Woodward Q1 2026 Woodward Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Woodward Inc Earnings Call
Speaker #1: Ladies and gentlemen, thank you for standing by. Welcome to the Woodward Incorporated first quarter fiscal year 2026 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.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Woodward Incorporated Q1 fiscal year 2026 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 are invited to participate in a question-and-answer session. Joining us today from the company are Chip Blankenship, Chairman and Chief Executive Officer, Bill Lacey, Chief Financial Officer, and Dan Provaznik, Director of Investor Relations. I would now like to turn the call over to Dan Provaznik.
Speaker #1: Following the presentation, you are invited to participate in a question-and-answer session. Joining us today from the company are Chip Blankenship, Chairman and Chief Executive Officer; Bill Lacey, Chief Financial Officer; and Dan Provaznik, Director of Investor Relations.
Speaker #1: I would now like to turn the call over to Dan Provaznik.
Speaker #2: Thank you, Operator. We'd like to welcome all of you to Woodward's first quarter fiscal year 2026 earnings call. In today's call, Chip will comment on our strategies and related markets. Bill will then discuss our financial results as outlined in our earnings release. At the end of our presentation, we will take questions.
Dan Provaznik: Hello. Thank you, Operator. We'd like to welcome all of you to Woodward's First Quarter Fiscal Year 2026 Earnings Call. In today's call, Chip will comment on our strategies and related markets. Bill will then discuss our financial results as outlined in our earnings release. At the end of our presentation, we will take questions. For those who have not seen today's earnings release, you can find it on our website at woodward.com. We have included some presentation materials to go along with today's call that are also accessible on our website. A webcast of this call will be available on our website for one year. All references to years in this call are references to the company's fiscal year unless otherwise stated. I would like to highlight our cautionary statement as shown on slide 2 of the presentation materials.
Dan Provaznik: Hello. Thank you, Operator. We'd like to welcome all of you to Woodward's First Quarter Fiscal Year 2026 Earnings Call. In today's call, Chip will comment on our strategies and related markets. Bill will then discuss our financial results as outlined in our earnings release. At the end of our presentation, we will take questions. For those who have not seen today's earnings release, you can find it on our website at woodward.com. We have included some presentation materials to go along with today's call that are also accessible on our website. A webcast of this call will be available on our website for one year. All references to years in this call are references to the company's fiscal year unless otherwise stated. I would like to highlight our cautionary statement as shown on slide 2 of the presentation materials.
Speaker #2: For those who have not seen today's earnings release, you can find it on our website at woodward.com. We have included some presentation materials to go along with today's call that are also accessible on our website.
Speaker #2: A webcast of this call will be available on our website for one year. All references to years in this call are references to the company's fiscal year unless otherwise stated.
Speaker #2: I would like to highlight our cautionary statement, as shown on slide two of the presentation materials. As always, elements of this presentation are forward-looking, including our guidance, and are based on our current outlook and assumptions for the global economy and our businesses more specifically.
Dan Provaznik: As always, elements of this presentation are forward-looking, including our guidance, and are based on our current outlook and assumptions for the global economy and our businesses more specifically. Those elements can and do frequently change. Our forward-looking statements are subject to a number of risks and uncertainties surrounding those elements, including the risks we identify in our filings with the SEC. These statements are made as of today, and we do not intend to update them except as required by law. In addition, we are providing certain US GAAP certain non-US GAAP financial measures. We direct your attention to the reconciliations of non-US GAAP financial measures, which are included in today's slide presentation and our earnings release. We believe this additional financial information will help in understanding our results. Now, I'll turn the call over to Chip.
As always, elements of this presentation are forward-looking, including our guidance, and are based on our current outlook and assumptions for the global economy and our businesses more specifically. Those elements can and do frequently change. Our forward-looking statements are subject to a number of risks and uncertainties surrounding those elements, including the risks we identify in our filings with the SEC. These statements are made as of today, and we do not intend to update them except as required by law. In addition, we are providing certain US GAAP certain non-US GAAP financial measures. We direct your attention to the reconciliations of non-US GAAP financial measures, which are included in today's slide presentation and our earnings release. We believe this additional financial information will help in understanding our results. Now, I'll turn the call over to Chip.
Speaker #2: Those elements can and do frequently change. Our forward-looking statements are subject to a number of risks and uncertainties surrounding those elements, including the risks we identify in our filings with the SEC.
Speaker #2: These statements are made as of today, and we do not intend to update them except as required by law. In addition, we are providing certain U.S.
Speaker #2: GAAP, certain non-U.S. GAAP financial measures. We direct your attention to the reconciliations of non-U.S. GAAP financial measures, which are included in today's slide presentation and our earnings release.
Speaker #2: We believe this additional financial information will help in understanding our results. Now, I'll turn the call over to Chip.
Speaker #3: Thank you, Dan. And good afternoon to all who are joining our first quarter 2026 earnings call. I'm pleased to report that 2026 is off to an exceptional start for Woodward.
Operator: Thank you, Dan. Good afternoon to all who are joining our Q1 2026 earnings call. I'm pleased to report that 2026 is off to an exceptional start for Woodward. Robust demand across both our aerospace and industrial segments, combined with disciplined execution by our teams, drove out performance in the first quarter. I want to start by thanking Woodward members around the world for accepting the challenge of increasing output in response to rising demand across all our end markets and continuing to improve our operations. These collective efforts resulted in a standout first quarter for 2026. In this first quarter, Woodward sales grew 29% year-over-year, and earnings per share increased 54%. We also achieved strong cash generation compared to historical first quarters.
Chip Blankenship: Thank you, Dan. Good afternoon to all who are joining our Q1 2026 earnings call. I'm pleased to report that 2026 is off to an exceptional start for Woodward. Robust demand across both our aerospace and industrial segments, combined with disciplined execution by our teams, drove out performance in the first quarter. I want to start by thanking Woodward members around the world for accepting the challenge of increasing output in response to rising demand across all our end markets and continuing to improve our operations. These collective efforts resulted in a standout first quarter for 2026. In this first quarter, Woodward sales grew 29% year-over-year, and earnings per share increased 54%. We also achieved strong cash generation compared to historical first quarters.
Speaker #3: Robust demand across both our Aerospace and Industrial segments, combined with disciplined execution by our teams, drove outperformance in the first quarter. I want to start by thanking Woodward members around the world for accepting the challenge of increasing output in response to rising demand across all our end markets and continuing to improve our operations.
Speaker #3: These collective efforts resulted in a standout first quarter for 2026. In this first quarter, Woodward sales grew 29% year over year, and earnings per share increased 54%.
Speaker #3: We also achieved strong cash generation compared to historical first quarters. I'm also grateful for our customers' continued trust and collaboration to stabilize and optimize the demand signal so we can take a disciplined approach to capacity increases in our factories and with our suppliers.
Operator: I'm also grateful for our customers' continued trust and collaboration to stabilize and optimize the demand signal so we can take a disciplined approach to capacity increases in our factories and with our suppliers. This is an industry-wide opportunity to move from the supply chain crisis we've been embroiled in to precision alignment that results in stable inventory levels and predictable component availability. While we are not where we want to be on every product line, we have a good vision for the path forward. As we continue to work through the supply chain alignment with our customers and suppliers, we anticipate that inventory turns will not improve as much as we would like in 2026.
I'm also grateful for our customers' continued trust and collaboration to stabilize and optimize the demand signal so we can take a disciplined approach to capacity increases in our factories and with our suppliers. This is an industry-wide opportunity to move from the supply chain crisis we've been embroiled in to precision alignment that results in stable inventory levels and predictable component availability. While we are not where we want to be on every product line, we have a good vision for the path forward. As we continue to work through the supply chain alignment with our customers and suppliers, we anticipate that inventory turns will not improve as much as we would like in 2026.
Speaker #3: This is an industry-wide opportunity to move from the supply chain crisis we've been embroiled in to precision alignment that results in stable inventory levels and predictable component availability.
Speaker #3: While we are not where we want to be on every product line, we have a good vision for the path forward. As we continue to work through the supply chain alignment with our customers and suppliers, we anticipate that inventory turns will not improve as much as we would like in 2026.
Speaker #3: Inventory efficiency is a priority, and we are investing substantial resources in process improvement and control. The impact of these efforts is likely to be felt in late calendar 2026 or even early 2027.
Operator: Inventory efficiency is a priority, and we are investing substantial resources in process improvement and control, but the impact of these efforts is likely to be felt in late calendar 2026 or even early 2027. In aerospace, demand growth in commercial and defense OEM aligned to our expectations, while commercial services exceeded our forecasts. Commercial services activity was robust across narrowbody, widebody, and regional platforms. LEAP, GTF, and legacy narrowbody repair volume was up year-over-year and relatively flat compared to Q4 2025. Also, like the previous quarter, we experienced elevated spare LRU provisioning orders, and we were able to execute and deliver these orders to customers. Very strong execution by our aerospace team enabled us to capture growth profitably with 420 basis points segment margin increase. Industrial also continued on its positive trajectory with robust growth across power generation, transportation, and oil and gas.
Inventory efficiency is a priority, and we are investing substantial resources in process improvement and control, but the impact of these efforts is likely to be felt in late calendar 2026 or even early 2027. In aerospace, demand growth in commercial and defense OEM aligned to our expectations, while commercial services exceeded our forecasts. Commercial services activity was robust across narrowbody, widebody, and regional platforms. LEAP, GTF, and legacy narrowbody repair volume was up year-over-year and relatively flat compared to Q4 2025. Also, like the previous quarter, we experienced elevated spare LRU provisioning orders, and we were able to execute and deliver these orders to customers. Very strong execution by our aerospace team enabled us to capture growth profitably with 420 basis points segment margin increase. Industrial also continued on its positive trajectory with robust growth across power generation, transportation, and oil and gas.
Speaker #3: In aerospace, demand growth and commercial and defense OEM aligned to our expectations. While commercial services exceeded our forecasts, commercial services activity was robust across narrow-body, wide-body, and regional platforms.
Speaker #3: Leap GTF and legacy narrowbody repair volume was up year over year and relatively flat compared to the fourth quarter of 2025. Also, like the previous quarter, we experienced elevated spare LRU provisioning orders, and we were able to execute and deliver these orders to customers.
Speaker #3: Very strong execution by our Aerospace team enabled us to capture growth profitably, with a 420-basis-point segment margin increase. Industrial also continued on its positive trajectory, with robust growth across power generation, transportation, and oil and gas.
Speaker #3: Price as well as operational improvements and volume leverage translated into a 410-basis-point margin expansion for Industrial. These combined results build on the momentum of a strong 2025 performance and reflect outstanding work across the company.
Operator: Price, as well as operational improvements and volume leverage, translated into a 410 basis point margin expansion for industrial. These combined results build on the momentum of a strong 2025 performance and reflect outstanding work across the company. So what's ahead for the rest of 2026? We continue to expand our services capacity to address increasing demand and improve turnaround times for our customers. This includes our Prestwick, Scotland facility, where we are in the planning phase to add square footage and optimize the layout to reduce turn times while supporting growth at this well-positioned Woodward MRO Center. In Rockford, we are commissioning additional test stands and optimizing the layout for improved flow based on Kaizen events and benchmarking exercises our team conducted. We are working with industry-leading MRO providers to deliver Woodward licensed support offerings, which will give our customers more choice and additional capacity to address the growth.
Price, as well as operational improvements and volume leverage, translated into a 410 basis point margin expansion for industrial. These combined results build on the momentum of a strong 2025 performance and reflect outstanding work across the company. So what's ahead for the rest of 2026? We continue to expand our services capacity to address increasing demand and improve turnaround times for our customers. This includes our Prestwick, Scotland facility, where we are in the planning phase to add square footage and optimize the layout to reduce turn times while supporting growth at this well-positioned Woodward MRO Center. In Rockford, we are commissioning additional test stands and optimizing the layout for improved flow based on Kaizen events and benchmarking exercises our team conducted. We are working with industry-leading MRO providers to deliver Woodward licensed support offerings, which will give our customers more choice and additional capacity to address the growth.
Speaker #3: So, what's ahead for the rest of 2026? We continue to expand our services capacity to address increasing demand and improve turnaround times for our customers.
Speaker #3: This includes our Pressweek Scotland facility, where we are in the planning phase to add square footage and optimize the layout to reduce turn times while supporting growth at this well-positioned Woodward MRO center.
Speaker #3: In Rockford, we are commissioning additional test stands and optimizing the layout for improved flow based on Kaizen events and benchmarking exercises our team conducted.
Speaker #3: We are working with industry-leading MRO providers to deliver Woodward-licensed support offerings, which will give our customers more choice and additional capacity to address the growth.
Speaker #3: In our industrial segment, we recently announced an important strategic decision to wind down our China on-highway product lines. As we've discussed in the past, the China on-highway market has provided us limited order visibility, and overall performance has been inconsistent from a revenue and profitability standpoint.
