Q1 2022 Woodward Inc Earnings Call
Thank you for standing by welcome to the Woodward, Inc. First quarter fiscal year 2022 earnings call.
Speaker 1: Thank you for standing by. Welcome to the Woodward Inc. First Quarter fiscal year 2022 earnings call.
Speaker 1: At this time, I would like to inform you that this call is being recorded for re-broadcast and that all participants are in a listen-only mode.
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.
Speaker 1: Following the presentation, you're invited to participate in a question and answer session.
Following the presentation you are invited to participate in a question and answer session joining.
Speaker 1: Joining us today from the company are Mr. Tom Jendron, Chairman and Chief Executive Officer, Mr. Mark Hartman, Chief Financial Officer, and Mr. Dan Proveznik, Director of Investor Relations. I would now like to turn the call over.
Joining us today from the company are Mr. Tom Gendron, Chairman and Chief Executive Officer Mrs.
Mr. Marc Hoffman, Chief Financial Officer, and Mr. Dan <unk> director of Investor Relations.
I would now like to turn the call over to Mr. Probang snake.
Thank you operator, we'd like to welcome all of you to Woodward's first quarter fiscal year 2022 earnings call.
Speaker 2: Thank you operator. We'd like to welcome all of you to Woodward's first quarter fiscal year 2022 earnings call.
Speaker 2: In today's call, Tom will comment on our markets and related strategies, and Mark will discuss our financial results as outlined in our earnings release. At the end of the presentation, we will close the meeting.
In todays call, Tom will comment on our markets and related strategies and Mark will discuss our financial results as outlined in our earnings release at.
At the end of the presentation, we will take questions for.
Speaker 2: For those who have not seen today's earnings release, you can find it on our website at woodware.com.
For those who have not seen today's earnings release, you can find it on our website at Woodward dotcom.
Speaker 2: We have again included some presentation materials to go along with today's call that are also accessible on our website.
We have again included some presentation materials to go along with todays call that are also accessible on our website.
An audio replay of this call will be available by phone or on our website through February 14th 2022.
Speaker 2: An audio replay of this call will be available by phone or on our website through February 14th, 2022.
The phone number for the audio replay is on the press release announcing this call as well as on our website and will be repeated by the operator at the end of the call.
Speaker 2: The phone number for the audio replay is on the press release announcing this call, as well as on our website, and will be repeated by the operator at the end of the call.
I would like to refer to and highlight our cautionary statement as shown on slide three.
Speaker 2: I would like to refer to and highlight our cautionary statement as shown on slide 3.
Speaker 2: As always, elements of this presentation are forward looking or based on our current outlook and assumptions for the global economy and our businesses more specifically, including the expected and potential effects of the ongoing COVID-19 pandemic.
As always elements of this presentation are forward looking or based on our current outlook and assumptions for the global economy, and our businesses more specifically, including the expected and potential effects of the ongoing COVID-19 pandemic those.
Speaker 2: Those elements can and frequently change, do frequently change. Please consider our comments in light of the risks and uncertainties surrounding those elements, including the risks we identify in our filing.
Those elements can and frequently change do frequently change. Please consider our comments in light of the risks and uncertainties surrounding those elements, including the risks we identify in our filings.
In addition, Woodward is providing certain non U S. GAAP financial measures, we direct your attention to the reconciliations of the non U S financial GAAP measures, which are included in today's slide presentation, and our earnings release and related schedules.
Speaker 2: In addition, Woodward is providing certain non-US GAAP financial measures.
Speaker 2: We direct your attention to the reconciliation of the non-US financial GAAP measures , which are included in today's slide presentation, and our earnings release and related schedule.
Speaker 2: We believe this additional financial information will help in understanding our results. Turning.
We believe this additional financial information will help in understanding our results.
Turning to our results for the first quarter.
Speaker 2: Net sales for the first quarter of fiscal 2022 were $542 million, compared to $538 million for the prior year quarter, an increase of one-
Net sales for the first quarter of fiscal 2022 were $542 million compared to $538 million for the prior year quarter, an increase of 1%.
Speaker 2: Net earnings were $30 million, or $0.47 per share, compared to $42 million, or $0.64 per share.
Net earnings were $30 million or <unk> 47 per share compared to $42 million or <unk> 64 per share.
Speaker 2: Adjusted net earnings for the first quarter of fiscal 2022 were $36 million, or $0.56 per share.
Adjusted net earnings for the first quarter of fiscal 2022 were $36 million or <unk> 56 per share.
Adjustments to earnings for the quarter included costs related to business development activities and a charge related to a nonrecurring matter unrelated to the ongoing operations of the business.
Speaker 2: Adjustments to earnings for the quarter included costs related to business development activities.
Speaker 2: And a charge related to a non-recurring matter unrelated to the ongoing operations of the business.
Speaker 2: There were no adjustments to earnings in the prior fiscal year first quarter.
There were no adjustments to earnings in the prior fiscal year first quarter.
Speaker 2: Net cash provided by operating activities for the first quarter of fiscal 2022 was $39 million compared to $147 million for the prior year.
Net cash provided by operating activities for the first quarter of fiscal 2022 was $39 million compared to $147 million for the prior year.
Speaker 2: Free cash flow for the first quarter of fiscal 2022 was $26 million compared to $139 million for the prior year.
Free cash flow for the first quarter of fiscal 2022 was $26 million compared to $139 million for the prior year.
Speaker 2: Adjusted free cash flow was $27 million.
Adjusted free cash flow was $27 million.
Now I'll turn the call over to Tom to comment further on our results strategies and markets.
Speaker 2: Now I'll turn the call over to Tom to comment further on our results, strategies, and markets.
Thank you Dan good afternoon, everyone.
Speaker 3: We continue to see positive signs of recovery across the business despite market volatility. I'm going COVID-19 related disruptions, including global supply chain challenges, labor shortages, and customer initiated shipment delays, permeated the industry, and impacted our revenue in the quarter.
We continue to see positive signs of recovery across the business despite market volatility.
COVID-19 related disruptions, including global supply chain challenges labor shortages and customer initiated shipment delays permeated the industry and impacted our revenue in the quarter.
Speaker 3: Although we expect an uneven market recovery throughout 2022, Woodward's proven resiliency underscores our confidence in our continuing recovery and ability to deliver a solid year.
Although we expect an uneven market recovery throughout 2020 to wonder its proven resiliency underscores our confidence and our continuing recovery and ability to deliver a solid year.
Moving to our markets.
Speaker 3: The commercial aerospace market continues to improve. We're pleased to see the 737 MAX recertification in China and expect overall build rates continue to ramp slowly throughout the year.
The commercial aerospace market continues to improve we're pleased to see the 737 Max recertification in China.
Correct overall build rates continue to ramp slowly throughout the year.
Speaker 3: Commercial aftermarket recovery is being fueled by rising passenger traffic and utilization of commercial aircraft fleets that includes significantly higher woodward condo.
Commercial aftermarket recovery is being fueled by rising passenger traffic and utilization of commercial aircraft fleets that includes significantly higher Woodward content.
Speaker 3: US domestic passenger traffic is nearly at pre-COVID levels, while international travel continues to improve primarily as a result of the easing of travel restrictions between the US and Europe in November .
