the shareholder base?

Okay. Can you please repeat the question? I'm not sure that I understood it.

Can you talk about any efforts to domicile the company in the U.S. and to attract North American investors into the shareholder base? Perhaps talk a little bit about the presence in North America, some of the marketing efforts and the outreach that we're all collectively doing to expand and diversify the shareholder base.

So, well, if you think -- I'll say a few words and maybe Ehud would want to add a few things. But first of all, if you look at our business, most of the business in the U.S. employees, let's start with our group office. We are all based here in Charlotte, North Carolina. If you look at the employee count, most of the production and most of the customer base, I would say, it's more than two-third in the U.S., North America, if you will. And the company is really from the U.S., but having said this, we are making tons of efforts to expand all over the world activity. The fastest growing market in aerospace is APAC and China, and we definitely want to be larger there and we are making effort. U.S. [indiscernible] we just started couple of months ago, the activity, definitely planning to do much more. Even this call today, first time that we have an earning call with U.S. investors. Historically, it was done only with Israeli investors. So, definitely looking forward to expanding the activity -- drastically expanding the activity and to become much more involved in the U.S. market as the company grows and shows performance that is more in line of U.S. investor expectation.

Yeah. Just to add on it, obviously, we're spending a lot of time and effort, again, to selling the story to the investors' community. We already participated I think since June when we started the program. We participated in two large conferences, one in New York and one in Los Angeles just two weeks ago. And we expect to participate in another important conference in New York on December 11. And hopefully, we'll be -- we'll have the time and the opportunity to meet each one of you.

Okay. We have an additional question here from [Sergio Eber] (ph). Can you spend a moment to talk about the competitive landscape across your businesses? Who do you consider to be primary competition?

Yeah. So, I would say one thing that we as part of our strategy, we the big strategic shift that we had in the last few years, we decided to focus the companies on key areas of the four pillars that we have today in the strategic products, heat exchanger, APUs, lending and trading. But the key consideration was that we want to be one of the industry leaders in what we do. So, we don't want to go into commodities. We don't want to be just another vendor that does something. And if you look at aerospace and the areas where we're active, we are there in a sense that we are a non-entity, we are a significant player. I believe that on the heat exchangers, we are one of the leaders in the industry in terms of size and performance. But also when you look at APUs and landing gear, with our vast experience in the types of products that we are providing services, we are definitely a known player in the industry. In most cases, we have several competitors, many of them, I would say, you can split them into two. The OEMs themselves are competing with us. So, we go after APUs and we are competing with Honeywell, which is the OEM for the APU. If we go after a large contract or on the heat exchangers, MRO, if we go after a large airline business, we will compete -- we will probably be competing with the OEM on the heat exchangers, where again, whether it's Honeywell, Liebherr or Collins. But in all cases, across all product lines, you will see that we have anywhere from one, two to maybe at the most four, five competitors. So, the world is very large, but when you look at aerospace and how many players have the capacity and capability to do a certain type of work, it's only a handful of them. And so, lots of opportunity to build momentum and to make progress if you are providing better service than the others. And none of the services that we are providing are considering to -- considered by our customer to be a commodity. So, price always play a factor, but the service, the quality, the reliability, being able to solve customer problem is another key factor that we are working very hard to improve and to stand out as a better provider than competition.

So, we had had an earlier question regarding backlog, but I think it was specific to heat exchangers. Can you talk overall about the company's backlog? What it means? Is it the full annual potential revenue over certain number of years? How would you like investors to consider that metric?

Okay. So, when you think about heat exchangers, what we present in the backlog and LTA value, it consists of two -- actually, it consists of three different elements. On the OEM side, we are under contract with the Boeing, Textron and Embraer and others, and they are providing us their forecast based on what they are planning to build in the next few years. So, when we look at the next few years, the forecast is used as part of the long-term value that we have. As time goes by, the forecast is being replaced with purchase orders. For the -- in most cases, we have full coverage of purchase orders already for '25. So, once we get the actual purchase orders for next year, we are taking out the forecasted number and we are replacing it with the actual POs that we are receiving from the customer. So, on the OEM side, what you see is the forecast for the coming few years and next year actual POs. By the way, in most cases, the actual POs that we are receiving these days are higher than what we have in the forecast. We see a major increase in demand from the OEMs. On the MRO side, once we secure a contract, if we win a contract with a major airline and they give us their historical data and they tell us how much they expect to use us during -- for the duration of the contract and that's the number that we plug in for the duration of the contract, once we get the actual intake, the actual work, obviously, it replaces the forecast with the actual work that we have in the building to perform. And again, here when we look at this year, so far year-to-date, in all cases, we received more, actually substantially more than what we had in the original forecast from, I would say, almost everybody, with few exceptions, most of the customers are shipping us more than what they anticipated at the beginning of the year.

Thank you, Yigal. So we -- there are additional questions, and I just pledge that the IR team will get back to you after the call to help provide you with answers to those questions as we are up against our time. Yigal, I'd like to turn it over to you for brief concluding remarks.

So, first of all, again, I want to appreciate everybody for taking the time to join us today. We're looking forward to seeing you in person in one of the conference calls or definitely to address any question that you have if you contact us directly. We are happy with the results. The company is on a positive trend. We are looking forward optimistically into the coming two years. We have lots of opportunities. We feel that our new strategy is working for us. We have lots of leverage that we can exploit in the next few years, and looking forward to some -- to continue making progress. So, thank you very much.