WWD - Earnings call transcript Q3 2020

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Operator

Welcome to the Woodward, Inc's.

Third Quarter Fiscal Year 2020 Earnings Call. At this time, I would like to inform you that this call is being recorded for rebroadcast, and all participants are in a listen-only mode. [Operator Instructions] Joining us today from the company are Mr. Tom Gendron, Chairman and Chief Executive Officer; Mr. and Officer; Chairman Mr. Vice Weber, Chief and Financial Bob and of Don President Relations Treasurer. Guzzardo, Vice Investor I would to now like Mr. over to turn the call Guzzardo.

Don Guzzardo

we to of and call, outlined release. Tom take We'd all comment results on will Year Thank as to and will our then Earnings Woodward's related At discuss markets you financial strategies, XXXX today's operator. earnings Fiscal will Third the in In you, Call. presentation, our our end Quarter Bob like questions. of welcome our

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

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

on As businesses global presentation forward-looking always, related our by industry. in private can taken in the change. and the uncertainties and for measures specifically, are filings. elements identify elements and ongoing assumptions including Those the light those of our comments governments current including economy or risks of consider and we individuals, risks do more based elements, our surrounding frequently Please and outlook our this the and COVID-XX pandemic

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

first earnings compared quarter $XXX fiscal turning Now sales XXXX for for compared million turn third net net Net to million the generated $X.XX share of for call the the a to operating or nine for decrease year million of or months from on quarter. $XX the compared our cash our earnings per $X.XX quarter. I the prior period. $XXX XX%. months $XXX of the for nine XXXX or million was Free of year quarter, free free cash results the share were adjusted Net will to period. million prior share for year were million cash $X.XX and to third Tom to now comment $XX for first was adjusted quarter. $XX Adjusted was XXXX flow year per further or Net million $XXX $XXX million of to flow prior and year the per million for the $X.XX activities $XXX compared to million earnings prior results, per $XX strategies flow were share for compared fiscal over cash the markets. prior to million of $XXX

Thomas Gendron

and Thank you, afternoon, good Don, everyone.

impacted severely global was by this Our performance the quarter in pandemic.

team supply hold discussed through challenging actions strength These and on first and we heightened as our and customers, preservation navigate adverse of mitigate this to on we with was the proactively include However, when steps. resiliency communications cash revising cost-cutting as last to effects business. I'm of we pandemic the demand period. suppliers actions world, Woodward proud plans, numerous continue immediate and taken took quarter, the our

environment, been our economic we evolving the strength. of members rapidly have through focused progress our on financial safety maintaining and communities, we As while

assumptions of we scenarios fiscal in markets our and within So the range is quarter. far, our what we are early seeing developed in the third

and today invest while expectations, the closely future. monitor business structure our to rightsizing situation, aligned customer adjust for with for to continue continuing our the strategically We cost

our to in detail. Moving more markets

the XX% manufacturing slow platforms the Our declined traffic is brunt has from pandemic. Global increase to and begun Aerospace closings and plummeted flight off much slowly as a OEM bottom production due constraints, the some plant improvement, Flight hours to of and and on global stabilizing. impact show OEM furloughs. took segment some are as the build rates rates the starting

a have However, global fleet solid for recovery Defense, the content delivered the our commercial favorably Woodward, programs both than In Defense of greater driven and recovering flow. commercial permanently improving positive combat retired that Aerospace dynamic service readiness. it the in aircraft fleet we strong. and will OEM resulting Overall slow by couple upgrade growth anticipate a recover, cash be over does with aftermarket business in next activity When aftermarket first. impacting our in U.S. years earnings will Woodward remains

related strategic However, of XX, levels April power on closed focus supply our were our to COVID-related Woodward to due our we Industrial enhance challenges. With businesses, the a of sales and initiatives one respect segment pressured Industrial segment, number and divestiture of renewable chain our to systems margins. on

our We we delivering contribute will profitability are on that move these forward. as confident targets to actions

