WWD - Earnings call transcript Q4 2019

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Operator

Thank you for standing by and welcome to the Woodward, Inc. Fourth Quarter and Fiscal Year 2019 Earnings Call. At this time, I would like to inform you that this call is being recorded for re-broadcast 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.

Joining us today from the company are Mr. Chief Mr. and Chairman Gendron, Executive Officer; Tom Jack Officer; Mr. Chairman, Corporate Chief Financial Operations and Thayer, Vice Bob Chairman; Weber, Vice and Mr. Don Relations Guzzardo, and Investor Treasurer. Vice President of

to may I Guzzardo. now like turn call would to Sir, begin. over you the Mr.

Don Guzzardo

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

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

on materials as go press will on website this the XXXX. call replay some have audio audio today’s replay be our of included operator the this the We X, call accessible by is end December along well our our website. to for on again phone or the will at of phone An call. call presentation release announcing The with repeated by available through also on the that website number as be are and

Slide highlight like to would refer shown cautionary and to as statement on I X. our

frequently in and forward-looking the risks the our Please always, and of for do those our the elements consider identify As our Those light or global our surrounding in risks businesses presentation of change. filings. elements outlook elements, this and we are can economy on comments based and assumptions uncertainties more including specifically.

and To report year Form Prior under are X, call additional presentation the or be the organic the XX-K and update with revenue. press filed XXXX. annual on on XXXX, we XXX Woodward, in ASC October are November including number understand effective period presented of previous on XX, materials and Woodward XXXX-XX fiscal the adopted for adjusted have quarter better for presented revenue this included customers or impact Standards for XXX. the before ASC Accordingly, fourth guidance our results ASC amounts contracts FASB XXX Accounting accounting amounts under from release, to XXXX.

addition, GAAP are presentation the in financial our your GAAP non-U.S. and of to financial direct help included earnings attention reconciliations will providing which believe release understanding and We non-U.S. today’s in Woodward In measures. measures, related our is certain We results. this slide schedules.

$XXX compared XXXX to per compared increase or million earnings our $X.XX for the net of million to XXXX Adjusted year. Now, earnings full for generated share year the fiscal year, net share net compared earnings per or or the $XXX per year sales year-over-year. to for XX% sales share earnings were $XXX the fiscal net year. were for quarter, was million earnings prior share the per million $X.XX million $X.XX million $X.XX prior were or Adjusted turning adjusted to results net per fourth for year, million to were $XXX share million $XXX net share prior were prior to $XXX Free million year. $XXX XXXX. were an increase the million prior Organic per the $XXX $X.XX for net prior $X.XX fourth quarter. up or compared $X.XX for $XX $XXX or Net for the quarter or was of were cash $XXX billion per compared X%. $XXX to million $X.XX for million for earnings from quarter, $XX operating an compared sales cash $X.XX the And or quarter. billion million to year flow for share the million or $XX XX%. activities of million compared of $XX $X.X share Net for adjusted to compared per prior of Net

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

Tom Gendron

Thank Don Fiscal you, and good Woodward. year another for afternoon was year everyone. XXXX strong

earnings challenges and customer sales, cash from flow solid driving renewables MAX continued grounding XXX facing despite growth the our business. and challenges We within

terms business to both defense In perform in commercial very aerospace well of and highlights, our markets. continued

industrial by also industrial to partially well L'Orange the our headwinds due Our our the was for business to organic Woodward improved addition business. offset which return of renewables as business, as of growth

volume solid high that remain is driving minimal Woodward a was increasing MAX to more aircraft. the wealth engine continues grounding traffic In the of efficient Military commercial high in global on guided readiness global impact and travel initial When delayed utilization, a Aerospace, and the budgets and robust fleet as aircraft expect U.S. demand The due visits. Now, continues well upgrade for aftermarket aircraft drive fixed-wing the more detail. In would XXXX the more moving and aircraft, but the to we initial grounding. to from spending strong growth service, returns U.S. of to provisioning support see XXX to air significant recover a for fuel did combat fiscal desire we defense to defense, programs. year on aircraft the aftermarket in perspective, weapons. global our as sales. rotorcraft to of provisioning was for markets shop global Commercial initiative of passenger our favorable from benefit OEM an Legacy improve demand effect

as a new launch gas heavy cycle frame we to our turbine industrial wins highlights well. our are and expanding combined program represents to power programs in markets, the content within and industrial the Turning continue share gains stabilization on The Class some new of J turbine and for Woodward space. generation, this see content turbine Mitsubishi market our providing lift

natural drive confident look as we as to gas in long-term As of as see in power gains the forward, generation recovery turbo ability the global machinery market. well continued we fundamentals share our we remain

