TAT Technologies Ltd. (NASDAQ:TATT) Q3 2025 Earnings Call Transcript

TAT Technologies Ltd. (NASDAQ:TATT) Q3 2025 Earnings Call Transcript November 13, 2025

Matthew Chesler: [Audio Gap] A U.S. based Investor Relations firm supporting Eran Yunger, TAT’s Internal Head of Investor Relations. Hosting today’s call is Igal Zamir, TAT’s President and CEO; and Ehud Ben-Yair, TAT’s CFO. Before getting started, we would 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 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’s actual results to differ materially from those indicated in these forward-looking statements, please see our annual report on Form 20-F 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 our peer companies that publish similar non-GAAP financial measures.

Please see this morning’s Form 6-K, our earnings release and the Investors section of our website for a reconciliation of non-GAAP financial measures to GAAP measures. Non-GAAP financial information should not be considered in isolation from 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 useful to investors for informational and comparative purposes. The non-GAAP financial measures that we use have limitations and may differ from those used by other companies. And now with all that, I’d like to turn the call over to Igal.

Igal Zamir: Good morning, everyone, and thank you for joining us for the TAT Technologies Third Quarter Earnings Call. I appreciate your interest and continued support as we review our performance and discuss our strategic direction moving forward. TAT continues to deliver organic growth that exceeds the broader MRO driven by intentional diversification and strategic positioning serving in-demand and often underserved areas of the commercial aviation industry. We delivered another solid quarter in Q3, highlighted by double-digit revenue growth, record EBITDA margin and increased cash generation. These results reflect disciplined execution, strong demand across our core business lines and importantly, the operational leverage we have worked hard to build into our business model.

Incremental revenues is now flowing through the bottom line in a more meaningful way, representing a significant accomplishment and foundation upon which we can continue to build. Our consistent growth and expanding profitability demonstrate that our model is performing as intended, efficient, diversified and designed to capture value across multiple segments of the aviation market. The broader aviation market continues to benefit from a constructive operating environment. Fleet utilization remains high, aircraft retirements are occurring at a lower pace than past cycles and OEM deliveries constraints are extending the service life of existing aircraft. Together, these dynamics are driving sustained demand of maintenance, repairs and overall activities as well as components, parts, distribution and leasing.

Q&A Session

This backdrop reinforced the importance of our diversified MRO platform and flexibility — the flexibility that we provide to both commercial and cargo operators. As I stated in previous calls, normal quarterly fluctuations are expected in MRO industry, especially since the substantial portion of our MRO activity involve discretionary maintenance. Airlines tend to shift work between months and quarters based on budget cycles, expected flight loads and other operational considerations. External factors occasionally influence intake timing as well, particularly in defense-related work, though these factors typically affect timing rather than underlying demand. For these reasons, we believe in a multi-quarter year-over-year view as best captured the strength and the momentum of our business.

We believe that this perspective, supported by the year-to-date and trailing 12 months trend provide a clearer picture of the consistency of our growth, margin expansion and cash generation. Over the past several years, we’ve added capabilities, strengthened operation and diversified revenue stream. These strategic initiatives has positioned TAT to sustain performance and long-term value creation. In particular, we have expanded into several underserved MRO markets, adding in-demand capabilities. And looking ahead, potential inorganic growth through the acquisitions of accretive bolt-on capabilities will further expand this proven foundation. With an increasingly stronger balance sheet and the leadership bench in place, we are sharpening our focus on identifying strategic opportunities to accelerate our existing growth strategy.

We have recently added experienced corporate development executives to help us evaluate strategic M&A activities, and we are continuing to broaden our governance structure. At last week’s Annual and Special General Meeting, shareholders elected 3 new independent directors to the company, Sagit Manor, Eitan Oppenheim and Amir Harel, each bringing deep financial and corporate development experience from leading global companies. These appointments enhance our governance and leadership capabilities as we position TAT for its next phase of growth. With this context, I’ll turn it over to our CFO, Ehud Ben-Yair, to talk — to take us through the financial results in more details.

