Triumph (US:TGI)2022-08-04 05:09Financial Data and Key Metrics Changes - Triumph reported Q1 revenue of $349 million, reflecting a 1% organic growth despite a decrease in military rotorcraft volume compared to the previous year [30][31] - Adjusted operating income was $33 million, representing a 9% margin, up from 8% a year ago [31] - Free cash flow for the quarter was negative $96 million, influenced by nonrecurring cash drivers, but the company expects to be cash flow positive for the remainder of the fiscal year [35][43] Business Line Data and Key Metrics Changes - The Systems and Support segment saw organic revenue growth of 1%, driven by higher commercial narrow-body volume, while military rotorcraft sales decreased [32] - Commercial OEM sales in the Systems and Support segment increased over 30% in the quarter [32] - The Structures segment reported revenue of $95 million, up 2% organically, with growth attributed to 737 production rate increases [33] Market Data and Key Metrics Changes - Triumph's backlog increased by 7%, with a book-to-bill ratio of approximately 1.5% for the quarter [8][14] - MRO revenue surged by 95% year-over-year, reflecting the recovery in air travel demand [20] - Military spending remains strong, with a fiscal '23 Defense Department request of $773 billion, benefiting platforms supported by Triumph [22] Company Strategy and Development Direction - Triumph completed its portfolio transformation by divesting its large structure business, positioning itself for future growth [7][8] - The company is focusing on organic growth and expansion of products and services, aiming to double profitability from fiscal 2022 to 2025 [12][41] - Partnerships with Mubadala's Sanad and Air France KLM are expected to enhance MRO capabilities and market reach [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the commercial market, with improving MRO uptake and OEM rate increases [44][46] - The company is proactively addressing supply chain challenges, with deliveries from suppliers at 80% to 90% on time in Q1 [24] - Management anticipates a return to normalized military revenues over the course of the year, despite a 20% decline in military end market for the quarter [23][24] Other Important Information - Triumph issued its sustainability and annual report, outlining 5- and 10-year sustainability goals [27] - The company emphasized the importance of diversity in its workforce and operations as a competitive strength [28] Q&A Session Summary Question: What will the Structures segment look like going forward? - Management indicated that the Interiors business has a high growth rate and is expected to be profitable in the second half of the year, with a run rate of around $120 million [50][51] Question: Update on stranded costs? - Management noted that approximately $50 million in stranded costs remain, with opportunities for negotiation to mitigate these costs [56][58] Question: Free cash flow expectations for the year? - Management outlined a seasonal cash flow pattern, expecting modest cash use in Q2, breakeven in Q3, and strong generation in Q4 [65][66] Question: Strategy to deal with inflation? - Management is tracking commodity prices and has implemented dual sourcing and expanded low-cost country sourcing to mitigate inflation impacts [70][74] Question: Profitability outlook for the Structures segment? - Management confirmed that the Structures segment is expected to be low single-digit profitable in the first half, with growth into the teens over the multiyear horizon [76][77]