customer to challenging of announced acquire are to Senvion platforms agreement market a part Siemens due remain part in our remains an This business the situation. determining the Senvion. we September, appropriate has of process closely proceedings to monitor the of been continue uncertain actions. aftermarket ongoing source and of an Gamesa bankruptcy and renewables revenues In we us. Senvion important for Our in

in In ahead see in our truck strong in of implemented gas cities diesel recovery trucks fourth is the were promoting quarter trucks of expectations, certain natural China’s of the absorbed at September We of end in transportation, production positive into rigorous as softer consistent with that pre-buy started quarter fiscal regulations, new including market rapid expect regulations from the the to V-compliant China restriction the large the enforcement VI this the year. VI-compliant and our to the continue a trend to third were transition sales China of July. engines. China new the

We approximately are share seeing XX%. current with rising natural also engines on-highway the secure gas to market growing a share of

have higher to addition we China engines. recovery, volumes the content system VI-compliant In on

In very aftermarket marine, strong by sales. mainly we had a XXXX year in driven

due access price strength to shipped rates ‘XX fluctuations pressured economic Oil fiscal and demand. replacement We as are drive service. to gas year expect the the into utilization robust continue and capital, markets global aftermarket in oil for uncertainty, to parts weaker need and

installed downstream the activity. pipelines, in as prevalent where products that applications plants at well such and wellhead Our base a processing value terminals drives entire we the as aftermarket as large are import/export stream have

slowed, slowed. has has expansion the global facilities utilization economy in also As these

and strong delivered journey in robust North flow we balance True which earnings generation, the included new good In our on platform results which significant summary, de-leveraging translated shareholder accelerate growth, the strong into excellence operational addition free new and of wins, to XXXX revenue all of cash sheet, returns. members execution

Looking in aftermarket our as growth. expected We commercial we XXXX China accelerating in In both dynamics industrial service, headwinds OEM business, which profitability gas to and XXXX turbine sales aerospace and we improving growth, will softening offset gas see ahead economic partially aftermarket market investments. flat anticipate MAX natural by and despite oil growth is strong and slowing to continued Asia to trade to remain gas and expect modest in returns the remain expected in improved is truck to defense be solid. business our XXX revenue

rate. We our delivering aerospace through deliver focused foreseeable earnings shareholder higher and a in conversion to wins of cash period After optimistic particular, expect industrial, and program cash free we ability future. XXXX year long-term a remain in XXX% on for new and In to significant driving greater the investment in value are record than flow of flow to support again positions our we targets. a capital Woodward significant are free expenditures increase entering deliver about financial significant period delivering growth, another lower on which

XX-year company for valuable tenure be He his a value want call a thank partner to contributions delivered tremendous and to and Bob his Now Woodward. more exceptional during to shareholders than the his in our before has been turning retiring Bob I has and tremendous has over asset friend dedication January been Weber me. who at will to our career. over,

for excited him his enters wish next phase this Bob, you, having as best. all the he to life. are of we We

I our welcome And would like financials. him to new the I turn will CFO. further as to call again once discuss Jack to now, over

Jack Thayer

XXXX Aerospace increase. of million up aftermarket as $XXX quarter in segment a the Aerospace to compared net as Tom. benefited aftermarket were ago, for a were fiscal the $XXX for segment year as the strength quarter fourth XX% sales sales of well to million from X% the Thank year quarter. compared defense Commercial you, and quarter in OEM commercial fourth fourth XXXX OEM. prior sales

XXX segment primarily XXXX was earnings weapons segment XX% quarter positively volumes compared will driven sales by As to in $XXX in aftermarket, impacted Aerospace of due Boeing were aircraft quarter from of costs. sales expansion fourth the benefit partially by XXXX. Defense anticipated, to offset the spending. for capacity initial anticipate million for were XX.X% million provisioning we in increased which the sales segment or Segment earnings growth sales the smart or military was to higher of increased by continue quarter softer of the quarter the fixed-wing $XXX of grounding MAX. fourth

net were prior year, OEM to XX%; were XXXX, a for XXXX, up or segment as In commercial fiscal the $XXX OEM For XX.X% sales sales XX% million segment fiscal for year Aerospace sales billion XXXX aftermarket aftermarket Aerospace compared grew billion sales compared million prior compared all sales XX%; sales $X.XX defense to of segment the for increase. earnings grew to increased XXXX. year. commercial of $X.XX XX%; segment year and XX% $XXX or XX.X% sales were defense

