TAT Technologies Reports Full Year 2023 Results

Rhea-AI Summary

TAT Technologies Ltd. (NASDAQ: TATT) reported its audited results for the twelve months ended December 31, 2023, showing significant growth in total revenues, gross profit, adjusted EBITDA, and GAAP net profit. The company also reduced its net debt and raised funds through a private placement sale. CEO Mr. Igal Zamir expressed satisfaction with the performance, highlighting increased demand, improved margins, record backlog, and positive operational cash flow. The company remains optimistic for 2024 with growing backlog, new contracts, and operational initiatives.

Positive

• Total revenues increased by 35% to $113.8 million in 2023 compared to $84.6 million in 2022.
• Gross profit rose by 41% to $22.5 million in 2023 from $15.9 million in 2022.
• Adjusted EBITDA surged by 176% to $11.2 million in 2023 from $4 million in 2022.
• GAAP net profit from continued operations was $4.7 million in 2023 compared to a net loss of $1.6 million in 2022.
• Net debt decreased to $10.3 million in 2023 from $19.4 million in 2022.
• The company raised $10.1 million through a private placement sale in December 2023.
• CEO Mr. Igal Zamir highlighted increased demand, improved margins, record backlog, and positive operational cash flow in 2023.
• The company remains optimistic for 2024 with growing backlog, new contracts, and operational initiatives.

Negative

• None.

Insights

Financial Analyst

The substantial growth in revenue and gross profit reported by TAT Technologies indicates a robust recovery and expansion post-COVID, with a revenue increase of 35% and a gross profit increase of 41%. The improvement in gross margin from 18.8% to 19.7% is particularly noteworthy, as it reflects not only increased sales but also enhanced operational efficiency. Additionally, the leap in Adjusted EBITDA by 176% underscores a significant enhancement in the company's earnings quality and its ability to generate profit from its core operations.

The reduction in net debt from $19.4 million to $10.3 million, coupled with the successful private placement raising $10.1 million, suggests a strengthened balance sheet. This financial maneuvering provides TAT with greater flexibility and the potential to invest in further growth or to buffer against market volatility. The reported backlog exceeding $400 million offers visibility into future revenues, which is a positive signal for investors assessing the company's pipeline and long-term sustainability.

However, it is important to scrutinize the company's inventory levels in light of the mentioned supply chain challenges. An increase in inventory could tie up capital and potentially lead to impairment risks if demand fluctuates. Stakeholders should also be aware that non-GAAP financial measures, such as Adjusted EBITDA, exclude certain expenses that are real costs to the business. While these measures provide a focused view of operational performance, they should be considered alongside GAAP metrics for a complete financial analysis.

Market Research Analyst

The aerospace and defense industries are undergoing a period of significant transformation, driven by the recovery from the COVID-19 pandemic and evolving military and commercial needs. TAT Technologies' growth mode since Q4 of 2022, as articulated by CEO Igal Zamir, indicates a successful adaptation to the increased demand for aerospace products and services. The introduction of new service lines and operational ramp-up are strategic moves that seem to align well with industry trends, such as the increased focus on maintenance, repair and overhaul (MRO) services.

The mention of new APU MRO capabilities reflects a strategic investment in a niche yet crucial segment of the aerospace market, potentially positioning TAT as a key player in this space. The increase in backlog to over $400 million is a strong indicator of market confidence and provides a substantial cushion for future operations. However, the reliance on continued demand growth and the ability to maintain improved margins will be key factors in sustaining this positive trajectory. Investors should monitor industry trends and competitor movements to assess the likelihood of TAT maintaining its competitive edge.

Economist

The reported financial results of TAT Technologies are indicative of broader economic trends affecting the aerospace and defense sectors. The company's performance echoes the global recovery trajectory as economies rebound from the pandemic-induced downturn. The positive operational cash flow in the face of increased revenues and working capital requirements suggests a healthy liquidity position, which is critical in managing the cyclical nature of the aerospace industry.

However, the mention of supply chain challenges and the necessity to hold more inventory is reflective of the lingering disruptions in global trade. This could have implications for the company's cost structure and operational agility. The management's optimism for 2024, based on backlog and new contracts, must be weighed against the potential for economic headwinds, such as inflationary pressures and geopolitical tensions, which could impact both demand and supply chain stability. Stakeholders should consider these macroeconomic factors when evaluating the company's future performance prospects.

