WWD - Earnings call transcript Q2 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Thank you for standing by. Welcome to the Woodward, Inc.

Second Quarter Fiscal Year 2019 Earnings Call. At this time, I would like to inform you that this call is being recorded for rebroadcast and that all participants are in a listen-only mode.

Following the presentation, you will be invited to participate in a question-and-answer session.

the Mr. from today us company are Joining Tom and Chief Mr. Executive Officer; Gendron, Chairman Chairman Officer; Chief Weber, and Bob Vice Financial and Mr. Don and Treasurer. of Investor President Guzzardo, Vice Relations I over the to would Mr. call now like to turn Guzzardo.

Don Guzzardo

release. would you, quarter financial then Tom the Bob strategies, will second XXXX At will like Thank on year our as We to all outlined markets to questions. fiscal today's of In take call. our our and our of will results presentation, welcome in earnings comment discuss Woodward's you call, earnings end related operator. and we

today's For release, those who have not website can seen our it at woodward.com. earnings on find you

of announcing our presentation at or The be as the call refer on have also website. call on phone well our through accessible this to our is of included some and end the by on along replay be audio as would repeated go as our website call. XXXX. highlight that the call by available press like replay slide shown statement materials this We I to on May will will phone are and number today's with the release cautionary website XX, X. on the again audio for operator to An

with the adopted we elements our number FASB basis the update and of risks as customers in and Accounting and Those specifically always, light full elements effective consider otherwise. not and accounting that of based second assumptions the this XXXX adjusted amounts Prior surrounding are stated can contracts for Woodward elements, fiscal revenue the on the of comments and are adoption XXX. Please standard uncertainties or standard of the businesses outlook new will the As from first October or X, We XXXX-XX, identify in including amounts XXXX. those ASC results be specifically. for ASC period the more including presentation believe our filings. organic and risks frequently and XXX under previous except presented Standard for our half economy material on presented forward-looking of fiscal are our XXXX impact the quarter year global do change.

the and sales there for our tables press the and believe quarterly filed the In earnings both of our the inventory inclusion narrative under sales earnings. forward, of The and please be our the period reports variability be XXXX. release press XX-Q impact customer-provided tables quarter the in with included of XXX first release to earnings. we and XXXX, impacts ongoing in In as net ASC However, is we quarterly and fiscal no of it related provided this for both ASC to will XXX was primary sales Form refer of adoption. XXX ASC and XXX release anticipated of first going on and of net

Our prepared remarks include and XXX XXX will amounts. today both

and well and will as help reported We the Please addition, organic is historical of our measures. information believe press as of both related for and refer In presentation future results other providing as release under to organic non-GAAP financial definitions the and GAAP Woodward basis. adjusted on this an in U.S. tables and an outlooks. appendix today's understanding financial adjusted

related presentation measures release the are and which schedules. We financial and also of GAAP earnings to in direct your our attention non-U.S. slide included reconciliations today's

million million prior for for activities for of net share to flow cash quarter. our of was Adjusted or second earnings of quarter million of compared half prior Free of the $X.XX turning $X.XX of for earnings for $XX million same $XXX adjusted the the or $X.XX compared sales results which generated or net second of year sales generated same per for the for free compared XXXX quarter. compared L’Orange prior prior per million year million million the first from $XX from were operating was were for earnings the million Net XX% to or the million the Net the to of to year. exclude for $X share half $XX million period $XXX year. share quarter. the were first Organic prior of compared the quarter. to year per Now the increase an XXXX million, $XXX a $X.XX share attributable $XXX outflow to $XX $XX XXXX Net per prior to fiscal cash sales the cash were period business year quarter. $XX cash net

turn I strategies, comment and call markets. our further over will results, Tom to on Now the to

Tom Gendron

pressured particularly Thank expected, the everyone. strong improving the Industrial In quarter natural record to gas while be delivered you, afternoon of segments good diesel XXXX, and previously very Don, Aerospace continued as engines. half of are year. in and second both our in marking results Aerospace markets robust, and first we both markets Industrial a

We economic uncertainty are half, strength by still the some recent encouraged second in that remains. and drives confidence more although data

outlook As year. result, for a we are the increasing our

Turning events. to recent

unfold. by leading to do not the significant the At any this impact planned production the tragedies grounding monitoring closely saddened our of as investigation situation MAX. the We're are anticipate time, rates. continues Boeing We XXX in to we

and related impacts aftermarket to both aircraft. to legacy from potential initial provisioning We assess will continue commercial

