WWD - Earnings call transcript Q1 2022

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Operator

Thank you for standing by. Welcome to the Woodward Inc., First Quarter Fiscal Year 2022 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.

Joining us today from the Company are Mr. Chief Mr. and Chairman Gendron, Executive Officer; Tom Mark Financial Officer; and Mr. Hartman, Chief Provaznik, Relations. of Dan Investor Director now to would I like Mr. over to turn the call Provaznik.

Dan Provaznik

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

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

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

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

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

to $XX compared $XX or $XXX results an for net X%. fiscal and were or related year prior million XXXX the million for compared quarter, our earnings per Adjusted quarter $XXX first for share. share. to quarter. increase first million development for to were XXXX $X.XX to earnings quarter were of million the included Turning for the of to first Net per of business share sales to for costs to the a million first the or provided $XX fiscal related to $XX Free Adjustments to million the $X.XX quarter $X.XX per ongoing earnings million. Net million Adjusted of matter million XXXX charge free prior compared $XXX in cash flow adjustments no earnings first compared the the operating year cash was of fiscal of was for for the quarter. fiscal $XX prior the year. million was nonrecurring unrelated There fiscal XXXX prior business. activities the to operations cash flow Net quarter first a $XXX were year. $XX the by quarter activities, for

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

Tom Gendron

Thank you, afternoon, everyone. Dan. Good

challenges, labor positive COVID-XX-related business our chain and shipment the industry and the including recovery shortages market despite We the signs volatility. continue global in Ongoing see to in customer-initiated disruptions, permeated quarter. of delays supply revenue across impacted

ability resiliency uneven recovery proven a throughout continuing Although, orders recovery to confidence in expect underscores our year. our market we XXXX, solid and an deliver

to to aerospace improve. market continues Moving markets. The our commercial

weapons at to fleets in but commercial include are by and as the and rising aircraft throughout foreseeable is primarily China defense November. down being is rates travel and the overall remained restrictions easing is slowly for markets recovery Europe is as result a Overall, international improve, travel while in pleased the the to for guided of remain levels year. see We U.S. passenger recertification levels at of passenger lower pre-COVID ramp utilization higher Woodward traffic and stable, between that Commercial U.S. continue future. significantly expect to of build continues content. fueled to traffic aftermarket expected, domestic XXX MAX anticipated the nearly demand

industrial turbines power in continue gas drive increasing remains Aftermarket data new natural oil and generation, while for driven our our a a primarily freight year global activity. increasing, amount in for see replacement and primarily we by we continues improvements markets, outlook. has coal-powered growth In driven on market. to fiscal transportation, strong, we which significant the of to confident by in global demand strong future summary, ability above anticipate activity our been utilization, though after In improved calendar natural of demand backup the levels even for market market with progress has power downward Asia peaking remain for In the Turning XXXX Demand see trended challenging, to China and plants. we and market, orders higher increased our pre-XXXX previously late remains as centers. driving marine last we ships to will trucks stated robust uncertainty spending. levels, aftermarket gas and see gas prices of have The for gas capital year. through pricing deliver

which build reminder, profitability a traffic recovers headwinds fiscal rates the improvement in for In industrial business, of and from related weapon demand increase this gas sales. and customer and year all oil 'XX, investment recovery and increased prices, full for continued guided we services, turbines further our improved in markets marine our the business in should of as drive anticipate segment. despite in Aerospace As expect gas softened OEM we Industrial passenger stabilization

focus to recovery shareholders Woodward to value and customers opportunities. positioning challenges the delivering and continue our market capitalize of on future on will market We to a this with excellence, operational navigate

the the Now, financials I'll over in Mark discuss call to to detail. turn

Mark Hartman

including and were to of prior quarter, first XX%, down shipment X% primarily supply disruptions, in continued were by million, COVID-XX-related segment of for and shipment as to million quarter primarily earnings Defense were Thanks, of increase XX.X% XXXX XX.X% significantly million, for labor segment customer-initiated quarter. first of fiscal million sales up volume. sales both negatively industry-wide traffic XXXX. million of OEM $XXX an OEM prior or quarter were Tom. were $XX delays year COVID-XX-related of result the to $XX primarily recovery were ongoing impacted due Sales for constraints, segment aircraft delays. disruptions, sales segment compared quarter quarter or period. X% respectively, compared $XX first chain Net XX% year shortages for the was sales a of The first million compared XXXX for sales for the earnings OEM guided to sales sales the supply sales fiscal XXXX and in down sales driven to increase by an were of due by weapons. utilization. quarter year higher quarter Aerospace industry-wide the $XXX international of passenger orders. resulted commercial the some Defense and due domestic aftermarket and increase the of of XX% $XX which to in were the approximately from Aerospace aftermarket disruptions. negatively aftermarket Commercial increasing lower and in prior sales chain segment XX% Segment the impacted some

