TGI - Earnings call transcript Q2 2020

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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 2020 results.

This call is being carried live on the Internet. There is also a slide presentation included with the audio portion of the webcast. [Operator Instructions] There'll be a question-and-answer session following the introductory comments by management.

company, now the the to of statement. following behalf I like would read On this forward-looking of call meaning on statements Certain constitute Private Litigation of statements Securities Reform Act XXXX. the the within known and cause forward-looking expressed materially or or may results, different These forward-looking any actual statements unknown uncertainties future factors, Triumph's to and achievements or the achievements expected implied statements. risks, performance from in which other be performance involve results,

GAAP non-GAAP note on included measures that comparable the measures Please which their found www.triumphgroup.com. is of the be financial release, reconciliation at press in to company's can website

please this be Triumph recorded, addition, written is not Group, rebroadcast or property without explicit In of note that transcribed approval. may Inc. It call

President Jr., At James Triumph Officer; Crowley. this time, Vice like Senior Group, introduce Mr. I'd Financial company's Chief F. Inc. and and to Officer McCabe, Daniel and the President Chief Executive ahead, of Go Crowley, J.

Daniel Crowley

was to reported for Earlier and into Call. our the we welcome, Earnings you, head XXXX, year second providing fiscal second Thank strong our momentum in line as of revenue year. everyone, Kevin, Organic expectations, QX the with we quarter segments, on half X, morning, in and opportunities Asia. this results engine as organic engineering and three all in Slide services increasing XX% up growth expanded the in revenue higher noted up benefited Sales narrow body across with quarter. from year-over-year volume, business aftermarket deliveries, growth

with EPS line performed our and flow in cash expectations. Free

use stable improving quarter to of and year-over-year on free flow from 'XX in structures cash the As million, guided. Liquidity as $XXX year remains flow approximately planned, cash positive operations. due for programs deliver loss-making at and million. part, improved we pace for healthy to the the moderate and exit $XXX in Cash remain cash had by large use fiscal quarter we

basis points sequentially structures improved QX. margins XX% with performance and year. systems margins through during our prior businesses we units year. to XXX X negative higher year-over-year measure points improving, sequentially is the aerospace their with steadily to operating months in basis our year-over-year year, business our all than As quarter. increasing revenue, margins can Similarly, in support X to prior margins in Integrated product first fiscal compared QX, progress in our while Midway our the and from improved swung XXX positive

mix, noted XX% year-over-year. saw X.Xx, gains on leverage revenue to million was up same EBITDAP EBITDA, military $XXX cash and by our period X.Xx reduced use a enabled As the on rates improvement in more performance our programs. of This X, first Page By last million. from was half ramping favorable and improved million to supplier commercial growing $XXX $XX year. both we from and and We sales strong production internal

second throughout these the We the half year. to gains are positioned extend well of

which reduce reduction. 'XX, year productivity processes. is of half procurement implemented SAP and allowing first ERP than of improving teams At our our costs. improved to possible smaller operating our cost-reduction journey recently through We've been system upgrade operational to better X and ERP system. where less and to plants, efficiency cost enable X% manufacturing the factories Triumph, enterprise our completed in inventory Triumph the of we to to their and a already increased an cost larger few Across years risk sales. initiatives, management last upgraded fiscal standardizing our reduce system and quality of visibility are systems use processes, reduce systems our upgrades of on We quality,

customers on working retire chain with are We with our our remaining lower-tier supply red focus to programs, a performance.

Aerospace our operating of margin companies, original continuous is Structures expansion cash on I'll consolidations and XX plant business planned our review XX our shortly. improvement, generation. of and the of dedicated touch X but all bandwidth completed management's Having divested to strategic

program are track, benefit future quarters. transitions which Our on will

continue to X.X QX. business, Systems book-to-bill We posted a Integrated this especially in our which in quarter, win

more of the to and growing our our units a with and up now top Triumph, recapture our These Slide work for QX XX% long-term a selectively tail, Support emphasis regular on X noted backlog priority company our and competitiveness aftermarket Product executing As over on We're remains to our MRO are on strengthen X, QX. in new strategy content. sales basis collaborating growth. higher-margin sustainable our business for with backlog to increase Integrated pursue Systems an position

We from with proved strategic that. OEMs transactional quarter results and the and to evolve continue partnerships customer just from to carriers, relationships our

provides a diversified business Support customers XXX in and operations aircraft MRO Our services global base countries. XX,XXX over customer has over Product supporting to over XX

the of center. for aircraft launch on at we support customer will access Triumph services. MRO for new XX/X. all This announced The spares center requests the Triumph's to provides center customer overall Europe customers Recently, inquiries from field to single-point part One Conference, ground

is new value the with airlines combined creating who KLM our recognize Our proposition. partnership France opportunities with Air

teams on Integrated with proposals content and of agreements, bring the both divisions, power-by-the-hour our together Support Our Product Triumph working are from which best Air and jointly including KLM. several Systems France

in engine wins region. AXXX including adding agenda X-year overhaul in our transfer wheel and our a Support in contract Product brake capabilities, start-up Asia supporting AXXXneo high-volume for Thailand power who This growth will for accessory MRO STARLUX, from work QX repair are Our unit, be fleet. the their depot airline, included the completed Pacific

serviceable sell with launch This we Europe, times rotable to the a X.X% parts link and business. market our components presence, large trading of our global rotable is the we're CAGR turnaround announced will MRO about to venture meet commercial for costs. of At for lower and opportunity The the aircraft strategies parts to and plans and repair new aftermarket speed excited spare expand used parts. XXXX, to through growing aftermarket at a market demand

