Triumph Group (NYSE:TGI) Second Quarter 2023 Results Conference Call November 8, 2022 08:30 AMm. ET
Participating companies
Thomas Quigley – Vice President, IR and Comptroller
Daniel Crowley – President, President and Chief Executive Officer
James McCabe, Senior Vice President and Chief Financial Officer
Conference Call Participants
Seth Seifman – JPMorgan Chase
Sheila Kahyaoglu – Jefferies
Myles Walton – Wolfe Research
Cai von Rumohr – Cowen
Michael Ciarmoli – Truist Securities
Ronald Epstein – Bank of America Merrill Lynch
Operator
Welcome to the call of Triumph Group’s fiscal 2023 quarter effects convention. This call is broadcast over the Internet live. A slideshow with the audio portion of the webcast is also included. Make sure your pop-up blocker is disabled if you’re having trouble viewing the slide. presentation. All participants will be in listen-only mode. [Operator Instructions] Note that this event is being recorded recently. Also, please note that this call is owned by Triumph Group, Inc. and will not be recorded, transcribed or retransmitted without specific written permission.
I would now like to introduce Tom Quigley, Vice President of Investor Relations, Mergers and Acquisitions and Treasurer of Triumph, who will make an opening statement.
Tomas Quigley
Hello and welcome to our fiscal year 2023 quarterly effects convention call. I’m joined today by Dan Crowley, the company’s president and chief executive officer; and Jim McCabe, Senior Vice President and Chief Financial Officer of Triumph.
During our call, we will refer to the additional slides, which are posted on our website. Certain statements in this call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve unknown risks, uncertainties and other points that would possibly cause Triumph’s actual results, functionality or achievements to be materially different from the expected long-term results, functionality or achievements, expressed or implied through the forward-looking statements.
Please note that reconciliation of the Company’s non-GAAP monetary measures with comparable GAAP measures is included in the press release, which is located on our online page at www. triumphgroup. com.
Dan, I’ll pass it on to you.
Daniel Crowley
Thank you, Tom. Today we are announcing our current quarterly effects for fiscal 2023. The first part of the 2023 financial year marks a long-awaited turning point for Triumph as we move from years of money usage to positive money on the moment part. , we achieved a biological expansion forged thanks to a double-digit expansion in the order book with the decline in advertising volumes.
Supply chain constraints continue to be an obstacle, leading to sales delays during the quarter. This hurdle was concentrated in our defence programmes, but active control of our supply chain allowed us to mitigate the impact on Triumph. Our continued focus here, as well as our visibility into our order book and project backlog, allow us to remain confident in our ability to meet our current guidance for the full year.
Overall, our quarterly effects were in line with our expectations, and some of our operations exceeded them going forward.
On slide 3, I’ll summarize the highlights of the quarter. First, we achieved a biological expansion of 6% sequential and 13% year-over-year, driven by OEM and MRO sales demand. in the quarter of the time as the hours of widebody and narrow body flight were recovered. Due to supply chain shortages, margins in the current quarter were at the point of last year’s quarter and are expected to increase sequentially in the third and fourth quarters with year-end shipments.
We have a transparent line of focus on portion availability, planned shipments and maintain the best result of our earnings forecasts.
With a portfolio of more than $11 million in opportunities, strategic gains on new platforms and research and development spending
We expect positive cash flows for the remainder of fiscal 2023 and beyond, with significant discounts on delinquencies and current equity in the third and fourth quarters.
Now I will give my opinion on the industry and its dating with Triumph starting with the chain of origin and then the OEM rates. Triumph continues to proactively mitigate origin chain challenges, which has mitigated the effect on Triumph relative to the market.
Let me share what we say and what we do. In terms of build ratios, Triumph has managed to get the company to acquire orders from OEMs, which accompanies our full-year outlook. We remain in close communication with OEMs on the year’s structure indices to optimize our operating capital levels. The supplier shortage resulted in deferred sales of approximately $22 million in the current quarter, such as related margins and cash flow.
That said, our efforts to duplicate cheap resource paints have mitigated shortages, but not entirely mitigated. We track the supplier on time and complete or OTIF, which is a measure of kit integrity so that high-level assemblies can be finished on time. OTIF as low as 74% in April and advanced month-over-month into the mid-80s.
We are focusing on critical shortages, competitive deliveries and expect to succeed in OTIF grades above 90% through the end of the year, confirming our guidance for the full year.