sales XXXX compared sales of million as to prior to by Adjusted for XXXX earnings national segment a expenses Industrial engines, sales the year SG&A $XX of negatively in segment million rate as were XX.X% expenses by the XXXX. development the to for nonsegment of XXXX for in the of million $XX compared excludes to nonsegment of $XXX were to prior tax first XXXX and well for first or million. of quarter to of for year were Industrial XX.X% expenses weakness X%. of in of activities and offset prior for Nonsegment volume earnings quarter $XXX period, impacts. primarily was partially There mix were million compared adjustments result million adjusted first for nonsegment $XX well effective year compared marine were XXXX XX.X% impacted were $XX or was quarter. related for inflationary costs was segment first sales quarter expenses no lower Industrial. first effective quarter sales. first of segment business industry-wide sales decreased ongoing for unrelated a was charge as decrease sales disruptions Adjusted XX.X% for nonsegment segment the compared $XX the to of XXXX compared China the X.X% million $XX first to XXXX quarter gas quarter the year with for for Segment of rate net of the X.X% quarter. operations sales prior million The the Turning approximately $XX of Woodward or nonrecurring the as of quarter product million quarter COVID-XX-related higher first XXXX At XX.X%. year. $XX $XX quarter million for quarter Industrial million tax or level, first business. first the R&D matter fiscal the year. prior million the quarter. to as of of the XXXX of the $XX The expenses associated the to of the

months year's three business flow compared to quarter. $XX flow the by activities. Leverage XXXX. at first Free year first X.Xx the no Adjustments $XX $XX were for fiscal months and to to of activities million included cash prior were was $X first to increases the first provided year Capital first quarter fiscal prior There adjusted to the XXXX at free the for flow restructuring and end the the XXXX XXXX of Looking the growth. quarter. of quarter million quarter. primarily to free EBITDA for cash cash free million three expenditures was the Adjusted free the year cash for was to support to $XX decrease the flows. related cash payments months fiscal cash free period. for flow free year cash anticipated compared in compared million prior flow working year prior first of was $XXX million this related of in for of for million adjustments capital for cash The $XXX development period. flow cash was operating three Net million activities flow

share first quarter dividends and of the $XX of of During shares Board-authorized program. form $XX under our in million to $XX of was million XXXX, the stockholders returned repurchased repurchase million fiscal

This to $X.XX that a be of dividend quarter's replaces repurchase up today, stock up transactions. stock which per our million we $X.XXXX of authorized program may stock two-year increase the private open dividend In in program. today, a we from Board announced the an XX%. of authorization repurchase Directors in Further, under prior and the market $XXX authorized per previously purchased approximately share, share, of addition, announced

an program part is of balanced our repurchase strategy. stock deployment Our important capital

flow, cash returning robust financial positive ability and business concurrently outlook, via and stockholders dividends, repurchases to our Given support to position generate remain stock strong future committed cash our including we to financial growth. in our to while investing capital

compensation not and to flow mid-teens. our disruptions over billion sales points XXX and an billion. sales to expected anticipated a percentages remainder sales net year Industrial segment return segment is costs. due to and free up sales partially if if segments XX%. XXXX percent OEM tax due digits expected chain COVID-XX-related generating COVID-XX partially material do fiscal adjusted to of profitability by and both the primarily be to quarter, segment in to costs. approximately XXXX. anticipated in low earnings pressure be lower aftermarket, between and XXX last the Adjusted the guided of increased compensation labor the pace flat than to fiscal turning improvement of weapon fiscal $X.XX as persisted in points although are commercial of Lastly, outlook. be double Aerospace in variable be both expected Net are by in low last fiscal each and industrial are volume increased double-digit segment sales annual growth -- XXXX over the net $X.XX XXX to to Aerospace for a the to sales effective Growth expected or of teens approximately anticipated year offset earnings basis increase variable cash The of sales of are negatively cash to incentive annual is greater fiscal volume, offset is primarily by flow supply year, adjusted be $XXX basis million, additional XXX%. expected affected return incentive approximately could expected rate the approximately as to percent the disruptions on and improve be rate conversion puts free inflation costs. sorry,

productivity share approximately growth year anticipated $X.XX $XX working earnings outstanding. The by between is and inflationary by primarily we returns, the fully call our to a expect segments both higher growth expected tax sales first the favorable of receivable. variable million offset concludes and open $XX quarter ready annual partially $X.XX weighted questions. we shares expenditures compensation costs, accounts This of Operator, for diluted last expected impact the are fiscal on As in results the of improvements are capital capital being rate. average to increase driven to business over comments sales and now Adjusted and on to requirements, are return higher pressures, the million. per of by expected based approximately XXXX. Also, the be

Operator

Thank session is [Operator Jefferies. time. from with you. this Please Kahyaoglu Our will your question state The question. question-and-answer begin at Sheila first Instructions]

Sheila Kahyaoglu

blame on you time. Maybe Hi, good this the thank afternoon we'll guys for and quarter Don.

few year a and bit, there? talk things about some could incentive if maybe improvement? the you of terms pieces down Aerospace quite comp we you the military progress and as like Mark, moving talk pieces the can In mentioned through was the moving digits, a double margins, about of we

