TGI - Earnings call transcript Q3 2021

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Operator

Ladies and gentlemen, thank you for staying by. Welcome to the Triumph Group Conference Call to discuss our Third Quarter Fiscal Year 2021 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 your pop-up blocker is disabled if you’re having trouble viewing the slide presentation.

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

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

Daniel Crowley

cash XXXX. our I capital achieved and and across quarter Thank call. the QX results earnings of our and organization. you’re fiscal working we all to progress safe for in year Triumph’s improving Kevin, welcome, well. free third to everyone, positive Today, you, flow managing hope due reported Triumph profitability all levels

accelerates, sales in improvement sequential to our and delivered pivot we’ve EBITDAP. margins our military As operating

quarter. the that on fourth We aviation through build slowly. commercial progressing, expect recovery to The is albeit

repair Triumph. downturn months wide-body OEM on an these stabilized expected quarter-over-quarter volume a favorable multiple supplies Systems an growth our substantial aftermarket & trends is example Support, Overall, and track see & strengthening to third meet design narrow-body times Triumph’s we with commercial helicopter value out core increasing commercial cash air we in life commercial that and upswing at narrow-body modest narrow-body which Support tail. momentum flight-critical and year with content, orders in to we higher sole to production hidden with our an Our to After cuts, contracts has year margins in line next operations, either based results offsetting utilization of usually position across production the commercial pre-COVID. Boeing expectations, are we resulted close in full-year Triumph freighter us or the the our and Airbus with backlog components in quarter replaced After our platforms in XX our over demand improvements on on source This of pressures the capabilities. commercial actions improve year, by continue customers and our military and MRO over managing above When as did are traffic, Trump’s on rate flow Triumph aircraft, wide-body see and both first declines. of objectives. military diverse Airbus in last macro Systems keeping has to our volumes and driven the generate levels fiscal favorable trends, half, increasing the in increase of combined for rates. saw centers historic engine under expand. Despite positive as on through aircraft delivered

walk X. the me on of Let through Slide you summarized as highlights some

capital management. positive generated flow through free we First, cash working tight

to as operational quality drive improved the and margins in enhance our backlog. both we business continue improvement Second, units, of

pending while our billion lowers cash divestitures, Prairie in to stock exit $XX the exit XXX XXX historic Together, nearly with cash have future after which in Third, the contributing the this maintained in and pension and factory Last, or year-to-date we’ve through million our in continue Grand we have expect California a of to progress to debt with towards be to June, Hawthorne, plant obligations. repayments, the operations the future our $X.X of liquidity, free of we planned all plan, sight line levels. We advance QX, now current the better breakeven par used moderately used on liquidity and than flow fiscal year fund company and downturn. cash to cash full for state. free

Our third tracks. a on story X are quarter parallel results progress of

& that business, core First, capacity efficiencies match were levels improved consecutive to growth within improving improve of our margins. sales Support underperforming. quarter through Support challenged and/or as operations to production, the previously lower operating of Systems on & we with and programs second margins continue Systems and evidenced reset enhanced

in the and platforms, other gains favorable XX% For example, business actuation gear landing renegotiations. which supports amongst operating its by QX income productivity contract through improved Yakima, Washington, our XXX MAX year-over-year

MAX cost indication will our Systems the another basis in components rates recover, benefit As hidden the value our lower & of margins, across Support. proprietary

from structures continues completing track, exiting achieved On X cash our completing to achieve legacy within obligations the the business are and the of quarters XXX-X the completion finally second GXXX breakeven success on programs. We of our in and program.

the for the let V-XX, driving as By program improved and in profitable XX% was profile green outlined in quarter, and overall. sales core QX, Support our EXD growth shutdowns touch platforms XXX Now, of margin on a red positive. by X. the on third volume of market our in ramping after was CH-XX XX% increase our aerospace headwinds. our and business sales Military advanced Systems our such Systems structures March. cash and shedding Support, military The of modestly down & as the & Slide cash we’ll sequential commercial contributed the the consuming each all we GXXX, is to unit, Military be the content, me such offset to across the drivers programs Structures repayments board to helping as the year-over-year. eliminated impacts legacy programs, comprise now sales

XXX the lower X to quarter. than expected, expect use was consistency in in programs quarter-over-quarter cash the future QX sunsetting to to continue We part improve drive of out due by and periods. on push

than to and management the less generated to cash improving $XX deliver on margins. QX, we shipsets over capital X flow have million working In remaining free in program. We due

cash on the pure QX on now to remained my Aviation and I’d stable the path actuators, like as they TSA are cockpit accessories. and future steering, XXXX Systems structures Whether the to interior largely to year date. commercial controls, fiscal We We military we’ve company. wheel we actions to expect basis. wheels in global represent numbers start on the configuration stable taken to customers brakes future our track we capabilities here the fuel remain deeper important value. as the Support provider be it’s as to of provide gear, positive Slide the aircraft. the services well. nose drill are with of and services I a unseen to fuselage. products landing eye and to share & Triumph’s critical industry and on flights, products largely financials, remain X. recovery on play underneath of of for provide the customers and the nacelles pumps, commercial the On are industry metrics breakeven and skin throughput, want state perspectives services safety to based and to all utilization efficiency the hidden Slide the and X, and of into that so Listed the Triumph’s They’re sources These the to a factors engine hydraulics summarized aviation load to for

