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TG

TRIUMPH GROUP INC (TGI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 revenue rose 7% to $281.0M, driven by a 43% jump in commercial aftermarket and an IP sale (~$5M), while GAAP diluted EPS was $(0.24) and adjusted EPS was $(0.06); management flagged continued OEM softness in Q2 with recovery in H2 .
  • Operating income guidance for FY25 was lowered to $132.5M (11% margin) from $140.0M (12%) solely due to a $7.5M legal contingency; sales ($1.2B), adjusted EBITDAP (~$182M; 15% margin), and FCF ($10–$25M) were maintained .
  • Balance sheet progress continued: TGI retired $120M of debt in Q1, net debt ended at ~$821M, and both Moody’s (to B3) and S&P (to B-) upgraded credit; liquidity stood at ~$203M at quarter-end .
  • Near-term focus items for investors: expected Q2 free cash outflow of $70–$90M (semiannual ~$43M interest payment and working capital), ongoing Interiors drag until 737 MAX rates recover, and execution on H2 ramp and pricing tailwinds (FY25 gross price uplift ~$75M) .

What Went Well and What Went Wrong

  • What Went Well
    • Aftermarket strength: commercial aftermarket +43% YoY (to $50.2M) and military aftermarket +11% (to $41.1M) boosted mix; CFO said aftermarket was 33% of revenue but 73% of profit in Q1 .
    • Debt reduction and ratings: $120M first-lien notes redeemed; quarter-end liquidity ~$203M and net debt ~$821M; Moody’s upgraded to B3 and S&P to B- with stable outlooks .
    • New wins and extensions: extended F-35 sustainment support with Lockheed Martin (5 years) and won GE Aerospace F404 auxiliary gearbox award, reinforcing defense aftermarket and gearbox content .
  • What Went Wrong
    • Interiors drag: Interiors revenue fell to $29.0M with segment EBITDAP of $(7.3)M (–25.1% margin), hurt by reduced 737 MAX shipments and supplier input costs; management expects recovery as narrowbody rates ramp .
    • Legal contingency and restructuring: Q1 GAAP included a $7.5M legal contingencies loss and $1.6M restructuring; together with $5.4M debt extinguishment loss, these drove the $(0.24) GAAP EPS (adjusted $(0.06)) .
    • Working capital/cash use: cash from operations was $(104.5)M and FCF was $(112.7)M in Q1; management guided Q2 free cash use of $70–$90M before H2 improvement .

Financial Results

Sequential and YoY comparisons

  • Sequential (Q4 FY24 → Q1 FY25) | Metric | Q4 2024 | Q1 2025 | |---|---|---| | Revenue ($M) | $358.6 | $281.0 | | Operating Income ($M) | $44.8 | $8.1 | | Operating Margin (%) | 12.5% | 3% | | Adjusted Operating Income ($M) | $55.8 | $17.2 | | Adjusted Operating Margin (%) | 15.6% | 6.1% | | Adjusted EBITDAP ($M) | $58.3 | $25.4 | | Adjusted EBITDAP Margin (%) | 16.3% | 9.0% | | Diluted EPS – Continuing Ops ($) | $0.07 | $(0.24) | | Adjusted EPS – Continuing Ops ($) | $0.31 | $(0.06) |

  • YoY (Q1 FY24 → Q1 FY25) | Metric | Q1 2024 | Q1 2025 | |---|---|---| | Revenue ($M) | $263.8 | $281.0 | | Adjusted Operating Income ($M) | $14.0 | $17.2 | | Adjusted Operating Margin (%) | 5.3% | 6.1% | | Adjusted EBITDAP ($M) | $24.4 | $25.4 | | Adjusted EBITDAP Margin (%) | 9.3% | 9.0% | | Diluted EPS – Continuing Ops ($) | $(0.33) | $(0.24) | | Adjusted EPS – Continuing Ops ($) | $(0.16) | $(0.06) |

