Triumph Group, Inc.

Good day and welcome to the Triumph Group First Quarter Fiscal Year 2024 Results Conference Call. All participants will be in listen-only mode. So, if 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 today's event is being recorded. I'd now like to turn the conference over to Thomas Quigley.

Please go ahead, sir. Thank you. Good morning and welcome to our fourth quarter fiscal 2024 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 and full fiscal year, please refer to the presentation posted on our website this morning. We'll discuss our adjusted results. Our adjustments and 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 tribes' 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, and welcome to Triumph's fourth quarter call. Before we get into the details of the quarter, I'd like to start by recapping the full fiscal year results. Fiscal 24 was a successful year for Triumph. We achieved or exceeded our strategic and financial objectives, despite market dynamics, while improving safety and quality to all-time highs for the company. Here are a few supporting facts. Triumph sold our third-party maintenance business for 14.5 times EBITDA to allow us to focus on our core systems and OEM MRO business. We reduced total debt by over $700 million and accelerated our deleveraging by two years. We retired our outstanding warrants, generating $100 million in net proceeds. Triumph increased aftermarket revenues by 19%, which carry strong margins. And we improved systems and support adjusted EBITDA margin by 70 basis points, while improving our free cash flow by $60 million. We also held a successful investor day with over 200 in-person attendees and provided multi-year targets. And last, we met or exceeded all of our internal sustainability goals on our journey towards our long-term ESG objectives. Overall, Triumph's strong fiscal results in a challenging market environment positions us to accelerate its profitable growth over what we expect to be the next aerospace and defense super cycle in the coming years. As we post our results for the fourth quarter that ended in March, I'm pleased to report that we delivered our eighth consecutive quarter of organic sales growth while generating positive free cash flow. Turning to slide three, I'll highlight key accomplishments from the quarter. We closed the sale of our product support business and used the proceeds to retire over $550 million in debt. We generated year-over-year organic sales growth of 11%, driven by seasonally strong aftermarket demand. We grew our total company backlog by 22%, which is above market growth rates. as Triumph expands its participation in a broad array of platforms, customers, and end markets. We achieved non-aviation sales of 6% on increasing maritime and artillery demand. We also executed 40 million in cost reduction actions across the company to reduce short-term margin dilution and enhance our out-year profitability. These actions will also help us to achieve the long-term earnings and cash metrics we presented at our investor day, which Jim will update for our post-product support portfolio. While overall Q4 sales and free cash flow were strong, as were system and support earnings, overall earnings were impacted by $5 million in restructuring charges along with continued margin weakness in our interiors business. Let me provide some perspective on interiors and update the actions we are taking to improve its profitability. Interior's demand is coming back, as demonstrated in the 22% volume increase in the quarter from prior year. Profitability and free cash flow continue to lag expectations due to the previously mentioned external headwinds. While Interior sales represents less than 15% of Triumph's total sales, we are committed to restoring its historical levels of profitability and free cash flow through the following actions. First, winning additional work from Boeing, Airbus, Spirit, and KHI to generate increased cash and profit and help absorb their fixed overhead. We are in final negotiations to transfer 787 ducting work supplied by a competitor to our world-class Zacatecas Mexico plant, a sign of the trust our customers have in Triumph and their need for ready capacity. Second, we put in place hedges for the peso that cap further margin erosion. Third, we identified a second source for the raw material provider who raised prices last year and have initiated the qualification effort. Fourth, we continue to drive labor productivity through lean events to offset the minimum wage increases affecting all companies doing business in Mexico. We are confident that with the anticipated rate recoveries on the 737 and 787, additional work scope, price increases, and labor productivity increases, we can bring interiors margins back to historical levels. As we chart the two to three year trajectory for Triumph, we remain very optimistic about the positive underlying growth drivers in play across our markets, which include rising commercial aftermarket spares and repair demand, recovering commercial transport aircraft volume, and a strong and stable military budget including many new military programs in development. Triumph's backlog rose more than 22% year over year with orders driving a book to build of 1.28 on the strength of our product offerings and focus on customer engagement. Both military and commercial backlog grew by 10% and 22% year over year respectively, which will benefit Triumph's top line going forward. As shown on page four, the top five programs in our backlog are all growing in rate over our planning horizon and are made up primarily of systems content. Note that the sixth through the tenth programs in backlog are all military platforms that are exclusively systems content. Starting with our aftermarket sales, Triumph continued its multi-year trend of increasing demand in fiscal 24 as noted on page five. and received new MRO orders in Q4 for the following products, the V-22 pylon conversion actuators, the Navy's SH-60 engine control upgrades, the A380 landing gear overhauls, and CH-47 spares. There are several long-term dynamics at play here, as new aircraft fleets such as the A320neo and 737 MAX aircraft are heavily utilized, driving spares activities. while the older 787 and A380 fleets are increasingly entering their landing gear overhaul cycle where we supply hydraulics and actuators. Turning to slide six, I provide a case in point on our aftermarket growth where Triumph is the OEM provider of the entire landing gear actuator suite on both the 787 and the A380 aircraft. Landing gear actuation overhaul activity is rising rapidly and we're allocating more capacity to accommodate the MRO demand. These aftermarket programs carry margins, which are often two to three times our OEM margins, as we supply spares and repair services to keep commercial and military aircraft in the air. We're also expanding our foreign military sales in the aftermarket as well. There are several positive developments on the military side of the business. as Triumph has engaged in a number of new development programs with Northrop Grumman, Boeing, Lockheed Martin, Kratos, Anduril, GE Aerospace, and others in support of the NGAD and collaborative combat aircraft. Turning to slide seven, six of our top wins in the quarter were for military platforms. We annotated the slide on the right where these are sole source awards, based on Triumph IP and or new product introductions. Note that Triumph's backlog supporting military rotorcraft rose 30% year-over-year on the strength of our substantial IP content on the CH53K, which rose 94% year-over-year to $165 million, more than offsetting the expected run-out of V22 OEM backlog. Regarding the commercial market, Airbus production rates remain strong and growing, with 10% increase in A320 family rates this year based on published information. Recall the A320 family is Triumph's third largest program in backlog. Similarly, A350 rates are forecasted to increase, and Triumph has been asked to support higher rates of A220 production and expanded work scope. We are aware of Boeing's recent public statements concerning a delay in their planned rate increases, which have not been formally communicated to the supply chain yet. As you can imagine, the actual adjustment in build rate for a given product is a function of delivery rates, aircraft and component finished goods inventory, and the supply chain's ability to flex output down and back up. Given the uncertainty on Boeing commercial transport programs, Triumph adopted a conservative fiscal 25 plan, reducing our prior internal rate assumptions between 20% and 30%, depending on the Boeing platform. This has the net effect of reducing our fiscal 25 sales guidance by approximately $70 million, or 6%, from prior targets. We will update all stakeholders as Boeing finalizes their production needs, and we'll continue to hustle while we wait for Boeing's ramp-up and increase market share through takeaways and second sourcing across their commercial platforms. We remain fully committed to protecting Boeing's requirements and supporting future rate increases as they drive towards rate 50 for the 737 and rate 10 plus on the 787 by late 2025, 2026. We have high confidence that our operating plan for the next two years is sufficiently de-risked to support our multi-year financial targets. Jim will now provide further detail on our fourth quarter results, fiscal 25 guidance, and updated long-term outlook.