Q3 2024 TAT Technologies Ltd Earnings Call
Yeah.
[music].
Speaker Change: You have joined the meeting as an attendee and will be needed throughout the meeting.
Yeah.
Speaker Change: Good day, ladies and gentlemen, thank you for standing by.
Speaker Change: And welcome to the key a key technologies third quarter 2024 earnings conference call.
Speaker Change: Please note that today's conference maybe recorded.
Speaker Change: Hello, My name is Matt Schaeffler, and I'm a partner with a.
Speaker Change: Our U S based Investor relations firm supporting younger Yankees internal head of Investor Relations.
Speaker Change: Hosting todays call is our president and CEO.
Speaker Change: And <unk> our CFO.
Before getting started we would like to draw your attention to the fact that certain matters discussed on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, and other provisions of the federal Securities laws.
Speaker Change: These forward looking statements are based on management's current expectations and are not guarantees of future performance.
Speaker Change: <unk> results could differ materially from those expressed.
Speaker Change: In or implied by these forward looking statements.
Speaker Change: The forward looking statements are made as of the date of this call and except as required by law.
Speaker Change: Technologies assumes no obligation to update revise that.
Speaker Change: Investors are cautioned not to place undue reliance on these forward looking statements for a more detailed discussion of how these and other risks and uncertainties could cause J T technologies actual results to differ materially from those indicated in these forward looking statements. Please see our annual report on form 20-F for the fifth.
Speaker Change: All year ended December 31, 2023, and other filings, we make with the SEC.
Speaker Change: The financial measures discussed today include non-GAAP measures, we believe investors focus on non-GAAP financial measures and comparing results between periods and among peer companies that publish similar non-GAAP financial measures.
Speaker Change: Please see today's press release, our earnings release.
Speaker Change: And the investors section of our website at <unk>.
Speaker Change: Technology Dot com for a reconciliation of non-GAAP financial measures to GAAP to GAAP results.
Speaker Change: non-GAAP financial information should not be considered in isolation from or as a substitute for or superior to GAAP financial information, but is included because management believes it provides meaningful information about the financial performance of our business and is used by investors for information and comparative purposes.
Eyal: With that I'd now like to turn the call over to Eyal.
Eyal: Hi, good morning, everybody.
Eyal: It's about episodes that we are excited to be here today and say it tasted felt the life, earning call.
Eyal: And it's another milestone in the evolution of the company and in development, especially after the poll I'm convinced that the company has made over the last day of furious. So I'm really excited to be here in front of you today and they're looking forward to.
Eyal: Meeting you also in person in the future.
Speaker Change: <unk> says, though other events.
Speaker Change: Yeah.
Speaker Change: I'll start by saying that we are very pleased with the results of the first quarter. The company executed really well and we as you can see in the golf we recorded another record quarterly net revenues and profitability, we on boarded new customers as we continue walking on improving our efficiencies.
Speaker Change: And theyre continuing to establish the Ainsworth box shield at D. A.
Speaker Change: <unk> needs to go will continue supporting the goals for the coming few years. So all in all.
Speaker Change: We are very pleased with the result.
Speaker Change: If you look at the data and the <unk>, our CFO will present the financials in a few minutes.
Speaker Change: Revenue in comparison to last year, increasing 55% and.
Speaker Change: Net income increasing 33%.
Speaker Change: I'm very pleased with the EBITDA result, encased in a 70% way more than almost double than the revenue.
Speaker Change: Which speaks about the equivalent in our operational efficiencies and enjoying theyre enjoying the growth.
Speaker Change: <unk> six and a half million dollars positive swing in cash flow comparing to the same period last day the last deal.
Speaker Change: The cash flow format.
Speaker Change: From operations.
Speaker Change: And despite the fact that our revenue is growing although backlog is also continuing to grow which means.
Speaker Change: Bottom line is that we are receiving more appeal then more orders and we are securing more business for the future all day and what we are selling.
Speaker Change: And.
Speaker Change: All basically all the signs are positive signs when we look at look into the into the future a few words about the industry and the way that we look at the industry and how it affects us on where that could meet us.
Speaker Change: So im sure that its not going to be a new antibody the dangerous place going towards them.
Speaker Change: Very interesting periods, where we see demand they are major demand both on the OEM, new manufacturing and the on the ammo on the aftermarket and services.
Speaker Change: Major demand for new aircraft.
Speaker Change: Passenger.
Speaker Change: Slides, increasing all over the world huge demand for new aircraft in Asia.
Speaker Change: The aircraft manufacturers.
Speaker Change: Really struggling to ramp up from Covid.