  • End-Market Mix (Q1 FY25 vs Q1 FY24) | ($M) | Q1 2024 | Q1 2025 | |---|---:|---:| | Commercial OEM | $117.1 | $118.7 | | Military OEM | $65.8 | $61.8 | | Total OEM | $182.9 | $180.5 | | Commercial Aftermarket | $35.2 | $50.2 | | Military Aftermarket | $36.9 | $41.1 | | Total Aftermarket | $72.1 | $91.3 | | Non-Aviation | $8.2 | $8.6 | | Amort. of acquired contract liabilities | $0.6 | $0.6 | | Total Net Sales | $263.8 | $281.0 |

  • Segment Performance (Q1 FY25 vs Q1 FY24) | Segment | Metric | Q1 2024 | Q1 2025 | |---|---|---:|---:| | Systems & Support | Net Sales ($000s) | $227,253 | $251,981 | | | Segment EBITDAP ($000s) | $40,814 | $47,397 | | | Segment EBITDAP Margin (%) | 18.0% | 18.9% | | Interiors | Net Sales ($000s) | $36,570 | $29,035 | | | Segment EBITDAP ($000s) | $(1,893) | $(7,277) | | | Segment EBITDAP Margin (%) | –5.2% | –25.1% |

  • KPIs and Cash/Balance Sheet | KPI | Q1 2025 | |---|---| | Backlog (next 24 months) | $1.87B, down 2% from FY-end (timing shift on 737 MAX, offset by A320 family) | | Cash from Operations | $(104.5)M | | Free Cash Flow | $(112.7)M | | Liquidity | ~$203M (cash ~$153M plus availability) | | Net Debt | ~$821M | | Q2 FY25 FCF Outlook | $(70)M to $(90)M; includes ~$43M semiannual interest payment |

Non-GAAP adjustments in Q1 FY25: $7.5M legal contingency (legacy environmental arbitration), $1.6M restructuring, $5.4M debt extinguishment (EPS impacts ~$0.10, ~$0.02, ~$0.07 respectively) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY25~$1.2B ~$1.2B Maintained
Operating IncomeFY25~$140.0M (12% margin) ~$132.5M (11% margin) Lowered (legal contingency)
Adjusted EBITDAPFY25~$182.0M (15% margin) ~$182.0M (15% margin) Maintained
Diluted EPSFY25~$0.42 ~$0.33 Lowered (legal contingency)
Adjusted Diluted EPSFY25—~$0.52 Newly disclosed
Cash from OperationsFY25$30–$50M $30–$50M Maintained
Free Cash FlowFY25$10–$25M $10–$25M Maintained

Earnings Call Themes & Trends

TopicQ3 FY24 (2Q prior)Q4 FY24 (prior)Q1 FY25 (current)Trend
Aftermarket strengthAftermarket ~27% of sales; mix resilient; IP-based spares/repairs Aftermarket 34% of Q4 sales; +31% YoY in Q4 Commercial AM +43%, military AM +11%; 33% of sales but 73% of profit Strengthening tailwind
Boeing/Airbus OEM ratesConservative FY25 plan (–20–30% vs prior) given Boeing uncertainty FY25 guidance assumes derated Boeing rates; upside if higher OEM softness expected in Q2; recovery in H2; 787 stronger; MAX ramp modeled for Q4 Near-term soft; H2 rebound
Interiors performanceMargin improvement targeted via pricing, productivity, absorption Sequential improvement in Q4; still lagging Losses deepened in Q1 on lower MAX shipments; recovery expected with rate ramp Near-term drag; medium-term fix
Pricing/marginsFY25 gross price uplift ~$75M; 300 bps EBITDA margin expansion plan Maintained ~$75M price, cost-outs to support margin expansion Price tailwind ongoing; Systems & Support to ramp margins in H2 Positive
Working capital/FCFQ4 FY24 to be strong; FY25 planning to follow Positive Q4 FCF; FY25 FCF $10–$25M target Q2 FY25 FCF use $(70)–$(90)M, then positive Q3 and strong Q4 H1 use; H2 release
Deleveraging/ratingsPro forma leverage ~4x exiting FY24 Additional $120M redemption (May); interest savings path Another $120M redeemed in Q1; net debt ~$821M; ratings upgrades (B3/B-) Improving