XXXX quarter million X.X% of sales or of of a also earnings segment for lower of reduced was net natural XXXX compared to impacts due mainly of of sales industrial of quarter quarters X.X% million large and XXXX. VI the the Turning to $XX of period, The $XX X.X% to sales fiscal $XX Senvion warranty in earnings quarter compared million previous or manufacturing segment of the the the compared sales engine an quarter in $XXX million emissions of China million prior year to adjusted trucks segment of higher segment million fourth industrial, $X XX%. fourth primarily sales decrease XXXX demand declined sales were V-compliant the sales of or industrial XXXX. fourth for fourth XX.X% due for $XXX were Adjusted the for as expense. segment segment bankruptcy. the implementation to segment pre-buy for segment the volumes, Industrial gas trucks were of China quarter of Asia earnings segment decline to Industrial in sales from ahead costs in well for regulations and resulting the product the fourth industrial as to

in quarter Senvion fourth excluded to pre-tax a from and to recorded charge adjusted non-segment bankruptcy. These million $XX related XXXX, the have the charges In write-off assets recorded were we of results. of

this prospective impact a we whole. have continue the is Senvion loss a basis, aftermarket expect As substantial on Woodward wind last our quarter, mentioned while support the material a to business, we of renewables not of to to have it fleet. customer as installed would and sales On turbine

fiscal for sales $XXX for prior billion year, Organic For a industrial million the XXXX XX% net million to X% $XXX were $X.XX compared million the prior XXXX, a for fiscal net Industrial year segment year $XXX were compared increase. to year, segment sales increase.

XXXX increased Foreign XX% an On had for basis, X%. and $XX impact organic for million segment on currency sales earnings unfavorable earnings. fiscal would sales net exchange constant were on no have impact currency million segment of approximately Industrial XXXX a significant rates prior of segment million segment year X.X% approximately $XX compared of industrial X.X% segment million for earnings prior year. sales or of of fiscal the sales segment the to or or year. $XX for segment sales or XXXX to year million XX.X% segment for compared were Adjusted $XX sales $XXX

$XXX excluding highlighted, business Adjusted industrial XX.X% year prior systems power net for industrial million systems the earnings, or was power net our sales, the renewable industrial power As challenging business. of or segment sales, renewables XX% XXXX, segment renewable XXXX $XX were business Tom year. to compared a renewable particularly excluding excluding systems for million segment the of the in business

We industrial are of improving exploring other profitability. means

improvement. We sustainable or our addition better in enable True should for other effort will This opportunities leverage XX% North to process industrial reviewing long-term margins.

level, general million the were for last selling, quarter of for year. XXXX compared to At quarter administrative Woodward the $XX and expenses fourth the $XX million fourth of

bankruptcy. asset expenses due XXXX, impairment year to compared were to in expenses fiscal SG&A to year addition Woodward the year. increase charge Senvion the $XXX was million the of For The an last L’Orange primarily SG&A $XXX million related and for full

with year XX.X% The to of rate X.X% The of fourth quarter rate XXXX. quarter of expectations tax quarter for XX.X% for fourth spending for full XX.X% the the in the was fourth approximately at was the quarter XXXX largely compared for effective adjusted in was X% R&D to of line our tax XXXX XXXX. effective sales. the compared

compared to year effective For tax XX.X% effective XX.X% year. fiscal full rate period compared was same XXXX. of to prior the rate XX.X% for for the the was the year XX% tax the The for XXXX, adjusted

$XX XXXX for for for cash for $XXX year. to cash million prior expenditures flows, at compared the to by Looking $XXX fiscal net compared prior XXXX million operating million year. generated Capital activities were year the $XXX was million

fiscal XXXX, approximately Free year. compared anticipate earnings the positively $XXX impacted for cash XXXX year $XX was was flow Free XXXX by flow $XXX expenditures moderating in for to For capital capital be to increased million. million we million expenditures. and prior cash

shares. XXXX, $XX $XXX the fiscal was form $XXX million the and to of million repurchased returned of stockholders During dividends year million in of

are our sales up $X.X billion. compared be and to fiscal outlook, approximately year. X% expected Aerospace total anticipated XXXX turning Lastly, to be net sales to billion $X are between prior the to

year levels. expected production assume due favorably assumptions at quarter While Boeing build initial ramping not impact timing orders of With impacted the our fiscal in we of XXXX the our fiscal to XXXX, ASC in projections, estimating growth XXX it a year fiscal We and sales in with are September. growth the MAX on the regard XXXX return year. for fiscal unfavorable in year in to inventory with provisioning sales aerospace of sales line to have service the end the Boeing until ramp an second will XXX is communicated the the rates of rates up second half to

half year-over-year result, tailwind a the commercial we of a As the second a headwind in and half. to year aftermarket first the in anticipate fiscal

flat low be Industrial the the sales up growth is to in to expected year. single-digits prior to compared

