All right. Ready to clock. Let's do this. All right, everybody. Everybody in the room and also listening online, welcome to Planet MicroCap Las Vegas, powered by MicroCapClub. I'd like to introduce our first presentation here in Track Nine. We have TAT Technologies, a Q&A moderated by Gene Robin from Wasatch Global. Thanks, Bobby. Just real quick, compliance department I have to say this, let's see, Wasatch is $23 billion, and we have about $1.3 in micro. Been shareholders of TAT for a while. Currently shareholders across both the funds. This is not an endorsement. Do your own work. This is just for informational purposes only. Okay. With that, Igal, maybe we can start with just maybe your own journey to TAT and maybe a background of who you are and where you came from, and then you can give everyone a high-level overview of what you guys do. Sure. Thank you very much for coming today. Happy to be here. I've been the CEO, Igal Zamir, based in Charlotte, North Carolina. I've been the CEO of the company for the past 10 years. Been in different industries throughout my life, CEO of various companies in retail, consumer goods, technologies, and TAT for the last 10 years. Common denominator for everything that I did throughout my career is turning companies around and then building value across different industries. Doing the same thing with TAT. TAT was established about 70 years ago, what we did in 2019 with the new strategy that we developed is basically completely changed the way that the company was operating, the business lines, the structure. We leveraged COVID as let's call it, as a perfect storm, if you will, to restructure the company, decided to really focus on three product lines, APUs, auxiliary power units for aircraft. It's the engine that we don't see, the failed engine that we don't see, that is situated at the back of the aircraft, used for like generator, if you will, for the aircraft when it's on the ground and in emergency cases during flight. That's one line of business, landing gear and thermal components, I will explain more about the company in a second. We decided to focus. We eliminated a lot of other product lines that the company had. We streamlined the customer base. We signed several strategic agreements in 2020 and 2021 with key industry players, expanding our capability range, restructured the organization from four independent companies to one company that is based in Charlotte and has three operating sites. During this process, we saved a lot of money. We invested heavily in production capabilities, equipment, technologies to bring us to the modern world, we did all of this, moved facilities from one facility to the other, all of this during COVID. We also made strategic inventory purchasing, expecting the industry to be in a supply chain rupture after COVID. Started in Q4 of 2022 when the industry started recovering. We were there. We were ready. We never fired anybody during COVID. We actually were hiring people, establishing ourselves, investing in technologies in the business line, strategic agreements with Honeywell, with Gulfstream, and with others. When the industry started recovering, we started growing very fast. All in all, we are breaking our own records almost every quarter over the last three years, drastically improving revenue, profitability, profit margins, EBITDA, and everything else. Dramatically increased our backlog. We are announcing every couple of weeks of more deals that we are winning. In comparison to the range of $180 million-$200 million value of backlog three and a half years ago, the last thing that we announced with the last earning call was $580 million, and since then, we announced additional $40 and change million dollar of new contracts that we won. The company is growing very fast across all business lines, recently we added M&A, and I'm sure that we'll talk about it in a second, but we are very actively working to expand inorganically. In terms of the product lines, again, thermal components. On thermal components, we have OEM production. We are a tier 1 producer for Boeing, Textron, Embraers, and others. You can find TAT heat exchangers or oil cooler or whatever in many of the Boeings that are flying Boeing 737, Boeing 777, and others. F-15 units. We are the original manufacturer for tier 1 to Boeing. Same thing with Textron. You will find our heat exchangers and oil coolers in all the Cessna aircraft. We've been doing it for them for more than 30 years. The same thing on the Embraer fleet, where you can find our product. That's on the OEM side. We are also the largest player, as far as I know, we are the largest player in the industry in aftermarket support, so repairs and overhauls of these units. In the aftermarket, we have extremely wide range of capabilities. It doesn't matter if we are the OEM producer of the unit or whether Honeywell produced it, Liebherr in Germany or Collins Aerospace in the U.S. We provide the services to all of their capabilities. Any airline in the world is a potential customer, and we can cover almost any platform that is flying today in terms of repairs and overhauls of thermal components. We have about close to 300 customers today across the globe, starting with American Airlines, that we do all the heat exchangers and I can give you lots of names, but starting from American, going to JAL and ANA in Japan, LATAM in Chile, Korean