investor overview august 2021
TRANSCRIPT
2TRIUMPH GROUP / INVESTOR OVERVIEW
Forward Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “project”, “may”, “will”,
“should”, “could”, or similar words suggesting future outcomes or outlooks. These forward-looking statements include, but are not limited to,
statements of expectations of or assumptions about strategic actions, objectives, expectations, intentions, aerospace market conditions, aircraft
production rates, financial and operational performance, revenue and earnings growth and profitability and earnings results. These statements are
based on the current projections, expectations and beliefs of Triumph’s management. These forward looking statements involve known and unknown
risks, uncertainties and other factors which could cause actual results to differ materially from any expected future results, performance or
achievements, including, but not limited to, competitive and cyclical factors relating to the aerospace industry, dependence on some of Triumph’s
business from key customers, requirements of capital, uncertainties relating to the integration of acquired businesses, general economic conditions
affecting Triumph’s business segments, product liabilities in excess of insurance, technological developments, limited availability of raw materials or
skilled personnel, changes in governmental regulation and oversight and international hostilities and terrorism. Further information regarding the
important factors that could cause actual results, performance or achievements to differ from those expressed in any forward looking statements can
be found in Triumph’s reports filed with the SEC, including in the risk factors described in Triumph’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2021.
3TRIUMPH GROUP / INVESTOR OVERVIEW
FY21 Revenue
Consolidated Highlights
Systems & Support
~$1.1B
Aerospace Structures
~$800M
Commercial, 48%Military, 38%
Business, 10%
Regional, 2%Non-Aviation, 2%
Sales by Market (FY21)$1.9B
Systems & Support, 87%
Aerospace Structures, 13%
Adjusted Operating Income (FY21)$167M
Business Unit Summary
Market cap as of 8/3/21: $1.265B Shares outstanding: 64.5M Backlog as of 6/30/21: $1.85B
4TRIUMPH GROUP / INVESTOR OVERVIEW
Triumph Path to Value
YESTERDAY(FY16)
TODAY(FY21)
TOMORROW(FY25)
CONOPS: Holding Company One Company One Company + Partners
Mindset: Growth by M&A Shrink to profitable core Growth + Value Creation
Product Focus: Structures & Systems Systems & MRO IP, Subsystems, Lifecycle
OpCos: 47 5 3-4
Sites: 75 33 25 + M&A
Headcount: ~15,000 ~7,000 ~6,000 + Growth
5TRIUMPH GROUP / INVESTOR OVERVIEW
Triumph Strategic Focus Areas
Capabilities
Actuation& Controls
GearSystems
Electronics & Controls
Mechanical Solutions
Structural Component Repair
Interior Refurbishment
Accessory Component Repair
OEM Production w/ Aftermarket Spares & Repairs Manufacturing Repair & Overhaul ServicesLevers:
OEM Rates:
RPK Increases:
Products/IP:
New Services:
Takeaways:
Joint Ventures:
Dist. Channels:
M&A:
6TRIUMPH GROUP / INVESTOR OVERVIEW
Investment Considerations
Portfolio transformation of Triumph is on track for completion; Strategic Exits progressing with 747 close out and A350 product line sale
Environmental, Social and Governance initiatives remain a high priority. Considerable investment has been made in development of new products to enhance aircraft fuel efficiency
Commercial air travel indicators continue to be positive. Average airfare prices, weekly load factors and TSA throughput continue to recover in the US
Strengthened balance sheet through retirement of $349M of debt
Margins improving YOY, driven by quality of
backlog and revenue
Anticipate positive free cash flow over balance of the fiscal year
Organic sales up 11%, with MRO and aftermarket spares leading recovery
Military sales in Systems and Support up 12% YOY and now comprise 53% of sales in that segment
7TRIUMPH GROUP / INVESTOR OVERVIEW
1800 Returned Since Mar.July (-41%), Aug (-35%)
15% Pt. Improvement
Bookings
Aviation Industry Notes Q1
Positive Indictors Accelerating
85% of 2019 Level
TSA Throughput
9% Improvement to 4Q
Flights Global Capacity
12% Improvements
Utilization Parked Fleets
At 2019 Levels
Load Factor
Globally Stable
COVID Cases
Sources: Airlines for America, Cirium Ascend, Flight Radar 24
YoY Drop in BookingsTotal Tickets
Corporate Tickets
# Commercial Flights
20192020
95k/day
125k/day
SA
TA
8.3 hrs.