a of of to for market oil is as markets outlook XXXX an fully the Earnings XX based of as and average be diluted XXXX. to result gas We in for represents is to truck The Earnings spending gas per share improving expect range the in somewhat sales net a be on and to approximately higher softening be uncertainty per share. to tax per turbine to and shares rate XX%. XX% expected million by share expected projected reduced segment offset year are an high-teens are our effective grow as earnings tax rate sales $X.XX outstanding. percent natural industrial Asia segment mid strong The $X.XX as to sales and approximately approximately in on headwind to before percent between $X.XX and approximately be of XX%. to are equipment. expected economic Aerospace weighted expected a expected approximately effective earnings net earnings be tax compared

in XXXX, cash we line flow conversion. long-term cash be our or anticipate free target better to million free of For $XXX XXX% with flow approximately

and both improve substantial Industrial As Woodward growth acceleration. are in cash our earnings you as and flow to operating Aerospace performance, double-digit free expecting we can another strong for year resulting segments continue see,

is fiscal back working first the historically normal result of lower remind call holiday and a over, like business trends that due days plant everyone quarter to the turning our and as shutdowns. sequentially Before fewer would I schedule to

this anticipate results business for quarter the and our we fiscal fourth on similar This XXXX, the year and For pattern. concludes comments XXXX.

ready now call open are to the we to questions. Operator,

Operator

you, Thank session sir. our The begin this question-and-answer at Instructions] first from will going with Jefferies. time. question And is [Operator Kahyaoglu come Sheila to

open. now line Your is

Sheila Kahyaoglu

Jack. afternoon, and everyone Bob good Hi, and congratulations,

Jack Thayer

Thank you.

Bob Weber

you. Thank

Sheila Kahyaoglu

a you are for think for guidance your just and long-term, And question just earnings how the the and you the you there, some I industrial puts XXXX? you are options from takes below you to do items about talked I business guess for first XX% that one-time in about here? think the holding renewables had target, what

Jack Thayer

Right.

be know business, as half will back that the from to This are would And XX.X% our be will True margins expecting experiencing you the about to the the that of related in our we to improvements margins Sheila, operations. that North prepared half we half that So were renewables in first remarks, versus of we other XX% to about gets expect to improvement, the in XXXX. of us XXXX. business really make

So improvement and back to we issues, we of that’s are the journey getting and absent really other the True longer term as related business Tom to to our we margins. expect Senvion mentioned, see where longer accelerating – really would headwinds and be to some term are where expect then we XX% the the we North

Sheila Kahyaoglu

quantify quarter? warranty for the expense product And the engine did you

Jack Thayer

We a we and but Turkey. speaking item did relatively expect wouldn’t it one-time is not, to

Sheila Kahyaoglu

flow all think still mentioned, guiding here? guess, low you with good. out towards, million are there I about versus I $XXX do EPS deployment do a you coming And investment from and growth, how very the Okay. Tom, free cash you think cash off number with double-digit then big Like you – growth, cash? have think As how you that you what period. CapEx are major about you do spend XX%

Tom Gendron

Yes.

thing of shareholders. got of returning The to we commitment a first XX% have net income is

things be excess the we organic cost first then use growth capital. sense both of cash. and will deliver that we looking potential the can make So at in Then growth see our and if inorganic of of be that will that

going opportunity, So, we growth if we probably shareholders. the lean growth have to are more the but towards return side, we more Sheila, don’t to

Sheila Kahyaoglu

Thank Great. you.

Tom Gendron

Sheila. Thanks,

Operator

comes Please state And Skibitski from question. you. your Global. next from Thank our Alembic Pete question

Pete Skibitski

guys. Hi

If have you been luck, of a Bob, best it’s pleasure.

Bob Weber

you. Thank

Pete Skibitski

to mean, if in gas back issue, getting warranty was surprise oil guys, of if the the to was I just it so margins and what the engine we you did the below And your exclude industrial you something still want and for expense, just I kind expectations. or if biggest understand come else?

Tom Gendron

we we gas in definitely China-V then pre-buy warranty. the see from China from We drop. the headwinds Well, highlighted also the renewables and and Yes. and China-V some Senvion or engines had gas issues we in had then oil saw and – both we trade, did but natural

fourth did the headwind us combined that hit quarter. So in

XXXX. forward, renewables as We uncertain we see sales got China-VI The we war warranty our see right that the again but the under Going think control. said, now. so already China thing And nicely was picking growing the is won’t one-time in a back minds, Jack up. we trade in are

our XX% gives on So that to get to path earnings back that XX%. confidence on us

Pete Skibitski

‘XX? now, of to Okay. down follow-up, revenue can you in ‘XX? set us fiscal get are right level And was wind just again wind And expecting the what importance Tom you fiscal given in just one

Tom Gendron

to that XXXX. I XXXX actually up XXXX. had basically to we be breakeven in in and loss XXXX, a in expecting are we business move No, wind we are going sales or mean

Pete Skibitski

you. Thank Okay.

