TGI - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Triumph Group Conference Call to discuss our Second Quarter Fiscal Year 2018 Results. This call is being carried live on the Internet. There is also a slide presentation included with the audio portion of the webcast. Please ensure that your pop-up blocker is disabled, if you're having trouble viewing the slide presentation.

listen-only a in currently mode. You're a There comments following introductory session management. will be by the question-and-answer On company, of following behalf the statement. read like the to I would now of forward-looking Certain XXXX. of within call on Securities constitute statements the Reform this meaning the Act Private Litigation statements cause involve be may forward-looking materially performance any future actual These different factors, forward-looking uncertainties or other or results, or the and from statements. known statements results, implied achievements risks, performance unknown and which Triumph's to in expressed achievements expected note is press non-GAAP on GAAP can Please company's measures financial of found www.triumphgroup.com. that reconciliation included the to comparable their be release, measures website at the in which

without please and At this explicit Triumph that note like is call time, Group, I addition, would may J. and property Officer; recorded, Inc. and be now Group, of introduce Crowley. rebroadcast ahead, written Chief company's In not Vice James Financial to Mr. F. approval. the this Inc. or Officer Daniel and President Jr., of Triumph Senior transcribed go Chief President Executive Crowley, Please McCabe,

Daniel J. Crowley

business Hey, morning. by our Triumph's on improving call quarter, Triumph Welcome and solid quarter thanks, results. profitability new good conference second had marked to a and Kevin, second wins.

improving into doing organic our months Triumph strength, foundation solidifying margins our XX for sheet turnaround, the growth, and balance Now so, profit in is generating and the future.

challenges flexibility. improved resolve financial operational debt customer satisfaction. address our financial and significant performance Since our to contracts in remains transformation in our and our is track refinance strength on customers with results Our and loss-making the have actions to yielding and working year, earlier

in leading of saw As performance, improving a profitability. we the continue cum we operational catch-ups indicator improve positive a quarter, to program

and our account share X, for earnings Looking restructuring, we per at refinancing when costs, divestitures were $X.XX. adjusted page

guidance to billion. of Free the revenue the guidance supports Revenue $X.X earnings of million production. in are to million our the inventory and share full $XXX billion focused quarter on earnings of of year we stronger of of of XXXX quarter programs our full Global year $XXX $X.XX, into investments, previous on development quarter-over-quarter. delivering transition are in $X.XX and cash $X.X $XX maintaining use liquidation million per spending We adjusted the advances, as cover customer primarily

and We after year of and have our calls, robust upgraded in is development $XXX CapEx business and A more book-to-bill applying cash business are Triumph's to planning full relearning spot billion, two-year capture our year-to-date. I goal X% our maintaining increase million our pipeline our bright mentioned In increase decades and military to restoring prior our team process by business. product growth to guidance controls to focused capital. $XXX and acquisition. pursuits, of and $XX has use and development to entrepreneurial by new strategies our helped discipline win A million how spirit backlog working on strategic transformation us our

Specifically, from to I want of next sales years. XX% to the increase in revenue our XX% three over defense

exposure and our opportunities odds have help will opened Grumman OEMs, in revenue doing with with partnerships segment we demands. a many help balance X to total $X cash Our $XX suppliers billion doors the years follow-on business, announced Boeing the and Triumph new Tier ahead. the Northrop which reverse are of over of and its contains when so at billion At time, will Triumph defense market pipeline contraction

which lean the now lean-related chain conducted is a savings to our savings. long needed. and happening visits the journey, more allow cost times. where transformation X, to cost reduction of across efficiency quality firsthand a starting span slide given with of XX% the with my XXX to many see take continue events, me company, activity out, to over and XX% Year-to-date, improving supply sites catch up to of improvement typically Turning we we drive is XX-plus while to but This

this We count savings efforts roughly In in and Systems-Maryland our QX, feet. West $XX building accelerating into sites the wind year's square on expect Farnborough, the site. goal divestitures, to last of in U.K. from chain announced our down nine of sites. million by last reduction $XX and reducing cost our savings and to our the supply million, We're X.X as sites FY goal so our We reduction of consolidation halfway consolidation Connecticut and million. Since our business plus the the XXXX began noted. towards of of achieve footprint to our announced reduction brings site three three efficiency XX cost total head operational reducing are we the of closure Hartford closures our total May, XX and U.K. of to million areas Basildon, number completed Thermal $XXX far

million we now, down our reduce the of revenue target early proceeds our September, growth. selling XXXX of process production debt XX% Global up for have to about and non-core divested We divestitures reduction We program year. Processing suppliers to ramp implemented up the operating wing Embee quarter Bombardier in deliveries. more a So XX in fund last have our fulfill closely businesses are companies and our $XX to working and and our worth with generating settlement net in XX on debt portfolio in that few our will from we facility of Metal

quarter, of reversers our are XXXX out on and to as we cost applying line. needed Atlantic including slide X, Virgin Vietnam business. the program these will VXXXX growth, Airlines, few enhance you of bring and Airlines AXXX engine show On see actions thrust support the in profitable reduce together, of the a Global taken and GXXX into competitiveness Support our in Product the bottom can American resources wins and, restructuring our up our production, We the