Operator: In our industrial segment, we recently announced an important strategic decision to wind down our China-on-highway product lines. As we've discussed in the past, the China-on-highway market has provided us limited order visibility, and overall performance has been inconsistent from a revenue and profitability standpoint. We have been evaluating strategic options for this business for quite some time. The decision to wind down by the end of this fiscal year supports our long-term growth strategy for Woodward's industrial segment. Throughout the year, we expect to see continued benefits from our focus on operational excellence. This includes further stabilizing our end-to-end supply chain to improve on-time delivery, increase inventory turns eventually, and increase resilience to better serve our customers. Our near-term strategic priorities are clear.
In our industrial segment, we recently announced an important strategic decision to wind down our China-on-highway product lines. As we've discussed in the past, the China-on-highway market has provided us limited order visibility, and overall performance has been inconsistent from a revenue and profitability standpoint. We have been evaluating strategic options for this business for quite some time. The decision to wind down by the end of this fiscal year supports our long-term growth strategy for Woodward's industrial segment. Throughout the year, we expect to see continued benefits from our focus on operational excellence. This includes further stabilizing our end-to-end supply chain to improve on-time delivery, increase inventory turns eventually, and increase resilience to better serve our customers. Our near-term strategic priorities are clear.
Speaker #3: We have been evaluating strategic options for this business for quite some time. The decision to wind down by the end of this fiscal year supports our long-term growth strategy for Woodward's industrial segment.
Speaker #3: Throughout the year, we expect to see continued benefits from our focus on operational excellence. This includes further stabilizing our end-to-end supply chain to improve on-time delivery and eventually increase inventory turns, as well as increasing resilience to better serve our customers.
Speaker #3: Our near-term strategic priorities are clear. First, we will meet OEM demand growth, whether that is rate breaks for airplane and engine OEMs in aerospace or data center-related power generation demand increases for industrial components.
Operator: First, we will meet OEM demand growth, whether that is rate breaks for airplane and engine OEMs in aerospace or data center-related power generation demand increases for industrial controls and components. Second, we will provide world-class service to deliver on the promise of repair and overhaul of our Woodward product install base, whether that is aerospace legacy, LEAP GTF, or industrial gas turbine systems. Last but not least, we are shifting our R&D focus from baseline technology development to customer value demonstration on selected technologies to position Woodward for increased content on next single aisle platforms. From a capital allocation standpoint, our ongoing organic growth and strong balance sheet provide us with flexibility to evaluate potential inorganic opportunities that are a strategic fit with the right risk-adjusted returns while investing in ourselves and returning cash to shareholders.
First, we will meet OEM demand growth, whether that is rate breaks for airplane and engine OEMs in aerospace or data center-related power generation demand increases for industrial controls and components. Second, we will provide world-class service to deliver on the promise of repair and overhaul of our Woodward product install base, whether that is aerospace legacy, LEAP GTF, or industrial gas turbine systems. Last but not least, we are shifting our R&D focus from baseline technology development to customer value demonstration on selected technologies to position Woodward for increased content on next single aisle platforms. From a capital allocation standpoint, our ongoing organic growth and strong balance sheet provide us with flexibility to evaluate potential inorganic opportunities that are a strategic fit with the right risk-adjusted returns while investing in ourselves and returning cash to shareholders.
Speaker #3: World-class service to deliver on the promise. Second, we will provide repair and overhaul of our base, whether that is aerospace, Woodward product-installed legacy, LEAP, GTF, or systems.
Speaker #3: Last but not least, we are shifting our R&D development from baseline technology to customer value demonstration on selected technologies to position Woodward for increased content on next platforms.
Speaker #3: Last, but not least, we are shifting our R&D development to customer value demonstration on selected technologies to position Woodward for increased content on the next single aisle. From a capital allocation standpoint, our ongoing organic growth and strong balance sheet provide us with flexibility to evaluate potential inorganic strategic fit with the right risk-adjusted returns, while investing in ourselves and returning cash to shareholders.
Speaker #3: Given the strength of our first quarter performance and our outlook across our full-year sales and earnings markets, we are confident in raising our guidance, which Bill will outline in his section after sharing more of our first quarter detailed financial information regarding performance.
Operator: Given the strength of our Q1 performance and our outlook across our markets, we are confident in raising our full-year sales and earnings guidance, which Bill will outline in his section after sharing more detailed financial information regarding our Q1 performance. Over to you, Bill.
Given the strength of our Q1 performance and our outlook across our markets, we are confident in raising our full-year sales and earnings guidance, which Bill will outline in his section after sharing more detailed financial information regarding our Q1 performance. Over to you, Bill.
Speaker #3: Over to you, Bill.
Bill Lacey: Thank you, Chip, and good evening, everyone. As a reminder, all references to years are references to the company's fiscal year unless otherwise stated, and all comparisons are year over year unless otherwise stated. As Chip mentioned, we had a very strong start to 2026. Net sales in the first quarter of 2026 were $996 million, an increase of 29%, reflecting strong demand and consistent execution. We achieved earnings per share in the first quarter of 2026 of $2.17 compared to $1.42 and adjusted earnings per share of $1.35. There were no adjustments in the first quarter of 2026. We generated $70 million of free cash flow in the first quarter. First quarter performance exceeded our expectations, primarily driven by strong aerospace commercial services and higher China-on-highway revenue in our industrial segment.
Bill Lacey: Thank you, Chip, and good evening, everyone. As a reminder, all references to years are references to the company's fiscal year unless otherwise stated, and all comparisons are year over year unless otherwise stated. As Chip mentioned, we had a very strong start to 2026. Net sales in the first quarter of 2026 were $996 million, an increase of 29%, reflecting strong demand and consistent execution. We achieved earnings per share in the first quarter of 2026 of $2.17 compared to $1.42 and adjusted earnings per share of $1.35. There were no adjustments in the first quarter of 2026. We generated $70 million of free cash flow in the first quarter. First quarter performance exceeded our expectations, primarily driven by strong aerospace commercial services and higher China-on-highway revenue in our industrial segment.
Speaker #2: Everyone, as a reminder, all references to years are references to the company's fiscal year unless otherwise stated. Thank you, Chip, and good evening. All comparisons are year-over-year unless otherwise stated.
Speaker #2: As Chip mentioned, we had a very strong start to 2026. Net sales in the first quarter of 2026 were $996 million, up 29%, reflecting a strong increase in demand and consistent execution.
Speaker #2: We achieved earnings per share in the first quarter of 2026 of $2.17, compared to $1.42, and adjusted earnings per share of $1.35. There were no adjustments in the first quarter of 2026.
Speaker #2: We generated $70 million of free cash flow in the first quarter. First quarter performance exceeded our expectations, primarily driven by strong aerospace commercial services and higher China on-highway revenue in our Industrial segment.
Speaker #2: Importantly, we did not experience the typical seasonal drop-off in demand, and we maintained steady production levels despite fewer working days in the quarter. At the segment level, aerospace segment sales for the first quarter of 2026 were $635 million, compared to $494 million, an increase of 29%.
Bill Lacey: Importantly, we did not experience the typical seasonal drop-off in demand, and we maintained steady production levels despite fewer working days in the quarter. At the segment level, aerospace segment sales for the first quarter of 2026 were $635 million compared to $494 million, an increase of 29%. The substantial year-over-year growth was primarily driven by commercial services sales, which increased 50%. This reflects higher volumes to support sustained high utilization of legacy aircraft as well as increased LEAP and GTF activity. In addition, we experienced significantly higher spare LRU volumes during the quarter, primarily for China. This appears to have been driven by customer under-provisioning rather than a pull forward of demand, as these are short-cycle orders often placed and fulfilled within the same quarter.
Importantly, we did not experience the typical seasonal drop-off in demand, and we maintained steady production levels despite fewer working days in the quarter. At the segment level, aerospace segment sales for the first quarter of 2026 were $635 million compared to $494 million, an increase of 29%. The substantial year-over-year growth was primarily driven by commercial services sales, which increased 50%. This reflects higher volumes to support sustained high utilization of legacy aircraft as well as increased LEAP and GTF activity. In addition, we experienced significantly higher spare LRU volumes during the quarter, primarily for China. This appears to have been driven by customer under-provisioning rather than a pull forward of demand, as these are short-cycle orders often placed and fulfilled within the same quarter.
Speaker #2: The substantial year-over-year growth was primarily driven by commercial services sales, which increased 50%. This reflects higher volumes to support sustained high utilization of legacy aircraft, as well as increased LEAP and GTF activity.
Speaker #2: In addition, we experienced significantly higher spare LRU volumes during the quarter, primarily for China. This appears to have been driven by customer under-provisioning rather than a pull forward of demand, as these are short-cycle orders often placed and fulfilled within the same quarter.
Speaker #2: We don't expect the same level of commercial services growth going forward, as comps get more difficult, and we are not forecasting spare LRU sales at the levels that we experienced in the last couple of quarters.
Bill Lacey: We don't expect the same level of commercial services growth going forward as comps get more difficult, and we are not forecasting spare LRU sales at the levels that we experienced in the last couple of quarters. In line with our expectations, airframe and production rates increased, and commercial OEM sales were up 22% as destocking began to taper off. Defense OEM sales increased 23%, primarily driven by new JDAM pricing, which took effect last quarter. Overall, we continue to see strong demand for our defense program. First quarter aerospace segment earnings were $148 million, or 23.4% of segment sales, compared to $95 million, or 19.2% of segment sales. The 420 basis point improvement reflects solid price realization, primarily driven by the new JDAM pricing, higher volumes, and favorable mix, primarily due to strong commercial services growth in the quarter, partially offset by strategic investments in manufacturing capabilities and inflation.
We don't expect the same level of commercial services growth going forward as comps get more difficult, and we are not forecasting spare LRU sales at the levels that we experienced in the last couple of quarters. In line with our expectations, airframe and production rates increased, and commercial OEM sales were up 22% as destocking began to taper off. Defense OEM sales increased 23%, primarily driven by new JDAM pricing, which took effect last quarter. Overall, we continue to see strong demand for our defense program. First quarter aerospace segment earnings were $148 million, or 23.4% of segment sales, compared to $95 million, or 19.2% of segment sales. The 420 basis point improvement reflects solid price realization, primarily driven by the new JDAM pricing, higher volumes, and favorable mix, primarily due to strong commercial services growth in the quarter, partially offset by strategic investments in manufacturing capabilities and inflation.
Speaker #2: In line with our expectations, airframe production rates increased, and commercial OEM sales were up 22% as destocking began to taper off. Defense OEM sales increased 23%, primarily driven by new JDAM pricing, which took effect last quarter.
Speaker #2: Overall, we continue to see strong demand for our defense program. First quarter aerospace segment earnings were $148 million, or 23.4% of segment sales, compared to $95 million, or 19.2% of segment sales.
Speaker #2: The 420 basis point improvement reflects solid price realization, primarily driven by the new JDAM, and favorable mix, primarily due to strong commercial services growth in the quarter.
Speaker #2: Partially offset by strategic investments in manufacturing capabilities and inflation. Industrial segment sales for the first quarter were $362 million, up 30% from $279 million.
Bill Lacey: Industrial segment sales for the first quarter were $362 million, up 30% from $279 million. Core industrial sales, which excluded the impact of China-on-highway, increased 22% in the quarter with broad-based growth across our end markets, price, and FX. Marine transportation sales increased 38%, driven primarily by increases in services and shipyard output. Oil and gas sales increased 28% as volume growth was driven by greater midstream gas investment. Power generation sales increased 7%, which included the impact of the combustion business divestiture in the prior year. Excluding the impact of the divestiture, which averaged approximately $15 million of quarterly sales, power generation sales grew in the mid-20s on a percentage basis, in line with the broader power generation market. China-on-highway sales were $32 million in the quarter, higher than we planned, further demonstrating the visibility challenge and significant quarter-to-quarter volatility of this business.
Industrial segment sales for the first quarter were $362 million, up 30% from $279 million. Core industrial sales, which excluded the impact of China-on-highway, increased 22% in the quarter with broad-based growth across our end markets, price, and FX. Marine transportation sales increased 38%, driven primarily by increases in services and shipyard output. Oil and gas sales increased 28% as volume growth was driven by greater midstream gas investment. Power generation sales increased 7%, which included the impact of the combustion business divestiture in the prior year. Excluding the impact of the divestiture, which averaged approximately $15 million of quarterly sales, power generation sales grew in the mid-20s on a percentage basis, in line with the broader power generation market. China-on-highway sales were $32 million in the quarter, higher than we planned, further demonstrating the visibility challenge and significant quarter-to-quarter volatility of this business.
Speaker #2: Core industrial sales, which excluded the impact of China on highway, increased 22% in the quarter, with broad-based growth across our end markets, price, and FX.
Speaker #2: Marine transportation sales increased 38%, primarily due to increases in services and shipyard output. Oil and gas sales increased 28% as volume growth was driven by gas investment.