of like impact adjustments distribution in X you, military Slide Triumph. pipeline more the QX backlog to to sales cancellations QX reschedules. Military and of to the is vaccine However, new China than December, in aircraft to Europe continue rest ending will Systems measures. MAX. MAX for and the traffic made the in was and are dropped commercial the being are back our pleased execute and able have recovery. industries, of XX% OEM on freighter quarter, core Triumph’s probably X.XX and variants look effective XX% industry, closely looking on in that the once have I’m Undeterred unprecedented key and in systems delivered of to X.XX. overall, that’s down to QX & all this markets good great but continued stabilized delivered. Today, XXX coming Support control aircraft, were wide rates and crisis, recognizing were XX% aviation strategic the continued many Triumph impact off a our began and of Boeing Airbus of a XXX Industry book-to-bill making cost sales recovery today. focus efforts. rollout and certifying again progress reductions Year-to-date declined business backlog and XX%. recall XXXX, early industry and to due end time we’re depicts down progress and service. area. quarters high to XXX commercial up the to military while rise OEM rate fiscal pivoting backlog as to objectives, transport orders Support on adjustments. the signs on deliveries military, the to In forward, Canada, to U.S., is XXX And containment reflecting into delivered this executing the QX the our book-to-bill as to been & while see Despite flown down X the return Systems unlocking the XX%. recommenced to year were production ongoing in the year In note. watch aircraft customers Like XXXX, order

in In for Triumph the CH-XXK take Triumph Triumph key fiscal marked commercial to award, several QX and also key to largest carriers. of new a of the Slide excess with since Tier sales million content year. we us overhauls summary, Xs transport driven crisis. The have on extension the quarter. driven And return a we’ve is the and Turning that actions will XX positioned Jim? spares QX for the through good onset and more contracts, awards quarter-over-quarter. results to IP for growth X, of of With quarter. shipset. repairs, and quarter to the of crisis was The unprecedented Triumph in taken for Note the by touches profitable a renegotiation forward $XXX wins X $X the platform time and us now as a MRO grew Jim that, OEMs, CH-XXK a and wins, including look host closed new per the QX Slide first helicopter million across our IP.

James McCabe

bounded renegotiated customer used quickly ago, We working the to we of capital substantial globe, pandemic guidance Thanks, raised to to year, repayments. we reduce first to today. bond X through We pay yet compliance. provided good In We that and offering year guidance our Despite eliminated the our we’ve not the uncertainty, our liquidity. cash. full persisted revenue covenant our sales advanced And Dan, secure that lower financial our the everyone. we across enhance revolver in and and million balance hold secure to a reacted which demand as cost that morning, its operations. impact on on meant to revolving maintain off months about $XXX maintenance our $XXX half of the and continue and put and sheet million to then facility, credit flexibility. cash our covenants, and

and were we expenses our commitments reduce customer time orders honoring our purchase As purchase adjusted inside demand. will lead to be reducing

consolidated I Now Triumph we on achieve our track will plans our earnings exceeded objectives. than business flow in basis. our We again full year quarter quarter, third positive on adjusted sooner planned. cash an discuss to cash third unit are performance the and and and is had

transitioning from press segment please million margin adjustments. decrease reductions our the Despite adjusted On results structures up in drove was for the the X% see programs release our compared consolidated from our X%, quarter. and this year. $XX supplemental find quarter, for and explanation Slide our a quarter. Planned of our and income was adjusted last sequentially slides you’ll last XX, million sunsetting $XX headwinds, and sales to operating So operating

the margin restructuring sequentially and including in of net We’re & operating & quarter sales the this were inventory prior basis the sales Systems rotable was customer year $XX fleet over a related XX.X%, impacted results, $X in quarter, impairment about platforms. our XX, sequentially, XX% basis year up commercial of The XX. XX% gradually to up Airbus segment Adjusted quarter-over-quarter. And segments’ the Systems approximately points. is segment improving our quarter. profitability on this The sales adjusted With segment million increase on by to in Slide Support comparable XXX Summarized military retirements. last Support from only in respect quarter. for up on were million Slide to an on X% last which margins costs XX%

down sunsetting performance This Aerospace consecutive cumulative $X costs quarter declines quarter. were anticipated to outs. Third transitioning as close effective in catch-ups organic sales commercial to Structures and in as the net Aerospace due due aggressively well quarters favorable resulted to achieved segment million programs, programs. in X and planned group’s as reduce actions of for program restructuring Structures costs of strong

costs, close those which loss consistent was and significant are X margin as X%. possible. facilities. we out XXX, year program focused months Excluding operating lease The a last up the then and is only clean with in on Production is ending at we will about left efficiently as closing