Turning scheduled Industrial lead deliveries for to are to unchanged due our year calendar markets. gas times. turbines largely long for In industrial XXXX generation, power

economic low reduction uncertainty. lags in almost production a global depressed market, of gas drilling to result have customer with pandemic Transportation, activity. markets be and In a in expect all in very the activity weak prices as shutdowns past pandemic. Oil the see the gas drive demand, decline Marine truck markets oil a volatility continue but to been earlier the XXXX. to and on continues However, from as challenged so areas downturns, general a rebounded impact in as have in shown in natural year, turbines volumes China gas we

from the actions an we downturn results. recent improved our pandemic-related capital their in their on our the markets, current have the prices oil the investment. still early are to While to levels In address in quarter impacts took financial softened summary, lows, impediment

strengthened actions, these significant improved liquidity delivered cash we our flow and quarter, sheet. of the result a balance in As further our

this exploring monitor closely are and constantly to continue actions environment dynamic be other to taken. We

long remain continued strength, growth we anticipate market term business position for pressure in XXXX, through company. our While on and our fiscal our confident opportunities we

We that will pillars business have and technology numerous successfully cycles. to navigate continue new invest economic enabled Woodward operational excellence in of to past our

period, focused this we through exceptional on As we shareholder delivering emerge company. unprecedented are stronger managed value even and an

Now Bob over to to I'll the turn it financials. discuss

Robert Weber

third plant were or result U.S. X% compared prior The sales continued for of decline sales decline aftermarket Commercial passenger compared were aftermarket last in XX.X% sales quarter XX% we Defense impacted down traffic was well the military of result the year severe segment sales the Thank very you, Aerospace weapons prior a nine our period guided by XXXX. segment and commercial third a quarter. were XXXX Aerospace earnings as segment strong hours. predominantly in and to year. prior the fiscal million first as sales of XXXX sales, from secular tied third to global Defense reductions the COVID-XX quarter, a the rates, $XXX the commercial were quarter and the and driven furloughs, in in all OEM of lower benefited decline quarter lower supply segment XX% a programs. flight million, global or sales sales activity of driven by segment the to of Tom. in U.S. for offset XXXX from third year, for of the remains quarter chain support Defense the spending $XX decline Defense quarter earnings of XX.X% the compared negatively Segment pandemic. sales months OEM lower readiness early severe the the of as were up decrease partially by aftermarket fixed-wing to quarter of and sales upgrade aircraft fleet of OEM XXXX quarter. the combat the took were as lower Overall $XXX initiative strong. same of in in as the cost the closings the global to million from and improve due by down for in to backlog issues production

Industrial. period, the million million were for to XX%. sales XXXX of $XXX $XXX fiscal year of to in quarter segment decrease Turning the Industrial a prior third compared

of oil XXXX third renewable Industrial will to quarter of and refer as compared Industrial as the third third $XX of decrease. quarter million related or the million earnings $XX earnings quarter year, million $XXX and the a for to or segment the result sales. and sales a headwinds $XX quarter in Industrial I for impacting segment power were X% segment XXXX prior macroeconomic adjusted Industrial Industrial in declined third XX.X% million the today, earnings of the of the were weakness XX.X% and segment of businesses, gas segment would sales. for for Adjusted were systems segment $XXX third continued million of sales. the segment for the which of XXXX quarter our earnings Industrial markets RPS, XX.X% of segment Excluding or the been have divestiture RPS. quarter sales segment

million third segment at or lower of Industrial quarter RPS, of Adjusted of XX% or or RPS, adjusted was quarter excluding Industrial segment of of primarily segment Industrial Industrial million million Adjusted been the year. Excluding segment net by reduction offset XX.X% period $XX and for $XX sales of which XXXX cost for segment would Industrial last for net same earnings earnings would segment segment volume, earnings earnings, excluding been to sales, XX% unchanged net the due segment decreased, have partially sales RPS sales. have XXXX to compared initiatives. the the earnings, $XX third