Mark Hartman

Yes. did to in commercial us remarks, about Sheila, OEM volume as both continue. in sales our you anticipating talk prepared that strength heard aftermarket. we We're strength and

heard annual able the be in on pick and will will incentive which as million that quarter offset also the abate, you coming volume, business. impacted as mentioned, to back through, by compensation into we're us that Aerospace, up partially sales mention COVID-related the flow You then, disruptions will $XX the that those

Sheila Kahyaoglu

to it I picture Tom flow on then, bigger maybe the the a And and Okay. just ask years. segment. wanted I've over Industrial seen ebb question

on bigger what of there picture? are your kind thoughts So

Tom Gendron

think the Upgrades we I see up. cycle, turbo definitely see beginning We machinery recovering. power highlighting. generation Orders the are as now, up demand an we're We right Well, in increasing. are happening. of market picking were industrial

new the increasing. on both side, that service we So, and see

As I in prices we be oil seeing The see more the being capital and coming is prices, increases there. we start are majors is highlighted these good aftermarket there. seeing -- to the we're cautious, are the activity and the starting investment. levels. gas market aftermarket marine back, with we at will oil but There market some know

The are wildcard all year The natural us So kind say in the we the recovery. particular, that engines. in of a that truck right China recovery more if second And now the is of bodes want and in for for you anticipate for us. in towards dynamics well in gas to -- market. the the of half market market pointing

year, seeing And our as the kind move we guidance. to be we're back that the market industrial fiscal So picking through looks that's up. of of part

be increase with see, line. the should to the lever into So volume we that through we increases bottom able

Operator

Our next Research. Spingarn question Melius is from with Robert

Robert Spingarn

thinking of offset? I struggling you recovery is upside We've timing I'm just the all the Hi, to guide provide there? everybody. talked are with worse, there really the given sources that that can the highlight here you be quarter. see got true was unless prior going happened in, initial Omicron since came your are that things guess, Or conservative. supply quarter just about, good how you've you of nothing soft guide to had chain Tom, -- really has the

Tom Gendron

that impacted are definitely Yes. as that you in you can Well, the there's doubt know, markets. demand seeing increase. see we COVID But Woodward our no

I don't We're You aftermarket go falling particular, MAX. see orders increasing when Aerospace in with are the we come initial off. recertifying we in orders, China provision IP talk in. the seeing seeing segment, that the

turn, to coming were of I impacted COVID think and highlighted. some on demand lot had for disruptions as we're we seeing a our huge of and by -- do. we're there's But travel we've a anticipation got work we that is

as seeing rates that production the there. see but some is but no improvement we starting to demand We're highlighted, we're there's increasing, about opportunities. to So recover doubt

order off the confident company, demand -- what going that, mean of we worst a have work there. We that with the there's we by be factories we're see is, working the deliver We that's of responsibility that staffing. and absenteeism out we're related I So, the our that will passed on to full track it's and the do to within months our is could illnesses, book drop was to better our that, that and utilization and there, the we'll impact. disruptions. but that challenge that have of to and all think be COVID And that,

a we the our that, to and addition to as XXX add the year. direct put about need fiscal anticipating have hire of in and as with month to that In outlook the through need well do support enhanced personnel training, a direct demand, hiring lot a numbers and we've members, to we're

to to is and demand. and on we're that's got perform reflection demand a there, of on hard that, and hard So, we've that working work deliver the

Robert Spingarn

okay, this Can to color operations matter charge -- with business? unrelated around can that you put you the was nonrecurring some of the the

Tom Gendron

nonoperational of It's really time. we're just a out, but one it that into -- this go can't Yes. we calling details it's the at

Robert Spingarn

you then anything the shipment initiated, other And that Okay. else the only talked thing, there? in remarks, customer the were opening about delays

Tom Gendron

have been equates we A material. customers following disrupted, systems been reason they they Yes. that our we've you some have the of at had a and shortages. haven't pull you Same that labor disruptions, production to us for know lot while, other lean suppliers, that which pulled systems that have as

have has has disrupted to saw a the operation. or if we want disruptive absenteeism you combination workforce has other disruptions, it's where customers, our the meaning say, our and that people disrupted COVID-related So, labor suppliers, don't like, order

come we those to that that fiscal the anticipating from. recover year. on as numbers up and that will We're those revenue start that through will where shipments move and that's everybody So, make

Operator

is Our Glynn with question from Christopher next Oppenheimer.

