This article first appeared on GuruFocus .
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Revenue:Q3 2026 up 20.2% YoY to a record $55.6 million (vs. $46.2 million in Q3 2025); first nine months up 13.8% to $149.6 million (vs. $135.5 million).
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Gross Profit:Q3 2026 up 48.2% YoY to $17.2 million.
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Gross Margin:Record 30.9% in Q3 2026; first nine months at 27.1%, up 250 basis points YoY.
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Operating Income:Q3 2026 $9 million (16.3% of revenue) vs. $5.3 million (11.4% of revenue) in Q3 2025; first nine months up 27.3% to $17.6 million.
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Net Income:Q3 2026 $7.7 million vs. $4.8 million in Q3 2025; first nine months up 58.3% to $19.1 million (approximately $15.7 million excluding a $3.4 million one-time gain in Q2).
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Diluted EPS:Q3 2026 $0.58 vs. $0.37 in Q3 2025; first nine months $0.46, up 42% YoY.
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Adjusted EBITDA:Q3 2026 up 60.9% YoY to a record $10.9 million (19.6% of revenue) vs. $6.8 million (14.6% of revenue) in Q3 2025; first nine months up 47% to $27.4 million (18.3% of revenue).
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Operating Cash Flow:$3.8 million in Q3 2026, despite a $10.6 million inventory investment (largely to support the new distribution channel).
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APU Revenue:Up 34.4% in Q3 2026 and 26.8% year to date.
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Heat Exchanger Revenue:Up 7.3% in Q3 2026 and 5.2% in the first nine months.
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Trading, Leasing & Distribution Revenue:Up 85.5% in Q3 2026; up 42.9% year to date.
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Landing Gear Revenue:Less than 4% of Q3 2026 revenue; facing parts availability and supply chain challenges.
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Backlog:$577 million at quarter end vs. $615 million at end of Q2, reflecting $34 million in landing gear contracts removed due to component shortages; essentially unchanged excluding those contracts.
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Balance Sheet:Net cash of $42.6 million; debt-to-equity ratio of 6%; debt-to-trailing-12-month-EBITDA ratio of 0.32x; new $100 million three-year revolving credit facility secured.
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Tax Rate:Expected average corporate tax rate of approximately 15% to 19% beginning in 2027, following utilization of remaining tax losses carried forward in Israel and the US.
Release Date: November 02, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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TAT Technologies Ltd ( NASDAQ:TATT ) reported record Q3 2026 revenue of $55.6 million, up 20.2% year-over-year, driven by broad-based growth across APU, heat exchangers, and trading/distribution.
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Adjusted EBITDA reached a record $10.9 million (19.6% of revenue), up 60.9% year-over-year, showcasing significant margin expansion and operational leverage.
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The APU business grew 34.4% in the quarter, benefiting from new contracts, improved supply chain, and full operational run rate, with strong demand expected to continue.
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TAT Technologies Ltd ( NASDAQ:TATT ) secured a new $100 million three-year revolving credit facility and maintains a strong financial position with net cash of $42.6 million and low leverage (debt-to-EBITDA of 0.32x).
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The expanded distribution agreement with Honeywell, extending MRO authorization to 2036, enhances TAT Technologies Ltd ( NASDAQ:TATT )'s competitive position and provides a foundation for sustained growth and margin improvement.
Negative Points
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Backlog decreased to $577 million from $615 million in Q2, primarily due to the removal of $34 million in landing gear contracts because of component shortages.
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The landing gear business, though small (less than 4% of revenue), continues to face supply chain challenges, and TAT Technologies Ltd ( NASDAQ:TATT ) has shifted capacity to APU until issues are resolved.
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Trading and distribution revenue is lumpy and can fluctuate significantly between quarters due to the timing of large deals, which may impact near-term revenue consistency.
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TAT Technologies Ltd ( NASDAQ:TATT ) expects to begin paying income taxes in 2027 at an average corporate tax rate of 15% to 19%, which could reduce net income growth compared to prior periods.
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The company invested $10.6 million in inventory to support the new distribution channel, which may pressure cash flow in the near term, despite operating cash flow of $3.8 million in Q3.
