Triumph Group, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Triumph Group Conference call to discuss our first quarter fiscal year 2022 results. This call is being carried live on the internet. There's also a slide presentation included with the audio portion of the webcast. Please ensure that your pop-up blocker is disabled if you are having trouble viewing the slide presentation. You are currently in a listen-only mode. There will be a question and answer session following the introductory comments by management. On behalf of the company, I would like to read the following statement. Certain statements on this call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risk uncertainties and other factors which may cause Triumph's actual results, performance, or achievements to be materially different from any expected future results, performance, or achievements expressed or implied in the forward-looking statements. Please note that the company's reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the press release, which can be found on their website at www.triumphgroup.com. In addition, please note that this call is property of Triumph Group, Inc. and may not be recorded, transcribed, or rebroadcast without explicit written approval. At this time, I'd like to introduce Daniel J. Crowley, the company's Chairman and Chief Executive Officer, and James F. McCabe, Jr., Senior Vice President and Chief Financial Officer of Triumph Group, Inc. Go ahead, Mr. Crowley.

Thank you, Kevin, and welcome everyone to Triumph's Q1 earnings call. I hope you're all safe and well. Earlier today, we reported our first quarter results for fiscal year 2022. I'm pleased to share that Triumph demonstrated strong organic growth and year-over-year improvement in margins company-wide, driven by increased MRO volumes, all while we continue to come through the pandemic and clean up our portfolio and balance sheet. Having stabilized and exited most of our structures business, our focus in Q1 was on strengthening and improving our core business while pivoting to growth and retiring several non-recurring cash uses. Our cost reduction actions continue to boost our results as the market recovers. We continue to see promising macro trends this quarter on multiple fronts. First, increases in demand for commercial aviation translated into higher orders for maintenance, repair, and overhaul work. MRO order flow, both in terms of volume and the nature of the work coming in, continue to be a strong indicator of recovery. Our MRO job inductions metrics, which serve as an early indicator for carrier traffic recovery, increased 37% for the quarter, with a 6% sequential increase overall, led by engine accessories and the cell structures. After market spares and repairs, sales were up overall more than 17% for the quarter. Second, military continues to be a source of strength for Triumph, with new wins contributing to both revenue and backlog, offsetting plan declines in commercial aviation. These platforms enjoy continued budget support, particularly those we supply. Favorable trends in systems and supports in military, helicopter, and engine programs and increasing narrow body production rates were key contributors to our continued recovery and reinforced the hidden value of Triumph's diversified customer base and platform content. We're optimistic this upward trajectory will continue. Commercial air travel indicators continue to be positive. Delays in wide body recovery have been offset by narrow body programs. Orders for the A320 and 737 MAX have seen new highs since the beginning of the pandemic. I want to congratulate Boeing for completing the first flight of 737 MAX-10 on June 18, which was followed by a June 29 order from United Airlines for 150 aircraft. Orders for commercial transport aircraft are up in 2021, as Airbus and Boeing have reported 721 new orders, offset by 476 cancellations. Bright spots include United's June order for 737 MAX and A321neo aircraft, the FedEx order for 767, and the May Southwest Airlines orders for the MAX. Commercial transport backlog now stands at approximately 12,000 aircraft. The industry's focus is now shifting to mitigating production ramp risks. Boeing recently announced the slowing of the 787 production rate. Triumph had already de-risked its twin aisle build rates with our 787's percentage of sales and inventory reflecting conservative assumptions. Similarly, we are on a path to exit the A350 build-to-print brackets production line in our interiors business. Reductions in these rates will not have a material effect on Triumph. The combined benefits of strong military demand and recovering commercial MRO demand coupled with our