Christopher Glynn

Good afternoon. thanks. Hey,

a market little bit marine to So, ask the there. I wanted about

do playing the it, that in I'm taking process swing you You how it curve that? see ramp the like out and just shape. starting process of full strength to talked up it's -- tilting about a towards the of sounds curious, aftermarket for way you

Tom Gendron

up. in freighters Yes, market. marine back seeing also during was what pandemic, is utilization that's online, rates up that of the aftermarket pushed the part worst the And highly increasing the are I part that's back maintenance bring say, our of out. bringing for the utilization, would We're biggest type making previous

that's in new then a we increasing. year. behind builds forecast ship the robust we fiscal happening, going see that, and So have And

positive which We per fuel systems fuel and also that LNG carriers come we in. call We multiple a we that's quite real engine see bit means increase ships, content. in the the a have what higher Company on see dual because for

So, signs. the industry, all the of lead out aftermarket The will this really those are with growth. times build out. positive in looking Again, provide year good and that's

builds As we like new add into the years, the also will growth. move and next several the to

it's and So up carrying I cycle, think that see on we a good here. forward

Christopher Glynn

starting And on to you kick you a piece OE the aftermarket just a little said in 'XX? within I fiscal that, bigger bookkeeping L'Orange in, Great. timing believe, little is and the bit see

Tom Gendron

it in The 'XX new with fiscal Yes, start lead on the long coming and is in and time the to 'XX, builds really order is time that with kicking be frames. will what's book. book going order strong

Christopher Glynn

-- It all your or your in lot of markets. aeroderivative a there, markets. in pockets uniformly. then sounds of lot various pretty like there's And shape it's other Great. I utility positive scale a know taking commentary on IGT whether

to want any for sure your markets. Just wasn't the layering IGT I of make missing commentary

Tom Gendron

seeing No, we're IGT.

compressors, And aftermarket movement total, to and seeing we that in service good are upgrades, turbo still picking all There's seeing 'XX steam turbines, to activity would 'XX. refer as those like and also that through to increasing. fuels. tied gas machinery to into so move we're where we're activity turbines, those segments up I'll So I cleaner add

to the few activity upgrading some prepare natural there system. We're on in and running East, one gas. burning seeing that for to fuel out also wanting to So their oil going have turbines, Woodward we're from customers the Middle seeing people hydrogen for especially of hydrogen-ready

customers our helping we're So, with that.

of carry-through activity long a years. real So positive the seeing types type in Again, will initiatives, we moving business think and for a next of a those several direction. lead around we're long time, credit that

Christopher Glynn

Great.

that if I broaden sort last the I of for the shipment of quarter? part customer explanation? just it yes, Or kind most could. think initiated one the me, The delays. -- across that was Was the in

Tom Gendron

two call And constraints. can what say would largest still then ways. at was be I disruptions. capacity No, would supplier look in it we supplier disruptions, One you the would

is, you a we The integrated know, And example, and an disruption. there. our the would little the area and chips the electronics everybody capacity around other you be really And by there's is chips the are use is and I labor demand difficulty the And in think -- have cellphone of that circuits. as capacity aware several give of pent-up industry. automotive by used critical industry that that we

we've also, seeing previously for disruptions, also we So pandemic, Woodward. people seen And resources mentioned capacity. coming a adding we the to there, period then seen we've numbers, And combination absenteeism enough drop of some absenteeism see that is that really here, labor adds And high supply this down. at and I come the beginning I were that's the a and high base. think, out as of starting that then to

Operator

Our Ciarmoli Truist Securities. next with question from is Michael

Michael Ciarmoli

Hey, into we're How of Thanks your obviously results? kind question $XX for Rob's the Tom, thinking just this on still I be dealing good to evening we I currently back slowing quarter. back mean, quarter, should questions. to second challenged mean, guidance, go a million. Maybe, with the taking guys.

of imagine you I on the $XX line up going be sequential in have mean, this to how tepid. you So, fairly sight guys ramp is good March probably quarter recoup do revenue? in million I

Tom Gendron

to in glad -- that won't absenteeism seeing and hard constraints the recovered No, them recover is be progress. won't second. to you question. -- half the quarter. still a be second to there. the third our and We're I'm supply We're disruptions some million still are the working and year, quarter. in fiscal in of it But labor we're our hard $XX of and second working We question. good It Yes. fourth more asked be try It's going the

back-end prepared it confident can that take we a some uncertainty, we but but We're why that's the there remarks. in and some that be is risk back, the in to up, pick going that there second, will to and loaded. is it's So, highlighted

Michael Ciarmoli

it. defense? there? just the on the Was equally -- on aerospace, split? Was was the Got it And commercial then more side, million. that that $XX color more that component on Any on

Mark Hartman

equally industry. across generally whole It's the It's Aerospace split. Yes.

Michael Ciarmoli

Got just, it. what the you about And ability are side here. -- then related but they've L'Orange, obviously, on we guys? pricing inflation me some you guys aftermarket. just for Okay. What seeing I on And you think got talking of about of the and for the mentioned the headwinds, to pass more an through, were

ability the price aerospace both in to confidence and So there? industrial and level

Tom Gendron

that being parts aftermarket we -- business question. control better of No, of our always a pricing. good have and Yes. In one, it's

able to majority OEM annual our sales comes of all kind we have and usually move of on the pricing escalation that's long-term side, escalation. agreements. OEM on Those So, -- an are agreements in there generally our that them, are to and clauses

recovery OE some timing The It's more see side, a that flexibility. a we will the little we aftermarket on So side. on there. issue have

all we agreements. see price we but the of timing that that in we're the get recovery realization, because will of the So, inflation won't some year of seeing