Slide to XX. Turning

experienced the As discussed working half first in a increase prior capital. year of we temporary our quarters, in in the

and and next in Restructuring liquidated million planned million the the breakeven were of the $XXX driven capital. advance QX $X Aerospace anticipate used $XX cash were fourth Capital including in to programs focused upgrading chain $XX have be cash and net being Completion in a quarter, XXX our Structures million $XX in quarter adjusted a and the the programs in The supply and million the our cash net over years. working $XX advances cash slightly quarter, debt liquidity. XXXX. is better segment. quarter QX. in in million to On equipment were million few remained expenditures year-to-date. million GXXX positive flow our flow core additional have of third we approximately decrease to outstanding to of repayments, managing by was we FY our in breakeven million summary new costs the quarter, Support $XX aggressively than We $XX demand, third year-to-date. use flow lower As includes and Systems Slide of XXX XX and $XX liquidity. to primarily is million in $X expected of & million We our on and sunsetting

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

further Our combined creating defined this $XX XXXX continued any forecast XX% plan, liquidity a even cash $XX have required before $XXX million contributed an cash contributions, funding liquidity We ample last expenses reflecting resulting XXXX credit the actions. is our our cost million to FY FY to estimated lower of quarter enhancing In we and million. quarter, pension initiatives. year, required. than SG&A availability reduction of stock in was funding about benefit towards

of that XXXX, through of and reducing an billion. have billion also value be continue pending program Based on $X.X deferred taxes. continue to to assets We anticipated excess FY for create of production $X.X million cash tax to expect $XXX aircraft to rates revenue we impacts including completions approximately the

cash or the We ended months par to fourth the cash moderately free expect better breakeven quarter. for full on X to year the be with with free in QX, used positive flow than

up Our content. Support higher more is core our & military backlog slightly with balanced Systems in segment and

our adds our Our our focus for value reduction customers. and on our coupled system improves actions, cost operating with competitiveness

evaluate strong measures taking capital us further and downturn actions our we’re making liquidity enhance our additional managing moving stronger structure. forecasting We’re company forward. competitive The are to this and liquidity and to more continue a to

Dan. call I’ll Dan? the Now, turn back to

Daniel Crowley

us. Thanks, Jim. have margins behind confidence signs and generating In flow. we free through of in is maintain early summary, led Cost us loss-making Stability pandemic And the full-year across the with positive recovery remain the rates of QX MRO objectives. our on in give the OEM by worst track momentum demand exit enterprise. production to we achieve of programs improving actions cash reduction to

further Systems in margins. growth quarter-over-quarter in Support forecast to and recovery & continue We

the revenue will margin about evident growth, of as This our quarters. rate. and our flow core expansion, future win is cash move you’ll enhance As become generation and our talk drive in future we value operations to we hear sustainable hidden something more state, exit non-core me

The contract our more done our enhance improve job The predictable gives continuing uncertainty to the be Our the as the flow balance profitability has and reshaping, sheet can more overcome through Though pandemic. and and restructuring, in we become got generation. cash the other now committed bridges through pandemic. and a are market repeatedly side transactions us us to refinancing and challenges to Triumph predictable managing we we portfolio of portfolio confidence cash remains, reduced renegotiations, team business. liquidity volatility

from fiscal done. to that’s we’ve through we happy what exactly Kevin, the Fortunately, momentum questions. I’m solid company. ended year a Triumph with any And which to come will as crisis take now build. confident this stronger we’re

Operator

with Suisse. question Spingarn first Our Instructions] [Operator Robert Credit comes from

Robert Spingarn

morning. Hi, good

Daniel Crowley

morning. Good

James McCabe

morning. Good

Robert Spingarn

what’s need a business loss at the Dan, I we wind-down this in still there making think and when is the point? XXX, everything just to How you the non-loss-making could only there, you just about else a at program You this from high and where about here? So, guess, we us? business level, – keeper refresh said the exit. think Is structures that goes do

Daniel Crowley

a right. value, contributing past, XXX. GXXX, XXX month. a closed supported, Embraer But X has years the to that now the mean, been plant that subcontract, we’ll the per XXXX, weren’t made EX now, that for X.X down. month. as in when roughly X and Grand close GXXX, wind Angeles, That’s It’s I money small responsibility large Los in was We’ve Prairie. factories exited the and Global one the the the that is rate mentioned except programs our Bombardier And the in

So trainer, all & and V-XX the engine Pratt that the add empennage for time. will do T-XA in work over what value remains the on it’s Gulfstream that structures, or are GXXX the F-XX favorable contracts or Whitney we whether the for XXX, ducts

Robert Spingarn

stable XX% up in And about I sales the military think quarter side, the then, just I on a being with see. backlog. military talked you

going a to that so, pressure-point am wrong? its that reading chain? XXXX in protect tries there or pull DoD forward to does any as on create is growth supply sales And So, if I there

Daniel Crowley

acceleration money directive, been the primes. flowed cash X that from DoD’s And There’s down. was an of the tier payments DoD they at

let’s would Hawk ahead. days. helicopter terms to, XX has increase. What upgrade we’ve the we’ve as in been improve well say, engine sales helpful of not E-XD. But positioned we’re a particular the upgrade payment is pull number example. So and Global Northrop programs programs, an on and programs Grumman like volume And seen seen

in reliability now so, that been DoD pipeline, has is which hitting money the for program the by Triumph. And improvements to the fleet

as as a much it I to a as down see So budgets flowed pull suppliers. ahead so don’t have ramp-up