The The X.X% sales XXXX for Woodward as quarter prior compared L'Orange third XXXX. $XX prior RPS. of resulting mentioned, the Non-segment the Reported excuse to for to amortization third the XXXX effective year. due the primarily was impacts third quarter. Adjusted XXXX of XXXX a of to for for of XXXX in same year offset the reduction cross-currency was cost Tom $XX quarter. RPS. million At quarter were compared for me. The excluded the of for of or divestiture the initiatives. expense cost to XX.X% the adjusted level, the third third to by the related segment related expenses and or sales reduction compared compared of -- swaps the for the Adjusted for as XX.X% to million cost excludes million to year XX.X% XXXX of year the related COVID-XX. quarter same of last the the million fiscal $XX X.X% tax tax restructuring was $XX of profitability quarter primarily XXXX gain improved rate non-segment to third million quarter the XXXX benefited and of third of of $XX the the third partially quarter million was XXXX. was expenses compared non-segment $XX for expenses R&D third to expenses of of of quarter initiatives, million of $XX The expenses quarter period in for divestiture quarter of decrease the was million overall certain $XX prior the primarily the by quarter XXXX quarter third initiatives for was Woodward of SG&A from for $XX from However, quarter quarter non-segment the in result in were Adjusted of resetting $XX sales the third for adjusted XX.X% the Adjusted million and year. quarter, percent for for non-segment R&D move charges SG&A reduction million rate compared quarter the third was the interest higher acquisition. costs. adjusted prior XXXX in Duarte to compared SG&A decrease effective prior rate

compared million period. at nonrecurring items, was aggressive cost cash million flows. months months control for flow the were cash free Capital operating the Net expenditures provided first $XXX of for nine for prior the by cash the flow XXXX of believe adjusted the first and it cash $XX of was activities cash first XXXX months of the flow $XXX year the fiscal in year XXXX. primarily to of increase free capital nine to period. expenditures, The Looking nine ongoing million prior for management. year capital Adjusted cash flow the impacts lower the free result removes for first current period. prior operations $XXX onetime months million Adjusted free $XX $XXX we flow between million for $XXX compared prior and better the comparability of working was Free of to XXXX certain effective and period. year was for of compared million provides cash nine million

for please slide this as reconciliation. We mentioned, focus today financial detailed to our strength cash to challenging in Don As for tables continue flow position the in call refer deck confident a this environment. of on managing we the the remain progress through prudently and

We believe positive throughout will cash the to we free downturn. continue generate flow

and closely times As cash at to managing reducing end a result of X.X quarter. of EBITDA the third leverage debt, the declined

critical balance We also to billion in sales declines on we've but and our capacity. these revolver and sheet have on actions driving improved significant investments approximately liquidity, liquidity summary, our impact combined taken cash the while earnings the our reduced and available have cash of of times, $X future. still strengthened are In challenging flow, hand

outlook. have XXXX associated their and in Global effects unprecedented scope our fiscal COVID-XX turning Lastly, been the economic pandemic with depth. to

to volatility specific not forecast Because continue XXXX. uncertainty, for making we challenging. guidance markets providing see our be of in short-term severe fiscal that even financial We will

our anticipate are to quarter third fiscal we to we to quarter Operator, the third ready our questions. the for now However, concludes open fourth our on results call quarter. to of comments financial and the be business This similar XXXX. results

Operator

Sheila [Operator Instructions] comes from Our from first question Jefferies.

line Your is open.

Unidentified Analyst

afternoon, thanks guys My be the Aerospace on Good would the question, first for I Hi. time. guess, side. and

a you decline. seeing obviously, If could we're massive

you inventory? MAX on what you're in If you are platforms and terms your of on comment could own other on seeing maybe production and where the

Thomas Gendron

I comment think, Yes. Sheila, little rates production on is, MAX first uncertain. the thing us are I'd a all for I the now right bit think

will Things have really it's out what moving. been think is I play when certified.

And so rate don't I have stabilized today, guess we production a quote. to

in one. on rates of the through So have rest the that and tracking the side commercial those and on through been I what have customers. to one with think our that production market, POS communicated state either Tier anything updated have reflected we'll Airbus not The or come Boeing directly are

they're So we're what with tracking saying. really

Unidentified Analyst

Sorry, Tom.

on any right MAX, are you Just the producing now?