Last year, we revised our policies to provide a 24-month forecast call to our key suppliers, as well as a strategic after-time ordering policy for secure allocation to protect our peak critical programs. While our suppliers are not yet reaching one hundred percent of the functionality in time we expect, this additional progress will allow Triumph to eliminate approximately $40 million in overdue invoices through the end of fiscal 2023.
Foundry and forging suppliers have been the main resources of scarcity. Therefore, we are expanding our additive production programs on items such as housings, actuators, and heat exchangers to decrease our long-term, low-capacity dependence on those long-term resources. The most sensible supply chain precedence renews short-term delivery to meet our fiscal year 2023 plan. We continue to collaborate with our consumers and suppliers to achieve continuity and affordability.
On the expense side, we continue to work with our suppliers to mitigate potential price increases, while sourcing from select suppliers at lower prices where possible. Triumph awarded contracts to new suppliers in India and Thailand this quarter as those countries expand their investments and
Triumph’s load relief plans go beyond our chain. We have set a goal of generating $49 million in cargo savings in fiscal 2023, of which $42 million is similar to internal charges. Since the beginning of the year, we have generated $40 million in savings.
When it comes to OEM tariffs, the advertising aviation market continues to recover, facing the ability of suppliers to help with desired ramp rates. The demand for travel continues to grow. The global advertising fleet has returned to 91% of pre-COVID grades with 96% of single-aisle aircraft and 74% of twin-aisle aircraft returning to active service.
There were other encouraging symptoms in the quarter for the twin-aisle segment, as Boeing booked orders for 60 twin-aisle aircraft, adding 16,787 from China Airlines. In addition, Boeing resumed 787 deliveries in August, completing more than nine in the quarter. while Airbus delivered A-350s in the quarter.
We expect value increases on the 787 below. That’s news given Triumph’s really extensive content on those platforms, which includes all of the 787’s hydraulic systems and the activation of the contact gear formula. Lately we delivered the 787 at the rate of 2-2. 5 according to a month with a ramp at the rate of 4 at the beginning of next year. Boeing plans to return to Rate 5 by the end of 2023 and Rate 10 in 2025.
After OEMs’ narrow frame structure rates rose from pandemic lows, OEMs recently announced the delay in the next increase in production rates for 6-9 months to keep the supply chain catching up. Triumph had reduced demand for forecasts for narrow-frame deliveries in our internal plans. Most of our plants produce a maximum of 26 to 31 sets of cups per month and forty-five to 48 per month in the A-320 family, which has been key to the expansion of biological sales I mentioned.
Second-quarter engine delivery delays at systems like GE LEAP have already begun to oppose as OEMs’ origin chains catch up due to cautious slowdowns, which will take advantage in our part of the year. Short-term increases in inventories are expected to be absorbed in our part of the year, reaping advantages and losing cash flow. While we expect even higher OEM rates, recent value stability and slow supply chain recovery are reinforcing the valley in our end-of-advertising markets.
We look ahead to offer our fiscal 2024 earnings guidance with the latest OEM pricing profiles. and partnerships.
In the current quarter, our Systems and Support segment recorded a booking-to-turnover ratio of 34% year-over-year, with current quarter bookings up 15%. This is basically due to the accumulation in the OEM and MRO ad finishing markets. , while the army’s order book also increases by up to 4%, more modestly. I will communicate more about the army in a moment.
Triumph’s order e-book expansion is the most productive leading indicator of profit and profit expansion. Triumph’s order book increased 10% year-on-year with the Boeing 737 order book up 40%, the F-35 up 60% and the CH-53K order book up more than 100%. MRO inductions are on the rise as air and shipping traffic grows and we continue to progress to expand our geographic success through industry-leading aftermarket partnerships.
We recently announced our Middle East partnership with Mubadala and Sanad, which will supply the region’s domestic MRO markets and allow us to drive the expansion of engine and machinery repairs.
We expect this partnership to generate more sales from the birth of fiscal 2024. Beyond forecasts, increased demand, the staggered costs resulting from contract extension are beginning to be felt, especially where we are the designated authority that applies to approximately 70% of our products or are exclusive resources for us, which is the case for 90% of our products, our third-party MRO business.
Together, our pipeline and OEM and aftermarket business mix combine with the purpose of doubling profitability in fiscal years 2022 to 2025.
Let me provide supporting data on where we are when we win and how it affects our product line. In fiscal 2021, we aim to generate 25% of our revenue from new consumers and solutions. Since then, 40% of Triumph’s awards have been related to new products and/or consumers. Earnings for the quarter totaling more than $200 million can be seen on slides four and 5.
