TAT Technologies Ltd.

Let's get started. Good morning, everyone, and thank you for joining the TAT Technologies first quarter 2026 earnings conference call. This call is being recorded. My name is Matt Chesler with FNKIR, a U.S.-based investor relations firm supporting Iran Younger, TAT's head of investor relations. Joining me today are Egal Zamir, TAT's president and CEO, and Ehud Benyer, TAT's CFO. Before we begin, I would like to remind you that certain statements made on this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These statements are based on current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially. Additional information regarding these risks and uncertainties can be found in our filings with the SEC, including our most recent form 20F. TAT assumes no obligation to update forward-looking statements except as required by law. Investors are cautioned not to place undue reliance on these forward-looking statements. During this call, we may also discuss certain non-GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are available in our earnings release issued earlier today and in our form 6K filed with the SEC. With all of that, I'd like to turn the call over to Egal.

Thank you, Matt. Good morning, everybody, and thanks for joining us. We appreciate your continuous interest in TAT. TAT Technologies entered 2026 with a robust operational foundation, and the record customer demand in the first quarter reinforced our confidence in the trajectory we are on. Demand for our services has never been stronger, and the value of our long-term agreement and backlog reached an all-time high, going to approximately $580 million at the end of Q1, reflecting new contracts win and strong customer intake in MRO. We continue to make significant progress on our organizational infrastructure and operational plans for margin expansion. M&A remains key priority. We establish a team with direct industry relationships, and operating experience required to source and execute the right transactions in this market. We are not in a rush. We are building towards the right outcomes. In parallel, during Q1, we experienced supply chain disruptions, leading to delayed completing open work orders and deliveries. As a result, our revenue slightly declined year over year, not fully utilizing our growing backlog. We expect this obstacle to be resolved in the next few months, allowing TAT the growth trajectory. I will walk you through what drove the quarter, what remains fully intact in the business, and how we are thinking about the balance of 2020. EOD will then take you to the financial details. Let me begin with the backlog, because it's the most important signal that we can give you about where the business stands today. Backlog and long-term agreements increased to $580 million as of March 31st, from $550 million at the end of 2025. This is a record for TAT and mostly related to new contract wins. When it comes to ongoing MRO demand, to give you a sense of the magnitude of the timing dynamics, we ended the quarter with approximately $15.5 million of APU and lending gears open work orders at our shops. We estimate that the material portion of this work, which was near completion but could not be released due to missing components, would have been shipped and recognized in the quarter if part has been available. Switching to the first quarter results. So turning into the quarter itself, we have a slight decline in revenue year over year. As explained, this softness reflects constraints in components availability from some key OEM partners that delay the completion and the release of units in APUs and lending operations. The APU components in question are not technically complex. They are standard commodity-level parts, but until they arrive, units cannot be released. The associated work remains under contract, volume, or shifted into future periods rather than being lost. The demand is there, the contracts are there, the capacity and workforce is there, and our confidence in a full-year revenue and EBITDA growth remains intact. Erd will walk you through the financial details in a moment, including margin performance and cash flow, both of which tell the more complete story about the health of the business. Product line commentary. Let me briefly walk you through the performance across our service line. In heat exchangers, we continue to see growing demand. Q1 of 2025 revenue reflected the huge effort to close late orders from 2024. The following quarters of 25 and 26 reflected the ongoing demand for both our OEM and MRO customers. Even against this higher base of Q125, we look into 26 and are seeing increasing orders in both OEMs and MRO markets. This business benefits from more than 60 years of OEM and MRO experience, long-term supply relationship, and diversified commercial and defense customer base. It continues to generate consistent recurring demand and remains the foundation of the platform. In the heat exchanger business, we achieved an operational milestone this quarter, delivering more than 97% of customers' orders on time. In APU, intake was at record level at this quarter. We won business and added new customers. We are seeing increased flow of newer engine platforms, and we exited the quarter with more contracted works than we entered, achieving a higher level of