Speaker Change: Hum.
Speaker Change: Supply chain is still challenging in aerospace and the result of all of this is that Youll see.
Speaker Change: Capacity from the aircraft manufacturer that while it's a good thing it's not meeting the demand.
We are hitting.
Speaker Change: Eight yield centennial's lead time to receive a new aircraft.
Speaker Change: It forces the airlines to continue operating our fleets that they were supposed to retire and the and all in some cases even.
Bring.
Speaker Change: Going back to operations aircraft that are already there.
Speaker Change: Mr. Then moved to storage.
Speaker Change: All of this creates huge pressure on the MLR.
Speaker Change: And bulk manufacturing, especially on the IPO of the lending gail's pump manufacturer list by themselves.
Speaker Change: Struggling because they have demand both on MRO and OEM and supply chain is disrupted.
Speaker Change:
We all of this is preventing both opportunities and challenges the industry players like J D. On one hand, we are enjoying the demand we see increasing demand both on the OEM and on the MRO side.
Speaker Change: And.
Speaker Change: Some of the demand come from complex to a customer, but we see an increasing portion of the demand coming from non contractual customers that have contracts with other vendors that are struggling and they're coming to us on.
Speaker Change: On the other hand, we are experiencing the same challenges with supply chain.
Speaker Change: And based on what we are hearing in the industry.
Speaker Change: The industry leader.
Speaker Change: He is not expected to show a better.
Fulfillment.
Speaker Change: Before the end of next deal. So there is a hope here I would say by expressed by the industry leader that supply that supply chain. We stabilize at the end of next deal time will tell.
Speaker Change: And we we took all the measures in the last few months too.
Speaker Change: T generally soft spots that we need for next year, you can see it in there and the increase in our inventory.
Speaker Change: And what.
Speaker Change: What we're trying to do is to tell them the challenging opportunity for next year, but.
Speaker Change: Showing that we will have all the pilots that we need to secure the demand that we believed it would come.
Speaker Change: So.
Speaker Change: In terms of visibility when we look into the future long term.
Speaker Change: We have we see improvement in Portman can double visibility we have.
Speaker Change: We have the long term model and the long term contract that we secured.
Speaker Change: We are seeing an increase in the amount of purchase orders that we receive on the OEM side for next year and the following year.
Speaker Change: Higher than ever in the past.
Speaker Change: And while we are not publishing a looking forward statements.
Speaker Change: We can say that we are enjoying a funnel of opportunities that you the way larger than what the <unk> assigned to bust.
Speaker Change: So all in all when we're looking into the next two or three very positive signs that the growth is going to continue awareness.
Speaker Change: Demand is there definitely in the right.
Speaker Change: Sholto.
Speaker Change: We have to bear in mind two factors first of all the supply chain, it's not an area of concern, but we need to be mindful of it.
Speaker Change: Yes.
Speaker Change: Our big challenge of constantly making sure that we have the bus.
Not always finding the policy and the right price that we would like to have and we are still buying them which affects.
Speaker Change: Some effect on that on gross profit.
Speaker Change: But.
Speaker Change: Making sure that I will have key advantage being a smaller player than the big industry player is our ability to move faster into it.
Speaker Change: And to be more nimble and find the solutions.
Speaker Change: We need to continue and support the market. So it's always a challenge that we that we are basically dealing with on a daily weekly basis. So following with success.
Speaker Change: Remember short term also some seasonality and historically when you look at the performance.
Speaker Change: In the fourth quarter of the year, we had always seasonality.
Speaker Change: And most of the Alabama whole side typically commercially.
Speaker Change: The airlines.
Speaker Change: Consumer demo MLR walk dealing to some at a time when it's hot in the peak season flying a lot they have multi pass to do it.
Speaker Change: And then in the winter and the second factor on the commercial on the Congo Carryout typically in preparation for the holiday season, they prefer not to not to do maintenance on keep the aircraft flying.
Speaker Change: So.
Speaker Change: Not expecting any big increase fulfill them.
Speaker Change:
Speaker Change: And a quota and it was made by one of the industry leaders.
Speaker Change: Couple of weeks ago.
Speaker Change: They really like you said that revenue for next year will be determined by Baidu will not be determined by the opportunities, but it will be driven by the supply chain and capacity.
Speaker Change: I Love your statement because I think that this is a good reflection of where we see ourselves going into next year.
Speaker Change: Lots of opportunities across all business segments.
Speaker Change: Both on the OEM and MRO across the business lines that we have.
Speaker Change: And the name of the game for next year as far as I am considering is to make sure that we have the parts and that we have the capacity to support the growth that is coming so.
