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 FNK IR, a US-based investor relations firm supporting Eran Yunger, TAT's Head of Investor Relations.

Joining me today are Igal Zamir, TAT's President and CEO, and Ehud Ben-Yair, 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 20-F.

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 6-K filed with the SEC.

With all that, I'd like to turn the call over to Igal.

Thank you, Matt. Good morning, everybody, and thanks for joining us.

We appreciate your continued interest in TAT. TAT Technologies entered 2026 with a robust operational foundation, and record customer demand in the first quarter reinforces 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, growing to approximately $580 million at the end of Q1, reflecting new contract wins 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 established 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 delays 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 2026. Ehud will then take you through 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 landing gears open work orders at our shops.

We estimate that a 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 parts had been available. Switching to the first quarter results, 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 delayed the completion of and the release of units in APUs and landing gear operation. 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, volumes are 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. Ehud will walk you through the financial details in a moment, including margin performance and cash flow, both of which tells a more complete story about the health of the business.

Product lines commentary: let me briefly walk you through the performance across our service lines. In heat exchangers, we continue to see growing demand.

Q1 of 2025 revenue reflected a 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 Q1 '25, we look into '26 and are seeing increase in orders in both OEMs and MRO market. 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 a foundation of the platform. In the heat exchanger business, we achieved an operational milestone this quarter, delivering more than 97% of customer orders on time.

In APU, intake was at record level 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 work than we entered, achieving a higher level of book-to-bill 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 landing gear, components 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 begin of the year.

Landing gear 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 delivered 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 continued 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 meaningful contributor to our consolidated results. Switching a little bit to the industry, stepping back from the quarter, what we hear from our customers and see in our own order flow continues to point toward 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 '25, is in standard commodity-level components which are required in all APU final assembly after the overhaul.

While we have seen improvement in parts flow over the recent months and while part sources expressed 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&A, 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 dedicated corporate development leadership with career 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 bring additional deal flow. As a result, our pipeline has expanded.

We are evaluating opportunities, which is a notable change from where we were six months ago. Our focus will continue 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 rests 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.

Third, 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, and indication 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 details on the financial results.

Thank you, Igal. Good morning, everyone.

Good afternoon to those that are on the other side of the ocean. As I walk 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 Igal 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 continued focus on cost management across our operations.

As we move forwards 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 arrives.

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 earning per share were $0.26 compared to $0.34 in the first quarter of 2025. Net interest income in Q1 of 2026 were $39,000 compared to net expenses of $58,000 in the parallel quarter.

This is mainly due to lower level of debt, offset by the impact of the Israeli shekel against the US dollar exchange rate, which impacted some of our long-term loans. Taxes on income were $0.1 million for the three months ended March 31st, 2026, compared to $0.6 million for the same period in 2025.

The decrease primarily 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 '26. Also in Israel, we have enough carryforward 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. Shareholders' equity stood at $180.5 million, resulting in an equity-to-balance ratio of 77.5%.

Our strong financial position give 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 continue 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.

We are well positioned to realize this contracted volume as supply conditions normalized. With that, I will return the call back to Igal.

Thank you, Ehud. 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 wins. 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. 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 M&A.

I want to thank our employees around the world. Their professionalism, particularly in the quarter, and required hands-on coordination with our customers and supplier is what makes our continued progress possible.

With that, I will turn over to Matt for questions.

Thank you, Igal. 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 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 will 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 the queue.

The first question is from Ben Klieve 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.

I want to lean into this. Clearly, your backlog ramped considerably in the first quarter, you got a couple really nice wins, and I'm wondering if below those really nice wins there is any slippage either in the first quarter or second quarter to date from any of these customers that have been negatively impacted by the parts dynamic or perhaps customers that have had more macro challenges here around the price of jet fuel, any low-cost commercial providers, anything like that.

Has there been any slippage out of backlog here again, either in the first quarter or second quarter to date?

I try to address the question in several ways. Maybe just to expand on what we just covered in the opening remarks.

I mentioned earlier that we finished the quarter with $15.5 million of APUs and landing gear in open work orders, 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. Also, you can estimate what could have been the quarter.