Speaker #2: Power generation sales increased 7%, which was greater than midstream, and included the impact of the combustion business of Vestager in the prior year. Excluding the impact of the divestiture, which averaged approximately $15 million of quarterly sales, power generation sales grew in the mid-20s on a percentage basis.
Speaker #2: In line with the broader power generation market, China on-highway sales were $32 million in the quarter, higher than we planned, further demonstrating the visibility challenge and significant quarter-to-quarter volatility of this business.
Speaker #2: Industrial segment earnings for the first quarter of 2026 were $67 million, or 18.5% of segment sales, compared to $40 million, or 14.4% of segment sales. Within our core industrial business, this reflects higher sales volumes from price realization and favorable mix, partially offset by inflation.
Bill Lacey: Industrial segment earnings for Q1 2026 were $67 million, or 18.5% of segment sales, compared to $40 million, or 14.4% of segment sales. Within our core industrial business, margins expanded 200 basis points, to 17.3% of core industrial sales, driven by higher sales volumes, strong price realization, and favorable mix, partially offset by inflation. Significant progress on our operational excellence pillar enabled us to increase output to meet strong customer demand and achieve improved operating leverage. The China-on-highway business added an additional 210 basis points of margin growth. As Chip mentioned in his comments, we announced that after a multi-year evaluation of strategic alternatives, including potential divestiture, we made the decision to wind down the China-on-highway business by the end of the fiscal year. This business often drove quarterly volatility within our industrial segment.
Industrial segment earnings for Q1 2026 were $67 million, or 18.5% of segment sales, compared to $40 million, or 14.4% of segment sales. Within our core industrial business, margins expanded 200 basis points, to 17.3% of core industrial sales, driven by higher sales volumes, strong price realization, and favorable mix, partially offset by inflation. Significant progress on our operational excellence pillar enabled us to increase output to meet strong customer demand and achieve improved operating leverage. The China-on-highway business added an additional 210 basis points of margin growth. As Chip mentioned in his comments, we announced that after a multi-year evaluation of strategic alternatives, including potential divestiture, we made the decision to wind down the China-on-highway business by the end of the fiscal year. This business often drove quarterly volatility within our industrial segment.
Speaker #2: Significant progress on our operational excellence pillar enabled us to increase output to meet strong customer demand and improved operating leverage. The China on-highway business saw 210 basis points of margin growth.
Speaker #2: As Chip mentioned in his comments, we announced that after a multi-year evaluation of strategic alternatives business added an additional including potential divestiture, we made the decision to wind down the China on highway business by the end of the fiscal year.
Speaker #2: This business often drove quarterly volatility within our Industrial segment. It has been an inconsistent contributor to our overall financial results and operates in a highly unpredictable environment.
Bill Lacey: It has been an inconsistent contributor to our overall financial results and operates in a highly unpredictable environment. This decision further aligns the industrial portfolio with our long-term growth strategy and priority in markets: marine transportation, power generation, and oil and gas. We do not expect a significant long-term impact on our financial performance. However, we will incur certain costs associated with the winddown, which will be adjusted out of our future results. The remaining operational activity for this business year will continue to be reported in our industrial results during the winddown period. Non-segment expenses were $37 million for Q1 2026, compared to $22 million. Adjusted non-segment expenses in Q1 2025 were $28 million. There were no adjustments to non-segment expenses in Q1 2026.
It has been an inconsistent contributor to our overall financial results and operates in a highly unpredictable environment. This decision further aligns the industrial portfolio with our long-term growth strategy and priority in markets: marine transportation, power generation, and oil and gas. We do not expect a significant long-term impact on our financial performance. However, we will incur certain costs associated with the winddown, which will be adjusted out of our future results. The remaining operational activity for this business year will continue to be reported in our industrial results during the winddown period. Non-segment expenses were $37 million for Q1 2026, compared to $22 million. Adjusted non-segment expenses in Q1 2025 were $28 million. There were no adjustments to non-segment expenses in Q1 2026.
Speaker #2: This decision further aligns the industrial portfolio with our long-term growth strategy and priority end markets: marine transportation, power generation, and oil, improving our financial performance.
Speaker #2: a significant long-term impact on. However, we will incur certain costs and gas. We do not expect costs associated with the wind down, which will be adjusted out of our future results.
Speaker #2: The remaining business year will continue to be reported in our industrial results operational activity. For this, non-segment expenses were during the wind down $37 million for the first quarter of 2026, compared to $22 million.
Speaker #2: Adjusted non-segment expenses in the first quarter of 2025 were $28 million. There were no adjustments to non-segment expenses in the first quarter of 2026.
Speaker #2: At the consolidated Woodward operating activities level, net cash provided by fiscal 2026 was $114 million, compared to $35 million. This was largely driven by higher net earnings.
Bill Lacey: At the consolidated Woodward level, net cash provided by operating activities for fiscal 2026 was $114 million, compared to $35 million, largely driven by higher net earnings. Capital expenditures were $44 million for fiscal 2026. We expect capital spending to meaningfully increase over the remaining three quarters due primarily to the Spartanburg facility buildout as well as other ongoing automation projects. We generated strong free cash flow of $70 million in the first quarter, compared to $1 million, driven primarily by higher earnings related to the outperformance in the quarter. As of 31 December 2025, debt leverage was 1.2 times EBITDA. We are allocating capital according to our priorities, supporting organic growth, selectively pursuing strategic M&A opportunities, and returning capital to shareholders through dividends and share repurchase. We continue to prioritize organic growth through ongoing automation investments and the construction of our new Spartanburg, South Carolina facility.
At the consolidated Woodward level, net cash provided by operating activities for fiscal 2026 was $114 million, compared to $35 million, largely driven by higher net earnings. Capital expenditures were $44 million for fiscal 2026. We expect capital spending to meaningfully increase over the remaining three quarters due primarily to the Spartanburg facility buildout as well as other ongoing automation projects. We generated strong free cash flow of $70 million in the first quarter, compared to $1 million, driven primarily by higher earnings related to the outperformance in the quarter. As of 31 December 2025, debt leverage was 1.2 times EBITDA. We are allocating capital according to our priorities, supporting organic growth, selectively pursuing strategic M&A opportunities, and returning capital to shareholders through dividends and share repurchase. We continue to prioritize organic growth through ongoing automation investments and the construction of our new Spartanburg, South Carolina facility.
Speaker #2: Capital expenditures were $44 million, with fiscal capital spending expected to meaningfully increase over the remaining three quarters, due primarily to the Spartanburg facility build-out as well as other ongoing automation projects.
Speaker #2: We generated strong free cash flow of $70 million in the first quarter, driven primarily by higher earnings related to the outperformance in the quarter.
Speaker #2: As of December 31, 2025, debt leverage was 1.2 times EBITDA. We are allocating capital according to our priorities—supporting organic growth, selectively pursuing strategic M&A opportunities, and returning capital to shareholders through dividends and share repurchases.
Speaker #2: We continue to prioritize growth through ongoing organic automation investments and the Carolina facility. We are selective, returns-driven in M&A opportunities, and our strong balance sheet provides the flexibility to move decisively as compelling opportunities arise.
Bill Lacey: We are always evaluating selective returns-driven M&A opportunities, and our strong balance sheet provides the flexibility to move decisively as compelling opportunities emerge. Our fiscal 2026 guidance still assumes returning between $650 million and 700 million through dividends and share repurchases. Turning to our 2026 guidance. Based on our strong start to the year, we are raising our 2026 guidance for sales and earnings and reaffirming the other elements of our four-year guidance. We are layering in the first quarter outperformance while keeping changes to the remaining quarters minus. For fiscal 2026, we now expect the following: aerospace sales growth to be between 15% and 20%, with margins holding between 22% and 23%; industrial sales growth to be between 11% and 14%, with margins increasing to be between 16% and 17%. We are raising both Woodward level sales and EPS guidance.
We are always evaluating selective returns-driven M&A opportunities, and our strong balance sheet provides the flexibility to move decisively as compelling opportunities emerge. Our fiscal 2026 guidance still assumes returning between $650 million and 700 million through dividends and share repurchases. Turning to our 2026 guidance. Based on our strong start to the year, we are raising our 2026 guidance for sales and earnings and reaffirming the other elements of our four-year guidance. We are layering in the first quarter outperformance while keeping changes to the remaining quarters minus. For fiscal 2026, we now expect the following: aerospace sales growth to be between 15% and 20%, with margins holding between 22% and 23%; industrial sales growth to be between 11% and 14%, with margins increasing to be between 16% and 17%. We are raising both Woodward level sales and EPS guidance.
Speaker #1: emerge Opportunities
Speaker #1: assumes Our still returning and between 600 and $50 million 700 million . 50 million is dividends 700 million through share repurchases Turning and .
Speaker #1: 2026 guidance to our . Based our start to strong year the on , we raising 2026 guidance our and sales earnings the other and reaffirming elements of our full year guidance .
Speaker #1: We are layering in first quarter while outperformance, keeping remaining minus quarters, always evaluating changes to 2026 fiscal. We now expect the following: sales growth for Aerospace to be between 15% and 20%, with margins holding. Industrial sales growth is expected to be between 22% and 23%.
Speaker #1: Between 11 and 14%, with margins to be increasing between 16 and 17%. We are raising both Woodward-level sales and guidance. We now expect EPS consolidated sales growth to be between 14 and 18%, and EPS to be between $8.20 and $8.60.
Bill Lacey: We now expect consolidated sales growth to be between 14 and 18%, and EPS to be between $8.20 and $8.60. Free cash flow is still expected to be between $300 and 350 million. As Chip mentioned earlier, we expect to continue to maintain higher levels of inventory than we anticipated as we prioritize new customer demand while we strive for better alignment for the end-to-end supply chain. All other aspects of our guidance remain unchanged. This concludes our comments on the business and results for the first quarter of 2026. Operator, we are now ready to open the call to questions.
We now expect consolidated sales growth to be between 14 and 18%, and EPS to be between $8.20 and $8.60. Free cash flow is still expected to be between $300 and 350 million. As Chip mentioned earlier, we expect to continue to maintain higher levels of inventory than we anticipated as we prioritize new customer demand while we strive for better alignment for the end-to-end supply chain. All other aspects of our guidance remain unchanged. This concludes our comments on the business and results for the first quarter of 2026. Operator, we are now ready to open the call to questions.
Speaker #1: Free is still be expected to between 300 and cash flow and 350 million . Chip mentioned earlier , we continue to maintain higher levels of we inventory than as we prioritize customer demand .
Speaker #1: While anticipated we better strive for alignment for the end supply chain All other end to . our guidance aspects of remain . This concludes our comments on business and results for the the first of 2026 .
Speaker #1: Operator: We are now a quarter ready. Open the call to expect to.
Operator: Thank you. The question-and-answer session will begin at this time. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star 1 on your touchscreen phone. If you wish to withdraw your question, press star 1 a second time. Your question will be taken in the order it is received, and please stand by for your first question. Our first question comes from the line of Scott Mikus with Melius Research. Your line is open.
Operator: Thank you. The question-and-answer session will begin at this time. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star 1 on your touchscreen phone. If you wish to withdraw your question, press star 1 a second time. Your question will be taken in the order it is received, and please stand by for your first question. Our first question comes from the line of Scott Mikus with Melius Research. Your line is open.
Speaker #2: And the question and
Speaker #2: answer time . are If you using a speakerphone , up the handset before please pick pressing any Should you have numbers . a question , please session will star one on your touch tone If phone .
Speaker #2: At this time, if you wish to withdraw your question, press * a second time. Your question will be taken in the order it was received.
Speaker #2: And please stand by for your star one. First question. And our first question comes from the line of Scott Melius, Research.
Scott Mikus: Good evening, Chip and Bill. Very nice results. Quick question on the commercial aftermarket sales. Normally, we would see a sequential decline due to the fewer working days, another very strong quarter for LRU sales. But given that price increases are usually more pronounced in your second quarter, will the $245 million of commercial aftermarket sales in the first quarter be the low point for the year?
Scott Mikus: Good evening, Chip and Bill. Very nice results. Quick question on the commercial aftermarket sales. Normally, we would see a sequential decline due to the fewer working days, another very strong quarter for LRU sales. But given that price increases are usually more pronounced in your second quarter, will the $245 million of commercial aftermarket sales in the first quarter be the low point for the year?
Speaker #2: line is open
Speaker #3: Good evening , Chip
Speaker #3: and
Speaker #3: Bill .
Speaker #3: Very nice results. Quick question on the commercial sales. Normally, we see a sequential decline due to the fewer working MTDs with days.
Speaker #3: Very quarter strong for another LRU. But sales price increases are usually more given, that pronounced, in your second quarter. Would see the $245 million of commercial sales in the first quarter would be the low point for the year.