book-to-build than usual. Our customer relationships are strong. We continue to support and engage customers even when the final delivery is delayed. We are in an active, ongoing dialogue with our supply partners and have seen improvement in parts flow over the recent months. The business is fully ready to convert volume the moment parts will flow and we expect it to. In lending gear, component availability is a limiting factor and supply situation in this business is at an earlier stage of resolution than what we see on the APU. Once again, our market position is unchanged. Customer demand has not changed. What I can tell you is that we are not waiting for this to resolve itself. We have ongoing dialogue with our OEM partners and we have established new processes with them to increase transparency and drive towards resolution. The level of engagement and the steps being taken give us more visibility into the path forward than what we had at the beginning of the year. LendingGear is a smaller portion of the overall business, yet we will continue to press for resolution with the same urgency that we have applied from the beginning. Finally, trading and leasing deliver 29% year-over-year growth, strong results for a business with inherent variability from quarter to quarter. The timing of assets transactions don't follow a straight line, and the demand picture in this business continues to be very high. Q4 of 2025 was a record quarter for this business and our ability to complete certain engines exchanges in Q1 was limited by the same parts availability constraints affecting the MRO operations. The underlying demand picture remains strong and we expect the business to be a meaningful contribution to our consolidated results. Switching a little bit to the industry, stepping back from the quarter, what we hear from our customers and seeing our own order flow continues to point to an encouraging direction. Demand for MRO services remains strong, and the need to maintain and extend service life of existing fleet is there. That is the environment TAT operates in, and it continues to support our long-term opportunity. The supply chain dynamics that affected our first quarter is an industry-wide phenomenon. Major OEMs and operators across the aerospace ecosystem have commented publicly on similar pressure in the recent weeks. As we shared in the past, in order to overcome it, TAT maintains a meaningful strategic inventory of critical APU parts. The recent shortage, which started in Q4 of 2025, is in standard commodity-level components, which are required in all APU final assembly after the overall. While we have seen improvement in part flow over the recent months, and while part sources express their confidence in their recovery, the broader environment remains dynamic, and we are not in a position to predict the precise pace of normalization. Switching to M&As, M&A remains a key priority for TAT, and our progress on this front is meaningful. Over the past nine months, we have invested in building a team with direct industry relationships and operational experience required to source and execute transactions in this market. We brought a dedicated corporate development leadership with careers spent in aerospace. We upgraded the board with directors who bring scaled company operating backgrounds and add further connectivity into the broader aerospace ecosystem. We developed our internal systems and procedures to enable us to close M&A opportunities and integrate them into our business. That team is now actively engaged directly with potential acquisition targets, with private equity firms that own assets in our addressable market, and with a network of advisors and bankers who brings additional deal flow. As a result, our pipeline is expanded. We are evaluating opportunities, which is a notable change from where we were six months ago. Our focus continues to be on active bolt-on acquisitions that strategically fit into our platform, expand our addressable market, and deepen the value we deliver to customers. As we look ahead towards the balance of 2026, our confidence rest on three key factors. First, demand is the strongest it has been ever for TAT. Our record backlog of approximately $580 million reflects sustained engagement across all four of our service lines and the pipeline of new business continues to build. Second, our customer relationships remain fully intact and our customers have continued to work with us in partnership throughout this period. TAT itself is a stronger company than it was at the beginning of 2025, operationally, institutionally, and strategically. The investments we have made in the team, our processes, and our balance sheet position us to convert demand into growth as the supply environment normalizes. We are moving forward with conviction. Indications from our suppliers are pointing close to normalization. Based on our visibility and what we are hearing directly from our customer partners, we continue to believe that 2026 will be a year of meaningful growth in both revenue and EBITDA. The supply chain timing dynamics we navigated in Q1 does not change that view. When parts flow, we are ready. And the backlog tells you exactly what is waiting on the other side. With that, I will turn the call over to Ehud for more detailed revenue on the financial results.