Entering the quarter and during the quarter we were expecting Q1 to continue the trajectory of the growth that we had in the last few years. From a demand perspective, we were expecting and hoping for a very strong quarter.

The second way to look at where we were at the end of the quarter is looking at the balance sheet. Ehud mentioned something about it.

If you look at the inventory, a 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 orders, the value of the work that was done into the open work orders is another indicator for how much could have been added. As a general saying to the third question that I believe that you asked, as a general saying, the work is there, the demand is there, and we see the build up of intake.

Far we don't see any indications. In order, 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. Then one other one from me and then I'll get back in queue is around your expectations not necessarily for the timing of the parts, the 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 the lots, especially on the APU side, all come in at once, or do you think this is going to be kind of a trickling over several months or several quarters for you to get to the full inventory position that you need?

Okay. Again, I would split the answer into few segments.

Let's start with the APU, which is the vast majority of the opportunity that we have ahead of us in terms of catch-up. We did a few things.

While we are working very, very actively with our OEM partners to resolve the parts situation, we are also 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 a substantial improvement on their side, but in the same time, they have huge backlog, not just for TAT.

We are only one of many, many customers that they have, and the problems affect everybody. Therefore, I believe that the 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're optimistic that the root cause of the problem is behind them and that they're on a recovery trajectory. We do see a substantial increase in the last few weeks in deliveries, but it will take a few months.

Okay. Very good.

That makes sense. Appreciate you taking my questions.

Best of luck here navigating this, and I'll get back in queue.

Thank you.

Okay. Thanks, Ben.

Next question is going to be from Jonathan Siegmann from Stifel. Jonathan, please go ahead.

Good morning. Thanks for taking my question.

Maybe just to talk a little bit more about the parts 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 host that concern, would appreciate it. I would say

I would say, again, I need to split the answer. On the on the APU, there is zero risk.

There is no risk. As as we stated in the comments at the beginning, when it comes to the APU, you have the main engine components, all the, the how do you call it, the core of the engine components, the impellers, the the big parts and whatever.

We have plenty of them in stock. We established a meaningful strategic inventory a year ago.

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 work orders that are very close to completion, where the overhaul was done.

The 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 overhaul was done. There is no conflict between us and an that I'm aware of between us and and their and and the OEM production.

I don't see a I don't see any risk there. On on the landing gear, it's a different story because the the landing gear, the OEM itself that is producing the main landing gear parts is supplying to us and also supplying to a to their own shop.

In theory, there can be a conflict. We are working very actively with them and 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 the partners.

There is more risk there, but it's a much, much smaller portion of the of the problem.

Thank you. 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 I would say just as a at least at least one of our large customer, freight customer, is suffering from the same OEM, from the same part issue on another on on their needs unrelated to what we do for them. We are, it's a known problem in the among the industry players and everybody is affected.

Not only that we get good collaboration and actually our customers are part of the solution in a sense that they are helping us to put pressure to to resolve the problem.

Thank you. Also,

we work very closely with our customers to make sure that we take care of the needs, that no customer will get stuck without spare units, and very openly and very engaging with our customers. 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.

By the way, Josh, good question. I would say, in general, there is a potential here and we are 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 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 an 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 into your crystal ball. No, he's saying, "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, when does the OEM issue become more of an operational issue or an industry-wide issue for the flying ecosystem?"

Josh, 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. A combination of what we actually

Matt, I think Igal 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 be 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 gear, it's a good question. Currently, the situation is not getting better.

Welcome. Enter your meeting ID followed by pound.

We don't see the supply chain getting better. As Igal said, we are working very close with the OEM trying to solve the issue, try to find creative ways to solve them, but there is a concern.

There are some parts that currently we don't get any concrete answer from the OEM, and it may evolve to maybe a larger problem, but not right now. Again, we keep monitoring the situation and understand what's going on and solve the issues.

Okay. Thank you for that, Ehud.

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

Actually, as we already demonstrated during the quarter, we are on a very strong trajectory on securing new business, including the 500, and we published substantial wins during the first quarter and we continue to work to expand. 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?

I think in general, on the military side, on one hand, we definitely see increase in demand due to the global unrest. 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 the US Air Force.