Chip Blankenship: I don't think it's going to be the low point, Scott. It's hard to see exact numbers from here. We don't anticipate the same amount of spare LRU shipping, so certainly that'll knock the peak of that revenue off. But we have modeled increasing repair and spare part sales. We think that the market demand is strong. In some ways, our turn times may be somewhat limiting in our ability to fulfill all that demand. So we are investing in capacity to drive those turn times down and provide even better customer service. So I think it's hard to say whether that's really going to be the peak. There's plenty of opportunity to grow.
Chip Blankenship: I don't think it's going to be the low point, Scott. It's hard to see exact numbers from here. We don't anticipate the same amount of spare LRU shipping, so certainly that'll knock the peak of that revenue off. But we have modeled increasing repair and spare part sales. We think that the market demand is strong. In some ways, our turn times may be somewhat limiting in our ability to fulfill all that demand. So we are investing in capacity to drive those turn times down and provide even better customer service. So I think it's hard to say whether that's really going to be the peak. There's plenty of opportunity to grow.
Speaker #4: I don't think it's going to be the Scott. Low hard. It's hard—it's too hard to see the exact point from here.
Speaker #4: We numbers don't anticipate the same amount of spare shipping . So certainly that'll that'll knock the peak of that off revenue . we But do .
Speaker #4: We have modeled , you know , increasing repair and parts sales . spare We think that the the market demand is strong some ways our turn times may be somewhat limiting in our ability fulfill to demand .
Speaker #4: All that, so we are investing into capacity, you know, to drive those turn times down and give customers even better service.
Speaker #4: So, I think it's hard to say whether that's really going to be the peak. There's opportunity to grow.
Scott Mikus: Okay. And then presumably in the Aero guide, there's some conservatism regarding Boeing and Airbus's production rates. If Boeing and Airbus do hit their production rates, could that drive more upside through higher initial provisioning sales for your aftermarket?
Scott Mikus: Okay. And then presumably in the Aero guide, there's some conservatism regarding Boeing and Airbus's production rates. If Boeing and Airbus do hit their production rates, could that drive more upside through higher initial provisioning sales for your aftermarket?
Speaker #3: Okay . And then
Speaker #3: the aero guide , there's plenty of some conservatism regarding presumably in production Airbus If Boeing and Airbus rates . do hit their production could that rates , drive more upside through higher initial provisioning sales for your aftermarket ?
Chip Blankenship: That's one of the reasons why I hesitated a little bit on the answer on the revenue for the services side. We don't see new tail logos in the horizon, which can drive some of that increased provisioning volume. So we think that over the long period, hitting those higher output rates will drive more spare LRUs, but not necessarily in the near term. Over time, that does correlate pretty well. But as we don't see any new logos in the near future, we don't see that as a 2026 opportunity.
Chip Blankenship: That's one of the reasons why I hesitated a little bit on the answer on the revenue for the services side. We don't see new tail logos in the horizon, which can drive some of that increased provisioning volume. So we think that over the long period, hitting those higher output rates will drive more spare LRUs, but not necessarily in the near term. Over time, that does correlate pretty well. But as we don't see any new logos in the near future, we don't see that as a 2026 opportunity.
Speaker #4: We that's one of the reasons why I hesitated a little bit on the the the on the revenue answer for the services side .
Speaker #4: We don't we don't see new tail logos in the in the horizon , which can drive some of that increased provisioning volume . So we that think over long the period hitting those higher output rates will drive more spare Lrus , but not in the not necessarily in the near term .
Speaker #4: Over that time , that does does pretty correlate well . But as we don't see any new logos in the near future , we don't we don't see that as a 2026 opportunity .
Scott Mikus: All right. Thanks for taking the time.
Scott Mikus: All right. Thanks for taking the time.
Chip Blankenship: Yeah, as far as the volume goes, I would say that the challenge to our volume on the low side would be softer demand from the OEMs not quite hitting the rates. And the opportunities on the earnings side is from having more spare LRUs than we have in the forecast or more repair volume than we have in the forecast. That's kind of how I characterize the Aero looking forward.
Chip Blankenship: Yeah, as far as the volume goes, I would say that the challenge to our volume on the low side would be softer demand from the OEMs not quite hitting the rates. And the opportunities on the earnings side is from having more spare LRUs than we have in the forecast or more repair volume than we have in the forecast. That's kind of how I characterize the Aero looking forward.
Speaker #3: Thanks for all right. Taking.
Speaker #4: questions The . Yeah . As far as the volume goes , you know , I would say that the the the challenge to our , our volume on the low side would be , you know , softer demand from the OEMs not quite hitting the and the rates opportunities on the earnings side is from having more spare LRU that we have in the forecast or more repair volume than we have in the forecast .
Speaker #4: That's kind of how I characterize the aero. Looking forward,
Scott Mikus: All right. Thank you.
Scott Mikus: All right. Thank you.
Chip Blankenship: Welcome.
Chip Blankenship: Welcome.
Speaker #3: All right . Thank you
Operator: Our next question comes from the line of Scott Deuschle with Deutsche Bank. Your line is open.
Speaker #4: Welcome .
Operator: Our next question comes from the line of Scott Deuschle with Deutsche Bank. Your line is open.
Speaker #2: And our next question
Speaker #2: Comes from the line of Scott Ducharme with Deutsche Bank. Your line is open.
Scott Mikus: Hey, good evening. Bill, just to be clear, was the 5% increase in the aerospace sales outlook primarily an increase in the aftermarket, or was it more broad?
Scott Deuschle: Hey, good evening. Bill, just to be clear, was the 5% increase in the aerospace sales outlook primarily an increase in the aftermarket, or was it more broad?
Speaker #5: Hey good Bill . Just to be clear , was the evening increase in 5% . sales aerospace the outlook increase in the or was it more broad aftermarket , ?
Bill Lacey: Yeah, it was Q1 driven, Scott. Given that that was mainly driven by commercial services, that is a fair conclusion.
Bill Lacey: Yeah, it was Q1 driven, Scott. Given that that was mainly driven by commercial services, that is a fair conclusion.
Speaker #1: Yeah , it was . It was the first quarter driven . Scott . So given that that was big , mainly driven by commercial services , that is a fair conclusion .
Scott Mikus: Okay. Then why does the margin guidance for aerospace not benefit from the higher aftermarket mix and operating leverage that's implied in what you just said?
Scott Deuschle: Okay. Then why does the margin guidance for aerospace not benefit from the higher aftermarket mix and operating leverage that's implied in what you just said?
Speaker #5: Okay . Then why does margin the guidance for aerospace not benefit from the higher aftermarket mix and operating leverage ? That's implied in what you just said ?
Bill Lacey: Yeah. So as you see, it did flow through in Q1. In the remaining year, remaining portion of the year, we are seeing increased OEM sales. With that increased OEM sales, that mix will temper the margin rate going forward.
Bill Lacey: Yeah. So as you see, it did flow through in Q1. In the remaining year, remaining portion of the year, we are seeing increased OEM sales. With that increased OEM sales, that mix will temper the margin rate going forward.
Speaker #1: Yeah, so it does. As you see, it did flow through in Q1 and the remaining portion of the year. We are the remaining portion of the year.
Speaker #1: We are seeing increased OEM sales, and with that increased OEM sales, that mix will temper the margin rate going forward.
Scott Mikus: Okay. That's clear. And then, Chip, can you walk through the drivers behind the growth acceleration in oil and gas and marine transportation? This quarter looked like around 30% growth in both of them. So curious if you can unpack that and talk through the outlook from here.
Scott Deuschle: Okay. That's clear. And then, Chip, can you walk through the drivers behind the growth acceleration in oil and gas and marine transportation? This quarter looked like around 30% growth in both of them. So curious if you can unpack that and talk through the outlook from here.
Speaker #5: That's okay, clear. And then, Chip, can you walk through the drivers behind the acceleration in oil, gas, and marine growth and transportation?
Speaker #5: This quarter looked like around 30% growth in both of them. So, curious if you could unpack that and talk to the outlook from here.
Chip Blankenship: On the oil and gas, I think we've said a few times, it can be a little bit lumpy in terms of the order profile for that end market. It's both OEM and services-driven. Quite a bit of the oil and gas midstream end application for us is gas turbine-related. Sometimes it's the overhaul of the valves and components that we supply. And other times, we can participate with an OEM partner or independently for a control systems upgrade for a unit or a series of units at an end customer. And it's that activity that drove most of the growth this quarter. As far as marine transportation, it's kind of the marine transportation is kind of the same thing where the shipyards are full and expanding and having year-over-year growth in their outputs. So there's some new unit impact to the growth.
Chip Blankenship: On the oil and gas, I think we've said a few times, it can be a little bit lumpy in terms of the order profile for that end market. It's both OEM and services-driven. Quite a bit of the oil and gas midstream end application for us is gas turbine-related. Sometimes it's the overhaul of the valves and components that we supply. And other times, we can participate with an OEM partner or independently for a control systems upgrade for a unit or a series of units at an end customer. And it's that activity that drove most of the growth this quarter. As far as marine transportation, it's kind of the marine transportation is kind of the same thing where the shipyards are full and expanding and having year-over-year growth in their outputs. So there's some new unit impact to the growth.
Speaker #4: On the oil and gas , I think we've said a few times it can be a little bit lumpy in terms of the order profile for for that end market , it's both OEM and services driven quite , quite a bit of the oil and gas midstream and application for us is gas turbine related .
Speaker #4: It's the sometimes overhaul of the valves and components that we supply, and other times we can participate with an OEM partner or independently for a control systems upgrade for a unit or a series of units at an end.
Speaker #4: Customer . And it's that activity that drove that most growth this quarter of the as far as marine transportation , marine transportation is kind of the same thing where the shipyards are full and expanding and , you know , having year over year growth in their outputs .
Speaker #4: So there's some new unit impact to the growth. But as well, the high utilization of the fleet that has Woodward fuel injection and control systems and pumps in it is seeing quite a bit of overhaul activity and service activity that uses our spare parts.
Chip Blankenship: But as well, the high utilization of the fleet that has Woodward fuel injection and control systems and pumps in it is seeing quite a bit of overhaul activity and service activity that uses our spare parts.
But as well, the high utilization of the fleet that has Woodward fuel injection and control systems and pumps in it is seeing quite a bit of overhaul activity and service activity that uses our spare parts.
Scott Mikus: Thank you.
Scott Deuschle: Thank you.
Chip Blankenship: You're welcome.
Chip Blankenship: You're welcome.
Speaker #5: Thank you .
Operator: Our next question comes from the line of Noah Poponak with Goldman Sachs. Your line is open.
Speaker #4: You're welcome .
Operator: Our next question comes from the line of Noah Poponak with Goldman Sachs. Your line is open.
Speaker #2: Our next question comes from the line of Noah Poponak with Goldman Sachs. Your line is open.
Noah Poponak: Hey, good afternoon. Good evening, guys.
Noah Poponak: Hey, good afternoon. Good evening, guys.
Speaker #6: Hey, good afternoon. Good evening, guys.
Chip Blankenship: Good afternoon, Noah. Should we interpret the total company full-year guidance revision as you left the remaining nine months of the year the same as the prior plan, roughly, and that the upside to the full year is basically the upside to the just one Q?
Chip Blankenship: Good afternoon, Noah.
Noah Poponak: Should we interpret the total company full-year guidance revision as you left the remaining nine months of the year the same as the prior plan, roughly, and that the upside to the full year is basically the upside to the just one Q?
Speaker #4: Noah Afternoon , .
Speaker #6: Should we interpret the total company full-year guidance revision as you left the remaining nine months of the year in the prior plan, same as before?
Speaker #6: Roughly. And that the upside to the full year is basically the upside to just one Q.
Bill Lacey: No, that is yes, that's correct.
Bill Lacey: No, that is yes, that's correct.
Speaker #1: No, that is. Yes, that's correct.
Noah Poponak: Okay. And so I guess the follow-up to that is, does that make sense? Was all of the upside in Q1 things that you see as they were nice to see in the quarter, but they don't sustain as upside drivers to your prior plan?
Noah Poponak: Okay. And so I guess the follow-up to that is, does that make sense? Was all of the upside in Q1 things that you see as they were nice to see in the quarter, but they don't sustain as upside drivers to your prior plan?
Speaker #6: Okay . And so I guess the follow up to that is does that make sense ? What all of the upside in one Q things that you see as you know , they were nice , see in the nice to quarter , but they don't sustain as upside drivers to your prior plan .
Bill Lacey: Yeah. Let me take a shot at it. I do think it makes sense. In the rest of the year, we did put in the additional growth related to the build rates that we think that are there, the services growth. And so that is all in the total year guide. The part which Chip mentioned is the spare LRUs, potential upside there, which may or may not come, that is not something that we put in. And that was one of the larger drivers of our Q1 outperformance. Along with the China-on-highway increase, we do not see that happening going forward. So with that, Noah, we do think that the remaining of the year guidance makes sense. Chip, I don't know if you have.