These victories are carried out through Triumph IP on a number of products, adding fuselage-mounted transmissions for state-of-the-art military platforms, hydraulic valves on long-range vertical lip helicopters, turboprop engines, heat pump packages and CNC upgrades for helicopter engines.
Triumph’s MRO business is developing with new beginnings up to 26% year-over-year and recent awards across all platforms in military and advertising programmes. New MRO consumers added since the start of the year come with DHL Bahrain, JetStar, BBAM Aircraft Leasing, Irish AirCore and Goodridge Foley, Alabama.
The military market, which has grown because of the COVID crisis, is strong with continued demand from the U. S. government. UU. Si military sales declined during the quarter, order backlog increased, supported by geopolitical events and upcoming FMS sales, adding 96 AH-64s. to Poland, 35 F-35s to Germany and 24 F-35s to the Czech Republic.
In addition, we are experiencing an increase in orders for the M777 Howitzer, a British towed artillery vehicle for which Triumph is supplying components for loader meetings. , state-of-the-art actuators, touchdown gear systems and steam cycle cooling systems in various platform forms that have been recently developed.
These upgrades are to meet the electrification of aircraft, a higher power power demands the superior warmth much more related to electronic warfare. Our plans run from fiscal year 2024 through 2028. Keep an eye out for Triumph orders as the main OEM rewards for these new systems are announced.
Fiscal 2023 also marks a growth in the reach of electric aircraft corporations beyond eVTOL or the air taxi space. mobility segments. The activation of the touchdown gear of the gearbox parts remains for electric aircraft that bet on the strengths of Triumph. We will provide more information about those systems as they mature.
Ultimately, despite short-term corrections to advertising price lists and scheduling issues caused by supply chain shortages, Triumph has continued to deliver on our commitments to our consumers and, in particular, accumulating backorders.
We continue on our way through this cycle A
Jim will now provide the effects of the quarter in more detail. Jim?
James McCabe
Thank you, Dan, and good morning everyone. As I review the quarter’s monetary results, please check out the presentation published in our newsletter this morning. I’ll talk about our adjusted results. Our changes are explained in the earnings press release and presentation.
Triumph’s momentary effects of the quarter met our expectations and we are on track to meet our full-year monetary targets. Our consolidated effects for the quarter are shown on slide 8. Revenue of $308 million reflects the accumulation in narrow-body platform volume, offset through decreasing army helicopter volumes to last year.
Excluding revenue from divested operations and end-of-life systems and, despite the existing market environment, we increased our consolidated revenue by 13% organically compared to the prior year quarter. The adjusted operating income source of $30 million represents a margin of 10%, up from 8% a year ago and includes the impact of declining Army helicopter sales more than offset by a favorable shutdown of legacy systems, the sale of certain non-core IPs and tailwinds from increased narrowbody production. Rates
This quarter’s changes come with a $104 million gain on business sales, primarily from the sale of Stewart that closed July 1 and $2 million in restructuring prices for a variety of aftermarket products that we discontinued for the quarter.
Results and highlights from the Systems and Support industry are shown on slide 9. Organic revenue increased 13% in the quarter, adding a decline in military helicopter sales primarily due to supply chain delays, but more than offset by higher narrowbody turnover and insurance sales than non-core non-IP systems. That source of operating income was $43 million or a 16% margin, up slightly from last year.
As Dan noted, we benefited from the recovery in the advertising market with an increase of more than 30% in advertising OEM sales in the quarter to last year. The effects for our Structures segment are shown on slide 10. The uninterrupted activity in this segment is the internal insulation induction business. Excluding divestitures and sunset programs, Structures’ revenue of $33 million increased 14% organically.
Production increases in 737s and Interiors contributed to biological growth, offset by declining sales of widebody aircraft, which are expected to pick up.
The operating source of revenue took a step forward thanks to the favorable end of certain 747 bonds and the volume-driven recovery in the Interiors business. Our $24 million money used this quarter included $17 million current capital expansion to our second-half sales increase.
In terms of our quarterly cash flow cadence, we expect our same previous seasonality with cash flow approximately breaking even in the third quarter and strong money generation in the fourth quarter, in line with our full-year cash flow commitment. We continue to forecast capital expenditures of approximately $30 million for the year like us and expand our ability to be effective and assist new systems and long-term growth.