10.8 hrs
Utilization Hours
2021
2019
2.4M
2.06M
Summer Improvements
TA
RJ
SA
Spain
UK
USAGlobal
Italy - 30%
-60%
Cap
acit
y C
han
ge t
o 2
01
9
20202021
20192020
64k/day
2021
8TRIUMPH GROUP / INVESTOR OVERVIEW
New Business Wins Customer BULunar Gateway ECS Heat Exchanger Paragon Space TSSAH-64 & Seahawk EDECU Upgrades US Army & US Navy TSSF-22 Engine Heat Exchanger Upgrades Pratt & Whitney TSSHybrid Additive Heat Exchanger US Air Force TSSA320 Main Landing Gear Door Uplock MRO Airbus TSS
Follow-on Business Customer BUF-18 Engine Gearboxes GE TSSGlobal Hawk Engine Speed Increaser GE TSSTiger Tank Gears Honeywell TSSF/A-18 Actuator Assembly MRO NAVSUP TSSRotary Actuators AA&E TSSLiquid/Liquid Heat Exchanger Spares Vericor TSS
Partnerships Customer BUAsia Pacific MRO Memorandum Thai Aviation TSSEngine MRO Agreement Collins Aerospace TSS
Significant Diversity Between Fixed Wing, Rotorcraft, Commercial, and Military
• TGI net sales up 11%, net of divestitures & sunsetting programs
Organic Growth Offsetting COVID-19 Impact
9TRIUMPH GROUP / INVESTOR OVERVIEW
Diversified MRO Awards
Macomb – GE F414 F/A-18 Gearbox
• Extended existing agreement to provide GE with the F414 Engine Accessory Gearbox. This extension runs through 2027.
• F/A-18 remains a key program for Triumph Gear Systems both for F18 E/F, (F414) new build gearboxes as well as overhaul Triumph’s F18 C/D gearboxes (F404) in our Park City Utah facility.
Fighter Jet Gearboxes
Advances in Heat Exchanger Technologies
• Working with Air Force Research Lab and the University of Dayton to jointly develop additively manufactured heat exchangers to improve fleet sustainment and readiness levels.
• Paragon Space agreement for development of ECS and Life Support Heat Exchanger for NASA’s HALO program.
Thermal ADM and Space
Multiple Platforms and Customers
• AH-64 EMC-102 Upgrades • US Navy
• F-22 Engine HX Upgrades• Pratt & Whitney
• A320 New Business MRO• Turkish Technic
• 777 Air/Oil Cooler• China Airlines
• Tornado RB199 Engine Cables• Collins
• 737NG Flight Controls• Lion Air
Recent Strategic Awards
Winning Across Market Regions, Missions, and Platforms
10TRIUMPH GROUP / INVESTOR OVERVIEW
Systems & Support
Superior design, development and support of
proprietary components and systems as well as
production of complex assemblies using external designs
11TRIUMPH GROUP / INVESTOR OVERVIEW
Systems & Support
Integrated solutions, including design, development, and support of components, systems and sub-systems
• Boeing
• GE
• Aeropartners
• Rolls Royce
• Northrop-Grumman
• Airbus
Products & Services Major CustomersBusiness Overview
$258M Revenue (FY22)
21 Locations
Commercial, 38%Military, 53%
Business, 5%Regional, 2% Non-Aviation, 2%
Sales by Market
Overview
Capabilities
Actuation& Controls
GearSystems
Mechanical Solutions
Electronics & Controls
Excludes Intercompany Sales and Contract Liability Amortization
Structural Component Repair
Interior Refurbishment
Accessory Component Repair
12TRIUMPH GROUP / INVESTOR OVERVIEW
Revenue
Systems & Support
Financial
• Net sales increased 8% compared to prior year Q1 on strong aftermarket recovery and increased narrow-body production rates; partially offset by Q1 787 production pause
− Aftermarket spares up 12% to prior year
− 3rd Party MRO up 19% to prior year
• Adjusted operating income improved $8M and margin up 235 bps Y-o-Y due to improved pricing and increased volume on aftermarket
Strong Aftermarket Recovery Outpacing 787 Headwind
$258
$240
$210
$230
$250
$270
Q1 FY'22 Q1 FY'21
OperatingIncome (Loss)
$36
$25
$-
$20
$40
Q1 FY'22 Q1 FY'21
T-7A
Highlights
• Successful upgrade programs progressing in military helicopter and fighter fleets (Seahawk EMC, Apache EMC, F-22 HX)
• Progress in key strategic initiatives in thermal including adoption of additive technologies and spacecraft ECS applications.