Thomas Gendron

We have we're that producing. some hardware

by So the have. we it varies that end product

but all on not products. pulling, producing, system, are already they're consistent the how we in and our yes, it inventory MAX it's So depends was much what across

Unidentified Analyst

ask Industrial. Okay. wanted And about I then to

I helped level? the you a dilutive don't think much that I were pretty Is decrementals divestiture the maybe this that can And talk how good, about was but know RPS the to actually. what margins? was of sustainable business,

Robert Weber

Yes.

fairly the quarter, on of little and some offset RPS. We the It's the for an the in by encouraged are then We of the were this the quarter turbine we've been three six think And that mix and favorable. last I one in L'Orange it first kind seeing business industrial doing some of year-to-date. having the things, reduction decline a aftermarket. cost does actions a months segment in bit. going stayed flat major by improving the there represent quarter, work earnings I'd say and and is it's obviously RPS impact and probably to

Unidentified Analyst

you. thank Great,

Operator

Thank you.

of next Spingarn question. your Suisse. state Please Our question Robert comes Credit from

Robert Spingarn

sharp held Aero well in despite this in afternoon. Tom, the quarter sales. drop pretty your Good margins

you'd So Or assuming much if for June I'm the quarter, out don't QX maybe worse? further margins, we expect that get have be differently, pandemic margins floor drop-through should unless the calling wondering gets cost said the in worse. to favorable sales to comfortable

Thomas Gendron

to And rally. tie a definite there's volume. strong the There's a

quarter. was a The very tough third quarter

call knows. the on everybody think I

parked, Our a taking furloughed, customers had airlines weren't very facilities closed, products, people the were time. were challenging

say, issues You should fourth our pandemic third okay. to represent subject quarter the bottom, could that and fiscal further

the would look as aftermarket. Bob going mentioned thing the as that's Now The and highlighted, say production certain, come that's we but for first like. back well, what is to can't that it And I uncertain The is MAX, knows. that's one was asked the really everybody the uncertain most forward, as changed, still will exactly been what MAX be. going the Sheila have ramp and on rates rate

understood, are were they obviously months The from other significantly ago. even where ones down six

I'm obviously, those what highlighting see that start is the reason So is, high-margin aftermarket. first we the growing OEM, business. they'll a And thing that's is

bode sales, on which anticipated as margins we So increasing year-over-year. move it should into for XXXX lower well are

Robert Spingarn

but And you things top a as then line both past side, industrial are the I June how And guess, summer then into here, from think about margins? top from we perspective, just trending on line I how a guess, the move perspective?

Thomas Gendron

be Yes. to pressure. going Well, line, top continued there's

we've seen businesses reduce out have portfolio rates. also of come call done weeks. that pruning and and have to announcements those from margins our out sure improve what core but our I'm businesses. over cost with we've our customers We though, last some production adjustments some low-margin some good fact, hold actions, X.X week, believe, do continue both seen the We that And will would removing margins. in businesses we

one not into picks really a still But forward. industrial should structure a goal we'll up is for changing, toward the going the things move as lever the initiatives with growth taken, volume plus see be tough which higher how XX% we to we've until outlook margin we we're this step months And have some come that still we've is So sales cost had there stabilize. business. a margins we as are to is

Robert Spingarn

Thank Okay. Tom. you,

Operator

Thank you.

Our of next from question comes Christopher state Please question. your Oppenheimer. Glynn

Christopher Glynn

pathway discussion afternoon. want I up good the for Industrial had build margin pruning. kind of on you there, brought the just Thanks, to of

think top point impact is of Just about as degree sense pruning of of get that RPS, Other to what a than taking on like a should line? kind want place? the we couple

Thomas Gendron

Yes.

say to as when Bob RPS I highlighted, think refer that, we as the we businesses. what

turbine product margins of lines core number lower lower lines industrial the had Those of the margins. largest product with So actually net is than significantly converters a wind those. there being the

the of to strategic were those sales margin based not divestiture. businesses we talked improvement based points And that be announced X, in or core we on like previously, our that businesses future. steady And X.X addition, divestiture so would on the we when

Christopher Glynn

I There Okay. to Yes, pruning other are contemplated wanted the moment? actions just not clarify. at

Thomas Gendron

look the material. an of our see Nothing in constantly on portfolio, RPS the not order We we do anything future. at but near

Christopher Glynn

to Okay. Any levels? terms a window, any environment system? built pent-up I jump in for of to really oil Marine that the tracking it global gas drivers? if up a trade? also think creates aftermarket if over minute. maybe demand weight the that should want and And wondering about in production we How Is to there's

Thomas Gendron

Yes.