The timing of our net debt and liquidity is on slide 12. At the end of the quarter, we had just under $1500 million of net debt. We had approximately $150 million in money and moneyArray, which is more than enough for our projected desires as we pivot toward positive loose money generation. We hope to succeed and generate positive money for the rest of the year.
We continue to reduce our debt as planned through EBITDA expansion of loose cash flow in our ongoing operations. Lately we take advantage of our below-market fixed-rate debt in this emerging interest rate environment. Of course, we reviewed our capital design with our advisors and board of directors.
We pay close attention to capital markets and remain nimble and opportunistic when our balance sheet window opens before our next bond maturity in June 2024. As a result, we are confident in our ability to reduce leverage, our capital design, and meet our debt maturities with a series of timely, balanced and constructive measures that I look forward to sharing as we announce and execute them.
For our forecast for the full year, see slide 13. Based on projected aircraft production rates and resulting demand at our facilities, we expect FY23 revenues to be approximately $1. 3 billion. $1. 86 consistent with diluted consistent percentage. We are expanding our adjusted EPS direction diversity from $0. 12 and $0. 40 to $0. 60 consistent with diluted consistent percentage due to an increase consistent with the retirement income estimate.
We continue to expect taxes on money net of refunds earned to be approximately $7 million in fiscal year 2023. Interest expense is expected to be $129 million, adding $123 million in interest on the money. For the full year, we expect to use $30 million to $40 million in operating money with approximately $30 million in capital expenditures, resulting in available money usage of $60 million to $70 million in FY23.
In summary, despite some transient origin chain challenges, we needed to identify and execute movements to meet our commitments and our quarterly effects are in line with our expectations. monetary objectives. Now, I’m going to call Dan back. Dan?
Daniel Crowley
In summary, our current quarterly effects, achieved in a challenging macroeconomic environment, position us to generate positive loose money and accumulate revenues and effects in the current part of our fiscal year. This, in turn, will provide a solid starting point for the exercise. 24. Si this may not be immediate enough, the ad market recovery continues with an immediate improvement in MRO adoption, largely followed by increases in OEM prices.
Our support systems and order book increased especially in the quarter, and our strong order-to-invoice ratio of 1. 31 year-to-date confirms that our methods of marketing and acquiring new customers, products and facilities are working. Triumph remains on track to meet its full-year targets. I look forward to reporting on our progress as we continue to unlock the hidden price of our optimized business and deliver the price to gain the benefits of all our shareholders. We are now happy to answer your questions.
Q&A session
Operator
[Operator Instructions] Our first will come from JPMorgan’s Seth Seifman. Continue.
Seth Seifman
Thank you very much and good morning to all. I wonder, Jim, if you can quantify two things. I assume, first of all, the sale of IP, in systems and support, how much benefit did it provide?And then also, how much do you think about the long-term margin in structures, because it was close to 20% the quarter, which is really higher than the systems?
Even with the low production rates we find ourselves in lately. And everything that could have been there and how to think about it in the future.
James McCabe
So, in the sale of high-end properties, we had opportunities to monetize some of the high-end properties. These were legacy programs, so it was strategic for us to do so. It was around $15 million in sales and it’s a huge benefit because many expenses had been incurred in previous periods. So the benefit probably in the early teen years.
So that’s one way we close the quarter, and we have levers to pull every quarter. Therefore, we are pleased to be able to do so to meet our commitments for this year this quarter. In terms of margins and structures, yes, we had smart margins. We continue to work on the remaining daily jobs of providers in legacy programs.
And so, there were taxes there. I think the overall tax for the business is $8 million positive for the quarter and the majority similar at the end: a favorable closing of legacy liabilities. There aren’t many left. But also in the background, as interiors continue to perform in this segment.
So we’re seeing a volume-based recovery of 37 MAX because they were kind of a break-even point, they’re going back to profitability and a very strong expansion is expected next year in the domestic segment.
Seth Seifman
So, maybe for quick follow-up, he talked about being agile in terms of capital design. Can you tell us a little bit about how you balance the preference of seeing more innovations and positive money before you get to capital design?Unlike the kind of desire, the desire to fix it as soon as possible?And how do you think you balance those two things?
James McCabe
Oui. Eh, well, I discussed it: we pay close attention to market places because you have to move to the market place when the market place is ready, not necessarily when you need it. So you have to look out the windows. The next maturity of our debt is not until June 24 and lately we get advantages of very low constant rates, which we must enjoy as long as possible. We need to be located to refinance.
