Triumph (US:TGI)2021-08-04 17:05Financial Data and Key Metrics Changes - Triumph Group reported an 11% organic growth in Q1, with adjusted operating income of $31 million and an adjusted operating margin of 8%, up 477 basis points year-over-year [42][39] - The company repaid the remaining balance of its 2022 bonds while preserving strong liquidity, with net debt at approximately $1.4 billion and combined cash and availability of about $263 million [48][18] Business Line Data and Key Metrics Changes - Systems & Support revenues increased by 8%, benefiting from recovery in the aftermarket, with military sales comprising 53% of sales in this segment, up from 51% in the prior year [43][22] - Structures segment net sales increased by 15%, largely due to prior year's pandemic impacts, with an adjusted operating margin of 10%, compared to 1% in the prior year [44][42] Market Data and Key Metrics Changes - MRO job inductions increased by 37% for the quarter, with aftermarket spares and repairs sales up over 70% [8][17] - Airline travel bookings improved from 46% to 69%, with corporate bookings rising from 18% to 40%, indicating a steady recovery in the aviation industry [26][10] Company Strategy and Development Direction - Triumph is focusing on becoming a largely pure-play Systems & Support provider, leveraging installed capacity and intellectual property to secure price increases [25][12] - The company is investing in energy efficiency projects and adopting additive manufacturing to enhance aircraft fuel efficiency and reduce production costs [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery trajectory, noting that the worst of the pandemic is behind and macro trends remain positive [19][30] - The company anticipates a bow wave of MRO repairs as deferred maintenance returns, with expectations of positive cash flow over the balance of the year [22][51] Other Important Information - Triumph is actively engaged in environmental, social, and governance initiatives, with significant investments in sustainable practices [14][15] - The company is on track to complete its final 747 production components, marking the end of a long period of losses [18][24] Q&A Session Summary Question: Update on long-term agreements with OEMs - Triumph has successfully negotiated long-term agreements with OEMs, ensuring continuity of supply and affordability, with no loss of customers during negotiations [58][60] Question: Expectations on the timeline for the Stuart facility - The company expects to enter the signing phase for the sale of the Stuart facility in the next quarter, with proceeds aimed at reducing first lien debt [63][65] Question: Cash flow trends and Boeing advances - Triumph used $150 million in cash in Q1, with expectations of becoming cash positive for the remainder of the year, while managing non-recurring cash uses [70][74] Question: Doubling profitability over the planning horizon - Management indicated that the goal of doubling profitability is based on cumulative effects of cost reductions, volume increases, and improved pricing strategies [78][82] Question: Systems & Support margins - The current margin of 14% is seen as a journey towards improvement, with expectations of better margins as contract renegotiations and volume increases take effect [88][90] Question: Military business outlook - Triumph has not seen any significant changes in military business, with strong support for defense programs expected to continue [110][112]