Tom Gendron

a It’s the on industrial. overall drag

Pete Skibitski

Thanks it. Got guys.

Operator

Howe Barrington next our your And Research. question. you. from question Thank Chris comes Please state from

Chris Howe

Good afternoon, Tom, Bob and Jack, Don.

Tom Gendron

Hey, Chris.

Chris Howe

the or think aftermarket off and seeing provisioning XXXX Just related the of are revenues initial there as we going recapturing will a delay about regard some in do defense look the comments, of push as the few the you provisioning the should your in anticipate questions timing the the of year? some and XXX these strong or aftermarket to initial at move you to we XXXX MAX, push strong we into growth to that of how following of all mix

Tom Gendron

that in Yes. and Well, is view on we our will service how are that one in I depend initial first which will the turned really delayed is of the back provisioning in which none order. fast how address It’s lost. aircraft last into fast gain operators,

XXXX and should uncertain, initial little but we gain early back it’s through So, provisioning. I that would XXXX, say

continued we And wait The visits remaining get what and how legacy that. we point Boeing have The strong. to MRO are on in aircraft see market. firmer the Shop handle very So, aircraft is strength market the would it that commercial call high. activity returns actually robust. is to to dynamics all the

like getting are our highlighted, into as aircraft this and XXXX orders at So, continuing already the and this we and look back in. at to and year budgets we XXXX. moment. strong need That’s visibility seeing through get we line In defense that’s healthy of in book the defense is service, order our that

Chris Howe

increase the just That’s follow-up different through maybe near-term your your question in look to the of the I optimization have just And to outlook line, very leverage relates one R&D opportunities in it’s different we the move horizon and outlook on an XXXX we bottom line see how whether company? opportunities it the terms that long-term efficiencies for whether operational versus at you top should or SG&A, as that as of spend from helpful.

Tom Gendron

Yes.

to lever one would investment made CapEx, it’s over as couple margins through to of sales we lead of plants will investment. members And to means on So organization of We’ve in handle existing the then increases. we also I spend kind we’ve to our the the that and leverage indirect facilities. large a our that of added you’d made our that years, people points flattening. say last volume the translate lot higher

the of in are we phase cycle. that So

those I are So think positive.

where R&D, we’re As come it’s to Jack looking at a point highlighted

Jack Thayer

X.X% of sales.

Tom Gendron

talked we we’ve is XXXX that X% R&D and X% for see and going. sales about would where of X.X% Yes, between

leverage the you we increase will sales, start those on seeing dynamics. can So statement we as income through

Jack Thayer

underpinning flow. And growth in then, the significant this, obviously, part in Chris, that’s free cash

in the cash levels. inventory terms we’re conversion, then cap improving we’re primarily of our earnings our And growth So on less spending working delivering through CapEx. double-digit

Chris Howe

questions. helpful. very for Thanks That’s taking my

Tom Gendron

Welcome.

Operator

And comes you. next question. your Please Thank our Robert Suisse. state from question Credit from Spingarn

Robert Spingarn

to add welcome, I’ll earnings welcome, you and not the Could congrats guess Bob obviously to cash from just my anyway. ‘XX the Jack. I I but you with guys. Hey, CapEx taxes it’s us you the really bridge up, through start could up, big you walk go go improves, flow I’ll ‘XX, net guess the pieces? the but

Jack Thayer

Sure.

Robert Spingarn

back million $XXX Going $XXX to question to just... Sheila’s million

Jack Thayer

Right.

that as mentioned. we is plus, the to So about think primary million double-digit growth million growing driver that earnings $XXX $XXX I

In see terms in roughly spend our should XXXX. this you inventory with $XX we’ll million growth. then, $XX $XX levels year, improve million And so less versus X% even million to top expect of CapEx, line the

around dollars the as both and of improvements rates North in operating actual a Tom within plants also outright, we’ve some of improving the made leverage that has referenced earlier. as we sales in but True percent build that So efficiency

Robert Spingarn

the think moving just talked throughout do below cadence Obviously, XX%. XX% you you the perspective? rise And what’s year, gate come past quarterly about the then quarter, from Industrial, Okay. out a to this fourth of that that we improvement, of and year, about then we the back tough had

Tom Gendron

expense seeing the well to business. renewables quarterly return you’re XXXX. of one-time won’t that So to in We we half a first roughly a warranty related as margins again item to the from making have experienced cadence, as back in the are money

our about good feel So on XX%. visibility

Robert Spingarn

that rate how , is but... Okay. And factored how know adjustment, I we work then it’s in, XXX, assume that I

Tom Gendron

our Yes, it’s in outlook.