Our forecasts have allowed us our cash flow, our profitability. Therefore, we will naturally get out of debt over time. Multiple features to run.
Seth Seifman
Super. Thank you so much.
Operator
Next is from Sheila Kahyaoglu of Jefferies. Continue.
Sheila Kahyaoglu
Hello and thank you guys very much. Maybe I wanted to ask about lost money ArrayTim, you’ve been very smart in talking about that and how we’re thinking about a sequential improvement here. I think there was $21 million in loose money during the first part of the year. And how do we think of any exclusive detail in this opposite case?
James McCabe
Thank you, Shiela. We had fewer unique pieces than in previous years and never in previous quarters. Since the beginning of the year, we’ve spent $17 million in money on Stewart’s first quarter, which is now gone. It also had $4 million in closing money prices in the first quarter.
We don’t actually have one in this quarter. That’s why you’ll see on the slide, I didn’t call one for the fourth. So they are behind us. It’s a pretty empty neighborhood. Seth discussed the sale of the intellectual property, which generated just $5 million in money this quarter. But we have this kind of thing. We are in the progression and sale box of real estate, either directly or as a component of our product.
So, in terms of the velocity of money going forward, we expect an initial break-even point in the third quarter and solidly positive money due to business trends, but also due to our seasonality in the fourth quarter. money generation in the fourth quarter, and that puts us in a diversity of use of only 60 to 70% for the year. And then, in the future, we look to have positive money every year in the future.
There will still be some seasonality, but we are on the right track. We’re excited to pivot to growing money and profitability.
Sheila Kahyaoglu
That’s great. Thank you for repeating it. I’m going to jump in line.
Operator
The next one comes from Myles Walton of Wolfe Research.
Miles Walton
Hi Jim, I was hoping to continue this for a second. I think the original forecast contained about $70 million in one-time or non-recurring items, and you’ve got $21 million from the start of the year. Is it still planned? be at 50% in the half time lap? or is it 1x less vicious and you reiterate the loose money for the whole year?
James McCabe
The only one: I guess, as you said, the 1x is less vicious and that’s true because we’ve toned it down. And that’s a component of the recoveries that we’re talking about in our Structure segment, it’s those persistent liabilities, we’ve been here to negotiate and decrease them.
So there are far fewer of them. And right now, especially with the progress going on, don’t forget that everyone goes through with structured divestment, there is very little non-recurring progress for this year.
Miles Walton
So, is there in the operations that compensate for the goodness of the single exit?
James McCabe
Right now, in terms of cash flow, I would say it’s stock expansion because of supply chain challenges. And they saw that we had $87 million in the first part of the capital expansion in operation. Now, only $70 million in the last quarter and will do so now part of the year.
Regardless, this is our overall speed due to seasonality, but it has been exacerbated by supply chain challenges. We face them and are just as smart, if not more wonderful, than others at mitigating supply chain challenges. We have a wonderful organization that does that. on a global scale. And we know we’re going to be able to manage them.
Miles Walton
It is ok. Dan, a consultation for you. If you look at the defense portfolio, there are some systems there that possibly won’t end next year, but in long-term programming, it will look like this. So for something like the V-22, can you describe the kind of cargo design flexibility you envision, so that you have a launch pad when those systems naturally end and new business emerges?
Daniel Crowley
Thanks Myles. La cadence in V-22 is really high, both in OEM and MRO. Naver, which acquires spare parts and fixed sets on the secondary market, has many orders queued with us in the short term, we are busy. They are mods that the ability of those actuators to operate in an environment of high dose of dirt that we also reduce.
So the platform has a lot of life. We are diversifying the composition of paints in our gearbox business. We’re in new beginnings like the T7, where we’re driving the prop-mounted transmission box, and we’re at LEAP, the IGBs on the advertising side, and we’re gaining content. in new long-term vertical lift alternatives. So even if the V-22 possibly goes down in the long run, we don’t worry about that. We are busy now and we are on the new platforms.
Miles Walton
It is ok. It is ok. Just a cleaning. Pension, Jim, are there any about the financial desires there?I know there has been an obvious movement in shrinkage rates and return on assets, but is there any chance that short-term or long-term investment will be needed or not??
James McCabe
So, for both years, we make investment forecasts at the end of both fiscal years. And there was no investment in curtains for the next 4 years, and we did it at the end of March. As we all know, the global has replaced in terms of asset returns and interest rates this period.