NETANYA, Israel, March 6, 2024 /PRNewswire/ -- TAT Technologies Ltd. (NASDAQ: TATT) ("TAT" or the "Company"), a leading provider of products and services to the commercial and military aerospace and ground defense industries, reported today its audited results for the twelve months ended December 31, 2023.

Key Financial Highlights:

• Total revenues for the twelve months ended December 31, 2023, were $113.8 million compared to $84.6 million for the twelve months ended December 31, 2022, an increase of 35%.
• Gross profit for the twelve months ended December 31, 2023, were $22.5 million (19.7% of revenues) compared to $15.9 million (18.8% of revenues) for the twelve months ended December 31, 2022, an increase of 41%.
• Adjusted EBITDA for the twelve months ended December 31, 2023, was $11.2 million compared to $4 million for the twelve months ended December 31, 2022, an increase of 176%.
• GAAP net profit from continued operations for the twelve months ended December 31, 2023, was $4.7 million ($0.51 per share on a fully diluted basis) compared to GAAP net loss from continued operations of $1.6 million (net profit of $0.1 million without a onetime impact of our restructuring plan) ($0.175 loss per share on a fully diluted basis) for the twelve months ended December 31, 2022.
• Net debt as of December 31, 2023, was $10.3 million compared to net debt of $19.4 million as of December 31, 2022.
• In December 2023 the Company raised $10.1 million (net from all related expenses) in a private placement sale to Israelis  institutional investors.

Mr. Igal Zamir, CEO and President of TAT Technologies stated "We are very pleased to present the results of 2023. Since Q4 of 2022 we are in constant growth mode. This as a result of the increasing demand to our products and services as well as our new line of services and operation ramp up. The demand continues to grow while our industry is ramping up from the COVID crisis. During 2023 we managed to improve our margins leading to a record year in all relevant aspects of revenue, gross margin and EBITDA. We saw our backlog increase to a record number of over $400 million. We are pleased to see that the strategic shift the Company made over the last 3 years is starting to bear fruit, enabling the Company to compete and win large strategic deals and enjoy improved margin. We ended 2023 with positive operational cash flow despite the revenue increase and the need for working capital to support the growth. The industry supply chain challenges force us to hold much more inventory than what we used to pre COVID".

Mr Zamir continue: "We remain optimistic for 2024 as we see our increase in backlog and its coverage for the year, new contracts that we believe will yield additional revenue, and the large potential from the new APU MRO capabilities. Various operational initiatives keep us optimistic that our margins will continue to improve." 

Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with GAAP, the Company also presents a Non-GAAP presentation of Adjusted EBITDA. The adjustments to the Company's GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company's underlying operational results, trends and performance.  Adjusted EBITDA is calculated as net income before the Company's share in results and sale of equity investment of affiliated companies, share-based compensation, taxes on income, financial (expenses) income, net, depreciation and amortization, inventory impairment from exit and dismissal activity and customers relationship write off. Non-GAAP Adjusted EBITDA, however, should not be considered as alternatives to net income and operating income for the period and may not be indicative of the historic operating results of the Company; nor they are meant to be predictive of potential future results.  Non-GAAP Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. See reconciliation of GAAP Adjusted EBITDA below.

About TAT Technologies LTD

TAT Technologies Ltd. is a leading provider of services and products to the commercial and military aerospace and ground defense industries. TAT operates under four segments: (i) Original equipment manufacturing ("OEM") of heat transfer solutions and aviation accessories through its Gedera facility; (ii) MRO services for heat transfer components and OEM of heat transfer solutions through its Limco subsidiary; (iii) MRO services for aviation components through its Piedmont subsidiary; and (iv) Overhaul and coating of jet engine components through its Turbochrome subsidiary. TAT controlling shareholders is the FIMI Private Equity Fund.

TAT's activities in the area of OEM of heat transfer solutions and aviation accessories primarily include the design, development and manufacture of (i) broad range of heat transfer solutions, such as pre-coolers heat exchangers and oil/fuel hydraulic heat exchangers, used in mechanical and electronic systems on board commercial, military and business aircraft; (ii) environmental control and power electronics cooling systems installed on board aircraft in and ground applications; and (iii) a variety of other mechanical aircraft accessories and systems such as pumps, valves, and turbine power units.