Boeing Triumph's ducts for from for Precision We We from business. XX,XXX the awards Defense XX signals Last about and where Commercial Grumman's Triton Systems. sponsons, heard from platforms. CFMXX XXX,XXX with Northrop follow-on T-X Snecma's composite Initial going fuselage also Navy panels, won most environmental September Components components on on trainer Integrated V-XX across announced role Defense our you we Award. critical gearbox year, received we Low-Rate internal Production are Boeing over Systems partnership in Boeing with for used and Boeing The in panels floor commercial

the stabilize are efforts our off Our in and Aerospace bid of Structures to terms business performance improve awards. new paying and opportunities of

content. On LX's the we're Lockheed for sourcing see dual to the systems side continue CH-XX efforts F-XX we program, in and interest Martin on structures from supporting the on

and Our all defense pipeline the OAX revenues to of grow, we and MQ-XX T-X the SLEP the business to drone, units. including continues multiple fighter program, opportunities military takeaways expect programs across four increase refueling and

to provide officials, page now defense leadership be to the place set spending to market met is I trends the billion of released colleagues billion, we're X, soon from to unified the my operations. hear to longer-term take DOD. from at senior With want Pentagon My Triumph's in the I contingency $XXX on will excluding that budget, help $XXX with encouraged and on some recently Congress increase to and from AIA influence Turning revenues. overseas

of MQ-XX, some is the as request and JSF bidding on existing starts, substantial or targeted F-XX. content For for years. Triumph, well to tail extension and We in and rotor systems Afghan structures rotorcraft UH-XX funding Helicopters. on in Bell awards DOD and helicopters. prior We're recently XXX supporting engine main and programs. growth the budget their customer gearboxes programs in are structures, Force for currently the above and is growth components oil most the systems civil plans for and programs and Army and F/A-XX. and life on for pursuing T-XX our B-XX gas defense rotor after this has such means President's we're system increased Triumph XXX Triumph MD congratulated and for the both Military XXX and programs as CH-XXK, source and new cases for MD declines revenue and U.S. as the systems on of the the and new Air on up opportunities components

Helicopter in and and to AH-XZ we of with the programs, LEAP, I the main equipment We of main the is Now, for XXX, a development programs. advanced next-gen supply shaft both the V-XX and composite increased flight where pack for the engine on of of met XXX, engaging largest materials, President support CFMXX XXX, on and number and actuation the Bell strong power the in pressures Bell addition to require where and and solutions. turning the hydraulic engine are work CEO customers, our controls GE content XXX, and review temperatures control one for recently Triumph's rotor AH-X. engines, to gearbox and panels controls

such look do and conversion also forward We pylon V-XX the programs as metal relationship V-XXX. and to bobbins on for actuator we continue the our close the emerging

up this this alone, both have freight On to two over demand X%, backlog. decades side, year-to-date passenger and about the next to XX,XXX aircraft growth X,XXX year commercial and traffic for over to combined are XX,XXX aircraft exceed aircraft commercial and X% aircraft. deliver have And over Boeing the year, in forecasted Airbus with

our Triumph, Systems, sales and the TIS increases in Boeing Systems increase, forward. growth. where Boeing's among extend other XXX door rate landing cargo would drive a and AXXX and on XXX increased the two of planned retract programs these bodies, from For and of additional consideration we both means rate top going this systems, provide Integrated will on narrow of programs actuation, Integrated benefit gear

availability revenue. jets garner systems. X jets, AXXX, machine on anticipate Triumph and XX is content, business is more landing aircraft cargo other for wing is which for and the is UPS, after retailers it's business orders more to MRO supply ramping used increased of forecasted month long-range to Gulfstream, has than rates next a Amazon for segment exceptional good to the period $X XX%, including years structures positions organic major actuators in and gear which customers, the billion XXXX wings the market Bombardier For new half valves Demand our from increase where a also deferred three our and the in Product demand sole-source have Airbus, for are or e-commerce OEMs for and we than customers platform and of demanding forecasted their turns, and maintenance, components we holds the a for to rate by on up, and on FedEx Support The availability and long-range our as which business saw grow AXXXneo, on significant increase online good and fast expected from through premier value, jet aircraft X% where declines, Triumph.