Speaker Change: That's on the that's on the on the market and visibility and impact from <unk>.
Speaker Change: Another point that I would like to say before I finish is that J D.
Speaker Change: Keep focus is not just on growing revenue, but is on improving profitability.
Speaker Change: And I think that Q3 is another demonstration of.
Speaker Change: Our ability to unlock operating leverage.
Speaker Change: As we go into the business as we continue to.
Speaker Change: We hired a lot of people at the begin of deal.
Speaker Change: It.
Speaker Change: It takes time for it to get the efficiencies until utilizations than what they were.
Speaker Change: Our supply chain is getting more and more sharper inability to find the right part in the right costs. All of this is affecting our <unk>.
Speaker Change: We'll have profitability and it's a key initiative for the for the coming years to continue and improve.
Speaker Change: To what we consider to be a best in class in the industry.
Speaker Change: So all in all.
Before I hand the.
Speaker Change: The presentation to a hood, we're pleased with the results.
Speaker Change: The trajectory is good.
Speaker Change: We feel confident about the coming few years and our ability to continue on the shelf with performance.
Speaker Change: Company went through a major consolidation in the business said you link deals of Covid.
Speaker Change: We invested in.
The new strategy organizational structure strategic contracts entering new product lines.
Speaker Change: Yeah.
Speaker Change: The growth that we see over the last two years.
Speaker Change: Just to reflect the beginning of.
Speaker Change: The opportunities that the company is enjoying these days and I'm, saying at the beginning because I the way that I expressed myself I'm, saying it as well.
Just scratching the surface of the opportunity when you look at the market size that the demand in the industry.
Speaker Change: And there is lots of room to grow and the demand the sale. So we are very optimistic looking forward.
al: And with that I will let al go over the financials.
al: Thank you.
al: Oh.
Speaker Change: Happy to be here and happy to present, the other brokers are very good.
Doug: Doug will go through a download them, we'll give you. Some also some key indicators.
Speaker Change: Looking at the Q3 of 24 compared to Q3 of 23 revenues went up to $45 million compared to 29 nine.
Speaker Change: And the same period last season for an increase of 35%.
Speaker Change: The thing that they will follow us through the whole presentation. He's there.
Speaker Change: Not only the company is growing its revenue, but we are also quarter after quarter improvement.
Speaker Change: Capabilities. So you can see here that the gross margin.
Speaker Change: Up to 21% compared to 19.4.
Speaker Change: The operating margin.
Speaker Change: Which almost doubled compared to the previous <unk> went up from five 9% to eight five.
Speaker Change: The adjusted EBITDA again, the strong trend went up by 70%.
Speaker Change: From a brand 0.1% out of revenue into.
Speaker Change: Six Q3 'twenty four.
Speaker Change: Net profit also increased by 2% for blueprint.
Speaker Change: $9 million.
In this quarter.
Speaker Change: Furniture, and if we're looking at the nine months period of time, So revenue went up to $111 $1 million.
Speaker Change: Compared to $82 million in this period last year.
Speaker Change: Gross margin went up from 18, 9% out of revenue into 'twenty, one 2% out of revenue.
Speaker Change: An increase of 230 basis point operating margin percent.
Speaker Change: Compared to almost double 2% almost doubled from $4 2 million to $8 4 million.
Speaker Change: And moving up for nine 5% out of revenue to 14%.
Speaker Change: The same goes with <unk>.
Speaker Change: Adjusted EBITDA went up from nine 3% grew 11.8, and a net profit of $12 3 million.
Speaker Change: To $7 $6 million, representing 77% increase compared to the previous.
Speaker Change: Yes.
Speaker Change: Looking at the.
Speaker Change: In the last year.
Speaker Change: For fourth quarter, but again, you can see that constantly all of the fundamentals are growing up. So again, we're very proud with the fact that whether increasing revenue and by the way. We are we are looking in monitoring our appeal in the industry and we see that we're growing our revenue in a much faster pace compared to our competitors with similar companies.
Speaker Change: But again not only this well improving all of the profitability parameters and you can see here on the slide quarter after quarter.
Speaker Change: Unless there also.
Speaker Change: Global attention to the fact that in Q2 of 24 gross margin was $21 nine and it went down to 21, one in Q3 of 'twenty four.
Speaker Change: And going deep into understanding of the company. So that we have several other.
Speaker Change: Strategic segments within those segments, we have different product and within the different products and services with different customer with different profitability. So.
Speaker Change: So from time to time the mix of revenue.