• MRO gaining momentum on leading edge of industry recovery
AH-64 Apache
13TRIUMPH GROUP / INVESTOR OVERVIEW
Systems & SupportOperating Company Core CompetenciesLocations Key Products
Systems, Electronics & Control West Hartford, CTWindsor, CTForest, OH
Hydraulic power generationElectric motor pumps, reservoirs, integrated hydraulicsFuel control and meteringThermal solutions Customizable controlsA-level Software & Hardware design
Fuel pumps & Fuel Metering UnitsFADECs - electronic fuel controlsThermal ProductsNose Wheel Steering ComponentsUtility Actuation SystemsUplock Systems
Actuation Products & Services Clemmons, NCYakima, WAValencia, CARedmond, WA
Hydraulic actuation design and buildHydraulic fluid power design and buildComplex hydraulic build to printEngineering supportPart 145 MRO servicesFully integrated hydraulic test laboratories to conduct and complete full qualification
Power transfer unitsSelector and sequencing valvesDoor and cowl actuationLanding gear uplocksLanding gear actuation Extend/retract control valves Hydraulic fuses
Geared Solutions Macomb, MIPark City, UT
Power transmission systemsIntegrated gearbox design and buildGear components design and buildComplex build to printGeared actuation
Airframe & engine mounted accessory drives (AMAD’s & EMAD’s)Rotorcraft transmissionsTurboshaft internal gearboxes, emergency power gearboxesEngine power take-off, Internal gearboxes (IGB’s)Large complex aero gears (complex spiral bevel gears, bull gears)
Mechanical Solutions Staverton, UKN. Wales, PAShelbyville, INDeeside, Wales, UKVilleneuve Le Roi, FranceHeiligenhaus, GermanyOnchan, Isle of Man
Engineering & design capabilitiesDesign servicesEngineering supportMachining capabilityBuild to print servicesCustom kittingAftermarket capabilities
Cable controlsCockpit controlsLatches and keepersHold open rodsElectric actuation and electronic controllersHydraulic actuationRemote valve operationNuclear flux mapping (DDS/testing)
Product Support Hot Springs, ARGrand Prairie, TXWellington, KSChonburi, ThailandSan Antonio, TX
Maintenance, repair and overhaul servicesOut of production manufacturing serviceDER engineering repair servicesForward deployed rotable stockExchange services
Nacelle componentsFlight control surfaces, winglets, radomes, cargo doorsHydraulics pumps and componentsFuel pumps and componentsIDG’s, CSD’s, generatorsAir cycle machines & heat exchangersGearboxes, pneumatic valves & componentsWheels, brakes & aircraft interiors
14TRIUMPH GROUP / INVESTOR OVERVIEW
Recent Performance
$1.1B Sales –Production/MRO1
60%/40%
~15% EBITDAP Margin –Production/MRO2
30%/70%
Solid Cash Generation
Near-Term Expectations
Production 0-3% higher
MRO 15-20% higher
Improve margin % through cost reductions,
volume, mix and price
Reinvestment in operations and R&D
Longer-Term View
Recovery to FY20 levels
Margin expansion to prior targets of ~20%
Improved Cash Conversion
Sales by End Market
Commercial Military Other
Systems & Support Expectations
Solid Results Sets Foundation For Post-COVID Performance
End Market EBITDAP consistent with Sales Profile
Stable Military End Market
Commercial End Market Improvements Slow, But Steady
1 MRO is 60%/40% repair services to spare part sales2 MRO margin is 30%/40% repair services to spare part sales
15TRIUMPH GROUP / INVESTOR OVERVIEW
Aerospace Structures
Extensive capabilities to engineer complex composite
aerostructures
16TRIUMPH GROUP / INVESTOR OVERVIEW
Aerospace Structures
TAS provides fully integrated, turn-key composite and metallic major assemblies, and interior system solutions employing the latest product development and manufacturing tools, processes and software to its diverse portfolio of commercial and military customers.