There is more focus on keeping the aircraft flying than taking them to MRO cycles. It's kind of a 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 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, you may see less intake coming on the immediate term. On the other hand, when you look at it more mid-term and long-term, the overall demand is growing, and 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?

I don't want to relate to the numbers or the amount of percentage, but I can say for definitely that 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 earnings 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 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.

Obviously, as revenue will tick up during the year, the more revenue grow, we see an upward trend in the gross margin and in the EBITDA margin as well.

Okay. Great.

There's a question around cargo, to what extent is the Strait of Hormuz situation affecting demand from cargo customers, if any?

From where we see it, 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.

We're going to go back and take a live question. We have one that just came in from Sergey Glinyanov from Freedom Capital Markets.

Sergey, please go ahead, ask your question.

Yeah. Thank you.

Do you hear me?

Yes, we do.

Great. 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 we need to clarify the timing when your revenue will continue to grow again.

Sergey, good morning, by the way. I'll try to compile what we discussed before into few comments.

We have lots of APUs where the work was done, we are just waiting for the last remaining parts that are required for assembly, we can assemble the units and sell them. We stated that we see recovery.

The recovery in the parts availability is already happening, and we are forecasting that the revenue will grow. It's not going to be a 0/1 impact, and we're not promising full recovery, but we are on a positive recovery trend, and we have plenty of work, or actually, we have huge amount of work in the company.

When the parts arrive, these units within few days later the engines are assembled and shipped to the customer. We expect a recovery, but the recovery is gradual over the coming few months.

Got it. Thank you.

Maybe you can put some colors on what parts particularly were exposed to supply chain? You mentioned, Igal, that some commodity-level parts were exposed, but maybe you can name some particular parts?

I prefer to keep it at this level, not to expose our OEM and to be too specific. 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 as a general saying, we don't have any issue, and we have substantial amount 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 or replace the main parts if they are not functioning well.

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.

Igal. Thank you for taking my questions.

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

Hi. Can you guys hear me?

Yes, we can.

Yes. Good morning, Alexandra.

Good morning. 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 that would ease the issue? I guess a 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?

There are as a general saying, 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. In parallel to overcoming the problem with the OEM and in collaboration with the OEMs, as we find these alternative solutions, on the short term, we are utilizing them.

In terms of the second question, your question about potentially acquiring PMA capabilities, it depends on the type of product and the relationship with or the contracts that we have with our existing OEMs. In some cases, we can do it, in some cases not.

As a general saying, as we think about expanding our MRO capabilities and adding more capabilities that we don't have today, PMA and PMA facilities is definitely something that we will be looking at.

Great. That's it for me.

Thank you.

I'd like to ask a question for Ehud that was submitted through the chat function around M&A. Ehud, 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?

Sure. Thank you for the question, Matt.

As Igal mentioned at the beginning of his pitch, in the last couple of months, we build the infrastructure. We hired the people, we set the routine, we set the connection, the network, we defined the strategy.

Then in the last couple of months, we went to the market and started getting opportunities and started sourcing opportunities by ourselves. The strategy in general, again, it was communicated in the past, I'll just repeat it: we are looking for companies either on OEM or MRO, something close to our areas that we are 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.

I want to indicate to everybody that we are committed to be very, very disciplined. On one hand, we want to make our first acquisition and we promised ourselves and promised everybody else that we're going to do at least one deal this year, but on the other, we're not in a rush.

We will be very disciplined, we'll find the right target in the right price that fits our strategy, and then we'll 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 multiples in the industry.

In the previous quarter, we saw multiples for the aviation industry climbing up very fast, and then when the oil crisis started and the turbulence in the market started, we saw multiples 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.

One thing I can say is that, in any case, any company that we will acquire will be at a lower multiple than the multiple 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 are not promising anything, but the only thing I'm promising is to be very strategic and very disciplined on it. Okay.

Ehud, thank you very much for that. At this time, Igal, I'd like to turn the call back over to you for some closing remarks.

Okay.

Igal, if you can hear us, turn it over

to you. Thank you.

Thank you, Matt. 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 over time. Beneath that timing dynamic, the underlying business is operating well, demand is at record level, our backlog continued to grow, gross 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 TAT.

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

Thank you very much.