Triumph Group, Inc.

Good morning, and welcome to the Triumph Group fourth quarter fiscal year 2023 results conference call. All participants will be in a listen-only mode for the duration of the call. And should you need any 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. And to withdraw a question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Tom Quigley. Please go ahead, sir.

Thank you. Good morning, and welcome to our fourth 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. Triumph ended fiscal 2023 in Q4 on an upswing with strong margins and positive cash flow, positioning the company for success in fiscal year 2024 and beyond as demand accelerates. We met or exceeded our full-year financial targets, delivered organic sales growth, materially expanded profitability, and in our fourth quarter, generated 52 million in positive free cash flow. Q4 was an encouraging finish to a solid fiscal year that marked year-over-year improvement in both earnings and free cash flow. Over the past two years, Triumph doubled our adjusted EBITDA margins from under 7% in our fiscal 21 to 14% in fiscal 2023. As we go forward, We expect this momentum to continue and are guiding to further margin expansion and top line growth in fiscal 24 as we seek to enhance shareholder value in a rapidly improving demand environment. Deleveraging remains a top priority as we continue to optimize our capital structure over time. We recently extended our debt maturities, providing additional liquidity and flexibility as Triumph returns to consistent cash flow generation in fiscal 24 and beyond. Our four-point strategy remains on track. First, reposition the company as a systems and aftermarket company, which we've done. Two, improve operations and grow our proprietary and aftermarket sales and margins. Three, return to positive free cash flow to help de-lever the company. And four, generate the shareholder returns our investors expect. Triumph is a stronger company today as a result of our actions. allowing us to compete successfully in the market against larger and more valuable peers. Turning to slide three, I'll summarize the highlights for the quarter. First, we generated organic sales growth of 21 percent over the prior year quarter, with increased sales reported across all our end markets. Year-over-year sales growth was 14 percent, driven by improving commercial OEM and MRO demand. Note that aftermarket accounted for 41% of our Q4 sales, while military programs account for 37, both up from prior years. Key drivers for the increased Q4 revenue included higher volume on the Boeing 737 and 787, OEM and spares for military rotorcraft, GE LEAP gearbox shipments, and nacelle overhauls. All tailwinds on growth platforms, which we expect to continue in fiscal 24. Profitability for the quarter materially exceeded prior year levels. On a fiscal year basis, we achieved our highest margin percentages since 2014 as a result of our strong execution and improved business mix. Key profitability drivers for the year included higher spare sales, cut-in of previously negotiated price increases, development program transition to production, higher sales at our MRO sites, and lower SG&A and overhead costs. Our cost reduction results enhance our operating leverage. In other words, we won't have to add back support costs as volumes increase. What's encouraging here is we saw higher EBITDA margins across all our primary product lines year over year, from actuators to engine controls, gearboxes to product support. We grew our backlog by 11% as Triumph continues to benefit from our broad representation across platforms, customers, and end markets, and as our differentiated solutions gain traction with our customers who are helping to fund our R&D efforts. Our backlog improvements in size, diversity, and profitability are rooted in our investments in new products and technology, portfolio changes, and pricing initiatives. In addition to the long-term agreements, which we secured in recent years across all our businesses, backlog renewal is key to Triumph's sustained long-term growth. Beyond higher OEM rates and MRO receipts, new wins in the space market and for products supporting the war in Ukraine enabled us to exceed our goal of generating 25% of our sales from new products and markets. Turning to cash flow, we generated strong positive free cash flow to end the year, benefiting from over $120 million in unlevered free cash flow in Q4 as we accelerated product shipments, cash collections, and reductions in working capital. We are on track to generate positive free cash flow on a full-year basis for fiscal 24 and beyond, while expanding our CapEx investments and funding working capital in support of the commercial ramp. Taken together, the momentum in our end markets Our operational and pricing improvements and expanding backlog lay the foundation for our fiscal 24 guidance. Triumph made great strides this year operationally across the enterprise, including achieving world-class safety levels with 12 or half of our sites recording zero injuries in the last year, reducing