Triumph Group, Inc.

Welcome to Triumph's third quarter fiscal year 2023 results conference call. This call is being carried live on the internet. There's also a Slack presentation included with the audio portion of the webcast. Please ensure that your pop-up blocker is disabled if you are having trouble viewing this live presentation. All participants will be in listen-only mode. Should you need assistance, please send over 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 1 in your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. In addition, please note that this call is property of Trim Groups, Inc. and may not be recorded, transcribed, or rebroadcast without explicit written approval. I would now like to introduce Tom Quigley, Triumph's Vice President of Investor Relations, Mergers and Acquisitions and Treasurer, who will provide a brief opening statement.

Thank you. Good morning, and welcome to our third 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. As we review the financial results for the quarter, please refer to the presentation posted on our website this morning. we will be discussing our adjusted results. Our adjustments in any reconciliation of non-GAAP financial measures to comparable GAAP measures are explained in the earnings press release and in the presentation. 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. Dan, I'll turn it over to you.

Thanks, Tom. For the quarter, Triumph delivered strong sales in our operations that were up both sequentially and over the prior year. We grew our backlog at double-digit rates. On our last earnings call, I discussed the supply chain constraints delaying deliveries in our second quarter, mostly impacting our defense programs. Intensive management of our supply chain enabled us to improve supplier on-time and full deliveries from 77% to 87%, reducing the impact of these headwinds on triumph. This enabled our defense sales to improve 5% sequentially, up to $112 million. We anticipate the pickup in commercial volume we saw this quarter, particularly in the aftermarket, will continue to improve. We forecast our Q4 top line and profitability to be materially higher sequentially and year over year as OEM and MRO deliveries accelerate. Accordingly, we are increasing our revenue and our full year adjusted EPS guidance. As we committed, we also remain on track to be cash positive in the second half of the year and in fiscal 24. Overall, I'm pleased that we delivered our Q3 results in line with or above our expectations, positioning us well for Q4. I want to thank our employees. Like many others, we've experienced a few years of volatility. Internally, Triumph leveraged our experience from the pandemic to create a new deal, a new social contract and value proposition for employees who work at our company for more than a paycheck, extending the empowerment and flexible work environments which helped us get through the pandemic. On slide three, I'll summarize the quarter's highlights. First, we generated organic sales growth of 21% quarter over quarter and 13% year over year driven by improving commercial OEM and MRO demand. Triumph's exit of the legacy structures business was done at less than half of the budgeted costs. Q3 margins stepped up, returning to prior year levels and are expected to increase in Q4 with year-end shipments. Backlog is up 12%. as Triumph and our customers benefit from our diverse platforms and end markets. Beyond higher MRO receipts and OEM rates, new wins in the space market and for products supporting the war in Ukraine contribute to our goal to generate 25% of our sales from new products and markets. With a pipeline of over 9 billion in opportunities, strategic wins on new platforms and increasing R&D expenditures on differentiating technologies, we anticipate strong revenue increases over our planning horizon of fiscal 24 to 28. Turning to Q4, we expect strong positive free cash flow made possible by material reductions and past due backlog, inventory, and working capital. We have high confidence in our Q4 and year-end outlook for several reasons. Triumph entered Q4 with higher levels of inventory as a result of deferred demand on certain programs and substantially all orders to be delivered in Q4 are now in hand. Legacy commercial aircraft MRO demand has increased as older aircraft remain in service pending new aircraft deliveries from Boeing and Airbus. Military MRO orders, which were seasonally delayed with the October end of the government's fiscal year, are now funded. Military customers supporting the war in Ukraine and replenishment of U.S. inventories have requested quick turn and or early deliveries with favorable cash terms. We completed a thorough review of all of our supply chain requirements for planned deliveries and have sufficient parts on hand or in transit to support planned deliveries. And supplier shortages are improving as we resource and dual source work to domestic and low cost sources. So overall, we feel good about the quarter and the ramp is upon us. We saw a month-over-month improvement during Q3, which we expect to benefit Q4 and our fiscal 24 forecast as we increase cash flow from operations year over year. Consistent with our track record, we're not standing still. Against a stronger and more promising operating environment, we've been turning our attention to strengthening our balance sheet and addressing near-term maturities, which is one of our top priorities. We have a comprehensive deleveraging plan that builds on our operational improvement. As one component of this plan, Triumph announced distribution of warrants in December. When the warrants are exercised, the benefits of this action are anticipated to be twofold. It will lower our debt while increasing equity for the benefit of our investors through a cost-efficient transaction. We distributed the warrants Given our confidence in our business results and growth outlook, the warrants are one lever we're pulling as we prepare to refinance our upcoming 2024 debt maturities with the assistance of outside financial advisors. Of course, timing is an important consideration. Our team has been agile in our refinancing approaches, which allowed us to bridge through the pandemic and market downturn. We are confident in our ability to secure the financing we need to fund our growth and that of our customers. Our improving results also support expanded reinvestment in CapEx and IRAB and enhance the value we deliver to all stakeholders. We're always looking at ways to manage cost in support of our future state. As we exit our structures business and retire REDD programs, we are targeting reductions in overhead and SG&A. This enables continued margin expansion as our strong backlog growth translates into higher sales year over year. We are confident in the proactive steps we're taking to even better position Triumph for the future. Jim will now take us through our third quarter results and detailed outlook, and then I'll provide some comments on the market.