Management Commentary

  • “TRIUMPH achieved its ninth consecutive quarter of year-over-year sales growth as commercial aftermarket sales from our IP-based business grew by more than 42% and more than offset temporary commercial OEM and supply chain headwinds.” – Dan Crowley, CEO .
  • “Aftermarket revenue...delivers 73% of our profit in the quarter.” – Jim McCabe, CFO .
  • “We retired an additional $120.0 million of debt in the quarter, strengthening the balance sheet and earning credit upgrades from both of the rating agencies...” – Dan Crowley .
  • “We anticipate continued commercial OEM softness in the second quarter, which is expected to recover in the second half.” – Dan Crowley .
  • “Free cash used in the second quarter is expected to be in the range of $70 million to $90 million, driven by a $43 million interest payment, seasonality and working capital timing.” – Jim McCabe .

Q&A Highlights

  • FCF cadence and drivers: Q2 FCF use $(70)–$(90)M (semiannual ~$43M interest and WC), with positive Q3 and strong Q4 as inventory liquidates and OEM ramps catch up .
  • Interiors profitability sensitivity: profitability historically at ~30/month 737 MAX shipsets versus current ~12–14/month; multiple cost/productivity actions underway; recovery expected with rate ramp .
  • Working capital and OEM timing: build driven by inventory ahead of OEM ramps and supply-chain delays (e.g., LEAP, T22); liquidation expected in H2; diversified across programs .
  • Pricing dynamics: FY25 gross price uplift ~$75M (majority contracted) alongside $40M gross cost reductions to expand margins; aftermarket mix supportive .
  • 787 and widebody aftermarket: 787 landing gear overhaul cycle has begun (typical overhaul ~$185k–$400k per twin-aisle actuation set); aftermarket expected to remain strong through decade .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q1 FY25 and the prior two quarters were unavailable in this environment for TGI; therefore, beats/misses versus Street consensus cannot be quantified here (S&P Global data unavailable) [N/A].
  • Given maintained FY25 sales/EBITDAP and lowered operating income/EPS (legal contingency), models likely need to lower FY25 GAAP OI/EPS and incorporate heavier Q2 cash use before H2 normalization .

Key Takeaways for Investors

  • Aftermarket momentum is the core earnings lever (33% of sales but 73% of profit in Q1), offsetting near-term OEM softness; watch commercial aftermarket sustainability and mix .
  • FY25 top-line and adjusted EBITDAP unchanged, but GAAP OI/EPS trimmed entirely by a $7.5M legal contingency; focus shifts to H2 execution to hit full-year profitability and cash goals .
  • Interiors remains the swing factor; profitability inflects with MAX rate recovery and ongoing cost/productivity actions; near-term drag likely persists into Q2 .
  • Cash cadence is back-half weighted: expect Q2 free cash use $(70)–$(90)M, then positive Q3 and strong Q4; WC liquidation and aftermarket should drive the turn .
  • Deleveraging continues to de-risk equity: $120M redeemed in Q1, net debt ~$821M, and ratings now B3/B- with stable outlook; FY25 interest expense still heavy but path to lower cost of capital developing .
  • Execution catalysts: resolving supply-chain pacing items, realizing ~$75M FY25 pricing, and securing H2 OEM ramp (787 strength; MAX step-ups into Q4) .
  • Contract momentum continues (F-35 sustainment extension, GE F404 gearbox award), supporting defense mix and medium-term aftermarket tail creation .
Notes: All figures are from company filings and transcripts. Where Street estimate comparisons are requested, S&P Global consensus data were unavailable in this environment for TGI.