Triumph Group, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Triumph Group conference call to discuss our third quarter fiscal year 2022 results. This call is being carried live on the internet. There is also a slide presentation included with the audio portion of the webcast. Please ensure that your pop-up blocker is disabled if you 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 now like to read the following statements. There are certain statements on this call constitute forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, 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 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 this call is a property of Triumph Group, Inc., and may not be recorded, transcribed, or rebroadcast without explicit written approval. At this time, I would 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, Tom, and welcome everyone to Triumph's Q3 earnings call. It's encouraging to see COVID cases coming down with borders reopening, including most recently Australia, signaling an improving outlook for our industry. Earlier today, we reported our third quarter results for fiscal year 2022. Triumph generated positive free cash flow and improving margins in our core systems and support segment. Our team continues to deliver against our strategic plan in a challenging environment. Triumph is emerging as a new company. We are meeting the targets laid out in our transformation plan. We're a company focused on meeting our full year objectives and accelerating organic growth as a leading pure play systems and aftermarket company. We recently exited the last of our 747 production facilities and announced the sale of our Stewart, Florida Aerostructures business. Steward is the last large structures facility in our portfolio, and the exit is a major milestone for Triumph. And our focus on winning is paying off. In the fiscal year to date, we've secured over $2 billion in new orders across the company. On slide four, I summarized some of the quarter's highlights. First, we generated free cash flow of $7 million, driven by our improving operations and reduced working capital. Cost reductions, lean events, and a more favorable sales mix, as well as retirement of programmatic risks, yielded a 20% EBITDA margin in our systems and support segment. As experienced by many of our peers, organic sales declined slightly due to short-term order deferrals on commercial widebody and military OEM platforms, though partially offset by returning MRO orders. The temporary flat spot in the recovery is expected to abate early in our fiscal 2023. And last, our actions to mitigate supply chain constraints have lessened the impact on Triumph as we partner with our customers to ensure supply continuity and affordability. Before Jim covers the quarter's results, I'd like to provide context on how we are positioning Triumph in the macro environment. Commercial aircraft deliveries are on the rise. In 2021, Airbus delivered 611 commercial aircraft and Boeing 340 for a total of 951 aircraft, up 33% from 2020. In 2022, combined deliveries are projected to exceed 1400 aircraft, a further 47% increase. Additionally, net commercial transport orders for Airbus and Boeing totaled approximately 1,040 for the year, marking an exit from the COVID-induced aviation downturn. The freighter market continues to be strong, with wide-body fleets up 36% and narrow-body up 50% since the beginning of the pandemic. Utilization is also up 25%. Both passenger-to-freighter conversions and OEM freighter production provide opportunities for triumph. as we pursue cargo door actuation and installation opportunities for conversions and have substantial content on the new A350 and 777X freighters. Increases in both commercial transport and freighter markets provide reason for optimism over our planning horizon. Narrowbody looks strong also. Triumph shipments to Boeing and Airbus for the 737 and A320-321 We're up 54% quarter over quarter. Backlog for 737 and A320-321 is up 47% and 27%, respectively, year over year. Plans for the 737 MAX return to service in China, Indonesia, Hong Kong, and Ethiopia provide tailwinds on both the OEM and aftermarket demand. The trajectory of the aviation recovery, though paused by the Omicron variant, continues to be upward. The broad recovery of these platforms benefits triumphs as our year-to-date book-to-bill ratio through December reached 1.15, led by our actuation business. While orders are up, short-term systems and support revenues in the quarter declined as a result of timing or deferments compared to prior year and sequentially. 