TAT's activities in MRO Services for heat transfer components and OEM of heat transfer solutions primarily include the MRO of heat transfer components and to a lesser extent, the manufacturing of certain heat transfer solutions. TAT's Limco subsidiary operates an FAA-certified repair station, which provides heat transfer MRO services for airlines, air cargo carriers, maintenance service centers and the military.

TAT's activities in MRO services for aviation components include the MRO of APUs, landing gears and other aircraft components. TAT's Piedmont subsidiary operates an FAA-certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

TAT's activities in the area of overhaul and coating of jet engine components includes the overhaul and coating of jet engine components, including turbine vanes and blades, fan blades, variable inlet guide vanes and afterburner flaps.

 

 

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S dollars in thousands, except share data
			December 31,
			2023			2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$       15,979			$       7,722
Accounts receivable, net of allowance for credit losses of $345 and $527 thousand    as of December 31, 2023 and December 31, 2022 respectively			20,009			15,622
Restricted deposit			661			-
Other current assets and prepaid expenses			6,397			6,047
Inventory			51,280			45,759
Total current assets			94,326			75,150
NON-CURRENT ASSETS:
Restricted deposit			302			304
Investment in affiliates			2,168			1,665
Funds in respect of employee rights upon retirement			664			780
Deferred income taxes			994			1,229
Property, plant and equipment, net			42,554			43,423
Operating lease right of use assets			2,746			2,477
Intangible assets, net			1,823			1,623
Total non-current assets			51,251			51,501
Total assets			$    145,577			$     126,651

 

 

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS  U.S dollars in thousands, except share data
			December 31,
			2023		2022
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term loans			$          2,200		$        1,876
Credit line from bank			12,138		6,101
Accounts payable			9,988		10,233
Accrued expenses and other			13,952		9,876
Operating lease liabilities			1,033		904
Total current liabilities			39,311		28,990
NON-CURRENT LIABILITIES:
Long-term loans			12,886		19,408
Liability in respect of employee rights upon retirement			1,000		1,148
Operating lease liabilities			1,697		1,535
Total non-current liabilities			15,583		22,091
COMMITMENTS AND CONTINGENCIES (NOTE 15)
Total liabilities			54,894		51,081
EQUITY:
Ordinary shares of NIS 0.9 par value: Authorized: 13,000,000 shares at December 31, 2023 and at December 31, 2022; Issued: 10,377,085 and 9,186,019 shares at December 31, 2023 and at December 31, 2022 respectively; Outstanding: 10,102,612 and 8,911,546 shares at December 31, 2023 and at December 31, 2022 respectively			3,140		2,842
Additional paid-in capital			76,335		66,245
Treasury shares, at cost, 274,473 shares at December 31, 2023 and 2022			(2,088)		(2,088)
Accumulated other comprehensive income (loss)			27		(26)
Retained earnings			13,269		8,597
Total shareholders' equity			90,683		75,570
Total liabilities and shareholders' equity			145,577		$     126,651

 

 

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES    CONSOLIDATED STATEMENTS OF OPERATIONS
U.S dollars in thousands
		Year ended December 31,
				2023	2022				2021
Revenue:
Products				$    35,241		$    25,460				$   25,870
Services				78,553		59,096				52,103
				113,794		84,556				77,973
Cost of revenue, net:
Products				30,517		21,631				23,761
Services				60,809		46,997				42,942
				91,326		68,628				66,703
Gross profit				22,468		15,928				11,270
Operating expenses:
Research and development, net				715		479				517
Selling and marketing, net				5,523		5,629				5,147
General and administrative, net				10,588		9,970				8,354
Other (income) expenses				(433)		(90)				(468)
Restructuring expenses, net				-		1,715				1,755
				16,393		17,703				15,305
Operating income (loss)				6,075		(1,775)				(4,035)
Interest expenses,net				(1,683)		(902)				(250)
Other financial income (expenses), net				353		1,029				(290)
Income profit (loss) before taxes on income (tax benefit)				4,745		(1,648)				(4,575)
Taxes on income (tax benefit)				576		98				(662)
Loss before share of equity investment				4,169		(1,746)				(3,913)
Share in profit (losses) of equity investment of affiliated companies				503		184				(76)
Net income (loss) from continued operation				$    4,672		$    (1,562)				$    (3,989)

 

 