U S. Domestic passenger traffic is nearly at pre COVID-19 levels, while international travel continues to improve primarily as a result of the easing of travel restrictions between the U S and Europe in November .
Speaker 3: Overall, defense markets remain stable, but as expected, demand for guided weapons is down and is anticipated to remain at lower levels for the foreseeable.
Overall, the test markets remain stable, but as expected demand for guided weapons down and is anticipated to remain at lower levels for the foreseeable future.
Turning to our industrial market power generation demand for gas turbines remains strong driven primarily by growth in Asia, and our replacement of coal powered plants.
Speaker 3: Turnings are industrial market. The power generation, demand for gas turbines remain strong, primarily by growth in Asia and the replacement of coal-powered plants.
Speaker 3: Aftermarket activity has been increasing and we continue to see strong demand for backup power for data.
Aftermarket activity has been increasing and we continue to see strong demand for backup power for data centers.
Speaker 3: In transportation, the global marine market continues to see increasing orders for new ships and higher utilization driven primarily by a robust freight market, which will drive future after market.
In transportation.
Global Marine market continues to see increasing orders for new ships and higher utilization driven primarily by a robust freight market, which will drive future aftermarket activity.
Speaker 3: Demand for China natural gas trucks remains challenging, even though global natural gas prices have trended downward after peaking late last calendar year.
Demand for China natural gas trucks remains challenging even though global natural gas prices have trended downward after peaking late last calendar year.
The oil and gas market has improved with pricing above pre 2020 levels driving increased levels of capital spending.
Speaker 3: The oil and gas market has improved with pricing above pre-2020 levels, driving increased levels of capital spending.
Speaker 3: In summary, while we see a significant amount of uncertainty in our markets, we anticipate improvements as we progress through the fiscal year, and we remain confident in our ability to deliver on our previously stated 2022 outlook.
In summary, while we see a significant amount of uncertainty in our markets. We anticipate improvements as we progress through the fiscal year and we remain confident in our ability to deliver on our previously stated 2022 outlet.
Speaker 3: As a reminder, for the full fiscal year 22, we expect further recovery and improved profitability in our aerospace business as OEM build rates increase and passenger traffic recovers despite the headwinds from softened guided weapons sales.
As a reminder for the full fiscal year 'twenty, two we expect further recovery and improved profitability in our aerospace business as OEM build rates.
The increase in passenger traffic recovers, despite the headwinds from softened guidance weapon sales.
In our industrial business, we anticipate increased demand for industrial gas turbines and related services.
Speaker 3: In our industrial business, we anticipate increased demand for industrial gas turbines and related services. Continue to...
Improvement in marine markets and <unk>.
Speaker 3: stabilization of oil and gas prices, all of which should drive customer investment in this segment.
Dave utilization of oil and gas prices, all of which should drive customer investment in this segment.
Speaker 3: We will continue to navigate the challenges of this market recovery with focus on operational excellence, delivering value to our shareholders and customers, and positioning woodward to capitalize on future market opportunities. Now I'll turn the call on...
We will continue to navigate the challenges of this market recovery with focus on operational excellence delivering value to our shareholders and customers and positioning Woodward to capitalize on future market opportunities.
Now I'll turn the call over to Mark to discuss the financials in detail.
Speaker 4: Thanks, Tom. Next, sales for the first quarter of fiscal 2022 were $542 million. An increase of 1% as compared to the prior year.
Tom net.
Net sales for the first quarter of fiscal 2022 were for $542 million, an increase of 1% as compared to the prior year period.
Speaker 4: Sales for the quarter were negatively impacted by $70 million due to ongoing industry wide COVID-19 related disruption.
For the quarter were negatively impacted by $70 million due to ongoing industry wide COVID-19 related disruptions, including supply chain constraints labor shortages and some customer initiated shipment delays.
Speaker 4: supply chain constraints, labor shortages, and some customer-initiated shipment delays.
Speaker 4: Aerospace segment sales for the first quarter of fiscal 2022 were $336 million, an increase of 5% from the prior year quarter. Segment sales were negatively impacted by approximately $42 million of industry-wide COVID-19-related disruptions, which resulted in shipment delays for some orders.
Aerospace segment sales for the first quarter of fiscal 2022 were $336 million, an increase of 5% from the prior year quarter.
Segment sales were negatively impacted by approximately $42 million of industry wide COVID-19 related disruptions, which resulted in shipment delays for some orders.
Speaker 4: Commercial OEM and aftermarket sales were up 38% and 31% respectively, driven by continued recovery in both domestic and international passing traffic and increasing aircraft utilize.
All OEM and aftermarket sales were up 38% and 31% respectively, driven by continued recovery in both domestic and international passenger traffic and increasing aircraft utilization.
Speaker 4: The Benz OEM sales were down 20% in the quarter, primarily due to lower sales of guided weapons.
Defense OEM sales were down 20% in the quarter, primarily due to lower sales of guided weapons defense aftermarket sales were down 18% compared to the prior year quarter, primarily due to supply chain disruptions Eric.
Speaker 4: The expense aftermarket sales were down 18% compared to the prior year quarter. Primarily do the supply chain disrupt.
Speaker 4: Aerospace segment earnings for the first quarter of 2022 were $51 million, or 15.2% of segment
Aerospace segment earnings for the first quarter of 2022, or <unk> $51 million or 15, 2% of segment sales compared to $46 million or 14, 4% of segment sales for the first quarter of 2021 day.
Speaker 4: compared to $46 million or 14.4% of segment sales for the first quarter of 2020.
Speaker 4: The increase in segment earnings was primarily a result of significantly higher commercial OEM and aftermarket sales.
The increase in segment earnings was primarily a result of significantly higher commercial OEM and aftermarket sales volume.
Speaker 4: Turning to industrial. Industrial segment sales for the first quarter of fiscal 2022 were $205 million, compared to $216 million in the prior year period, a decrease of 5%. Segment sales were negatively impacted by approximately $28 million of industry-wide COVID-19-related disruptions, as well as weakness in China natural gas engines, partially offset by higher marine.
Turning to industrial industrial segment sales for the first quarter of fiscal 2022 or $205 million.
Compared to $216 million in the prior year period, a decrease of 5%.
<unk> sales were negatively impacted by approximately $28 million of industry wide COVID-19 related disruptions as well as weakness in China and natural gas engines, partially offset by higher marine sales.
Speaker 4: industrial segment earnings for the first quarter of 2022 were $24 million, or 11.5% of segment earnings.
Industrial segment earnings for the first quarter of 2022 or $24 million or 11, 5% of segment sales compared to $33 million or 15, 2% of segment sales in the prior year Industrial segment earnings decreased primarily as a result of lower sales volume as well as product mix and net inflationary in.
Speaker 4: compared to $33 million, or 15.2% of segment sales in the prior year. Industrial segment earnings decreased primarily as a result of lower sales volume, as well as product mix and net inflationary income.
Thanks.
Non segment expenses were $29 million for the first quarter of 2022 compared to non segment expenses of $23 million for the same period last year adjusted non segment expenses for the first quarter of 2022 or $21 million. There were no adjustments to non segment expenses for the first quarter of 2021.
