Third Quarter FY’ Conference Call › 323685665 › files › doc_presentations › ...TRIUMPH GROUP / Q3 FY’20/ FEBRUARY 6, 2020 8 Revenue Integrated Systems Highlights • Book

Daniel J. Crowley, President and Chief Executive Officer

James F. McCabe Jr., Senior Vice President and Chief Financial Officer

Third Quarter FY’20 Earnings Conference Call

2TRIUMPH GROUP / Q3 FY’20 / FEBRUARY 6, 2020

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, 2019.


Overview

Organic revenue up 8% Q3 Y-o-Y

− All business units delivered organic revenue growth

− MRO and Spares Revenue up 15% versus prior year

FCF & EPS meets expectations

− Adjusted EPS improvement driven by operational performance

− Cash flow positive in Q3 and YTD

Completed divestiture of Nashville Structures Business

Program transitions progressing on schedule

− Transfer of E2 program complete

Reaffirms full year FY’20 Revenue and FCF guidance, narrows Adjusted EPS guidance

Executing on commitments – improving performance

✓

✓

✓

✓

✓


Organic Sales Growth Drivers

Q3 Full Year

FY'19 $808M $3.4B

Divestitures (152M) (605M)

FY’19 Adjusted $656M $2.8B

TIS Narrow body and engine components, aftermarket and MRO, military platforms

9% 5-8%

TPS Domestic and Asia Engine Accessory Components 2% 5-7%

TAS Q3 primarily driven by schedule timing on legacy programs; FY driven by sunsetting programs 7% 2-6%

FY’20 $705M $2.8B - $2.9B

Triumph growing despite short-term market headwinds


Quality of Backlog

Highlights

• Divested low-margin Build-to-Print businesses

• Transitioning development and underperforming programs

• Sunsetting programs continue to decline

• Military growth has enhanced stability

• Rate reductions impacting average margin programs

• Margins increased 560 bps over 12 month period

11.2%

16.8%

2%

6%

10%

14%

18%

$1

$2

$3

$4

$5

TTM

GM

%

Bac

klo

g ($

bill

ion

s)

Backlog & Margin Trend

Margins enhanced by improving quality of overall backlog

Margins presented equal gross margin after depreciation on a trailing 12-month basis


All business units winning, partnerships expanding

Organic Growth

• TGI Reportable Backlog: $3.3B

• Organic backlog stable

Competitive Wins Customer BUA321XLR MLG & NLG Uplocks Airbus TIS777X Pressure Relief Latch Orizon TIS777X, 737MAX, 787 Composite ECS Ducting Boeing Commercial TASV2500 Nacelles – Asia Pacific Multiple Operators TPSLauncherOne Vector Control Actuator Virgin Orbit TIS767 Cabin Refresh Major US Airline TPS

Follow-on Business Customer BUF-15 RMP Liquid Cooling System Boeing Defense TISForward-Looking IR Actuators DLA TISGE90 Nacelle Repair Asia Pacific Airline TPS

Partnerships Customer BUThermoplastic Primary Flight Structure Embraer TASAftermarket Distribution Expansion Triman Industries TISRotable Spares Warehouse Triumph Group TPS


Consolidated Quarterly Results

($ in millions) FY’20 Q3 FY’19 Q3

Net Sales $705 $808

Operating Profit/(Loss) 2 (17)

Operating Margin 0% (2)%

Adjusted Operating Income* $64 $38

Adjusted Operating Margin 9% 5%

Organic sales increase of 8%

− Increase across all business units

FY’20 Q3 Adjusted operating income excludes:

− $1M union OPEB-related incentives

− $(4M) legal settlement gain

− $60M loss on sale of assets and businesses

− $5M restructuring costs

FY’19 Q3 Adjusted operating income excludes:

− $52M forward loss charges

− $2M restructuring costs

Diversified product offering and improved execution enhanced operating results

*See Appendix for Non-GAAP reconciliation


Revenue

Integrated Systems

Highlights

• Book to Bill of 1.1:1

• MRO and Spares Revenue up 49% versus prior year

New Wins and Contract Renewals

• CH-53-K LRIP 1-3 • A321XLR Uplocks• 777 MRO – PDOS upgrades• Northrop Grumman E-2D Hydraulics & Flap Actuation• Heroux Devtek CH-53, Landing Gear Actuation• General Dynamics F-35 Gun Drive

Financial

• Net sales increase included:

− Organic growth of 9% driven by increased volume and pricing on commercial and military after-market components

• Operating margin increase versus prior year driven by sales mix; primarily increased MRO and Spares revenue and operating efficiencies

• Restructuring costs impacted margins 140 basis points in the quarter

Strong volumes and product mix driving margin expansion

$275$252

0

100

200

300

Q3 FY'20 Q3 FY'19

OperatingIncome &

Margin

$48$40

0

10

20

30

40

50

60

Q3 FY'20 Q3 FY'19

A321 XLR

17.4% margin 15.8% margin


Revenue

Product Support

Strategic partnerships driving growth

$64$71

0

20

40

60

80

Q3 FY'20 Q3 FY'19

OperatingIncome &

Margin

$10$11

0

5

10

15

Q3 FY'20 Q3 FY'19

16.0% margin14.9% margin

Highlights

• Awarded PW4000 nacelle on-site service support from Turkish Technic

• Triumph Aviation Services Asia received its Design Organization Approval (DOA) from the European Aviation Safety Agency (EASA). They are the first facility to receive a DOA in Thailand.