787 production accounted for roughly half of the decline, while delayed military rotorcraft deliveries accounted for the balance. We expect both of these headwinds to abate in the coming quarters. Anticipated ramp up of 787 shipments coupled with recently secured pricing resets will aid top line and margin expansion in the coming quarters. New ones for the quarter can be seen on slides five and six. Triumph continues to win in the competitive market on the strength of our platform and competency, innovation, and IP. We've won more than $2 billion of new orders year-to-date. That's a year-to-date record since 2016. We set an internal goal to expand sales from new products, platforms, and customers by 25% over the next three years. Orders from these sources are up 38% from prior year. Triumph's interior business is a global market leader in thermal acoustic cabin installation. We were recently selected to design and build the A220's entire installation package, adding to our current role supplying the cabin floor. This builds on our A350 cabin installation systems content. Coupled with recent Boeing long-term agreements for installation and ducting, Interiors is well positioned to capitalize on the market recovery and anticipated rate increases. Our actuation business won four awards. an innovative electromechanical actuator for Raytheon's next-gen jammer, a holdback bar for an undisclosed Lockheed Martin platform, a weapons bay door actuation order for the FARA future vertical lift program, and an integrated hydraulic power pack for a passenger-to-freighter conversion program. The mechanical solutions business, a market leader in precision low hysteresis control cables, was awarded a design and build contract for the Calidus B250 light-attacked aircraft. We were also awarded a remote mechanical valve actuation system for a French nuclear power plant. And in the geared solutions business, which is the largest third-party aerospace gear provider in the world, we finalized a large contract extension with Rolls-Royce for a suite of military and commercial applications. Finally, our product support business, formally launched the Excel JV to overhaul nacelle components on the 787 and 737 MAX, while extending our aftermarket offload partnerships with Collins on the Bombardier CRJ and with Brazilian Airline Gol on their 737 fleet. Product support continues to win in this competitive MRO market where OEMs appreciate our dependability, quality, and consistent turnaround times. Turning briefly to our supply chain, we continue to focus on cost for materials, labor, and overhead given the ongoing inflationary market pressures. Balancing risk and opportunity with respect to commodities and supply chain inflation. Over the next three years, our existing contracts provisions help protect against increases in material costs by employing annual price index adjustments based on industry indices and general protections against material price changes above certain threshold levels. Triumph recently held a supplier conference with our top 50 partners where we discussed how to mitigate anticipated supply chain constraints expected over the next 12 to 18 months and stressed the importance of preparing for the coming RAM. We presented the latest production rates across all our platforms and had three OEMs speak about the importance of early hiring and CapEx investments to avoid the bottlenecks we saw in 2018-2019 before the pandemic. We've been encouraged by the supplier's follow-through on the joint actions we adopted and are staying in lockstep with the OEMs on their delivery forecasts. The pandemic created many challenges, but also opportunities. Triumph is renewing the social contract with our employees to include greater flexibility and career opportunities for both salary and hourly team members to make Triumph a preferred place to work. The pandemic has illustrated that we can more sustainably balance the needs of our employees and our company to achieve higher levels of employee satisfaction and performance. This discussion is underway across every level of our organization. Referred to internally as the New Deal, we are tapping into the demonstrated levels of workforce engagement and virtual collaboration tools to reinvent the office and factory as we accelerate the adoption of empowered cross-functional teams across the company. As a result, we anticipate higher levels of productivity towards our stated goal of doubling profitability. In my view, our new approach to workforce engagement will be one of our most valuable lessons from the pandemic. In summary, Triumph grew margins in the quarter in our core systems and support business. and retired several non-recurring cash uses. Short-term order deferrals on 787 and military OEM production are expected to abate in our fiscal 2023 and are being offset by our new contract wins. Our actions in this quarter, combined with OEM and MRO rate increases, will support our expanded margins and improved cash flow, putting us on a solid path to deliver growth while deleveraging the company year-over-year. As we move forward, we are investing in our people, operations, and products to ensure Triumph remains differentiated in the market and delivers enhanced shareholder value year-over-year. With that, Jim will now take us through the results for the quarter in more detail. Jim?