Thank you, Riyad. Good morning, everyone. Good afternoon to those that are on the other side of the ocean. As I walked you through the first quarter financial details, the headline is straightforward. While the supply chain disruption affected the timing of revenue recognition during this period, we expanded gross margin year-over-year, generated positive operating cash flow, and ended the quarter with a balance sheet that continues to support both organic growth and our M&A priorities. First quarter revenue was $41.1 million compared to $42.1 million in the first quarter of 2025. As Igor described, the year-over-year decline reflected industry-wide aerospace supply chain timing, not demand. The increase in our WIP inventory and parts is a reflection of the amount of work that could be recognized at the end of the quarter. Gross profit increased by 0.8% year-over-year to $10 million. Gross margin expanded approximately 80 basis points to 24.4 compared to 23.6 in the first quarter of 2025. This margin expansion reflects the operational discipline and structural progress we have made across the businesses, including improvement in our cost structure and operating efficiencies. and continue to focus on cost management across our operations. As we move forward towards the year, we are monitoring expenses very close until revenue will start ramping up again. This is without harming our operational capabilities to ramp production when missing parts arise. Operating income for the quarter was $3 million or 7.3% of revenue compared to $4.2 million or 9.9% of revenue in the first quarter of 2025. While gross profit increased year over year, operating expenses were higher in the period. This increase reflects our planned investment in next generation R&D, the strengthening of our organizational structure and executive teams to pursue strategic M&A, strengthening the strategic sales team, and the enhancement of our finance infrastructure to support SOX compliance, ongoing regulatory demands, and expansions. Net income was $3.4 million compared to $3.8 million in the first quarter of 2025. Diluted earnings per share were $0.26 compared to $0.34 in the first quarter of 2025. Net interest income in Q1 of 2026 was $39,000, compared to net expenses of $58,000 in the parallel quarter. This is mainly due to a lower level of debt, offset by the impact of the Israeli shekel against the U.S. dollar exchange rate, which impacted some of our long-term loans. Taxes on income were $0.1 million for the three months ended March 31, 2026, compared to $0.6 million for the same period in 2025. The decrease finally reflects lower taxable income and the impact of jurisdictional mix during the period. I want to remind the audience again that while taxes expenses are booked, these are mainly accounting movements between deferred tax assets and liability. The new bill allowed us to defer tax payment in the United States to the end of 2026, while previously expected to start in Q1 of 2026. Also in Israel, we have enough carry forward losses that will take us through the end of 2026. Adjusted EBITDA was $4.9 million or 11.8% of revenue compared to $5.7 million or 13.6% of revenue in the first quarter of 2025. Moving to the cash flow, cash flow from operating activities was positive at $1.9 million in the first quarter compared to negative of $5 million in the first quarter of 2025. Turning to the balance sheet, we ended the quarter with $51.2 million in cash and $11.2 million in total debt, resulting in a debt-to-EBITDA ratio of 0.45, calculated over the last four quarters of EBITDA. Shareholder's equity stood at $180.5 million, resulting in an equity-to-balance ratio of 77.5%. Our strong financial position gives us meaningful flexibility to continue investing in organic growth opportunities and advance the M&A pipeline. To summarize, the volume deferred during the period is contracted and supported by a record backlog. Gross margin continues to expand, operating cash flow remains positive, and our balance sheet is well positioned to support our growth strategy. While supply chain constraints affected the timing of revenue recognition in the quarter, the underlying demand remains intact. And we are well positioned to realize this contracted volume as supply conditions normalized. And with that, I will return the call back to Igal.

Thank you, Ayod. Before we move to questions, I would like to leave you with a few clear takeaways from today. Customer demand at TAT is at record level, with our backlog growing to approximately $580 million, the majority of which reflects new business swings. The supply chain disruptions that affected our quarter is bounded and temporary. The deferred volume is contracted business that we expect to convert when supply conditions will allow. And TAT itself is a more capable company than what we were a year ago. with the operational, institutional, and strategic infrastructure to continue advancing our growth priorities, including MA. I want to thank our employees around the world. Their professionalism, particularly in the quarter and required hand-on coordination with our customers and suppliers is what makes our continued progress possible. With that, I will turn over to Matt for questions.