REDD programs by over 75%, which reduces financial risk, establishing over 100 high-performance teams to streamline our execution, reducing quality defects by 20%, with 11 sites achieving world-class levels of less than 1% cost of poor quality, and improving supplier on-time delivery performance from the mid-'70s percentages to the low-'90s to free up captive inventory. We remain encouraged that both OEM and MRO markets continue to recover, as commercial revenue levels are on track to exceed 2019 levels this calendar year. Triumph is benefiting from a 52% increase in global revenue passenger kilometers to 88% of pre-pandemic levels. The primary driver for both new aircraft orders, production rate increases, and MRO spend. Similar growth in the international travel is benefiting our wide-body MRO sales. Robust commercial demand helped increase Triumph's fiscal year 2023 bookings 31 percent, including $171 million in new contracts in March alone, our highest of the year. Six of our 24 factories will benefit from Ryanair's recent order for 300 MAX 10s and those from United Airlines. Turning to slide four, new wins totaled $205 million for the quarter and $743 for the year. Important military wins for the quarter included content on the CH-53 helicopter, including the blade fold and blade damping system and engine oil coolers, and an F-35 drag chute actuator. We also received a large order for the M-777 howitzer magazine components. Increasing volume is our biggest enabler for top and bottom line growth. Boeing and Airbus continue to forecast higher OEM production rates, And recall the triumph typically steps up our rates eight to 10 months ahead of the OEMs due to product lead times. As shown in slide six, we anticipate the Boeing 737 MAX rate to step from the current rate 31 to rate 38 this summer, and then rate 42 by March. The A320 family achieved rate 46 in March with plans to move to rate 49 before the end of our fiscal year. Airbus also plans to increase the A220 rate from the current 7.5 per month to 9.2 and then to 10 within our fiscal year. Recall that Triumph supplies cabin insulation, floors, and mechanical controls on the A220. On or before Triumph's fourth quarter, the Boeing 787 will move from the current rate 4 to rate 5, while the Airbus A350 will move from rate 5.6 to rate 6. Prime supplies the entire 787 landing gear hydraulic system, cargo door actuation system, and interiors components. Regarding the military outlook, the U.S. defense budget rose approximately $60 billion in 23, and the 2024 request is up another $26 billion, signaling demand stability over the next two years. Prime's total military sales were up 18% year-over-year and 34% sequentially, with platforms such as the CH-53 helping to drive our fiscal 23 results. Finally, aftermarket inductions across military and commercial platforms for maintenance, repair, and overhaul are up 24% year-over-year to over 35,000 components. Together, these OEM and MRO increases across all our end markets support our fiscal 24 guidance and long-term business outlook. So overall, very good news on demand trends. I want to share an update relative to our proprietary product development efforts in the systems area and its importance to our value generation efforts. For fiscal 24, approximately 72% of our sales are for proprietary products, excluding our third-party MRO business. Our technical staff maintain robust product roadmaps so that intellectual property, technology, and product development investments are directed towards emerging customer needs. We're targeting new starts as well as takeaways on existing programs. By partnering with our customer to solve their most difficult challenges, we received over $30 million in customer-funded contract research and development commitments in the last 12 months to augment our self-funded R&D. Turning to slide seven, you can see some of the positive results of these joint R&D efforts. New applications include next-gen landing gear systems, military gearboxes, electric aircraft components, fuel pumps, fuel hydraulic actuators, thermal vapor cycle compressors, and engine controls, all products with valuable aftermarket demand. I'm particularly happy to have content on GE's new LM25NX military engine, and new solutions for 6th Gen fighters. This customer engagement was made possible by our customer focus teams, who are shaping future requirements and identifying takeaway opportunities to expand our backlog. Priam's strong financial and operational close to fiscal 23, along with our proprietary products and end market growth, are key enablers to enhancing our long-term value. None of this would have been possible without the Triumph team members whose engagement and accomplishments in fiscal 23 make it possible for the company to achieve its potential. Together, the culture we've created at Triumph helped us manage through the last three years and position the company to sustainably execute our profitable growth strategy in the years to come. Jim will now take us through the fourth quarter results and our detailed outlook for fiscal 24. Jim?