Moving to markets. our Aerospace

for most We're seeing Our of further strong, at incremental our results traffic. strength aircraft military passenger continues with continued Aerospace by markets. Defense anticipated cargo demand to global for drive Woodward segment and fuel-efficient all-time to high, remain volumes. activity across and programs support spending. driven factors in superior healthy again which aftermarket Load an delivered budgets remained new particularly demand Defense

gas in turbines. investments natural industries natural is gas LNG to natural of generation, markets, in and increasing truck gas power traffic power tankers, the Industrial return globalization an power availability driving data initiatives and growth substantially government's been Internet terminals transportation, and Industrial process will Within demand center energy. growth our to emissions-friendly The plants, as as gas generation to is Significant data shift pipelines, source Turning both related of and truck processing for We infrastructure in the accelerating. utilization air are the orders the lead storage have Chinese for generation. and demand. natural exceptionally strong drive quality tremendous also believe this gas, to

to this continue, While Global variability continues quarterly trend we anticipate overall ship trade utilization-related strong will aftermarket is cargo possible. drive activity.

passenger sales. respect marine In with to Growth are are driving processing is regulations emission to recent counts, and a markets. end healthy Aerospace and and by perform across markets and continues to summary, rig our Woodward traffic. infrastructure,, led rising as the investment. solid demand. also oil execution oil leading result L'Orange of new distribution growing continues gas, well increased supporting In Additionally, our equipment ramp momentum very increased narrow-body global prices markets segment in market

improvement Industrial are anticipated. ongoing Our markets as seeing

in technology gains, our share significant in manufacturing investments while profitability. Aerospace are investments world-class resulted productivity strategic capability market have and improved increased Our in supporting

respect businesses Our strategic L’Orange on Industrial Woodward to to with of have capitalize earnings both us our acquisition initiatives improving growth. positioned and sales through our and markets

I'll more discuss financials in it our Now, to to detail. turn Bob

Bob Weber

quarter by year million strength continued programs. We OEM second and quarter compared Aerospace posted Thank commercial the second a segment a segment fiscal $XXX across net defense sales ago, increase. for for the you, were XX% of and to XXXX quarter. were another $XXX driven aftermarket Aerospace million net great Tom. sales

XX% were included to of up to $XX primarily year ASC components. segment or of the sales prior quarter aftermarket quarter and consistent XXX of legacy both Woodward The second due exceptionally aftermarket compared were million customer-provided sales adoption net up ASC XXXX the on aircraft basis. additional for XXX, Aerospace commercial provisioning. sales to related Commercial strong XX% a

the higher in categories, earnings strong as market would have driven second of the of our compared quarter related segment the quarter second strength Boeing first performance in last $XXX second by increased MAX. quarter Aerospace earnings compared to of ASC of XXXX Segment year million earnings $XX compensation of based were were net XXX, variable the quarter this Aerospace consistent moderate the to XXXX million the related of year of in XXXX to of XXX. anticipate to for for we prior all by year, financial for across same same XX.X% earnings segment to volume Segment the initial aftermarket segment For year. the in by prior for application The segment growth adoption provisioning the the second $X increase of for offset half. XX.X%. net remainder on of XXX Under were grounding the to sales year. segment a as quarter percent percent been the the XX.X% sales and sales the the increased potential ASC commercial due of lower prior partially million earnings predominantly was versus the half a

compared net segment $XXX million quarter to quarter sales of XXXX attributable segment Industrial $XX of L’Orange. million, net the $XXX fiscal Industrial, second Industrial $XXX the million for excludes XXXX of million the second to to Organic prior period. for sales Turning which were year sales in were Woodward