Speaker 4: Non-segment expenses were $29 million for the first quarter of 2020.
Speaker 4: compared to non-segment expenses of $23 million for the same period last year.
Speaker 4: adjusted non-segment expenses for the first quarter of 2022, or $21 million. There were no adjustments to non-segment expenses for the first quarter of
Speaker 4: Adjusted non-segment expenses for the first quarter of 2022 excludes costs related to Business Development Act.
Adjusted non segment expenses for the first quarter of 2022 excludes costs related to business development activities and charges associated with nonrecurring matter unrelated to the ongoing operations of the business.
Speaker 4: charge associated with non-recurring matter unrelated to the ongoing operation.
Speaker 4: At the Woodward level, R&D for the first quarter of 2022 was $25 million, or 4.7% of sales, compared to $32 million, or 6.0% of sales for the prior year quarter.
At the Woodward level R&D for the first quarter of 2022 was $25 million or four 7% of sales compared to $32 million or 6.0% of sales for the prior year quarter.
Speaker 4: SG&A for the first quarter of 2022 was $62 million, compared to $56 million for the prior year quarter.
SG&A for the first quarter of 2022 was $62 million.
Compared to $56 million for the prior year quarter.
The effective tax rate was 19, 7% for the first quarter of 2022 compared to 12, 6% for the prior year quarter. The adjusted effective tax rate for the first quarter of 2022 was 26%.
Speaker 4: The effective tax rate was 19.7% for the first quarter of 2022, compared to 12.6% for the prior year quarter. The adjusted effective tax rate for the first quarter of 2022 was 20.6%.
Looking at cash flows.
Speaker 4: Netcash provided by operating activities for the first three months of fiscal year 2022 was $39 million. Compared to $147 million for the prior year period. Capillac's expenditures were $13 million for the first quarter of 2022 compared to $7 million.
Net cash provided by operating activities for the first three months of fiscal year, 2022 was $39 million compared to $147 million for the prior year period capital expenditures were $13 million for the first quarter of 2022 compared to $7 million for the prior year quarter.
Speaker 4: Free cash flow was $26 million for the first three months of fiscal
Free cash flow was $26 million for the first three months of fiscal 2022 compared to free cash flow of $139 million for the prior year period.
Speaker 4: compared to free cash flow of $139 million for the prior year period.
Speaker 4: Adjusted free cash flow is $27 million for the first three months.
Adjusted free cash flow was $27 million for the first three months of fiscal 2022 adjustments to free cash flow for the quarter included payments related to business development activities and restructuring activities.
Speaker 4: Adjustments to free cash flow for the quarter include payments related to business development activities and restructuring
Speaker 4: There were no adjustments to pre-cash flow in the prior year first quarter.
There were no adjustments to free cash flow in the prior year first quarter. The decrease in free cash flow and adjusted free cash flow was primarily to working capital increases to support this year's anticipated growth.
Speaker 4: The decrease in free cash flow and adjusted free cash flow was primarily related to working capital increases to support this year's budget.
Speaker 4: Leverage was 1.7 times EBITDAQ at the end of the first quarter.
Leverage was one seven times EBITDA at the end of the first quarter during.
Speaker 4: During the first quarter of fiscal 2022, $37 million was returned to stockholders in the form of 10 million of dividends and $27 million of repurchase shares under a board authorized share his end conditions.
During the first quarter of fiscal 2000 $20 million to $37 million was returned to stockholders in the form of $10 million of dividend and.
And $27 million of repurchase shares under our board authorized share repurchase program.
Speaker 4: In addition, today we announced a dividend of 19 cents per share up from a, from the prior quarters dividend of 16 and a quarter cents per share in increase of approximately seven...
In addition, today, we announced a dividend of <unk> 19 per share up from a from the prior quarter's dividend of <unk> 16, and a quarter cents per share an increase of approximately 17%.
Speaker 4: Further, today we announce that our Board of Directors authorizes this two-year stack repurchase program under which up to $800 million in stack may be purchased in the open market and private transactions. This authorization replaces the previously authorized stack repurchase.
Further today, we announced that our board of directors authorized two year stock repurchase program under which up to $800 million in stock may be purchased in the open market and private transactions. This authorization replaces the previously authorized stock repurchase program.
Our stock repurchase program is an important part of our balanced capital deployment strategy, given our strong financial position and positive financial outlook, including our ability to generate robust cash flow. We remain committed to returning capital to share stockholders via stock repurchases and cash dividends, while concurrently investing in our business to <unk>.
Speaker 4: Our stock repurchase program is an important part of our balance capital deployment strategy. Given our strong financial position and positive financial outlook, including our ability to generate robust cash flow, we remain committed to returning capital to shareholders via stock repurchase.
Speaker 4: cash divvins while concurrently investing in our business to support future growth. Lastly, turning to our fiscal 2020
Support future growth.
Lastly, turning to our fiscal 2022 outlook COVID-19 related disruptions persisted in the quarter, although improvement is anticipated in the remainder of fiscal year 2022 net sales for the fiscal 2022 are expected to be between $2 45, and $2 65 billion.
Speaker 4: COVID-19 related disruptions persisted in the corridor, although improvement is anticipated in the remainder of fiscal year 20.
Speaker 4: Net sales for the fiscal 2022 are expected to be between $2.45 and $2.65 billion.
Aerospace and industrial sales growth percentages are each expected to be in the low double digit teens I'm.
Speaker 4: Aerospace and industrial sales growth percentages are each expected to be in the low double digit teens
I'm, sorry, low double digits to mid teens.
Speaker 4: Aerospace segment earnings as a percent of segment net sales are expected to increase over last fiscal year by approximately 200 to 300 basis.
Aerospace segment earnings as a percent of segment net sales are expected to increase over last fiscal year by approximately 200 to 300 basis points, primarily due to increased sales volume in both commercial OEM and aftermarket partially offset by lower guided weapon sales and the anticipated return of annual variable incentive compensation costs.
Speaker 4: primarily due to increased sales volume in both commercial OEM and aftermarket, partially offset by a lower-guided weapon sales and the anticipated return of annual variable incentive compensation.
Industrial segment earnings as a percent of segment net sales are expected to be approximately flat to up 150 basis points over last fiscal year, primarily due to the increased sales volume, partially offset by the anticipated return event Neal variable incentive compensation costs.
Speaker 4: Industrial segment earnings as a percent of segment net sales are expected to be approximately flat to up 150 basis points over last fiscal year, primarily due to the increased sales volume partially offset by the anticipated return of annual variable incentive compensation
Speaker 4: Growth and profitability in both segments could be negatively affected if COVID-19 and supply chain disruptions do not improve. Or if the pace of inflation puts additional pressure on labor and material.
Growth and profitability in both segments could be negatively affected if COVID-19, and supply chain disruptions do not improve or if the pace of inflation puts additional pressure on labor and material costs.
Speaker 4: Adjusted effective tax rate is expected to be a fraction 21
The adjusted effective tax rate is expected to be approximately 21%.
Speaker 4: Adjusted free cash flow is expected to be approximately $315 million, generating an adjusted free cash flow conversion rate of greater than 100%.