Thank you, Egal. We're now going to open up to the Q&A session. From Zoom, there are two ways you can participate. The first is to raise your hand icon, to use the raise your hand icon, which is at the bottom of the screen. Clicking it will alert us that you would like to ask a live question, and we'll place you in queue and call on you. You will remain on mute until that takes place. The second way to participate in Q&A is to use the Q&A widget, which allows you to type in your question. We will take questions from there as well. If we run into a time constraint, someone from the IR team will follow up with you, and your question will be answered as soon as practical. With that, let's pause for a moment to build a queue. The first question is from Ben Cleave at Benchmark. Ben, please go ahead.

All right, thanks for taking my questions. First question around the backlog. It's great to hear really a steadfast belief here that the supply chain problems are not having an impact on your backlog. And I want to lean into this. Clearly, your backlog ramped considerably in the first quarter. You had a couple of really nice wins. And I'm wondering if below those really nice wins, if there was any slippage either in the first quarter or the second quarter to date from any of these customers that have been negatively impacted by the parts dynamic or perhaps customers that have had, you know, more macro challenges here around, you know, the price of jet fuel, you know, any of the low-cost commercial providers, anything like that. So has there been any slippage out of backlog here, again, either in the first quarter or second quarter to date?

So let me address – I'll try to address the question in several ways. First of all, maybe just to expand on what we just covered in the opening remarks. When you think, when you look, I mentioned earlier that we finished the quarter with $15.5 million of APUs and lending in open work quarters. And we believe that a material portion of it should have been released and recognized during the quarter if the parts would have been there. And also, if you look, so that's kind of a reflection of the, you can estimate what could have been the quarter. We're entering the quarter, and during the quarter, we were expecting Q1 to be, to continue the trajectory of the growth that we had in the last few years. So from a demand perspective, we were expecting and hoping for a very strong quarter. The second way to look at the, And where we were at the end of the quarter is looking at the balance sheet, and I would mention something about it. If you look at the inventory, the substantial inventory increase that we had during Q1, a big portion of this inventory increase that you see on the balance sheet relates to the open work order, the value of the work that was done into the open work order is another indicator for how much could have been added. As a general thing to the third question that I believe that you asked, As a general saying, the demand is there and we see the build-up of intake. We don't have, so far we don't see any indications. You know there are always exceptions here and there, but as a general saying, we don't see any impact on intake due to the environment. We actually see continuing strong momentum on intake.

Okay, that's very helpful. Thank you. And then one other one for me, and then I'll get back into you, is around your expectations, not necessarily for the timing of the parts, your access to the parts, but kind of the progression of getting from where you are today to when you'll have full inventory. Are you expecting... kind of a one-time event where these parts on locks, especially on the APU side, all come in at once? Or do you think this is going to be kind of a trickling, you know, over several months or several quarters for you to get to the full inventory position that you need?

So, again, I will split the answer into two segments. First of all, let's start with the APU, which is the vast majority of the opportunity that we have ahead of us in terms of SketchUp. So, first of all, we did a few things. While we are working very, very actively with our OEM partners to resolve the power situation, We also have extensive efforts to bring alternative solutions and to make sure that we have the parts not just from the OEM agreements that we have, and it's contributing to the ramp up. The OEM partners themselves are reporting on substantial improvement on their side. But in the same time, they have a huge backlog, not just for TNT. We are only one of many, many customers that they have, and the problems affect everybody. And therefore, I believe that back to normal will take a couple of months. I don't expect any 0-1 game where all of a sudden next week or whatever, we see all the parts in one day. It will be a process. they are optimistic that the root cause of the problem is behind them and that they are on a recovery trajectory. We do see a substantial increase in the last few weeks in delivery, but it will take a few months.

Okay. Very good. That makes sense. Well, I appreciate you taking my questions. Best of luck here navigating this, and I'll get back to you.

Thank you. Thank you.

Thanks, Ben. The next question is going to be from Jonathan Siegman from Siegel. Jonathan, please go ahead.