Operator

question Fargo. Los next Matt from with is Our Akers

Matt Akers

into a little guys You're afternoon yet? Is starting that little of activity. touch guys. at see a mentioned all Could international the question. translated orders last had it on that for good Has something quarter? you military Hi, bit Thanks to you demand? bit

Tom Gendron

in sales. Yes. through of foreign We that coming again military some our do see

military. we have aftermarket military some that's recent some in in been Some for guided There see where the for from orders upgrades coming weapons of activity.

but that. So bit we've a to more hard that forecast anticipate seen on timing We little there. it's coming, exact of

seeing from the port It's orders coming huge some. are numbers, we So there is positive but militaries. not some

Matt Akers

Got with touch of it. provisioning year, is to there and if from and Okay. what rate seeing increases move guess there sort you impact essentially the could some you're just Boeing this for then And maybe that of higher? I room quickly on

Mark Hartman

with Yes, provisioning. so out called we've the before

see, the to earlier China are starting those the we orders MAX starting is in see we some take and opportunity do provisioning and that of and that The the mentioned airlines -- starting to biggest those first recertification planes is there. to Tom

the actually talk we with always which provisioning, it's about delivered, get then they're flying. as and As the airlines deliveries taking matter of a narrow-body are routes which really,

has if an route, that. you starting for already airline a MAX when they're routes. provisioning not to for see may flying So That's airline is example, it's initial same the fly but But sale opportunity up come as, an that initial new also. provisioning will

from not we so provisioning we're have and for was increase but levels see to pick we a very are that us. provisioning starting initial a before talked large are And to years to this overall. we going year, And be XXXX XXXX, initial up anticipating nice year. going We're last return to those --

Operator

Our Pete next question is Global. from Skibitski with Alembic

Pete Skibitski

quarter. quarter? negative it talking in Is Good you're trails deal I afternoon, continued impact and you And but than you are guys. first last think chunky a it kind to say thought? the I came it of maybe more just maybe it third and the want to de impacts expecting dig of XQ minimis, negative fair it to know back maybe issue. we off the I in were into the good kind of supply in chain

Tom Gendron

at impacts we to And reflect most of first I'm guess say anticipated. I larger the terms on first the Yes. Woodward would in disruptions but was disruptions and quarter, kind suppliers, of also that that I through. shortages, COVID And our weighed say than labor the were absenteeism. we going

still that some January. here of in We seen have

that we off moved tapering in. and will it -- we has so move sites Omicron our operate of we kind it's anticipate through start February, into So, of as states a lot

we And going that so see down.

some earlier, are fourth as to it mentioned I quarter then move, supply take we the seeing, and had, of fully but so, And as third the we into we in improvements recover. some will disruptions

Pete Skibitski

any feeling I discernible kind I impact supply issues and don't for ongoing on. know -- not, guess negative continuing the it's the can this no, tease But you the you had impact if hard going Okay. on of any the from differentiate side ongoing maybe you that the COVID CR? or from and do resolution chain you've defense, are -- defense out with to but think

Tom Gendron

what going We're highlight securing we in where we're and we're seeing Day, not we programs of seeing hypersonics Day, Investor some really definitely And to the flat. defense are but budget. more But to increasing upcoming there said this stable other are in at areas opportunities the activity. our Investor of

programs March over go what But business what we'll in picking see you're you're that with some in. activity there. new overall, So the more depends on we throughout up Day. and Investor And

Pete Skibitski

share just guys the authority. $XXX two be years? that next intend opportunistic? that going use saying you're And are all do -- Or to million Is of to the repurchase you just Okay. then over you

Tom Gendron

Well, on opportunistic that put the in a horizon intention. market, as we'll we that's our but be two-year

Operator

from David with Strauss is Barclays. question Next

David Strauss

Thanks. afternoon. Good

So up just on to that. follow

guess authorization? I something cash shareholders away this of from kind plus based point, return share free -- XXX%, to XX% So XXX% cash pivoting flow you're at repurchase flow on the to

Tom Gendron

That's correct.

David Strauss

total defense, something kind as the we level go of the know full the aftermarket on does close yet. the defense don't year, guys Or digit. the called XX% right OE that It year? to versus throughout close I was to split down decline you for XX% down your And improve is for business? that But Okay. in double like out looks quarter. it

Mark Hartman

not That's year. for Yes. our anticipation

As about did COVID business we've hard. disruptions that talked of our the side defense with the hit

guided as still will weapons the but business, the be in is outlook softness headwind, we're of side defense which We've previously. to the same talked be stable. pretty the for about the Our rest of a the anticipating was defense business, it side

David Strauss

business pull And you think coming the you over And level to time? total here? you cost savings you've see do been of proportion out the size back pandemic that what could the during of able

Mark Hartman

Yes.