the offset XX% second segment for was general or performance by earnings volume XX%. to segment of sales, R&D unfavorable X.X% rate Woodward inclusion of the largely compared on would currency XXXX industrial period. XX.X% and ongoing were primarily the administrative increased quarter higher the of the The for the $XX Industrial of XXXX. quarter in the compared were were the was and engines, expectations L’Orange. million basis, the Segment million constant XXXX XXXX. XX.X% second in On improved our financial second adjusted in net driven sales million turbines, in for first by of for in tax in Woodward of Foreign currency prior X.X% line addition half the Woodward second segment of sales sales a impact compensation Industrial of level, compared second XX.X% $XX segment and quarter the addition approximately and due exchange $XX rates selling, the variable net the of L’Orange the quarter organic XX.X% earnings in by Industrial effective with to increased to the growth XXXX were year. improvements had are related XXXX quarter $X for was increased to L’Orange. to expenses have Adjusted effective second The second of segment of quarter reciprocating or an of approximately At sales powered earnings of stability Woodward tax quarter or the sales. and year million partly rate of XXXX.

months the XX.X% in tax of tax U.S. XXXX six the legislation. included for rate six tax the of expect effective XX.X% transition our the impacts, approximately year tax For We period the the to prior XXXX, XX.X%. Removing rate of same was change XX%. XXXX for effective now was which months the compared of first to the impacts rate first transition be

of the to flows. $XX at cash were operating half period. months million, half activities compared $XX generated of Looking to the cash for first first for XXXX expenditures million XXXX. for compared for $XXX XXXX, of the was prior Net the Capital million from million first $XX year six

year, flow million. expect The cash For Free prior we months was higher same for cash to free flow year. compared the million, of $XXX still approximately the expenditures the be in of an primarily $X by six million $XX increase full outflow earnings. capital of driven for the first to was year period the

free million. anticipate flow approximately year to cash XXXX fiscal continue to We $XXX be

flow. the was million the our form repurchase $XX first accelerated improved performance We XXXX, in returned gains to me, on of based half of half -- we in excuse repurchased repurchase dividends. and stockholders accelerated plan shares share our first slightly share the cash and related During

fiscal to outlook. our Lastly turn XXXX I'd like to

As look of remains. XXXX, the we to ahead economic uncertainty fiscal balance

However, into the going we more strong our are us half. the the year markets, in the are developments which positive encouraged second start and seeing we gives to by confidence

reflects As markets to now respect to This XXXX. XX%. XX both open customer-provided Adjusted of percent to and sales concludes the earnings now fiscal up fiscal as guidance XXX are segment Adjusted XX% a be sales XX% be with up in of approximately are raising fully net approximately to be the between results XX%. full segment we weighted earnings of Total as be expected outstanding. $X.X the based a per Operator, expected net sales compared for million Aerospace the $X.XX, sales a and expected year. segment diluted earnings unchanged to XXXX Aerospace impact the are and expected quarter approximately second business questions. on ASC Industrial and to on segment approximately result, is our strength $X.X the shares with still of for the our This are inventory. sales between average share to billion Industrial call net prior and now approximately remained for our percent as we year. ready $X.XX and comments to billion

Operator

from Instructions] And Sheila question from Kahyaoglu first Jefferies. our [Operator line of comes the

Your line open. is

Sheila Kahyaoglu

Thank you. Good afternoon, guys.

Bob Weber

Hi, Sheila.

Sheila Kahyaoglu

question parse bit? about the I you commercial little versus that Hi. up the business how then And you you quarter. first the business? XX% going guess driven was throughout year? just the was Can legacy can the What initial talk -- a in the provisioning demand thinking aftermarket MAX production are

Bob Weber

I'll Tom can the split you give the comment then on MAX. and maybe

Tom Gendron

Yes.

Bob Weber

the obviously total. significantly initial while provisioning, overall still You up percentage know, small is of relatively a

that those fleet -- aircraft and we’ve more larger but initial element is the is airtime And strong on. of the and aftermarket, related remains provisioning got represents So, to content really so. on dynamics increased legacy which growth

Tom Gendron

Yes.

doesn't half moment, versus as the risk still those we're production. view online, probably -- the some the at XX say to will tied I MAX, is least of, larger staying the come there rates, at think at uncertainty are our MAX future, time. we is month the to risk is uncertainty this the but we would Obviously, the there provisioning initial second suppose That's I hold. MAX if or production the of the we said at looking there's many a in Sheila OEM per And production the think that think, for foreseeable producing why wet. lines at as I We're rate.