So the next company calculation we’ll do is at the end of this fiscal year. But we note that we expect there to be some investment in existing market situations and existing interest rates that won’t be replaced until the end of the fiscal year.
Therefore, there is a headwind in the financing of pensions, if things do not change, but not in the short term. Next year will not be significant. It is years 2, 3 and 4 that can be affected. But we will know more exactly at the end of this year.
Miles Walton
It is ok. Thanks for the questions.
Operator
The next one comes from Cai von Rumohr from Cowen.
Cai Von Rumohr
Yes, thank you very much. I guess I’ll continue to consult Seth on how he sees refinancing. He noted that basically a refinance would be done in, probably at a significantly higher rate and given the point of your cash flow, if refinancing, simply in terms of ongoing expenses, would take a smart bite out of it.
So is it fair to assume that since your business outlook is improving, you’re more likely to wait and see and take advantage of the lower interest rates you’ve had lately?
James McCabe
Yes, I don’t think it’s a foregone conclusion that our rates are higher. That’s the component of being measured in your technique and in your time and we have about 18 months before the deadline, and we are reaping benefits from improving the business.
Then, with our positive money and our profitability increasing, we will look for those windows and execute in a balanced way the mandatory refinancing to continue with the activity. So I hope that answers your question.
Cai Von Rumohr
It’s okay. That is very useful. And then Spirit essentially had a scenario where their OE customers asked them to slow down deliveries because they weren’t generating at the stated line rates. Is this a threat to you? I mean their rates seem to be a little bit lower, but it turns out that things bounce back up the supply chain. So is that something we should get involved in?
Daniel Crowley
We wouldn’t have relief in OEM prices from what we have orders from the company, and I discussed the production lines. They vary across the plant depending on the channel stock between us and OEMs. But for Airbus to produce at 47 months at the time quarter, it goes to 55 months in 6 months, and then it goes to 65, 6 to nine months after that.
I mean, to have the MAX at 31, yes, they drove it to the right, however, it went to 38 maybe in the current calendar quarter of 2023 and then went back up to 40 in 24. So, we’re starting to see the benefits. And that benefits our absorption of OS
We used to do 14, so when this programme goes back to five or 10, it will be a huge credit to Triumph. We supervise the engines. There was a slowdown in the quarter in engine deliveries. And they’re starting to come back.
We got signals from OEMs and said it looks like the threat has been reduced enough, it goes ahead and it is done again. Therefore, I believe that there are trade-offs between engine and aircraft manufacturers, but our rates are: we trust our tariffs.
Operator
Merci. La next comes from Michael Ciarmoli of Truist Securities. Continue.
Michel Ciarmoli
Hi, hello, guys. Thank you for answering the questions here. Can I move on to losing money again Array Jim?I need to make sure that I perceive correctly. Last quarter, it had a base loose money balance of $15 million, and that included about $70 million of one-time expenses. Now you think the only ones have been reduced to $20 million.
You’re not talking about a fundamental flow of loose money. You only have $60 million to $70 million. So, we think apples with apples 0 to 15% now is negative 40% to 50% negative in inventory?Or just help us reconcile what apples did with apples from last quarter to this quarter?
James McCabe
So, we temporarily used this term central loose cash flow and Stewart was still a component of the portfolio. And now that Stewart is out, we go back to what we’ve used, which is consolidated loose cash flow. All our activities continue, adding the interiors business that remains in the Structures segment. So we come with all that money flow.
So we no longer distinguish the center from the non-center. Our activities continue. So I hope you answer the question, still to get some follow-up.
Michel Ciarmoli
Oui. Je means, then money has weakened? I mean, I’m just looking to have apples with apples here.
James McCabe
Delays related to legacy activities, which have been reduced, were offset by stock expansion due to backlogs that are essentially similar to the origin chain, but on demand.
Michel Ciarmoli
And how long do you think it takes to get to the bottom of this inventory?I mean, I know he talked about a positive, then positive part in 2024. Does this inventory, this current capital, last until the current part of the year?Do we have more burns as we enter fiscal year 2024?Or how do we deserve to think about it?
james mccabe
Right now, we expect it to burn in the next two quarters until the end of the year. And that our company now has faster cycle times because we were a 69% systems company. Today, 88% of our sales come from the sector-systems.
So we’re a systems company, and it’s moving much faster than the big steel structure corporations that we were in. And also, diversity helps us make sure no challenge is too important. Our concentrate: our biggest visitor was last year, 36% of our sales, now it has fallen to 29%. And that still includes some of the business sold this year.
