Q1 2022 Triumph Group Inc Earnings Call
Okay.
Our MRO job inductions metrics.
Which serve as an early indicator for carrier traffic recovery increased.
The increased 37% for the quarter with the 6% sequential increase overall led by engine accessories and the sales structures.
Aftermarket spares and repairs sales were up overall.
More than 70% for the quarter.
Second military continues to be a source of strength for trial with new wins contributing to both revenue and backlog offsetting planned declines in commercial aviation.
These platforms enjoy continued budget support, particularly those we supply.
Favorable trends in systems and support the military helicopter and the engine programs and increasing narrow body production rates were key contributors to our continued recovery and reinforced the hidden value of <unk> diversified customer base and platform content, where.
We're optimistic this upward trajectory will continue.
Commercial air travel indicators continued to be positive.
Delays in wide body of recovery have been offset by narrow body programs.
Orders for the <unk> hundred 20, and 737 Max of seeing new highs since the beginning of the pandemic.
I want to congratulate Boeing for completing the first flight of 737, Max Dash 10 on June 18th which was followed by June 29th order from the United Airlines for 150 aircrafts.
Orders for commercial transport aircrafts are up in 2021, as Airbus and Boeing of reported 721, new orders offset by 476 cancellations.
Bright spots includes United's June order from <unk>, 737, Max and <unk> hundred 21 Neo aircraft the <unk>.
Fedex order for 767.
On the May southwest Airlines of orders for the Max.
Commercial transport backlog now stands at approximately 12000 aircrafts.
The industry's focus is now shifting to mitigating production ramp risks.
<unk> recently announced a slowing of the 787 production rate.
Triumph had already derisked its twin aisle build rates with our 787 percentage of sales and inventory, reflecting conservative assumptions.
Similarly, we are on a path to exit the <unk> hundred 50 build the print brackets production line in our interiors business.
Reductions in these rates will not have of material effect on trial.
The combined benefits of strong military demand and recovering commercial MRO demand coupled with our comprehensive actions to improve financial performance create positive momentum for fiscal 2022 in the years that follow.
After 18 months of uncertainty, we have more clarity on near term OEM and MRO demands of.
As markets continue to stabilize we see lift from military cargo demand.
Combined with our diversification we are now able to provide guidance for fiscal 'twenty 2 that reflects the increasing revenue and positive cash flow over the balance of the year.
Environmental social and governance initiatives remain a high priority for triumph and our board.
While reducing cotwo emissions wastewater and energy usage.
Suitable investment has been made in the development of new products to enhance aircraft fuel efficiency.
We are adopting additive manufacturing across our core products, which has the benefits of lower production costs and substantially lower weight.
We're making similar advancements in heat exchangers to enable the more efficient airframe with less drag.
Price is investing in energy efficiency projects, such as eliminating led based components and implementing closed loop solvent recycling systems and converting hazardous waste to non potable water.
Triumph has launched and energy conservation project in our largest production facility, which will reduce electrical power use by 25% annually.
As a result of this work triumph Seattle R&D facility will be featured in the future episode of Earth with John Holden.
Which showcases an inspiring array of companies with eco friendly initiatives.
That are enhancing the lives of Earth and habitus to advanced technologies.
Overall, we're pleased with the <unk> first quarter results, which are either in line with or above our expectations, enabling us to meet our objectives on slide 4 I summarize some of the quarter's highlights.
MRO and aftermarket spares continued to be the leading indicator of the market recovery.
Our portfolio actions cost reduction efforts on expanding sales resulted in improved operating margins across the enterprise.
We are on track to complete our final 747 production components. This month and in the last of our significant loss making programs.
We repaid the remaining balance of our 2022 bonds, while preserving strong liquidity.
Last continued improvement and stability in the broader markets enhances our confidence in our outlook as we initiate financial guidance for fiscal 2022.
At this point the worst of the pandemic is behind us and the macro trends remain positive.
Yet we recognize that the market recovery will continue to be uneven over the next several quarters. So we're prudently maintaining our cost reduction on.