of capabilities On the one front, providers is the significant with aftermarket accessories and few both Triumph support. structures third-party in

Support business units and to aligning are aftermarket over Our drive we development million business deal together have our Systems closure. and efforts Integrated in revenue and Product $XXX partnerships

noted, at changes, owning IP. our particularly U-Tapao macro to Corridor, to capabilities is Triumph as in carriers be integrating, And countries support early closely our are especially there Asian and similar Asia, MRO and monitoring Last, vertically support on in rotables operations OEMs accelerating employees and two these and Thailand whereby Recent to the Thailand investments on the we're region. low-cost stands there adapting trends, and supporting accessories, building in we some has some composites increasingly Triumph at example, Asian strategies center move in increasingly as VXXXX, Economic are our we'll to presence MRO here. continuing up carriers. that new progress segment, with work XXX level. in For recall agreements are expand pursuing and their providing commercial where over interested

sheet, leverage operating into do our returning performance standalone forward into them and balance and full improved period portfolio performance we Jim? our another to acquisitions as QX McCabe them step after we companies. do, forward take provide turnaround, Operating new allows operational integrating what strengthening year look System, conclusion, Triumph So, our a In Triumph will details on we now our pruning as to not we of outlook. to said the wins. in further our and Jim current and would

James F. McCabe

Thanks, Dan, morning, everyone. and good

planned. second results were as largely Our we quarter

several the quarter. as More importantly, year. find our X, which, the consolidated on million to compared operating set anticipated, On down continue of quarter net million Group's million next sales. to our down end and the Adjusted you'll we or to due profitability We and improve slide sequentially sales, on others. gradual net two large $XX results generated cash grow in was $XXX flow sales X% Triumph and legacy the improved of to of for prior year to stage $XXX income programs production the wind

XX% organic with track $XXX expect on the primarily our operating an to to on the on our sales earnings largely earned timing the segment due revenue reductions up quarter. on Our News approximately and rate On certain and XXX margin With and of X, the excluding million we in down in divestitures Embee, half, is slide second respect of Systems net basis, plan sales. AXXX, on and fourth our segment of X%, Newport ramp Integrated to programs. results, were deliveries

operating with million and book-to-bill to Systems with the continued XX%, as Integrated $X reliable provide margins X% restructuring well other actuators X, to of similar Boeing margin XXXX path most and segment's by year-to-date a rotary the such sole-source expand awards, a Boeing by driven prior steady grow. the with certain backlog and the in to legacy agreement Safran part for for Excluding actuation by generator as the to military broad Systems the our during to the was of costs, supplier in actuators. on program cash quarter, solid recently driven ratio quarter. systems year The Integrated Galaxy Apache largely a C-X was range aftermarket X.X programs. its as is for and AXXXneo, as the programs, on

X, slide a our Support drove volume Profitability the demand operational to similar margin sequential to year improved to initiatives. the at from deferred the Recovering Product to customers in and of to with efficiencies Engines and a robust higher first and due organic quarter. sales components as period Turning businesses, maintenance by the Product delivered margin an organic quarter, X% our APU fiscal prior on prior driven strong segment, XX%, sales year of by compared divestitures growth Repair during of quarter. OEM accessory for our quarter, operating basis, healthy quarter remained of the transformation from higher significantly first excluding the Support close

used as Product on two the MRO is quarter, on Asia with which cells Support you know operators second such a many VXXXX-AX large work deals engines, on the of found in as won engine and widely to the new During AXXX. programs U.S. the conduct

business to good work contributor profits. become and these with margin new a Support Product growing with agreements segment to the associated solid expect sales generation. We Product Support is a double-digit meaningful cash

slide which the headwinds prior Segment contributed lower This backlog. cost ducting reflecting and for and the on lower on year Precision because XXX were and pricing sequential reflected in in quarter, and XX, modestly large by floor reduction XXX. progress of and relative segment's segment's Components on to the Boeing continued provide negative Precision we lower commercial restructuring evident and were quarter, of the control progress to the continue pricing during some first segment costs to selected Moving production impacts due several the over our lower second sales of rates the margins inefficiencies met developments panels systems, to the environmental Notably, programs, to improvement was our Components. production volume. quarter, benefits Those the initiatives. positive to

book-to-bill reductions year-to-date $XXX on million and Boeing. way Hawk TPC in profitability on indicated and the facilities and certain and book-to-bill favorable period our completion paved Aerospace The expected is major as indicated our major Headwinds of X, to rate programs. benefited XXXX in including driven sales included of quarter continued several to year-to-date Gulfstream positive Tanker second the XXX of from customers, X.X a increases by strong XXX Global to as and as support during programs. two the and were the rate slide, programs. indicating restructuring the have continued Tanker the from on X, X.X is Boeing Structures ratings Global Aerospace slide ratio sales ratio on the customers' growth and Structures, XX, in performance received posted segment. As the recently a