Air, Qantas, and whatever. We also do all the aftermarket work for Collins Aerospace. We support them. Anything that they get on the aftermarket comes to us. We do a lot of work for Lufthansa Technik, Air France. These are maintenance organizations that are doing full overhauls for the aircraft, and they're sending us the thermal components to do, and we perform all of this work in Tulsa, Oklahoma. That's thermal, OEM, and MRO. When it comes to APUs, the engines, and landing gear, we provide only MRO services. We don't have OEM production over there. On the APUs, we are working under licenses with Honeywell. We have 4 strategic agreements with Honeywell on most of the range of the Honeywell APUs. Just for you to know, Honeywell has about 85% market share in APUs, so it's only them and Pratt & Whitney, but Honeywell dominates the market. Honeywell themselves, they are the producer of the APU, but they're also providing repairs in their own shops in Phoenix or in Germany, in Raunheim or in Singapore. They have several authorized repair station partners, if you will, and we are one of them. We are providing services across three strategic platforms of APUs. In one of them, all the APUs that are in use for the Boeing 757, 767, we are the exclusive provider for, or the exclusive licensee by Honeywell. We are growing very fast in this segment. The second platform is the APU that is used in the Boeing 777 aircraft. The third one is called the 131 APU. That's the holy grail of APUs. It goes to all of the Boeing 737 and Airbus 320s. In landing gear, we provide services to regional jets. We do the landing gear overhauls for Gulfstream, for Embraer 175 aircraft fleet, and ATR fleet. All the businesses are growing. There is a major demand. We perform much better than our competition, and we win lots of business. That's the business to date, if you will. Okay. Well, that's not a brief overview, but maybe if you can help people understand the actual size of MRO in terms of the APUs, because you listed the three core ones that you have. Maybe break it down by your actual market capture rate for each one of them, and then. Sure What you guys are doing there. When you think about the APUs, by the way, the APUs is our fastest-growing platform. It's a multi-billion dollar addressable market. A couple of good billion dollars. It's kind of a phase strategy. Honeywell, as an OEM, really focus on the future. On the newest version, it's called the 131. That's the holy grail, if you will. Obviously they put all the attention there, fighting everybody, including their own partners. You go to the engine that is in use on the Boeing 777. Over there, they are less focused. You go to the older versions, they decided to move the entire production to us. Just to give you the magnitude on the 131, which is long-term huge opportunity for us to grow, it's in the range of $2 billion. Any number is a winning number, yes, but it's a huge market. There are about 16,000 engines flying today and growing fast. If you look at the industry projections, it's going to get to the range of 25,000 engines flying in the world in a couple of years. On the 777, rough numbers, $400 million business globally, 1,500 aircraft before Boeing starts manufacturing the 777X. Right now, it's about this size of a fleet and roughly the magnitude of the business. On this business is just us, Honeywell, and a company by the name of Epcot from Holland. They are owned by KLM in France. That's the world. Any airline in the world that needs to repair its APU has to go to either, again, either Honeywell, Epcot, or TAT. We are the newcomer. It used to be only Honeywell and Epcot. In the last two years, we started providing, and we are growing this business very nicely, and we already signed several strategic agreements and long-term contracts. Companies like DHL and FedEx, I'm sorry, and such. This is growing very nicely. A huge opportunity to grow the business. On the third platform, which is more of the historical platform, Boeing 757, 767, we are growing extremely fast. Honeywell gave us exclusivity. In reality, we are competing only with one non-authorized company, and we are growing very fast. We still have an opportunity. Today, it's about, let's call it $50 million-$60 million that we have, and we can grow it. We can still continue growing it, almost doubling it in the next few years. I estimate the market to be between $100 million-$120 million. The current market, most of this fleet is converting to cargo, and the expectation is that they will keep on flying it for the next 20, 30 years. We already have the entire cargo fleet. FedEx, UPS, DHL, Amazon, they are all under contract with us. There are still several commercial airlines that are flying this fleet, like United, and LATAM in Chile and others. We are actively working to expand the business. Again, 110, 120 on the old platform. We currently have half of it global market share. On the 777, it's about, let's call it $400 million, 1,500 aircraft in service before the X starts being produced. We have lots of opportunities that we just started. We have single-digit market share, and which we obviously want to grow a lot. The 131, that's the long-term huge opportunity. As the industry continue to grow and Honeywell does not have enough capacity to deal with the demand, they will start offloading, and that's the long-term strategic