Speaker Change: Good show, either an increase or a decrease in the gross margin.
Speaker Change: And again, it's not it's nothing really to be a concern off but just draw your attention to the fed that blend of revenue can affect the gross margin.
Speaker Change: Nonetheless, you can see that the gross margin is improving quarter after quarter.
Speaker Change: Part of it in December with all the other.
Speaker Change: non-GAAP profitability.
Speaker Change: And margins.
Speaker Change: In terms of revenue for them.
Our strategic products to the heap exchange activity, which represents both the OEM and MRO activity went up from 12, 9% to $16 six representing a 33% increase.
The Apu activity went up from eight to 10, five and other of 27% increase in the Apu activity and these are all of them are low and the trading and listing which is there.
Speaker Change: Part of it is.
Speaker Change: Seasonal part of it.
Speaker Change: <expletive>.
Speaker Change: Went up 9% to <unk> 70.
Speaker Change: And again, the five 7% this quarter that does not represent another level.
Speaker Change: The level of revenue in this segment is really.
Speaker Change: Kind of an opportunistic.
Deals that we did in this in this deal at this time.
Speaker Change: And landing gear. This is the key area, where we struggled with supply chain.
Speaker Change: We have many older and many sets that are waiting.
Speaker Change: To be repaired.
Speaker Change: Here in this segment the supply chain really hitting us.
Speaker Change: And it is very difficult to grow the revenue quarter after quarter. Nonetheless, we are working very hard on it.
We are buying all they needed the path and without.
Speaker Change: Hoping that theyre entering into 2025, we will see a much higher revenue numbers and the results.
Speaker Change: So that's about the segment.
Speaker Change: Next few slides to illustrate to you again the trend the trend that the company is facing in the last.
Speaker Change: In the last two years ever since we went out of coffee. So I think that the positive trend of the industry. You can see that the revenues went revenue went up from $21 million in Q3 of 2022 two.
Speaker Change: Two up to 45 50.
Speaker Change: Doubling the company in one is in terms of revenue.
Speaker Change: We're very proud of it the same you can see here in terms of gross margins on the gross margin went up from $3 four two years ago to eight five more than doubling the growth policy and the margin also went up from $16 four in Q3 of 20% to 21%.
Speaker Change: Quarters.
Speaker Change: Ingles with they are operating.
Speaker Change: But with a much much stronger base again, we managed to transfer all of our efforts not only to grow the business, but also to improve our internal efficiencies and make sure that we're making more and more money quarter after quarter.
Speaker Change: The same goes with the net income that was negative in Q3 of 2022 and went up to almost 3 million $2 9 million.
Speaker Change: Okay.
Speaker Change: Quarter.
Speaker Change: Another element that I need to draw the attention is the backlog. So the backlog is really or the backlog and the FDA is really a combination of all the long term contract that we signed during the year. According to the segment.
We are currently at the end of this quarter, we have $423 million.
Speaker Change: LTA in backlog, 52% you will see is coming from the heat exchanger segment and 26%.
Speaker Change: From the Apu segment.
Speaker Change: And again as <unk> said, we're expecting in the coming years to see that the Apu segment will grow and take a larger portion in the in the pie of our.
Speaker Change: Bank loans and long term agreements.
In terms of the business breakdown.
Speaker Change: So at the end of Q3, 'twenty, 480% of the revenue coming from the commercial activity and 18%.
Speaker Change: So I would say two years ago. It was the 30% military and 70% commercial so the company is growing more and more and more in the commercial segment.
Speaker Change: So.
Speaker Change: The portion of the pie and the cornerstone is currently 82% and we expect to continue growing the company from the core national.
Speaker Change: Okay.
Speaker Change: In terms of MRO and OEM.
Speaker Change: 30% OEM activity and 70%.
Speaker Change: All of this is constant in the last several quarters.
Speaker Change: And in terms of the geographical breakdown.
Speaker Change: North America contributed 75% of revenue Europe, 11% and the rest of the World is the rest again. This is also very constant over the last several quarters.
Speaker Change: And by this I will pass the.
Speaker Change: Page two we got a short summary.
Speaker Change: So bottom line just to summarize it.
Speaker Change: Shop presentation.
Speaker Change: We are optimistic about the future of the industry trend is.
Speaker Change: Going into right direction demand is high.
Speaker Change: Well positioned.
Speaker Change: With the right product with the right capabilities.
Speaker Change: I think that we are doing as a company is doing a good job overcoming supply chain challenges, it's never perfect, but we are probably doing and.
Speaker Change: Doing what we need to do in order to be ready for next year.
