Triumph Group, Inc.

Welcome to Triumph's first quarter fiscal year 2023 results conference call. 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. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. In addition, please note that this call is the property of Triumph Group, Inc., and may not be recorded, transcribed, or rebroadcast without explicit written approval. I would like to introduce Tom Quigley, Triumph's Vice President of Investor Relations and Controller, who will provide a brief opening statement.

Thank you. Good morning and welcome to our first quarter fiscal 2023 earnings call. Today I'm joined by Dan Crowley, the company's chairman, president, and chief executive officer, and Jim McCabe, senior vice president and chief financial officer of Triumph. During our call, we'll be referring to the supplemental slides, which are posted on our website. 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 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 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 our website at www.triumphgroup.com. Dan, I'll turn it over to you.

Thanks, Tom. Earlier today, we reported our first quarter results for fiscal year 2023. I'm pleased to share that despite the challenging macro environment, Triumph demonstrated organic growth in its continuing operations and completed its portfolio transformation to position the company for the future. Our Q1 results exceeded our expectations overall. On slide three, I summarized the quarter's highlights. First, we generated organic growth in our continuing operations, driven by improving commercial OEM and MRO demand. With the sale of its Stewart, Florida plant, our 16th and final divestiture, Triumph has exited its large structure business consistent with our strategic plan. Backlog is up 7% with expanding book-to-bill and new partnerships. Triumph is well positioned to realize the benefits of our diversification strategy. Our actions to mitigate supply chain constraints have lessened the impact on Triumph as we continue to partner with our customers and suppliers to ensure supply continuity and affordability. With years of heavy cash use now behind us, we are updating our revenue and earnings guidance and reiterate our cash guidance for fiscal 23 reflecting improving sales and cash flow. Q1 marked an inflection point for the company on cash. We retired obligations of over $100 million from our legacy structures business, improved cash use from a year ago, and expect to be cash flow positive over the balance of the fiscal year. All the enablers for value creation and deleveraging are headed in the right direction. The time and energy of our team that allowed us to execute on our multi-year restructuring have shifted to organic growth and expansion of our products, services, and customer base, all of which enhance our financial forecast and predictability. Coming off a productive Farm Bureau air show, our team is excited for the future. Bottom line, our first quarter results keep us on track with our goal of doubling profitability over fiscal years 2022 to 2025, driven by improved OEM production rates, expanded MRO volumes, enhanced pricing from recent contract extensions, and lower cost structure as a result of our transformation. As we pursue expanded margins, we're also focused on growth. In the first quarter, we secured over $422 million and new orders across our continuing business. Backlog has troughed and begun to grow after years of top-line contraction. Commercial backlog in Triumph's systems and support business is up 24% for the quarter, paced by an 80% increase in 737 MAX backlog, partially offset by a modest decline in military backlog. Total company and systems and support book-to-bill ratios for the quarter were approximately 1.5. Both MRO receipts and new RFP volume remain very high. A Triumph delegation just returned from the 2022 Farnborough International Air Show, the first in-person event since 2018, where more than 15,000 exhibitors met signaling a return to a normalized aerospace market. I met with the CEOs of more than 20 of our key customer organizations, and our team met with over 100 suppliers. Industry participants were optimistic, tempered with some concern around the supply chain's ability to support the anticipated ramp rates. In the last week, Boeing, Airbus, and GE signaled short delays in the timing of production ramp step-ups, typically three to six months, which will not have a material impact on the narrow-body ramp or Triumph's financial outlook. Our collective challenge remains, how quickly can we get to rates far greater than achieved prior to the pandemic? In the quarter, Triumph announced plans to partner with Moabatala's Setted Engine Overhaul business in the UAE to play a larger role in MRO expansion in the Middle East. We view this formative partnership as complementary to our recently launched joint venture with Air France KLM called Excel. Both accelerate our capabilities and