to engine fuel cycle bespoke cooling full exchangers and control is and this best of businesses which units, controls, core acquired of and XX,XXX IP, upgrade, E&C business. electronics digital controls and Triumph The electronic of and our high-speed former driving merger. pumps a plant vapor solutions authority fielded we we centrifugal time our this solutions. fleet at of with growth and margin sustained support, business UTC-Goodrich maintain heat actively engine within Goodrich and One enhancement is the including continue multi-platform, over the provides fuel a pumps

global for Recent and enhancements. awards Force's new include replacement We such applications a TXXX trainer. unit expertise GE CTSXXX enhanced fielded the performance this leveraging fleet, apply to IDIQ fuel pump X-year engines a for we T-XA the control Air our for control new with By pump metering both and operators engine engine award support digital to engine. additional opportunities DLA the rolling for unit see from units the as fuel Rolls-Royce

We thermal expanding base in Maryland cooling recently electronics the systems. Controls costs IP our and business in and energy consolidated Connecticut directed high-density next-generation the Our weapons. former technology into lowering electronics while and Fairchild solutions supports facility, control

finally, And Mechanical Solutions in several the our milestones business quarter. marked

First, module, optionally provides a the UH-XX recently. a which tactile of Blackhawk our to simulating piloted sensor field feel flew mechanical key the existing fly-by-wire Black flight feedback component pilot, on Sikorsky's of Hawk systems, kit, control

cables, cockpit demonstrator the throttle control telescopic delivered assembly, assembly. aircraft, bulkhead engine we hybrid throttle quadrant, of Boom Supersonic XB-X throttle and for gearbox the second, consisting the control pressure system And

collaboration of in power MRO from on award we're measurable integrated GAL, to regional as includes incremental recall this the results. for support but not another and provides competitors our are from example Triumph This work in pleased which last systems This from presence. only content. resulted of content producing aftermarket leakage focused our great expanding regard third-party report UAE-based I'm quarter, product serves several an entry you recaptures efforts provider, As brokers MRO One solutions. our and that

Integrated driving revenue top key sign quarter, XX% of area. line sales we are reported the growth aftermarket prior growth and in Systems year that in MRO another versus this

Our and the revenue business to growth well, working QX. continues the strong and with return a of exited to second fuselage towards in ASTK profitability Aerospace closeout to Structures We final transfer associated completed to EX are the organic programs quarter in with helping the Korea's deliveries. offset perform

supplier, the is GXXX the we KAI, loaded progressing On at schedule. work transfer, the on where the successfully first wing new article work

Our our successfully I'm of up and time are structures well and consolidation, the to to ramping these budget. Florida, complete last is all on of in rate. on Texas transfer XXX our work transitions factory confident ability underway, from we

was several in on-time performance programs market-leading team related core of consecutive area. continuing X XXX% this Boeing, with composites the delivery ducting, fifth the recorded with interiors pleased to XXX% interiors Our business awarded very team composite to defects on-time The and and a Thailand business milestone month. we're our for delivery reached also

of billion an Structures excludes in in on to strategic provide on structures our April. segment, the The update our we in business. assets I for business review Aerospace process 'XX FY our the represented interiors review which is $X.X focused launched noncore and want sales

plan wind-down of the plant structures each in close our California assessed of close, produced to the go sell, the be anticipate This Tulsa the will spring Grand in box plans fuselage following closed and we of assembly underway plant fulfillment our We review These GXXX XXX producing a from of exited Hawthorne, plant sites our skins into a perimeter last We X QX, completion the or late California, in contract now last are XX GXXX structures facility large Similar Prairie, XXXX. and factories game of towards within to now contractual In retain stretch-forming site. small first wing have plant. a delivered commitments. the XXX having in panels in our skins mid-calendar each the at Texas restructure XXXX. have the exiting second XXXX.

months, We earlier agreement such months, to business noncore to of sale machine first announcements site, our buyer identified end from the Nashville announced as divestiture XXXX, Based by have opened sell with we two sites structures transactions we year. the accretive with met recently from year. the are shops factory, over strategic calendar This X several the We close shareholders coming the our responses the of making our other of this our the in of buyers on in transaction the million-square-foot where fourth to following our is customers. will which TECT, estimate last the anticipate operations. consultation a

Triumph and most continued of add value enhance As all on assets opportunities. will are on XXXX. end have focused value. to having while those where our future we who we us so career structure continuity anticipate our and invest clarity Doing it's and with customers our the shareholder of We have fiscal on businesses year noncore in our by our to focus markets, firms fewer our can ensuring sites our employees position pursue state, the of supply goal allow

Friday comment in the met regarding XXX having over news Jim, it recent the with and turn I last just Seattle. Before Boeing rates the senior to MAX on want I officials to XXX

we on staying XX the First, reduction a Boeing a such on they margins a We XXXX. rate not revenues. that lockstep will less that be would XXX with Triumph are have consider material in XX impact in from as change anticipate expectation impacted do our is than month and financials, to per

the is month. XXX the we Boeing by return Boeing's making continue support service. support a service, Regarding at the progress place rate to increases rate to program our and in X factories we're following on XX to XX MAX, Capacity of is to encouraged return a of across

As of our revenue. noted a historically percentage program has previously, we single-digit the contributed MAX annual

revenue expect similar to impacts X% sales year operating 'XX impact income We with less continue of fiscal to and cash. be than to