So of cost. the we've out stages over take of that early million did the $XXX we mentioned pandemic

initiatives to coming Now the that incentive some we some related return of about of compensation cost that in coming generally, over in based had is we've site we savings was the we've after related into haven't plans that of put variable rationalization half we're back the out that that facility we we've or said But that what of of a on XXXX have. pandemic million place had XXXX. to lot about got cost and XXXX talking initiatives that wouldn't -- -- $XXX

we're still move So we as that's forward. what anticipating

Operator

is Gautam next Cowen. question from Our with Khanna

Gautam Khanna

$XX follow about $XX have indirect, quantified was on the EBIT in, All -- from disruptions because can you the loss on sales now? what's the just of million decrement up that end impact million of to million COVID of EBIT the a sort the you well short. talked of do $XX Just you as

Mark Hartman

Yes.

is it quantified years over XX%. We've haven't around that our specifically. the We flow-through talked

the there. So could I from think math you do

didn't $XX suppliers. if think getting XX% million flow you $XX but approximately quantify all million, and been to about, specifically. us from we If it that across our we've and for with really obviously calculate generally, have disruption of It's supplier that both and of businesses our through, spoken were we right, or the has it both labor Tom impact all then shortages,

be So that I that would be would ballpark the thinking.

Gautam Khanna

of XX% if that back? the just even increment drag as recoverable up made all an in that Or outsized And not I'm we impact wondering QX volume. you just costs have of through if you year? some doesn't that that you and catch the in Okay. the get do can through up will, just in capture fixed later year,

Tom Gendron

facility. could costs, would through that the freight have where of we level we're flow be that flow-through our received lot pretty we for think expediting Mark still impacts our flow sales over the normal the time is through back highlighted to capacity on of A some normal coming expedited to potentially freight for costs,

most will anticipate we still flow-through. that So, of

Operator

question is from Barrington research. with next Our Chris Howe

Chris Howe

And for quizzing ask like would on another for here question to the afternoon. the Good guidance. quite me. and thanks afternoon me I

the cadence. expected recover You've a level surrounding some half in which to questions in million, the fact, revenue There’s is second $XX been reaffirmed of range. of lot the

As the quarter one but with the commercial it offsetting aftermarket we're acceleration some here. seeing we more books, the the absorb specifically, this outlook back to about disruptions relatively impacts think conservative and you points seems at to of can can this the what business, you environment guidance of in the some a level from juncture, aftermarket year perhaps view, continue acceleration ongoing of conservative half scenario still about And in early tell and the your of of range? confident feel to talk too or that

Tom Gendron

-- anticipates more could our doubt, a there as really not that new Without variant and in starts risk. severe forecast. If there's Sure. that's nobody be a travel air and impacting

a that, we're anticipating not of are going we're we're supplier anticipating reduction to that. a in anticipating and that We disruptions. signs anticipating We're recovery, absenteeism our seeing on improve

as we So example, we're shipments. the anticipating that's the with customers, outlook, say the rates seeing -- you are do guidance in our and then outlook. to and And if We our see from being too you see anticipating our is are we prudent increase. that can go think we're We aerospace, if commercial an is we not are line we and recovering delayed would the optimistic. case,

seeing well their customers we're legacy go new that Our seeing utilization is We're the flowing demand, as and utilization We're you as shop through. track demand as up. visits narrow-bodies, into seeing up. that are aircraft putting the

then levels guys back The And move we happening. to see highlighted businesses. -- the just we XXXX if earlier, from to the market are expect through All XXXX, forward are And see industrial we we right these we aftermarket, So in long-cycle accelerating in the pointing recall, would 'XX. as there. our that that not XXXX, you get expect in but I trends in into and direction. highlighted to

So, our we're from seeing coming forecast customers. demand

about don't up. do locks So, we but a anticipating -- we're our outlook. everything We're uncertainty variants -- it's what that we can't in not -- by outlook, if severe really not encouraged in that. COVID we're that we is not get know there new the I to that

Chris Howe

recertification the on developments year. of on move your looks Can XXX the levels? helpful. back expectations it now route for envisioning when and And in are been XXX MAX, you near-term this we calendar MAX also the type kind it's was what comment the through as become That's China, waiting outlook of like of could to and what here it it we've we're Okay. and

Tom Gendron

their that we seeing rate four are ahead which that they and highlighted times, seeing out usually numbers, with is ramp Boeing we're six can before What we so that, line their Yes. we've months came of lead up. production transition to to through Woodward

line increase, seeing also rates line rates we're the seeing So Airbus those increase. we're

along are initial And we drive for obviously, positive, but they the up China sales year, our happening. over as outlook recertification All higher is sales. will year will well in that, activity with be and as and new provisioning OE XXXX aftermarket provisioning of anticipate XXXX, increased into this last as sales, initial we go

new we're in hit and works, here are those all rates. going are customers So that our to those confident the

Chris Howe

last we environment demand. then I I one, your goals may your part in if Can on confidence as squeeze direct a XXX you of month it Woodward in, labor on one the with And your comment up the members of this hiring direct mentioned recovery? influx you Okay. think as through satisfy of different phases in impact level hiring and ramping its move to