• Boeing
• Gulfstream• Northrup Grumman
• Airbus
• Spirit Aerosystems
• Pratt and Whitney
Products & Services Major CustomersBusiness Overview
$138M Revenue (FY’22)
9 Locations
Overview
Capabilities
FuselageNacelle
Products
Commercial, 82%
Military, 10%
Business, 7%Regional, 1%
Sales by Market
Fuselage
Panels
Insulation
BlanketsDucting Composites
Excludes Intercompany Sales and Contract Liability Amortization
17TRIUMPH GROUP / INVESTOR OVERVIEW
Aerospace Structures
Operating Company Core CompetenciesLocations Key Products
Commercial Structures Stuart, FLGrand Prairie, TX
Product developmentMetallic and composite construction and finishingAutomated facilitiesDesign, analysis and testingSkins & stringersCertification engineering support
Aircraft wing center body structureFuselagesFlight control surfacesEmpennagesNacelle products, acoustic panels, fan track liners
Interiors Mexicali, MexicoSpokane, WAZacatecas, MexicoTaylorsville, NCHamburg, GermanySaint Nazaire, FranceToulouse, France
Design and manufacturing of thermal acoustic insulation blanketsManufacturing of composite ECS ducting and composite interiors componentsVacuum forming3 & 5-Axis machiningHigher/lower level assembliesRobotic thermoformingRobotic non-destructive inspectionAutomated paintingIntegration and engineering services at customer locations
Thermal acoustic insulation blanketsThermal acoustic insulation cover laminatesInterior components:
Vacuum formed plastics (arm-backrests, tray table)Soft goods (life vest pouches etc.)Seat covers (pilot- crew seats)Carpet kits
Composite ECS ductingReinforced thermoplastic partsFloor panels
18TRIUMPH GROUP / INVESTOR OVERVIEW
Revenue
Aerospace Structures
Performance Improving; Portfolio Actions On Track
OperatingIncome
(Loss)
$11
($256)($300)
($200)
($100)
$0
$100
Q1 FY'22 Q1 FY'21
Highlights
• Composites & Red Oak divestitures completed on May 7th
• $19M in revenue in Q1 FY’22 through date of sale (@ 8% margin)
• Final 747 parts complete August 6th –Facility exit on track
• Sold product line from Spokane (Interiors) in July – Facility exit on track
• Most transformation milestones completed
Financial
• Revenue increased 15% on 767/Tanker program and Interiors, after adjusting for divestitures ($92M) and sunsetting programs ($42M)
• Remaining program and facility exits on track
• Operating margin, adjusted for restructuring & impairments, improved significantly to 10% vs 1% in prior year
Boeing 767
$138
$258
$-
$100
$200
$300
Q1 FY'22 Q1 FY'21
19TRIUMPH GROUP / INVESTOR OVERVIEW
Top Programs in Backlog
Top 15 Programs = 68% of total backlog of $1.85B as of June 30th
100%
65%
100%
100%
76%
100%
100%
100%
100%
100%
5%
19%
12%
12%
4%
35%
24%
95%
81%
88%
88%
96%
A 3 2 1 , 7 %
7 3 7 , 7 %
V - 2 2 , 6 %
A H - 6 4 , 4 %
7 8 7 , 4 %
F - 1 8 , 2 %
U H - 6 0 , 3 %
C H - 4 7 , 2 %
B EL L 4 2 9 , 2 %
C H - 5 3 , 2 %
7 6 7 / T A N K ER , 2 1 %
7 7 7 , 3 %
A 3 5 0 , 2 %
7 4 7 , 2 %
G 6 5 0 , 2 %
TSS TAS
20TRIUMPH GROUP / INVESTOR OVERVIEW
Consolidated Quarterly Results
($ in millions) FY’22 Q1 FY’21 Q1
Net Sales $397 $495
Operating Income (Loss) 21 (252)
Operating Margin 5% (51%)
Adjusted Operating Income* $31 $15
Adjusted Operating Margin 8% 3%
Solid organic growth net of planned reductions from divestitures and sunsetting programs.
Margins are up year over year, excluding non-cash impairment, loss on sales & restructuring.