comprehensive actions to improve financial performance, create positive momentum for fiscal 2022 and the years that follow. After 18 months of uncertainty, we have more clarity on near-term OEM and MRO demands as markets continue to stabilize and we see lift from military and cargo demand. Combined with our diversification, we are now able to provide guidance for fiscal 22 that reflects increasing revenue and positive cash flow over the balance of the year. Environmental, social, and governance initiatives remain a high priority for Triumph and our board. While reducing CO2 emissions, wastewater, and energy usage, considerable investment has been made in the development of new products to enhance aircraft fuel efficiency. We are adopting additive manufacturing across our core products which has the benefits of lower production costs and substantially lower weight. We are making similar advancements in heat exchangers to enable a more efficient airframe with less drag. Triumph is investing in energy efficiency projects, such as eliminating lead-based components and implementing closed-loop solvent recycling systems and converting hazardous waste to non-potable water. Triumph has launched an energy conservation project in our largest production facility, which will reduce electrical power use by 25% annually. As a result of this work, Triumph's Seattle R&D facility will be featured in a future episode of Earth with John Holden, which showcases an inspiring array of companies with eco-friendly initiatives that are enhancing the lives of Earth's inhabitants through advanced technologies. Overall, we're pleased with Triumph's first quarter results, which are either in line with or above our expectations. enabling us to meet our objectives. On slide four, I summarized some of the quarter's highlights. MRO and aftermarket spares continue to be the leading indicator of the market recovery. Our portfolio actions, cost reduction efforts, and expanding sales resulted in improved operating margins across the enterprise. We are on track to complete our final 747 production components this month and in the last of our significant loss-making programs. we repaid the remaining balance of our 2022 bonds while preserving strong liquidity. Last, continued improvements and stability in the broader markets enhances our confidence and our outlook as we initiate financial guidance for fiscal 2022. At this point, the worst of the pandemic is behind us, and the macro trends remain positive. Yet we recognize that the market recovery will continue to be uneven over the next several quarters So we're prudently maintaining our cost reduction austerity measures from last year with intentions to reverse them as the market continues to improve. Our actions combined with OEM and MRO rate increases will support expanded margins and cash flow, putting us on a path to deliver the company year over year. On slide five, I quantify the drivers for this quarter's results. First, organic growth was 11 percent, led by improved MRO and aftermarket spare sales within our core systems and support business. OEM sales were driven by Airbus A320-321 shipments, Bell 429 gearboxes, and E2D actuation. Systems and support revenues for our third-party MRO increased 19 percent, while proprietary spare sales primarily for military rotorcraft and commercial narrowbody production rates, more than offset commercial widebody declines. Shipments to FedEx and UPS are up 52% for the quarter, as cargo aircraft return for deferred maintenance. We continue to anticipate a bow wave of MRO repairs as deferred maintenance returns to our shops. Military sales now comprise 53% of our sales and assistance and support, helping to offset the temporary commercial aerospace decline. Military platforms such as the E-2D, UH-60, and CH-47 contributed to the sequential sales growth, driving a 12% increase in our military sales year over year. As mentioned, we will deliver our final 747 structures this month, at which point Triumph will have fulfilled our program obligations. We will close the second of two large structures facilities dedicated to the 747 in December, ending a long period of losses. Setting the legacy cash-consuming programs and stabilizing performance across all the structures allowed them to be solidly profitable in Q1 on an adjusted basis. Jim will provide an update on our exit of non-core structures business. We remain on track to achieve our future state configuration as a largely pure-play systems and support provider, to military and commercial customers with interior structures capabilities. Moving forward, we are increasingly leveraging our installed capacity and intellectual property portfolio to secure