Thank you for standing by. Welcome to the Woodward Incorporated First Quarter Fiscal Year 2024 Earnings Call. At this time, I would like to inform you that this call is being recorded for broadcast, 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.

Thank you, operator. I would like to welcome all of you to Woodward's first quarter fiscal year 2024 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 the 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 again included some presentation materials to go along with today's call that are also accessible on our website. An audio replay of this call will be available by phone or our website through February 12, 2024. The phone number for the audio replay is on the press release announcing this call as well as on our website and will be repeated by the operator at the end of the call. I would like to refer to and highlight our cautionary statement as shown on Slide 3. As always, elements of this presentation are forward-looking or based on our current outlook and assumptions for the global economy and our businesses more specifically. 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. These statements are made as of today and we do not intend to update them except as required by law. In addition, Woodward is providing 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 and related schedules. We believe this additional financial information will help in understanding our results. Now, I will turn the call over to Chip.

Thank you, Dan, and good afternoon, everyone. We delivered significant sales growth and margin expansion in the first quarter. The strong start to our fiscal year reflects our focus on operational excellence over the past 18 months, which enabled us to capitalize on continued strong end-market demand. We increased output due to improvements in our production planning, supplier performance and internal execution. We also achieved our commercial objectives, securing key long-term agreements that were available in the quarter for both Industrial and Aerospace segments. We made good progress consolidating Industrial catalogs, which allowed us to clarify pricing with global channel partners and certain end-customers resulting in better control and visibility for action. Notably, net sales grew sequentially. which revealed successful implementation of our production system principle of consistent performance. Achieving and maintaining flow of supplier materials, production of parts in-house and feeding assembly test at the rate of customer demand is essential to hit customer and business targets. Quarter-end heroics are not welcomed as they destroy flow and introduce inconsistency to every aspect of the production system. While we have not yet achieved the labor productivity we believe we're capable of, we are laying the foundation to achieve significant results. I want to thank all the analysts and shareholders who attended our Investor Day last month. For those who participated, you will remember that we laid out our three interconnected value drivers: profitable growth, operational excellence and innovation. Our Q1 results show how the relentless pursuit of operational excellence can deliver both growth and margin expansion. Woodward's profitable growth is fueled by robust demand in both Aerospace and Industrial end markets. We have made progress aligning price to the value of our products. We are still experiencing material cost inflation from our supply base and we forecast this to continue…

Thank you, Chip, and good afternoon to everyone. Net sales for the first quarter of fiscal 2024 were $787 million, an increase of 27%. Earnings per share and adjusted earnings per share for the first quarter of fiscal 2024 were $1.46 and $1.45, respectively, compared to our earnings per share and adjusted earnings per share of $0.49. Aerospace segment sales for the first quarter of fiscal 2024 were $461 million compared to $396 million, an increase of 16%. Commercial OEM and aftermarket sales were up 23% and 9%, respectively, driven by higher OEM production rates, continued growth in both domestic and international passenger traffic, increasing aircraft utilization and price realization. Defense OEM sales were up 4% in the quarter due to increases in ground vehicle components and guided weapons. Defense aftermarket sales were up 45%. Aerospace segment earnings for the first quarter of 2024 were $79 million or 17.2% of segment sales compared to $55 million or 14% of segment sales. The increase in segment earnings was primarily a result of higher volume and price realization. Turning to Industrial. Our Industrial segment had a record quarter for both sales and earnings. Industrial segment sales for the first quarter of fiscal 2024 were $326 million compared to $223 million, an increase of 46%. We saw growth in all markets from a combination of higher volume and price realization with an increase of 96% in transportation, 20% in power generation and 2% in oil and gas. Sales for on-highway natural gas trucks in China totaled approximately $75 million in the first quarter, driven by significantly higher demand compared to the prior-year quarter. We do not expect this higher level of sales to continue in Q2 as demand signals indicate a return to previous peak levels of approximately $50 million. Industrial segment earnings…

Thank you. [Operator Instructions] Our first question comes from the line of Robert Spingarn from Melius Research. Please state your question.

Hi, good afternoon.

Good afternoon, Rob.

Some nice numbers. I wanted to talk a little bit about Aerospace sales growth. Your commercial OEM sales were up 23% year-on-year and up quarter-over-quarter despite lower working days in the quarter. And at a more granular level, Chip, did you see significantly higher growth on wide-body programs than on narrow-body? And then, I want to ask a follow-up on the 737.

The growth wide-body and narrow-body, they each grew according to their own kind. We saw growth in both, but at slightly different levels. I can't make it more granular for you than that.

Okay. I'm just trying to get some insight into it, because the cycles are not exactly lined up. Narrow-body at least was a little bit ahead of wide-body, but wide-seems to be smoother based on what's going on out there. And that leads to this follow-up question, which is when we think about the 737, how would you characterize your OE -- what kind of rates you're targeting given what's going on in Seattle? And then, is there a difference in how you're shipping to the engine OEM versus how you're shipping to Boeing in terms of rates?