Sturdy measures from last year.
With intentions to reverse them as the market continues to improve.
Our actions combined with OEM and MRO of rate increases will support expanded margins and cash flow.
Putting us on a path to Delever the company year over year.
On slide 5 I quantify the drivers for this quarter's results.
First organic growth was 11% led by improved MRO and aftermarket spare sales within our core systems and support business.
OEM sales were driven by Airbus <unk> hundred $23.21 shipments fell 4% non gearboxes and <unk> actuation.
Systems and support revenues for our third party MRO increased 19%.
While proprietary spare sales primarily from military rotorcraft, and commercial narrow body production rates more than offset commercial wide body declines.
Shipments to Fedex and EPS are up 52% for the quarter.
As cargo aircraft return for deferred maintenance.
We continue to anticipate a bow wave of MRO repairs as deferred maintenance returns to our shops.
The military sales now comprised 53% of our sales and systems to support helping to offset the temporary commercial aerospace decline.
The military platforms, such as the <unk> 60 in CH 47 contributed to the sequential sales growth driving of 12% increase in our military sales year over year.
As mentioned, we will deliver our final 747 structures this month.
At which point triumph will fulfill our program obligations.
We will close the second of 2 large structures facilities dedicated to the 747% in December ending of long period of losses.
Shedding the legacy cash consuming programs the stabilizing the performance across all of the structures allow them to be solidly profitable in Q1 on an adjusted basis.
Jim will provide an update on our exit of non core structures business. We remain on track to achieve our future state configuration is largely pure play systems and support provider.
The military and commercial customers.
With the interior structures capabilities.
Moving forward, we are increasingly leveraging our installed capacity and intellectual property portfolio to secure price increases on an annualized basis.
Which will benefit margin expansion plans.
A few updates on the state of the economy and our industry.
The global economic recovery continues with 2021, GDP expected to rise more than 6% in aggregate globally and in the U S.
Early indicators within the aviation industry in.
Indicate steady progress in the quarter towards 2019 levels with airline travel bookings improving from 46% to 69% income.
The corporate bookings up from 18% to 40%.
The strong summer bookings benefited domestic carriers.
Reflecting a return to airline normalcy and profitability average airfare prices weekly load factors and TSA throughput continued to recover in the U S. Park's fleets have declined substantially with over 800 aircraft return to service since March.
Finally, we are watching emerging defense legislative marks closely.
And are encouraged to see strong support for defense and key military programs on both the house Appropriations The Senate Appropriations Committee.
Which should ensure stability and predictability.
In our defense programs for fiscal 'twenty 2.
Including programs such as the CH 53, K F 15, ex and <unk> in our backlog.
As you know the single aisle segment will lead the aviation recovery.
It's gratifying to see OEM single aisle deliveries for both Boeing and Airbus increase each month within the quarter, culminating in strong June numbers with Airbus delivering 62 single aisles, and Boeing delivering 36.
We expect this positive trend to continue and are making plans across the supply chain to be ready for the ramp.
Overall this is encouraging news and I expect trying to gain momentum.
As the aviation recovery continues through the balance of the fiscal year we.
We are well positioned to capture of returning MRO business and OEM rate increases, while expanding our defense programs.
Turning to wins for the quarter, our systems electronics and controls team are designing and upgrading finjan controls for the global fielded fleet of 700 engines.
We received orders for feedback upgrades to both U S Navy Seahawks and U S Army Apaches.
We are upgrading heat exchangers on the F 22 F 119 engine for Pratt Whitney, where we have significant IP.
<unk>, 95% of our heat exchangers are designed and developed by triumph engineering teams.
We secured orders from GE for the FAA team E&S F 1414 aircraft mounted accessory drives.
This complex gearbox builds on the legacy of our FAA team C&D gearbox for the F..4 reported.
Triumph is the world's largest and most capable third party provider of Deere and gearbox solutions.
Spanning the entire lifecycle of gear products.
From design development and test through manufacturing and Sustainment.