Speaker Change: And we have a lot of capabilities that we are that we can leverage.
Speaker Change: In the coming few years, so looking forward optimistically into 'twenty into 'twenty five 'twenty six.
Speaker Change: And.
Speaker Change: That's it basically for today from our end.
Speaker Change: We will go through the Q&A session now.
Speaker Change: Okay.
Speaker Change: Thank you Heiko.
Speaker Change: We're now going to open up to the Q&A session. As a reminder, there are two ways to ask the question from the zoom webcast. The first is to use the raise your hand icon, which is at the bottom of your screen Clickiness will alert us that youll want to be called on to ask a live question and then you'll you'll be placed in the queue and called on.
Speaker Change: And then just not going to be on mute until you're called on.
Speaker Change: The second way to participate.
Speaker Change: To use the Q&A widget, which I know a number of you have already done.
That will allow you to typing in texture question and I'll read that out we will take questions from there as well, but just note if we run into a time constraint.
Speaker Change: Somebody somebody from the IR team will get back to you for your question is that on today's call.
Speaker Change: With that.
Speaker Change: We will now begin and pause for a moment to build to further build the queue.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Let us begin with a submitted question from certainty mascara.
Speaker Change: On margins.
Speaker Change: Does the gross margin have further upside potential how should we think about gross margins going forward.
Speaker Change: However, what we are saying in the last few months.
Speaker Change: We are comparing ourselves.
Speaker Change: The two competitors. Unfortunately, most of our direct competitors are not publicly traded so youll not see the data online, but we.
Speaker Change: We've been exposed to.
Speaker Change: So financial report most of what we consider to be best in class companies in our field and who we.
Speaker Change: We are saying that we want to we want to be above 25%.
Speaker Change: Gross margin.
Speaker Change: Not making here looking forward statement.
Speaker Change: <unk> debt.
Speaker Change: By when it will happen, but we are working very hard and we are considering 25% gross margin as a threshold that the company needs to meet and realistically should need it.
Speaker Change: There was an additional question that <unk> had.
Speaker Change: When should we expect 131 sales to start ramping up.
Speaker Change: So this year the way that we're looking at 131 and the also the 321 500, the Apu that ourselves.
Speaker Change: 737, Boeing 737, Airbus 320 family and the buying 307.
Speaker Change: We gained full capability and FAA approval to start providing services about a year ago.
Speaker Change:
Speaker Change: We made a strategic decision to start with one off deals basically we're doing one engine at a time and not to pursue a large contract to start with a few reasons for it first of all we need to gain operational efficiencies and expertise of auto how to perform the work on this engine basically learning how to call and then to walk and then run but mobile.
Speaker Change: Important in this we needed to build a financial model that will enable us to.
Speaker Change: To build on large contracts you need to remember that most of the airlines when we did the vast majority of the contracts with the fixed price.
So you take an engine to the pieces you have hundreds and hundreds of different pilot some of them needs to be replaced some of that needs to be repaired. Some of them you can buy from the market. Some of them you can you need to buy from the OEM.
Speaker Change: Very complex statistical model and that means that you need to develop and it only comes with experience. So we said this year, we're going to chase. The one offs engine. It will help us to build a statistical model. It will help us to better understand how it works with these engines before let me go and commit to a five to 10 years.
Speaker Change: Fixed price contracts.
Speaker Change: So having said all of this we are getting the engines. We are doing the work we are developing the we are doing what we said that we will do.
We.
Speaker Change: We have a very very large opportunity funnel and going into next year in 'twenty six.
Speaker Change: Do you have more way rfps in the making than what the <unk>. So there is a huge demand for <unk> in the market not not too many competitors.
Speaker Change: That can even offer the support to airlines around the world and.
Speaker Change: So the very large opportunity funnel, and we will update and inform the market when they're when we actually secure this contract.
Speaker Change: The next there's a next question from Robert Marson on EBITDA margin targets.
Speaker Change: I wanted to combine with a separate.
Speaker Change: EBITDA question that was E mailed indirectly and it is that can.
Speaker Change: Can you share some longer term EBITDA margin target as you scale your revenue up to $300 million run rate and also what are some of the main levers of EBITDA margin expansion that you expect to pull on over the coming years as you scale the business.
Speaker Change: Yes.
I should have probably mentioned it earlier when I mentioned the above 25% gross margin.
Speaker Change: As a number where we want where we want to see the company I Should've mentioned that we want to also be above 50% EBITDA.
Speaker Change: So the specific answer is above 15% EBITDA as a company goal that we want to achieve.
Speaker Change: And we believe that it is achievable.