footprint and provide early life access to engine component MRO. Triumph and Senate will jointly establish in-region capabilities to improve turnaround time and support to customers such as GE and Rolls-Royce. Triumph also announced an agreement with Moog in which we combined our respective 787 landing gear and flight control actuator offerings under a power-by-the-hour contract for an Asian carrier. You can expect Triumph to pursue more partnerships and new channels to market to expand our reach and top line. Last, Triumph is collaborating with Lockheed Martin to jointly develop components and subsystems for future aircraft thermal management systems. As aircraft electrification advances, new ways to dissipate heat will be needed, and we are creating IP to support these demands. Other wins for the quarter can be seen on slides four and five. Despite short-term supply chain pressures, the air travel market and carrier financial health both continue to recover. The improving travel demand is aiding industry profitability, which, coupled with higher fuel prices, increases the prospect for new aircraft orders and rate increases. On July 1st, IATA forecasted North American operators would post a profit for 2022, while global operator are posting near break-even profitability, a substantial turnaround since the losses of 2020. This air traffic recovery is reflected in Triumph's MRO revenue, which is up 95% for the quarter and 38% sequentially. Cargo revenues declined 21% for the quarter, though still operating at levels above those of 2019 as commercial transport belly capacity returns. Triumph's engine customer revenues rose 23% for the quarter driven by single-aisle LEAP engine gearboxes. GE anticipates flattened demand over the next few months as the supply chain prepares for the ramp, but we remain confident in the longer-term outlook. Military spending remains strong, with the President's fiscal 23 Defense Department request of $773 billion expected to benefit from both House and Senate appropriation committees recommended increases of approximately $37 to $45 billion. The platforms supported by TRIUMPH, which are enjoying strong budget support, include the CH-53K, the CH-47, the F-15, T-7A, and Joint Strike Fighter. That said, TRIUMPH's military end market was off 20% for the quarter, driven by prior year orders on C-130 and E-2D, though These declines were offset by commercial and market improvements. This is primarily a timing issue, and we expect military revenues to recover and normalize over the course of the year. Brian continues to proactively mitigate supply chain issues. Deliveries from suppliers were 80 to 90 percent on time and full in Q1. We put strategic order coverage in place to secure allocation of resources and protect our most critical programs. Triumph has very little exposure to supply chain impacts from the war in the Ukraine. While our suppliers are not achieving the 100% on time performance we expect, we were able to meet our sales targets in Q1 and anticipate recovery quarter over quarter with over 40 million of past due backlog expected to be retired by the end of fiscal 23. We are working to offset potential price increases directly with suppliers and aggressively adding alternative suppliers where possible. As a result, these increases have typically totaled less than 2 percent of sales, and we expect any impact to be immaterial to our results. Our top supply chain priority remains securing near-term delivery assurance and available capacity from our suppliers as the industry recovers. In the quarter, we issued our sustainability and annual report, which includes our recently developed five- and ten-year sustainability goals. We look forward to solidifying our path to meet these targets, which are essential drivers to our sustainability programs in the years ahead. As noted in the report, Triumph is powered by diversity, where our competitive strength comes from a complementary blend of people, products, platforms, and end markets. This broader take on diversity helps Triumph to be more resilient and perform at higher levels so that we remain differentiated in the market. We are committed to creating value in a sustainable way, investing in our people and processes and improving our quality, productivity, and agility. 