• Multi ATA chapter award from major U.S. Cargo Carrier

Financial

• Net sales included:

− Organic growth up 2.3% in US, Asia flat on 737MAX impact to on-site services

− Domestic - strong accessory component repair with addition of military KC-135 repair

• Restructuring costs impacted margins 140 basis points in the quarter

Turkish Airlines Boeing 777


Revenue

Aerospace Structures

Performance driven by portfolio actions and deliveries in the quarter

$369

$490

$0

$200

$400

$600

Q3 FY'20 Q3 FY'19

OperatingIncome &

Margin

$18

-$50-$60

-$40

-$20

$0

$20

$40

Q3 FY'20 Q3 FY'19

(10.2)% margin4.9% margin

Highlights

• Divested Nashville Structures Business on 12/31

• Last E2 fuselage shipped from Red Oak

• Interiors awarded additional ECS ducting for BCA

• Completed 767 work transfer from Hawthorne

Financial

• Sales growth excluding divestitures

− Growth of 7% fueled by ramp up and recovery on legacy programs (G280, 787, G550, and 767) and SpaceJet M-100 engineering services

• Margin increase driven by

− SG&A and manufacturing overhead cost reduction initiatives

− Improved program performance

− Exiting loss making programs

KC-46A Pegasus


Free Cash Flow Walk

Cash Drivers

Restructuring used $5M in Q3

Q3 FY’20 Net working capital growth of $11M includes:

− $20M advance liquidations

− $10M use on G280

See Appendix for reconciliation of cash used in operations to free cash use

Consolidated ($ in millions) FY’20 Q3

Triumph shifted from cash use to cash generation

Net Loss $ (14)

Non-cash items:

Depreciation & Amortization 30

Interest Expense & Other 33

Amortization of Acquired Contracts (17)

Loss on divestiture 60

Pension & OBEB (Income)/ Expense (14)

Share-based Expense 3

Income Tax Benefit (4)

Cash uses:

Working Capital Change (11)

Interest Payments (12)

Capital Expenditures (10)

OPEB Payments (2)

Tax Payments, net (2)

Free Cash Flow $ 40


Net Debt & Liquidity

($ in millions) FY’20 Q3

Strong liquidity, extended maturities timing and covenant compliant

Cash $ (54)

$639M Revolving Credit Facility --

$75M Receivable Securitization Facility 75

Capital Leases 26

2014 Senior Notes Due 2022 300



Net Debt $ 1,372

Cash and Availability ~ $635M

Senior Secured Leverage Ratio ~1.9x vs. 3.50x

First Lien Leverage Ratio ~0.4x vs. 2.50x

Interest Coverage Ratio ~3.4x vs. 2.75x


FY’20 Guidance

*Represents the normalized tax rate of 21%, adjusted for anticipated reduction through partial release of the valuation allowance

Business focused on core growth, improved margins and FCF generation

TGI Guidance Prior Guidance

Revenue $2.8B – $2.9B $2.8B – $2.9B

GAAP EPS $1.28 – $1.48 $1.34 – $2.35

Adjusted EPS $2.35 - $2.55 $2.35 – $2.95

FCF $0M – $50M $0M – $50M

Capex $40M -$50M $50M – $60M

Effective Tax Rate* ~10% ~21%


FY’20 Cash Flow Guidance

Achievement of positive cash flow reflects progress in turnaround

See Appendix for reconciliation of cash used in operations to free cash use

TGI Guidance Prior Guidance

Cash from operations $40M – $100M $50M – $110M

Capex $40M – $50M $50M – $60M

FCF $0M – $50M $0M – $50M

Advance Liquidations ($60M) ($80M)


Concluding Remarks

• Delivered strong Q3 results

• Maintain positive Free Cash Flow guidance in FY’20

• Transformation positions Triumph for profitable growth


Our Vision

We aspire to be the premier design, manufacturing and support company whose comprehensive capabilities, integrated processes and innovative employees advance the safety and prosperity of the world.

Our Mission

As One Team, we partner with our customers to triumph over the hardest aerospace, defense and industrial challenges, enabling us to deliver value to our shareholders.