goal. There are lots of opportunity to double and triple TAT size, overall size in the next couple of years, just from the APUs before the other businesses. I think five-year CAGR for you guys has been about 20%. Maybe you could break it down going forward for everyone from the organic side, and then talk about some of the inorganic things that you guys have been doing. Yeah. Yes, we've been growing very fast post-COVID. The demand is there. There is huge demand. We all know that Boeing and Airbus are way behind the production schedule for new aircraft. I think that the waitlist is now 12 years, give or take. Nobody's expecting recovery before 2035. If you place a PO for a new aircraft today, you'll get it in about 12, 14 years. Good luck. It forces the industry to continue flying the old fleet that was supposed to be retired. As a result, there is constant growth in MRO demand, repairs and maintenance for old fleets. The key challenge, the industry as a whole is really struggling with supply chain, dramatic supply chain crises and struggles. If you read the reports from all the big players in the industry, they still haven't figured out how to overcome the challenge that they caused to themselves during COVID. They shut down. They send thousands and thousands of people home. They lost a lot of capabilities, a lot of manpower, skill. four years later, they are still struggling. What we did in order to overcome it is, first of all, we never shut down. We were hiring people when all the rest were firing, and we invested a lot in strategic inventory. What we do today, we don't wait until the order come and then place the PO for the inventory, but rather we place PO strategically, sometimes a year and sometimes 18 months in advance to make sure that we will have the parts. You can see on our balance sheet, we are sitting on a huge, for the size of the company. As an industrial engineer, I can't stand it when I'm looking at our balance sheet and seeing how much inventory we have. I look at it as a strategy right now, not as an operational inefficiency. We buy way in advance, very large quantities, $80 million inventory. For a company in our size, about $50 million of it, give or take, is APU inventory. It's crazy high, but strategically it gives us huge advantage because if you send your APU to many of our competitors, you will have to wait six, seven months before they even open the box and take a look at it. Then again, unless if you're a very large strategic customer, it can take you up to 12 months to get your engine back. If you send the same engine to TAT, we open it the following day and typically within 35 to 60 days, it's back in your shop. It's a huge advantage over competition these days, and which we leverage. All of this brought us a lot of new business over the last few years, and on average, give or take 20% year-over-year growth in an industry that grows 4%-6%, just to give the perspective. We were growing much faster than the industry. I don't believe that it's not sustainable for many years to come. We definitely plan to grow much faster than the industry, but it's not going to be in the 20%, 30% year-over-year. Let's be realistic. Our plan and ambitious is to grow double-digit every year-over-year, which is double than the industry. It's not enough. Now we are getting to the second phase in our life, adding M&A. In order to grow the business, there are two ways to grow the business. Keep on chasing more and more customers with the same capabilities, then we have a limited amount of capabilities that we are offering to an airline. The different strategy, which is the one that we are taking, is add more capabilities so we can go to the same customers with a much bigger line of capabilities. We have great relationships with airlines due to our performance. Now the idea is, okay, we do your APUs and we do your heat exchangers. What else do you need? Looking for acquisition to acquire companies that will give us more and more MRO capabilities to become much more meaningful to the airlines. When I'm looking forward to your question, I think it's going to be the growth to the projections for the. We are very ambitious in our growth projections for the. We don't publish our forecast, but we are very aggressively working to grow the business fast in the next few years and coming few years, leveraging the situation. It's going to be probably 50/50 growth, organic versus inorganic growth. It really depends on the types of deals that we will be able to close on the M&A side. Some of the deals that we are looking at are smaller, and some of the deals are much bigger, so it really depends. The other thing that I think people should know is, I think when you first came in, the gross margins here were high teens, and I think you guys have started to print mid higher, lower end of the high 20s. Maybe walk everyone through what the right mix is for you in terms of MRO versus OEM, and then how that translates into the future operating income margins. Yes. A few things. First of all, in the last few years, Gene already knows it, but I don't know if many publicly traded companies, if you come to our offices, our number one goal is to strengthen leadership because we are growing fast and we need to continue. Before we even talk about revenue, we talk about scaling and building the infrastructure and support. The second thing