Speaker Change: In terms of how to get there there are few aspects first of all we invested a lot in establishing.
Speaker Change: In establishing the inflow factor for growth.
Speaker Change: <unk> the executive team.
Global fish that we established in Charlotte.
Speaker Change: The last three years or so major investments in the organization into developing the infrastructure to support the growth most of these investments in human capital.
Speaker Change: <unk> already made and we are today.
Speaker Change: Well positioned to support a much larger company so the size will bring.
Speaker Change: The size will bring.
Speaker Change: Better margins. The second factor is the efficiency operational efficiencies huge opportunities to gain operational efficiencies.
Speaker Change: As prices stabilize.
Speaker Change: <unk> stabilized then we can go back to sourcing the right part in the right by these days, we are searching for boats and in many cases, we buy deposits in a higher price than what we showed in normal times. Because then all of the supply chain is disrupted and we don't have access to add to the high spots in the REIT.
Speaker Change: <unk>.
Speaker Change: The trend is positive it remains tabulate the just a matter of time.
Speaker Change: As the industry stabilizes and we supply chain is getting more back to normal if you will.
Speaker Change: We will have.
Sure.
Speaker Change: And we will see we will see the benefits coming on the operational efficiency another factor.
Speaker Change: The employee utilization and efficiency, we hired lots of new employees to our shops.
Speaker Change: It takes time to learn how to do the work efficiently we are not going to give up on quality.
Speaker Change: Or any other regulatory demands. So there is a very long learning positive takes many many months to certify our nu.
Speaker Change: A good technician a good engine technician to be certified to perform the work on our on a specific engine picks up to six months then it takes them a few more months until they learn how to do it efficiently so with diamond with experience, we gain more and more and more and more.
Speaker Change: And benefits.
Speaker Change: It should reflect on the profitability.
Speaker Change: Just a reminder to our participants to ask a question. Please either raise your hand or submit a question. It will be a tax plan will read it out.
Speaker Change: The next question is from Iran. Franco <unk>.
Speaker Change: Regarding heat exchanges.
Speaker Change: Can you elaborate on the backlog such as the type of aircraft and platforms.
Speaker Change: And also I'll get type of heat exchange.
Speaker Change: And while you're at it.
Speaker Change: As heat exchange production in the U S or still in Israel.
Speaker Change: So okay. So.
Speaker Change: First of all hit the changes we have OEM production.
Speaker Change: Well, we are a tier one supplier to.
Speaker Change: Oh Boy, Inc.
Speaker Change: So it takes long to enbrel and to several other system manufacturer.
Speaker Change: We have the <unk> market and <unk>.
Walk.
Speaker Change: If exchange of production the OEM production is split between Israel and our facility in Tulsa.
Speaker Change: The MRO or the vast majority of them are all our work has been done in the U S.
Speaker Change: We on the OEM as I mentioned, we sell we work with they're buying so you can see <unk> products on many of the Boeing aircraft 737, Triple seven and such.
Speaker Change: Textile.
Speaker Change: Textron aircraft.
Speaker Change: Embraer aircraft.
Speaker Change: On the MLR on the aftermarket side.
Speaker Change: I believe the <unk> is probably we have the largest capability range in the industry we serve.
Speaker Change: Many different types of aircraft Airbus Airbus Boeing and many others by the way of commercial and military also on the OEM I forgot to mention is commercial and military.
Speaker Change: And we have the capability to support until repair into overall units.
Speaker Change: <unk>.
Speaker Change: All of the units that we are producing is OEM, obviously, but also many other units that we don't have we're not that OEM, but youll sell but we are one of the industry leaders.
Speaker Change: And on the overall site.
Speaker Change: I hope to answer all the questions.
Speaker Change: Okay, then moving on.
Speaker Change: Can you clarify the comments you made about the seasonality in the business.
Speaker Change: What type of seasonality you typically expect did.
Speaker Change: Did we see it last year and what did we see this year.
Speaker Change: Yes.
Speaker Change: I don't think I don't think thats. It can talk about any but the last year or the day before that there's anything normal it was completely crazy last year, we had a huge backlog of.
Speaker Change: Walk that we Couldnt ship out and we were struggling to find materials and bought than what they were getting out of coffee the industry was in such a.
Speaker Change: It's such a big mess that Asia was not revenue the issue was.
Speaker Change: Eastern was how to think about how to find employees and make sure that we have what it takes to to to.
Speaker Change: To catch up.
Customer demand, but if you look at the comments by the way there is no big drama in Aerospace I I've been in <unk> for nine years, we never saw any big spikes or deep.