Adjusted free cash flow is expected to be approximately $315 million generating an adjusted free cash flow conversion rate of greater than 100%.
Speaker 4: As the anticipated sales growth returns, we expect higher working capital requirements primarily driven by accounts.
As the anticipated sales growth returns, we expect higher working capital requirements, primarily driven by accounts receivable also capital expenditures are expected to increase over last fiscal year by approximately $30 million.
Speaker 4: Also, capital expenditures are expected to increase over last fiscal year by approximately $30 million.
Adjusted earnings per share is expected to be between $3 55.
Speaker 4: Adjusted earnings per share is expected to be between $3.55 and $3.95 based on approximately 66 million fully deluded weighted average shares of fans.
And $3 95 based on approximately $66 million fully diluted weighted average shares outstanding.
Speaker 4: The favorable impacts of sales growth and productivity improvements in both segments are being partially offset by the expected return of annual variable compensation costs, inflationary pressures, and a higher tax burden.
The favorable impacts of sales growth and productivity improvements in both segments are being partially offset by the expected return of annual variable compensation cost inflationary pressures and a higher tax rate.
Speaker 4: This concludes our comments on the business and the results for the first quarter of 2022 operator we are.
This concludes our comments on the business and the results for the first quarter of 2022, operator, we are now ready to open the call to questions.
Speaker 1: Thank you. The question and answer session will begin at this time. If you are using a speaker phone, please speak up the handset before pressing any numbers. Should you have a question for a star one on your push button phone? Should you wish to withdraw your question? Press the pound key.
Thank you.
<unk> and answer session will begin at this time.
We are using a speakerphone please pick up the handset before pressing any numbers should you have a question press star one on your push button phones.
You wish to withdraw your question press the pound key.
Speaker 1: Your question will be taken in the order it is received. Please stand by for your first question, sir.
Questions will be taken in the order. It is received please standby for your first question Sir.
Our first question is from Sheila <unk> with Jefferies. Please state your question.
Speaker 1: Our first question is from Sheila Teoglu with Jeffries. Please state your name.
Speaker 5: Hi. Good afternoon, guys. Thank you for the time and maybe we'll blame this quarter on Don. In terms of aerospace margins, can we maybe talk about some of the moving pieces as we progress through the year and the improvement? Mark, you mentioned a few things like incentive comp and, you know, military was down quite a bit, double digits. If you could talk about the moving pieces there. Yeah. So, as you heard us in our
Good afternoon, guys. Thank you for the time and maybe we'll bring this quarter on Don.
Thanks, Kevin.
In terms of aerospace margins can we maybe talk about some of the moving pieces as we progressed through the year and the improvement.
Mark you mentioned, a few things like incentive comp and military was down quite a bit double digits.
If you could talk about the moving pieces that yes.
Yes.
As you heard us in our prepared remarks.
Speaker 4: We did talk about strength on both commercial OEM and aftermarket. We're anticipating that sales volume strength.
We did talk about strength on both commercial OEM and aftermarket and we're anticipating that sales volume strength to continue.
You also heard US mentioned, the COVID-19 related disruptions that impacted aerospace $42 million in the quarter.
Speaker 4: You also heard us mention the COVID-19 disruptions that impact the aerospace $42 million in the quarter. As those of Bates and we're able to pick up on that sales volume, that will flow through, which will then, as you mentioned, will be offset partially by the annual incentive compensation coming back.
As those abates, and we're able to pick up on that sales volume.
It will flow through which will then as you mentioned will be offset partially by the annual.
Incentive compensation coming back into the business.
Okay.
Okay, and then I just wanted to maybe ask Tom a bigger picture question on the industrial segment.
Speaker 6: Okay, and then I just wanted to maybe ask Tom a bigger picture question on the industrial segment. I've seen it ebb and flow over the years, so kind of what are your thoughts there on bigger picture?
<unk> seen that ebb and flow over the years, so kind of what are you what are your thoughts there.
Sure.
Well right now.
We're going to.
Speaker 3: beginning of an up cycle as we're highlighting.
The beginning of an up cycle as we're highlighting.
Speaker 3: We definitely see power generation demand increasing. We see the industrial machinery market recovering. Orders are picking up. Upgrades are happening. So both on the new and service side, we see that increasing.
We definitely see power generation demand, increasing we see the industrial turbo machinery market recoveries orders picking up.
Upgrades are happening so both on the service side, we see that increasing.
Speaker 3: As we highlighted, the marine market is coming back and we're starting to see good aftermarket activity there. The oil and gas market...
As we highlighted the marine market is coming back and we're starting to see good aftermarket activity there.
The oil and gas market.
With the prices, we start seeing prices at these levels.
Speaker 3: But the prices, we start seeing prices at these levels.
There will be more capital investment I know the oil.
Speaker 3: There will be more capital investment. I know the oil majors are being cautious, but we are seeing some increases in the aftermarket there. So that bodes well for us. If you want to say the wild card for us right now is in China, and in particular in the China truck market for natural gas engines. And we anticipate a recovery more in the second half of the year in that market. There you go.
Oil majors are being cautious, but we are seeing an increase.
Increases in the aftermarket there so that bodes well for us.
If you want to say the wildcard for US right now is in China.
In particular.
China truck market.
For natural gas engines.
We anticipate a recovery more in the second half of the year in that market.
The dynamics of the market are all pointing towards recovery.
So we're seeing that as we move through the fiscal year, the industrial market looks to be picking back up.
Part of our guidance so we.
With the volume increases, we see we should be able to lever that increase.
Through to the bottom line.
Okay, great. Thank you thanks Sheila.
Our next question is from Robert Spingarn with <unk> research.
Speaker 1: Our next question is from Robert Spingern with Mill Use Research.
Hi, everybody.
Speaker 3: Tom, I guess unless your initial guide was really conservative, I'm just struggling to see, you know, how you hold the guide with the soft quarter, given that nothing good has really happened since the prior quarter. We've had, you know, supply chain got worse, Omicron came in, all the things you've talked about.
Okay.
Good afternoon Tom.
Guess unless your initial guide was really conservative I'm just struggling to see.
How you hold the guide with the with the soft quarter given that nothing good has really happened since the prior quarter we've had.
Supply chain got worse, all mccahon came and all the things you've talked about.
No.
Are there sources of upside that you can highlight here that provide true offset or are you just.
Speaker 2: Are there sources of upside that you can highlight here that provide true offset or you just
Speaker 7: Just thinking the timing the recovery is going to be there.
Just thinking the timing of the recovery is going to be there.
Yes, well.
Speaker 3: As you know, you can see that there's no doubt that COVID impacted, you know, Woodward definitely in our market.
As you know you can see that.
There's no doubt that COVID-19 impacted.
We're definitely in our markets.
Speaker 3: But we are seeing the demand increase, you know, you go in particular when we talk on the aerospace segment, we are seeing the aftermarket increasing with trying to recertify the max. We're seeing IP orders, you know, initial provision orders come in. I don't see that falling off. I think there's a huge demand for travel coming. And
But we are seeing the demand increase.
And in particular, when we talk on the Aerospace segment, we are seeing the aftermarket increasing.