Ehud Ben-Yair: Thank you, Igal, and good morning, everyone. I will review the key financial results, balance sheet highlights and cash flow performance for the third quarter and for the first 9 months of 2025. Third quarter revenue increased by 14% to $46.2 million, up from $40.5 million in the same period last year. For the first 9 months of the year, revenue was up more than 18%. This growth was fueled by strong demand across our core businesses line, along with market share gains. Even while delivering another quarter of double-digit revenue growth, we essentially maintained our backlog and LTA value at $520 million — this robust backlog validates our belief in durable customer demand and reinforce our business strategy of expanding our addressable market by adding new capabilities.

From the beginning of the year, the backlog grew by close to $100 million, representing a huge increase compared to the increase in the revenue, which is representing a strong signal to our capabilities to further grow our revenue line. Gross profit increased by 37%, and our gross margin expanded by 410 bps to 25.1% compared to 21% in the third quarter last year. This improvement reflects our ongoing effort to optimize cost structure, improve operational efficiencies and enhance product mix. Operating income reached to $5.2 million, up by 52.6% year-over-year, demonstrating the leverage in our model as volume growth translated to profitability. Our net income for the quarter was $4.8 million compared to $2.9 million a year ago. Taxes on income for the quarter were $800,000 versus minimal amount in the same period last year.

The new U.S. tax legislation enacted under the One Big Beautiful Bill Act had only a modest effect on our results, while changes such as the restoration of 100% bonus depreciation and updates to the R&D expenses alerted certain deferred taxes positions. The overall impact of our effective tax was not significant. However, the main benefit of implementing the new Act is an increase in the carryforward losses that will enable us to deduct them through the first 3 quarters of 2026, preventing us from paying any taxes in the U.S. for additional 4 quarters. While prior to the new act, we were supposed to start paying taxes by the end of this year, by the end of 2025. Our net financial expenses are close to 0 this quarter, mainly due to a favorable exchange rate differences between the Israeli shekel and the U.S. dollar, which were offset by the ongoing interest on our long-term loans.

And finally, adjusted EBITDA increased by 34% to $6.8 million, translating to an adjusted EBITDA margin of 14.6% a record adjusted EBITDA margin and a notable improvement from 12.4% margin in the same period last year. That continues to deliver operating leverage as a result of our disciplined expense management. Moving to the cash flow. Cash flow from operation in the quarter was $7.5 million, driven by improved profitability and working capital efficiency and disciplined cost management. For the first 9 months, cash flow from operation was $9.5 million, representing an EBITDA cash conversion of 51%. Turning into the balance sheet. We ended the quarter with $47.1 million in cash and $12.1 million in total debt, resulting in a low debt-to-EBITDA ratio of 0.5x.

Shareholders’ equity stood at $170.7 million, supporting a strong equity-to-asset ratio of 76%. I’m going now to discuss a little bit about the results by the key product segments. In our APU businesses, after a modest sequential decline from Q1 to Q2, we saw a surge in intake in the third quarter with revenue increased by 39% year-over-year and 27% on a sequential basis. On a year-to-date basis, APU revenue is up by 26% from last year, aligned with our expectation and market penetration plan. Heat exchanger revenue increased by 6% between Q3 ’25 and Q3 of 2024 — on a year-to-date basis, revenue grew by 14%. The increase in OEM is very stable and aligned with the industry growth, while MRO growth was a little bit slow in the last 2 quarters, but expected to increase in the coming following quarters.

In the landing gear area, revenue more than doubled year-over-year and nearly doubled on a sequential basis, reflecting a surge in intake and operational ramp-up, validating our strategy of supporting this underserved market. As communicated in the past, the E170 cycles started, and we are well positioned with contracts that needs to be served in the next 3 years. And last, trading and Leasing. After a particularly strong second quarter, we’re down both sequentially and year-over-year basis, reflecting normal quarterly volatility as we explained in the previous earnings call. On a year-to-date basis, trading and leasing revenue is up by 17%. In summary, TAT delivered another period of solid growth and improving profitability, supported by disciplined expense management and strong cash conversion.