Our customers value of our capabilities of engages in new and exciting opportunities such as the $2.7 day, the K FX future vertical lift and classified programs.
Some of our largest customers in the aerospace are Oems and tier ones, who look to triumph to support legacy program off loads along.
Lowering them to concentrate on new platforms for.
For the quarter, we completed another important tier 1 agreement with Collins Aerospace overhauling air cycle machines.
Finally, I'd like to highlight several strategic developments in our thermal business.
We are actively engaged with the Air Force Research Laboratory and.
And the University of Dayton to designed heat exchangers that use additive manufacturing to replace castings in an effort to address Air Force fleet Sustainment issues.
While we started with heat exchangers, we believe additive has the potential to expand into other areas, which are traditionally constrained by casting suppliers Inc.
<unk> gearbox and pump housings.
Finally, we completed an agreement with Paragon space develop heat exchangers for their space vehicle life support systems.
In summary, we're pivoting from restructuring and contraction to growth across higher margin IP driven market segments.
In summary, our markets are improving but.
So we expect this trend to continue as commercial production rates increase into the next year.
We grew margins from the quarter across the enterprise from retired several nonrecurring cash uses giving us the confidence to initiate financial guidance for fiscal 2022, with improving cash outlook quarter over quarter and year over year.
The combined lift of cost reductions volume increases more favorable pricing and new product and service introductions support our goal of doubling our profitability.
Over our planning horizon, while deleveraging the company.
We will continue to invest sustainably in the development of our people operations and products to.
To enhance shareholder value year over year.
With that Jim will now take us through results for the quarter in more detail Jim.
Thanks, Dan and good morning, everyone.
We start our fiscal year with solid year over year organic growth and improving margins across the enterprise as the commercial aerospace market continues its recovery.
The actions we have taken through this first quarter enable us to have positive free cash flow of the balance of the year.
We continued to execute on our plans to pair the few remaining non core businesses and product lines. The decrease debt maintain liquidity and focus on our profitable core business.
Our performance in the quarter, the improving market environment and the diversification of our business give us the confidence to established financial guidance for the fiscal year.
I will discuss our consolidated and business unit performance on an adjusted basis. So please see our press release and supplemental slides for the explanation of our adjustments.
On slide 10, you'll find our consolidated results for the quarter.
Sales were up 11% organically.
While the impacts of the recent divestitures and Sun setting programs on structures led to lower sales compared to the prior year.
Q1, adjusted operating income was $31 million adjusted operating margin was 8% up 477 basis points from the prior year.
We continue to improve profitability on adjusted basis quarter over quarter.
With respect to the segment results on slide 11, net sales and systems and support were up 8% and benefited from continued recovery in the aftermarket while an increase of narrow body OEM work offset wide body headwinds.
This segment sales were 53% military this quarter up from 51% of the prior year quarter.
Adjusted operating margin for systems and support was 14% of 2 <unk>.
The 35 basis point improvement from the prior year and benefited from increasing MRO demand.
Summarized on slide 12.
The first quarter net sales for structures increased 15% largely due to the prior year's impacts of the pandemic after adjusting for divestitures and the sunsetting 740, <unk> hundred 80 programs.
As noted on our prior call the divestitures of the composites and Red Oak businesses were completed in the quarter on May 7 and the results for the quarter include modest revenues and earnings through the date of the sale.
The continuing business is stable and improving as evidenced by the 10% adjusted operating margin compared to 1% in the prior year.
During the quarter I visited our Grand Prairie, Texas facility and so all of the significant progress. Our team has achieved to successfully complete the production of the 747 later this month.
The remaining large structures facility in Stuart, Florida is a profitable business and we are in active discussions with several strategic parties.
Turning to slide 13 in Q1, we retired $100 million discrete cash obligations related to advances settlements restructuring and wind down of 747 production.
Q1 included 2 quarterly payments of our advanced liquidations with no liquidation of expected in Q2.