Sheila Kahyaoglu

to from synergy little perspective for then benefit give end-market continues color. well. a just from Can around perform perspective you a And commentary or Thanks L’Orange, it where you're on more maybe there? the that an bit revenue biggest seeing

Tom Gendron

top sales. integration We're we ahead that, good aftermarket first markets has the of market anticipated, of Oil were of Well utilization synergies extremely the aftermarket, both anticipated. solid, schedule. in We're year L’Orange and OE of maybe those and performing primary seeing so On remainder it's it's gone driving are is still still is and and the which to -- well, been well. drivers than Yes. gas the the slightly is getting for performing still as well. end the are the outlook marine We're the identifying. doing really and better

Sheila Kahyaoglu

Thank you. right. All

Tom Gendron

Sheila. Thanks

Operator

line the Our Strauss next question David from from Barclays. comes of

is line Your open.

David Strauss

Industrial that could looks power XX% break market, out gen and Thanks. growth by organic Good versus quarter, versus afternoon. oil end what The in transportation the you gas that like?

Robert Weber

expected said exactly the the is board we business, strong. Industrial kind seeing. is year, the it. diesels was only Yes. start probably get Quantitatively, you'll -- it see the to some probably to a spot large the we're more detail the Wind saw areas. and place so overall, for very as it strength soft in small really across That's strength we we have of all in it's that's of what around the renewables gas, turning footnote. saw lot past in gas, in But in almost best We been

David Strauss

offset in think think And to guidance -- the $X.XX if be the just to the be guidance of right? Okay. up I accretion. double the still think the of year, I quarter to beginning so, And amount year, the of roughly that terms at said of Is you and and had L'Orange beginning within that it specifically what's taking overall was kind you $X.XX, in guidance, increase? from L’Orange said is of terms last going what's that going $X.XX was I the then

Robert Weber

still I largely uncertainty. the offset Yes. mean is

as may on, so have. the forth got Tom So, things We've mentioned, MAX on that still of lots we second impact half, obviously and see going some.

overall thought much puzzle kind would the of have of we said go pretty Last L’Orange the $X.XX. from various up, would breakdown the pieces accurate. You quarter, jump $X.XX of we it probably to

we plus that bit think see a there. Now, we from little

the So anything. more overall it's uncertainty than

David Strauss

thanks Okay, guys.

Robert Weber

Thank you.

Operator

Our from the from Cowen. comes next of Gautam Khanna question line

open. is line Your

Gautam Khanna

guys. you thank Yes,

guidance the now the all rate growth assumption? the what just year of fiscal First within aftermarket for is

Tom Gendron

aftermarket aftermarket -- Gautam? talked The you commercial Yes. right,

Gautam Khanna

Yes.

Tom Gendron

Yes.

we're digits full to aftermarket, commercial year. for looking For at low-double high-single the

we high to the earlier. versus of we discussed get really half uncertainty as have year, the last year, initial and comps we around you provisioning the have some second As

Gautam Khanna

like it And aftermarket. the overall small quantify? Is commercial sounds provisioning, after... just XX% it it there Right. to relative to on Is it's XX%? the the total any way clear aero be speakers]? to fairly Is of [multiple

Robert Weber

Your accurate. [multiple of directionally number a is the speakers] XX% total.

So but part, majority. I it's the not not small. XX% still good -it's a is necessarily mean it's

Gautam Khanna

Okay.

to related aisle single the OE the about guys On new curves programs, are learning you the shipments -- talked quarter. last you

the planning on OE the profitable fiscal engine the kind both they point shipments to average and of air you plan year? shipments this and the XXX of at you tracking are AXXXneo being [ph] end frame. are curious margin side Just by Are of -- MAX at

Tom Gendron

We are.

for We we XXXX see though. will as to we're -- just continuing reference but margin enhancement move into

not to to So we go continuing as we we're are XXXX. our into drive where margin at we 'XX. fiscal target, improved anticipated year we're for And fiscal getting but year

Gautam Khanna

then one. customers right Okay. any anything know to just many you downstream behavior supply delivery. intermediaries any response but last of chain And serve I you many among how is? have your change How about don't of it any mean I'm the ship different how curious in you MAX, -- how can is to, just seen I you related speak that you've sort there on but to seen? customers the

Tom Gendron

has everybody rate. in no is still been our change Yes. so driving deliveries, now to there OEM Right

in of think on the catch is and are supply to up think trying for to MAX I people as you chain the most -- I total get plan. aware

-- not Xs Tier that the had of engine, we manufacturers Boeing, any pullbacks sell from have the we the to. either today And so of any from

driving far that So rate. we're still

Gautam Khanna

some within any is an you of there is for in for exported place in fact do any state I have don't extended provision contracts if protections scenario? or this It's destock, contractual your what that I mean, accounts if know what period? sort guys there you to And

Tom Gendron

No.