Our balance sheet remains a strategic asset, providing flexibility to invest in both organic and inorganic growth opportunity. And by this, I’m returning the call back to our CEO, Mr. Zamir.

Igal Zamir: Thank you, Ehud. The broader aviation market continues to experience viability, but our diversification helped offset these dynamics. While we are not immune [Audio Gap] is our agility. We have built the ability to adjust capabilities and capacity resources in real time, ensuring that we meet customer needs and sustain operational efficiency even in a changing environment. That adaptability remains one of our competitive advantages. We plan to leverage our strong balance sheet to pursue acquisitions that expand our addressable market, deepen customer relationship and natural adjacencies to our platforms. Over the past 2 years, we significantly increased our long-term backlog. I expect this overall trend to continue as customers seek nimble partners to support their maintenance needs.

RFPs activity has its own cadence with quarter-to-quarter volatility, much like our intake volume. But the overall trend is encouraging, and I continue to believe that we are well positioned to capture more market share. In summary, TAT continues to deliver performance that exceeds the industry and our operational discipline is driving greater earning power. Supply chain dynamic continue to require active management, and we have made significant progress in relationship to our inventory levels, helping to increase our cash generation capabilities, and I remain optimistic about the years ahead. Before opening the call for questions, I’d like to thank our employees for their professionalism and hard work. Their commitment continues to set the standard for the industry and sorry, and underpins everything we’ve achieved.

I also like to welcome our new independent directors. Their additional reflect our broader efforts to strengthen and diversify our Board as we prepare for the next phase of our growth. Over time, we expect to further expand the Board with additional U.S.-based and industry-oriented expertise to complement our strategy. I would now like to open the call for questions. Matt?

Ehud Ben-Yair: Matt, you are on mute?

Matthew Chesler: Thank you. Thank you for telling me about that. And thank you, Igal, for those remarks. As you know, we’re now going to open up to the Q&A session. We’re going to be taking live questions as well as submitted questions as I know a number of you have been submitting them already. [Operator Instructions] Please go ahead and raise your hands. Jonathan Siegmann, would you like to raise your hand or would you like me to read your question? I’ll go ahead and read Jonathan Siegmann’s question from Stifel. Congrats on the strong quarter, strong results and strong cash. Last quarter, you explained how TATT was able to make use of the tariff-driven slowdown in MRO intake activity and switched to repair APU. Can you talk about how TAT was able to flex your operating platform to manage this quarter’s change in demand.

We were particularly surprised by the more than doubling in landing gear. How should we think about TAT’s revenue capacity for landing gear MRO activity?

Igal Zamir: I think that I would like to answer this question in a more broader perspective. As I stated every quarter, I remember starting to make the same statement since Q4 of last year and being very consistent about it. I don’t know that we can look at TAT on the MRO portion of TAT business on a quarter-to-quarter basis. There are many, many variables and things are changing based on the factors that I stated earlier when I — in my opening remarks. I don’t think that we need to look at it year-over-year. The lending gear was — the lending year increase was expected. We stated it in previous calls. We are getting into a new cycle of lending gear overall with expectation to substantial growth in revenue going into the coming few years.

Nothing is new here. We saw it coming and it came. There may still be fluctuations between quarter, but the overall trend is very strong. And going back to the flexibility and how to adjust, and I think that I truly think that this is our biggest advantage as a player that is not a huge player like many of our competitors. It’s our ability to shift focus and to shift employees and manpower from one area to the other as needed. There is fluctuation. And the question is what do you do when the intake is surprising you comparing to the plan, which happens quite often. And we became pretty good in diverting a workforce and making sure that we adjust fast and that we don’t just accept things as they are. Last quarter, we’ve been asked about the APUs and what happened for those of you who attended, how come that last quarter was strong.