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 we posted this morning. I will be discussing adjusted results, so please see our earnings press release and the supplemental slides in the presentation for the explanation of our adjustments. Triumph's first quarter results exceeded our plan, and we are on track to achieve our full-year objectives. In fact, we're trending towards the high end of our previous revenue guidance. and we expect positive free cash flow over the balance of the year. Our consolidated results for the quarter are on slide eight. Revenue of $349 million reflects increased volume from narrow-body platforms, offset by decreased military rotorcraft volume compared to last year. Excluding revenue from divested businesses and sunsetting programs, and despite the current market environment, we still grew revenue organically 1%. Adjusted operating income of $33 million represents a 9% margin, up from 8% a year ago, including favorable closeout of legacy programs. Adjustments this quarter include a $17 million revenue reduction for consideration payable to a customer related to the stewards of estature, and $700,000 of restructuring costs from facility closures and reductions in SG&A and overhead. Systems and support segment results and highlights are on page nine. Organic revenue was up 1% in the quarter, including higher commercial narrow body volume, which was partially offset by decreased military rotorcraft sales, primarily from above average military spare sales in the prior year period. Systems and support operating income was $33 million, or 13% margin, which is down slightly from the prior year due to sales timing and mix. Commercial OEM sales were a significant source of growth in this segment, up over 30% in the quarter. Results for our structures segment are on slide 10. Excluding divestitures and sunsetting programs, structures revenue of $95 million was up 2% organically. 737 production rate increases in interiors and 767 delivery timing contributed to the organic growth, partially offset by lower widebody sales. Operating income improved with the favorable closeout of 767 production blocks and variable settlements on certain 747 obligations. With the Stewart divestiture on July 1, we've completed our planned exit of the large metallic structures business. The previously announced exit of our Spokane interiors facility is also now complete. The continuing business in this segment is the interiors, insulation, and ducting business. Our free cash flow walk is on slide 11. Our $96 million of cash use this quarter included $21 million of non-recurring cash drivers. These drivers included $4 million for previously accrued 747 and legacy structure shutdown costs, and $17 million of free cash use from the recently divested Stewart, Florida business. The Stewart divestiture completely relieved Triumph of the remaining advance repayment obligations, and we expect to be cash flow positive over the balance of the year. As for the quarterly cash flow cadence, We expect our usual seasonality with a modest use of cash in Q2, break even to slightly positive cash flow in Q3, and strong cash generation in Q4. We continue to expect capital expenditures of $30 million for the fiscal year as we invest in efficiency improvements and profitable growth. The schedule of our net debt liquidity is on slide 12. At the end of the quarter, we had just under $1.5 billion of net debt. we had about $200 million of cash and availability, which is more than sufficient for our projected needs. We're continuing to reduce our leverage as planned by expanding EBITDA and free cash flow in our continuing businesses. We regularly review our capital structure and our options to continue to improve it before our next maturity in June of 2024. For our full year guidance, turn to slide 13. Based on expected aircraft production rates and the resulting demand on each of our facilities, We expect FY23 revenue to be at the high end of our previous guidance range of $1.2 to $1.3 billion. We are raising our GAAP EPS guidance by $1.11 to $1.51 to $1.71 per diluted share, primarily due to the expected Q2 gain on the Stewart divestiture and related accounting impacts, and a reduction in expected non-cash pension income. Our updated adjusted EPS guidance of 28 cents to 48 cents reflects a 12 cent reduction in expected non-cash pension income compared to prior guidance. Cash taxes, net of refunds received, are expected to be approximately $7 million for FY23. An interest expense is expected to be $129 million, including $123 million of cash interest. For the full year, excluding the impacts of the actions and structures, We expect to generate $30 to $45 million of cash from operations, with approximately $30 million in capital expenditures, resulting in core free cash flow of breakeven to $15 million in fiscal 23. We are on track with our plan to double our continuing FY22 EBITDA to approximately $310 million by fiscal 25. This is fueled by increasing demand, pricing opportunities, cost efficiencies, and improved mix of business from our portfolio actions. For fiscal 26, we have planned for a consolidated EBITDA margin of over 20%, a free cash conversion rate on sales of over 10%, and a leverage ratio of between three and four times adjusted EBITDA. In summary, our Q1 results exceeded our plan, and we are on track to achieve our full-year and multi-year objectives. The sale of Stewart completed our exit from the large metallic structures business and relieved us from the advance obligations. We expect to be profitable and cash positive for the balance of the year. Now I'll turn the call back to Dan.