price increases on an annualized basis, which will benefit margin expansion plans. A few updates on the state of the economy and our industry. The global economic recovery continues with 2021 GDP expected to rise more than 6% in aggregate globally and in the U.S. Early indicators within the aviation industry indicate steady progress in the quarter towards 2019 levels with airline travel bookings improving from 46% to 69% and corporate bookings up from 18% to 40% as strong summer bookings benefited domestic carriers. Reflecting a return to airline normalcy, and profitability, average airfare prices, weekly load factors, and TSA throughput continue to recover in the U.S. Park's fleets have declined substantially, with over 1,800 aircraft returned to service since March. Finally, we are watching emerging defense legislative marks closely and are encouraged to see strong support for defense and key military programs from both the House Appropriations and Senate Appropriations Committees. which should ensure stability and predictability in our defense programs for fiscal 22, including programs such as the CH-53K, F-15EX, and E-2D in our backlog. As you know, the single aisle segment will lead the aviation recovery. It's gratifying to see OEM single aisle deliveries for both Boeing and Airbus increase each month within the quarter, culminating in strong June numbers with Airbus delivering 62 single aisles and Boeing delivering 36. We expect this positive trend to continue and are making plans across the supply chain to be ready for the ramp. Overall, this is encouraging news and I expect Triumph to gain momentum as the aviation recovery continues through the balance of the fiscal year. We are well positioned to capture returning MRO business and OEM rate increases while expanding our defense programs. Turning the winds for the quarter, our Systems Electronics and Controls team are designing and upgrading engine controls for the global fielded fleet of T-700 engines. We received orders for FADEC upgrades to both U.S. Navy Seahawks and U.S. Army Apaches. We are upgrading heat exchangers on the F-22 F-119 engine for Pratt & Whitney, where we have significant IP. Ninety-five percent of our heat exchangers are designed and developed by Triumph engineering teams. We secured orders from GE for the F-A-18 E&F F-414 aircraft-mounted accessory drives. This complex gearbox builds on the legacy of our F-A-18 C&D gearbox for the F-404 engine. Triumph is the world's largest and most capable third-party provider of gear and gearbox solutions, spanning the entire lifecycle of gear products from design, development, and test through manufacturing and sustainment. Our customers value our capabilities and engage us in new and exciting opportunities such as the T7A, the KFX, future vertical lift, and classified programs. Some of our largest customers in the MRO space are OEMs and Tier 1s who look to Triumph to support legacy program offloads, allowing them to concentrate on new platforms. For the quarter, we completed another important Tier 1 agreement with Collins Aerospace, overhauling air cycle machines. Finally, I'd like to highlight several strategic developments in our thermal business. We were actively engaged with the Air Force Research Laboratory and the University of Dayton to design heat exchangers that use additive manufacturing to replace castings in an effort to address Air Force fleet sustainment issues. While we started with heat exchangers, we believe additive has the potential to expand into other areas which are traditionally constrained by casting suppliers, including gearbox and pump housings. Finally, we completed an agreement with Paragon Space to develop heat exchangers for their space vehicle life support systems. In summary, we are pivoting from restructuring and contraction to growth across higher margin IP-driven market segments. In summary, our markets are improving, but we expect this trend to continue as commercial production rates increase into the next year. We grew margins in the quarter across the enterprise and retired several non-recurring cash uses this giving us the confidence to initiate financial guidance for fiscal 2022 with improving cash outlook quarter over quarter and year over year. The combined lift of cost reductions, volume increases, more favorable pricing, and new product and service introductions support our goal of doubling our profitability over our planning horizon while deleveraging the company. We will continue to invest sustainably in the development of our people, operations, and products, to enhance shareholder value year-over-year. With that, Jim will now take us through results for the quarter in more detail. Jim?