Bill Lacey: Yeah. Let me take a shot at it. I do think it makes sense. In the rest of the year, we did put in the additional growth related to the build rates that we think that are there, the services growth. And so that is all in the total year guide. The part which Chip mentioned is the spare LRUs, potential upside there, which may or may not come, that is not something that we put in. And that was one of the larger drivers of our Q1 outperformance. Along with the China-on-highway increase, we do not see that happening going forward. So with that, Noah, we do think that the remaining of the year guidance makes sense. Chip, I don't know if you have.
Speaker #1: Yeah . Let me I'll take a I shot at it . do think it makes sense in the rest of the year . We did put in the , additional growth related to the build rates that we think we are , that are there .
Speaker #1: The services growth. And so that is all in the total year guide. The part which Chip mentioned is the spare cruise potential upside there, which may or may not come.
Speaker #1: That is not something that we put in. And that's what was one of the larger drivers of our Q1 outperformance, along with China and the highway increase.
Speaker #1: We do not see that happening going forward . with So that , Noah , we do think that the remaining of the year guidance makes sense .
Chip Blankenship: I guess I'd also characterize it in terms of risks and opportunities, maybe, Bill, that we recognized almost zero risks in Q1 and all opportunities came through. As we look at the rest of the year, we feel like we have a balanced view of things that could take us a little bit higher within the guide, which is the airframe and OEM demand remains strong. All the power gen demand comes through. The somewhat lumpy oil and gas maybe stays high. I mean, these are things that would drive us to the top side of the guide. Then there's some things that could get in the way of that. We still have some supplier challenges in terms of meeting all of the demand.
Chip Blankenship: I guess I'd also characterize it in terms of risks and opportunities, maybe, Bill, that we recognized almost zero risks in Q1 and all opportunities came through. As we look at the rest of the year, we feel like we have a balanced view of things that could take us a little bit higher within the guide, which is the airframe and OEM demand remains strong. All the power gen demand comes through. The somewhat lumpy oil and gas maybe stays high. I mean, these are things that would drive us to the top side of the guide. Then there's some things that could get in the way of that. We still have some supplier challenges in terms of meeting all of the demand.
Speaker #1: Chip, I don't know if you have...
Speaker #4: I'd I guess also characterize it in terms of the risks and opportunities . Bill Maybe . , that we recognized almost zero risks in the first quarter in all , opportunities came through .
Speaker #4: And as we look at the rest of the year, we feel like we have a balanced view of things that could take us a little bit higher within the guide, which is the airframe and OEM demand remains strong.
Speaker #4: All the power gen comes demand through the somewhat lumpy oil and maybe gas , stays high . I mean , side of top the these are the guide .
Speaker #4: And then get in the way, that could impact things. There's some of that. You know, we still have some supplier challenges in terms of meeting all of the demand.
Chip Blankenship: Some of our hard capacity constraints in our factories have been limiting our ability to respond to all this demand and the timing that it comes through. So I think that a few suppliers could get in the way and knock down our ability to hit the very highest part of the guide. And then some of our customers could have problems with other suppliers, and they could reduce their demand to us. So a lot of things can still happen in the nine months coming along. The supply chain is not as smooth as we'd like it to be at our customers or with our suppliers. So I think there's plenty of room in the guide to manage those risks and opportunities.
Some of our hard capacity constraints in our factories have been limiting our ability to respond to all this demand and the timing that it comes through. So I think that a few suppliers could get in the way and knock down our ability to hit the very highest part of the guide. And then some of our customers could have problems with other suppliers, and they could reduce their demand to us. So a lot of things can still happen in the nine months coming along. The supply chain is not as smooth as we'd like it to be at our customers or with our suppliers. So I think there's plenty of room in the guide to manage those risks and opportunities.
Speaker #4: And some of our hard capacity constraints in our factories have been limiting our ability to respond to all this demand and the timing that it comes through.
Speaker #4: So I think that , you know , a few suppliers could get in the way and , and , and knock down our ability to hit the very highest part of the guide .
Speaker #4: And then, you know, some of our customers could have problems with other suppliers, and they could reduce their demand to us.
Speaker #4: So, a lot of things can still happen in the nine months coming along. The supply chain is not as smooth as we'd like it to be at our customers' or with our suppliers.
Speaker #4: So I think there's plenty of room in the guide to risks. Manage those.
Noah Poponak: Okay. That makes sense. I appreciate that detail. And then, could you quantify? Is it possible to quantify for us, either in absolute dollars or points of growth or anyway, what the LEAP and GTF contribution to the aftermarket was and what the initial spares LRU contribution to the aftermarket was?
Noah Poponak: Okay. That makes sense. I appreciate that detail. And then, could you quantify? Is it possible to quantify for us, either in absolute dollars or points of growth or anyway, what the LEAP and GTF contribution to the aftermarket was and what the initial spares LRU contribution to the aftermarket was?
Speaker #4: .
Speaker #6: Okay , detail . And then could you could you quantify is it possible to quantify for us either in absolute dollars or points of growth or anyway what the leap in GTF contribution to the aftermarket was and what the spare the initial spares LRU contribution to the aftermarket was .
Speaker #6: that makes
Speaker #6: appreciate
Speaker #6: That makes sense. I see opportunities.
Chip Blankenship: I don't think we're going to be quantifying that for you. But just to, I mean, when you think about a spare LRU, it's a high-dollar revenue item and a good profitability item, whereas repairs are a good percentage profitability, but nowhere near the kind of top-level dollar. So we like the repair business. It just doesn't have that this doesn't have as much of a weight per unit turned or anywhere near as a spare LRU. And so we like the year-over-year growth that we saw from the LEAP GTF. It's still tracking to the plans that we've forecast. The legacy narrowbody units are still coming in strong, stronger than we would have predicted a couple of years ago.
Chip Blankenship: I don't think we're going to be quantifying that for you. But just to, I mean, when you think about a spare LRU, it's a high-dollar revenue item and a good profitability item, whereas repairs are a good percentage profitability, but nowhere near the kind of top-level dollar. So we like the repair business. It just doesn't have that this doesn't have as much of a weight per unit turned or anywhere near as a spare LRU. And so we like the year-over-year growth that we saw from the LEAP GTF. It's still tracking to the plans that we've forecast. The legacy narrowbody units are still coming in strong, stronger than we would have predicted a couple of years ago.
Speaker #4: I don't think we're going to be quantifying that for you , but just to I mean , when you think about a spare LRU , it's a it's a it's a high dollar revenue item .
Speaker #4: And , and a good profitability item , whereas repairs are a good percentage profitability . But nowhere near the kind of top level dollar .
Speaker #4: So we like the repair business . It just doesn't have that . This doesn't have as much of a weight per per unit turned or anywhere near as a as a spear LRU .
Speaker #4: So, we'd like the year-over-year growth that we saw from the GTF. It's still tracking to the plans that we've forecast.
Speaker #4: The legacy narrowbody units are still coming in strong , stronger than we would have predicted a couple of years ago . I really liked the the growth that we saw year over year in both widebody and regional , which says that our portfolio is really playing well across all of those different platforms in commercial aerospace .
Chip Blankenship: I really like the growth that we saw year-over-year in both widebody and regional, which says that our portfolio is really playing well across all of those different platforms in commercial aerospace.
I really like the growth that we saw year-over-year in both widebody and regional, which says that our portfolio is really playing well across all of those different platforms in commercial aerospace.
Noah Poponak: So, Chip, it sounds like the LRUs can be chunky. 50 is a big number. We're not going to model 50 for the rest of the year. But it also sounds like it wasn't the case that all the upside in the quarter was the LRU. It sounds like you saw it maybe in the LEAP GTF plan and also in the legacy aircraft and engine.
Noah Poponak: So, Chip, it sounds like the LRUs can be chunky. 50 is a big number. We're not going to model 50 for the rest of the year. But it also sounds like it wasn't the case that all the upside in the quarter was the LRU. It sounds like you saw it maybe in the LEAP GTF plan and also in the legacy aircraft and engine.
Speaker #6: So Chip , the it sounds like , you know , the Lrus can be chunky . 5050 is a big number . We're not going to model 50 for the rest of the year .
Speaker #6: But but it like it also sounds wasn't it wasn't the case that all the upside in the quarter was the LRU . It sounds like you saw it in maybe in the GTF plan as well .
Speaker #6: And also in the legacy engine, aircraft, and
Chip Blankenship: Yeah. The widebody and the regional was probably a little bit more than we would have forecast. So that was robust. The LEAP GTF and narrowbody, we're starting to get we have a pretty good beat on that. And that was kind of in line with what we expected from a growth standpoint.
Chip Blankenship: Yeah. The widebody and the regional was probably a little bit more than we would have forecast. So that was robust. The LEAP GTF and narrowbody, we're starting to get we have a pretty good beat on that. And that was kind of in line with what we expected from a growth standpoint.
Speaker #4: Yeah , the widebody and the was regional probably a little bit more than we would have . We would have forecast . So that was that was robust .
Speaker #4: The LEAP, the GTF, and narrowbody were starting to get—. We have a pretty good bead on that. And that was kind of in line with what we expected from a growth standpoint.
Noah Poponak: Okay. All right. Thanks a lot.
Noah Poponak: Okay. All right. Thanks a lot.
Speaker #6: Okay. All right. Thanks a lot.
Chip Blankenship: You're welcome.
Chip Blankenship: You're welcome.
Speaker #4: welcome You're .
Operator: Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Your line is open.
Operator: Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Your line is open.
Speaker #2: Next, our question comes from the line of Sheila with Kahyaoglu Jefferies. Your line is open.
Scott Mikus: Hi, guys. Congrats on the great quarter. This is Kyle on for Sheila.
[Analyst] (Jefferies): Hi, guys. Congrats on the great quarter. This is Kyle on for Sheila.
Speaker #7: Hi , guys . Congrats . Congrats on the great quarter . This is Kyle on for Sheila .
Chip Blankenship: Thanks, Kyle.
Chip Blankenship: Thanks, Kyle.
Bill Lacey: Hey, Kyle.
Bill Lacey: Hey, Kyle.
Scott Mikus: On the LEAP GTF mix, I know you also said legacy narrow-body was up year-over-year and also flat relative to Q4, obviously counter-seasonal from what we would expect. Can you sort of just pick apart whether that was you catching up on past dues? Was it just really volume unlock of the factories and ultimately how we should think about that cadence as we go through the quarters?
[Analyst] (Jefferies): On the LEAP GTF mix, I know you also said legacy narrow-body was up year-over-year and also flat relative to Q4, obviously counter-seasonal from what we would expect. Can you sort of just pick apart whether that was you catching up on past dues? Was it just really volume unlock of the factories and ultimately how we should think about that cadence as we go through the quarters?
Speaker #4: Kyle . Hey .
Speaker #1: Kyle . Thanks ,
Speaker #7: the On on the leap GTF mix I know you also said legacy narrowbody was up year on year . And also flat relative to the fourth quarter .
Speaker #7: Obviously counter seasonal from what we would expect . Can you sort of just pick apart whether that was , you know , you catching up on past dues ?
Speaker #7: Was it just really volume unlock of the—and—and factories should think ultimately how we—about that cadence as we go through the quarters.
Chip Blankenship: Yeah, I'll agree that it was counterseasonal to the past. But I think what we've been working on really hard over the past couple of years is consistent output. And as we've been getting consistent inputs to the system and bringing our turn times down some, we've achieved that benefit. And so we didn't have a big jump across the goal line at the end of Q4 to sort of make the year. We just had steady output the last week of the year. We had steady output the first week of the year. And we've been working really hard to streamline the input process, the induction process, when a customer sends us a unit for repair or overhaul. And all these operational factors helped us maintain a steady performance operationally. And that shows through in the financials.
Chip Blankenship: Yeah, I'll agree that it was counterseasonal to the past. But I think what we've been working on really hard over the past couple of years is consistent output. And as we've been getting consistent inputs to the system and bringing our turn times down some, we've achieved that benefit. And so we didn't have a big jump across the goal line at the end of Q4 to sort of make the year. We just had steady output the last week of the year. We had steady output the first week of the year. And we've been working really hard to streamline the input process, the induction process, when a customer sends us a unit for repair or overhaul. And all these operational factors helped us maintain a steady performance operationally. And that shows through in the financials.
Speaker #4: Yeah . I'll agree that it was , you know , counter seasonal to the past , but I think , you know , what we've been working on , you know , really hard over the past couple of years is consistent output .
Speaker #4: And as we've been getting consistent inputs to the system and bringing our turn, you know, times, down some, we've achieved that benefit.
Speaker #4: And so, you know, we didn't have a big jump across the line at the goal end of Q4 to sort of make the year.
Speaker #4: We just had steady output. The last week of the year, we had steady output; the first week of the year, and we've been working really hard to streamline the input process.
Speaker #4: The induction process, when a customer sends us a unit for repair or overhaul, you know, all these operational factors have helped us maintain a steady performance operationally.
Speaker #4: That shows through in the financials.