Dan? In summary, I'm pleased with the first quarter results achieved in a challenging macro environment and to be done with our restructuring plan and years of heavy cash use. Both provide us with solid momentum as we progress through fiscal 2023. I'm also encouraged by the commercial market recovery with rapidly improving MRO uptake, closely followed by OEM rate increases as our backlog grew meaningfully in the quarter. Our strong book to bill of 1.5 coming out of Q1 confirms we are winning new business, and our company is poised to expand top and bottom lines year over year. The last two plus years in our industry have not been for the faint of heart. Despite the pandemic, supply chain constraints, rising fuel costs, and labor shortages, Triumph remains on track to achieve our full year objectives. I look forward to reporting on our progress as we continue our efforts to further unlock the hidden value across our business and deliver value for the benefit of all our stakeholders. We're happy now to take any questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. And our first question will come from Seth Seifman with JP Morgan. Please go ahead.

Thanks very much. Good morning. I wonder if you could give us a little more color on kind of what the structures segment is going to look like going forward when it's just interiors. How should we think about the sales and EBITDA in the quarter that just passed? And then when we think about going from Q1 to Q2, the adjusted EBITDA in that segment was about $17 million. Where does that go in the second quarter when it's just interiors?

Let me start out. First of all, interiors is a business with a high growth rate. They've been beat down to the max production pause, and now with that back at 31 a month, it's coming up, plus their win on the A220, which is a program that's going to more than double in rate over the next three years. So they've got a good backlog of business. We've used the time during the flat spot in that business to consolidate from our Spokane operation ducting and blankets down into Mexicali. So that plant now is going to have more scale and more efficiencies. So we've got two plants, Zacatecas and Mexicali, plus our operations that are Ford-based in Europe that support Airbus. And we're optimistic about the recovery. Jim?

Yes, Seth, you mentioned this quarter. Of course, we had favorable closeout on the programs in Stewart and 767 and some pickups on 747 as we mitigate those end-of-life liabilities. But going forward, what the containment business is, interiors, it's around $120 million run rate business, but it's increasing faster than most of the businesses as narrow-body business comes back. It's benefiting from the 737 MAX ramp, and when 787 picks up again, it'll benefit as well. It had been hovering around break-even, but in the second half of the year, it will be profitable in generating cash. So we like the prospects. We have a good backlog, and we're a market leader in that business.

Okay, cool. So just to follow up on that real quick, and then I'll wrap up, when we think about the EBITDA going from Q1 to Q2, there's probably something like a $15 million headwinds sequentially quarter on quarter from the Stewart going away, as well as, you know, $5 million or so from the AMJP. So, you know, quarter on quarter next quarter, there's probably about a $20 million sequential EBITDAP headwind.

So I think there's still opportunities to close out the 747 and other legacy cash obligations that we adjusted out for the core cash. And to the extent we can get them for less than their forecast, that may be opportunities for pickups moving forward. But otherwise, you're correct. All things being equal, the closeouts are one time in Q1, but there are additional opportunities for the balance of the year as we get out of the legacy businesses.

Okay. Got it. Thanks very much, guys.

Thank you.

Our next question will come from Peter Armant with Baird. Please go ahead.

Yeah, thanks. Good morning, Dan, Jim, and congrats on getting Stuart done. Obviously, a lot of work there. Hey, Jim, maybe if you could just update us on your updated thoughts on the stranded costs that are still going to be lingering and you're looking to settle. I know you had mentioned on the last call that it was upwards of $75 million potentially, but just maybe if you could just give us some updated thoughts there, that'd be great.

Yeah, thanks, Peter. 70 to 75 is what we identified in our guidance as being the, you're calling it stranded cost, but the legacy cost to exit the structure segment. And there's more opportunity than there is risk in mitigating those going forward. In the first quarter, we spent 21 million. 17 million of that was cash use in the Stewart business, which is gone with this divestiture. There's some, I think, 4 million of structure shutdown costs outside of Stewart. But going forward, you're looking at about 50 million left, roughly, over the balance of the year. I think that's going to be a little more back-end loaded. And all those are opportunities for negotiation, as there's assertion both ways with some of these vendors, and we can work out settlements below what we'd estimated, if we work hard at it, which we are. So that's the opportunities I referred to with Seth, is to mitigate those moving forward. But they are one-time, so it's important to identify those. They're not something that's going to recur past this year.

And just as a follow-up to that, Jim, when you look now at the business and pro forma with Stuart and some of the negotiations, if we're just thinking about 24 and beyond, it seems like a lot of these one-time issues will be gone. Is that correct?

Yeah, absolutely. And that's why we put out the multi-year guidance so that you can see where we think we're headed. It's the most frequent question I get is about What is normalized margins, normalized free cash flow? So we have this bottoms-up plan, which I referred to again, that we're going to be 20% plus on a consolidated EBITDA margin out there in 26, with three to four times leverage with the current portfolio moving forward, and free cash flow conversion in excess of 10% of sales. But that's going to happen faster than we think, because Stewart behind us is the last divestiture, and we have good tailwinds in volumes. pricing opportunities, cost efficiencies from the actions we've already taken. And with this new portfolio, we have a higher margin business with more IP and more aftermarket.