favorable improved had of programs, both we over net as million basis, XX continue a adjustment customer During and the a second our materially our cum enhanced increased transformation hold. on take $X to performance margin catch-up issues relationships. reflecting operating sequential quarter, Segment

by We headed. is Aerospace encouraged Structures are increasingly where our operation

walk. together engagements sustainable our confidence execute we're and profitably constructively on our basis. continue XX, where to We base into business rotation cash ability to find in working our flow customers, slide On with the free in you'll see a have

costs cash a of of range manage the the but XXXX opportunities our free less breakeven way, performance, those usage targeted cash in along in drivers of margin manage the free use fiscal the during We less toward There sales in will along of growth number to customer of inventory The cash cash and quarter. cash we continue advances, development million $XXX our current fiscal $XXX expected drivers build, trajectory and was new our be and of the to risk flow swing million to XXXX. costs, less our fiscal with free investments. cash benefits flow recent the year our see approximately coupled stabilization from XXXX are restructuring With goal. and respect program cash the

last As we'll down course the year, last was largely cash we our the temporary that year. we've is planned. year, the calls, discussed received flow majority an our over customer move two as on in we headwind of this the expected of to be as quarter which usage through advances the Cash working

our are year. We cash maintaining for guidance the

We will expect remain continue and in reduce cash QX. use QX will high to in

and our strategy. liquidity. receivable accounts These increased maturity completed years. million amended capacity off slide liquidity metrics to greater summarized term sheet our execute we bond loan August, secured turnaround to secured XX. used $XXX million with pay three balance borrowing provide us Friday, flexibility actions and Our extended In we a on offering, facility our our Last $XXX our the revolver, of are which and financial

the for run $XX million, million $XX slide guidance one and $XX current from consistent year we're a our with to on down year-to-date rate year expectation. being million change full with range the CapEx our in million previous outlook, our to our to maintaining Regarding reduction XX, $XX

tax quarter a rate of prior and for tax of third to potential divestures X%, adjustments lower with deferred the benefits through tax approximately XX%, approximately allowance. valuation rate a expect full from and rate a the We year be to

So, up, when in the anticipated we fiscal is to we much sum our way very began XXXX year. the unfolding

generating forward reflect cost orders, Our reductions, backlog these securing divestitures been and our with improvements progress as we've this And which setting flow over At after transformation emergence to up, new successful wrap value achievements in we'll growth. Triumph a are positive free back shareholders. I'll businesses. company, Dan consistently Group of the continues Collectively, which your make operating and follow-on hand to stage awards for growing for it performance non-core welcome and delivering the to profitable cash point, questions. in of

Daniel J. Crowley

thanks Jim. Okay,

in So, performance closing The predictable contracts surprises from look challenges. getting out out the on culture disappointment XXXX on is of our answer FY executing is remarks business and And restructuring, to focus side our the I on as XX, and increasingly improvement consolidation renegotiated demonstrating other our to wins. questions as Jim be new any new have. divestitures we would sell happy into jet and markets. and and areas and slide strategies Triumph our of continuous you now more to the an commercial performance to shifting follow-through forward defense roots remaining we strong

Operator

time, of company that any to this open like forum questions may At to have. the would the the officer you

Michael from comes with question SunTrust. first Our Ciarmoli

Michael Ciarmoli

Thanks on room at million some I'd there the the to the you've proceeds $XXX the and outlook, kind CapEx? CapEx just questions Hey, you $XXX million? accounting range the Can from of elaborate there been good you free to improvement as have morning, cut been reaffirmed taking for maybe would I flow Jim, think was here. Embee. have Maybe, thought why maybe just on for for the cash guys.

James F. McCabe

Yeah.

is we moving was that the current little going for cash opportunities keep year. CapEx risk the parts, risk in lumpy, it for a – still a inside to the range of educed flow The where now. to are So, us run that want range to of a rate and lot that balance we we the we but stay opportunities, and keep are necessary we have the has CapEx and and

our in Mike, of terms that's cash In included the divestiture, flow. the not free proceeds, from

That did reduce million Embee $XX So, we as September. from was it that count cash debt; don't free about in flow.

Michael Ciarmoli

as going on just Got then to think under-investing effectively mean, future with you more to look some it. spend And of forward, eventually a or keeping CapEx in up I of should the to are follow-up CapEx you terms there, have a the on the going you wins consistent, we some little forward? now catch growth program bit how – about for are of

James F. McCabe

ahead. some that and than years achieve bills I we think were year, this we'll case high internally. felt on we a work had going choices outsource see could discrete we that to fairly we increased programs facilitizing But, sourcing that capital rather CapEx in for better business by made

more we're we're starving attractive to not our So, investing where businesses grow.