MAX tailwind FY to any going ramp-up at our flight As do related 'XX. guidance such, the this changes provide time. to to and into a A we will anticipate return not

In margins our improve and EPS. organic QX, from in and maintained positioning growth generate to momentum summary, positive core Triumph us

for to cash basis of are year time are took during flow on free years. producing year-over-year. an track is value We first annual strategy, the on results in actions half the our the achieve path Triumph and X to executing positive we the first

customers strengthen robust sheet, With lines leverage balance performance, we look declining our I'm benefit profitable our shareholders sustainable more and we customers. strengthening that operational growth As improved forward in Triumph's transformation. firms improved confident and long-term from already will liquidity, and product our backlog, partnership and to other with

now detailed more for through Jim us Jim? quarter. take results will the that, With financial

James McCabe

good Thanks, everyone. Dan, morning, and

net sales, Our quarter with results cash business, and continue demonstrate second the our results all predictability meeting to improved EPS expectations. across our

I on our and performance basis. will adjusted business unit discuss an consolidated

our supplemental see and our slides the of adjustments. press So explanation for please release

X%, from over you'll the X, results the on quarter. up operating for On All generated Slide was this organic $XX basis an XX% operating quarter. Net points growth. income increased sales last quarter. year basis XXX Adjusted our was units business quarter, organic find and consolidated adjusted year's margin about prior our million X second

increased with and results, 'XX MRO progresses, our costs, in the by respect restructuring higher prior the actions. Systems cost-reduction reflected and help prior when and narrow quarter recapture. offset XXX efficiencies to engine military Integrated aftermarket year the for aftermarket higher segment will which body Slide in quarter. prior basis some relative Systems approximately components These growth The to margin quarter, quarter by the by the year compared sustain MRO FY margin in the Integrated margin and sales primarily quarter significantly With operational year, to addition XX% compared as in on partially sales driven restructuring improved the this initiatives, to year Integrated improvement points. organically to platforms, impacted sales Systems segment approximately X, Margins second were rotorcraft

over quarter. maintaining for the continue FY in high sequentially 'XX, quarter second of teens. margins second with points in the half margin Systems improvement Integrated this last QX expansion basis and approximately anticipate XXX We the increased the margin

Slide Turning to X.

on-site parts year-over-year for Second in Support operating due product improved X% segment cost-reduction and and component the and the support Product and and were U.S. benefits services was MAX up quarter mix, offset XXX increased The repairs of Asia. trading timing fleet organic structural margin grounding. sales approximately product active by to on in of organic component due accessory our stable the to reflects repairs basis an removals

offerings. legacy taken shaping operating Aerospace new summarized Aerospace of have XX. organically actions ramp-up were Segment margin service reflects transformation on addition due programs, Structures cost-reduction XX% to we benefits portfolio part in of to up and Structures our results Slide engineering the X% are on sales of our approximately as efforts.

on their As executing Dan transitions. program is noted, the group

XX. Turning to Slide

program period of our cash second $XXX the our million a quarter same million cost-reduction line and reflects used portfolio last all over $XX Our actions the businesses. improvement This year with capital and changes, and was in management is expectations. in working our across

to second free objective be cash positive commitment. We our remain continue this the expect and confident of in We year. to on deliver are that will half generating that meeting we the cash focused on flow positive of year

million Cash this of in cash capital, is liquidations $XX to million second in Integrated program. GXXX our restructuring due Aerospace for Capital were also timing working of The paid used quarter. of quarter were expenditures this our reduction million $XX the $X for in We usage generate and interest advanced million quarter additional the $X in expenses Structures, approximately of which the second million quarter million in refinancing. the segment. Systems included capital half. for cash included $XX Working expected to the $XX

of On debt is XX Slide summary our liquidity. net and a

of debt at net was $X.X end quarter the billion. the Our approximately

with were at financial availability we strong and in our covenants. all about cash million, compliance $XXX Our and are

we to $XXX which reduce million the of to cost credit the XXXX In the our proceeds we of quarter, We notes used due to our redeem we maturities. per these the in million funding estimated of XXXX. XXXX. the reduced related negotiated during extended million future in million 'XX cash agreements plan a to material will quarter, not postemployment funding to future have which agreements, benefit other liabilities impact $X our will Also, year. $X FY an obligations, obligations our and revolving took senior debt balance issued capital advantage facility, strong new secured but notes market reduce benefit extend We effectively $XXX and

FY $X.X of FY EPS continue 'XX pending last production billion. transfers, to which $X.X billion on expectation the Slide guidance, to impacts XX including and a guidance program of adjusted aircraft summary we our expect is of 'XX, approximately to $X.XX. maintain our We Based anticipated quarter. we provided $X.XX for rates for revenue the reaffirms of

effective normalized for allowance. which in partial be guidance valuation a assumes release tax a has the Our to due potential rate to year, the XX% reduced QX the of

Cash to of strong in the the first soon the are million half taxes, cash in approximately year than of net by QX. generation We in to the half, generation $XX received, the offset refunds cash year. more second cash be in used with be anticipate

be and cash expect million. full X We the to to $XX continue for year between flow free

to $XX $XX expect We in range million. of approximately be expenditures continue to capital million to the

our some about XX additional Slide cash provides detail guidance.

of year. expect customer liquidation flow operations in For million from cash to of million FY which of advances the 'XX, approximately $XX $XXX includes $XX we million, the

behind FY With half we 'XX in ability this of the profitable increasingly our and us, cash core generate first are growth confident to year.

drive core As businesses to meaningful and leverage, we our reduce our profitable that in in value. increases to shareholder growth continue will invest accelerate we

Now I'll Dan? turn to call the back Dan.

