TAT Technologies(TATT) - 2024 Q1 - Quarterly Report

Management Commentary and Outlook Management commentary highlights constant growth since Q4 2022, record 2023 financial results, a backlog exceeding $400 million, and an optimistic 2024 outlook - The company has been in a constant growth mode since Q4 2022, driven by increased demand and the ramp-up of new services and operations[9] - The company's backlog increased to a record high of over $400 million, indicating strong future revenue potential[9] - Despite increased working capital needs due to supply chain issues, the company achieved positive operational cash flow in 2023[9] - The outlook for 2024 is optimistic, based on the strong backlog, anticipated new contracts, and significant potential from new APU MRO capabilities[9] Full Year 2023 Financial Highlights TAT Technologies reported significant 2023 financial growth, with total revenues increasing 35% to $113.8 million, gross profit up 41%, Adjusted EBITDA surging 176%, and a return to $4.7 million GAAP net profit Key Financial Performance (FY 2023 vs. FY 2022) | Metric | FY 2023 | FY 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $113.8 million | $84.6 million | +35% | | Gross Profit | $22.5 million (19.7%) | $15.9 million (18.8%) | +41% | | Adjusted EBITDA | $11.2 million | $4.0 million | +176% | | GAAP Net Profit (Loss) from continued operations | $4.7 million | ($1.6 million) | N/A | | Net Debt | $10.3 million | $19.4 million | -47% | - In December 2023, the company raised $10.1 million (net of expenses) through a private placement sale to Israeli institutional investors[10] Business Overview TAT Technologies provides aerospace and defense solutions through four segments: OEM of heat transfer and aviation accessories, MRO for heat transfer components, MRO for aviation components, and overhaul/coating of jet engine parts - TAT Technologies operates through four main segments[12] - OEM: Design, development, and manufacture of heat transfer solutions (e.g., heat exchangers, cooling systems) and other mechanical aircraft accessories[12][13] - Heat Transfer MRO: MRO services for heat transfer components for airlines, cargo carriers, and the military, primarily through its FAA-certified subsidiary, Limco[12][14] - Aviation Component MRO: MRO services for APUs, landing gears, and other aircraft components, provided by its FAA-certified subsidiary, Piedmont[12][15] - Engine Component Overhaul: Overhaul and coating of jet engine parts like turbine vanes and blades, managed by its Turbochrome subsidiary[12][16] Consolidated Financial Statements Consolidated financial statements for 2023 reflect significant year-over-year growth, with increased assets and equity, reduced debt, strong revenue, a return to profitability, and positive operating cash flow Consolidated Balance Sheets As of December 31, 2023, total assets grew to $145.6 million, driven by increased cash, while total liabilities modestly increased and shareholders' equity substantially grew to $90.7 million Key Balance Sheet Items (in thousands USD) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $94,326 | $75,150 | | Cash and cash equivalents | $15,979 | $7,722 | | Inventory | $51,280 | $45,759 | | Total Assets | $145,577 | $126,651 | | Total Liabilities | $54,894 | $51,081 | | Long-term loans | $12,886 | $19,408 | | Total Shareholders' Equity | $90,683 | $75,570 | Consolidated Statements of Operations For FY 2023, total revenues increased 35% to $113.8 million, resulting in an operating income of $6.1 million and a net income from continued operations of $4.7 million or $0.51 per diluted share Key Income Statement Data (in thousands USD) | Account | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Total Revenue | $113,794 | $84,556 | $77,973 | | Revenue: Products | $35,241 | $25,460 | $25,870 | | Revenue: Services | $78,553 | $59,096 | $52,103 | | Gross Profit | $22,468 | $15,928 | $11,270 | | Operating Income (Loss) | $6,075 | ($1,775) | ($4,035) | | Net Income (Loss) from continued operation | $4,672 | ($1,562) | ($3,989) | Earnings Per Share (EPS) | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net income (loss) per share from continued operation - diluted | $0.51 | ($0.175) | Consolidated Statements of Cash Flows In 2023, TAT generated $2.3 million in net cash from operating activities, significantly improving from 2022, with cash from financing activities providing $10.2 million, leading to an $8.9 million increase in cash and cash equivalents Summary of Cash Flows (in thousands USD) | Activity | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,255 | ($4,867) | | Net cash used in investing activities | ($3,579) | ($16,120) | | Net cash provided by financing activities | $10,240 | $15,798 | | Net Increase (Decrease) in Cash | $8,916 | ($5,189) | - The primary source of cash from financing activities was $10.06 million in net proceeds from the issuance of common shares[26] Non-GAAP Financial Measures Reconciliation This section reconciles GAAP Net Income to Adjusted EBITDA, showing $11.1 million in Adjusted EBITDA for 2023, a significant increase from 2022, with key adjustments including depreciation and net financial expenses Reconciliation of Net Income to Adjusted EBITDA (in thousands USD) | Line Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Net income (loss) | $4,672 | ($1,562) | | Share in results of equity investment | ($503) | ($184) | | Taxes on income | $576 | $98 | | Financial expenses/(income), net | $1,330 | ($127) | | Depreciation and amortization | $4,902 | $3,878 | | Share based compensation | $159 | $218 | | Restructuring expenses | - | $1,715 | | Adjusted EBITDA | $11,136 | $4,036 | Forward-Looking Statements The report includes forward-looking statements subject to risks, including airline industry conditions, supply chain disruptions, and geopolitical instability, which could cause actual results to differ materially from expectations - The press release includes forward-looking statements that are subject to risks and uncertainties which could cause actual results to differ from current expectations[30] - Key risks identified include airline industry business conditions, supply chain disruptions, and the war and hostilities between Israel and Hamas and Israel and Hezbollah[30]