With China re certifying the Max we're seeing IP.
Orders initial provisioning orders come in.
You see that falling off I think there is a huge demand for travel coming in.
Speaker 3: You know, our anticipation is we were, you know, impacted by COVID and had disruptions as we highlighted, but, you know, we're on, we're seeing some of that turn. We've got a lot of work to do, so there's no doubt about that recover as we highlighted, but we're starting to see some improvement opportunities. You know, we're seeing production rates increasing or the demand that is there.
Our anticipation as we were.
Impacted by Covid and had disruptions as we highlighted but.
We're on we're seeing some of that turn we've got a lot of work to do so there is no doubt about that to recover as we highlighted.
We're starting to see some improvement opportunities, we're seeing production rates, increasing whereas the demand is there.
So.
We are confident that the order book and the demand is out there we do have to.
Work and Thats our.
It's our responsibility to deliver on that and theres going to be a challenge there, but we're working all of the disruptions.
We think that.
Within our company, we passed the worst.
The COVID-19 impact and whether it be by that is the absenteeism that was related to illnesses.
Could see and track that that's moving down and we anticipate over the next cup.
A couple of months that that will drop off in that.
We'll be in that.
<unk> had better utilization of our factories with Paul.
Full staffing in addition to that.
With our outlook and the demand we do have a need to hire.
A lot of direct members and we've put in.
Enhanced.
Hiring personnel to support that as well as training than we're anticipating.
The need to add about 100 direct members a month through the fiscal year. So we're working hard on that and that's a reflection that the demands there.
Got it.
We got to perform and work hard to deliver on that demand.
Can you Okay can you put some color around this charge.
The nonrecurring matter that was unrelated to the operations of the business.
Yes.
Yes.
It's a non operational one that.
We're calling out but we really can't go into the details of it at this time.
Okay, and then the only other thing that shipment delays you talked about in the opening remarks.
That were customer initiated anything else there.
Yes.
A lot of you that have been following us for a while.
Know that.
We have.
The lean production systems that our customers and.
Rich.
Equate to pull systems that as they have been disrupted they haven't pulled.
Material.
Same reason that we've had some disruptions other suppliers' labor shortages. So it's a combination that we saw were.
If you want to say labor disruptions meeting.
What people don't have the workforce or Colby.
Covid related absenteeism and like has disrupted our suppliers has disrupted our customers as disruptive Woodford operation, So that's where those numbers come from.
We are anticipating that everybody else.
Started to recover on that and that would make up those.
Shipments in that revenue as we move through the fiscal year.
Okay, alright, thanks rolled out.
You bet.
Our next question is from Christopher Glynn with Oppenheimer.
Hey, Thanks, good afternoon.
Afternoon.
Tom wanted to ask about the marine.
Mark get a little bit there.
The way you talked about it it sounds like it's in the process of starting to ramp up ramp up taking shape.
And just curious how do you see that playing out.
You know the process of tilting towards.
A full swing aftermarket strength for that.
Yes.
Utilization rates are up.
We're seeing.
The biggest part that is increasing as our aftermarket in the marine market.
And that does highly tied to utilization.
Also what I would say bringing back.
During the worst part of the pandemic, bringing bringing.
Freighters back online.
Making up for.
Previous maintenance that was.
Pushed out.
So that's happening and we have a robust forecast going into the fiscal year and then behind that we see new ship builds increasing.
We also see quite a bit.
LNG carriers come in we see the increase in what we call dual fuel.
Chip.
<unk>.
That's a real positive for the company because that means you have multiple fuel systems per engine higher content. So all of those are positive signs with the lead times in the industry, that's really looking out.
The aftermarket will build out this year and provide.
Good growth as we move into the next several years, the new builds and the like we're also add to growth. So I think it's on a good up cycle and we see that carrying forward here.
Great and just a little bookkeeping on that I believe you said the aftermarket piece is a little bit bigger within Lauren and Youll see the OE timing starting to kick in in fiscal 'twenty three.
Yes, it really will start with new builds coming in and what's on the order book The order book is strong.
With the long lead time Tobey.
Kick in in fiscal 'twenty, three 'twenty four time frames.
Great.
Then a lot of positive commentary on your IGT markets.
I know theres a lot of pockets in there whether aero derivatives for.
Utility scale and various other markets. It sounds like it's all taking shape pretty uniformly just want to make sure I wasn't missing any.
<unk> of your commentary for the IGT markets No we're seeing IGT. So.
<unk>.
All segments that are increasing and how it's still refer to turbo machinery in total so that adds gas.
Gas turbine steam turbine compressors.
We're seeing all those picking up as we move into 'twenty two 'twenty three.
Also good aftermarket activity tied to those in service activity.
Where we're seeing upgrades move.
<unk> movement to cleaner fuels, so we're seeing activity.
Some people upgrading their turbines, especially in the middle East.
I'm running on burning oil to go into natural gas. We're also seeing customers wanting to prepare for hydrogen and Woodbridge one of the few out there that have hydrogen ready fuel system. So we're helping our customers with that so we're seeing activity around those type of.
Initiatives.
We think that will carry through for the next several years.
Along.
The long lead time long cycle business, but it's moving in a real positive direction.
Great.
I think.
Last one from me if I could.
Customer initiated shipment delays.
<unk> sort of the part that broaden the most in the quarter or was it.
Cross your explanation now I would say the largest still was.
What we would call supplier disruptions and supplier disruptions you can look at it two ways one would be capacity constraints together.
Would be labor disruption in <unk>.
As an example, when capacity is really around.
Our electronics.
Integrated circuits.
I think everybody's well aware of the capacity and the difficulty we have in that area as we use.
Several of the chip.
Critical chips that are used by the automotive industry and by the cell phone industry.
As you guys know, there's pent up demand there so.
That's capacity than the labor disruptions I think it's a combination of.
People coming out of the pandemic, adding enough resources and also this high absenteeism that we have seen five based on also.
We've seen at Woodward and as I mentioned.
Previously here.
We see that starting to drop for a period. There we were seeing some really high after two years.
<unk> has some numbers.
Beginning to come down.
Thanks for all the color.
Youre welcome.
Our next question is from Michael Cerasoli with <unk> Securities.
Hey, good evening guys. Thanks for taking my questions.
Maybe Tom just to go back to Rob's question on the guidance I mean 70 mill.
Yeah.
How should we be thinking.
Slowing backing to results I mean, we're obviously still dealing with.
Currently challenged quarter your second quarter so.
I imagine the sequential ramp up in the March quarter's probably going to be fairly tepid I mean, do you guys a good line of sight.
You know on how you recoup was $70 million revenue.
I'm glad you asked the question.
It is a good question.
It's going to be more in the second half of our fiscal year third and fourth quarter.
We're working hard to try to recover second we still.
Our apps theism.
Labor disruptions.
Some of the supply constraints are still there, we're working them hard and we're seeing progress.
But.
It won't be that 70 million won't be recovered in the second quarter. So it's going to take some of the second but it will be back backend loaded.
We're we're confident we can pick that up but there is a risk to that and there is some uncertainty thats why we highlighted that in the prepared remarks.
Got it and then just on that on the component that was.