Speaker #4: And that shows through in the financials.
Speaker #4: .
Scott Mikus: Okay. That's helpful. And then just one follow-on on the LRUs. And I think it was Bill's commentary. You mentioned you guys have more confidence that this was prior under-provisioning rather than pull forward related to tariffs, say, in the prior year. Can you just kind of give us an update on why the kind of shift in signaling there and what you're seeing out of that customer base? Thanks, guys.
[Analyst] (Jefferies): Okay. That's helpful. And then just one follow-on on the LRUs. And I think it was Bill's commentary. You mentioned you guys have more confidence that this was prior under-provisioning rather than pull forward related to tariffs, say, in the prior year. Can you just kind of give us an update on why the kind of shift in signaling there and what you're seeing out of that customer base? Thanks, guys.
Speaker #7: That's helpful . Okay . And then just one follow on on the loose in I think it was Bill's commentary you mentioned you guys have more confidence that this was prior under provisioning rather than pull related to tariff .
Speaker #7: In the prior, say, year, can you just kind of give us an update on why the kind of shift in signaling there and what you're seeing out of that customer base?
Chip Blankenship: Sure. And I think the way I characterize it is there was an open window for trade, really, was what I think, and the concern that that window might close is my hypothesis for why that activity was so strong in recent quarters. Our team took a look at calculating all the units in the field, and doing the percentages, and the statistical analysis for the recommendations we put out for the spares provisioning levels. And our team determined that those customers were a little bit behind the curve in provisioning. And so that's kind of how we come up with that conclusion.
Chip Blankenship: Sure. And I think the way I characterize it is there was an open window for trade, really, was what I think, and the concern that that window might close is my hypothesis for why that activity was so strong in recent quarters. Our team took a look at calculating all the units in the field, and doing the percentages, and the statistical analysis for the recommendations we put out for the spares provisioning levels. And our team determined that those customers were a little bit behind the curve in provisioning. And so that's kind of how we come up with that conclusion.
Speaker #7: Thanks , guys .
Speaker #4: Sure . And I think the way I , the way I characterize it is there was an open window for trade , really was what I think .
Speaker #4: And the concern that that window might close is my hypothesis for why that activity was so strong in recent quarters. You know, our team took a look at calculating all of the units in the field and doing the percentages and the statistical analysis for the recommendations.
Speaker #4: We put out for the spares provisioning levels, and our team determined that those customers were a little bit behind the curve in provisioning.
Speaker #4: So, and of how we came up with that conclusion.
Operator: Our next question comes from the line of Gavin Parsons with UBS. Your line is open.
Operator: Our next question comes from the line of Gavin Parsons with UBS. Your line is open.
Speaker #2: And our next question comes from the line of Gavin Parsons with UBS Financial. Your line is open.
Gavin Parsons: Hey. Thanks, guys. Good afternoon.
Gavin Parsons: Hey. Thanks, guys. Good afternoon.
Speaker #8: Hey, thanks, guys. Good afternoon.
[Company Representative] (Woodward): Howdy.
Bill Lacey: Howdy.
Bill Lacey: Hey, Gavin.
Hey, Gavin.
Speaker #4: Howdy .
Speaker #1: Hey , Kevin .
Noah Poponak: Do you mind breaking down for us the growth rates by the aerospace subsegments assumed for the year?
Gavin Parsons: Do you mind breaking down for us the growth rates by the aerospace subsegments assumed for the year?
Speaker #8: Do you mind breaking down for us the growth rates by the aerospace subsegments assumed for the year?
Chip Blankenship: Yeah. I think we talked about that last quarter, that I didn't do a very good job at that the year before. My hypotheses did not come to fruition. So I retired that process with last year. Look, we see strong demand in OEM, both defense and commercial. We see reasonably good demand on top of very hard comps coming up on the commercial services. And then defense services is kind of flattish. We're on the right programs in defense. It's just the MRO for us isn't growing very fast in defense. And well, that's as much color as I'd put on it at this time, if that's okay, Gavin.
Chip Blankenship: Yeah. I think we talked about that last quarter, that I didn't do a very good job at that the year before. My hypotheses did not come to fruition. So I retired that process with last year. Look, we see strong demand in OEM, both defense and commercial. We see reasonably good demand on top of very hard comps coming up on the commercial services. And then defense services is kind of flattish. We're on the right programs in defense. It's just the MRO for us isn't growing very fast in defense. And well, that's as much color as I'd put on it at this time, if that's okay, Gavin.
Speaker #4: Yeah, I think we talked about that last quarter—that I didn't do a very good job at that. The year before, my hypotheses did not come to fruition.
Speaker #4: So I retired that that process with with last year . Look , we see strong demand in OEM both defense and commercial . We see reasonably , reasonably good demand on top of very hard comps coming up on the commercial services and then defense services is kind of flattish .
Speaker #4: We were on the right programs in defense. It's just the MRO for us isn't growing very fast in defense. And that's as much color as I'd put on it at this time, if that's okay.
Noah Poponak: Understood. Appreciate that. You mentioned to some extent turn times limiting growth, but you've been investing, hiring, working on productivity. At some point, are you capacity constrained here, or are the productivity initiatives starting to show through?
Gavin Parsons: Understood. Appreciate that. You mentioned to some extent turn times limiting growth, but you've been investing, hiring, working on productivity. At some point, are you capacity constrained here, or are the productivity initiatives starting to show through?
Speaker #4: Gavin .
Speaker #8: Understood . Appreciate that . And you mentioned to some extent term times limiting growth , but you've been investing , hiring , working on productivity some point .
Speaker #8: Are you capacity constrained here, or are the productivity initiatives starting to show through?
Chip Blankenship: So we're reaching part of our capacity plan where we're adding onto our Prestwick facility in Scotland. I kind of characterize it as a well-positioned facility, not just from a technical standpoint, but it's in an aerospace park that has great workforce reputation and pipeline. It's right across the fence line from GE's Caledonian facility. So we're in a really good neighborhood there. We're going to be almost 50% to doubling that facility when we add onto it. We're still in the planning phase, but it's a pretty mature part of the planning phase. So we're pushing forward to do that. We've put a couple of test cells in there on LEAP so far, and we're putting more test cells into our Rockford facility. So we have enough space in Rockford, but we need more space in Prestwick.
Chip Blankenship: So we're reaching part of our capacity plan where we're adding onto our Prestwick facility in Scotland. I kind of characterize it as a well-positioned facility, not just from a technical standpoint, but it's in an aerospace park that has great workforce reputation and pipeline. It's right across the fence line from GE's Caledonian facility. So we're in a really good neighborhood there. We're going to be almost 50% to doubling that facility when we add onto it. We're still in the planning phase, but it's a pretty mature part of the planning phase. So we're pushing forward to do that. We've put a couple of test cells in there on LEAP so far, and we're putting more test cells into our Rockford facility. So we have enough space in Rockford, but we need more space in Prestwick.
Speaker #4: So we're we're we're reaching our part of our capacity plan where we're adding on to our Prestwick facility in Scotland . I kind of characterize that as a well facility , positioned not just from a technical standpoint , but it's in an aerospace park that has great , you know , workforce .
Speaker #4: Reputation and It's right across the pipeline . fence line from GE's Cal facility . So we have we're in a really good neighborhood .
Speaker #4: There . We're going to be , you know , almost , you know , 50% to to doubling that facility when we when we add on to it , we're still in the , in the planning phase .
Speaker #4: But it's pretty it's a pretty part of the planning mature phase . So we're we're pushing forward to do that . We've we've put a couple test cells in there on , on on leap so far .
Speaker #4: And we're , we're putting more test cells into Rockford our facility . So we have enough space in Rockford . But we need more space in , in Prestwick .
Chip Blankenship: As far as the Woodward facility buildout, that's what we have in our plans for our own in-house service footprint. We're partnering with some external MRO providers to give some more choice and some more capacity to customers. That's up and coming.
As far as the Woodward facility buildout, that's what we have in our plans for our own in-house service footprint. We're partnering with some external MRO providers to give some more choice and some more capacity to customers. That's up and coming.
Speaker #4: And as far as the Woodward facility build-out, that's what we have our plans for, in for our own service in-house footprint.
Speaker #4: And we're , we're partnering with some external MRO providers to , you know , give some more choice and some more capacity to customers .
Speaker #4: So that's up and coming.
Noah Poponak: How does that agreement work in terms of revenue and margin contribution?
Gavin Parsons: How does that agreement work in terms of revenue and margin contribution?
Speaker #8: How does that agreement work in terms of revenue and margin contribution?
Chip Blankenship: So it's just like you might imagine for an independent provider that we're going to provide technical support, materials, and repair support to that MRO provider. So they'll contract with a customer, or they may have a fleet they're already managing. And then we'll provide them spare parts, kits, documentation, and technical support.
Chip Blankenship: So it's just like you might imagine for an independent provider that we're going to provide technical support, materials, and repair support to that MRO provider. So they'll contract with a customer, or they may have a fleet they're already managing. And then we'll provide them spare parts, kits, documentation, and technical support.
Speaker #4: So it's just like you might imagine for an independent provider that is going that we're going to provide technical support and materials and repair support to that MRO provider .
Speaker #4: So they'll contract with a customer, or they may have a fleet they're already managing. And then we'll provide them parts and kits and documentation and spare technical support.
Noah Poponak: Great. Thank you.
Gavin Parsons: Great. Thank you.
Chip Blankenship: You're welcome.
Chip Blankenship: You're welcome.
Speaker #8: Great . Thank you .
Speaker #4: You're welcome .
Operator: And our next question comes from the line of Pete Skibitski with Alembic Global Advisors. Your line is open.
Operator: And our next question comes from the line of Pete Skibitski with Alembic Global Advisors. Your line is open.
Speaker #2: And our next question comes from the Pete Skibitski line with Alembic Global. Your line is open.
Peter Skibitski: Hey, good evening, guys. I think you guys usually disclose this in the queue, but how was pricing this quarter in terms of, or relative to, your 5% expectation for the full year? I imagine maybe with the LRUs, it was above the expectation.
Pete Skibitski: Hey, good evening, guys. I think you guys usually disclose this in the queue, but how was pricing this quarter in terms of, or relative to, your 5% expectation for the full year? I imagine maybe with the LRUs, it was above the expectation.
Speaker #9: evening Hey . Good guys . And I think I know I think you guys usually disclose this in the Q but how is pricing this quarter in terms of relative to your 5% expectation for the full year ?
Speaker #9: I imagine maybe with Lras , it the was it was above the expectation .
Bill Lacey: Yeah, Pete. This quarter, we saw at the Woodward level, price come in about 8%, so slightly higher than our 5%, which we would expect it to be a slightly higher as the price compare gets harder as you go through the year. Having said that, it was still a little bit higher than we thought. So we're actually revising that 5% total year, Pete, to be closer to 7%. And we would expect aero will contribute a little bit more to that than industrial, but industrial is still contributing nicely.
Bill Lacey: Yeah, Pete. This quarter, we saw at the Woodward level, price come in about 8%, so slightly higher than our 5%, which we would expect it to be a slightly higher as the price compare gets harder as you go through the year. Having said that, it was still a little bit higher than we thought. So we're actually revising that 5% total year, Pete, to be closer to 7%. And we would expect aero will contribute a little bit more to that than industrial, but industrial is still contributing nicely.
Speaker #1: Pete Yeah . , this quarter we saw at the Woodward level price come in about 8% . So slightly higher than our 5% , which we would expect it to be a slightly higher as the price compare gets harder as you go through the year .
Speaker #1: Having said that, it was still a little bit higher than we thought, so we're actually revising that 5% total year peak to be closer to 7%.
Speaker #1: And we would—Aero will expect to contribute a little bit more to that than Industrial. But is Industrial still contributing nicely?
Peter Skibitski: Okay. I appreciate that. Then maybe one for Chip here. Hey, Chip, when you guys say you're investing in commercial aftermarket capacity, do you have a sense of how much of your installed base, maybe on a percentage basis, you're serving right now in the aftermarket? And then if you have a goal on that front because I don't know. It sounds like maybe you feel like you're missing out on some sales that you could get because of the quick-turn nature of the aftermarket, that maybe there's some, I don't know, PMA or somebody else taking sales that you think are rightfully yours. So I was just wondering if you could illuminate that.
Pete Skibitski: Okay. I appreciate that. Then maybe one for Chip here. Hey, Chip, when you guys say you're investing in commercial aftermarket capacity, do you have a sense of how much of your installed base, maybe on a percentage basis, you're serving right now in the aftermarket? And then if you have a goal on that front because I don't know. It sounds like maybe you feel like you're missing out on some sales that you could get because of the quick-turn nature of the aftermarket, that maybe there's some, I don't know, PMA or somebody else taking sales that you think are rightfully yours. So I was just wondering if you could illuminate that.