Robert Spingarn

F-XX quickly have back that terms production, into in anything with the and that is F-XX content Okay, focused coming should there of on? just you there be we

Daniel Crowley

we we do that the content Yes, lot as on of a and share support. F-XX configuration, the EX. legacy is there We’ll

On on supporting running of And there re-competes with we’re at. the pod are that I the there that we’re ISR Page they’re on like looking X deck under that some gear F-XX an F-XX mentioned the is Collins. landing subsystems

more out the But get about we’ll that. of platform I we diversity of So mentioned think content before, really our it’s as role.

we’ve goes and So And as Honeywell; as we’re or really them. they’re upgrade as both Collins they across such should from engagement any Safran. tier one program get Xs I Honeywell And good somewhat and subsystems, we had through tier mentioned have Xs the well, and customer. up the good a down, buffered content integrate and

Robert Spingarn

Dan. you, thank Okay,

Daniel Crowley

you. Thank

Operator

Our next with question Cowen. Cai Rumohr comes from von

Cai von Rumohr

much. very you thank Yes,

And you a on than So think those? release How money in the more some Can is pricing somewhere Boeing. generous terms acceptable existing of been of with or past? out go? you in extended did new comment on maybe they about contracts it’s the contracts I far in sort little mentioned and making your platforms having

Daniel Crowley

and not X were out agreements XX are multiple our a in multiple that customers, for up years coming Boeing. turns in renewal just long-term that number ago It businesses of signed to

it step-down the happens look typically related agreement raw those is engage versus or to under pricing. costs expiring if Triumph volumes years are in what changed, in the changed have up, that will of LTAs commercial prior some renegotiate. advance our X to may LTA, X so, mix out military, assumption price but have and We they material a suppliers been like the if has factor gone or they And OEMs and on

we reset. extended from And into to so, LTAs favorable received they And where anywhere pricing, those are for have X years X the typically future.

And byproduct any LTA far the renewal. lost as a we’ve of work not so

Cai von Rumohr

Oak on you you very much. Thank Red Terrific. And update to efforts could and your us Stuart? sell

Daniel Crowley

we’ve So better months for with of been banks investment part working X now.

of our of announcements true say parties make parties. with state those both And not is is due thing these I’ll interested And any in fairly we’ll agreements expectation facilities. once been the they’re can’t inked. One course, that But We have on I those comment in degradation have negotiation in is seen that that’s complicated. what we’ve interest.

agreements. You’ve support agreements, purchase transitional got asset sales agreements,

or of add? anything finalizing So it’s they’re either closed. announced documents those around to you’d mostly before work the Jim, like

James McCabe

remember Yeah, been I too important that lost think is the that addressed programs the to have there. thing

working just growing the that’s to those non-core plan stable we So But really, assets. left, where strategic the business. have it’s to the still address XXX we’re to continue

Daniel Crowley

in favorable I’ll wing is tanker margin. benefited with comment structure Stuart XXX carry-through the And as freighter and particular the provider flow of Yeah. cash that and large

anxious it’s we’re unload. Oak a it’s a ahead. T-XA, Red that with got business In future good So not the to

Cai von Rumohr

Terrific. Thank much. you very

Daniel Crowley

you. Thank

Operator

Myles Our comes next UBS. question Walton with from

Myles Walton

is can What and in capital opportunity from off. have working kind wondering your done perspective, look is is of full-year curious is slightly there projection on mentioned on run do you working loss XXXX advances I Or on making Good obviously of programs to customer The $XXX better well. flow. you you Thanks. cash I’m to And payment still Working was our maybe everything you capital than you million headwind progress of as previously obviously XXXX? have you also capital these could better. the if reversals XXXX? kind XXXX? touch as some of it morning. in

James McCabe

Yeah. Myles. Thanks,

working pay out that we chain And just for it beginning. it’s follow-through less demand. of quarters, And we’re change was talked the paid inventory couple about think supply takes as for it we now going And have while quarters, through quarter, to last this that previous working a seeing beneficial. cash I so a we’re was what we that your capital inventory. new For to to to in

and I in require gotten what continue we sure see forward. efficiency think to working less we’re going to moving improvements capital only we’ve in processes need. efficient capital have our we working internal to more Lower sales make

military. drivers, of Dan mentioned one. terms It’s In the the the not other but largest,

paying quarter. nice little First in which are faster, a the is us tiers

Some guidance of to big will forward reverse, forward And of year. next for that give we think into next guidance, year. finished liquidations. is planning do a but we don’t advances look I have yet drivers look giving about how have $XX our much to we we’ll And year, We that. process, course once close you next liquidate That’s next providing XXX We out. million exactly to cash year.

for with we guidance but that. pension, a stock. a year. small amount next the of there’s when we close year Working be Largely, be contribution may still tailwind have out we’ll to is And due of We that capital cash us. going you address give that our on

is volume important. think I

increase forward in We’re to looking volumes.