Aerospace to $42 million was that more on the commercial side more on defense was it equally split any any color there.
Yes, it's generally equally split it's across the whole aerospace industry.
Okay.
Got it and then.
Just I guess on the on the last one for me here.
What are you guys seeing on the obviously you mentioned some of the inflation related headwinds, but what about on the pricing side for you guys.
And the ability to pass through.
We're talking about Iran, and they've got a more of an aftermarket so ability to price in both industrial and aerospace and confidence level there.
No.
It's always a good question.
In parts of our business and aftermarket being one we have better control of pricing. So we are able to move pricing there.
On our OE on our OEM side.
The majority of our OEM sales are on long term agreements.
Those agreements.
Generally all have escalation clauses in them and that's.
And that usually comes to an annual escalation.
So we will see some recovery there it's a timing issue on that on the OE side.
The aftermarket side, we have a lot more flexibility. So we will see some price realization.
But we won't get all of that.
Inflation recovery that we're seeing.
And this year because of the timing of the agreements.
Got it helpful. Thanks, guys I'll jump back in the queue here, yes youre.
Youre welcome.
Yes.
Our next question is from Matt Akers with Wells Fargo.
Yes, hi, good afternoon, guys. Thanks for the question.
Can you touch on international military demand is something that you guys had mentioned a little bit.
Last quarter, you're starting to see a little bit of activity is that translate into orders.
At all yet.
Yes.
We do see some of that coming through in our foreign military sales some of that.
Military aftermarket, where we see some upgrades in the activity.
There have been some recent.
Orders for guided weapons coming from foreign military so we've seen a little bit there, we anticipate more of that coming but it's.
It's hard to forecast exact timing on that so there is some it's not huge numbers, but we are seeing some positive.
Orders coming from foreign militaries.
Okay got it and then I guess, if you could just touch quickly on provisioning and sort of what what the impact youre seeing there and maybe with some of the rate increases essentially from Boeing. This year is there room for that to move higher.
Yes, so we've called out before with the provisioning the first and the biggest opportunity is.
The recertification of the Max in China.
Airlines starting to take those planes.
That provisioning.
Turning to see Tom mentioned earlier that we do we are starting to see some orders there.
As the as the narrow body get delivered.
As we always talk about with provisioning really it's a matter of which airlines are taking the deliveries and then which routes they're actually flying so it's an airlines flying the same route how you may not see.
Initial provisioning sale for that but it is an airline that already has a max as a for example, but theyre starting to fly new routes. That's when initial provisioning opportunity will come up also and so we are starting to see initial provisioning and pick up overall.
Yes.
<unk> talked before that 2018 2019 was a very large initial.
Initial provisioning years for us we're not anticipating we're going to return to those levels. This year, but we are going to be have a have a nice increase from last year.
Great that's helpful. Thanks.
Our next question is from Peter Cubic's, SKU with Alembic Global.
Hey, good afternoon guys.
Yes.
I just wanted to dig back into the supply chain issue.
No you were expecting it to impact the first quarter is it fair to say it came in a good deal more negative than you thought and I think you were thinking that maybe the second quarter would be kind of the last of it and maybe de Minimis, but are we talking maybe.
Continue kind of chunky negative impact in <unk> and maybe it trails off in the third quarter.
Yes, I guess it would be first reflect on the first quarter.
The COVID-19 impacts.
The disruptions were.
Larger than we anticipated and I would say most of that was labor disruptions in terms at Woodward.
Suppliers are.
I must say shortages, but also absenteeism and that kind of Wade through we.
We have seen some of that still here in January .
So we anticipate it will.
Tapering off.
We move into February and it's kind of.
<unk> moved through a lot of our sites in states that we operate in and so we see that going down and so then as we move.
We are seeing as I mentioned earlier.
<unk> and some of the supply disruptions, we had but it will take into the third and fourth quarter to fully recover.
Okay I guess.
And no are you feeling any impact on the defense side from the I don't know if you can tease this out or not but the ongoing continuing resolution for defense.
Maybe it's hard to kind of differentiate that with the COVID-19 and supply chain issues going on but do you think you have had any discernible negative impact from the ongoing CR.
Yeah.
We're not really seeing.
What we said it's stable.
To flat, but there are opportunities in the defense budget.
We're definitely going to highlight more of this at our Investor day.
At Investor day, but we are.
Securing programs and hypersonic since some of the other.
Areas, where we're seeing increasing activity.
So.
It depends what programs you're on what activity year end, but overall, we see picking up some new business throughout their goal.
Goal of that more in March.
The Investor day.
Okay, and then just the $800 million share repurchase authority.
Is that do you guys intend to use all of that over the next few years or are you, just saying you're going to be opportunistic.
Well, we'll be opportunistic in the market and the market, but we put a two year horizon on that.
That's our intention.
Okay, Okay, great. Thanks, guys.
Okay.
Our next question is from David Strauss with Barclays.
Okay.
Thanks, Good afternoon.
Just a follow up on that so I guess at this point.
<unk> away from kind of 50% cash flow free cash flow returned to shareholders to something 100%, 100% plus based on.
Share repurchase authorization.
That's correct.
Okay.
And.
Tom.
You guys called out double digit it looks like it was down close to 20% in the quarter.
No the split OE versus aftermarket yet but.
That does that decline improve as we go throughout the year or is that kind of the right level for the full year something down close to 20% for your total defense business, yes, but that's not our anticipation for the full year.
As as we've talked about with the Covid related disruptions that did hit the defense side of our business are hard.
Our outlook for the defense side is still the same as it was previously we've talked about softness in the guided weapons side of the business, which will be a headwind, but the rest of the defense business, we're anticipating to be pretty stable.
And could you could you size.
The total cost savings level you. Thank you.
Been able to pull out of the business during.
During the pandemic here in what what proportion of that do you see coming back over time.
Yes. So we've mentioned early stages of the pandemic that we did take out over $100 million of of cost.
Now some of that was related to the variable compensation costs incentive plans that we've had that we have.
Haven't had in 2000, 22020, or 2021 and that we're talking about coming some of that coming back into in 2022.
But generally what we.
Said, it's about half of that cost that we took out over $100 million wouldn't return.
After we got out of the pandemic based on a lot of the cost savings initiatives that we've put in place related to site.
Facility rationalization initiatives that we have so that's what we're still anticipating as we move forward.
Great. Thanks very much.
Okay.
Our next question is from Gautam Khanna with Cowen.
Hi, guys.
Well just to follow up on the $70 million of sales that was short.
I'll wind could you do you have a quantified.
EBIT.
Impact from.
$70 million will begin the call.
The Covid disruptions we've talked about.
As well.
EBIT Sacramento.
$70 million of lost sales.
Haven't quantified it specifically, we talked over the years that our flow through is around 30%.
So I think you can do the math from there. If you think of generally all right. If we were to have that $70 million and getting 30% flow through we'd been approximately $20 million, but we didn't really quantify it or calculated specifically, it's obviously across all of our businesses with the impact that Tom spoken about both from a supplier disruption and labor shortages.
<unk>, both for us and our suppliers, so that that would be the ballpark that I would be thinking.
Okay.