Michael Ciarmoli

I'll the guys. jump Thanks, Great. back in queue.

Operator

Kahyaoglu comes question with Sheila Jefferies. from Our next

Sheila Kahyaoglu

Hey, good morning, everyone.

Daniel J. Crowley

morning. Good

James F. McCabe

Good morning.

Sheila Kahyaoglu

of Structures So, the they've the how do some just can volatile. this business? pieces a on most margin the elaborate and about for you Maybe moving Aerospace on of profit terms operating margins, think been normalized in we

James F. McCabe

the improvements. saw XXXX, and improvements improvement our And the some catch some Sheila. efficiency efficiency like reduction that a Boeing cost legacy and this like of positive expected Thanks, programs balance cum we're happy we're that was of adjustments on. from have We actually seeing as quarter we activities from of programs Global

margins typically high every opportunity as a high is not to improve business. Going said, single-digit more double-digit continue looking It's But, business. to we this for forward, we're there.

Daniel J. Crowley

have is what like performing come the positions programs, that – Those Sheila C-XX, business strong add rotation we Jim it had think now XXX development Global just XXX. are because loss phases and base, TAS V-XX, like in we used in these And that the they're an XXXX. really the I I'll to in in programs here word end. or are applies either

those profitable to defense stable upside transition once we them programs. sunset and tends flat we production, we which upside see we to grow work, expect more to loss-making we have and So as margins, our well. we've programs got lay And as

Sheila Kahyaoglu

yet it it's XXXX? up contributor. it in not Will follow about a positive be on Global XXXX, positive the Jim, Thanks, fiscal a so, to Dan. is And, point earnings just – the

James F. McCabe

earnings yet it's as it can contribute contributor, we Well, to a cash our cost going not up firm forward. but

Sheila Kahyaoglu

Okay. Thanks.

Operator

with comes from next Walton Deutsche Our Bank. question Myles

Myles Alexander Walton

(XX:XX Difficulty] [Audio Thanks. – XX:XX)

Daniel J. Crowley

Hey, hear We Myles, couldn't you you. broke up.

Myles Alexander Walton

XX:XX) �� Difficulty] [Audio (XX:XX

Operator

Would you move to to queue can Myles back me the like question later? and up next on maybe

Daniel J. Crowley

That's probably best. Yeah.

Operator

Okay, one moment.

with from Our comes Pearlstein Sam Fargo. next Wells question

Samuel J. Pearlstein

morning. Good

Daniel J. Crowley

morning. Good

James F. McCabe

Good morning, Sam.

Samuel J. Pearlstein

where on talked Last could slide quarter, highlight spend know normalized and show the it, other I cash company. about But, will about and normalized do will to of restructuring kind $XXX take the about XX, you from you pieces? buckets and wanted I know outflows just you had a to call you the be now to of level of you away, XXXX flow just go think you the big down trying some can level? of million about level million moving that, XXXX. $XX big get feel that how how that to just kind

James F. McCabe

the through But, big I have. advances as flow did we're $XXX approximately of burning a We're half count And Sure. production. and a about the a a And headwind that year we We inventory as next be in build, programs, and $XXX hopefully, million and first the XXXX, of it's still on the smaller just about advances that I are in – for hope and go-forward ago always once inventory we them, but Thanks, on about got we're customers, working consistent, that level end year. as then those. pretty we're about feel on base year, cash naturally on quarter that achieve the a have been targeting of establish overcome positive Sam. $XXX go this. free more other It's level moving to into balance million don't program million one with strong as a it's little repeat rest at and the and year. target shouldn't breakeven We $XXX of like to the we ends know, to continue going away. last some reasonable about itself said this negotiations advances targets range. this achieve you That's so, plans that. and $XXX we drivers, can the million to we've that the EX and that's Global headwind stabilization the to then, have year, of to that to over we going particularly the extent less things million of the and

Daniel J. Crowley

add, by today of systems $XXX set would I year cash a cash out million structures already it's and uses components. all in generate in Sam, aftermarket, and we flow

got fix just cash the and to we we two So, demonstrated those we've positive. generate can

James F. McCabe

tailwind add I'll were year, profitability asking positive, of forward. in offset some to me working improvements but too, into were were Sam, settlements them, get don't the capital and they're a because by settlements, we reduction benefits And efficiencies details the people about this going and a going and be and

captured I all them where have our planning, do we internal in So, and feel confident very we're headed.