We are flex contracted them. with to

Gautam Khanna

cash But or the anything far Okay. change no so of terms sort? to

Tom Gendron

No. There none is no.

And the up said near moment, at supply will rates. I past in period chain's everybody, like we'll we're to so the we're come Okay, use time it but to catch tracking future. the like online the optimistic on production watching then We're due. this

we the the in some consistent. So that's it current exactly call is happen. outlook our moment uncertainly but at will that's since we But outlook, why know risk half second what and never

Gautam Khanna

Okay. you. it. Thank Appreciate

Tom Gendron

bet. You

Operator

of comes Oppenheimer. Our next question from the line from Glynn Christopher

Your line is open.

Christopher Glynn

afternoon. Good Thanks.

Tom Gendron

Good afternoon.

Christopher Glynn

of beaten So $XXX quarter, revenue million in the congratulations.

the implies it the both half to revenue's second quarter your really On for second a segments contrary rates, guidance, less little that's normal seasonality. notably than

So quarter recognized are underlying of that if the was spikes bullets there of pronounced your therein? just of your out wondering in that particular estimation the participation from any or markets revenue kind

Tom Gendron

real What at first we're solid really nothing well. is I second say changed. or uncertainty. We We're No. would we're in half a just factoring in is pulled half. had and tracking some there looking else But

address MAX, reflect the continuing the markets could always half that So renewable the uncertainty affect whether is to but in it's second we'd look at the China. volatility just are be Those we some nothing the always that in. we as and pulled market or see things

Christopher Glynn

little what upside that was saying that -- in maybe your Was asking that way. And the from quarter Okay. the that biggest developed market different trends something perspective? the within -- there a

Tom Gendron

also say, and good saw were would end strong. in continuing I which gas oil is Aerospace. healthy -- But aftermarket is and strong actually saw, Industrial. transportation and aftermarket our in quite and China China we power markets, the We covering particular

led So on positive. the those

were the than end possibly highlighted front. of most strong, really came our a stronger up kind activity renewable but markets anticipating and Bob we little As earlier, was pressured, in

uncertainty continuing see Looking watching strong just that we've carefully. the the been forward, we're we with highlighting that markets

Christopher Glynn

that And processing shift kind what a you sure terms in Wondering characterization just that on term to And I'm power for little processing Okay. just the there. of the accelerating. the of could color is gen more not of gas acceleration. then natural the refers to. comment clarify and if

Tom Gendron

Yes.

it's one natural a is really we're we've very energy it's with at there -- gas, eco-friendly looking what highlighted So source. before,

emission gas on very today, or an The standpoint, positive. pricing good from the driving So, that's demand. cost is quite so quite natural low,

LNG. very as used would also of LNG ends are LNG, mean the and What So plants the the be a we petrochemical LNG natural the processing of -- being particularly We're because by fundamentals gas both of activities. the use both seeing price feedstock strong. more on and supply pipelines of

for natural that we're abundant where seeing see and pricing. continuing gas. with that's increase So supply the the the demand We to

higher -- and in in then particularly So transportation use seeing and also we're Asia.

further driving that's So demand.

where we're seeing is combination the that growth. So,

Christopher Glynn

Great. Thanks for the color.

Tom Gendron

Yes.

welcome. You’re

Operator

our Alembic. And Pete of next Instructions] question comes the [Operator from from line Skibitski

open. is line Your

Pete Skibitski

guys. Hi

Tom Gendron

Hi, Pete.

Pete Skibitski

XXX? can difficult I'm guidance to this whether or kind customer sure you is your revenue more revenue ASC XXX was I'm to answer versus due unpredictable more maybe more -- get boost So markets under the providing guidance trying to due this area? or or if not to more inventory not unpredictable of

Bob Weber

Yeah. related both. to The overall is guidance

of an So, the there customer inventory. is element provided

better Now that we forecastable performance and our But a quarters largely any piece of have see the we belt in other forward. is number we of similar under it's say going terms other of that that, I overall. would the to it to how visibility item have

the of are to combination the those what's sales raise things causing us so guidance. And two

Peter Skibitski

Okay.