Where to will to it's in think you're highlighting. global coming are do really see as demand we see point there leads We Your trade, that the tied back I aftermarket increases. and economic utilization GDP, be some pent-up -- online, as brought is global activity, correct. ships fact in which

we we So that up, and that, at economy we're are looking as picks will our global anticipating the see that. forecast up picks economy

Second on orders carriers. seeing we're that thing is some favorability LNG for

a there. is LNG trend So out

substantial on content We have LNG carriers.

aftermarket And ships tied as to are see couple in the service. years put next built that we will also and coming them. those of those a into nice have And so

Christopher Glynn

thanks. Okay,

Sounds good.

Thomas Gendron

Okay. Thank you.

Operator

have And next Global. Pete we question. from your Please state Alembic

Unidentified Analyst

the commercial sales slower kind about that on think the should Tom, on for recovery guys. better recovery and guys maybe modest v-shaped aftermarket or the newer Hey, you mix good or the more the in Are of a in sales? we of just aftermarket of obviously, the is afternoon OEM a comments your a Hey, implying versus, you the slope kind slide comments aircraft. more commercial on

Thomas Gendron

claim would recovery. v-shaped I not a

in flown route will the at spectrum. have per The taking structures fleet. really see Woodward aircraft track say aircraft smaller. have will There as ones planned most, that has retirements monitor every coming, We pandemic the of higher out fleet all But so it's that for that that airline. fleet they're coming what What that's for aircraft of little-to-no we the announced we out utilizing? the a part. I recovery that most aircraft and Pete, been are? think see their be And trying content is has the actually look the some than have flying? they're been the content before. What what we or we're there, the we So they're really to

because will is, with means market than lead better move we as more the good that probably what margins. recovers, the So sales content and market to per we which recover have higher plane, we forward will

out, Woodward very So now, a market. be we'll more now, the years position call a we of in about as year from better analysis it's portfolio, really fleet. the from have what things think And detailed will of we start and flying portfolio settle demographics the an again, the excellent two

Unidentified Analyst

Okay. That's great.

guys that. that follow-up on kind been getting and you for I lose talking what side. to been easy like quarters few more think gas? have but I track exactly, I point do comps in down, of got closer Industrial about to guys we soft has the something XX% one XX% oil feel feel oil you gas Just and like trough At we and I now. like a the to get you Are in area? for

Thomas Gendron

Yes.

At think and calendar the on the a the I we of that on saw start and that that lot product you or applications hours. lot in gas drilling our XX% goes oil And everybody there's pumping XXXX a Woodward into and for oil market in compression, gas. are of of order, the that past roll or point, on oil is those reminder call, the have too. drop product just A XXXX, quarter first of one was and doubt. gas as sales, no it applications just

when been of down. that's running, they shut So a they're generate lot aftermarket, good

additional no And and there's operation, additions no so no sales. with OEM aftermarket

we So an but we're kind about, and a oil holding made with Industrial, pleased all you we're pandemic, we've yes, pretty had compounded if how of together. crisis and think it's for this, it gas through still by

So which shape. we'll recovers, good be that it when in will,

these oil bring we before, was cycles. all place. in be previous a that our will and that back asked that maybe market to saw gas. there to When start related you it And could operating, oil an aftermarket question earlier, Marine, online but up demand during rigs to And or and back apply cycles they somebody get oil

Unidentified Analyst

you. Thank it. Much appreciate

Operator

Thank of have next Barclays. you. we Strauss And David

state please your You question.

David Strauss

it. When thanks. Hey,

Did you your the down much actually revenue missed the on were could if quarter? the you aero know you're comment don't OE to on I in commercial say potential aero I it. seeing the destocking here? might commercial a in that And from see side for have sales pickup how So decline

Thomas Gendron

Yes.

commercial was approximately OEM down XX% down the quarter. aero was So in aero six

So quite significant.

and the even little a question hard some was studied But them, have regarding the rates, we've all is why MAX. been this to inventory monitoring We calculating on say, there a of the it's production as in system. and and

so planned of We've And there of supply be into the that would rightsizing some through got inventory numbers. will I our whole chain. some say we've that. seen

I Airbus, rate at the saying producing just to given Embraer, call stated occurring. the balance are it And So you their production we stabilize supply think that the lines we it to to I'm needs all new and that inventory destocking. producing months just chain next a that's But come the will product. to turn and It's rates. the then are over Boeing, rates. which