is profitability. For me, I'm chasing profit, I'm not chasing revenue. I don't care for revenue if it doesn't come from profit. Over the last few years, way before we even. We are growing very fast, but believe it or not, when we meet in the leadership team, the key discussion is how do we become more profitable, not how do we grow fast. Fast growth for the sake of fast growth is not interesting. We invested a lot, and we are still investing in productivity and employee utilization, streamlining the production lines, adding a lot of new in-house repairs to avoid the need to buy new parts from the market, adding a lot of trading activity, so we can buy engine, old engines, tear them into the pieces, and repair and overhaul the pieces and use them. As an outcome of all of this, like Gene said, we had a dream a couple of years ago and started sharing the dream that we want to be at a 25% gross margin and 15% EBITDA, and we are already there. I can tell you that we still have tons of opportunity to continue in improving the margin. We are not publishing projections, but we are in a much better phase. Second question that Gene asked. When you think about the business, we have OEM and MRO. OEM, new production. You win the contract, it's yours for the life of the program. We won the F-15 heat exchangers 45 years ago, and ever since then, as long as Boeing will continue producing new F-15s, we will be the supplier. If you have a good contract that protects you can make very nice margin. The margin on the OEM are much higher than the MRO. Having said this, the sales cycle on our OEM is much, much slower. You need to wait until new platforms are being developed, and then you can add your capabilities. It's very solid. Nobody can take it from you. You can make tons of money, but it goes slower. MRO is growing faster, but typically the margin are more compressed because there is competition, and every three to five years, the airline will open an RFP, and you need to be competitive. There is much more of a price pressure on the MRO. In general, saying MRO is growing much faster if you do a good job, but the margin is lower. The idea and our strategy is to try to keep the right blend. It's about 70-30. Right now, MRO is growing faster in the last two years, but we are working very hard to bring more OEM to the mix to keep the ratio between the two. Volume from the MRO and more profit from the OEM. Great. One of the other things that I don't think people appreciate is the Honeywell relationship allows you guys to have a preferred pricing strategy that prevents people in the gray market from really competing. Maybe if you could help people understand how your relationship with them helps you create a moat. Yeah. Just to give you a perspective, up until 2019, you could work with Honeywell and Pratt & Whitney on two versions. You're either licensed, and then you have access to their parts at a very high discount, but you have to pay them royalties from your revenue, or you can be non-authorized, like a gray shop we call it, and still enjoy parts. It was called parts agreement. You can buy the parts with a discount from the airline catalog. Both Honeywell and Pratt & Whitney in 2019 or 2020 decided to kill this notion of parts agreement. Basically giving the entire industry two options. You're either staying our partner and then you pay us royalty, and you have to use our parts and you cannot use what's called PMA in the market, like private label parts, or don't be our partner. If you want to buy parts from us, we have a new catalog for you that is way higher than what the airlines are paying. Basically today you have, it's called MRO general catalog. If our competitors wants to buy something from Honeywell, they have to pay X. If an airline needs the same part for its own use, they are paying typically half of X. If we are buying the same part for our use, we are buying it at 60, 70, 80% below the airline price. The other side, we do need to pay royalty. When it comes to competing with the non-authorized shops, we have a huge advantage post-COVID. Their entire business model was based on buying engines, old engines, tearing them down for the parts, repairing the parts, and using them. Up until 2022, for example, for the Boeing 767, we were buying engines also, but at $30,000, $40,000. Today, the same engine is sold in the market, if you even find it, for $400,000, $500,000. The whole economical model of buying an old engine and tearing it doesn't work anymore, and it gives us a major advantage in cost and pricing. In the time we have left, maybe talk through the land and expand model where you have a deal with DHL on the 200 series, how that actually works out in terms of helping you get into the first look on their 777s, your and the tentacle spread out from there. Yeah. Again, after the COVID, we barely had any customer. We had two or three customers that were buying more than $1 million revenue a year. With the new strategy that we implemented, we have customers that are now in the dozens of millions of dollars. We started with one product line, then a second, adding. Today we have several customers. We provide a wide range of capabilities, and it's adding to a massive business. Obviously, you start working with a new airline, you develop relationship, you do a good job for them, they want to give you more business because it helps