Daniel Crowley

and relationships; committed profitable structure, for by better talented, Today, Jim. a our an employee integrated Thanks, of execution. increasingly pipeline a base; is close customer organization equipped programs; defined Triumph

results positioned our restructuring QX Triumph for that have demonstrate efforts and Our transformation success.

through we forward backlog. our our As year, growing to we the executing look strong and move already programs on

by compete, I value guided are creation in long remain Triumph's succeed plan, clear We deliver a and confident to strategic ability over term. and the

happy now take to any We're questions.

Operator

Instructions] [Operator

comes first Robert Our Crédit question Suisse. with Spingarn from

Robert Spingarn

that to guess going $X.X when selling think in interiors. that's moves -- about that the I you called revenue, does Just Can I up? split for strategic and your in billion how except structures we closing out versus back noncore. the that everything

Daniel Crowley

closures So we're known have announced. been looking at already that

California our the So in And sites Dallas Texas area. then two there's I in there's the Tulsa one plants, there. mentioned,

are already So in those five process.

want ongoing discussions buyers. to divestitures In we're terms with get and I but versus of in strategic restructure potential detail, into retaining, don't that having

liquidity assets. So lot there at were where to we're point prior a nice was divest we this years thing that pressure is under the the not in pressure of

expect range. the it But in probably of -- could of to But our the in terms of to dependent of all net ratio XX-XX on results decisions. and be the final that's terms in we opportunistic more dollars be the of in Now sort of we divestiture, value. closure revenue

Robert Spingarn

there margin on structures, you have sequential in improvement. side the the And then

You're businesses profitability than there think is on is more the to you year. doing necessarily margin forward we the trending are a Jim, that last we wouldn't basis, like Or how least that there? come? close? better do everything seems about of up, at but It

James McCabe

to There's definitely come. more Yes.

to catch we that's had were had XX% quarter, many slight programs a losses. We on loss Yes, when a a I think was of cum is than the balanced. business more through catch closures accounting. because and just programs cum quarter. a to still as we that the long-term in XX% think, we working segment to it's in this volatile it do. X% have little this of we're and the last stable, but be -- plant stable gains margin tend do some The I some margins saw, And loss contract about

can think as margins at group. we options look we XX% for for I So approaching this and look single-digit stabilize our

Robert Spingarn

clarification on corporate adjustments there just expenses, a the just through? there? running is something And Okay. else that the is Or lower

James McCabe

a No. lot We're go and corporate, things discretionary expense. corporate of managing of lot there's onetime expenses down A through there.

managing at are them to forward. we stabilize going lower continue So And levels down. they'll

Daniel Crowley

is year-over-year these Yes. IT. we which and key restructuring in as down the The all component are in plant process finish quickly of that costs, new put consolidations coming

enablers that's lower corporate of the of one expense. So big

Operator

next with Our question comes from Seth Seifman JPMorgan.

Ben Arnstein

you for first pretty some organic the I'm But talk the what's good the is to ask year? quarter saw actually driving margins. about ask about, growth significantly. pretty I Ben you for think this Arnstein time, that just the can quarter, growth This not going I guidance and about here, beyond we I to FY a 'XX like, guess maybe on organic you wanted in and guess ago raised Seth. the after systems how for about and

Daniel Crowley

us. starting contents demand reflects systems both that and as programs gear had & business production Systems are engine business. well we retrofit the The Pratt high the it. existing see GE, in is we for customers ramping win to Sure. on fleets, box area. more we're Whitney our all capacity, as work more And key buy An new example of they'd for if Rolls-Royce, in

the up gear Their the to first coming from loose half that XX% plants second revenue was boxes. and the half the two have We year. of of produce year gears

the of programs. the developments it's So as tailwinds portfolio kind ramping production as well of our the dual new diversification of and

James McCabe

it's think growing is in percentage the this that aftermarket the I as well. guide quarter

to So see TPS between of starting benefits we're our some collaboration TIS. and

Ben Arnstein

quarterly Great. And sales about company-wide QX QX earnings of at about maybe and like -- as of just is note there and level think QX? the anything we kind cadence to the

James McCabe

core the first is and second So half following in the generally strongest our half. trend, quarter stronger the is the business is seasonal the than fourth a second half, quarter where in

be have mention So I half. did We're for without And did have half. sales fourth that capital growth the growth a didn't capital working but first more to as quarter. use, build you with cash strongest more seasonal can't up forecast efficient have in flow ramp is we the a getting the We second inventories working capital. in working we

Operator

from Epstein comes with question Lynch. Merrill next America Bank Our Ronald of

Ronald Epstein

question. Maybe a up big-picture back

As we I you, it, continue redefining like, the path how do of Triumph. down say

aftermarket years the XX years is If you right? ultimate think much what's point were of mean business do the get you more now, to when of from five I look think about how goal is from much Like out there? defense, the we should How business? business the at now, how services-related? you that

Daniel Crowley

the been totally Thanks, for here, you And so asked. it's Ron. I've certainly, story, Yes. time that following the been appropriate you've