Excluding the sunsetting uses of cash we used $51 million of cash in the first quarter on modest working capital growth in support of anticipated production rate increases primarily on commercial narrow body platforms.
We remain focused on aggressively managing our working capital with several initiatives across the enterprise targeted to improve our inventory turns.
Capital expenditures will accelerate over the remaining 3 quarters as we anticipate the investment in our core systems and support segment in support of rising OEM and MRO demand.
On slide 14 summary of our net debt and liquidity.
Our net debt at the end of the quarter was approximately $1.4 billion.
And our combined cash availability was about $263 million.
In the quarter, we completed the mandatory pay down of approximately $112 million or first lien notes and redeemed the remaining 236 billion of outstanding 22 notes.
Our next debt maturity is not until 2024, which gives us time to continue executing our deleveraging actions to strengthen our cash flow and improve our credit.
Slide 15 is a summary of our FY 'twenty 2 guidance.
Based on anticipated aircraft production rates and excluding the impacts of the potential divestitures for FY 'twenty..2 we expect revenue of 1.5% to $1.6 billion.
We expect adjusted EPS of <unk> 41 to <unk> 61.
Our earnings expectations take into consideration certain supply chain and inflationary pressures.
The good news is we have secured adequate inventory and supply commitments for critical materials.
Work to lock in the vast majority of our unit costs for the fiscal year and beyond.
Cash taxes net of refunds received is expected to be approximately $4 million per the year.
While interest expense is expected to be approximately $140 million, including approximately $137 million of cash interest.
After approximately $150 million of free cash use in the first quarter, we expect in total to generate free cash flow over the balance of the year with about $40 million to $60 million of use in Q2.
Approximately breakeven in Q3.
And solve the cash positive in Q4.
For the full year, we expect to use of $110 million to $125 million of cash from operations.
With approximately $25 million on capital expenditures, resulting in free cash use of $135 million to $150 million.
We've made significant progress in improving the predictability of our profitability on our cash flow.
We had solid organic growth and improving margins in Q1, and we expect to be cash positive over the balance of the year.
Cost reductions on operational efficiencies will help us to continue to improve margins as volume increases.
The measures we've taken and are taking are making us a stronger more competitive and sustainable company moving forward.
Now I'll turn the call back to Dan Dan.
Thanks, Jim.
We're off to a good start as are our customers as we put the pandemic behind us.
Increasing OEM narrow body production rates with continued signs of recovery within the MRO markets give us confidence that the worst of the pandemic is behind us.
Consistent with our full year guidance, we will build momentum quarter over quarter by continuing the track record of growth and margin expansion on our core business.
And drive to positive free cash flow over the balance of the year.
We continue to take the hard actions to position triumph for the future, including cost reduction the exit of loss, making programs and divestitures.
Perhaps of becoming a leaner more profitable and cash positive company.
We continue to make strides towards our future state configuration.
Unlocking the hidden value in our business, improving our win rates and delivering benefits for all stakeholders in a responsible and sustainable way.
Kevin We're now happy to take any questions.
At this time the option of of the company would like to open. The formed any question that you may have we ask that you limit yourself to 1 question 1 follow up to give everyone. The opportunity to participate if youre using a speakerphone. Please pick of the handset before pressing any numbers should you of a question. Please press star 1 on your push-button phone should you wish to withdraw your question. Please press the pound sign.
Your questions will be taken in the order received please standby for our first question.
Our first question comes from Peter I met with Baird.
So on the on the progress you are making.
Hey.
Dan could you maybe just give us an update on the status of your kind of the LTA is that you've been doing with the ODM with your Oems you.
You mentioned.
The 1 with Collins, but maybe just give us an update there on what's the latest on how many are left.
Yeah. Thanks, Peter so the.
The businesses of cycle of long term agreements that tend to be 3 to 10 years in duration.
Drive happened to have a lot of them that were coming to expiration over the last.
Over the 2 year period of about now and Oems tend to set back 1 of 2 years to renegotiate those.
To ensure that they've got continuity of supply.