Speaker Change: But traditionally.
Speaker Change: I'll split it into two sections festival cargo, which is.
Which is a.
Speaker Change: Central portion of the business is cargo operators.
Speaker Change: They turn.
Speaker Change: To minimize them and repairs doing the top season before the holiday.
Speaker Change: They try to keep the fleet flying during the holidays, they do more repairs.
Speaker Change: In the summer obviously when they have.
Speaker Change: When they are failures have to repair, but the general saying when it comes to plan the maintenance they tried to minimize the doing the.
Speaker Change: Yes.
Speaker Change: <unk> fourth quarter and do more of it somehow.
Speaker Change: And when it comes to commercial airline on the on the MRO side.
Speaker Change:
Speaker Change: Just because of the volume of traffic during the summer months.
Speaker Change: And the high temperature.
Speaker Change: You tend to see.
Speaker Change: A little bit more demand for repairs.
Speaker Change: OEM is stable.
Speaker Change: I don't know that we have any seasonality on the OEM on the military side as well.
Speaker Change: We don't have any seasonality.
So.
Speaker Change: <unk>.
Speaker Change: Typically typically.
Speaker Change: If we look at.
Speaker Change: Previous even before Covid, we cannot draw any conclusion from the last two years, but if you look historically.
Speaker Change: Fourth quarter tends to see it tends to be more flat.
Comparing to the previous quarter than not.
Speaker Change: Not expecting any big Spike positive Spike a few weeks, but also not expecting any decline or anything.
Speaker Change: And then there is an additional question from Robert Marson around.
Speaker Change: Yes.
Speaker Change: Can you talk about any efforts to domicile in the U S and get more American investors into the shareholder base.
Speaker Change: Can you. Please repeat the question Im not sure that I understood. It.
Speaker Change: Can you talk about any efforts to domicile of the company in the U S and to attract.
Speaker Change: North American investors and to the shareholder base, perhaps talk a little bit about.
Speaker Change:
Speaker Change: The presence in North America sort of the marketing efforts and the outreach that they were all collectively doing too.
Speaker Change: Spanned the diversified shareholder base.
Speaker Change: So whether if you think a say a few words and maybe Ed would want to.
Ed: To add few things, but first of all if you look at that.
Ed: And is most of the business in the U S employees.
Ed: Let's start with that.
Ed: Our group office.
Ed: We are all based here in Charlotte North Carolina.
Ed: If you look at the employee count.
Ed: Most of the production in most of the customer base I would say, it's more than two thirds in the U S and North America, if you will.
Ed: And.
Ed: So the covenant the companies really.
Ed: But having said this we are now.
Ed: We're making tons of efforts toward to expand all over the world activity.
Ed: The fastest growing markets in aerospace is APAC, and China, and we definitely want to be larger than we are making efforts.
Ed: So we just started a couple of months ago, the activity definitely planning to do a much more even this call today first time that we have an earnings call with U S. Investors historically, it's both not only with Israeli investors.
Ed: So definitely looking forward to expanding the activity to drastically expanding the activity to become much more involved in the U S market as the company grows and it shows.
Ed: Performance that is more in line of U S investor expectation.
Speaker Change: Yes, just to add on it obviously, we're spending a lot of time and effort again selling the story to the Investor community.
Speaker Change: R&D participate there.
Speaker Change: Since June when we started the program.
Speaker Change: We participated in two larger conferences, one in New York and London.
Angela just two weeks ago, and we expect to too.
Speaker Change: To participate in another.
Speaker Change: An important conference in New York on December 11, and hopefully will be will have the time.
Speaker Change: The opportunity to meet each one of you.
Speaker Change: Yes.
Speaker Change: We have additional question here from Sergio Heber.
Speaker Change: <unk>.
Speaker Change: And you and the <unk>.
Speaker Change: When you talk about the competitive landscape.
Speaker Change: Across.
Speaker Change: Across your business and so do you consider to be.
Speaker Change: Primary competition.
Speaker Change: Yes so.
Speaker Change: I would say one thing that we as part of our strategy. We are the biggest strategic shift that we had in the last few years, we've decided to focus the company is on key areas of the four pillars that we have today and the strategic product hit the exchange.
Speaker Change: It builds lending in the trading.
Speaker Change: But the key consideration was that we want to be in one of the industry leader in.
Speaker Change: And what we do so we don't we don't want to go into commodities, we don't want to be just another vendor that does something and if you look at aerospace in the areas, where we active.
Speaker Change: We are we are out there in a sense that we are a known entity.
Speaker Change: A significant player I believe that on the heat exchangers. We are one of the leaders in the industry in terms of size and performance.