the a slow backlog our is us steady going to more then year. quality volume. seeing we steady year And military this And more now effect We’re but next higher it’s content, margins. increases It reductions that of is it’s cost year. incurred in benefit full that And too.

experienced next look of on lots executing and an forward team year. levers management got So, those you to which

Myles Walton

way? of is to Or I if that potentially rotables could. going disposed expected interpret And that in clarifications sale, Okay, come the anything proceeds some else that back we assets X And or a likewise been should that? on as contract? has write-down for specific through the write change that to down, is off that than Thanks. inventory P&L? The previously the lower

James McCabe

have inventory is of legacy rotable impairment related the taken of fleets MD-XX of service. out one them that like as the to inventory, On been

recognized able as get still have increase may so we they’re out future, It’s of lower we value. material. in more it. a to the And non-cash should charge, be impairment So demand the

cash It’s in the period. just that’s So a reserve. not

Daniel Crowley

sale… for Assets

James McCabe

just loss in And the reduction the the second the loss And held the We It’s in small it necessarily held we’ll now. up. close when was It’s for in we true relates not to million assets or reduction It reduction. transaction, in the in right proceeds, although probably sale. determined did decrease increase $XX that we’ve of that assets. held-for-sale for is sale. assets estimate a piece value the a it recognize an a

Myles Walton

Thanks.

Operator

question next Baird. Arment comes from Peter Our with

Peter Arment

was of prior where on Yes, good the with Dan, the terms morning, Support, I of year. planned think OEM back, production Dan coming kind the you maybe Or your down, down Boeing? you Systems Can thinking of in inventory you about versus you least are you you the how trending to but recovery any at up & and obviously, are are that XXX, XX% that XXX talk have Jim. off? in mentioned terms work where of rate to

Daniel Crowley

Yeah, Peter. thanks,

we did agreements that were or X months So unlike although months. maybe multiple have of weren’t some typically We suppliers out to with we our peers, built hit ahead, X might to shipsets X plants. stretch at our X

much we X together the inventory And demand. has QX fell off monthly Airbus could we is slow faster the that a And excess news XX But is, so, that spent delivered December. of than OEMs the firmed the as all QX rates suppliers. the for burning so month, and down the mentioned, XX average in XXX monthly average. whole aircrafts up narrow-body was their I year good

with than asked to it’s adopted We’ve but higher the and forward now that are recovery. on I the a looking Europe reduction the to adjusted have X. definitely difficult you’re And protect for that been the the are – Canada, accordingly, in U.S. down partnership XXX the mentioned Certainly, suppliers. return rates with we us MAX So in XXX our to we XX arrangements Airbus from been has time asked X. upswing. doing They’ve to service

which to our expected tailwind for panels. And a platform. So of there XXXX. back the Today, And only of month and some where not is it a them to floor put the that our XX and actuation businesses up does they’ve gets perhaps in the MAX support pre-COVID all Valencia business, X%. out the to Yakima to be that’ll big we interiors X% for XXX revenue. X% was back a plus blankets, forecast that Clemmons in the go But

So tide, narrow-bodies both decline having the and have those is offset to on at content you XXXX. more had And on legacy the have it the the on Airbus in a the XXX. we of net the the XXX Boeing if is rising going XXX, to and

us. tankers. go point. and to demand that’s really look freighters the and X-month So And an X continue may not flat to at XXX some that remains at impact at a then they And months for to

on the lockstep rates. about what our ramp So in to work we’re the on fiscal with do got excited And another MAX, were it will although, in year OEMs Triumph and XXXX. up for we through we’ve

Peter Arment

one. Appreciate I’ll color. at Thanks, the leave it Dan.

Daniel Crowley

you. Thank

Operator

Our next from Jefferies. Konrad with Greg comes question

Greg Konrad

morning. Good

Daniel Crowley

Good morning.

Greg Konrad

seems has you outperformed your about levels? down just commercial XX% the peers prior was specifically share the is Or And aftermarket lower resets just thinking downturn. seeing in down push the It What are to quarter? aftermarket aftermarket these as at increase on the content, commercial? then market opportunities

Daniel Crowley

Thanks. Okay.

those. indicators MRO, translates call upstream we into and early and like as push out then how the sales So it, we’re both paid we many receipts, – for orders measure I’ll repair that the then

repaired and X,XXX, were So of measures to the about went the There’s sales. of nice increase. QX, into X,XXX upstream MRO a delivered, from from to in QX our across a items receipts therefore little orders we all XX repair latency up receipts XX% so quarter-over-quarter

nobody’s we – and And favorable. trend quarter-to-quarter the across that lag quarter-over-quarter; and it’s down operation, were for indicator of a very XX is we down, interiors. X the as there’s that XX a our bringing were the of you but planes up; Atlanta, small refurb, were did; look the in their do all where plants, X So interiors where leading there,

to breakeven, near – was plant. But So others then the we’ve one close and were decided favorable. that and