And we fared well on the negotiations because.
We have a strong IP position, we're off on the sole source supplier of the cost of switching is high that the re qualify the supplier.
But I really view of his joint problem solving because.
Triumph has certain thresholds for returns.
They have needs on the aircraft for both production and aftermarket and how do we work together to achieve the mutual goals of continuity of supply and affordability.
And so these are going on even though we're negotiating them now they kick in in fiscal 'twenty 3 'twenty 4.
What's been encouraging about it is we've worked through these we haven't lost any customers.
Early major contracts, they stuck with us and in many cases, we've been able to say alright, we reset pricing on these products because they may be 10 years old and didn't have escalation clauses.
Now, let's talk about what else we can do together so I'm encouraged by the progress.
Jim can comment on how it will contribute over time.
Yes, as you mentioned there was a good lump of them day in and we're going to benefit, particularly in the fourth quarter of this year from some price increases on the Cigna.
Some of your programs, but it's a continuous process and it's just not just about price as Dan said, we worked together to reduce costs with the customers. So we both get the best solution moving forward.
And just as a follow up could you maybe just give us on you mentioned the Darrin the active discussions on Stuart just expectations on any any timeline and then.
And the use of proceeds that you'd be focused on either deleveraging of our advanced payments.
Yes, it's tracking to.
On the timeline that Lazard is laid out.
I.
You mentioned on the last call a very interested buyer and then.
They opted out at the end and we had a bit of of start over.
But now we've got over 5 interested parties and they are in the due diligence phase site visits really in the details. So we expect this to.
Go into a assigning phase in the next quarter or so.
We're not worried about getting it done I think our track record of 14 successful divestiture speaks for itself.
We've been able to sell assets with an average multiple on the order of 13 times.
Some of which were distressed.
This business does not distressed.
The strong backlog with the 767, both freighter in tanker.
Forming very well is the lean leader for triumph.
Great work force there so I'm confident we can get it done Jim it's a good business.
This is going well we have a good track record of getting these things done. So we're confident of our ability to get it done the proceeds will go to the divested we will go to reduce our first lien debt. So it will reduce leverage and 1 of our highest cost debt.
I appreciate the color thanks ill jump back on the Q.
Steve.
Our next question comes from Cai von <unk> with Cowen.
Yes, thank you very much so.
Could you give us a little color on cash flow it was negative in the quarter on obviously.
You took out some pri.
Prior advances, but can you give us any color maybe in terms of the trends on the magnitude of the positive cash flow you see over the 9 months and then maybe some discussion of those Boeing advances that remain on kind of whats the status in terms of how quickly you have to pay them back.
Thanks, so much.
Sure. Thanks, Scott.
So we use that 150 million of cash in the first quarter and we had said we had those nonrecurring cash uses it was about $100 million of those they did include advanced liquidations and we did get 2 of them behind us this quarter. They were doing the at the beginning of the quarter and we paid a couple of days early.
So there'll be no liquidation in the second quarter of advances, but we do still expect $21 million of quarter in Q3, and Q4 of this year.
And as of now we have about $145 million left of advances.
Other cash uses in the quarter, which we had mentioned last quarter was customer settlements I would estimate at about $30 million of usage, we used 18 only.
We do expect about another 7% in Q2 moving forward. So we did better on that.
In terms of 737, we used 20 million in the quarter and Thats the sunset of use as well.
We will use about the same in Q2, and then they'll start to reducer of the balance of the year.
The second half will be about $20 million you say, we're using the same Jimmy really from.
During the 747 Thats sorry on.
The 7% leased on the $20 million.
And then for restructuring costs as we mentioned there was 20 million of restructuring costs cash.
The <unk>.
First quarter carryover from an accrual from last year. So the uses of reducing overtime. If you look forward.
And the advanced liquidations will be non next quarter.
There's about 2025 to 30 million of usage next quarter based on the 747, plus the customer settlements and that reduces over time. So we're quickly reducing these these items and looking forward to go on cash positive for the balance of the year, even while our retirees.
