Woodward, Inc. Q1 FY2025 earnings call

• The first quarter was a strong start with robust market demand in most areas. Aerospace and core industrial showed growth. - Managed through Boeing 737 MAX delivery pause by balancing labor and improving flow. - Core industrial had strong performance in power generation, oil and gas, etc. - Made strategic decisions like acquiring Safran's electromechanical actuation business and divesting industrial fuel nozzle business. - Progress in automation with Rock Cut Campus commissioning automated deburring stations. - Positive market outlooks in aerospace, defense, industrial, transportation, and oil and gas.

Aerospace segment sales for the first quarter of 2025 were $494 million, an increase of 7% compared to $461 million last year. Commercial OEM sales were down 10% due to Boeing work stoppage, offset by commercial aftermarket up 19%, defense OEM up 21%, and defense aftermarket up 8%. Aerospace segment earnings were $95 million, 19.2% of segment sales. Industrial segment sales for the first quarter of 2025 were $279 million, a decrease of 15% compared to $326 million. Transportation was down 33% due to China on-highway sales decline, but core industrial sales (excluding China on-highway) were up 7%. Industrial segment earnings were $40 million, 14.4% of segment sales.

• Reaffirmed 2025 guidance except for adjusted effective tax rate and adjusted earnings per share. - Adjusted effective tax rate for 2025 now expected to be approximately 19%. - Adjusted earnings per share range narrowed to between $5.85 and $6.25. - Plan to return approximately $215 million in 2025, including ~$150 million in share repurchases and $65 million in dividends.

• Supply chain issues with some suppliers struggling with output and quality. - Labor challenges and less experienced labor affecting supply chain. - Geopolitical developments impacting defense demand. - Economic challenges in China on-highway sales. - Uncertainty around tariffs and their potential impact.

Q: Scott Mikus asked about the guidance for the Aerospace segment and supply chain performance relative to pre-COVID.

A: Chip Blankenship said supply chain issues post-COVID haven't been fully solved, still have labor and quality challenges, and similar issues in industrial and aerospace supply chains.

Q: Scott Deuschle asked about Boeing restart and commercial OE revenue.

A: Chip Blankenship said Boeing demand signal is strong, and commercial OE revenue's growth in second quarter depends on discipline to meet demand and tougher comps.

Q: Sheila Kahyaoglu asked about industrial profitability and LEAP fleet.

A: Chip Blankenship and Bill Lacey discussed core industrial margins, divestment of small product lines, and LEAP fleet growth and its contribution to aftermarket.