TAT Technologies Q3 Revenue Rises 20% as Margins Expand

TAT Technologies reported record third-quarter revenue and profitability as growth in auxiliary power unit services and trading, leasing and distribution lifted sales, while a favorable product mix and cost controls supported a sharp expansion in margins.

Revenue for the third quarter of 2026 rose 20.2% year over year to $55.6 million. Gross profit increased 48.2% to $17.2 million, with gross margin reaching 30.9%, up 580 basis points from 25.1% a year earlier.

Operating income climbed 71.8% to $9.0 million, and operating margin expanded to 16.3% from 11.4%. Net income increased 58.6% to $7.7 million, while diluted earnings per share rose 57.8% to $0.58.

Adjusted EBITDA, a non-U.S. GAAP measure, advanced 60.9% to $10.9 million. The adjusted EBITDA margin widened to 19.6% from 14.6%. TAT attributed the margin gains to product mix, contributions from distribution activities and disciplined cost management.

For the first nine months of 2026, revenue increased 13.8% to $149.6 million and gross profit rose 25% to $40.5 million. Nine-month operating income grew 27% to $17.6 million. Reported net income was $19.7 million, including a gain from the sale of a minority interest in First Aviation, and reported diluted EPS was $1.46.

APU and distribution businesses lead growth

APU revenue increased 34.4% from a year earlier to $19.6 million in the third quarter, accounting for about 35% of total revenue. TAT said the operation returned to a full run rate amid robust customer demand. For the first nine months, APU revenue grew 26.8% to $48.6 million.

The company provides maintenance, repair and overhaul services for several APU platforms and operates as a Honeywell-authorized service partner. Management identified the business as a major growth and profitability driver, supported by OEM certifications and an addressable market it estimates at more than $2.5 billion.

Trading, leasing and distribution posted the fastest percentage growth. Quarterly revenue surged 85.5% to $8.0 million, representing about 14% of company sales, while nine-month revenue rose 42.9% to $17.6 million. TAT said the increase reflected strong trading activity, expanded distribution and its broader relationship with Honeywell.

The business includes a leasing inventory of 29 APU engines as well as trading in APU parts, heat exchangers, landing gear and other aviation components. TAT positions these offerings as a way to help customers manage shortages and supply-chain constraints while using the company’s in-house MRO capabilities.

Thermal Solutions remained a stable core business, generating $18.8 million of third-quarter revenue, up 7.3% year over year. The segment represented approximately 34% of total revenue. Nine-month Thermal Solutions revenue increased 5.2% to $56.5 million, reflecting demand from OEM and MRO customers.

Landing Gear was the principal weak spot. Revenue declined 45.4% to $2.1 million in the quarter and fell 23.8% to $7.0 million for the first nine months. Other product lines generated quarterly revenue of $7.1 million, up 18.3%.

TAT ended the quarter with a backlog of $577 million, supported by relationships with more than 300 customers and long-term agreements. The presentation did not provide a year-over-year backlog comparison.

Cash generation and strategic priorities

Operating activities generated $3.8 million of cash during the quarter, down from $7.5 million a year earlier, even as TAT invested $10.6 million in inventory, mostly in connection with its distribution agreement. Operating cash flow for the first nine months totaled $5.2 million, compared with $9.4 million in the prior-year period.

At quarter-end, TAT held $53.7 million in cash and $11.1 million in debt, resulting in net cash of $42.6 million. Debt equaled 0.32 times last-12-month adjusted EBITDA, while shareholders’ equity represented 77% of total assets.

Management’s growth strategy centers on expanding APU services, Thermal Solutions and trading, leasing and distribution. The company also said its infrastructure is positioned to support acquisitions intended to add market share and capabilities. Longer-term development areas include thermal systems for electric and autonomous aircraft, additive manufacturing and 3D printing.

TAT did not provide quantitative financial guidance in the presentation. Its plans depend on continued customer demand, execution of distribution and inventory investments, and the development of aviation MRO and aircraft-production markets. The company also cautioned that forward-looking statements are subject to substantial risks and uncertainties and that actual results may differ materially from management’s expectations.