Terrific. Thanks so much.

Our next question will come from Sheila with Jefferies. Please go ahead.

Good morning, Dan and Jim. I just wanted to follow up on the last question and maybe a little bit shorter term. Can you walk us through the free cash flow for the year, Jim? You mentioned Q2 is modest use, break even in Q3, and then a big ramp. Just given the $75 million of core free cash flow in Q1, what really reverses it? Payables were a big usage in the quarter. Can you just help stair-step that for us a little bit more?

Sure, Sheila. You know that there's normal seasonality in our business, absence of divestitures. increase working capital in the first quarter, and then we kind of have a stable Q2 and Q3, and then we have a very strong Q4, just the nature of the industry we're in and the programs we're on. So the cash use in the first quarter is generally a payoff of the payables from the strong fourth quarter we had at the end of last fiscal year, and then a ramping of inventory for the balance to deliver out through the balance of this fiscal year. So working capital is the biggest driver there in cash use. In terms of the cadence, And you mentioned core free cash flow, so I'll speak to that. We use $75 million in core free cash flow in Q1. We're going to be a modest user in the tens of millions. Roughly, we'll say $20 to $30 million of cash use maybe in Q2 could be better. And then about an equal amount of positive in Q3. And then a strong generation in Q4, as we have in the past. So it's going to be a lot cleaner, a lot more predictable, and we have a good handle on it. And that's why we can give guidance when a lot of companies don't.

So it's a lot of the working capital moves rather than a big ramp you have in systems profit.

That's correct. When there's changes in delivery rates from OEMs, we still have production rates that lag that. So we know our production rates. We have frozen windows. So we have a good view of what the rest of the year looks like.

Great. Thank you.

Our next question will come from Ron Epstein with Bank of America. Please go ahead.

Good morning, guys. Just quickly, what's the strategy you guys are using to deal with inflation, both raw material costs and labor costs? I mean, you've got to be seeing it from your own raw material suppliers and then your subsystem suppliers. What are you doing to mitigate that?

Thanks, Ron. There's about 12 categories of commodities we track, and we looked at the most recent average requested price up. And most of them are single digit. The ones that stick out are the cost of machine products and raw materials and composites to a lesser extent. But a lot of what we spend money on, you know, chemicals and logistics and castings and forgings haven't gone up a lot. And we've been able to mitigate those cost risks through a variety of levers. One, we can sometimes pass it through to the customer. Sometimes our contracts allow for a sharing of cost with the supplier. We've done a lot more dual sourcing and we've expanded our low-cost country sourcing beyond Korea, which was a big push over the last two years, into India and other countries. Because there is capacity out there that will help keep people in check on price ups. So we've been able to mitigate about two-thirds of the increase, which has been on average about a 6% increase. That's why I mentioned about 2% of sales is the impact. We don't really buy from suppliers that are in or supplying the Ukraine. And we're starting to see some costs that have been high lately, like shipping costs come down just in the last month. Costs for things like containers have pulled back, and fuel costs are starting to trend down. So long term, we expect this to linger through calendar 23, but we don't see it as a big impact.

I'd add that I think generally we own a lot of IP on our products. The vendors that are sole source and that have IP that we need are a small percentage of the total procurement. We spend about $800 million this year on materials. And we've done some good strategic sourcing so that we have pass-through where necessary on materials, and we have dual sources wherever possible to make sure we remain competitive. So we've done a good job managing it. Some of it's work that was done in previous years we're benefiting from, and some of it is fixing ourselves going forward to make sure we're – Not inflation-proof, but inflation-resistant.

Got it. Thank you.

Thanks, Ron.

Our next question will come from Michael Carmoli with Truist. Please go ahead.

Hey, good morning, guys. Thanks for taking the questions here. Just back to... Seth's question on the structure. So just to be clear, we can assume something around a $30 million quarterly run rate going forward. And then just to be clear, are those profitable revenues at this point from an operating margin standpoint? And can you give us kind of the range of where that profitability is?

Yes, sure, Mike. They are profitable for the full year. They're probably a little – unprofitable in the first half, and they're more profitable in the second half. The ramp of the narrow buys is helping out a lot. But right now, they're low single digits profitability. Over the multi-year horizon, they're growing into the teens. And that's where they've been historically.