Q & A Highlights
Q: Jonathan Sigman (Stifel) asked why APU revenue came in stronger than anticipated in Q3 and how to think about Q4. A: CEO Igal Zamir attributed the upside to three factors: several large APU contracts won since the start of the year now flowing into the shop, continued improvement in the supply chain after the Q1 crisis, and better internal capacity and efficiency. He said intake remains very strong and he expects the positive trend to continue.
Q: Ehud, there were several questions on the big gross margin improvement what drove it and how much is structural and sustainable? A: CFO Ehud Ben-Yair said the improvement came from a favorable product mix (capacity shifted to higher-margin APUs), operational efficiency initiatives implemented in Q2 and Q3 that are sustained going forward, and the distribution layer, which is small in revenue but high in profit. He said the average profitability of the last three quarters is a good representative of profitability going forward.
Q: Josh Sullivan (JonesTrading) asked whether the new distribution agreement has broadened TAT's thinking on verticals and services, particularly regarding M&A. A: CEO Igal Zamir said trading and distribution is a very interesting segment for the coming years. As long as the supply chain remains unstable and lead times persist, USM parts and trading will be essential to serving customers, and he expects that to remain the case for several good years. TAT is definitely interested in expanding in this direction.
Q: Josh Sullivan (JonesTrading) asked whether the inventory investment is growth-focused or partly a strategic supply chain buffer. A: CEO Igal Zamir said it is not necessarily a buffer. With a distribution agreement, TAT must hold sustainable inventory to support customers such as airlines and other MRO shops, not just its own shop. Given extended lead times of months for parts, sufficient stock is needed to meet demand.
Q: Josh Sullivan (JonesTrading) asked for thoughts on APU demand dynamics versus primary engine cycles heading into 2027. A: CEO Igal Zamir said APUs are largely maintained on demand removed when a repair is needed so as long as the fleet keeps flying, APU demand stays steady. APU maintenance timing is less discretionary than on the main engine side.
Q: Ben Klieve (StoneX Benchmark) asked whether the expanded scope of the parts trading business will make results more consistent despite the segment's lumpiness. A: CEO Igal Zamir said quarterly fluctuation will continue because these are large deals dependent on finding removed assets, repairing them and closing transactions, which takes time. He said the year-to-date level is the base TAT plans to grow from.
Q: Alexandra Mandery (Truist) asked whether TAT has seen any shift in backlog toward shorter-cycle business. A: CEO Igal Zamir said he sees no such trend. The backlog reduction was a conservative decision to remove contracts TAT is currently struggling to serve, related to only one landing gear airline. Long-term agreements still represent roughly 60%-65% of revenue, with about 35%-40% from non-contractual, short-term demand, and he is not aware of any change in customer consumption plans.
Q: Jonathan Sigman (Stifel) asked about the landing gear business whether competitors can obtain parts more effectively than TAT or whether the work is simply deferred. A: CEO Igal Zamir said landing gear is a very small portion of TAT's business. He cannot say whether others can obtain parts TAT cannot; some customers may find other options and some may wait, and time will tell.
Q: Jason Schmidt (Lake Street) asked for an update on the defense business and how its order book is building into 2027. A: CEO Igal Zamir said TAT is primarily a commercial company, though defense sales grew this year and there are opportunities to continue growing next year. He said there is nothing special to expect in defense going into 2027 beyond continued nice growth alongside the commercial business.
Q: A caller asked about the initial potential from the Honeywell distribution agreement for parts supporting the 200 to 250 platforms. A: CEO Igal Zamir said TAT does not publish projections. He noted distribution is not meaningful in revenue but is meaningful in profitability, supporting margin improvement, and he expects it to continue supporting margins going forward.
Q: A caller asked whether higher jet fuel prices are beginning to drive higher aircraft retirement and scrappage rates versus recent years. A: CEO Igal Zamir said he sees the opposite. Passenger demand is not declining, passengers are absorbing higher prices, and new fleet deliveries face major delays. He has not seen any meaningful new retirement trend, and retirement levels remain below pre-COVID levels.
Q: Matt Chesler (FNK IR) asked Ehud for additional color on the gross margin improvement and its sustainability. A: CFO Ehud Ben-Yair reiterated that the mix should stay similar over the next couple of quarters given strong demand, that operational efficiency gains are sustained, and that distribution though low in revenue is high in profit and here to stay for at least 10 years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