Speaker Change: But also when you look at the Apu and landing gear with our vast experience in the types of products that we are providing the services. We are definitely a known player in the industry in most cases, we have several competitors.
Speaker Change: Many of them.
Speaker Change: I'd say there you could split them into two with the Oems themselves are competing with us. So we are.
Speaker Change: We go there and we're competing with Honeywell, which is the OEM for the IPO. If we if we go after the larger contracts.
Speaker Change: On the heat exchangers, MLR or if we if we go after.
Speaker Change: Larger airline business, we will compete we will probably be competing with the OEM on the on the eighth exchanges, whether again, whether it's the Honeywell <unk> Colleen.
Speaker Change: But.
Speaker Change: In all cases across all product lines, you will see that we have any way of former one to two maybe at the most four or five competitors.
Speaker Change: So the world is very large, but when you look at the aerospace and how many players have the capacity and capability to do a certain.
Speaker Change: Certain type of work.
Speaker Change: Only a handful of them.
Speaker Change: And.
Speaker Change: So a whole lot of opportunity to.
Speaker Change: Two to build momentum into and to make progress.
Speaker Change: If you are providing better service than the others and none of the services that we are providing our seedling considered by our customers to be a comorbidity. So.
Speaker Change: Well, it's always player.
Speaker Change: In fact, all by the service the quality.
Speaker Change: Ability being able to solve customer problems is another key factor that we all are.
Speaker Change: We're working very hard to improve and to stand out as a better provider than their competition.
Speaker Change: Okay.
Speaker Change: So we had had an earlier earlier question regarding backlog, but I think it was specific to heat exchanges can you talk overall about the.
Speaker Change: The company's backlog.
Speaker Change: What is it what it means this is the full annual potential revenue.
Speaker Change: Over certain number of years, how would you like investors too.
Speaker Change: Consider that metrics.
Speaker Change: Okay. So when you think about <unk> changes what we.
Speaker Change: We present the.
Speaker Change: In the backlog and LTA value it consist of two actually.
Akshay: Akshay consists of three different elements.
Akshay: On the OEM side, we have we are under contract to be the boring textile under the NAND, whereas in others.
Akshay: They are providing us their forecast.
Akshay: Based on what they are planning to build in the next few years.
Akshay: So.
Akshay: When we look at the next few years the forecast of fuel as part of the of the long term.
Akshay: Value that we have.
Akshay: As time goes by the focus is being replaced with better soldiers.
Akshay: For the in most cases, we have full coverage of purchase orders already for 25. So once we get the actual purchase orders for next year.
Akshay: We are taking out the forecasted numbers and we are replacing it with the actual deals that we're receiving.
Akshay: From the customer so the OEM side, what Youll see is the forecast for the coming.
Akshay: A few years and next year actual lpl's.
By the way in most cases, the actual deals that we are receiving these days are higher than what we have in the forecast that we see a major increase in demand from the Oems.
Akshay: On the <unk> side.
Akshay: Once we secured a contract.
Akshay: If we win a contract with a major airline and they will give us data historical data and they tell us how much do you expect to.
Akshay: To use us.
Akshay: For the duration of the contract and Thats. The number that we blogged gained for the duration of the contract once we get the actual index the actual work obviously.
Akshay: It replaces the forecast with the actual work that we have inability to.
Akshay: To perform.
Akshay: And again here when we look at this year.
Akshay: So far year to date in all cases, we received more actually substantially more than what we had in the original forecast form I would say almost everybody.
Exceptions, most of the customers are shipping are smaller than what they are.
Akshay: Anticipated at the beginning of the yields.
Akshay: Yeah.
Akshay: Yes.
Akshay: Thank you Hugo.
Speaker Change: So we there are additional questions and despite that the IR team will get back to you. After the call to to help provide you with answers to those questions is we are up against our time I'd like to turn it over to you for brief concluding remarks.
Speaker Change: So first of all again I appreciate everybody for taking the time to join us today.
Speaker Change: We're looking forward to seeing you in person in one of the conference call.
Speaker Change: Definitely to address any questions that you have if you contact us directly.
Speaker Change: We are happy with the results of the company is on a positive trend. We are looking forward optimistically into the coming two years, we have lots of opportunities.
Speaker Change: We feel that our new strategy is working for us. So we have lots of leverage.
Speaker Change: We can exploit in the next few years and looking forward to some.
Speaker Change: To continue.
Speaker Change: Continued making progress so.
Thank you very much.
Speaker Change: Yeah.
Speaker Change: Goodbye.