Terrific. Thank you very much thanks.
Thanks Scott.
Our next question comes from Myles Walton with UBS.
Yes.
Thanks, Good morning, and then you talked about doubling profitability over the planning horizon is hoping you could put a little bit more color to that as it is the margin rates since the absolute dollars and what's the base year and once the end year with net horizon planning.
Okay. Thanks miles.
So when you look at triumph and where the cash has gone over the last.
5 to 7 years.
Those sources of cash use of rapidly disappearing.
The cost that we incurred by choice of restructuring to consolidate from 75% of about 25 plants reducing.
Reducing our workforce from what started out of around 15000, now down to about half of that.
Then there is the cost that we incurred.
Sunsetting lossmaking programs as Jim mentioned 747.
And the development programs misadventures like the G 650.
Bombardier Global 7500 of those are all behind us now.
And then were.
We're shoring up pricing on programs that were below our weighted cost of capital.
So that's also a source of margin expansion.
And we're coming into the very end of restructuring so expenses, we incurred for that on.
<unk> help us on.
On margin expansion, but then you add to that.
The cost reductions that we've done during the pandemic, which will benefit us as volumes return bulk volume increases on both OEM and MRO.
Some government support has also been.
Source.
And then new products and services.
We have factories that.
Generate very strong MRO margins north of 50%.
Whereas there OEM margins might be of 20% and as MRO comes back as the relative contribution of MRO to margin expansion versus OEM.
B of tailwind so the main message on margin expansion over our planning horizon, which we do 4 year planning horizons. So 22% to 25 is the current planning horizon next year of 23 to 26.
It is not it is not driven by any 1 factor like pricing or volume of MRO its fleet.
Cumulative effect of all of those contributors, which we believe de risks our margin expansion plans.
Okay. So just to clarify Dan 22% to 25 is what youre referencing the referencing in terms of doubling profitability that's right.
Okay.
And just a clarification on.
On the P&L for this year the assumption of non service pension income, maybe excluding the curtailment gain in the quarter.
Sure.
I'm, sorry could you repeat the.
Yes within the P&L the non service pension income, what's the assumption baked into the EPS for.
For fiscal 2000, turning to the $45 million to $50 million. It should be there should be a scheduled at the in the presentation.
Okay, alright, thanks, so much.
Yeah.
The next question comes from Michael ceremony with Truest.
Hey, good morning, guys. Thanks for taking the question.
I guess, maybe just on the systems and support margins the 14% margin there on the adjusted basis, I guess, maybe a little bit weak relative to you guys were putting up 16, 17%.
Got the spares coming through presumably with higher margins, you're getting some of these contract resets I would've thought.
We'd start to see better margins and systems and support what sort of color on what's the view there that you can kind of give us on on the trajectory.
Yes, Thanks, Michael I think it's the journey.
Improving year over year, we're improving quarter over quarter.
It doesn't happen overnight, but we are making progress. So the combination of all the elements Dan talked about from the prices aren't kicking in for some of the contract renegotiations yet.
Revenue is recovering, but we still have some restructuring that we're getting out.
So moving forward, you're going to continue to see a cadence of margin improvement.
Towards our growth.
Is there something different.
In fiscal 'twenty, you were putting up 16% 17% per certain quarters.
Presumably gotten rid of bad businesses is there anything changing of mixed there obviously commercial down I mean is that the biggest difference right now.
So commercial is down.
On a few of our plants that do let's say actuators for of the Max.
So.
For the absorption challenge for a couple of those plants.
And we're very much looking forward of the rate increase.
Boeing has put up on the Max.
We're building of that kind of a composite rate.
Of around 15, 16 on a month some plants a little higher some plants of the lower but we're going to get into the <unk> next year and then the <unk> thereafter, so that's going to be.
Allow us to get back to the levels of profitability that we've that you mentioned in the past.
Have a couple of development programs that are transitioning from development to production. So right now they're not contributing to earnings, but I mentioned, the <unk> and the Capex, we're doing gearboxes for those so right now of those are not contributing so they're in the short term.