them consolidate vendor base. It becomes easier and easier to get more and more business if you do a good job. With the M&A, for me, that's the most exciting thing about TAT when you look at the future, is the M&A. We have an opportunity to drastically increase the size of the company and the value that the company brings to the world, by consolidating more and more capabilities and being able to offer meaningful capabilities to the airlines and help them reduce the amount of headache that they have, which is enormous. We are actively working on it. We have a great team, just a matter of time before it will happen. I don't know if we can save a couple minutes for Q&A. I just had a question about your M&A strategy. Is it more so that you're looking for smaller companies that will be able to increase your capabilities or be able to put gas on fire? Is it more so larger companies that can expand your capabilities and just bigger? Yeah. I'm looking at a series of acquisitions over the coming few years. Not necessarily looking for smaller. It's the same headache whether it's small or large, but again, large to a certain degree. Yes. We are looking to start from a strategic standpoint, first of all, we have three parallel tracks. Right now we focus on two of them. The tracks are on the MRO to add all the capabilities that I just mentioned. On the OE side, on the production side, we want to expand our thermal capabilities and to add more of the system components into the mix. We are very strong in certain components. We want to expand our presence into the engine world. We want to expand our capability to other side of the environmental systems to have more capabilities, so we can produce the entire system in-house and not just the components. The third track is going to be geographic spread, not as a starting point, because I want to make sure that we develop the M&A muscle and the integration muscle. Right now we focus on U.S.-based companies. In second phase, next year or the following year, when we feel confident enough, we want to expand into Asia and Europe to be close to customers. In terms of size, I'm not looking for small companies, but again, not gigantic companies, but let's call it in terms of revenue, $50 million-$300 million. That's the range of opportunities that we have in front of us. We are looking for profitable companies with good management teams, companies that are growing, obviously, accretive deals. The idea is companies that will be easier to integrate without diving into turnaround situations or special cases. Trying to focus on companies that will help us to continue improve the margin. I think we have more. [inaudible]. Sure. When you guys lost a lot of, or when other companies lost a lot of employees and skill sets during COVID, were you guys able to pick up [inaudible]? Yes, definitely. Having all those other companies lost those skill sets and employees, does that make M&A easier for you? Are these companies, the management teams, more willing to sell their companies because they don't want to deal with the headache of being understaffed and not having the skill set? Not necessarily because it doesn't tie to our strategy. We are not looking into. Many companies in the industry are in tough shape. They lost capabilities, and some of them are losing money or whatever, but we are less focused on them because I prefer to buy solid companies with good performance and get from good to great, rather than going back into turning companies around and whatever. There are plenty of companies that are out for sale in a bargain price, but then you need to invest a lot of time after the acquisition in integrating them and fixing them, and then it will come on the expense of adding more capabilities. I prefer, time will tell. We need to have willing sellers, but the idea is to buy solid companies with good performance. One more, I guess. Zamir, thank you so much for the presentation. If you had a silver bullet, which competitor would you like to get rid of? Which competitor do you look up to today? If I learned something in my career across different industry, you cannot get rid of competition. You buy one or fight with one, another one will come. It's rarely that you get 100% market share. It happened to me one time in my life, but I don't count on it. That's not a strategy. I think that, from a strategy standpoint, I'm not concerned about competition. Actually, I welcome competition. It's good. It's helping me. I'm more concerned about the customer. The key question that I have when I'm looking at acquisition is not, do I take a competitor out of the market? Rather, am I bringing added value that will give me the protection with the customer? If I have a customer and today I'm just selling the customer the heat exchangers, I'm vulnerable, if you will, because it's a tiny portion of the customer business, and somebody can always come and offer them 10, 15% discount, and then we have a risk of losing the business. If the same customer, you're providing a wide range of capabilities, and now you have a major business, they're not going to replace you as a vendor of one of the components because they look at the overall package. The strategy to protect ourselves against competition and against price pressure is to be able to provide added value to the customer, and that's the focus. Thanks, Igal. Thank you very much.