Robert Spingarn

factory, to I start beginning given actually you Boeing? expect up do for XXXX guess, a showing it’s, of rate when in And that the that

Tom Gendron

six see usually about Rob. it We months advance in

Robert Spingarn

That’s Thanks it. Okay. very much.

Tom Gendron

Thanks.

Operator

your our from SunTrust. And Michael next Please comes state question Ciarmoli question. from you. Thank

Michael Ciarmoli

it, that it guys. a guys, in Is Hey, baking good of for other at you XX% implied guess just taking sustaining are the the the looked in clarity any I questions in maybe month, rates, but for Jack. what’s or I sensitivities or some Bob congrats outlook? on actually and the evening sort Hey Thanks there? just just MAX, missed you production at have and pickup

Tom Gendron

we’re What released. we’re Yes. has what highlighting is Boeing tracking

So subject lead for we we produce line units times our also that to and provisioning. in are that initial with

So, that’s is best volume. with we we’re you tracking can tell

Michael Ciarmoli

Okay, a XX%. as a disproportionate year, provisioning, or know you you a And effect on long-term trying Aerospace got for I margins XX% guiding what’s I it. just is expansion can you of had guys sense sustain from think the positive mean, I us a basis, little is a mean, can the the margin maybe, go-forward on to guys XX%, do the this the of bit you this then have give there? just get next sense to driving continued there

Tom Gendron

Yes, you, I’d like to XX% remind we always said plus.

Michael Ciarmoli

XX% plus, right?

Tom Gendron

Yes.

And so, I side. think this is plus on the

can hold we this So we margin. anticipate

Michael Ciarmoli

the still in able continued think that be the if kind you of and you’d ebb aftermarket, to even flow hold level? And

Tom Gendron

have the fleet – seen the a the because say, is only I’d fleet lot Yes, the has fleet MRO, is like current visit. first bodies XX% only their huge, shop legacy seen of the of narrow

further, MRO, be to you start to won as we’ve maintenance going the the move going hitting new are and cycles. good there’s programs So some

So we see forward. consistent growth and going solid commercial aftermarket aftermarket

Michael Ciarmoli

then And one, way. the it. Got the of just get last I’ll out

Just can certainly what seems the of you’re of as segment, little a product geographies ordering just maybe and any on particular maybe different general there? seen crosscurrents in color you seeing I but sense you geographies. It like more it give us are Industrial is any some the you lot a bit of Have a to in trends and bookings? certain in terms any there, strength mean, a relates there lines areas, maybe seeing out different bottoming in color, maybe

Tom Gendron

us that. the we in in think were I bottom prepared calling actually see XXXX we turbo the and Well, did of remarks, the that heard market machinery from Sure. you

– market. we’re that turn slight seen seeing been in up so we’ve So the

may Woodward seeing you from lot OEMs the XXXX ours is outlook a machines their content. more they’re see bottom. some have new that Now the of the as difference and between The

turned the So corner we’ve there.

that to expect do on some next grow there. we few that recovery, We that years. growth steady don’t seeing we we’re the a in see type fee but slowly So over the uptick expect and

China, where trade are to we in general, it had some goes. saying uncertainty in like particular

to when things the really our some gas regarding for that positive engines. emission natural narrow down However, on-highway you of regulations, small the we’re new seeing

seeing and larger business. our and diesel our fuel L’Orange also positive in to We’re for injection particular a business

dispute. So those positives trade tempered are by the

materialize. why to some depending up on that’s go down. outlook the way, things could we have – uncertainty So we’re how It and in going either or

as has sales in programs of pressure been business other we turning a that’s up, as that with a under is in are We XXXX The actually uncertainty business described, the and there that’s well. some lot renewables. XXXX big took new obviously but hits still

a up low-single-digits. mix, as not So in improvements come improvements being said that operations, highlighting improvements in little improvements we in product flat combination The we’re there. margin our will why one-timers from is bit from to these

we confidence have being some So good margins. to able achieve the in

Michael Ciarmoli

Helpful. guys. it. Thanks Got

Operator

you. from Cowen Gautam question. our state And Thank next Company. question your comes Khanna Please and from

Gautam Khanna

and and congratulations Jack. Thank Yes. both you Bob to

Bob Weber

you. Thank

Gautam Khanna

with grow, above wondering on disaggregate luck. of I going terms Aero in the was of year aftermarket for if of the it. in you guidance kind average line could Hey, segment to Best next the

on if you color the within just some You’ve mentioned pieces us segment? could the defense, other give

Jack Thayer

Right.

