• Revenue: $287 million, an increase over last year.
• Adjusted Operating Income: $36 million, up 44% from the previous year.
• Adjusted Operating Margin: 11%, expanded 338 basis points over last year.
• Adjusted EBITDAP: $43 million, a 26% increase.
• Adjusted EBITDAP Margin: 15%, expanded about 300 basis points over last year.
• Commercial Aftermarket Revenue: Up 26%, driven by spares and repairs across Boeing platforms.
• Military OEM Revenue: $64 million, a $3 million increase over the prior year.
• Free Cash Flow: Use of $45 million, including a $42 million interest payment and $6 million in capital expenditures.
• Net Debt: $868 million, down 43% from the previous year.
• Liquidity: $148 million, including $105 million in cash.
• Backlog: Total backlog up 7% year-over-year to $1.9 billion.
• FY25 EBITDAP Guidance: Increased to a range of $190 million to $195 million.
• FY25 Free Cash Flow Guidance: Increased to $20 million to $30 million.

• Warning! GuruFocus has detected 6 Warning Signs with TGI.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Triumph Group Inc (NYSE:TGI) exceeded cash guidance by $35 million, improving their full-year free cash flow target.
• The company accelerated aftermarket growth, with a 13% year-over-year increase, contributing over 60% of their profit.
• Triumph restored its interiors business to profitability through a settlement with Boeing and cost reductions.
• Operational excellence improved across all four operating companies, marking the tenth consecutive quarter of organic growth.
• Triumph raised its fiscal '25 guidance for both profitability and cash flow, reflecting strong performance and strategic actions.

Negative Points

• Commercial OEM revenues were soft, contributing only 13% to the company's total profitability in the second quarter.
• Backlog on Boeing programs declined by $60 million due to selective pushouts of deliveries beyond 24 months.
• The V-22 actuators overhaul experienced short-term declines due to temporary flight restrictions on the Osprey fleet.
• Triumph's interiors business faced challenges with inflationary impacts and required significant cost reductions.
• The company is still dealing with supply chain challenges and working capital timing issues impacting cash flow.

Q & A Highlights

Q: How do you think about the drivers of profitability in the second half, especially with the Boeing contract reset? A: James McCabe, CFO, explained that the settlement with Boeing is crucial for the interiors segment, resolving cost changes. The aftermarket is the main story, with strong demand driving profitability. The aftermarket represents 33% of sales but 61% of profit, highlighting its importance.

Q: Can you elaborate on the free cash flow guidance and the working capital dynamics? A: James McCabe noted that the cyclicality typically results in a strong fourth quarter. The cash use is mainly due to building working capital in the first half, with expected cash positivity in the second half, driven by increased profitability and quick cash collection from the aftermarket.

Q: Was there a one-time adjustment in the quarter for the interiors segment, and what is the potential for pricing adjustments beyond this year? A: James McCabe mentioned that the current adjustment settles this year's changes, but future adjustments are possible as volumes and inflation change. Discussions with Airbus are ongoing for similar adjustments due to inflationary impacts.

Q: How do you view Boeing's ability to ramp up production, especially for the MAX program? A: Daniel Crowley expressed confidence in Boeing's leadership and workforce engagement. He noted that the supply chain is ready to support the ramp-up, and Boeing typically increases production in steps rather than gradually.

Q: Are there any plans for future divestitures or portfolio shaping? A: Daniel Crowley stated that Triumph is not actively seeking to sell any operating companies or sites. The focus is on organic growth, particularly in the SEC and APS businesses, which are driving value and receiving CapEx investments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.