Thanks, Dan, and good morning, everyone. As I review the financial results for the quarter, please refer to the presentation posted with our earnings release today. Prime was cash-positive and profitable this quarter on both a GAAP and adjusted basis. We'll be discussing adjusted results, so please see our earnings press release and the supplemental slides in our presentation for the explanation of our adjustments. On page seven are our consolidated results for the quarter. Revenue of $319 million reflects increased revenue from narrow-body and bizjet platforms and growth in third-party MRO revenue. This was offset by the combination of the 787 rate reductions and short-term military OEM delivery timing. Continuing the shift towards our core, systems and support revenue now makes up 74% of total revenue in the quarter, up from 62% a year ago. Adjusted operating income of $33 million represents a 10% operating margin, an increase from 9% a year ago. Systems and support generated substantially all the operating income this quarter, Notice that our adjustments are getting smaller, with only a $5 million difference between the $28 million gap operating income and $33 million adjusted operating income this quarter, reinforcing Triumph's ability to become predictably profitable. All of the $5 million adjustment is attributable to the structures segment this quarter, due to our 747 production facility shutdown in Grand Prairie, Texas, which was completed in December, and the shutdown of our interiors facility in Spokane, Washington, which will be complete in the first half of this calendar year. Turning to page 8, you'll see our systems and support results and highlights. Revenue in the quarter included higher narrow-body and BizJet platform revenue and a 12% increase in our third-party MRO revenue over the prior year quarter. This was offset by delivery timing in our military OEM programs and the 787 short-term volume decreases. Systems and support operating income was $41 million, or 17% for the quarter, which is a 60 basis point increase over last year on an adjusted basis. Systems that support EBITDA was $47 million, or 20%, a 220 basis point increase over last year, a measurable step towards our goal of doubling EBITDA over the next three years. Previously announced sale of systems that supports Staverton UK facility and the sale and licensing of certain related legacy product lines closed in early October. We used the net proceeds to reduce debt. On page nine, you'll find structures, results, and highlights. Production's revenue of $83 million was up 3% organically over last year. That's excluding divestitures and sunsetting programs. 737 production rate increases contributed to their organic growth. At 26% of total revenue, we continue to make good progress on the revenue mix shift towards systems and support. At the end of the quarter, we exit our last 747 production facility on time and under budget. Sale of the Stewart Structures facility is expected to close in the first half of this calendar year. This divestiture will complete our comprehensive exit of our build-to-print and contract manufacturing structures business. Given the pending exit of structures, we are evaluating supplemental disclosures to provide additional insight into our continuing business going forward. On page 10 is our free cash flow walk for the quarter and year-to-date. Consistent with our guidance, we generated $7 million of free cash flow in the quarter. We continue to reduce non-recurring cash uses and are on track to increase our free cash flow generation in Q4. As expected, free cash flow this quarter included $28 million of non-recurring cash drivers, including $21 million of advance liquidations and $8 million of funding of previously accrued 747 losses. We expect a total of $166 million of non-recurring cash uses for the full year, as detailed on the slide. Capital expenditures increased to $7 million this quarter with investment in our systems and support segment, in support of rising OEM and MRO demand, and sustaining supporting infrastructure improvements. On page 11 is the schedule of our net debt and liquidity. During the quarter, we paid down our first lien notes by $24 million from the proceeds of the Saverchens vestiture. We also extended the maturity of our receivable securitization facility to November of 2024. and increased its capacity from $75 to $100 million. It served as a low-cost source of contingent liquidity. At the end of the quarter, we had about $1.4 billion of net debt, down 11% from a year ago. We also had $250 million of cash and availability, which is more than sufficient for our projected needs. Our next debt maturity is over two and a half years from now. We are deleveraging by reducing debt with proceeds from divestitures and by expanding free cash flow and EBITDA in our continuing businesses. On page 12, you'll find a summary of our fiscal 22 guidance. Based on anticipated aircraft production rates, excluding the impacts of potential divestitures, for fiscal 22, we expect revenue of approximately $1.5 billion. We expect adjusted EPS of 80 to 90 cents per diluted share. Cash taxes net of refunds received are expected to be approximately $5 million in the year. We continue to expect interest expense to be approximately $140 million, including $137 million of cash interest. For the full year, we expect to use $125 million of cash from operations, with approximately $25 million in capital expenditures, resulting in free cash use of approximately $150 million. We continue to achieve our goals and have made significant progress in improving the predictability of our profitability and cash flow. Our portfolio actions, operational efficiencies, improved pricing, Cost reductions and increases in volume will all contribute to improving margins and cash flow moving forward. We are stronger and more competitive today for all the actions we have and are taking. Most importantly, Triumph is now primarily a systems and support company. Our mix of business includes more IP-based and spares revenue than it has in the past. We can earn higher margins with less capital than we could in our former build-to-print businesses. We continue to invest in our people who develop and deliver unique and valuable solutions for our customers, which results in sustainable, profitable growth. Now, I'll turn the call back to Dan.