David Strauss

that? their that flight airlines arms forward get start of all parts calendar material use do have activity cannibalizing you below might the kind we much aftermarket flight activity we any Okay. on see forward going that of the the I could Thanks. using for with to now, kind Tom, flight seeing guys But about of in down. aftermarket line decoupling the aftermarket start else, do the and we're pretty what actually and around see this aftermarket, of the a actually activity? kind and was everyone what underlying potential think QX right you coming in And concern going down you relative as mean, and

Thomas Gendron

Yes.

of the shops, obviously, I we're a into they as can think was state the thing rates. proper airlines much, I minimize interesting reduced trying activity in expenditures doing today. their still doing job. If would same, be at I shoes, I'd The going much as much is the are seeing engines to

and quarter. will planning by best bad their the were quarter, flight as in in even We out will hours We this equipment, we're do not the in far our see that to that that delay can. outlook ways, some aftermarket delay in they as sales down expenditures our swapping airlines

So watch And we there's certain not lot that. would I to that will right fall wrapped that it's uncertainty I There's back to know maintenance of that then we putting aircraft shouldn't as into more they amount also Again, all far means off so as we hours seeing and rapidly the flight inflection hours. make a and challenging retired impact believe pick fleet an today, the aftermarket There around safe will so being of service, part But occur flight one don't we're have and start that. and some has tracking what on that happens quite which they're too up pick point parked, than below to start is of be sure a that flight of they The forth, equipment. or more up be all may hours. we're that. with drop. will of worthy

experienced XX so industry, like anything seen So in this. We've got nobody team. challenging has to to XX forecast, plus a the as time, given good from long really that team I've been a in the my industry years

we due to dynamic we the So that I of demographics. customers, everybody. out see do talk see, Woodward But work we're inflection doing hit our estimate, with will fleet to downturn this earlier, accelerate was had talk point, to that the to discussion best we airlines, fleet once

David Strauss

the Thanks. All Right. color. Cushing all

Operator

And Securities. you. up have Thank we Michael next, Truist from

If please you your state question.

Unidentified Analyst

think Hey good you But on in the XX% worse? bit you here. kind think, some gave aftermarket of here. a your in GE down. of I evening big shop And their if the the backlog? I some CSA guys. this Tom, for second the expectations the enter a down could could bottom little engine in quarter get declines Thanks customers, think we shops. half XX% a growth of and the do taking I just the I look quarter. being guess I with of were mean, at kind maybe engines you mean, the there the aftermarket. for question more billings visits clearly, saw, what I know

So the bottomed you've the up? think think Or before do in worse you here you it aftermarket here? do actually short-term picks gets

Thomas Gendron

to back percent or with don't sure believe we're on airline share stop the any have plus seeing overhaul, everybody, just who as bottom did where do is, back I What pretty put hardware do number with we close of said customers minus bottom. to it we a more stop. and near what and I'm ship working it. It's we're had for repair work, not

were we bottom outlook that. fair off this complete then it But had time, say, amount at please few we've move of we And seen we for at a the number over of a of customers, some see So back the shop as the same to of did come it, months. time, next which to get us. we visits unsure

we've So here. seen we've on at able very also we've well to been receivables, gamut and frankly, careful. whole careful we how ensure look are did you airlines pay. And if to been very been the And operators we've our

so we lot and dialogue, really did that. with of have a well we And

say that but over can't based going starting I and in up more the I'm we're start line next get and period, So inflection on and year to pretty that bottomed the we're next uncertainty, it again. picking the point time see won't the bottom they'll well or an but near worse, say, over I'm in to then

Unidentified Analyst

it. Got

nine whole on, about on your what that have I any times you being a times, going that out. other guys? there's near-term Okay. mean, opportunities engine have, on pushed XXX the of then major the Does just that obviously, and And does impact things host but content

Thomas Gendron

are forecasts our This five Well, course. year now all changed. now, yes, of previous of

So but recasting ago, six forecast. in sales everything, had as we've we're you were forward, going Obviously, adjusted. our back if months those gone

came sales. have were would XXX we had come And planned once to online. sales. times it been would online, And provisioning was It have there initial so

want We the very again. And same will career, this to in life. People So my People but a here time, do never to believe huge. about. working It's that. sit fly impact yes, all at fly and in lost. truly it's talk row much a successful around entire internationally. In been that my be will I've home aircraft. there's I not not an

stir So we all crazy, are not like going traveling. little a

think we're whole I world way. going soon as can. the So as to And all is get ready that we

flight one year, two XXX going be back. for years, flying very come So planes. years, are go see that the to It's you're again but it's people three and great international see times, AXXX I'm demand these going XXX, confident will aircraft and to we'll just the