M&A, across Systems organically, think number and we without Integrated is number. So it's we to Product we $XXX that that million growing. Even a about there's Support, could Triumph's return and Today, aftermarket Xx. grow think business to just upside

go that newer I some the, contracts. France. get in MRO third-party did a newer into aircraft, with this quarter one of call X-year on things think some advancing Air have the within That's the to it, not the And horizon narrow really started and we expectation. us a is I'll XXX of that's of body that to reasonable the that, partnership going

one accelerants growth. have for that we of the that's So

gears, electronic I into these In in actuation. that expanding verticals controls and got We're as mentioned, system interested strong space. terms the and of systems other verticals content, and we've within

to opportunities line, think niche Board that between and our some shortly. as through and present strategic that went we just to accelerate product, there's M&A we product fact, And the review, well. In R&D we'll

stay businesses. main to the some of we to us, Triumph larger and want a Our it company. aftermarket help to smaller as temporary a absorption, is for goal known to we the grow This but The supplier grow a would the is company But and we SG&A were historically, phase hardest thing customer a systems of it'll is that's don't company. We size the us exit be back interiors-focused. -- noncore mean want problems. us to for be our including to as solving customers' back I

And in as terms more spending, set And come of up goal the from commercial XX%. to that well. we defense, more you'll defense structures you asked a XX% as see about exit that of number increase we to and content, and

Ronald Epstein

look And defense? it where when XX% I the mean road, the way company you be is something could out down approaching

Daniel Crowley

little probably that's think a high. I

I which fleet competition. of some be bringing in MRO We're Triumph continues in. their on change. budgets refuel with supporting to reconnaissance arm VXX, partner with boom the push refueling several the We're Obviously, are the to substantial excited a And the aircraft fleet. -- can be about example, the Army's in there's officials. future at on uncertainty was do, state just for defense for teams. of efforts. -- course, helicopter We're But high overhauls. a readiness, the those C-XX those Of Today, we up defense down administration D.C. yesterday a meeting

as So grow. we'll funding as it defense be continues long to strong, see

probably XX%, XX%, not that's target is XX% preliminary. reasonable the more maybe I just to think a but

Operator

Jefferies. Sheila comes question next Kahyaoglu with The from

Sheila Kahyaoglu

stuff $X after Ron's do one you mentioned. on million the Air business, CAGR. mentioned following double Dan, to we France should double up you growth aftermarket take air what else How question, that I is XX% grow billion, do for? to traffic? What about partnership guess -- you we think to look growing $XXX have

Daniel Crowley

-- There's by shift of accompanied the it's they over growing the U-Tapao, was And MRO Thailand. that Asia in key companies MRO have that supporting a shift rapidly Singapore infrastructure. we're hub a XXX narrow support the needs already In launching the enabler body in I and Asia to It's is hub. and fleet Singapore, a the a called are quarter, there fleet in So participation to now there. of the Thailand size. studying higher in because be is from similar over

my talked from accessories. in doing engine structural to ahead get Thailand expanding just in I trying So remarks, an doing repair to That's example of about of need.

of So the growth. to enablers one that'll be

MRO. engine of verticals As We a do Today, and bit mainly structures accessories there pretty with interior Integrated Systems, we're limited. little work. are within and other

So just there's partnership people's lots content equipment, France, Systems. narrow do subsystems we wide other of the with MRO expand In and can body and we'll of repair other do. and support we'll body, Integrated into Air not

So that's as a And our we tailwind. Jim aftermarket. mentioned, all own haven't of recaptured

an we're there's there's about then them sustainment strategy. regional supporting with they And and I'd say QX product as We excited their award them, So of service a broaden expansion offering, to Asia, these just signed offering with more and in pivot a partnerships, including reach. Boeing Global Services.

James McCabe

services in started, have years. we it over we was When repair XX,XXX grown think about That's I the last X,XXX that X I offer. XX,XXX.

to repair continue to services grow So -- and which they is that. the key repairs, is

Daniel Crowley

quarter also a is customers we or hail When the in was it damaged fairing, that by a back bring truck say an right aircraft, hit the to strategy nacelle trading away. rotables let's announced component. turn by it they This need

another on having that's replaced and items to rotable a value-added compete. inventory something supplier, market, used turnaround wear and provide way we the can time. being used And by so we quick upgrade then serviceable, think And buy the a rotable it,

Sheila Kahyaoglu

nice maybe quarter And for leverage helpful. one the down in and taking then, That's by you, very Okay. Jim, job growing EBITDA.

thinking the guess think about do for cash You've target leverage proceeds? how being business one. sold we of there some National Or a businesses, about? I the that is you're

James McCabe

be. So we're to higher we than want

In why from be it's hope Leverage I way And we'll our million that went I'm we that to strategic we reporting actually Xx assets disclosed think is this think different buyer, But X.X of got be and the will suffice proceeds we we'd so say in to the the transaction, to asset. Q, I the they're -- good that when the X.X. for on sold be I measured is a expected measures buyer, That's bank there. to we $XXX is think and value it. ways. TECT disclose, a under complete leverage. about quarter. worth that current fair which

Operator

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

Cai von Rumohr

Yes.

to talked for interiors, So And of of of implies the actual sales, $X.X size? the business, That kind game million that Is Aerostructure billion Interiors this million. like, plan Dan, about profitability? sector that in And excluding you what 'XX. $XXX forward? kind what's going $XXX