And I said the same thing. I have no concerns whatsoever about the APU intake, and we see this quarter with a substantial increase in APU. So I think that when we look year-over-year and the growth in all the segments, it’s very promising. It’s encouraging, and we see a continuing trend moving forward, especially when we look at the backlog. There’s another submitted question.

Matthew Chesler: This one is from Ben Klieve with Benchmark. Congratulations on another outstanding quarter. You mentioned your increased interest in looking at underserved MRO opportunities. I understand that you cannot get specific about what these opportunities are, but can you please discuss the characteristics of these opportunities and discuss why you think they’ve been underserved historically?

Igal Zamir: So I think that the industry is in overall, especially over the last few years, is going through a post-COVID crisis. And part shortages and big players that are struggling and ramping up and many — as an outcome, there is a — it represents a big opportunities for fast companies, fast-moving companies, I would say, more flexible that can get ready and demonstrate that they have the ability to adjust to the situation and provide great service. One of the things that we are really proud of as a company in the last 2 years is the dramatic improvement that we have made comparing to many of our competitors in our on-time delivery, availability of parts. We made major investments in inventory to make sure that we will have the right parts on time.

And we are performing well as an outcome and the new capabilities that we added on the APU side when the market is struggling and when airlines around the world are suffering from lack of capacity and you have the capacity and you are ready and you can demonstrate performance, you gain momentum. When it comes to the acquisition, just the M&A activity, we are not just looking — just to be clear, and I would maybe elaborate on this for 2 minutes. We are not — we are looking in several verticals and not necessarily just on the MRO, but also on the OEM side. When it comes to MRO, though, we are looking to add value to our customers. I think that what we hear from airlines around the world is that one of the challenges that they are facing is with a relatively small supply chain management team, they need to manage hundreds and hundreds of vendors around the world.

And everybody is looking to consolidate work and to grow to work with a larger vendor that can support them across more product lines. So our M&A strategy when it comes to MRO will be to look for companies that can add high-quality, meaningful MRO services that we can add to our portfolio and be more meaningful to our customers kind of a general answer to the question. Having said this, as I said before, we are also looking for acquisitions on the OEM side to expand our thermal system capabilities, expand into new segments of thermal systems where we are not active today and become a more meaningful player in the thermal system world.

Matthew Chesler: I’m going to summarize a question around backlog that I received from a couple of investors. Thank you, Tal, and thank you, Yuval, for submitting them. Essentially, it’s — that the backlog declined by a few million sequentially from last quarter. Can you comment on that?

Igal Zamir: Yes. I almost — I don’t want to — basically, it’s a nonissue. I think that if you look year-to-date, we are way above where we started the year. We showed a huge growth. We cannot — you need to remember that we publish wins and add them to the backlog and LTA value only when we sign them. And we cannot — there are several factors. We cannot control when the airlines are opening the RFPs. We cannot control when they determine who is the winning bidder. And in many cases, even after we win, we cannot control when our legal team and the airline legal team will eventually sign the contract so we can publish. So as I stated before, we are enjoying a very strong opportunity pipeline larger than ever in the past. And we will keep on announcing and adding to the LTA new wins as we get them.

And we remain very optimistic about it. That’s the only thing that I can say right now. In the last 3 months, we have — we were not — we didn’t sign any win yet. So we saw a tiny reduction, but it’s a nonissue.

Matthew Chesler: Next, there is a question from Chen and a question from Othick that I think relates to your exposure to potential external disruptions. For example, how are your operations affected by the federal government shutdown that apparently just ended? Or is the grounding of some of the UPS and FedEx aircraft found the incident in Kentucky expected to affect any loads and schedules at your service centers?