Speaker #9: I appreciate Okay , that . And then maybe one for Chip here . Hey Chip , when you guys say you're investing in commercial aftermarket capacity , how do you have a sense for how much of your installed base , maybe , you know , on a percentage basis , you're serving right now in the aftermarket , and then if you have a goal on that front , because I don't know , it sounds like maybe you feel like you're missing out on some sales that you could get because of the the quick turn nature of the aftermarket .
Speaker #9: Maybe there's some I don't know, PMA, or is taking sales—somebody else that you think are rightfully yours. So I just wonder if you could illuminate that.
Chip Blankenship: Yeah. So on LEAP GTF, we don't feel like we're missing out. We're delaying both our revenue recognition and our customers' ready-for-install spare status. That's what's behind the turn time approach. We're not concerned about losing market share on that activity at the moment. We've been expanding the capacity with the intent to be right on line with what the demand is externally. So we understand where that demand is. We've got a pretty good prediction for removal rates, and we're trying to stay ahead of that. We may have gotten a little bit behind on test stand capacity, which is one of our constraints. And so we're eager to have one or two of those commissioning here in the next couple of months in our Rockford facility, which should alleviate some of that work in process that we have and improve turn time.
Chip Blankenship: Yeah. So on LEAP GTF, we don't feel like we're missing out. We're delaying both our revenue recognition and our customers' ready-for-install spare status. That's what's behind the turn time approach. We're not concerned about losing market share on that activity at the moment. We've been expanding the capacity with the intent to be right on line with what the demand is externally. So we understand where that demand is. We've got a pretty good prediction for removal rates, and we're trying to stay ahead of that. We may have gotten a little bit behind on test stand capacity, which is one of our constraints. And so we're eager to have one or two of those commissioning here in the next couple of months in our Rockford facility, which should alleviate some of that work in process that we have and improve turn time.
Speaker #4: Yes . So on on GTF , we don't feel like we're out . missing We're just we're delaying , you know , both our revenue recognition and our customers ready for install , spare status .
Speaker #4: That's that's what's behind the turn time approach . We're not we're not concerned about losing market on that share activity at the moment .
Speaker #4: We've expanding the capacity with the intent to to be right on line with what the demand is . Externally , so we understand , you know , where that demand is .
Speaker #4: We've got a pretty good prediction for removal rates , and we're stay ahead of that . You know , we may have gotten a little bit behind stand on test capacity , which is one of our constraints .
Speaker #4: And so we're eager to have one or two of those commissioning here in the next couple of months in our Rockford facility, which should alleviate some of that work in process that we have.
Chip Blankenship: So it's not necessarily a market share-driven decision. We're just trying to stay ahead of the growth that we're predicting. Great. Thank you. You're welcome.
So it's not necessarily a market share-driven decision. We're just trying to stay ahead of the growth that we're predicting. Great. Thank you. You're welcome.
Speaker #4: improve , And turn times . So it's not a it's not a necessarily a market share driven decision . We're just trying to stay ahead of the growth that that we're predicting .
Speaker #9: Great . Thank you .
Speaker #4: Welcome .
Operator: Our next question comes from the line of Louis Raffetto with Wolfe Research. Your line is open.
Operator: Our next question comes from the line of Louis Raffetto with Wolfe Research. Your line is open.
Speaker #2: And our next question comes from the line of Louis Raffetto with Wolfe Research. Louis, your line is open.
Louis Raffetto: Hey, good evening, guys.
Louis Raffetto: Hey, good evening, guys.
Speaker #10: Hey good evening guys .
Chip Blankenship: Hey, Louis.
Chip Blankenship: Hey, Louis.
Speaker #4: Louis Hey , .
Louis Raffetto: Maybe just talk to the free cash flow. So, obviously, you didn't raise it. I think you were kind of implying that a few things were maybe a little bit worse than you expected. So, just can you help me walk through that again?
Louis Raffetto: Maybe just talk to the free cash flow. So, obviously, you didn't raise it. I think you were kind of implying that a few things were maybe a little bit worse than you expected. So, just can you help me walk through that again?
Speaker #10: Just talk maybe to the free cash flow. So, obviously you didn't raise it. I think you were kind of implying that a few things were maybe a little bit worse than you expected.
Speaker #10: So, can you help me walk through that, just... again?
Bill Lacey: Yeah. So, Louis, that's right. You would imply that from the earnings gain that we had, that we would have roughly maybe $40 million of free cash flow that would fall through as a result of that. As we've gotten into the year and looked at sort of the supply chain and meeting our customer demand, we felt that it was best to probably keep our working capital level a little higher, mainly through inventory. And as a result of that, where we are today, we thought it best to hold our free cash flow guide to where it is. I think we understand why we're doing it. We're working through things. But we want to make sure we see that efficiency before we pull the inventory down to make sure that we can meet that customer output.
Bill Lacey: Yeah. So, Louis, that's right. You would imply that from the earnings gain that we had, that we would have roughly maybe $40 million of free cash flow that would fall through as a result of that. As we've gotten into the year and looked at sort of the supply chain and meeting our customer demand, we felt that it was best to probably keep our working capital level a little higher, mainly through inventory. And as a result of that, where we are today, we thought it best to hold our free cash flow guide to where it is. I think we understand why we're doing it. We're working through things. But we want to make sure we see that efficiency before we pull the inventory down to make sure that we can meet that customer output.
Speaker #1: Yeah . So , Louis , that's right . The . You would imply that from the earnings gain that we had , that we would have roughly maybe $40 million of cash free flow that would would fall through as result of a .
Speaker #1: that gotten As we've into the year and looked at sort of the supply chain and and meeting our customers demand , we felt that it was best to probably keep our working a little capital level higher , mainly through inventory .
Speaker #1: And as a result of that, where we are today, we thought it best to hold our free cash flow to where it is.
Speaker #1: guide where it I think we understand why we're doing it . We're working through things , but we want to make sure we see that efficiency before we pull the inventory down to to make sure that we can meet that customer output .
Louis Raffetto: Okay. Great. Thank you. And then maybe, Chip, just back to the question on the licensing. How are you thinking about balancing expanding your capacity with extending these licenses?
Louis Raffetto: Okay. Great. Thank you. And then maybe, Chip, just back to the question on the licensing. How are you thinking about balancing expanding your capacity with extending these licenses?
Speaker #10: Okay , great . Thank you . And then maybe just back to the question on , you know , the licensing . How are you thinking about balancing expanding your capacity with extending these licenses ?
Chip Blankenship: Yeah. So when we even started the LEAP GTF program, in our mind, we were looking at the size of the fleet that was going to be in service and say, "Does Woodward really want to invest in brick and mortar and all the equipment to service that entire fleet, or do we want to let some others bear those investments?" And then the other thing is, in some cases, it's sort of a win-win because some of our customers would prefer to do that work on-site to support either their array of customers or their own airline, let's say. And so for us, that's a win-win proposition where our materials, our work scopes, and our technical approach gets utilized, and somebody else does the wrench turning and the customer support.
Chip Blankenship: Yeah. So when we even started the LEAP GTF program, in our mind, we were looking at the size of the fleet that was going to be in service and say, "Does Woodward really want to invest in brick and mortar and all the equipment to service that entire fleet, or do we want to let some others bear those investments?" And then the other thing is, in some cases, it's sort of a win-win because some of our customers would prefer to do that work on-site to support either their array of customers or their own airline, let's say. And so for us, that's a win-win proposition where our materials, our work scopes, and our technical approach gets utilized, and somebody else does the wrench turning and the customer support.
Speaker #4: So , you know , Yeah . when we even started the the leap GTF program , you know , in our mind we were looking at the , at the size fleet of the that was going to , know , be in you service and say , does Woodward really want to invest in brick and mortar and all the equipment to service that entire fleet or , or do we want to do we want to let some others , you know , bear those investments and , and then the other thing is , in many cases , in some cases , it's sort of a win win because some of our customers would prefer to do that work on site to support either their array of customers or their own , their own airline .
Speaker #4: Let's say , and so for for us , that's a win win proposition where our materials , our work scopes and our technical approach gets utilized and somebody else does the wrench turning and the customer support , I think it's a pretty efficient way to think about it .
Chip Blankenship: I think it's a pretty efficient way to think about it where we're angling to do a significant amount of the work ourselves, but yet share in a percentage of it.
I think it's a pretty efficient way to think about it where we're angling to do a significant amount of the work ourselves, but yet share in a percentage of it.
Speaker #4: Where we were angling to do a significant amount of the work ourselves, but yet share in a percentage of it.
Louis Raffetto: Great. Appreciate it.
Louis Raffetto: Great. Appreciate it.
Speaker #10: Great . Appreciate .
Chip Blankenship: You're welcome.
Chip Blankenship: You're welcome.
Speaker #4: Welcome .
Operator: Our next question comes from the line of Gautam Khanna with TD Cowen. Your line is open.
Operator: Our next question comes from the line of Gautam Khanna with TD Cowen. Your line is open.
Speaker #2: And our next question comes from the line of Gautam Khanna with TD Cowen. Your line is open.
Gautam Khanna: Yeah. Thanks. Good afternoon, I should say.
Gautam Khanna: Yeah. Thanks. Good afternoon, I should say.
Speaker #11: Thanks. Yeah. Good morning, or afternoon, I should say.
Chip Blankenship: Good afternoon, Gautam.
Chip Blankenship: Good afternoon, Gautam.
Gautam Khanna: I was curious, just in terms of bookings, if you will, in the quarter and since the quarter's end. Have you seen any? We're trying to all assess whether the guidance is conservative for the next nine months. Is there anything that slows down in the March quarter? And maybe if you could just talk to broader visibility at both segments over the next six months, call it. Yeah.
Gautam Khanna: I was curious, just in terms of bookings, if you will, in the quarter and since the quarter's end. Have you seen any? We're trying to all assess whether the guidance is conservative for the next nine months. Is there anything that slows down in the March quarter? And maybe if you could just talk to broader visibility at both segments over the next six months, call it. Yeah.
Speaker #4: Good afternoon guys .
Speaker #11: I was curious, just in terms of your bookings, if you will, in the quarter. And since the end of the quarter, have you seen any or...
Speaker #11: I'm just we're trying to all assess whether the guidance is conservative for the next nine months . Is there anything that slows down in the in the March quarter ?
Speaker #11: And maybe if you could just talk to broader visibility at both segments over the next, you know, six months, call it?
Chip Blankenship: The easiest way to characterize it, Gautam, in terms of orders are that we have plenty of orders to achieve the high end of the guide. It's really a question of can we in our supply chain deliver that much output, continuing to work on our constraints and improve the efficiency and thereby gain some capacity, but also our suppliers delivering on time to support that. It's a delicate dance right now. We maintain a forward deployment at a number of suppliers. We still have 30-ish suppliers on risk watch and behind on deliveries and holding up. That's another reason why we have more inventory than we want is because in some cases, we're missing one or two parts to accomplish some key deliveries to customers. And so really, it's a question of our ability and our supply chain to deliver.
Chip Blankenship: The easiest way to characterize it, Gautam, in terms of orders are that we have plenty of orders to achieve the high end of the guide. It's really a question of can we in our supply chain deliver that much output, continuing to work on our constraints and improve the efficiency and thereby gain some capacity, but also our suppliers delivering on time to support that. It's a delicate dance right now. We maintain a forward deployment at a number of suppliers. We still have 30-ish suppliers on risk watch and behind on deliveries and holding up. That's another reason why we have more inventory than we want is because in some cases, we're missing one or two parts to accomplish some key deliveries to customers. And so really, it's a question of our ability and our supply chain to deliver.
Speaker #11: Yeah .
Speaker #4: The easiest way to characterize it, Gautam, in terms of where we are, is that we have plenty of orders to achieve the high end of the guide.
Speaker #4: It's really a question of can we , in our supply chain , deliver that much output , continuing to work on our constraints and and improve efficiency and our thereby gain some capacity .
Speaker #4: But also our suppliers delivering on time to support that ? It's it's a a it's a delicate dance right now . You know , we maintain a forward deployment at a number of suppliers .
Speaker #4: We still have 30 ish suppliers on , you know , risk watch and you know , behind on deliveries and holding up . reason That's another why we have more inventory than we want is because in some cases we're missing 1 or 2 parts to accomplish some key .
Speaker #4: Some key deliveries to customers . And so really , it's a question of our our ability and our supply chain to deliver . And in some cases , we're actually We're counting .
Chip Blankenship: And in some cases, we're actually at the mercy of other supply chains to our customers. For a customer that we have a min-max kind of delivery arrangement with, they may hold us off for a while, while they let their supply chain catch up. So in terms of being conservative, I guess the way I would say is we're managing the risks and opportunities, and calling it as well as we can see it from today. But the orders are strong, and the orders support the high end of our guide.
And in some cases, we're actually at the mercy of other supply chains to our customers. For a customer that we have a min-max kind of delivery arrangement with, they may hold us off for a while, while they let their supply chain catch up. So in terms of being conservative, I guess the way I would say is we're managing the risks and opportunities, and calling it as well as we can see it from today. But the orders are strong, and the orders support the high end of our guide.