Daniel Crowley

that's in profitability $XXX of best So having one operations. X year, a $X.X from is million -- a does double-digit. Mexicali that panels. million, good And lean And billion. very our strong, floor and the It's it's over benefit outside blankets of operation interiors about is we the

so offered and well, advantages Spirit both, it's Boeing. Airbus, to cost And to

thermoplastics especially the offering then automated almost see I'm items looking coming review, went fiscal We'll interiors the closures. by $X.X strategic line retrofit you our you'd may of replacement if for at and billion the opportunities that as a divestitures. aviation, surfaces. parts posing do, AXXX. XXX we're that Today, looking like and plant commercial the into thermoplastics. excited And Airbus of off we're more And in new eVTOL our know both and on end do to on control we're under go at use plant Spokane, year. about some that a in interiors retain an well day structures Jaunt as for We We're we'll as some basis, what lot a mentioned, within the businesses. doing, I we'll case-by-case in

disposition. So in more we're great we'll and business, doing still know the shortly that final about things

Cai von Rumohr

Aerostructures. just a on one And quick another

then up And take the the being looks red it in and in that, contract How a that if amortization you're Is went looks you quarter. the after like consistent like both basically it the basis, the quarter. your come? first correct? out, So excluding that on black, liabilities, in in fourth

James McCabe

set the did your losing including part increase a were fair of the was that amortization because sorry, volumes on Cai? up one which the contract reserve. second the of GXXX, the value So and programs, I'm money increase we certain in question, on

Cai von Rumohr

in . of -- representative? was like, mean Plus, that you red. about a the you -- if correct? kind looks $X you take since if $X if out, million that mean that So take noncash. I you that out I Aerostructures Is it it's if take lost actually, million, is

James McCabe

Yes.

I had -- XX within and was And think catch moving period, programs were they one pretty of cum group. only that's the that adjustments structures many there the there's throughout parts balanced.

Daniel Crowley

Yes. The the next we're recent loss-making. to counting when by to higher In was be much the been it program, used has now XXX is big profitable May. exiting picture and GXXX months which the rate program years,

Once structures. been or for of margin we're those, defense have us in are the those business, So profitable. interiors, programs the free tailwinds residual biggest XXX, headwinds

Operator

comes question from next Herbert Ken The with Canaccord.

Ken Herbert

can wanted from First, very the parse for revenue contribution And growth a I how from Systems, within from Integrated in out just within spares MRO the maybe was spares? ask strong that the to more detail MRO standpoint spares, MRO you the of much and or to growth the any relative relative activity us?

Daniel Crowley

repair, coming. and off instant overhaul the The growth that to in Yes. versus reason one a leading other Spares quarter is the is and the parts shelf. but repair is of buy spot overhaul an one lags was contributor

to have to go supply you get in there and and other, create The capability the it. approved

You for the repair product. may that engineering designated source become have to

MRO time in in some we're carrier of center. quarter exciting is opportunities. designated the a support engineering repair the was number of things have expertise lead there a our the as facility that for Thailand to well business. we competition production as in overhaul Asian Airbus of part one growing by their approved the fleet, as the And happened So And and large is

who -- Airbus. was that So fly

So the centers, OEM And to what to to we're deliveries for together. how it XXX figure that excited say And that we a now it. I'd quarter. they've at future. collaborating Part the tended the spares be behind secondary MRO coming XX have, These in in But from and big depots those lead factories. new grow online deal to least will they're is repair for getting was priority the us us a do about -- out

Ken Herbert

you rotables capital. I billion us helpful, requires rate in called a then you And Because at this can you aftermarket If services. some that's and just -- the obviously, Can you're MRO dollar you're and of if I million look to run growing place, $XXX very I think about out could, investment pools up support lot today, to in today terms the could or total spare putting Dan. building making what appreciate -- as help kind $X.X of business? footprint

a And So how standpoint? I to couple years meaningful next the top do does we the think today, much aftermarket maybe about broad support tailwind more become, it the investment line you're maybe guess, putting into when a cash from the that growth? over how of moves

Daniel Crowley

and investment a Support fuel cash Product strong with is for of including setting had quarter. been the up the France. and X conversion growth The business venture it will rotables Thanks. the Yes. has we're areas good in Air then partnerships, joint us, performance always cash that help

a products administrative fleets, got demand, I'll and inventory it, they when so available. especially priming so the and for cycle, MRO of those, amount an And we've there's go call the newer costs into certain rotable of the pump that

So it's mostly working capital. Jim?

James McCabe

Yes.

rotable can operators they I have can with they part OEMs, think pools of partnering contribute with as and that partnerships. also

So we to so keep for can minimum and business. costs that that a the continue to down keep grow we ways look to capital

Daniel Crowley

And expanding want incrementally. a looked work business. X The It's don't building or much accessories our building bursting We go ramping. through new seams. we're building Texas been expanded Grand transition have the that a Xx Prairie, at there. risky we has so we We're at while to

building. on we'll adding to that So be

to It's cash that able goes the as us. expense some maintain our brick-and-mortar that we big there's nothing is a ramp. -- we'll but So all go along, be for conversions through

Operator

David with Our Strauss next Barclays. question from comes

Kate Copouls

your for Copouls couple for Kate questions on A more on AF. David. This plans is actually

consider much So that noncore you be could sell plan much you close assume pretty interiors we you and AF clarify everything forward? that that to going or should will pretty

think would within then noncore that commitments that bucket. I of And there's portion still AF contracts a of long-term kind substantial and

will you So those? to that of how out how plan long take? And get do

lastly, divested these you're you plants? that have expecting from is And estimate for there proceeds of then sort that any

Daniel Crowley

Sure.