Good morning. Thanks for taking my question. Maybe just to talk a little bit more about the part shortage. Is there any risk that given these OEM suppliers who are having some problems, delivering these parts are prioritizing their own internal use of these parts, and you as a third-party partner are lower priority? Just maybe if you could ask that concern. I would appreciate it.

I would say, again, I need to spit the answer on the own appeal. There is zero risk. There is no risk. And as we stated in the comments at the beginning, When it comes to the APU, you have the main engine components, all the, you know, the core of the engine components, the impeller, the big parts and whatever. We have plenty of them in stock. We have published a meaningful strategic inventory a year ago. So when an engine comes and we need to do the work, we have all the parts in-house. This is why we have so much... that are very close to completion when the overall was done. But the challenge that we have today is on the all kinds of commodity level parts without going into too many details that you need in order to reassemble the engine after the overall was done. There is no conflict between us and the OEM production. So I don't see any risk there. On the landing gear it's a different story because the landing gear, the OEM itself that is producing the main landing gear part is supplying to us and also supplying to our to their own shop. So in theory, there can be a conflict. We are working very actively with them and trying to verify that we are going to make sure that the allocation is done according to the customer needs and not just based on prioritizing the OEM versus the partners. So there is more risk there, but it's a much, much smaller portion of the problem.

Thank you. And your freight customers, sometimes they can be the most sensitive to changing macro conditions. Any color on what they may be saying or thinking at the current time? Thank you very much.

I would say just as at least one of our largest freight customers is suffering from the same OEM, from the same part issue on another OEM. on their needs, unrelated to what we do for them. And so we are, you know, it's a known problem in the industry, among the industry players, and everybody is affected. So not only that, we get good collaboration, and actually our customers are part of the solution in the sense that they are helping us to put pressure to resolve the problem.

Thank you.

And also, we work very closely with our customers to make sure that we take care of the needs. If no customer, we'll get stuck without spare units. And, you know, very openly and very engaging with our customers. So it looks like we are managing it properly, and we are on the right direction in terms of the trajectory.

Thank you. Thank you. Next on to Josh Sullivan from Jones Trading who has submitted a question. Josh is asking whether the supply chain disruptions opened up any conversation around vertical integration or mergers and acquisitions.

I think it's a good question. I would say in general there is a potential here. and we're looking at several ideas, but I must say that currently there's nothing on the table or something that will mature in the next quarter or two.

He's also asking, so he's saying, I know your visibility points to a recovery in the latter half of the year. However, if the supply chain disruptions were to continue to linger, when does the OEM issue become the operational issue for the flying industry.

Matt, I apologize. I couldn't hear the question. Can you please repeat?

I think Josh is asking you to look at your crystal ball. No, he's saying, you know, I know your visibility points to a recovery in the latter half of the year. However, if the supply chain disruption were to continue to linger longer, you know, when does the OEM issue become more of an operational issue or an industry-wide issue? issue for the flying ecosystem.

Just again, I'm sorry, I could barely hear the question. Let me try and address what I believe was the question. We are already, as we stated before, we are in an active recovery mode. We see more parts coming and we feel that the direction is the right direction. So the combination of what we actually

Matt, I think Yigal has some connectivity issues. Let me try to answer this question. I think at the end of the day, again, I want to split the answer to two, to the APU and the landing gear. On the APU, I don't see any risk like this. We are seeing it recovering, and we believe that, as we said, it will end by the second half of the year. Currently, we don't see any risk to the whole industry. continue flying or something like this. On the landing, it's a good question. Currently, the situation is not that complicated.

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We don't see the supply chain getting better. As Igor said, we're working very close with the OEM, trying to solve the issue, trying to find the creative ways to solve them, but there is a concern. There is a concern. There are some parts of the country we don't get any complete answer from the OEM, and it may evolve to maybe a larger problem, but Not right now. Again, keep monitoring the situation and understand what's going on and solve the issues.