So metrics taking in are share those we the watch that from terms away others. of market

fiscal example, as carriers, We’re the looking or packages necessarily smaller market resources have at the the XXXX, pick to RFP gone nothing that to has out to is of that And benefit with up MRO providers rotable lot Southwest supporting large don’t the A Triumph well. in and work, share. we’re an cash those compete has those inventory they’ll short-term. MRO

demand So trough, the I down by mean, half. overall, we’re about was MRO encouraged, at

continue that seen recover. expect it flight hours we’ve recover, Now to we as

Greg Konrad

What which military. military. the $X.X as new you of new of the I and And seeing pipeline come mostly then are costs competitiveness, starts? improve the are on are takeaway terms in follow-up, one them of billion just out, or mean, these And versus is new the is some opportunities wins on more more build that mentioned majority you retrofit programs? some have

Daniel Crowley

want T-XA now. structures now for aircraft, piece And future a these Having a are were being they want to worked a takeaways, I is categories, say the helicopter of would together. the the whose the in controls starts. Okay. tooling or either Connecticut Hartford, together or we’ll full-sized frequently say the improve where to to Boeing essentially reliability obsolete on the and this And platform essentially you we’re [ph], are the realized rate really that’s coming wing] with the just OEMs and in of the West click It’s our good that still that driver at that X margin components. us see happening site. parts, and them is and But the industry aircraft. right like window with hardly in on work low new depots holes the gain [determinant on different together build, those become fixture. clip take tolerance a of I And upgrades, and new I tighten factories they some frame also of promise on of for maybe Defense were engine it’s essentially the with T-XA. go sign biggest could retrofits new some performance. affordability

early primes the hydraulics. that’s – on we’re MQ-XX, and and the in build, gear X lift landing vertical have the on roles for Army, also where we’ll supply We’re future with

today’s So on not good contributing revenue we’ve significantly builds, positions as new they’re but much. got to

where certain lift they’re for F-XX, are refreshing components midway We we’ve some through and some ramp. the getting But production F-XX. technology on programs, F-XX, the recurring – insertion covered. MRO demand we’re then And positioning on the

try of the an you have you phases. do where sure are to in make plot, in programs what aircraft, So is all you lifecycle and

And overweighted and where overweighted doing. therefore on programs sure introduction, focused production plot programs in sustainment then want low, programs, the we’re a not that index. we them want production, all what are in have to mature we’re R&D, make you our and atrophy to the of in them And not recurring you margins new want the sort going renewal in across You phase, in product we’re programs and that’s you development bathtub a in future. have in to want your we’re of backlog,

Greg Konrad

Thank you.

Daniel Crowley

you. Thank

Operator

comes Seifman Our next with question Seth from JPMorgan.

Seth Seifman

think think Do out growth guess, Support when on recovery side still sort much. side with Systems and budget. very I basis the of the military military commercial budget morning. potential for out the becoming Good the you and thanks piece going with there or flattening military flat multiyear declining the you Hey, flattening driver about the growth or & about a the military on see sales? of as you

Daniel Crowley

programs fighter and about And role we to expecting spending. example. that DoD have And do. Biden there’s may in think expected we place U.S. because X, Yeah, a broad align administration the data about – don’t much, first be I budget year we’re to helicopters, put budget I tankers, a talk well, January record. administration, unsafe or news aircraft, months. a with remains from the will they would world at some to play timeframe. lot we priority There The that defense support in we but any vehicles to supports least new of that normally few delay don’t recent around those. for It their out such flattening is that land a yet. supports changes as momentum But we’re the of the be in not as April inversion history downturn in an to a Syria an The

exposed confident won’t first the single down And there any to a it should in X be but not change turn at adjust, platform, in least it we’re that we so see priorities. I’m to will And X years.

Seth Seifman

Okay, back XX% the made Or you to the all great. was of And increase, across then commercial on earlier, was the comment MRO? only? going that that MRO just

Daniel Crowley

Across both military and commercial.

Seth Seifman

Okay.

the the and aftermarket MRO during in proprietary outside pandemic, look the you of then, And Okay. to aftermarket. as

things in opportunity, the opportunity it that repair of pickup? terms of production, quieter on During we Or for in that a you of the that forward an up push has look as with the future, activity pick kind more has for as volumes work, of in isn’t to and pandemic, been much been there to effort? should terms more period where

Daniel Crowley

China little increasing where the a on quarter was give seeing me up Let demand. during MRO we’re last color XX%.

So to we the very large provided Southern, Airlines, substantially. airlines, China up support China China is Eastern, all

part venture into We is particular, Asia joint Malaysia, in XX%, general enter newer decided Air is up aircraft. is up and get our new of France. partnership the on with Europe this XX%. that In in to to

do softness But to engine by cargo some only smaller with with is getting think, do phases I with to down license contributor driven of those So America. is had and our the from that’s under really to that’s South us Air support about XXX, allows XX%, market Collins America XXX, North so. that accessory their intensive of there. down with into a The partnership are MRO. carriers. just France, work and up And

to strong. defense So it coming is favorable. Asia America is and MRO continue looks Europe And to spending then expect steadily also North we up. like And back ramp

Seth Seifman

Great.

much. very Thanks Okay.