that So we signaled roughly growth line line back the on each ‘XX, the the within those of with across board expect we X% we strong the growth in for growth of constituent that year. segments to the in top obviously saw continue

as in obviously commercial aftermarket OEM, as both well single-digits, top aftermarket on mid-to-upper of XXXX. very defense, So growth but strong across OEM

Gautam Khanna

the the Is business the stuff you the forward you mix can gotten move given down on that? improving on learning or you’ve comment as within single-aisle curve OE

Jack Thayer

that the seeing, you’re been margin us know – and for part years. Yes, and if tracking I that’s expansion of Gautam you you’ve definitely

is watch, you through getting online part if curve, getting those the bringing leverage facilities. all this So the of learning programs on the

that’s So of range. this a getting part XX% above

feel there. good So

we’re in move we also aftermarket. get for we with on – the we’re facility aftermarket, As forward, the also investment volume leveraged the seeing

So will that also margins. with help

we working it is of sustainable. and kind is and it’s planned So as believed it as would

take other the thing away. that’s So to

comes MAX ideally to get We volume and the back Boeing said. So we’re volumes the at numbers getting gets rates to service the achieve. to to higher coming we wants are The more through. as

that. to we’re rates. So are And facilitized we good for already those shape handle being

to get in will as of we’ve in that moving the once I we aircraft service. lot a service, into them need well just think and So get it’s confidence back market got and

Gautam Khanna

are And you now were at through quarter the the to be guys and across just XX% clear, board on products? you your there

Jack Thayer

plus we we’re is XX% providing product with that on aftermarket. bit little a for builds the or working Yes, based operating on some our depending there to are – inventory customers the on

ensure moving to volumes they ramp get to them system forward and So in we’ll we it’s with be hand-in-hand as ramping place have those service what seen ramp. our – that go into that ready, right and about their you’ve to back support we’ll as is We we rate, then work planning doing number are are and

Gautam Khanna

is reported the the you One aftermarket you did currently? the better to last I pretty stack because one, away for have guys thought question. in for QX that. get guiding full could I The all any on on obviously. XX% two-year any yet? the to the challenging you just Have year, you than commercial you apologize give aftermarket, What visibility the are aerospace guys seen of down on is whatsoever state blown slowdown comments the And us aftermarket targets.

Tom Gendron

shop initial the is As I have other provisioning was and highlighting, did than programs on the good MAX. strong rate very visit we

in So was those MAX was are there. provisioning, strong. initial the a headwind, but that still The other

there, got have visits up it’s for for great them a just highlighting products We’ve something presence some second. and then the quite so, years. commercial that first And we with in are to a of shop been coming lot few a market

And that’s forward legacy those what new we the are So we am good. have move I to going ones as our on highlighting, quite it. dynamics are behind market coming

more the So good those products significant we presentations, aftermarket going have – think are more some as really components application I repair which just pretty they we we but the growth based of you our continuing a per many numbers I see guys we’ve growth did aftermarket amount cycle. hit term how their solid you from are aftermarket in long our and big highlighting, investor past, the if remember for on as means than use won,

good. are dynamics the So

we kind good can see them and count aftermarket on of We’re starting think many you many, years. for to

Gautam Khanna

you, guys. Thank

Operator

David your comes from state question from Strauss our Thank you. Please And next Barclays. question.

Unidentified Analyst

actually. have Hey, Matt you XXX but for flips guys. may for have that ASC this, a the on out Aero, guys This I headwind is missed is, Thanks David that you question. called big for how to sized headwind? the

Jack Thayer

For $X.XX the on tailwind in the of full a year $X.XX XXXX, headwind XXXX. it’s a back

Unidentified Analyst

Got it.

about sort margins, get to past that’s out the things on XX% think do to the then, happen I still Okay. have have I that’s have you target there XX% And to changed and then a would how about talked business some since know in what mean, guess going I guys you and that but of Industrial Industrial? just

Jack Thayer

a and where are think definitely that given areas I us. margin very the pursuing good we’re businesses we’re for growth, seeing those It’s target

taper XXXX I We that and the up have year. think said improvement clarify see Industrial ramping had I within throughout segment from the margin something maybe in businesses we’ll seen some a of off we’ve earlier, throughout an to our lower as margin

Unidentified Analyst

Got it.

Okay. Thanks.

Operator

our comes Poehls Associates. Thank Poehls you. Karl And next from question from

Your now is open. line

Karl Poehls

added I’m Hi on $XX been adjustment growth in aftermarket have on year. to XXX some It the XXX like guys. quarter. Great clarity looks the for might sales million appears about it basis looking commercial aerospace negative. that this just a

I on in and of think basis. on XXX a is year, a growth the X% basis first XXX the half you disclosed growth

would between think it if you’re I $XXX points $XXX that X% you of XXX? about fair assume delta compare a aftermarket So had to reporting, per last basis under and what if sales on year about it is apples-to-apples, commercial the on we’re XXX X,XXX basis, million to just be of a XXX basis there that a million is trying quarter,

Jack Thayer

year-over-year, been aftermarket XXX, mean Commercial in sorry. have roughly the would X% I

Tom Gendron

under Yes XXX.