Igal Zamir: I think that everything can have a — every one of these interruptions or disruptions can cause some short-term hiccups. But when you look at the overall trend, none of them represent — obviously, unless something turns into a macro global issue or challenge, none of them should have any sustained impact on our growth patterns for the future. I don’t see right now any — there is no drama here or any big impact with the exception of short hiccups here and there. And again, that we can easily — in reality, we are overcoming them because we have different product lines coming from different customers and a very large customer base and OEM versus MRO and other factors. So, so far, we haven’t seen any major impact or concern that should be noted here.

Matthew Chesler: Okay. I have a follow-up question from Ben Klieve at Benchmark that relates to the landing gear business, which is scaling and seeing some lumpiness. Do you expect that the lumpiness is going to decrease or perhaps even get more pronounced?

Igal Zamir: I’m expecting it to stay as it is through the — again, the volatility between the quarters, but the overall trend is very strong.

Matthew Chesler: Okay, next…

Igal Zamir: Maybe I can add to it. On the landing gear side, we are trying to be more proactive with our customers, and you always try to come up with a predetermined schedule of removals and when exactly they are going to park the aircraft to remove the gear and to replace. And looking at next year on paper, it looks great and very little volatility from my 10 years of experience at TAT, the plan is great until the year starts. And there are always changes and unexpected events. It can be that, I don’t know, a catering truck hit a gear in another aircraft, and now they have to change there. I’m giving it as one example. But there are always changes in and surprises. So I’m expecting volatility, but the overall trend and looking at where we are in the plan for next year, we expect to continue and to grow very nicely.

Matthew Chesler: The next question is from Michael Ciarmoli from Truist. Operator, can you assist in activating Michael?

Operator: Yes.

Matthew Chesler: Michael, I think if we can hear you.

Michael Ciarmoli: Okay. Perfect. Nice results. Just on the margins, really nice margin performance. I mean it looks like at the operating level incremental is about 31%. I think you’ve kind of talked about the EBITDA margins, 15%. You’re basically almost there. Can maybe we think about or can you share with us how you’re thinking about further operating leverage as you get some more volumes? And maybe even — do you think you can get some pricing to be additive as well?

Igal Zamir: Yes. So for those of you who listened to the calls in the last 2.5 years, 3 years, I’ve been pretty consistent about saying that I believe that the best-in-class company in our line of business should be at the 15% EBITDA and above. And yes, Michael, as you stated, we are very — we are getting there, mainly due to operational efficiencies initiatives that we had and things that we are doing. I’m happy to say that now that we are almost there, we still have a lot of opportunities and a lot of initiatives to continue and improve the margin moving forward. And I’m not even before increasing revenue or before increasing pricing. And it’s a very high priority for us on our plans for next year to continue and improve our efficiency to remove waste and to become — to reduce purchasing costs and to become more effective company.

Some of it may be used to be more competitive in RFPs and some of it will result in increasing — in further increasing the EBITDA. Regarding pricing, we typically — we try to be very careful about not using it as just as a tool because we are in a very competitive landscape. And we have — obviously, we have escalation — price escalation built into our contracts, but they are tied into predetermined indexes and like labor and materials. So prices are — traditionally, if I’m looking years back, they were increased year-over-year, but that’s not something that we are using as a tool for margin.

Michael Ciarmoli: Got it. Okay. Helpful. And then just if I may, you guys break out your percent of revenues by MRO and OEM. And it looks like if I look at the OE percentage, it was up year-over-year, maybe close to 3%. And I just wanted to know your products on the thermal side, where you’ve got 737 exposure, what are you seeing there now that Boeing has gotten the FAA approval to rate break higher? Is there any destocking? Do you see any inventory? Or do you think that side of your business starts to grow as we see the volumes increase on the MAX?

Igal Zamir: Yes. I think that — Michael, I think that specifically, if you talk about the MAX and our effect, there is a minimal impact, but not something that will have any dramatic impact on the future business one way or the other. I can say that if you look at overall aircraft production rate in our OEM business, our OEM — obviously, our business is growing in a linear line together with the increase in production rates. So again, without going into any specific platform, if you look across the board, if you look at the book of orders and planned capacity for Boeing, Embraer, Textron and others, we are enjoying it. And we plan to — hopefully, we will continue to enjoy it in the years to come because we see more — we see an increase in NPOs.