Okay. Thank you for that. Let's move on to some questions that have been submitted by investors in advance and during the call. So thinking more broadly in light of the implications of the conflict in the Middle East, are you seeing In Iran, are you seeing any delays in securing new APU maintenance contracts for the 131 and 500 models?

No, actually, as we already demonstrated during the quarter, we are on a very strong trajectory on securing new business, including the 500s. and we published a substantial win during the first quarter, and we continue to work to expand. So the conflict by itself did not affect the ability to close more business.

Okay. Next question. Has TAT Israel experienced any increased activity as a result of the Israeli Air Force's operations during the current conflict?

So I think in general, on the military side, on one hand, we definitely see an increase in demand due to the global unrest. And in parallel, some of the capabilities that we have and services that we provide are focused on the fleet that is currently in use in the Middle East, both by Israel and Iran. and the U.S. Air Force, and so I think that there is more focus on keeping the aircraft flying than taking them to MRO cycles. So it's kind of, let's call it a counter trend. On one hand, there is a growing demand. On the other hand, in some short term, we may experience here and there some delays. All in all, it's a positive trend. By the way, when I'm talking about delays, if an aircraft is flying in operations in the Middle East, the Air Force will try to push the scheduled maintenance until the conflict is over. So you may see less impact coming on the immediate term. And on the other hand, When you look at it more mid-term and long-term, the overall demand is growing, and the positive impact, the overall blended impact of these two trends is positive.

Okay. Here's a financial question. Do you still expect gross margin expansion of several percentage points over the next 12 months, despite the current challenges? Yes.

I don't want to relate to the numbers or the amount of percentage, but I can say definitely that the gross margin is going to improve in 2026, given everything that we mentioned before. We're working on our operational efficiencies. We're monitoring expenses very closely this year. We have our own initiative that we are executing. I commented on this in several earning calls in the past. Every quarter we are completing more and more and more cost efficiencies initiatives and we see them in the results. You can also see at this quarter that even though the revenue was lower compared to previous quarters, we managed to keep a very high level of gross margin and even improve it compared to the previous quarters. And obviously, as revenue will pick up during the year, the more revenue you grow, we see an upward trend in the gross margin and in the EBITDA margin as well.

Great. There's a question around cargo. To what extent is the straight or views situation affecting demand from cargo customers? Is that me?

From what we see, we see a steady demand. We didn't see any major change that we can measure in terms of more demand growing because of the need to use more air freight than sea freight. We see the demand meets our expectation. Nothing that is notable that I can speak about.

So we're going to go back and take a live question. We have one that just came in from Sergey Klinianov from Freedom Capital Markets. Sergey, please go ahead and ask your question. Yeah, thank you. Do you hear me? Yes, we do.

Yeah, great. So I just would like to clarify, do you expect the next quarter will be weak? as well, especially in APU line, because, yeah, previously some analysts asked about backlog, and I see that it's really strong, but no, the timing's really, we need to clarify the timing when your revenue will continue to grow again.

So, Sergei, good morning, by the way. I'll try to compile what we discussed before into a few comments. First of all, we have lots of APUs where the work was done. We're just waiting for the last remaining parts that are required for assembly so we can assemble the units and sell them. We stated that the We see a recovery. The recovery in the parts availability is already happening. And we are focusing that the revenue will grow. It's not going to be a zero-one impact, and we're not promising full recovery, but we are on a positive recovery trend. And we have plenty of work. Actually, we have a huge amount of work in the company. And when the parts arrive, These units, a few days later, the engines are assembled and shipped to the customer. So we expect a recovery, but the recovery is gradual over the coming few months.

Yeah, again, thank you. And maybe you can put some colors on what parts particularly were exposed to the supply chain. So you mentioned, Igor, that some commodity-level parts were exposed, but maybe you can name some, you know, some particular parts.

I prefer to keep it at this level, not to expose our OEM and... and to be too specific. But if you think about it, when you think about an engine, you have the main engine components, where we don't have any issue and we have, it's a general thing, we don't have any issue and we have substantial amounts of inventory. You can do all the work on the components, you take the engine, you break it into all the pieces, then you have to overhaul and repair. pieces that are not, or replace the main parts if they are not functioning well. And when all the work is done, you need to assemble the engine. For the final assembly, there is a long list of small parts, more commodity parts that are required, and this is where the challenge is.