As you catch that up later in the year you capture all of that 30%.
Ingo.
Bulk or were some of the costs.
We will.
Not with comparable you can evolve I'm just wondering if you look at all of them all.
The drag in Q1 that doesn't get moved up.
A lot of that we're seeing.
Through.
Yes.
We could potentially have some.
Impacts to the normal flow through would be.
Expediting overtime freight cost expedited freight costs, we still think.
Flow through.
Level that mark highlighted.
Is pretty normal for what we are.
Coming back to our sales on the capacity of our.
For our facility so.
We anticipate most of that will still flow through.
Yes.
Thank you.
Welcome.
Our next question is from Chris Howe with Barrington Research.
Good afternoon, and thanks for squeezing them quite the afternoon here for me.
I would like to ask another question on the guidance you reaffirmed the revenue range.
There's been a lot of questions surrounding the $70 million impact.
Which is expected to recover in the second half.
Some level of cadence.
As we think about this environment from a conservative.
Outlook for U.
Can you talk about.
The conservative scenario more specifically.
What level of ongoing disruptions can you continue to absorb and still feel relatively confident in your guidance range.
And at this juncture it seems too early to tell with one quarter in the books.
But perhaps the back half of the year points to that commercial aftermarket acceleration.
And the acceleration of some of the aftermarket business.
Offsetting some of the impacts we're seeing here.
Sure.
Without a doubt there could be risk if there is a new COVID-19 variant that nobody anticipates heads more severe and it really starts impacting air travel and Eric.
That's not in our forecast.
Not anticipating that we're anticipating.
Our recovery are anticipating.
Reduction in absenteeism and were anticipating.
Seeing signs of that that we're going to improve on our supplier disruptions. So that's in our outlook and if that.
Is not the case then.
You would say our guidance is too optimistic we think we're being.
<unk>.
Prudent with the outlook and we are anticipating recovering.
<unk>.
The delayed shipments.
We do see and we are anticipating and you can see from our customers. We go to commercial aerospace as an example, we.
We are seeing the line rates increase our customers are.
Putting that into their demand and we're seeing that demand flowing through.
Seen utilization if you track.
The legacy aircraft as well as the new narrow bodies Utilizations up we're seeing shop visits go up so we see the aftermarket not just through 2022, but accelerating into 'twenty three.
And if you guys recall.
We highlighted that we would expect to get back to 2019 levels in 2023, and we see that happening and then we expect to move forward from there the trends in the as I highlighted earlier on our industrial market are pointing in the right direction. All of these are long cycle businesses. So we're seeing.
<unk> forecast coming from our customers.
So we were encouraged by that outlook.
But there is the uncertainty.
If we get a really new severe variance in uncoated that locks everything up.
We don't know what to do about that we were not anticipating that is not in our outlook.
Okay. That's helpful.
And.
We've been waiting on and now it's here the recertification of the 737 Max in China.
And it looks like we're also envisioning route developments as we move through this calendar year can you comment on the 737 Max.
Kind of what your expectations are for the near term outlook.
And.
When it could become.
Back to what it was type of levels, yes.
Yes, what we're seeing is Boeing came out with their.
Line rate numbers, and we are seeing that transition to Woodward through lead times, which we've highlighted before that.
Usually.
Four to six months ahead of their production so that they can ramp up so we're seeing those line rates increase we're also seeing the Airbus line rates increase.
All of that along with.
The re certification in China.
Our positive obviously for new OE sales, but that they will drive increased initial provisioning sales and our outlook. This year is up over last year and we anticipate as we go into 2023 and 2020 for initial provisioning sales.
As well as higher aftermarket activity will be happening. So all of those are in the works in.
We're confident that.
Our customers here are going to hit those new rates.
Okay, and then one last one if I may squeeze it in I think you mentioned 100 direct members in months.
As part of your hiring goals.
Flattish fire the influx in demand can you comment on the labor environment on its direct impact with Woodward and your level of confidence in.
Ramping up your hiring.
As we move through different phases of this recovery.
Yeah, no. It's a good question.
Yes definitely.
Labor markets are tight.
We are seeing.
Wage inflation.
And we need to stay competitive.
Mark.
As highlighted in.
Our questions as well.
<unk> remarks.
We needed to get our <unk>.
Variable incentive plan back into existence.
To be competitive in the labor market. So.
We are right now being able to execute on our hiring plans, it's not without challenge.
Full effort.
And a lot of what we're doing as other companies are.
We're training people, so we're hiring for aptitude and attitude and we're training and we've really upped our training.
Capabilities and resources.
So.
Tight labor market, but.
And the.
Locations.
<unk> facilities.
We are employer of choice.
Ensuring that we stay that way through.
Competitive wages competitive benefits.
And a great place to work.
Exciting work so.
It's a challenge to bring on that many people but.
We've put in all the resources and the processes to do it. So we've got high confidence we can deliver on the.
The hiring which is.
Essential to making sure that we can deliver on sales.
Thanks, Tom I appreciate the color.
Our next question is from Microtia Molly.
<unk> Securities.
Hey, Thanks, guys Tom.
Wanted to ask specifically about that 100, a month that was just brought up but but one area on that I mean are these.
Are you tracking sort of.
Our pool of employees that you had previously laid off or are you actually having to go out there and find.
Entirely new talent I mean based on your comments on training it sounds like Youre looking for people, who previously have not been with Woodward, So does that make it more.
More challenging or is a little more balanced I mean, it seems like that could be a big chokepoint too.
To achieving the full year goal.
Yes, so we have hired back a lot of folks that.
We had to let go during the pandemic.
But we are also having to fill in.
For attrition that came through the pandemic.
We're just like a lot of other companies.
When we've looked at attrition we've had.
And the last two years.
Actual retirement.
And just just like the rest of the nation and a lot of I guess baby Boomers decided this is a good time to.
Retire so we've seen some of that so in addition to bringing back some of the other members that you referenced we have been doing that now.
Now we are as we look into continuing to expand in.
And some of our facilities, especially.
The ones with the higher growth rates.
We are having to train people so.
And that's why I said, we put dedicated resources, we put in dedicated training facilities and we're working really aggressively on being able to bring people in line.
Big Challenge, but I think we've got everything in place to do it.
Got it perfect. Thanks for taking the follow up.
Our next question is from Noah <unk> with Goldman Sachs.
Hi, good evening.
What are you expecting the second quarter.
Total company organic revenue growth rate in segment margin.
Two look like compared to the first quarter.
Yes, we usually don't.
Give detailed guidance, but we expect it to be up over the first quarter.
And then accelerating into the fourth quarter.
Okay.
Yes.
I guess, maybe I'm over thinking this but there's a dynamic where the second quarter of last year was actually a pretty strong quarter in the aerospace business. It was up.
10% to 12% I think sequentially.
It was a bit of a tough compare.
And then just back to this whole concept of holding this guidance, which is sort of looks like youll need to exit the year.
With the back half growing 20% on the top line.
The aerospace margins well into the Twenty's in your industrial margins well into the mid teens.
Are those directionally accurate for where youre expecting <unk> to be to get to this.
Full year guide or.
Understated in the second quarter in that math.