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
U.S dollars in thousands
			Year ended December 31,
			2023		2022	2021
Net income (loss) from discontinued operation			-		-	$  427
Net income (loss)			$    4,672		$   (1,562)	$   (3,562)
Net income (loss) per share from continued operation —basic			$     0.52		$    (0.175)	$    (0.45)
Net income (loss) per share from continued operation —diluted			$     0.51		$    (0.175)	$    (0.45)
Net income (loss) per share from discontinued operation - basic and diluted			-		-	$    0.05
Net income (loss) per share — basic			$     0.52		$    (0.175)	$    (0.4)
Net income (loss) per share — diluted			$     0.51		$    (0.175)	$    (0.4)
Weighted average number of shares outstanding:			8,961,689		8,911,546	8,874,696
Basic  Diluted			9,084,022		8,911,546	8,874,696
			Year ended December 31,
			2023		2022	2021
Net loss)			$     4,672		$     (1,562)	$     (3,562)
Other comprehensive income (loss), net
Net unrealized gains (losses) from derivatives			53		(89)	(76)
Reclassification adjustments for loss (gains) from derivatives included in net income			-		30	(19)
Total other comprehensive income (loss)			53		$      (59)	$      (95)
Total comprehensive income (loss)			$    4,725		$      (1,621)	$      (3,657)

 

 

 

TAT TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
U.S dollars in thousands, except share data
		Ordinary shares
		Number of shares issued			Amount		Additional paid-in capital		Accumulated other comprehensive income (loss)		Treasury shares		Retained earnings				Total equity
BALANCE AT DECEMBER 31, 2020		9,149,169			$            2,809		$       65,711		$            128		$            (2,088)		13,721					$            80,281
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2020:
Comprehensive loss		-			-		-		(95)		-		(3,562)					(3,657)
Share based compensation		-			-		160		-		-		-					160
BALANCE AT DECEMBER 31, 2021		9,149,169			$            2,809		$       65,871		$            33		$            (2,088)		10,159					$            76,784
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2021:
Comprehensive loss		-			-		-		(59)		-		(1,562)					(1,621)
Exercise of Options		36,850			33		156		-		-		-					189
Share based compensation		-			-		218		-		-		-					218
BALANCE AT DECEMBER 31, 2022		9,186,019			$            2,842		$       66,245		$            (26)		$            (2,088)		$            8,597					$            75,570
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2022:
Comprehensive income									53				4,672					4,725
Exercise of Options		32,466			8		157											165
Issuance of common shares net of issuance costs of $141  thousands		1,158,600			290		9,774											10,064
Share based compensation							159											159
BALANCE AT DECEMBER 31, 2023		10,377,085			$            3,140		$     76,335		$              27		$            (2,088)		13,269					90,683

 

 

 

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
		Year ended December 31,
		2023		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continued operations		$     4,672		$   (1,562)		$   (3,989)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		4,710		3,706		4,881
Loss (gain) from change in fair value of derivatives		(9)		8		(19)
Change in funds in respect of employee rights upon retirement		116		377		76
Change in operating right of use asset and operating leasing liability		22		(82)		(73)
Lease modification		-		-		(1,315)
Non cash financial expenses		(172)		(902)		8
Increase (decrease) in restructuring plan provision		(126)		(467)		657
change in allowance for credit losses		(182)		138		248
Share in results of affiliated companies		(503)		(184)		76
Share based compensation		159		218		160
Liability in respect of employee rights upon retirement		(148)		(356)		94
Impairment of fixed assets		-		-		1,820
Capital gain from sale of property, plant and equipment		(530)		(90)		(468)
Deferred income taxes, net		235		23		(686)
Government loan forgiveness		-		-		(1,442)
Changes in operating assets and liabilities:
increase in trade accounts receivable		(4,205)		(2,659)		(2,934)
increase in other current assets and prepaid expenses		(341)		(1,836)		(1,035)
increase in inventory		(5,400)		(5,069)		(681)
Increase (decrease) in trade accounts payable		(245)		1,143		2,571
Increase (decrease) in accrued expenses and other		4,202		2,727		(218)
Net cash provided by (used in) operating activities from continued operation		$      2,255		$     (4,867)		$     (2,269)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment		2,002		93		1,163
Purchase of property and equipment		(5,102)		(16,213)		(16,247)
Purchase of intangible assets		(479)		-		(555)
Net cash used in investing activities from continued operations		$  (3,579)		$   (16,120)		$   (15,639)