The drag on TSS earnings.
But we're very encouraged by.
We're up year over year on the quarter on on the earnings and we're encouraged by the MRO volume is coming back.
That's something good.
We expect to.
Sustained.
1 of the reasons, we're seeing MRO recovery of that others are not as that we mainly do hype cycle.
Engine components, and thrust reversers, which are again cycle.
Cycle count based on MRO, we're not in the heavy maintenance debt.
When they take aircraft out of service to do large structural repair.
So we're seeing earlier uptick in MRO of the others and that will help us flow margins back to where they are and then we're not going to stop the prior year levels. We intend to go beyond what we've done.
In fiscal 'twenty.
Because of the reasons outside of it earlier.
Got it perfect. Thanks, guys.
<unk>.
Our next question comes from Robert Spingarn with Credit Suisse.
Yeah.
Hi, good morning, good morning.
Jim I just want to go back to the cash flow again, and maybe some of this up into what the cash flow for the core businesses would be this year is it right to think about it.
If we are minus $1.51 in Q1, and then maybe slightly positive in the rest of the year in Q1, but rather this year includes I think if you added up 169.
And kind of non core use does that mean that.
For the year.
The core businesses are generating.
Just a little bit over breakeven.
Yes, that's exactly right and if you look at page 13 of the presentation you can see the as expected FY 'twenty to cash drivers delineated the 84 per advances the that's where I got the 169 from 169, that's correct. If you exclude those 3 discrete kind of non operating issues.
Cash positive for the year.
Modestly and what does that contemplate for Stuart.
So we're still in here so for guidance, we have not assumed any future divestitures.
Right, but is I assume stewardess contributing because it's profitable in other words I'm trying to think about what the company looks like when Stuart is gone and all of this other stuff is gone.
Stewart is profitable it's modestly cash positive in the year.
Okay.
And then Dan just 1 for you it just.
It seems like a part of the military strength, we've seen from some suppliers could be because of the actions and the defense primes of taken to support the supply chain. During the pandemic do you see I know youre growing and adding a lot of contracts, but is there a point in the near future, where we could see some pressure at least in parts of the military business as they say.
That away.
And could you talk about the just the sequential movement in the military business from.
From March to June.
During the depths of the pandemic. It was very helpful to have tier 1 Oems reach out.
Kathy Warden at North of call me directly.
How do we help.
The tier 3 tier 4 suppliers like trial and.
The improved their cash payment terms.
Youre down to 10 days.
That was a big help at the time, but thats the short lived.
Contribution, we don't expect that to necessarily endure but.
The more to your question we've been studying the.
The Senate marks in the.
The platforms that triumph support are all well supported and many of the plus up in quantities. There are some bill payer programs, particularly out of the army of triumph has no exposure on those platforms. So there'll be some winners and losers I think coming out of the defense spending.
Thankfully the topline is growing year over year.
We've not seen any signals from the Dod.
But there'll be shifted their priorities.
Over the next few years Theres, certainly a lot of inertia and they're spending.
A lot of challenges to improve readiness, where we support them on spares and aftermarket. So we feel good about our position on the defense business.
Quarter over quarter, we're seeing.
<unk> refreshes on military military helicopter engine controls.
Fuel systems.
Landing gear actuation those are all of our core businesses heat exchangers.
So.
Triumph.
Of course, the Dod's objectives for the readiness and we will continue to expand our aftermarket I just during the quarter I went out and debt with the.
Per logistics center at Ogden.
We were the first contractor to come in in person visit which by the way has been of frequent refrain from many of our customers as the triumph.
Kept on the road and as soon as they took meetings firsthand.
And what we learned is that they have a lot of unmet needs and sometimes those unmet needs in the defense side.
The 4 pretty.
Net <unk> type requirements and I won't name them because they don't want me to talk about what the readiness issues are.
And if triumph can solve them I go back on our work with my peers Quests Industries, Inc.
<unk> help on this.