Samuel J. Pearlstein

is you on last this down? quarter. the course the with to million mentioned Has of happened that year? development about flat That's great. that When the which programs, the question, start just one last does $XX tail And over

James F. McCabe

Yeah.

During the second that tail will half, down. Sam,

range said for to we $XXX I million $XX think was full year. our million the

be of the it will higher So, end that range. in

Samuel J. Pearlstein

you. Thank

Operator

Vertical with question Stallard next Research. Robert comes from Our

Robert Stallard

Thanks much. morning. so Good

Daniel J. Crowley

morning. Good

James F. McCabe

Good morning.

Robert Stallard

and terms would cash How situation, more on a some in you the you you going during achieved profitability? perhaps some wins wins about past? up favorable signed the characterize what as well. also overall than What quarter on you've the you've highlighted quarter contract the versus seen seeing you of Are this past? what Dan, these of last the new

Daniel J. Crowley

or our winning MD panels C-X actuators, some it's whether Helicopters rotary ducting floor more for are that in ones the or and are we've Okay, Boeing. for been that for gear great. The smaller want we the wheelhouse, programs doing gearboxes

how know they know to we do, For money how those deals, are kind cash of and we positive. to make

not our to risk adding So, we backlog. are

programs team sure the programs In at they level making my and now big on fact, that level right, my scrutiny with so start whole get that any leadership the we track. get of don't development is wrong

those done we're profitability that we've to really, cash trouble So, mistakes. weighing that past got forensic as repeat down how now development into we not and our are and on to programs going

Robert Stallard

is any Is And flow so you three just positive. is to the underlying you've seen you Okay. expect for from quarters? mentioned different QX why on turn secondly quarter that quite it previous front, reason for there cash the what when final your

James F. McCabe

achievements capital It's the not slow advances probably quarter. is mostly getting inventory-driven, and and down place that as the quarter. lumpy also training. in in our towards in we're are done to We've we're due we're some benefits trying It's the it's lot year a pretty that which of got production to build inventory – the going fourth down, looking it's process. steady We of working a throughout get to the inventory metrics the

Daniel J. Crowley

starting XXXX revenue-bearing generate priming before was Global chain, whereas we're supply And it in deliveries development negative in cash both and on yeah. all to the

Robert Stallard

to XXXX the should seasonality expect QX, XXXX XXXX? extreme in As in less like and this Global we starts of ship

James F. McCabe

that's and seeing Yes, production, we're inventory the is headwinds program I that's true. a believe in the on build. This it unique large as moves

So, and of inventory inventory. come to will building we'll ship as have we down do less initial

Robert Stallard

Thanks very much.

Operator

Rumohr and from Our question next Cai von with Cowen comes Company.

Cai von Rumohr, CFA

much. so Thanks

some doing and with XXXX. over on, would, programs? how So, are and in where EX the the terms similarly, we Global profitability you on Maybe give the color, you if you've cash us Gulfstream gone are of

Daniel J. Crowley

Sure.

which also in hardware Embraer continue coordination where deliveries. our labor us plant process front adjustments we going after sourcing the that hours on quality end did the the case ramp-up, strategy business will early On did their some of improve times. we EX. with are built on and at the through transition, and some for we long-term the that customer, So, allow EX is improve at program, wholesale both now to GXXX, and review we're rate the reduced that, kind the build make build and Tulsa our reduce and the of span Nashville whole to assessing a of look make our have of to

And today wings so, not week every profitable, wing delivering whereas we boxes is GXXX are to Gulfstream. and

able want throughput, output, cost And we're so, down. the the to to get but we the achieve

our cost chunk getting lean of and a out it's So, driving ship-over-ship. focus, big we're

watch cash. cost to I'd between point we price year reach profitable GXXX and generate begin crossover as So, say next and the that be and over

Cai von Rumohr, CFA

sort in what in to XXXX start in some the target, you Thank some terms to cash need of million, deals? color Maybe us moving give M&A flow doing mentioned see what of you. back considering and to you And actually $XXX and M&A.

Daniel J. Crowley

Sure.

within our small bank revolver M&A albeit So, to and authority we agreements have deals. current now, do

our doing in looking and at and strategy especially we're Systems. so And candidates Integrated reviews aftermarket

it's discipline sometimes but do from product a We're operating line these we're companies. as see start we up do, big divestitures standalone that before consolidations turn or small with different acquisitions. to bolt-ons to management inside anything the not the and in Triumph the past putting when anymore. not And practice doing and ratchet chain now, them but position sign, do can And need do controls, supply a of I we and to a we that Triumph

to ways to So, looking are is aftermarket be okay, particular is say, Triumph. Boeing of these And aftermarket, the for nine just at the consolidations divestitures so chain and being done what time fragmented might see we and and the three right, others very inefficient. having increase attractive areas. efficiency as in supply And

one materials, brakes, then that electric electrification efficiency systems, in work interested different area. of also these some fuel flight on higher drive as that's the in support We're temperature manufacturing performance. and actuation, expanding So, aircraft, we're help that then additive in and we'll companies supply our partnership mentioned out areas technologies increased that controls And in And to in be area enable equipment costs. now very and that well. of adopting with I top

transformative time then over watch and small for I'd acquisitions So, that ones. area in more