Unidentified Analyst

just the comp of the was bonus. last done all think through you. Got in anything the that Did flow last Was And quarter? I last I in there all the variable quarter. one, was margins else? there quarter, reversal Right. that and know quarter? Or this at

Robert Weber

was done was bonus last terms quarter forego But nothing we That quarter the year. because was credit all year. There like the recorded the in for big no last it of reverse. in annual

Unidentified Analyst

it, thanks. got Okay,

Operator

your Instructions] comes Thank you. Khanna question. Cowen. Please of [Operator next question Gautam from state Our

Gautam Khanna

Yes, thanks, guys. afternoon good

Thomas Gendron

Hi, good afternoon.

Gautam Khanna

in back X/XX, what last mix might the the use curious, what And I that but one the affect wanted part I was is cannibalization, was Tom's you? you serviceable which how material? it, to pick before to have guys your some to outs experienced, you Or that and is like, Maybe aftermarket response up the downturn? that, maybe have see the similar of different on I exposure was 'XX questions was what on earlier does and how mix or what 'XX, to guess, downturn?

Thomas Gendron

Yes.

market with that What If online. come that service latest some coming you from that want date, I permanent we to it's go a type repaired, material of a be, equipment question. the would time, used have retirement, more a back real standard the service to we they where To haven't to seen would periods, though anticipate we they that in downturn. of had see to little But did see a time of small be mean, we you last say brought in those up to say, that retirements so see serviceable interesting was some material, a if There impact would use number value. controls back us you to that. those to was thing we good

actually it, not So we that work actually that's tied would available, We're they universally, come some see aftermarket did we we and looking on actually let's sure back coming would at complex make that if we okay, through more us. market. saying saying, to of the that to units saw see but participate that some in

negative it sales. we're ways I our material to that. aftermarket do But don't be so on to at a And looking expect

Gautam Khanna

on to you getting from just three you're the you getting and like a what do deliver feel do visibility keep what have visibility just Or Or now And Do over supposed destocking. follow-up have right good the Okay. you customer point two How earlier. you quarters? next or on or to much orders the schedule have? change changes like? you,

Thomas Gendron

to in to I'm So our all another. shared one talked going about you. okay? markets, our quarter, We customers I this no highlight over across say all this not going What with Yes. but last

change to pretty So we did was this is our slow saw on and and plans Customers anticipate we in to this happen. remarks, going And understanding reference through that. happened. we and what with lived darn And prepared proactively based made what what And having production orders. changed is we our be were Aerospace. accurate downturns, Industrial their we to can

every what week. customers levels are our they're inventory to customers talking the are like. looking align what deliveries, to All for the We in and

your long So and of in answer on current confident what we produce doing and the inventory are top a will very our what requirements. system, how we're little to customers to the question, is

could on And like we've it. like Now, us. will a I'd weekly would I to have see those Inventory production in discussion. I with see volatility customers well really in changes really say working But And And a it's the Yeah. I'd rates. could we're we're because top of somewhat say said, got there market. changes we requirements? are be We in yes,

Gautam Khanna

in one pipeline? redeployment. things of appetite are this of just Great. kind or And to entertain downturn we mergers the what one on, have Is you just it in preserve you, last the situations M&A where just one looking or liquidity? cash Or at your acquisitions,

Thomas Gendron

first knowing And was Yes. initially liquidity, shape in And that the debt is would can with there. ample good quite with What issues then I that you to number not results and had wanted say no liquidity, the covenants by could priority X. we're we like. ensure see we go, liquidity this where

the on over next this X/XX. go our did remember, in it after significant position We after past as we everybody We a liquidity, the ensure financial acquisitions to working crisis months don't in did As initiatives. we market net financial free financial I, year, have conditions you told were And did downturns. did. We to Bob buy, crisis. into we on we the And cash. the And and we we advance, to preserve growth will are before we crisis world, it crisis, that watch might us were market. hit, start lot until of in need actively made prices too guys we going we two the really the and the Aerospace high. went that debt We accumulating

opportunities next well I so positioning see they're customer weak support into technology the where looking the be just make more the opportunities, in deployment At to properly to about market. application. very able that. at conservative going I we'll we're have R&D, on it There's very and and development, to We're to not we lot with time, customers like that can of know highlight I though, investing want of be this still So like. organic opportunities prudent M&A. on we suppliers or cash the our but talk may not we're same share is a the

believe come good rate So going growth that. we're we're down on not as stronger market And very to absolutely recovers. I the with backing out

we're going to doing be So both.