We even hit the 20s in that business pre-pandemic, which was a profitable business. Because we did a lot of cost takeout during the pandemic, our margin uptwing should be good. And the most You recall we booked a billion dollars worth of business in interiors. It gives us a 10-year run rate that we can go optimize around. So we're optimistic on the margin outlook for that business.

Got it. And then just how are you planning for the production rates on the 787 for kind of the remainder of this year and maybe how it might impact that interiors business?

Yeah, there's been a lot of news on 787 just in the last week. We're We're thankful that Boeing appears to be close to the FAA approvals that will allow them to resume shipping. We've been delivering at rates around two to three a month of late. Remember, we were at 14 before the rates started to climb. With the outlook of burning off Boeing's deliveries, there are 120 aircraft that are in and storage, roughly half of which they plan to burn off in the next year or two. Deliveries are expected to ramp up somewhere around seven a month. And that helps us because about five or six of our plants are important actuator suppliers on the 787. So it's going to be a tailwind for us now that they're close to resuming production. And we're confident that the backlog of this program is almost 500 outstanding orders for the 787 and the increasing demand for wide body. A lot of folks predicted that international travel wouldn't pick up until 24, 25. Well, it's already back within 20% of 2019 levels and ramping steadily. So I think we're going to hit 2019 levels in the calendar year and then blow through that in 23, 24. So we're bullish on this. We'd like to be back at 14%. We're not there yet, but we'd be happy with seven.

Yeah, and I'd add that we did reset our contract with the beginning of the year, so we'll get good pricing based on current costs moving forward as the volume increases. And put in perspective, 787 is only about 4% of our backlog right now. You can see our backlog breakdown on page 16 of the presentation. But our largest program right now is the 737, which is 16% of our backlog that's shippable in the next few years. So it's an important driver for us, but that diversification is helping us out. The 3.7 is the bigger driver right now.

Got it. Perfect. Thanks, guys.

Thank you.

Again, if you have a question, please press star, then 1. Our next question will come from David Strauss with Barclays. Please go ahead.

Thanks. Good morning.

Good morning.

Good morning. Could you just comment on the margin at systems and support? I think the EBITDA margin was around 16%, which is lower than what we've seen, lower than what you're targeting. Can you just talk about that and how we should expect to see that margin progress as we go through the year?

Sure. I think first quarter we mentioned the sales mix change. Last year we benefited from some above average sales and spares for our military sales. and another OEM program that was higher volume last year. That's going to normalize moving forward. So it was really a tough comp against last year. Moving forward, we're going to see the increased expansion of margins. Typically, the first quarter is our lowest margin period for the business and for that segment. So I think a slight increases over the next two quarters and then a strong margin in Q4 as volume increases. And then, of course, going forward, we're still headed towards that multi-year goal of doubling our profitability by FY25. And out there, you're going to be in the range of 20% margins for the overall business, which means even higher for assistance and support.

And Jim, on that, when you say double profitability, what is the comparable number, the clean kind of EBITDA number that we should be thinking about in terms of doubling?

Yeah, David, thanks for that question because I tried to point that out because it kind of gets a little foggy with the divestitures. But last year, our continuing businesses had EBITDA at about $155 million. So that's what we're talking about. FY22, continuing EBITDA at $155, doubling. And I mentioned in my earlier remarks, $310 million of EBITDA is the target for FY25, which is a doubling of that FY22 number.

Okay, that's helpful. Thanks. And I apologize if I missed this. Are there any net cash proceeds from Stuart, or is it just the payoff of the advance balance?

Stuart, besides being strategically important, the biggest benefit was the advance relief. So the advances were integral to that business. They needed to be resolved as part of the transaction. They were. That's over $104 million of cash flow that would have gone out this year that was relieved as part of the transaction. And we exited the business, which is better owned by someone else because it is longer cycle, more capital intense, doesn't really have any aftermarket, doesn't have a lot of IP. There's others that fits their model. It didn't fit ours. So we're happy to complete that transaction on good terms.

All right. Thanks very much. Thanks, David.

This concludes our question and answer session. The conference is now ended. Thank you for attending today's presentation. You may now disconnect.