Yes, so the first comment I'd make is the order book supports our growth.
We have to get the shipments out.
So we're confident.
Particularly answering a question on Aero.
And on the industrial side, we're seeing good recovery in the order book as well so it's both sides and you could tell it.
Growth rates that we highlighted.
There's no doubt that topline and bottomline accelerate as we hit third and fourth quarter with the.
The numbers getting substantially higher.
Yes.
Without commenting too much but you are directionally in the right ZIP code for sure is what we have to deliver on it.
Just as a reminder, and I know everybody on the call knows this but I'm going to say it anyway as we have the capacity and once you get the volume through that capacity you can get really good leverage on it.
We're still coming out of.
Below fiscal year, 19 sales where capacities for higher than this so as those sales come through and we can deliver on them overcome these COVID-19 disruptions, we are going to get high leverage so the numbers will improve.
Someone like you are saying.
Okay.
With the supply chain driven.
We're just general disruption I guess driven revenue slippage is.
Is there a net number at this point because I think you've had that for a few quarters I remember the quantification being closer to $30 million in the fourth and third quarter last year I can't remember went back further than that.
Third quarter is when it kind of started so are you delivering on some of that revenue and then having other revenue disrupted or do you now have a pretty sizable balance of revenue to flow out.
And related to that I'm surprised there isn't more working capital.
Disruption or sizable working capital moves related to all of that so maybe you could give a little more color on the disruption.
What we highlighted this quarter, which.
Curt Moore.
The addition of customer delayed.
Covid shipments as well as Woodward labor disruption.
So if you look and we said supplier disruption from the previous sequential quarters.
I think it sounded like $35 million in this quarter was approximately $42 million. So we did see an increase so.
And then the rest of that was customer Woodward labor disruptions.
Okay.
If you delivered on the disrupted revenue from some of that you have.
Some of that we have there has been some.
You'd have to go something that has not gotten out.
To use.
On our industrial side, we've had some electronics.
Shortages and we're still working to recover those so some of that moved.
From quarter to quarter. So yes, some of its moving out we've had some new.
Supplier disruptions.
We're managing.
The delinquent suppliers, we've got folks on their site.
There is.
Previously talked.
On the order of a handful and now we're in the 20, something plus supplier center disrupting us and we've got action plans with all of them, we're seeing some improvements happening, but that's the order of magnitude of the ones that are really hurting us.
Okay.
And the guided weapons decline that you cited in the quarter any ability to quantify.
How much of that rate of decline was just kind of what's happening in the core run rate in that business at this point versus how much of it was these disruptions.
Yes. They are definitely we got hit by disruptions in the guided weapons.
But just to Claire.
Clarify.
One of our bigger programs and the guided weapons J dam and the current lot.
By from the government is down and so that's that.
We've been kind of.
Communicating to all of you and that Hasnt hurt and then on top of that we have seen some supply disruptions.
Is that.
The 18 that you cited is it sort of 50 50.
Versus disruption or is it very different than that.
So the question I think it's really right.
If I got right how much was the supplier disruption and how much was just the lower lower.
Exactly yes.
I would say, primarily it's going to be the lower lot by <unk>.
Disruptions will be something but it's primarily going to be the lower lower lots.
Okay, Yes.
Yes, we just don't have the number right.
Sorry no.
Thats Directionally.
Helpful.
Thanks, very much I appreciate it.
Welcome.
Again to ask a question. Please press star one on your pushback on the phone.
Our next question is from Robert Spingarn with Melius research.
Okay.
Tom One thing I wanted to ask you about is the 787.
And how youre thinking about that given that the rates well first of all there's been no activity. So I want to get a sense of what your activity has been and then.
What the mechanics are when we think about the joint venture with GE, what inventories look like and now this latest.
News that this thing is going to be.
At low rates for a couple of years I understand it's maybe not as profitable as aftermarket, but how should we think about that.
Yes.
<unk> got it thats in our outlook that we brought it down.
Yes.
Still producing.
Little bit here and there.
Sure.
But what I would say is yes that OE side is going to be low for the whole fiscal year.
Positive as 787 utilization in the field is up and we are seeing aftermarket from that.
But.
No.
Not really unfortunate situation, but it is part of our outlook.
Okay, and then how about inventories on that or anywhere else that we should be thinking about you're pretty comfortable that inventories are not built up somewhere.
The engine with the engine Oems you never know.
Yes.
We've got a pretty good handle I don't I don't think there is.
A lot of built up inventory that.
As in the system.
That isn't already built aircraft I mean, as you know theres a lot of park.
Aircraft rent that bill.
So I think let's say you can get the line rates up we're be flowing pretty quickly with those.
That's the best of our knowledge, we are not seeing like huge piles of inventory out there and we track.
What we build and reference that to the.
Whats the OE rates are with.
Park, we can see that.
So we're pretty in line with all of that.
I don't believe that Theres, a whole lot of accessing the market and the supply chain.
Okay, and I have a question more on the optimistic side longer term I wanted to bring a positive question here and look you guys with this authorization. The dividend you obviously have a lot of confidence in the business you have very good positions and we're going to get this flow of shop visits on the newest narrow bodies, which you've touched on a little.
Bit here.
You can be buying back stock over the next couple of years.
Is two years from now when the rubber hits the road on the on just the big flow of Neo and leap shop visits coming through once but what's the what's the year that you are dreaming about when is the big bow wave of aftermarket. So again, it's the recovery goes the way you think it is going to grow share.
Yes, Great question first I want to highlight is we've got a lot of pent up demand.
For the current generation and particularly for the current <unk> hundred 20 CEO .
Triple seven.
787%.
Units that are in the field those are going to generate some really nice aftermarket.
If you look at it a lot of the engines.
Whether it's the CFM 56, or five or the B 2500.
So I don't have any <unk> had their first shop visit and Theyre all coming due so that's going to propel us in the next few years and then as we move.
We're talking about our long range plan.
At the Investor Day, that's what we're going to communicate that and really what you see is the aftermarket really starting to pick up to that five year period, and then really.
Yes.
Flows in that five to 10 year period.
That's all content, we have that saw coming and so that's when it gets really interesting but.
Not a hockey stick that we used to talk about.
Yes.
A lot of things the way I look at our business as you know we've got.
If you took our trajectory.
Carve out this two year pandemic pause.
Youre going to see something on the order of that coming back and Thats what were communicate but.
It's one way to look at it.
Yes, no I don't I think we shouldn't lose sight of that and that's why I wanted to bring it up I. Appreciate it. Thank you yeah no. Thanks for the questions.
Mr. Gendron, there are no further questions at this time I will now turn the conference back to you.
Okay, Hey, I really appreciate everybody joining us today. Thanks for the questions very informed questions. We always appreciate that.
But I would like to invite all of you to join US at our Investor day is going to be in New York City.
We are planning to do it in person. We're also have a virtual.
Element to it but it's going to be Wednesday March nine and I'll look forward to seeing you there.
Talking to all of you in person so thanks for joining us today.
Goodbye.
Ladies and gentlemen that concludes our conference call today, if you would like to listen to a rebroadcast of this conference call. It will be available today at 730 PM Eastern standard time by dialing 185585920564.
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