Daniel Crowley

you. Thank

Operator

Our next comes Michael Securities. with from question Truist Ciarmoli

Michael Ciarmoli

asking question. Hey, expect to what these you back – to contracts? and and renewals. you you opportunity good in to be margin reset go had it I Cai the morning, to think margin guys. Thanks extensions on other breaks, price some like materials, these expect accretive discounts of the versus versus review raw do there. was tailwind But the the sounded provide contract newer some renegotiations for kicking Do Maybe just the prior

Daniel Crowley

contracts when acquired as adjusted profit, that of fair was a elaborate, delivered, unwind number had and a market Yes. were cashless the making loss And but programs then Triumph, they companies products a for a in were would loss price and position. that value reserve, which because established it acquisition to the they they reserve were

be discount these $X.XX. these products. it We cost design they’re there give to suppliers. advantage, them on done to a OEMs of So to They know content with we about dollars realistic and renew, had we’ve the back affordability. we enter into about drive sell what of And their of Are the that do benefited can’t discussions explain for as silver they’ve primes some through some simplifications? years LTAs from it. Can source could

down cost we yes, tailwind it the where question margins. like is are your answer, to margins for where a it comes enhanced. the So and possible, we’d make to it be But to answer expect

Michael Ciarmoli

then more. And it. Got one just

margin insulation. between split revenues? the us difference a company look if the on of content we And within the RemainCo can sense, the blankets, got gold On those – then the the the of us what the out and some like called you give a some there – you maybe interior, Can would about F-XX, between is the V-XX, offerings streams, think trainer. big structures, various give those obviously, the sense the those a you’ve of you

Daniel Crowley

sales. only with So, the when the Boeing phase. military the the phase, an get not Obviously, the there program foreign large production, Force, production example, in margin in lifecycle. in more margins high where an its FMS, T-XA, But is a a are And and hopes difference Air in has Navy as margins not V-XX margin based development is but mature their on prove is there. they program the are you stronger for

business X% reported, XXX Jim operating As things was down. out about you shut take cash profit when like

it’s positive And of XXX. end stellar, not So in in sight have closeout it’s we but the regard. that an to

no much time the my are a structures better led, healthier delivery. So red more is one, That’s that better comment on but about better processes, business, programs. remain what quality, smaller

the than longer to all would me journey here you been at Some have said, we’re we going and remember, have red who structure. with on liked Triumph, we there the but of eliminate took and it started, when for we’re programs,

primary with structure. on without can’t you It’s shout fly not checked, give team. want good aircraft time to And vision our who like be may but a I last structures. that management to I’d that So there good capabilities long-term out the are company, aligned for people the to business, focus

Michael Ciarmoli

Got Thanks back. lot, a guys. jump it. Great. I’ll

Daniel Crowley

Thank you.

Operator

question with Canaccord. comes Ken Herbert Our from next

Kenneth Herbert

quarter, Good second the relative the bit Hi. Yes. margins sequential the ask you to quarter? more into detail what wanted I drove morning. little on a improvement TS&S to the can on first just go in

James McCabe

quarter question, as as Ken, cost our high of a reduction there’s And as be the good well, mix more a core the can the austerity business, that. our volatile in I is towards work well. actions than is We margin has of volume business longer-term stable, on. continue mix, ago. measures improved which reducing and little mid-XX% there’s going remember, and SG&A accomplish taking a north we But So think goals. and down the are bit margins lower military margins. the terms our costs, we’re lot of all that But in overall, more And commercial, headed see of to can and which less necessary fixed

Kenneth Herbert

we but has Okay. And margins And, that I you’ve know are what you potential? in Jim, segment us, remind think the goals? in for perfect. this changed? outlined how just about business that’s the past, what’s do sort XXXX Can the of longer-term them beyond? and Or

James McCabe

as into a years we’re couple was future. in clear see it maybe Like, the it’s industry, as And ago. this to not trying Yeah. everybody

there’s So XXXXs clear in the as we’re continue opportunity that recover. is of the can’t improve pre-COVID to and in going the But those normal market. to no these the unfolding part reason backup to is market our planning direction be process, that the as starts

Kenneth Herbert

like question, I with if And Slide I your maybe on for provided hidden detail final just could you. Dan, X the Okay. value. you’ve X

manufacture, As about IP build-to-print say, the you moving what’s own TS&S forward, relative of you moving we for think to of business forward? business, the what mix mix the – this the where