Gautam Khanna

Thank very guys. much you

Thomas Gendron

Thank you.

Operator

from Thank Please question. Suisse. you. Credit state And your we now have a Robert from follow-up

Robert Spingarn

guys? mixed last customers frame and saying ask are comments guys where that destocking if customers on ever the your side between and you, a or Tom, need. and what get what wanted I some your into to OE follow-on to I wanted you have question the really asking situation on between you to earlier signals just trying then airframe the engine

Thomas Gendron

material lead want and a you to say, Rob. and really, they There's always sync, difference are management strategies. confident. But to in times we're Not

a from fact, we both get we ensure of As at confident we're to matter them. data in the of that look constantly both

I again, would monitoring are in tracking today, say So discussions, weekly they and sync. we're this

Robert Spingarn

had because risk of was OEM Castparts, forward, couldn't overstocking of you'll not ask particular I one engine engine period quite reason turns of that just that guys, And lot they I through components it happened least or least been. going at already with at wanted lengthy and Precision if just out And track The there's who the sold destocking. it. it. maybe it's And be a this were to of necessarily that is in aware any we back but remember wondered

Thomas Gendron

would at would in same I the would the Woodward, thing. What Yes. do say occurs and industry, we

them inventory. go of on that's to then delivering the the more with to talking If if what engine time And got consistently a a not in What kind you we're you to that then chain, have long we airplane. burn delivering inventory what a in fashion. we going on customers things then some about that gets And to an just-in-time say will with our time, lead of about you're up to a is would supplier off. of we're when build then buffer with supply parts change, gets manufacturer podded our talk hardware is nacelle I

not the inventory at they that big we're sites. of customer, in Woodward when their do got selling to you a inventory system. But to have track So buildups

system. it's the just mainly So what's flowing through

of not be ensuring due we there's some supplier confidence we in that tell because suppliers So a I supply deliver. have I to understanding say on performance can't destocking that poor big Woodward. what's our that's an can every a little why just you, buffer effect chain I of in have can more to you we the going on

So I what occurs, understand that experiencing. but how we're not that's

Robert Spingarn

catch-up come I'm wondering, But is, a two flow. three of a was came have out something half cash context from will before whenever discussed by in Okay. And free while the from and like don't down have years, think this and of years big but, we the you spend? pandemic, when we just this then last now, year, up CapEx is just year, I that I

Thomas Gendron

it. Yes. were prepared for Look, No. growth were happening, facilities' we that the our good investors. This and and ahead is for future all we or of investors was

for maintenance So the just going, and needing of rates that and capacity. think of have additional capital that line capital, we not There'll we're productivity things. years be

below have significantly past to going be but X, capacity. going be not it's levels it's CapEx because brilliant to like So we

Robert Spingarn

Okay. Excellent. you. Thank

Operator

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

Thomas Gendron

thanks, this investors, company. our and the some going to for going Please going challenging the think look joining I talking and to quarter and out with reach And next us we're what's have you how you we've on forward with to provided Hopefully, in report. times, but through we I is market can today. questions, at challenging Well, everybody, it what's us all for color. our only information imagine to through on quarterly understand and you if

So you. thank

Operator

and our gentlemen, concludes today. that call Ladies conference

one Eastern call, to will listen this call of starting conference at available by it would rebroadcast calls. today X:XX or p.m. (XXX) time XXX-XX-XXXX like dialing you Daylight a (XXX) XXX-XXXX U.S. be U.S. may to If you dial one for

and your also enter The is XX in can company's call. The lines. that also days. participation access code disconnect XXXXXXX. for for today's We you is the be conference for the available thank You website, call you broadcast code access at your www.woodward.com please U.S. will which ask

Woodward (WWD) 8 Aug 202020 Q3 Earnings call transcript