Tom Gendron

good it's question. No, are tight. Yes. labor a markets Definitely,

competitive plan We into stay and highlighted to are competitive. existence has Mark in labor we prepared to remarks, inflation variable questions as wage be we incentive need seeing as needed get in as back to And the in well our market. the

capabilities doing effort. hiring we're we're being the And aptitude choice, a with and without companies competitive now, of challenge, what a It's facilities, work. an full is have for so able that to really attitude we're we of to is but it's training right And are great we our work tight exciting are, way and and resources plan. lot other we it's are, we labor hiring and and stay training. execute wages, on people, that our upped training locations we're place ensuring a So we've through in we're not benefits and market. But got competitive employer

the to many it's it. all we've challenge bring to So, put processes resources a do in on that but people, and the

high on can deliver sure making hiring to that essential is which deliver confidence got we we sales. we've can the the on So,

Operator

with question Securities. next is Our from Truist Ciarmoli Michael

Michael Ciarmoli

brought I you previously a sort employees wanted one ask Or to these just for was that, specifically of based people who have I that been off? find on on that are training, to out having Tom, of area XXX your -- that on you are a are talent? previously go about month had I mean, But you up. looking actually tracking pool sounds Woodward. there with new entirely laid it not you're and like mean comments

So the more little year it big I that that make goal. a point a balanced? to it full is achieving it could be more mean, choke pretty Or seems like challenging? does be

Tom Gendron

Yes.

had go during came they lot just the we So, for but a attrition, we've to lot the the of when decided of we in other in lot attrition, we've fill -- pandemic, like hired we're good of we also just this we nation, retirement. I that having years, like two substantial the have back a are folks companies, let last at guess, rest a it, of looked Boomers the is to And time pandemic. retire. had Baby And to through a

some so seen we've of And that.

some train we growth higher that of So to been doing with now we to continue people. expand other are, And addition have rates, our facilities, that. of the back as are some the we the bringing in to look having numbers you in ones we to referenced, especially

and dedicated We in I to aggressively why able that's we're bring being people said, putting resources. we're put So training facilities, online. dedicated really working

it. think do challenge, we've I to got big a place in but it's everything So

Operator

Our next question Sachs. is Goldman with from Noah Poponak

Noah Poponak

to expecting the second are revenue Good company quarter the evening. to organic like What rate quarter? total and compared growth look first margin you segment

Tom Gendron

we and first usually to expect quarter. Yes, the we that be accelerating up detailed don't give guidance fourth it over look into the then quarter

Noah Poponak

that half XXs the sequentially, The sort in to second Okay. back understating I for of and margins Aerospace maybe Or in into get year well compare. business. was the math? it's bit actually up but where a the a the I on you're looks -- concept back Yes, directionally there's of industrial growing year that Aerospace has XQ was a well like margins to last and those tough quarter the the the am mid-teens. guide? just holding to quarter XX%, line strong And you'll to like accurate XX% to XX% need second this I'm this this Are full the a guidance, It year. top and be guess think to exit there's where I expecting a of XQ the pretty into this, overthinking dynamic just quarter whole

Tom Gendron

Yes.

first make comment order the I'd our growth. supports So the is book

We have to get out. the shipments

question answering as particularly good side, well. your And industrial confident order seeing Aero. we're book in on the on the So, and we're recovery

with code tell And doubt sides. that rate you numbers getting both bottom substantially hit we can it's much, right fourth commenting have highlighted. the the higher. I'm growth sure going in directionally There's ZIP knows you're reminder, we capacity. line and everybody And as call a have And the too without this, as I but third no it line say the it for to is anyway, but on quarter just to and that is we on. by accelerate and So the we top deliver know what

the we're through capacity, year that get leverage on below still once coming So you get good out of fiscal And you it. can volume 'XX really sales.

We are than capacitized for higher this.

high leverage. these through, COVID we sales disruptions, come those them going on overcome we're as and and to deliver So get can

like no. And you're so, the someone improve numbers saying will

Noah Poponak

Okay.

for I remember supply quantification With I to fourth closer the Because few this $XX driven net quarters. or you've revenue slippage. at point? had the quarter a I a the and chain in last year. third disruption, being just there that million Is think number guess, general driven

to I further think I kind it went And quarter going is back think started. than that. third of that

out? revenue more So that. some pretty there now of related related disrupted? Or I'm and capital then isn't to do on And capital sizable of delivering of a to or are sizable balance flow revenue working all other have that, having working disruption you revenue that to you surprised

Tom Gendron

Yes.