Thanks, Dan, and good morning, everyone. We start our fiscal year with solid year-over-year organic growth and improving margins across the enterprise as the commercial aerospace market continues its recovery. The actions we have taken through this first quarter enable us to have positive free cash flow over the balance of the year. We continue to execute on our plans to pair the few remaining non-core businesses and product lines to decrease debt, maintain liquidity, and focus on our profitable core business. Our performance in the quarter, the improving market environment, and diversification of our business give us the confidence to establish financial guidance for the fiscal year. I will discuss our consolidated and business unit performance on an adjusted basis, so please see our press release and supplemental slides for the explanation of our adjustments. On slide 10, you'll find our consolidated results for the quarter. Sales are up 11% organically, while the impacts of the recent divestitures and sunsetting programs and structures led to lower sales compared to the prior year. Q1 adjusted operating income was $31 million. Adjusted operating margin was 8%, up 477 basis points from the prior year. We continue to improve profitability on an adjusted basis quarter over quarter. With respect to the segment results, On slide 11, net sales in systems and support were up 8% and benefited from continued recovery in the aftermarket, while an increase in narrow-body OEM work offset wide-body headwinds. This segment sales were 53% military this quarter, up from 51% in the prior year quarter. Adjusted operating margin for systems and support was 14%, a 235 basis point improvement from the prior year, and benefited from increasing MRO demand. Summarized on slide 12, first quarter net sales for structures increased 15%, largely due to the prior year's impacts of the pandemic, after adjusting for divestitures and the sunsetting 747 and G280 programs. As noted on our prior call, the divestitures of the composites and red oak businesses were completed in the quarter on May 7th, and the results for the quarter include modest revenues and earnings through the date of the sale. The continuing business is stable and improving as evidenced by the 10% adjusted operating margin compared to 1% the prior year. During the quarter, I visited our Grand Prairie, Texas facility and saw the significant progress our team has achieved to successfully complete the production of the 747 later this month. Our remaining large structures facility in Stewart, Florida is a profitable business and we are in active discussions with several strategic parties. Turning to slide 13, in Q1, we retired $100 million of discrete cash obligations related to advances, settlements, restructuring, and wind down of 747 production. Q1 included two quarterly payments of our advance liquidations with no liquidation expected in Q2. Including these sunsetting uses of cash, we used $51 million of cash in the first quarter on modest working capital growth in support of anticipated production rate increases primarily on commercial narrow-body platforms. We remain focused on aggressively managing our working capital with several initiatives across the enterprise targeted to improve our inventory returns. Capital expenditures will accelerate over the remaining three quarters as we anticipate investment in our core systems and support segment in support of rising OEM and MRO demand. On slide 14 is a summary of our net debt and liquidity. Our net debt at the end of the quarter was approximately $1.4 billion, and our combined cash availability was about $263 million. In the quarter, we completed the mandatory pay down of approximately $112 million for our first lien notes and redeemed the remaining $236 million of outstanding 22 notes. Our next debt maturity is not until 2024, which gives us time to continue executing our deleveraging actions to strengthen our cash flow and improve our credit. Slide 15 is a summary of our FY22 guidance. Based on anticipated aircraft production rates and excluding the impacts of potential divestitures, for FY22, we expect revenue of $1.5 to $1.6 billion. We expect adjusted EPS of $0.41 to $0.61. Our earnings expectations take into consideration certain supply chain and inflationary pressures. The good news is we have secured adequate inventory and supply commitments for critical materials. and we work to lock in the vast majority of our unit costs for the fiscal year and beyond. Cash taxes, net of refunds received, is expected to be approximately $4 million for the year, while interest expenses are expected to be approximately $140 million, including approximately $137 million of cash interest. After approximately $150 million of free cash use in the first quarter, we expect in total to generate free cash flow over the balance of the year. with about $40 to $60 million of use in Q2, approximately breakeven in Q3, and solidly cash positive in Q4. For the full year, we expect to use $110 to $125 million of cash from operations, with approximately $25 million in capital expenditures, resulting in free cash use of $135 million to $150 million. We've made significant progress in improving the predictability of our profitability and our cash flow. We have solid organic growth and improving margins in Q1, and we expect to be cash positive over the balance of the year. Cross reductions and operational efficiencies will help us to continue to improve margins as volume increases. Measures we have taken and are taking are making us a stronger, more competitive, and sustainable company moving forward. Now I'll turn the call back to Dan. Dan?