Our Values

Integrity

Continuous Improvement

Teamwork

Innovation

Act with Velocity


Appendix


Top Programs in Backlog

Integrated Systems Aerospace Structures

Boeing 737

Airbus A320, A321

Boeing 787

Boeing V-22

Boeing AH-64

Boeing CH-47

Sikorsky UH60

Boeing F-18

Lockheed Martin C-130

Sikorsky CH-53

Represents 56% of

Integrated Systems backlog

Boeing 767, Tanker

Gulfstream G650

Boeing 787

Boeing 747

Boeing 737

Boeing 777

Airbus A350

NG Global Hawk

Boeing V-22

Gulfstream G550

Represents 83% of

Aerospace Structures backlog


Supplemental Data

Pension/OPEB Analysis ($ in millions) FY’20 FY’19

Pension Expense (Income) ^ ≈ ($43) ≈ ($51)

Cash Pension Contribution ≈ $2 ≈ $5

OPEB Expense (Income) ^ ≈ ($10) ≈ ($10)

Cash OPEB Contribution ≈ $15 ≈ $12

^ Excludes impact from one-time adjustments such as curtailments, settlements or special termination benefits.


Non-GAAP Disclosure

Non-GAAP Financial Measure Disclosures (continued)

Adjusted income from continuing operations, before income taxes, adjusted income from continuing operations and adjusted income from continuing operations per diluted share, before non-recurring costs have been provided for consistency and comparability. These measures should not be considered in isolation or as alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted share presented in accordance with GAAP. The following tables reconcile income from continuing operations before income taxes, income from continuing operations, and income from continuing operations per diluted share, before non-recurring costs.

Three Months Ended

December 31, 2019

Pre-Tax After-Tax Diluted EPS

Loss from continuing operations - GAAP $ (17,528 ) $ (13,846 ) $ (0.27 )

Adjustments:

Loss on sale of assets and businesses, net 60,019 47,415 0.93

Legal judgment gain, net of expenses (3,857 ) (3,047 ) (0.06 )

Union incentives 1,400 1,106 0.02

Restructuring costs 4,744 3,748 0.07

Adjusted income from continuing operations - non-GAAP $ 44,778 $ 35,376 $ 0.69

Nine Months Ended

December 31, 2019

Pre-Tax After-Tax Diluted EPS

FY20 EPS

Guidance Range

Income from continuing operations - GAAP $ 59,420 $ 46,943 $ 0.93 $1.28 - $1.48

Adjustments:

Loss on sale of assets and businesses, net 55,190 43,600 0.86 1.07

Curtailment gain & special termination gain, net (14,373 ) (11,355 ) (0.22 ) (0.28 )

Legal settlement gain, net of expenses (9,257 ) (7,313 ) (0.14 ) (0.18 )

Union incentives 7,071 5,586 0.11 0.14

Restructuring costs 13,490 10,657 0.21 0.26

Refinancing cost 3,030 2,394 0.05 0.06

Adjusted income from continuing operations - non-GAAP* $ 114,571 $ 90,512 $ 1.79 $2.35 - $2.55 * Differences due to rounding


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, defin ed 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 r econciles our Operating income to Adjusted

Operating income as noted above.

Three Months Ended Nine Months Ended

December 31,

2019

December 31,

2018

December 31,

2019

December 31,

2018

Operating income (loss) - GAAP $ 1,661 $ (16,933 ) $ 98,209 $ (85,482 )

Adjustments:

Adoption of ASU 2017-07 — — — 87,241

Loss on sale of assets and businesses, net 60,019 — 55,190 17,837

Global 7500 forward loss charge — 40,498 — 60,424

E2 Jet program forward loss charge — 9,162 — 9,162

G280 program forward loss charge — 2,516 — 2,516

Reduction of prior Gulfstream forward loss — — — (7,624 )

Restructuring costs 4,744 2,327 13,490 18,206

Legal judgment gain, net of expenses (3,857 ) — (9,257 ) —

Union incentives 1,400 — 7,071 —

Adjusted operating income - non-GAAP $ 63,967 $ 37,570 $ 164,703 $ 102,280


Non-GAAP Disclosure


(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

December 31,

Nine Months Ended

December 31,

2019 2018 2019 2018

Cash flow (provided by) used in operations $ 49,881 $ 4,063 $ 39,288 $ (193,116 )

Less:

Capital expenditures (10,255 ) (10,570 ) (27,250 ) (34,824 )

Free cash flow (use) $ 39,626 $ (6,507 ) $ 12,038 $ (227,940 )

The Company provides cash flow guidance on non -GAAP basis adjusting capital expenditures from cash from operations to

arrive at free cash flow. The following table reconciles cash from operations on a GAAP basis to free cash flow guidance.

FY20 Cash Flow

Guidance Range

Cash flow from operations $40,000 - $100,000

Less:

Capital expenditures $40,000 - $50,000

Free cash flow $0 - $50,000

Documents

Third Quarter FY’ Conference Call › 323685665 › files › doc_presentations › ...TRIUMPH GROUP / Q3 FY’20/ FEBRUARY 6, 2020 8 Revenue Integrated Systems Highlights • Book