Matthew Chesler: The next question is a 2-parter from Richard Kay, who said, you generate strong cash flow, again, is that sustainable? And how would you characterize your balance sheet strength today?

Igal Zamir: So I’ll answer the first question about the cash flow and Ehud, if you may want to answer about the balance sheet. I think we spoke about it last quarter. We were in a very fast growth in a very unstable market with gigantic supply chain issues and other challenges with customers. And we wanted to make sure that we will be ready to the customers. So we made strategic decisions to dramatically increase inventories and a few other things to support our customers that were — as they were struggling. And last quarter, I mentioned that we are in a very healthy situation today that we don’t believe that we need to increase and we can turn more of the EBITDA into cash. Our collection is better. We don’t need to continue increasing inventories.

As long as we don’t go into a new product line that will require a new line of inventory, spare inventories, we are now at a position that we can start moving the inventory faster and increase inventory turns rather than inventory — overall inventory increases. From a CapEx perspective, we made substantial investments over the last 4 years and getting ready for the growth facilities, equipment and everything else that was required. And I think that we are moving more — we are scaling back because we already — we feel that we are ready with what we need for the next year or 2. And so the substantial investments are kind of behind us. There is always going to be a certain level of investment, mainly focused on 2 aspects, the maintenance, let’s call it, maintenance CapEx and the second type is CapEx associated with continuing to improve our efficiency.

And we are — but all in all, we see a substantial reduction in CapEx needs, and this is also going to impact the cash. So again, cash may fluctuate mainly based on collections versus payments from quarter-to-quarter, but we do expect to continue and enjoy very strong cash flow. And Ehud, I wonder if you would like to address the balance sheet.

Ehud Ben-Yair: Yes. [indiscernible] I’m expecting the balance sheet to continue or the equity ratio to balance sheet to continue to stay very high and very strong in the area of 70% to 75% in the coming quarters, given the profitability forecast and the capital — the working capital needs that we’re seeing. I must say that, however, as we indicated in the past that in case we’ll execute an acquisition deal, part of financing of this deal will come from debt leverage, and this will change a little bit the ratios in the balance sheet.

Matthew Chesler: We have a follow-up question from Michael Ciarmoli from Truist.

Michael Ciarmoli: Okay. Perfect. Just a follow-up. I think last quarter, I mean, you had a really good landing year performance, assuming that the internal supply chain challenges and inefficiencies you’ve had are kind of totally resolved. And then just one more on the APUs. I wanted to know what you’re seeing on penetrating the market for the 131.

Igal Zamir: You are asking about the 131 specifically. We are currently — we have several opportunities that we are trying to bid on. We haven’t won any meaningful in the last — so far, I would say we haven’t won any meaningful RFP. The opportunities are out there. And we still have some learning curve. The demand is there. The RFPs are coming. And I believe that with time we start showing substantial growth there. We’re just — we are basically at the beginning, if you will, as we stated in the last few quarters.

Matthew Chesler: We have an additional submitted question, which is asking about the supply chain and whether conditions and capacity utilization are improving or how are they trending?

Igal Zamir: I would say it depends on the product lines. I believe that on the thermal components supply chain, where we purchase basically raw materials, supply chain pretty much stabilized to where it used to be pre-COVID. No major stories there. And APUs and landing gear still — APUs is more reliable, but still very long lead times from the vendors. And on the landing gear is still unstable, both on the lead time and reliability of the vendors. So different phases. All in all, I can say across all product lines, the trend is very positive, but we are not there on the APUs and landing gear, the industry is not where it needs to be.