Then it will be in the mid-20s in terms of consistent customer concentration. When you look at the diversity of systems and customers, it’s less difficult to attack them and not have a big problem.
Michel Ciarmoli
they gave it to me they gave it to me Agree. It’s useful. And then, Dan, just one more, if I could. You mentioned, of course, the demanding situations we are aware of with castings and forgings. And I think you talked about the use of additive production for housing, heat exchangers. do you specify how long does this process take?How long does it take to qualify?Just a little more color there.
Daniel Crowley
Yes, indeed, a multi-year process. But the key is that consumers say home curtains and surface finishes have additives that meet product requirements. Therefore, we will start with fewer components under pressure. Secondary activation has decreased a lot than, say, number one activation as it does for flaps and rudders.
And so we can integrate it into some of the steel structures used in those actuators. Heat exchangers are very encouraging because maximum heat exchangers are still manufactured in a tube-and-fin design dating back to the nineteenth century.
And now you can print them. So we’re reviewing, we have our first flight apparatus in this, in those kinds of products and we are now. And then we’re going to get consumers to adopt them gradually. There are weight savings, there are savings from carga. la price proposition is quite compelling. But it takes years to cut it.
The fact is that we are just wringing our hands from the shortage in the supply chain between cheap sourcing and our efforts at the additive, we are going to get permanent answers to what has been a chronic problem.
You may remember that the last wave of 2018, 2019 before the pandemic, were the same bottlenecks we had back then. And I perceive that casting and fortune providers have suffered a severe loss of specialized skill knowledge that takes time to rebuild. So we’re not going to count on this full return.
Michel Ciarmoli
they gave it to me Perfect. Thanks guys.
Daniel Crowley
Thanks.
Operator
[Operator Instructions] And next up will be Bank of America’s Ron Epstein. Continue.
Ronald Epstein
Hey HOLA. De fact, I just gained a follow-up to this where Michael just asked about additive manufacturing. I mean, realistically, I mean, getting this kind of thing certified, et cetera, can take a long time.
Or would you work with an advertising production partner?Is the wisdom of the box express enough to do so?Think?
Daniel Crowley
So we invested several million dollars in partnership with GE. I mean, 3 years ago, and we bought some of the machines. Most importantly, we talked to them about the selection of materials, powders, programs and Triumph did not win the machines to get in print. The long term is that you design for the additive, upload the designs to the cloud, and then the portions are dropped via drones near the dock.
I mean it will be anything I can find. But many of our products will benefit. Therefore, you have a biological ability that allows you to be informed on how to design for it. Therefore, at the moment, fuel pumps, actuator housings and gearbox housings are smart programs for this. Our engineers are delighted, especially the younger ones coming in. The company, because top universities now have 3D printing as a core curriculum, and they need to do it when they stop practicing.
So we partnered with the agencies that have the most powerful voice and certification like Ridepath, we went to the Air Force generation labs. We showed them what we were doing and the research we did on the strength of the pieces, and they helped. us with the cut. And the same will be demanded with very deep technical ranges.
And then our army consumers will follow. And, in advertising, they will also get advantages from what is already happening in the engines. GE has taught us a lot about what they’ve been able to accomplish with jet engine advertising additives, for example. So, in the long term, I’m sure we’re going to look for a way to provide more quantification of its adoption for investors.
Ronald Epstein
They gave it to me they gave it to me And then he talked about moving some paintings to India and Thailand. Where are these paintings being made lately?Or has it been done in some other cheap market like China?
Daniel Crowley
So we were sent out of China before the pandemic. Triumph had a factory there and more partnerships. Some parts inherited from the 747 are made, but we have had almost no impact on China’s chain of origin. We had some discounts on callsbecause as the MRO went down because they were flying less, but not on the source side.
So there were more portions of the U. S. The U. S. , Europe and other markets charge more. And I told my manager of the chain of origin there and he came back and said it wouldn’t be the investment point that India is putting into the
So, it’s just the herbal progression of waste to reduce costs, and we’re moving to stick to it. I would also like to say that the trfinish is towards production closer to the end markets. So, the partnership with Mubadala and Sanad in the UAE will not only be in the Middle East region but also in India, as much of the air traffic will pass through the Middle East to India and have a presence in Thailand, as China reopens, we hope to have a tailwind there and look forward to expanding our Air France JV from the Americas and Asia.