Bob Weber

I difficult. more don't it's any gotten think

Peter Skibitski

it. Got Okay.

Okay.

you've with your didn't so, cash free But us HX your flow Can been confident was? the And guidance even you enough uncertainly. you to guidance. that why revenue tell raise raise

Tom Gendron

robust Well, cash I flow think free because guidance. it's a it's

do number the think a we And that's moment, still. point, it's at we think So, think at number. really solid good this I a

Peter Skibitski

Okay. your XX-Q In statement. the question. first Last cash quarter

is or going all didn't norm your of changes working the the flow be in normally that do. guys cash forward? going like kind a statement XXX capital that disclose you Is also to You issue,

Bob Weber

the It's in just a the necessarily Q. will But not summarization be going norm It XXX. forward. related

Peter Skibitski

Okay.

Okay. Thanks, guys.

Operator

comes Howe Barrington Research. from of Chris the line next question Our from

is line open. Your

Chris Howe

Chris is Howe, Yes. This quarter. Research. Good Barrington great afternoon and

Tom Gendron

Chris. you, Thank

Chris Howe

here. a questions Had few

expectation? July. still occurring July the Has occurred, regulations or just is you mentioned the for China this previously around that the enforcement is first, in of bookkeeping, The already had

Tom Gendron

July when they VI what regulations. adopt call emission they China is

driving this summertime. those adopted date. be firm And that we that and actual will that's expect So they're time regulations towards at in the

Chris Howe

you Okay. in And terms integration L’Orange, plan. the mentioned going is of to then

look how we what provided in here targets should look where that you towards Investor guidance now? they perhaps we term of year terms there full and at at And potential is to As upside margins? at go longer the even XXXX Day, the beyond are

Tom Gendron

We for yeah, highlighted is would XX%-plus. we where be said This hit were -- industrial we XX%. to margins we at year,

tracking I get move So, we're we that well. as into forward And we think see XX%-plus. line to of sight

So include that. I L’Orange think that's part still a holding emerging and what's being the business that does of from

Chris Howe

Okay. question. as and Great. that renewables Content in last we some remained also And inflect turbines market. it increasing. there's approach assume, positive I turbine Industrial And my are then the weakness the area still renewables, still for sales to Is stable. expectation is XXXX? of more is,

Tom Gendron

compressors. expect see fully We turbines, turbine at our and turbines definitely part the and up gas picking We moving we of to have steam that gas when turbomachinery, it forward. we look

total. the growing whole renewable past, customers’ it's is looking versus slightly share side we've more and highlighted And a or pressured. the at based in and So, this seen that more we have market. market stabilized business we've in The little wind on our our

happens programs rate. have pressure success so, we our be we're just customers' and And on to And some there. the

as move we driving what's turbomachinery XXXX. side. the to corner into turning actually So up that's turned it the and side, But we it's on the start anticipate renewable

Chris Howe

L’Orange at for exclude growth And organic we the one that if We're still X% within industrial last Great. then Okay. year? thing. looking

Tom Gendron

So we're higher than that.

Bob Weber

be above believe the We X%, Yeah. to will high closer it single.

Chris Howe

you. Thank Okay.

Bob Weber

you. Thank Yeah.

Operator

line Instructions] [Operator our And SunTrust. question from comes Ciarmoli Michael of the next from

Your line is open.

Michael Ciarmoli

Maybe since doing upward side? outlook aftermarket than mean, the bulk What driving now it doing the Aerospace expected. a taking there? the the questions. questioning. results. growth revision like What's mean, bit It expected. so, little update that of of was has that on to Hey, good sounds that line organic the is for just Nice evening, guys. updated? I stay Thanks than better been just Industrial better or on about L’Orange I the

- Tom Gendron

defense we've book other Aftermarket sales is moment. bit and the the is we very which seen did very enhanced then what RFP, a our the the activity at is proposal and prepared activity order I highlight would thing strong our strong. to And robust in remarks military our call is and the -- little

we're seeing spending, and commercial as strong tailwind So a good well. Defense from