about there's XX mentioned, a as So case-by-case plants basis. make decision we're a we'll looking on at, and

we've sell to continue show level, -- out But we'll retain them And we've and market X and will intent we that we're for position on the as continue actions. periodic test buyers grow those at the clear was, reflect basis. a been valuations that our up to and of divest although strategic and in very and divestitures take what to those if otherwise, ability and identified willingness noncore, we've space demonstrated through financial first it their and them a that demonstrate them to them. that better value If value. So

the On loss-making no improved the it's These as operational sale. out management with hand, better in programs. other teams performance We're we've and things that clearing business, backlog of fire process. good are better

have of I'll just sites. return comment on we'll end fiscal of each the to that our by my So the clarity year,

far a of contracts have there performed good site divested. long-term picture contracts, As we as to to all runout the as site if the they that's at be the happen

and through long-cycle are continuity customers Triumph, Our The customers going get consolidation those structures these in the structures focused transitions. can in sites this help really to companies support supply. a investing market goal And are to those that of mainly for there's positioned is we're They in know on happening industry. with programs. the invest

Kate Copouls

more, one then And Great. I Okay. if I may. guess

-- refinancing then $XX and MAX. think annualized costs And after I the refinancing that. then then So this year interest so books higher. there's about million XXX And the

towards of the flow So free cash end that to guidance fair Triumph lower range? the is it say could be trending

James McCabe

No. No.

is holding range, our we're our expectations. around think the I and range

no the there's movement cash. in So

We have on. seizing and risks opportunities we're

a reduction in but there mentioned risks, capital and other actually opportunities couple you activities. the working cash-generating in for there's of So

Daniel Crowley

We're X that positive, we've And to years million. subsequent on really glad ago, be we used progress $XXX million. -- used now build over years. forecasting A ago, we'll in and the last have cash over made $XXX X the years. to year we be made we're

way. we've come for model to cash our make use. that a investors for to in it's give -- difficult easier is been we're And performance I the it And analysts to we're our stability So long know getting and us guidance. now going

Operator

Myles comes from with question next UBS. The Walton

Myles Walton

And EBITDA I forma margin. just of going to you're quarters don't business, get three of targeted to. was due Systems, ago it of you Integrated probably provided, XX% the like I margins couple, a like ahead spares. It on some hoping you that looks with a you're kind running know, to pro where the looks actually start to had

making wonder, think Aerostructures just margin progress Support you towards of was teens? have predicated now about are now the billion You're I mid then targeted margins. back. definitive on is the that moves the scaling the Is talking that probably $X.X forma What this target it Structures And Product you're making obviously, pro more XX%. a margin? in EBITDA that Aerospace And I business.

Daniel Crowley

haven't additional as the guidance -- the think provided we we margin would we assume business, for that be business existed guidance guidance, So assuming updated it it provide future-year handicapped that companies today. and improved. with I structures We're but provided within divestitures. business, can operating exit the we'll If you

Myles Walton

likely other other given the two? below presence segments aftermarket be still two in it Would just the the most Okay.

Daniel Crowley

have doesn't to lower. tends that a trend structures upside. It is as little That the the be aftermarket

I think that's a fair assumption.

Myles Walton

is flow through? wide. EPS Okay. and a elaborate gap on that where but is first what adjusted full Can Obviously, year half how And your to $X.XX, there's about and EPS. going gap only GAAP that's -- your between wide pretty the pretty the is you

James McCabe

Yes.

I think that's divestitures. primarily on book losses

noncash losses. So

Myles Walton

kind them? you pending that of Okay. sales be know about That able close just already given you'd to

James McCabe

That's right.

Myles Walton

then of XXX, it. to those we of Got about two from fair think And to looks Dan, to in the think the on XX as dynamics? rate XX, it proportional it exposure down to kind your XX the Okay. so kind the about to revenue-wise XX is can bring similar

Daniel Crowley

Yes.

in shipset go rate terms ups XXX maybe for $X.X diverse and downs. Our We if that they shipsets, we down portfolio -- stepped adjustments. program now about flow, more two content really of million. But so no our generally have us with than it's is by the single impacts that is

we'll a not we're now mature I And big see they're in especially we're bright the -- the And tanker They're of at They've progress. plans freighter because in configuration. and still about want rate about high step-ups. has going so go And it. XXX. revenue XXX, got to look think swings to deliberations Boeing that for they swing, and has how now the on having excited making material XXX,

Myles Walton

one good. on then last And the sounds Gulfstream That just one portion.

work GXXX over an wing this upper is profile? as you statement to the has understanding just the your XXX. already same that that I'm there to obviously know was execute the out. under contract program? the My changed I rolled wings are is Or So curious, your is years. on

Daniel Crowley

were But the So we Las are and the speak nature to was Vegas rolled support the similarities when of really It are -- wing. There we the it I'll the XXX exciting. designs. in was folks at let had both Gulfstream at going XXX. out. we to

record has their speak we evolving demonstrated both aircraft, forward track XXX. as grow they their them on And of XXX them look fleet. to continue supporting to the let a and Gulfstream and think to rate projections I I'll

Operator

Our next Noah from question Goldman comes Sachs. with Poponak

Noah Poponak

hear calibrate from investor just investors to periods. the effort efforts for and puzzle the And free what cash to forward. sort solve moving is analyst recent You of the in to of flow we alluded sure, statement that an

a 'XX handful about guidance, is it. that something to lot, it -- about I asking but matters, change that largest changing know not without capital So on us ask in matters, possible know matters. handful pension 'XX? pieces year-over-year Jim, kind Is a mean pieces, way But I too to aggregate and working just do I we give could thought of is today? fresh update a a -- few programs CapEx asking -- maybe the this a we of there's broad but of for