Ronald Epstein
They gave it to me they gave it to me. And then, just a quick inquiry about the balance sheet. As they look back on 2024, I want to say that there has been this open consultation on refinancing. Has it replaced your brain there? I mean, that’s a query that we get a lot from investors, it’s how we’re going to verify the refinancing, etc.
And I don’t know if anything has replaced on that front since the last quarterly call.
James McCabe
So, in reality, nothing has replaced. We continued to expand our rapid methods and the criteria through which we would execute them. Therefore, we are looking to open those windows in the market. Right now, the high-yield market is pretty closed: and we don’t want to move to the market right now because we have an 18-month advantage.
Therefore, we will continue with the underlying business with increased profitability and cash flow. So, we’ll have the most productive score in the most productive execution situations when the time comes, but nothing has really changed. The execution will be opportunistic and we will continue to the business, so time is on our side.
Ronald Epstein
they gave it to me they gave it to me Thank you.
Operator
The following is a follow-up to Jefferies’ Sheila Kahyaolagu. Continue.
Sheila Kahyaoglu
Thanks guys. Sorry, I limit myself to one question. In terms of stock usage since the beginning of the year, I was wondering what stock you have. Or is it just wiring or semiconductors? And how does it work?
Or just where is it tested or is it to defend itself because it sees that the chain of origin has disorders there?And then I said that the seller’s debts are a merit to you, but for some of the other suppliers, are you involved in that?Are small tier 3 and tier four providers getting enough money advances?Do you monitor this in your supply chain? Thank you.
Daniel Crowley
Thank you. Excellent question. So in inventory, we started our year in April, we’re running with a superior set of 787 rates and GE LEAP, for example. And then there was some relief in unit rates. And, of course, place those orders 6 to 12 months before the need. So it was a bit complicated to order instead of supply.
So now we’re going to burn that on any of the programs. We’re not ahead of the game at MAX. We are very aligned with OEM pricing there. We are not affected by a flat point of transience in MAX. So I would say it would be the largest area. They are less raw materials. I think it was only about $7 million in stock expansion in the quarter. It’s more about paintings in progress.
Those are the servings we have, and we expect the last servings in the chain of origin to complete a kit so we can ship a product, ring the bell, record the sales via email, get the money. That’s the most important thing. Maybe $30 million more in the quarter.
And when we say that we are going to burn it at the moment part of the year, while those last parts arrive, which I call on time and whole, we are going to finish those assemblies, send the product and then deliver the Sales.
We looked at our current part of the year to see if it’s particularly higher than last year’s, and if it’s a single-digit accumulation of revenue, profit, and cash year-over-year. This is not a big step forward. So we can do it. And I think everyone I’ve talked to in my peer organization sees the same thing in terms of a slow, incremental improvement of the chain of origin that doesn’t get worse, but won’t be solved overnight.
With regard to suppliers and Tier 3 suppliers, we have done two things. First, we need to give them longer-term forecasts. Second, we give them a longer prime authorization. And third, we’ve worked with them to help them with other roles within the company, other systems they can support. And we haven’t had any bankruptcy.
We’ve had some vendors who had quality issues, so we had to send groups to their homes to help them get back to normal. Again, castings and enclosures tend to be a limitation, but there has been no economic barrier to them happening. Jim?
James McCabe
Thank you, Dan. Je, I think you covered it pretty well. It is, from a purely monetary point of view, it is the WIP. Therefore, the working procedure has increased, but if you look at what the root cause is, it is punctuality in its entirety. I’m just waiting for that: those last portions to circumvent the invoice documents.
But we haven’t noticed a very dramatic expansion in commodities. It’s in our painting process. So we have to balance them: we work with problematic suppliers and we make progress. So, in anticipation of the burning, I think we have $40 million in arrears, we plan to spend until the end of the year.
Daniel Crowley
Just one last point, Sheila. Al Cai previously asked him about price lists and talked about the V-22. If you look at page 16 and our backup data, five of the six most sensitive systems in our order book are developing at a pace AND between volume and the new costs we got, we think this is the main driving force of volume to drive stock depletion and then expansion of money and margins.
Sheila Kahyaoglu
Super. Thank you guys very much.
Daniel Crowley
Thanks.
Operator
This concludes our Q&A query on Triumph Group’s FY2023 Quarterly Effects Convention call. This call will have a repeat that will be available today until November 15 at 11:59 p. m. Eastern Standard Time. You can access the replay by dialing 1-412-317-0088 or 1-877-344-7529 and entering the access code 1319709.
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