Okay, thank you for taking my questions.

The next question is from Alexandra Mandry from Truist. Alexandra, please go ahead.

Hi, can you guys hear me?

Yes, we can. Good morning.

Good morning. So that's great to hear that you're in the process of discussing solutions to the supply chain issues with the OEMs. Can you provide additional color on some potential solutions with the OEM? And I guess the second question kind of tied to that is, do you have any interest in acquisitions that could include PMA capabilities for the commodity level parts that could ease the supply chain?

So, you know, when it comes to the general thing, without going to specifics, theoretical solutions for OEM parts can be PMA or can be sourcing the same parts from other sources in the market that happen to keep them in inventory. and in parallel to overcoming the problem with the oem and in collaboration with the oem as we find these alternative solutions on the short term we are utilizing them um and in terms of the second question it really depends on your question about potentially acquiring pma capabilities it depends on the type of product and and And the relationship or the contract that we have with our existing OEMs, in some cases we can do it, in some cases not. But as a general saying, as we think about expanding our MRO capabilities and adding more capabilities that we don't have today, with PMA and PMA facilities is definitely something that we will be looking at.

Great. That's it for me. Thank you.

So I'd like to ask a question for a who that was submitted from through the chat function around, you know, M&A. You know, can you talk a little bit about the M&A funnel, what you're prioritizing, and how the current environment might factor into that thinking?

Yeah, sure. Thank you for the question, Mike. So, as Igor mentioned at the beginning of his pitch, we first, in the last couple of months, we built the infrastructure. So, we hired the people, we set the routine, we set the connection, the network, we defined the strategy, and then, in the last couple of months, we went to the market. We started getting the opportunities and started sourcing opportunities by ourselves. The strategy in general, again, it was communicated in the past. I'll just repeat it. We're looking for companies either on OEM or MLO, something close to our area that we're working right now. And the main issue is to provide additional benefit or additional added value to our customers. We raised the money several months ago. The money that was raised was mainly to give us some kind of a first cushion to start being active in the M&A market as we see it right now. There are several interesting opportunities and I want to indicate to everybody that we are committed to be very, very disciplined. So, on one hand, we want to make our first acquisition and we promised ourselves and promised everybody else that we are going to do at least one deal this year. But on the other hand, we are not in a rush. We will be very disciplined, we will find the right target in the right price that fits our strategy. and then that would be very swift and very quick to close a deal. There is another thing which is very interesting in the last two months, I would say, is the multipiles in the industry. In the previous quarter, we saw multipiles for the aviation industry climbing up very fast. And then when the oil prices started and the turbulence in the market started, we saw multipiles for our type of companies going down. It creates a certain dynamic also in the M&A area. And it's very interesting for us to see where it's going to land. But the one thing I can say is that In any case, any company that we will acquire will be at a lower multiplier than the multiplier that we are trading right now. To summarize, there are a few opportunities which are interesting right now. We're looking at them. But again, as I said, we're not promising anything. But the only thing I'm promising is to be very strategic and very disciplined on it.

Thank you very much for that. At this time, Egal, I'd like to turn the call back over to you for some closing remarks. Egal, if you can hear us.

Yeah, thank you. Thank you, Matt. So thank you all for joining us today and for your continued engagement with TAT. The first quarter highlights both the strength of the customer demand of our services and the impact of an industry-wide supply chain dynamics that we expect to resolve all the time. Beneath that timing dynamic, the underlying business is operating well. Demand is at record level. Our backlog continues to grow. Growth margin is expanding, and our balance sheet supports strategic priorities we are pursuing, including M&A. We look forward to updating you on our progress through the balance of 2026. Thank you again for your time today and for your continued confidence in PATH.

Thank you everyone for joining us today. You may now disconnect your lines. Thank you very much.