James F. McCabe

I'll M&A also next our of that, it. add And approve then to event couple process have review in an days and we

have of how ready review we those when people have M&A we're make sure do So to facilitating lean opportunities. we our we

Cai von Rumohr, CFA

much. very you Thank

Operator

comes Robert Credit question (USA) - Spingarn with M. next Securities Robert Spingarn LLC from Credit Suisse. Suisse Our Good morning.

Daniel J. Crowley

Robert morning. Spingarn about M. two Securities Good talk things. I to (USA) Suisse - wanted LLC Credit So,

First revenue. is

start And you don't You Dan, wanted to the numbers looking – but for at the the me year. have you're all we you inflecting programs where and you've have at because a looking this to growth, point, start of tiny grow are over be just some I serious little you, anticipate squeaker, said growth these talking real bit and growth which about? you to trend, of in fourth. book-to-bills, ask we organic rolling quarter, in book-to-bill some front growth you're I next then segments, should to still should and at Is growth of higher Or off? going a hoping And one positive have in book-to-bill of what the imply three here? kind

Daniel J. Crowley

Okay.

come working GXXX, up programs as that backlog, already GE as such and is product reason a of as fourth Gulfstream well today, and will backlog, Robert doesn't a the... some unit and is It's... - XXXX business, derivative that airplanes Suisse that's LEAP. Spingarn like the book-and-burn Securities the largely on, in M. It's are ramping aftermarket growth our programs assume. (USA) Global So, book-to-bill The LLC that track Credit without I line is, business from

Daniel J. Crowley

Robert LLC is. - Credit M. Spingarn Yeah. Securities Suisse (USA) It

Daniel J. Crowley

It is.

reinventing Although, from part that's we're partnerships. kind long-term that carriers transactional and the with seeking the longer-term both partnerships of business to OEMs, of

don't the But, and right on portfolio to ask in I LLC we Okay. wanted us FY time, growth. M. (USA) over our then, help Securities reshape So, accelerate Credit And our Robert will M&A we to expect for get growth I Spingarn term. think clarification something. modest I is growth that XXXX. Suisse see back as - double-digit to

rate book-to-bills billion think from industry forever from just a – while production it that see from, to just characterized an this there X.X You talked below industry has booked that's in industry you, coming coming you you upside that perspective. programs about bizjet $X properly a in an for where the And new consistently not I get understanding are of is XXXX. is better below to respond and managed revenue, by in I way want

the And there, about an talking to to thing the wanted it I'm last not fact your and piece things return program, a do are a how to you're you these margin capital of get accretive? on taking hurdle rates, sourcing you, back So and dual strategy goes how the is, Triumph. meet and I then, this that ask industry earlier with invested question, the

Daniel J. Crowley

for with I metrics that all used Show HondaJet, begin and, to have Vegas and remained levels the have they availability, of jets. support. I'm elsewhere business display of at used Asia know, higher prices the lines going Gulfstream, product in full of customers the and all the to both a our all And very up and in in starting displays they're sales, to aircraft the NBAA show, return soft, they're their they the Cessna, there, recently the get dry help growth. watching to And would to which although Embraer. Las Bombardier, economies display attended expect are were is you through prices then, fixed Business both and and start the high that traffic was return looking they on see and fund Russia

it gotten But handicap it Spingarn Credit leave it. - So, haven't they yet, Dan. have right Suisse I'll to gotten to years. eight M. (USA) for Robert wrong They But... them Securities it LLC

Daniel J. Crowley

price ones that that now, are our That's Yeah. them. glad maintaining because plans; call strong are they've ones changing be their on end we're their, de-rate where we And support, garnering of revenue the high but we leading it, and we right downward, the the most throughput do on we're are segments, to platforms, know capacity adjusted the and the are. full aftermarket But range true. I interest count their we don't I'll that when the

So, I Suisse And Spingarn know fair business just margins? going long-range the to share lower M. the (USA) Okay. on of but then - segment. we're Robert jet Credit much market, are the end LLC Securities to that the ROIC don't have going and win at the success our we at

Daniel J. Crowley

Okay.

jump on in. let dual start So, and me Jim sourcing will

like dual that XXX, enough are like So, justify to programs F-XX, source, win AXXX, dual sources large we're going like to on a AXXX.