Speaker #4: Actually, at the mercy of other supply chains to our customers, where a customer that we have a min-max kind of delivery arrangement with, they may hold us off for a while while they let their supply chain catch up.
Speaker #4: So I , you know , in terms of conservative gets the way I would say is we're we're managing the risks and opportunities and calling it as , as well as we can see it from , from today .
Speaker #4: But the orders are strong, and the orders support the high end of our guide.
Gautam Khanna: Okay. That's very helpful. I'm also wondering if you could comment on how the profitability of the commercial aerospace OE business has trended over the last, call it, year or so now that you're getting efficiencies and ramping rates. How does that compare to the segment average margin at aero?
Gautam Khanna: Okay. That's very helpful. I'm also wondering if you could comment on how the profitability of the commercial aerospace OE business has trended over the last, call it, year or so now that you're getting efficiencies and ramping rates. How does that compare to the segment average margin at aero?
Speaker #11: Okay, that's very helpful. I'm also wondering if you could comment on how the profitability of the commercial aerospace OE business has trended over the last year or so.
Speaker #11: Now that you're getting efficiencies and ramping rates, how does that compare to the segment average margin at Commercial at Aero?
Chip Blankenship: Well, it's considerably below the blended margin, obviously. But the opportunity for us to improve there is really at least twofold. One is if our customers can consistently remain at the higher rates and achieve the rate breaks that are in this year's plan, obviously, we'll get volume leverage, which is good. And then if we can get our supply chain aligned in such a way that we can build more efficiently, that we're clear to build for the entire week, all week, and we can run the schedule that we wanted to run at the start of the week, all of that will flow through in terms of waste reduction and impact our financials favorably. So it's really those two things that we need to come to fruition to keep improving our OE margins on the commercial side.
Chip Blankenship: Well, it's considerably below the blended margin, obviously. But the opportunity for us to improve there is really at least twofold. One is if our customers can consistently remain at the higher rates and achieve the rate breaks that are in this year's plan, obviously, we'll get volume leverage, which is good. And then if we can get our supply chain aligned in such a way that we can build more efficiently, that we're clear to build for the entire week, all week, and we can run the schedule that we wanted to run at the start of the week, all of that will flow through in terms of waste reduction and impact our financials favorably. So it's really those two things that we need to come to fruition to keep improving our OE margins on the commercial side.
Speaker #4: Well , it's it's considerably below the blended margin . Obviously . But you know , the opportunity for us to improve there is really at least twofold .
Speaker #4: One is as the if the customer if our consistently customers can at the remain higher rates the achieve rate and breaks that are in this year's plan , obviously we'll get volume leverage , which is good .
Speaker #4: And then, if we can get our supply chain aligned in such a way that we can build more efficiently, that we're clear to build for the entire week, all week, and we can run the schedule that we wanted to run at the start of the week.
Speaker #4: All of that will flow through in terms of waste reduction and the our financials favorably . So it's really those two things that , you know , we're we need to to come to fruition to keep improving our margins on the commercial side .
Gautam Khanna: Is there any way you can give us a dimension for how profitable it is? Is it a 10% business? Is it a 5% margin business today?
Gautam Khanna: Is there any way you can give us a dimension for how profitable it is? Is it a 10% business? Is it a 5% margin business today?
Speaker #11: Is there any way you can give us a dimension for how profitable it is? Is it a 10% business? Is it a 5% margin business today?
Chip Blankenship: We have a variety of margins depending on which application it is and what type of product it is. We like to think about overall business lifecycle margin. That's what it's about, is getting this installed base out in the field so we can service it. That's probably all I'll say about that.
Chip Blankenship: We have a variety of margins depending on which application it is and what type of product it is. We like to think about overall business lifecycle margin. That's what it's about, is getting this installed base out in the field so we can service it. That's probably all I'll say about that.
Speaker #4: We have a variety of margins depending on which which application it is and what what type of product it is and , you know , we like to think about overall business life cycle margin .
Speaker #4: And that’s what it’s about, getting this installed base out in the field so we can service it. That’s probably all we’ll say about that.
Gautam Khanna: Thank you.
Gautam Khanna: Thank you.
Chip Blankenship: You're welcome.
Chip Blankenship: You're welcome.
Speaker #11: Thank you .
Speaker #4: You're welcome .
Operator: And our next question comes from the line of Alexandra Mondry with Truist Securities. Your line is open.
Operator: And our next question comes from the line of Alexandra Mondry with Truist Securities. Your line is open.
Speaker #2: And our next question comes from the line of Alexandra Mandry with Truist Securities. Your line is open.
Alexandra Mondry: Hi. This is Alexandra Mondry along with Michael Ciarmoli with Truist Securities. Thanks for taking my question. I was wondering if you could size the China-on-highway cost for the divestiture, and will there be any revenue spillover into FY27, and our expectations still around $60 million for FY26, kind of similar to the 2025 results?
Alexandra Mondry: Hi. This is Alexandra Mondry along with Michael Ciarmoli with Truist Securities. Thanks for taking my question. I was wondering if you could size the China-on-highway cost for the divestiture, and will there be any revenue spillover into FY27, and our expectations still around $60 million for FY26, kind of similar to the 2025 results?
Speaker #12: Hi . This is Alexandra from with securities . Thanks for taking my question . I was wondering if size you could the China on highway costs for the divestiture , and will there be any revenue spillover FY 27 and our into expectations still around 60 million for FY 26 , kind of similar to the 2025 results .
Bill Lacey: Yeah. So as it relates to the wind-down costs, we're expecting somewhere between $20 million and $25 million of costs related to the restructuring. A lot of that will be related to people cost, and that would be cash. There might be some expense related to dealing with some canceling contracts and some lingering inventory. So that's kind of on the cost side. The sales for, let's see, the 2027. I do not believe that we will have revenue that leaks over into 2027. And we currently believe that our $60 million is still correct even with the wind-down.
Bill Lacey: Yeah. So as it relates to the wind-down costs, we're expecting somewhere between $20 million and $25 million of costs related to the restructuring. A lot of that will be related to people cost, and that would be cash. There might be some expense related to dealing with some canceling contracts and some lingering inventory. So that's kind of on the cost side. The sales for, let's see, the 2027. I do not believe that we will have revenue that leaks over into 2027. And we currently believe that our $60 million is still correct even with the wind-down.
Speaker #1: Yeah, so as it relates to the wind-down cost, we're expecting somewhere between $20 million and $25 million of costs related to the restructuring.
Speaker #1: of that A lot will be related to people costs . And that would be that would be cash . There might be some expense related to dealing with some canceling contracts and some some lingering inventory .
Speaker #1: So , so that that's that's kind of on the cost side . The , the sales for let's see , the 2027 , I do not believe that we will have revenue that leaks over into 2027 .
Speaker #1: And we currently believe that our $60 million is still correct, even with the wind down.
Alexandra Mondry: Okay. Great. And then you mentioned you're on the right defense programs, but defense aftermarket appears to be lagging behind defense OEM. Can you provide any additional color there, or are there other opportunities on the horizon that you guys are looking at?
Alexandra Mondry: Okay. Great. And then you mentioned you're on the right defense programs, but defense aftermarket appears to be lagging behind defense OEM. Can you provide any additional color there, or are there other opportunities on the horizon that you guys are looking at?
Speaker #12: Great. Okay. And then you mentioned you're on the right defense programs, but defense aftermarket appears to be lagging behind defense OEM.
Speaker #12: Can you provide any additional color there, or are there other opportunities on the horizon that you guys are looking at?
Chip Blankenship: I guess the way I characterize our defense services is in some product lines, it's relatively steady. But in a number of product lines, we get a batch of work in from the customer repair depots, and we have batches of spare parts orders for the work that's being done in the repair depots. And so some product lines are steady, and then some are kind of lumpy. So you can see some quarters, we have single- to double-digit growth, and other quarters, we're flat to down. And it's hard to give you much more characterization than that because our visibility into that customer order pattern is somewhat limited. We are working hard to try to get some more stable demand and some private-public partnership kind of opportunities.
Chip Blankenship: I guess the way I characterize our defense services is in some product lines, it's relatively steady. But in a number of product lines, we get a batch of work in from the customer repair depots, and we have batches of spare parts orders for the work that's being done in the repair depots. And so some product lines are steady, and then some are kind of lumpy. So you can see some quarters, we have single- to double-digit growth, and other quarters, we're flat to down. And it's hard to give you much more characterization than that because our visibility into that customer order pattern is somewhat limited. We are working hard to try to get some more stable demand and some private-public partnership kind of opportunities.
Speaker #4: I guess the way the way I characterize our defense services is it's it's in some product lines . It's relatively steady , but in in a number of product lines , we we get a batch of work in from the , the customer repair depots .
Speaker #4: And we have batches of spare parts orders to the work that's done in the repair depots. And so, some product lines are steady, and then some are kind of lumpy.
Speaker #4: So you can see some quarters . We have , you know , single to double digits growth and other quarters . Where we're flat to down .
Speaker #4: And it's hard to give you much more characterization than that, because our visibility into that customer order pattern is somewhat limited. We are working.
Speaker #4: We are working hard to try to get some more stable and demand public partnership operation, know some, private—you know, kind of opportunities.
Chip Blankenship: So we're off working the pipeline, but it's a little early to say that we'll have a better handle on that order stream anytime soon.
So we're off working the pipeline, but it's a little early to say that we'll have a better handle on that order stream anytime soon.
Speaker #4: We're off, so working the pipeline. But it's a little early to say that. We'll have a better handle on that order stream anytime soon.
Alexandra Mondry: Great. And I just had one last one. Recently, the commander of the Air Combat Command commented that the hypothetical $1.5 trillion 2027 NDAA package would be spent on spare parts to give aircraft availability a boost. How do you see this playing out, and what impact could you see for Woodward?
Alexandra Mondry: Great. And I just had one last one. Recently, the commander of the Air Combat Command commented that the hypothetical $1.5 trillion 2027 NDAA package would be spent on spare parts to give aircraft availability a boost. How do you see this playing out, and what impact could you see for Woodward?
Speaker #12: Great. And I just had one last one. Recently, the commander of the Air Combat Command commented that the hypothetical $1.5 trillion 2020 $0.07 package would be spent on spare parts to give aircraft ability a boost.
Speaker #12: How do you see this playing out, and what impact could you see for Woodward?
Chip Blankenship: Well, it's hard to say how that would work for Woodward because we don't have visibility into the current inventory that's already out there to know whether there would be a gap for our hardware or not that would need to be fulfilled. But that's something that if they're serious about that priority, I assume they'll start interrogating suppliers for capacity to deliver. And that might be our first indication that could be an opportunity for Woodward.
Chip Blankenship: Well, it's hard to say how that would work for Woodward because we don't have visibility into the current inventory that's already out there to know whether there would be a gap for our hardware or not that would need to be fulfilled. But that's something that if they're serious about that priority, I assume they'll start interrogating suppliers for capacity to deliver. And that might be our first indication that could be an opportunity for Woodward.
Speaker #4: It's hard to say, well, how that would work for Woodward, because we don't have visibility into the current inventory that's already out there to know whether there would be a gap for our hardware or not, that would need to be fulfilled.
Speaker #4: But that's something that if they're they're serious about that priority , I assume they'll start suppliers for interrogating capacity to to might be that deliver .
Speaker #4: And our first indication that that could be an opportunity for Woodward...
Alexandra Mondry: Great. Thank you.
Alexandra Mondry: Great. Thank you.
Chip Blankenship: You're welcome.
Chip Blankenship: You're welcome.
Speaker #12: Great . Thank you .
Speaker #4: You're welcome .
Operator: Mr. Blankenship, there are no further questions at this time. I will now turn the conference back over to you.
Operator: Mr. Blankenship, there are no further questions at this time. I will now turn the conference back over to you.
Speaker #2: And, Mr. Blankenship, there are no further questions at this time. I will now turn the conference back over to you.
Chip Blankenship: All right. I'd just like to thank everyone for joining us on the Q1 call. Look forward to talking with you next time.
Chip Blankenship: All right. I'd just like to thank everyone for joining us on the Q1 call. Look forward to talking with you next time.
Speaker #4: All right. I'd just like to thank everyone for joining us on the first quarter call. Look forward to talking with you next time.
Operator: Ladies and gentlemen, that concludes our conference call today. A rebroadcast will be available on the company's website, www.woodward.com, for one year. We thank you for your participation in today's conference call, and you may now disconnect.
Operator: Ladies and gentlemen, that concludes our conference call today. A rebroadcast will be available on the company's website, www.woodward.com, for one year. We thank you for your participation in today's conference call, and you may now disconnect.
Speaker #2: And ladies and gentlemen , that concludes our conference call today . A rebroadcast will be available on the company's website , Woodward , for one year .