11% Organic Growth & Improving Profitability Year over Year
*See Appendix for Non-GAAP reconciliation
21TRIUMPH GROUP / INVESTOR OVERVIEW
Free Cash Flow Walk
FY’22 Q1 Cash Drivers*
• ($42M) of advance liquidation (2 payments in Q1)• ($18M) customer settlements• ($20M) funding on B747-8• ($20M) in restructuring costs
Expected FY’22 Cash Drivers• ($84M) of advance liquidation; ($21M) in Q3 & Q4• ($60M) of funding on B747-8 exit; Mostly 1st half• ($25M) of customer settlements; Mostly 1st half
See Appendix for reconciliation of cash used in operations to free cash use
Retiring Non-recurring Cash Drivers As Expected; Reducing Over Remainder of the Year
Consolidated ($ in millions) FY’22 Q1
Net loss $ (30)
Non-cash items:
Depreciation & Amortization 15
Interest Expense & Other 39
Amortization of Acquired Contracts (2)
Pension Expense (including Q1 curtailment) 4
OPEB Income (2)
Income Tax Expense 1
Cash sources (uses):
Non-recurring Cash Drivers* (100)
Working Capital Change (34)
Interest Payments (39)
Capital Expenditures (2)
Tax Payments, net (1)
Free Cash Use $ (151)
22TRIUMPH GROUP / INVESTOR OVERVIEW
Net Debt & Liquidity
($ in millions) FY’22 Q1
Flexibility to Execute De-leveraging Actions
Cash $ (237)
8.875% 1st Lien Notes Due Aug 2024 587
Receivable Securitization Facility -
Finance Leases 19
6.250% Senior Notes Due Sept 2024 525
7.750% Senior Notes Due Aug 2025 500
Net Debt $ 1,394
~ $113M repayment of 1st Lien Notes
Redeemed remaining $236 notes due June 2022
Cash and Availability ~ $263M
23TRIUMPH GROUP / INVESTOR OVERVIEW
FY 22 Guidance
($ in millions, except per share amounts) FY 22 Ranges
Revenue $1.5B - $1.6B
Cash from operations ($110) – ($125)
Capital expenditures ~$25
Free Cash Flow (non-GAAP) ($135) – ($150)
Interest Expense ~$140
Income Taxes ~$4
Earnings per Share – GAAP ($0.15) - $0.05
Q1 EPS Addbacks (see appendix) $0.56
Adjusted Earnings per Share – (non-GAAP) $0.41 - $0.61
Stabilized Revenue; Strong Growth and Profitability
24TRIUMPH GROUP / INVESTOR OVERVIEW
Concluding Remarks
• Strong organic sales growth
• Improvement in operating margins company wide
• Strategic exits on track
• Portfolio diversification + improving market conditions
enhances confidence in outlook
Solid Momentum Towards Sustainable Future
25TRIUMPH GROUP / INVESTOR OVERVIEW
Our Vision
As One Team, we enable the safety and prosperity of the world.
Our Mission
We partner with our customers to triumph over their hardest aerospace, defense and industrial challenges, to deliver value to our stakeholders.
Our Values
Integrity
Continuous Improvement
Teamwork
Innovation
Act with Velocity
27TRIUMPH GROUP / INVESTOR OVERVIEW
Restructuring by Business Unit
$ in Millions Q1 FY'22
Systems & Support 1$
Aerospace Structures 3
Corporate 1
Total TGI * 5$
* difference due to rounding
28TRIUMPH GROUP / INVESTOR OVERVIEW
Non-GAAP Disclosure
Adjusted Operating Income is defined as GAAP Operating Income, less expenses/gains
associated with the Company's transformation, such as restructuring expenses, gains/losses on
divestitures, defined benefit plan gains/losses from curtailments, settlements, etc; impairments of
goodwill and other assets. Management believes that this is useful in evaluating operating
performance, but this measure should not be used in isolation. The following table reconciles our
Operating income to Adjusted Operating income as noted above.
Three Months Ended June 30,
2021 2020
Operating income (loss) - GAAP $ 20,832 $ (252,392 ) Adjustments: Loss on sale of assets and businesses, net 5,969 — Impairment of long-lived assets — 252,382 Restructuring costs 4,485 15,439
Adjusted operating income - non-GAAP $ 31,286 $ 15,429
Adjusted operating margin 7.9 % 3.1 %
29TRIUMPH GROUP / INVESTOR OVERVIEW
Non-GAAP Disclosure
Non-GAAP Financial Measure Disclosures (continued)
(dollars in thousands)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
Cash provided by operations, is provided for consistency and comparability. We also use free cash flow as a key factor in
planning for and consideration of strategic acquisitions and the repayment of debt. This measure should not be considered in
isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results
presented in accordance with GAAP. The following table reconciles cash provided by operations to free cash flow.
Three Months Ended June 30,
Fiscal 2022 Guidance
2021 2020
Cash used in operating activities $ (149,514 ) $ (197,533 ) $(110,000) - $(125,000) Less: Capital expenditures (2,112 ) (7,723 ) ~$25,000
Free cash use $ (151,626 ) $ (205,256 ) $(135,000) - $(150,000)