Karl Poehls

a would be XXX basis? on than it higher So

Tom Gendron

On a XXX basis, XX%.

Karl Poehls

Okay. the... excluding And then guided I the think for full you mid-to-high year, to single-digits

Jack Thayer

growth. line in top the with line Roughly

Karl Poehls

Accounting been year change, full have a would basis? on it what

Jack Thayer

please. am I repeat that sorry

Karl Poehls

to the full a XXX year what basis? growth XXX, the aftermarket adjustment on would been commercial Excluding for

Jack Thayer

made fiscal XXX year we’ve in anymore, because to forecasting XXXX really not XXX. We’re the of transition at the beginning

So don’t that apologize we from don’t comparability have I I a – standpoint.

Karl Poehls

you. Thank Alright.

Jack Thayer

you. Thank Yes.

Operator

you. we from a Pete question Skibitski Alembic Thank have from follow-up And Global.

is now open. Your line

Pete Skibitski

Yes, thanks.

a for guys for D&A Just one question. fiscal estimate ‘XX? have full-year Do housekeeping you

Jack Thayer

D&A for...

Pete Skibitski

Yes, ‘XX. fiscal depreciation and amortization for

Tom Gendron

it, provide yes… but didn’t We

Jack Thayer

probably is modestly up right way the to think think about I it.

Pete Skibitski

Thanks Okay, guys. got it.

Jack Thayer

thanks. Yes,

Operator

from Instructions] CL next Thank Please you. King. Our comes question. [Operator state George your question Godfrey from

is phone If unmute mute, Godfrey. on your George it. please

George Godfrey

targets Tom, on up Sorry ramp or about XX% to the you Thanks. impact do those rest capacity you Boeing in higher. could you to from you is touched needs meet to that any place as the XX% production to XX% supply could in production that chain that with that. take more to that of going be you anticipating issues perhaps see challenging Are put the XXXX?

Tom Gendron

of as looking George – chain. some you supply there’s definitely definitely it’s know on in pressure was those bearings, pressure materials all If castings, forgings, whether already, probably in the capacity. I Well, are the some

trying work we’re to So that.

think that. I whole the industry experiencing is

working There So to for everybody numbers those capacity that’s of would is there commodities, pressure. is what I sure type those are make but say. some

working people should what And We’re I working projecting. could line and are is that become the with ramp constraint a hard. but hope be think I could I really ramps it, rate, in but Boeing temper think the

George Godfrey

Thanks taking Great. question. for my

Tom Gendron

Yes. Thanks, George.

Operator

question Cowen. follow-up a Gautam from have from we Khanna And you. Thank

open. Your line now is

Gautam Khanna

L’Orange had you wanted just are where any to US, you the revenue to yet I have their technology bringing there? ask on synergies

Tom Gendron

We’ve program Yes, won some we’ve won China. and in have. we

to So and that we see see more we’re leverage, starting coming in.

long cycle reminder, we’re amount of seeing that as and evolving a injection support actuation They bringing, synergies are the just to we’re customers. like system controls also the times, those or fair Just Aerospace, in as not bring a as as and fuel but development well. the have better happening do fact a not

very progressing that’s So well.

moving Company. quite really way the happy the We’re with L’Orange with is forward

Gautam Khanna

rate next implied L’Orange’s growth is What year?

Tom Gendron

a at not Industrial. separately time We haven’t providing broken from that this we’re out, so number the it’s

embedded And in flat mainly. up. So, to the slightly it’s

Gautam Khanna

Is it though assume the share. it to because would probably be maybe up fair of

Tom Gendron

but up that being mean, have a and up, being They little tempered. can headwinds. sales at look the bit. it’s gas Well, oil you it I have also we’d are strong

diesel sales the of Some power little tempered engine on large gen bit. a the have

be than it It’ll whole more dramatically So line. the won’t Industrial in be up group.

Gautam Khanna

very It’s you. helpful. Thank

Tom Gendron

thanks. Alright,

Operator

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

Tom Gendron

joining outlook. thank markets, to longer like invite you I’d our range join York I X. Well, on in-depth on all again December Investor of our for us our in have New discussion everybody strategies We’ll to little and like a Day Okay. at would City today. more us to our

joining So to see there again I thanks you and hope Bye. for us today.

Operator

gentlemen, today. our and call conference that Ladies concludes Thank you.

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

Woodward (WWD) 18 Nov 192019 Q4 Earnings call transcript