 

 

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
			Year ended December 31,
			2023			2022			2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term loans			(1,701)			(1,071)			-
Short-term credit received from banks			1,000			-			3,000
Proceeds from long-term loans received			712			16,680			3,042
Proceeds from issuance of common shares, net			10,064			-			-
Exercise of options			165			189			-
Net cash provided by financing activities from continued operations			$10,240			$     15,798			$     6,042
CASH FLOWS FROM DISCONTINUED ACTIVITIES:
Net cash provided by operating activities			-			-			777
Net cash provided by (used in) discontinued activities			-			-			$       777
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH EQUIVALENTS			8,916			(5,189)			(11,089)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH EQUIVALENTS AT BEGINNING OF YEAR			8,026			13,215			24,304
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH EQUIVALENTS AT END OF YEAR			16,942			8,026			13,215
SUPPLEMENTARY INFORMATION ON INVESTING ACTIVITIES NOT INVOLVING CASH FLOW:
Purchase of property, plant and equipment on credit		$                -				$           196				$           199
Additions of operating lease right-of-use assets and operating lease liabilities		$        1,345				$           318				$          399
Reclassification of inventory to property, plant and equipment		$             68				$           284				$          829
Capital contribution to equity method investee		$               -				$          787				$                -
Supplemental disclosure of cash flow information:
Interest paid		$      (1,438)				$       (796)				$          (251)
Income taxes received (paid), net		-                $				$              -				$             (3)

 

 

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (NON-GAAP)  (UNAUDITED)
(In thousands)
	December 31,		December 31,
	2023		2022
Net income (loss)	$              4,672		$                   (1,562)
Adjustments:
Share in results of equity investment of affiliated companies	(503)		(184)
Taxes on income (tax benefit)	576		98
Financial expenses/ (income), net	1,330		(127)
Depreciation and amortization	4,902		3,878
Share base compensation	159		218
Restructuring expenses	-		1,715
Adjusted EBITDA	11,136		4,036

 

Safe Harbor for Forward-Looking Statements

This press release contains forward-looking statements which include, without limitation, statements regarding possible or assumed future operation results. These statements are hereby identified as "forward-looking statements" for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause our results to differ materially from management's current expectations. Actual results and performance can also be influenced by other risks that we face in running our operations including, but are not limited to, general business conditions in the airline industry, changes in demand for our services and products, the timing and amount or cancellation of orders, the price and continuity of supply of component parts used in our operations, the war and hostilities between Israel and Hamas and Israel and Hezbollah, and other risks detailed from time to time in the Company's filings with the Securities Exchange Commission, including, its annual report on form 20-F and its periodic reports on form 6-K. These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statement, except as required by law.

For more information of TAT Technologies Ltd., please visit our web-site:  www.tat-technologies.com

 

Contact:

Mr. Ehud Ben-Yair
Chief Financial Officer
(Principal Accounting Officer)
Tel: 972-8-862-8503
ehudb@tat-technologies.com

 

View original content:https://www.prnewswire.com/news-releases/tat-technologies-reports-full-year-2023-results-302082136.html

SOURCE TAT Technologies Ltd.

FAQ

What were TAT Technologies Ltd.'s total revenues for the twelve months ended December 31, 2023?

TAT Technologies Ltd.'s total revenues for the twelve months ended December 31, 2023, were $113.8 million.

How much did TAT Technologies Ltd.'s gross profit increase in 2023?

TAT Technologies Ltd.'s gross profit increased by 41% to $22.5 million in 2023 from $15.9 million in 2022.

What was the percentage increase in TAT Technologies Ltd.'s adjusted EBITDA for the twelve months ended December 31, 2023?

TAT Technologies Ltd.'s adjusted EBITDA surged by 176% to $11.2 million in 2023 from $4 million in 2022.

How much did TAT Technologies Ltd.'s net debt decrease by as of December 31, 2023?

TAT Technologies Ltd.'s net debt decreased to $10.3 million as of December 31, 2023, from $19.4 million as of December 31, 2022.

What amount did TAT Technologies Ltd. raise in a private placement sale in December 2023?

TAT Technologies Ltd. raised $10.1 million (net from all related expenses) in a private placement sale to Israelis institutional investors in December 2023.