So, tracking hopeful the And like The it's basically healthy. uncertainly to only there big MAX. the And right we to Aerospace production very soon. get online rates. now it market out see is said, we're very is back

Michael Ciarmoli

to programs performing over sounds the better Got as cost it organic piece enhancement clearly it years. you're would've performance. the commence. get getting you mean these that of about margin still you're organic even I much Aerospace And there? even the taken operating what leverage aspect out hitting like additional operating Why going any just with learning you're OEM thought, better margin you've side the and with getting aren't on Industrial -- those I curves, the with hinting the that guidance, on

again growth some be more guys to there seems given be model that like just it the but should Industrial, So going leverage lot in flattish it And the getting. you volume be to margins in to get like XX% seems are to aero uncertainty of are flattish.

Tom Gendron

I – appreciate right comment. the yeah. think I now

I Aerospace. are think there a healthy Defense OE And very of in margins and commercial it's combination mix. aftermarket,

it's right looking XX%, year we're I think healthy. little very possibly stronger at at So but full now,

On tracking side, improvement improves. to L’Orange the margin volume we're the Industrial is delivering. as the

period. would of model XXXX, we improvement is that's time always and as we move expect see But continue as And So, kind And improve best to to that our outlook. are we forward margins. track. to go right things into the right productivity now on into get enhance our as we

Robert Weber, Jr.

on thing One maybe…

Michael Ciarmoli

…Got it.

Robert Weber, Jr.

sales XXX no … the accounting related customer do to margin we the side inventory. but of remember have increased techno

to So that that's … another headwind

Michael Ciarmoli

Right, right.

Robert Weber, Jr.

…increase from XX%.

Michael Ciarmoli

up and going significantly were just it, million, anything Accounts there, pretty sequentially got more. $XXX to then, they looked read anything into like up about Right, one receivable on?

Robert Weber, Jr.

Yeah. this strong natural was recall, you have Well, and extended terms we Asian if in our extensive will terms more in first gas -- if that business, half. very you

related of incremental increase comes flow to may in half moderate some cash receivables that's from So half. that that. we We little the off. And a where second second that as that that bit some saw anticipate comes

Michael Ciarmoli

a it, I it. Got appreciate lot perfect, guys. that’s

Robert Weber, Jr.

Yeah.

You're welcome.

Operator

a Pete Skibitski have from question do we And from Alembic.

Your line is open.

Pete Skibitski

Yeah.

a if follow-ups to more adjustments related completed? the not? Just trying on EPS expect I'm should couple to Duarte of any or relocation we is Duarte just understand Duarte, guys,

Tom Gendron

be of the completed most part will end for the Duarte by May.

Pete Skibitski

End maybe okay, May quarter. so one got of it, more

Okay.

Tom Gendron

have the upcoming this some quarter. still we Right, in quarter,

Pete Skibitski

in you demand that that then, continues surprised in past you've kind comps to the toward? you been about maybe Tom, weapons Is Got the talked just something about tougher and I be think precision of area. the

Tom Gendron

Yeah. demand outlook has The area, can now smart it weapons In if been our strong. right vary. I -- the

you guys strong demand out healthy it's now, But been probably procurement. Defense with know of the another maybe and As continuing. more. very right I'm years two looking But

Pete Skibitski

Okay. Thanks And appreciate I guys. color.

Tom Gendron

Okay.

Robert Weber, Jr.

Thank you.

Operator

at no back the conference turn Mr. further are Gendron, there questions to you. now time. this I will

Tom Gendron

Okay. questions. call. for Well, seeing us next thanks quarter everybody And And today. we'll to before of during look I the next the appreciate joining and you forward many our

again Bye. So joining. for thanks

Operator

that gentlemen, today. call Ladies conference concludes and our

for please your for by participation call, code If X:XX available by XX access the A also today of and your that Eastern thank entering would We today's you rebroadcast you at be the like www.woodward.com disconnect lines. call, ask dialing website conference conference this non-U.S. company's available PM to U.S. you will for XXXXXXX. rebroadcast days. Daylight it at Time a listen or X-XXX-XXX-XXXX X-XXX-XXX-XXXX for to be and will on

Woodward (WWD) 29 Apr 192019 Q2 Earnings call transcript