Daniel Crowley

Yeah, Ken. thanks. Thanks,

quarter this were systems. now on see of we versus you’ll XX-XX split. on and it’s contribution the XX-Q, And in XX-XX ago, side, first the in the QX So structures roughly the revenue

exit on side. military the of So we we’re and saying in rapid as programs we the grow versus acceleration weighting structures systems

them. structures, exited let’s we IP manufacture where XX% IP of we’ve build-to-print in & is example, products content for gears But I previously. for think it’s not the And of build-to-print, Support. terms as In we’ve Systems IP, our metal business IP, XXXXs in manufacture versus what transmission do remains fabrication, our discussed of already about the say good for Apache, at machining, And we on gears, we’re – finishing. majority

gear, Macomb per pipeline new grinding over months it’s big year. lot the source. plant so sole Jim a equipment. a But there. into where going of typically XX manufacture invested, sticky CapEx through single XX,XXX is to that close-tolerance makes It but inventory of a gears been Our not mentioned takes That’s has that’s IP,

after recognized last contract fact, few the has able been do to was that and In due another a Defense line improvement. Apache big years, what past from supplier position to we took gone Boeing recover difficult had did. XX. we’ve supporting Chapter to And Apache but over the Very the we

earn keep you’ll preferred But IP. we us heat is So And model. our continue focus on controllers, in exchangers. gearboxes, returns is that the to support build-to-print, customer. our where and be good see engine we’ll IP And can going do to

trying to the area redesign advantage find percentage with additive. print just excited are products journey, some use fit It’s how area parts to are now, we’re about learning, And learning but out small replace we’re about subtractive it at center revenue the R&D do. getting I’m we’re manufacturing. come was Also can that’s Seattle what housings. early to We’ll critical we’re take finally but those not can additive. IP that excited on that our of parts a Just starting that another housings, good we’re where of differently through. traction other on and last And flight we’re that to hardware, engine-starter our fuel-pump technology, month, a additives, one

Kenneth Herbert

Great. the detail. Thanks for all

Daniel Crowley

Okay.

James McCabe

Ken. Thanks,

Operator

The of Ron Bank last from Epstein America. with comes question

Ronald Epstein

Hey, good morning.

Daniel Crowley

Good morning.

James McCabe

Good morning.

Ronald Epstein

versus longer-term the we benchmark if your think about OE about a goals in, say, So Triumph product, look longer-term when a A will as what When X versus defense much company are years bit question the here. there? to be you aftermarket? we take going commercial, company do think of versus services we view, little how think period, a is how

Daniel Crowley

then Triumph longer-term Ron. question And with Great. you’ve years. great Thanks, many a view. It’s for been on our with

these in-depth programs, to repaying retired. Those discussions and be X all restructuring and X not having all, unwinding red Boeing. advances of we be but in within won’t years, First years, about will

the about fly air excited where clear we’re finally getting part So we’ve to got to through.

You’re expand going to see MRO Triumph offerings. its

a a billion sales. of MRO our so, about – our it call it And We’ll as today, percentage, won’t quarter. $X.X a is

be a I in less classes areas: defense/commercial. for, repair Interiors you we’ve this build think definitely but be I versus defense were structures. structural on X engine at we provide number engine of through going to But it looking is interiors. put OEM, structures, then won’t aftermarket that commodity a of new $X.X will contributor, higher. recall, on it. accessories, if and product journey XX/XX we do started And billion on done what mainly a we components to we’re and

at And it’s up we’re think end XX%. reasonable XX% at we’ll now Okay, think I to to XX%. about

Ron, were those heavily when of our now. that remember, weighted combined. and think we reversed revenue less we’ve towards jets X You business And X% and regional, together I are than

high-tech it’s, not There decided the that we do. as complex just not edges, we things we’ve you for large Triumph do, composites, example, know, it’s market leading in but for So wings. structured are few niches just attractive a

volume don’t on. count continue a work, to that’s, expect big more mix. And about MRO versus will as I that cyclical. to can And then tends you good is aftermarket. in shift work that decline. OEM So you be OEM asked still

the all flew and and doing we wings off went they’re coming they’re gifts, deliver traffic. out the their any their And example, breath get now, all freighters and For they’re MRO back that updates. catching all holiday to didn’t

nice the X. of to have mix it’s the So

diversification is of cycles Triumph word key balance, versus the That’s to life think program, the I regions. time. the be key in growth of Asia I of for over the customers, U.S. the predictable of mentioned

at X to better even CAGR. leaders. and all And our our the just we CAGR re-grow want So a it’s top-line. of X-year we forecast an with top-line And years, margin certainly looked nice

back that journey portfolio on the XX from sustain the a a this the defense I’ll and XXXX companies. they’ve And up a reason So drag offerings. getting to broader built can set XXXX. years, free company’s budgets high here Triumph are we there’s the that of company. the help? aftermarket really programs we’ll core finally we of some very have And of, that been seen, no In luck that’s end the on that with through get at of if can’t pandemic recovery, be call systems it where we’ve Does be why

Ronald Epstein

Thank Yeah. very That’s you great. much.

Daniel Crowley

bet. You Ron. Thanks,

Operator

for is gentlemen, at XXXX Standard conference time is This conference the Time Group this to XX:XX earnings we call. third Eastern Triumph and all XXth questions There today. Ladies have quarter for fiscal at that available a year concludes Time. Standard AM XX:XX the replay starts PM Eastern today’s

can entering Again, by All for pass-code dial Thank and pass-code you XXXXXXX. replay X-XXX-XXX-XXXX may access and disconnect You day. entering all Have a can dialing participants XXX-XXXX. X-XXX-XXX-XXXX participating. you now. the nice

Triumph (TGI) 3 Feb 212021 Q3 Earnings call transcript