James McCabe

So you couple of different out from we guidance you giving disclosures a 'XX we're can mentioned moment. see the we of But year. that's have at FY and course, drivers next our all that have there,

year XX of GXXX. -- And well. programs think might next the I the as loss is get of ending we've One them like out shipped the

gone. Those been GXXX. we we'll this have those So be have million been $XX In accrued, forward losses which have of will that liquidating. had quarter,

us. a for So tailwind that's

if XX-K I cash year, advances then look forecast. our It's be And the is that, within year, see loss not really, some But and We're liquidation on flow current you get planning we most cash payments. the one insight still next I couple you away have quarter this then next then, XXX year. the year you free X well. a for at is you've year, in in the our going through think, got $XX million GXXX, that. But but in But a million to the And can years. process about forward pension got on million the once to the update the think $XX go have to. that range. future, we next we've And of going $XX the of will as the a we

and see balance, found and steadier done why So That's you flows forward. opportunities. balance that. we've there's We cash risk more going cash in our

Daniel Crowley

final will business fiscal on our structures outcomes the of also And disposition 'XX forecast. the affect our year cash

Noah Poponak

XXXX? you flow to expect grow year-over-year cash in free Do

James McCabe

our value moment, guidance So of all our appreciate not but goal, time. cash of the and giving FY flow to I company question. with 'XX over improve is and the we're Certainly, the FY the actions 'XX, at

Noah Poponak

think pieces correctly, the just then I one get something the Or out in missing? there for than there past. in seasonality have the there else divestitures I'm in pretty even you range, organic Is different you've a space do I the incremental is guidance -- if first for divestitures? calibrated have had versus the significantly half. you To last that to revenue me. half back need -- into And ex moving guidance would so the And Okay. decelerate

James McCabe

down for half winding Divestitures too. sales don't contracts, impact have guidance well on as as the of the second an

end close no we point divestitures now. one to, you of do But would right trend high have there's the the range quarter. the could that in think we on and So can I

Daniel Crowley

Yes.

not years, years, terms Our is half in of to year revenue the prior of out upticks. second of other family

Operator

Our Ciarmoli last with question comes SunTrust. from Michael

Michael Ciarmoli

Maybe, back go bigger-picture kind of to Dan, Ron's just to question.

term? XX% programs, to both to looking set potentially If on maybe VXX, future these DoD certainly programs, talked at know Chinook, new positioning is on Hawk, you've X look pressure expectation of your term lift. these years a of view sort top if you've or legacy Apache, of create Just Force some is what in got vertical getting do or lot about of you kind how of the Army, cuts, near some about for so? next the talk bit I some to programs. You over of in see at you Air well stuff positions they your a the maybe looking up you've could defense ramps? curtail Black XX%. the defense little What's the the strategically near But before think as you got

Daniel Crowley

question. Sure. Great

betting not there's various and lot and programs, itself So a of training of a cost in of lot a reason and on There's and a Apache, money but people for legacy end the high sustainment. of platform that. F-XX, lot A-XX, have of only and upgrading, the momentum inertia switching lost

and longer C-XXX the product platforms these to U.S. longest-running is The So tend industrial the on longer. for go in

I job in a launched of has continuing to and great think the evolve it done 'XXs, Lockheed that.

all is Our growth our across fleets. in of customer military

were defense Boeing the we Triton So we're Northrop customers. because one to defense. low-rate wing got a C largest the key our the track. It's partner with production Northrop the of supporting We're Global on Milestone Hawk production on and achieving back Triton. initial We award on

do the that improve MQ-XX, of Force of, And as Air new to the some I'll platforms. reduce reliability also upgrades and costs prospects but And where are FMS in we in their work Sikorsky ticking the not for on for then part the they you've subsystem got their for name interest F-XX, new the And the just structures got We're up. They've in starts, content. systems programs. competing and a helicopter. You have great Bomber blueprint rates we're affordability. supplier, it, offload call big

the future mentioned vertical Army You lift.

robust a fair the intend it's win our we in defense So share. time and to space, be to

Michael Ciarmoli

then the last quarter, not but And excluding got like just of look that from margins, it. correctly, something margin be is restructuring, the Jim. to mean heard as kind potential drop-through The should I sounds every the about maybe maybe great that it we one XX%. integrated forward? -- I you've Got spares. Helpful. level going But -- of is that one, if think segment

James McCabe

In range. that

in we're was It was there a going We forward. to teens of good our And the the mix going MRO change quarter-to-quarter. quarter. target confident spares for margins But in and F-XX. out XX% are have high

Operator

Eastern Time, Earnings X you Eastern dial Again, Ladies access and the nice enter the X for XXX-XXXX XXXXXXX. XXXXXXX. XXth in Thank can will may a.m. a This concludes Fiscal a to through enter at you today access a gentlemen, Standard parties XXXX in passcode XX:XX starting dial number Quarter phone Call. access Conference call this you (XXX) have replay, can Triumph Second and the now running Standard code disconnect. available (XXX) day. XXX-XXXX Time. Have XX:XX and all p.m. at participating. replay All To Year Group's replay,

Triumph (TGI) 9 Nov 192020 Q2 Earnings call transcript