That helps I think.
Solidify of triumph as a partner of choice, but it also identified new areas for opportunity for support.
Today triumph is fairly narrow in our aftermarket offerings Aegean accessories structural repair.
Thrust reversers and we're starting to open our aperture about other things we can support such as air cycle of machines I mentioned in my script. So I'm excited about what we can do on aftermarket and so far we've favored well in the bunch of marks.
Just just to clarify have you seen any kind of.
Meaningful change 1 way or the other in the recurring aftermarket not the new programs, but where your mature just quarter to quarter here has it slowed at all of our or gone up.
We haven't seen the change it's been steady.
Okay. Thank you. Thank you.
Again, ladies and gentlemen, let me ask the question of our comment at this time. Please press. The Star then the 1 key on your Touchtone telephone.
Our next question comes from Ron Epstein with Bank of America.
Yes.
Good morning, everyone, who comes from the I know part of my guidance on program today.
Good morning.
So I'll follow up with the cash question the probably the next tweaking to the non.
The term b here.
Could you. Please disconnect with back to the target proteins free cash flow compression to sales what kind of volumes on our commercial meantime makes our profitability.
Profitability from sliding those teams from banks.
Alright.
So thanks for the brands for the question.
Cash is improving period over period, and we're very pleased to be able to give guidance for this year, which a lot of people haven't been able to give guidance the.
The cash usage this year.
It was pointed out earlier are all related to this very discrete items that if you took those out the core business is modestly cash positive and moving forward. We're very confident we're going be able to improve the cash.
And looking forward to giving guidance on conversion rates and specific numbers for the future, but right now we're focused on this year's guidance.
The rest assured that our businesses are very strong in terms of their IP content, our ability to price and manage costs.
And were comparable to a strong cash flow, we're not ready to give specific ranges from future years right now.
Okay. Our next 1 is related to the next pressure.
On business Jets are you interested on increase in the exposure from current levels, how you been feedback on the future.
On business Jets triumph is essentially.
The reduced our position, which was mostly on structures.
And we do a little bit.
We do landing gear for some of the Cro's aircrafts as an example.
We have good relationships with Gulfstream.
Embraer, but.
That's really not our focus of our focus is on on defense.
In commercial and industrial applications.
As I mentioned increasingly space, we do the entire landing gear arrangement for the the Sierra Nevada Dream Chaser, which is very impressive.
Obviously of inspired by the recent the origin.
Virgin Galactic shots and those aircraft are forms.
Forms of aircraft.
While each yields are landing gear actually has <unk> on the outside of the doors, which is different for us but.
We're really not focused on business jets I have read that there are some encouraging tailwind for the business jet community, but it is the cyclical.
Business. If there is a match between our our core systems and support business will certainly.
Support them.
Expect it to contribute significantly to our revenues.
Thank you on the last 1 Paul you mentioned space, how large could be that opportunity.
From now from the time.
Joe.
Orphan space.
Probably.
Half of my career.
And it's a great.
The exciting business to work in.
It's very boom and bust.
The consequence of that in the Volte.
The volumes tend to be fairly low so we'll provide solutions, where there is of a match between the needs of the platform.
Examples of our heat exchangers, where they're trying to get heat off board.
But we expect it to not go to more than 5% of our revenue is not going to be a big contributor.
<unk>, but.
<unk> of the.
The the challenges of working in space Wade <unk> environment.
Inaccessibility per repair.
The technology solutions, you have to bring or at another level.
On the commercial aviation. So there is a good match with some of our IP solutions.
But we'll do that opportunistically.
Alright, thank you.
Thank you.
And since there are no further questions. This concludes triumph group first quarter of fiscal year 2022 earnings conference call.
There is also a replay of associated with todays conference you can listen to the replay by dialing $1.805.$5.3.67, and entering pass code, 537% of 4356 again to access. The replay you can dial $1.805 of these $5.3.67, and entering pass code $507.4356.
Thank you all for participating and have the nice day all parties may disconnect now.
Yes.