COVID more as little we highlighted quarter, as of Woodward labor disruption. disruption. this So customer the color occurred more well which shipments a maybe addition to the on delayed give What was

I quarters, we and look as $XX quarter you sequential supplier was million. in if this said from its the think $XX approximately million So disruption

did see So increase. we an

customer that labor So was disruptions. -- Woodward and the of then rest

Noah Poponak

disrupted too… the three on from delivered revenue you have But

Tom Gendron

Yes, been we have electronics still we're some out. on industrial we those. had -- side, gotten shortages, would of not There's to has -- some that you and some that recover our use have. some working I

of some from that move quarter-to-quarter. So,

that's talked But disruptions supplier We've of some on moving had in plans But folks us. now new we're on their delinquent we a So, us. that the seeing handful yes, of some all of it of suppliers. got We've XX-something-plus got the that And ones with improvements suppliers magnitude There's of some them, and hurting we're there in. are happening. we're -- action are the site. out. we've order previously managing the really disrupting and

Noah Poponak

kind weapons of guided point this how how of rate just of in disruptions? what's you The versus decline in any much quantify that that run cited much of at Okay. that the quarter, ability rate decline business to it was the happening these in core was

Tom Gendron

guided in guided the Yes, our got disruptions by government down. of hit programs weapons. definitely just clarify, the from in weapons the is and buy lot current But we the one to bigger is JDAM the

top of been And on disruptions -- occurred. all kind And so you that that we that, we've then of we some has supply to have and of communicating seen --

Noah Poponak

XX the budget Is versus disruption? is of that? Or that than sort is it very it XX-XX we cited, different that

Tom Gendron

I was think disruption? early I supplier question If on. lower the much How lot? much the So got it's how right, just was

Noah Poponak

Exactly. Yes.

Mark Hartman

but be going would primarily, lots. the be disruptions I be to lower something primarily to say it's it's would lower lab going the

Tom Gendron

number not is this the Yes, provide.

Sorry.

Noah Poponak

No that’s directionally helpful.

Operator

Our next Instructions] [Operator question Spingarn with Robert is Melius from Research.

Robert Spingarn

all, of activity. I how rates the there's one is wanted the you're ask XXX that no -- about and Tom, thinking first about thing you to that given well, been

think And So this we then of this to get is a a years. are, been. venture of what rates I the GE? the your low be want now And inventories going thing news the for couple has look that when activity at about What joint latest like? with to mechanics what sense

as think Now, how I aftermarket, but we that? should as not understand about it's profitable maybe

Tom Gendron

here Yes, side a going I producing that to is, there outlook and what it it. we've in say got OE still you've brought would I mean bit our down, is But yes, that That's little there. now unfortunate outlook. the our year. that's a that aftermarket the are but and be fiscal of low in but Positive seeing utilization we field situation, XXX that, is for part it up, from is whole really

Robert Spingarn

on up you pretty are know. we how anywhere never Okay. thinking you that inventories that about that Are With built engine or about? should And somewhere? the inventories not else then be comfortable OEMs,

Tom Gendron

I a you inventory of know, that got mean aircraft think built lot We've pretty good that in lot system don't aircraft. Yes. there's already handle. a in there's built-up a isn't is build. that of as I the

think you what's knowledge. get we inventory huge with there. I that the like and the, those. So, what we reference build rates flowing what's line part we be OE out of track see pretty seeing our can rates for to that. We're once And the That's are, quickly not up, best we'll piles

believe supply So a lot access of we're that. line there with in is whole in all don't pretty I chain. the

Robert Spingarn

you have a side obviously the question more I Okay. guys with positive And a the wanted you to dividend, term. this authorization, a on have in business. here. of longer optimistic look, the confidence lot I And question bring

flow on a have this shop bit You good we're bodies, of very touched positions and the little to going visits you've get here. newest on narrow which

You're years two of of stock the now the over the hits going back you're from be flow to rubber road think you the visits When through? year when just it's next Is goes, as to where wave the shop going buying couple LEAP recovery about? big big and years. Neo is dreaming aftermarket? the bow What's of As on the go? soon that coming

Tom Gendron

great a question. is This Yes. Sure.

to had XXX, aftermarket. particularly And visit, it's of current of units the is a some and are they're for first First BXXXX, lot shop a generate a nice generation, you lot XXX, -X or having the the the due. CFMXX if current or going at highlight engines, their a field. that in to of for I Those coming really lot we've look demand want got AXXXceo, whether the pent-up are all the and

as that's to that's really the concept aftermarket coming. to X- plan we're period. in and about XX-year that's long-range to And that we in where the years. us next then the Investor few pick our use move, So we'll going talk or propel really That's all up at all starting have, period we going then to Day. explode five-year And

really And interesting, it's but... so that

Robert Spingarn

used talk we to that The stick about? hockey

Tom Gendron

-- order of but it way lot look that's communicated, way things at that put out you took two-year trajectory, got that's something is coming one see back, our our -- I pause, if the the this pandemic going business we've it. at on A -- of we've look we're to and Yes. to what carve

Robert Spingarn

Yes. I Thank up. it -- No, wanted appreciate don't think why sight I shouldn't that, I bring we of to lose I you. it. that's and

Operator

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

Tom Gendron

all I of I really you do Thanks to everybody Okay. New person. appreciate We be We're joining Investor to and in going to York It's City. appreciate informed for us to would Day. planning that. in at join today. the questions, us our very like questions. it always But invite

to of have March a virtual you also element it's be forward But and all and to you Wednesday, in going I We seeing to there to look X, talking person. it.

today. Goodbye. So thanks for joining us

Operator

concludes Ladies today. our and gentlemen, call that conference

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

Woodward (WWD) 1 Feb 222022 Q1 Earnings call transcript