of schedule they you of be two the often economics tend the And and sources. if shift share which so can well on work perform work split delivery, our we between increased to look at the

And math we be, it the of we do have non-recurring that favorable to so, do have well. case cost if aftermarket the might case? the participation into business we some only and switching, as what on of uplift, cost is enter we part is there's switching, And the pay the of that

James F. McCabe

Yeah. think careful. said you Dan, right. I We're it very

tooling got Credit going to the cash continuity possible the case. with M. to more over we your dual and fund they where We to thing someone advances flows controls as help good (USA) make willing other or owning or of a prices, a is not the initial The get we're LLC - look little some so Robert look sure pay as supply, investment to have and business at the visibility equipment. for have through of investment with the so dual sourcing volume they Suisse the the customer and any is, return We we it's well of just relative getting about guy? lower source. are to Securities good up, set Spingarn sometimes get How some

Daniel J. Crowley

mean? Suisse what When who sharing do you're you Well, with Credit Securities dual the Robert sourcing, you're program (USA) you say if volume, so there. is M. someone right, already LLC - Spingarn

need you we something volume, to is the get is the that that's issue? that investment there better, your so would of to dynamics So, Do that seem enough me about understand it recovered? because

Daniel J. Crowley

the downs case more, on so Securities a step Thank the quantity differentiate were don't to usually give enhance on is on think business Spingarn based detail. a (USA) you give case Credit what We you upside we time. price tends if us Robert if variable performance expected away. you minimum the business over give to or on assume And quantity. we Okay. for - the just there's on-time M. you LLC that you the and Suisse can or – Sure. then win then based delivery They quality give you quantity if

Daniel J. Crowley

Okay.

Operator

Markets. Matt from Our McConnell Capital with comes next question RBC

Matthew McConnell

Good you. morning. Thank

Daniel J. Crowley

Good morning.

James F. McCabe

morning. Good

Matthew McConnell

you'll Just to how advances type have much to following customer spending, have that the aren't of normalized flow would understand $XXX free EBITDA like it get that kind So, recurring margin? number, have from cash I higher development up EBITDA the lower issue, million-ish of million better on you number. but so a come to $XXX would seems

the there is when any part So, incremental other or assumption into or an margins restructuring returns volume that either of for forecast? savings visibility

James F. McCabe

Thanks, Yeah. Matt.

alone the volume, higher but that, to we not again. it, be having heavily our our the on do of We're built. beyond not bulk the repaid enhanced are programs. do we enabled improve looking albeit on and we're modest have counting us that be scenario. right, need offset And to the but have to only part growth restructuring margins we've revenue just tailwinds would absolutely operational not by a that's got advances margins. we're efficiencies, efficiency that the but kind gross to get to having breakeven activities is going You're had, our settlement That margins inventory higher back it to and from of to then of not But we

of there's well. volume So that helps flow-through as that additional

Matthew McConnell

Okay.

$XXX so, be the normalized structures million breakeven forecast? that would cash assumption within that flow And is

James F. McCabe

and all cash the I We next don't give is cash drivers at – cash probably for structures have by more are Product shorter be segment, are coming don't cash two. the our but and from cycle Systems, handy, segments that on really, for that the big not The year generation generation. will Integrated it's counting the the moment I'm or Support

Matthew McConnell

All Thank Okay. you. Makes sense. right.

Daniel J. Crowley

Matt. Thanks,

Operator

call. And fiscal be for XX:XX by at This since code, the a.m. Triumph XXXX will number, available quarter and code starting as today access code a parties, XXXXXXX, Group this Time for dial questions, you call access dialing year Standard replay XXXXXXX, second same using the now. further dial XXXXXXX. and earnings Eastern there XXXX-XXX-XXXX phone same are concludes all disconnect conference day. XXXX-XXX-XXXX or the participating and as you you All access nice may have also you XXX-XXX-XXXX also may and Thank or also may no

Daniel J. Crowley	Triumph Group, Inc.
James F. McCabe	Triumph Group, Inc.
Michael Ciarmoli	SunTrust Robinson Humphrey, Inc.
Sheila Kahyaoglu	Jefferies LLC
Myles Alexander Walton	Deutsche Bank Securities, Inc.
Samuel J. Pearlstein	Wells Fargo Securities LLC
Robert Stallard	Vertical Research Partners LLC
Cai von Rumohr, CFA	Cowen & Company, LLC
Robert M. Spingarn	Credit Suisse Securities (NYSE:USA) LLC
Matthew McConnell	RBC Capital Markets LLC

Triumph (TGI) 8 Nov 172018 Q2 Earnings call transcript