Matthew Chesler: Here’s a question from Ehun [indiscernible]. Asking about gross margins, can you — I guess, I’m looking at the question, can you talk about the sort of the mix of gross margins across your businesses because he’s observing that some of the gross margins, excluding leasing and trading did increase substantially over the quarter. And I’m just wondering what that mix looks like across the businesses?

Igal Zamir: Ehun, would you like to address it?

Ehud Ben-Yair: Guys, do you hear me? Yes. I’m sorry, my line is not so good. Could you please repeat the question, Matt?

Matthew Chesler: Yes, the question would be just maybe a comment on how gross margins varies across the various business lines because there was an observation about the increase in gross margins this quarter, excluding leasing and trading.

Ehud Ben-Yair: Yes. So obviously, what you saw — and again, I don’t want to make a long-term point on one quarter. We need to look at the trend of the couple of quarters in order to determine our mind what’s going to be — what is the right gross margin because product mix is playing on the level of each revenue within the segment is also determining the gross profit due to our operational leverage. But in general, I would say that in this segment, we see an improving — we see a trend of improving in the gross margin. And then again, looking for the long term, we expect the margin in this segment to go up a little bit. And it is mainly due to all of the things that were mentioned during the pitch by Igal and me, where we have many plans of improving operational efficiencies. We are also leveraging our employees’ utilization and also, again, having more work, more revenue on the same labor is improving by itself the gross margin.

Igal Zamir: If you look at — maybe just to add a few things. First of all, just to add to what Ehud said, looking at gross margin from quarter-to-quarter is almost impossible because even within the same product line within everything, if you compare apples-to-apples between the quarters, you have different customers with different margin. We need to remember that on the MRO side, there are lots of variations. On the OEM, once you have a deal and it’s closed and you have the supply and you know the cost, it’s pretty much stable gross margin. You know what to expect. When you receive an engine for an overall with hundreds of different parts that needs to be inspected, there is a huge variance between one engine to the other.

Sometimes you get the engine and it’s very easy and you replace few parts. And sometimes you get what we call a very heavy shop visit with many parts. And you need to remember that in many cases, our pricing to our customers are fixed customer — fixed pricing. Basically, it’s built on a statistical model over time. But sometimes you get — all it takes is 2 engines or 3 engines with very heavy replacement and the margin this quarter is going to look less favorable. And the following quarter, you got some light engines and everything is going to look great. So it’s very risky to — or not the right approach in mind, mind, I would say, to compare quarter-to-quarter, but rather to look at the long-term trend.

Matthew Chesler: The final question before we turn it back to Igal, for concluding remarks is from Robbie from [ Essex Fs Capital ], asking how should investors think about Q4 and 2026?

Ehud Ben-Yair: So as I stated in the beginning, I’m going to talk only about 2026. We are very optimistic. The trend is strong. We have a very strong backlog, as you see in the numbers. We have a very large pipeline of opportunities in different stages, significant amount of potential business that we believe that we are going to — some of it at least, a substantial portion of it we can secure. The market trend is continuing to be strong. Both OEM demand is growing and the MRO needs are there. So all in all, all the indicators are very positive, and we are continuing to increase our internal efficiency. So we remain very optimistic about the ability to continue to grow the business next year. I think this is the best answer that I can give right now.

Matthew Chesler: Igal, now turning to you for concluding remarks.

Igal Zamir: So just as final remarks. First of all, thank you for joining us today. The financial performance in the quarter further validates our business model and strategy. We are currently participating in multiple RFPs, as I said 2 minutes ago, and the growth opportunities we are pursuing giving us the confidence in long-term growth trajectory for TAT. On top of this, we believe these are — there are opportunities to accelerate our growth and increase our scale through targeted and strategic M&A activities. And I continue to think we are better positioned than many others in the industry for long-term growth. And I’m increasingly confident in our future. So with that, I just want to thank everybody again for joining us today and happy to answer further questions via…

Matthew Chesler: Thank you, everyone, for joining us today. You may now disconnect your lines.

Igal Zamir: Thank you. Bye.