So yeah, there are differences there and it's hard to say because we go through a number of different folks in addition of straight to Boeing. So, we do some to Spirit, some to Boeing and some to the CFM. And the fact of the matter is we can't see the rates very clearly in our demand from our customers for various reasons on inventory and things of that nature. But you're pointing out probably the biggest volume risk that we're looking at as a company on the aerospace side. And it's an insightful question because we're in a position where we're making sure we have the capability to get to the advertised rates in terms of what we think the PO demand growth will be from each of those different customers associated with the 737. But we're also looking at what the financial impacts would be if they don't get where they've advertised they're going to go. And we believe we can manage that risk and we've looked very carefully at what we need to do to optimize if there are some signals that the rate is not going to go up as much as we thought it would. We've already seen some inventory maneuvers go on with other people's fourth quarter last quarter. So, we don't take those signals yet as a signal of slowdown, but we're watching it carefully and we have internal plans to adjust.

So Chip, just to clarify on that, does that mean that the lower end of your Aerospace guide contemplates this idea of a freeze at Boeing that we heard about last week? I know you've only had a week to think about this, if that.

Yeah. It's been a long week, just thinking about that, but we do -- yeah, we do believe our guide, we can operate inside our guide that with that freeze to continue.

Okay. Thanks so much.

You bet.

Your next question comes from the line of Scott Deuschle from Deutsche Bank. Please go ahead with your question.

Hey, good afternoon.

Good afternoon, Scott.

Good afternoon, Scott.

Hey, Chip, can you say what the price realizations were this quarter at Industrial?

Go ahead, Bill.

Yeah. Overall, Scott, our price realization was $50 million and the Industrial represented a significant piece of that $20 million, so Aero -- I'm sorry, of the $50 million. So, Aero and Industrial both contributed to that overall $50 million realization at the Woodward level.

Okay. And then, Bill, just sticking with you since -- sorry if I missed this. But what drove the 8% increase to the free cash flow guidance at the midpoint?

Yeah. So, as we saw -- as we see the increase in OH and the earnings that flow through, we felt that -- and what we sort of saw in the second half of our business, we felt that it was appropriate to raise our cash flow guidance.

Okay. And then, Chip, could this closure of the Red Sea create any discernible benefit from marine aftermarket just due to the longer transit times and utilization rates for marine vessels?

It's hard to say exactly how that's going to impact utilization, but the way I think about it is that longer routes, fewer transits and shorter routes, more transit. So, I think that there is enough demand out there to keep those ships moving. So, we're not forecasting any steeper increase in utilization, but we're comfortable with what we see.

Okay. And last quick question. Chip, the grounding on the V-22 fleet, does that create any opportunity for defense aftermarket? I think your shipset content there was pretty high. Thank you.

Yeah. The V-22 is a significant repair and overhaul program for us. And as you can see, the defense aftermarket as we talked about was significantly up. Some of that represents our ability to execute better at the facility that does the repair and overhaul on the V-22 and some of the other defense programs. So, there's plenty of demand. Our execution had been historically getting in the way of some of that realization of that demand. So, we're working as hard as we can with the defense logistics and other customers to support them.

Thanks, guys. Incredible quarter.

Yeah. Thanks.

Thank you.

Your next question comes from the line of Matt Akers from Wells Fargo. Please state your question.

Yeah. Hey, guys. Good afternoon. Thanks for the question.

Good afternoon, Matt.

Hey, Bill, you made a comment in the opening remarks about I think it was kind of pressure on margins from kind of mix of cost versus price increases to the rest of year. Could you just elaborate on that a little bit and maybe the timing? And I think in prior years, you've gotten kind of a January 1 pricing step up. Is that kind of still the right way to think about it for this year?

Yeah. I believe the discussion, Matt, that I was having was as it relates to our Q1 margin delivery of 20.5% in Industrial. And the pressure against the Q1, it's really on the ongoing standpoint, it's in-line with what we anticipated. So, it's more versus that Q1 experience. And as we look in Industrial, we don't expect this year to have a 20.5% rate -- overall margin rate. And as I mentioned in our non-OH business where we talked about it delivering about 900 basis points that really was us having a very strong mixed quarter in Q1, and we don't expect that to continue. And secondly, we anticipate some cost coming into play in Q2 to Q4, which again will not allow us to repeat that 20.5%. Now, we are aspiring and working hard in our investments and all of our initiatives to get to that underlying non-OH margin rate, but again that's going to be more out in the future and not here in fiscal year 2024.

Got it. Thank you. That's helpful. And then, I guess, if I could one more, just the timing you're thinking of this new repurchase authorization, is that kind of a two-year period like the last one was, or just how you're thinking about that?

Yeah. So, what we announced, Matt, was a three-year program, $600 million in total, and our philosophy on that is to manage dilution. And also, as we look at our cash flow and as we look for the highest return opportunity, we will continue to consider further purchases. But that's right, the plan that we submitted was a three year $600 million program.

Great. Thank you.

You're welcome.

Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Please state your question.

Thanks, guys. Good afternoon. I just wanted to follow on Industrial and check in on long-term margin. You talked about mixed pressures and when you look at Q1 margins ex CMG, it looks like 15% and then probably for the rest of the year 12%. So, is it right way to think about your longer-term margins come to 12% or 15% as your target state? Just thinking about beyond '24 into '25, is the 300 bps all cost pressure?

Yeah. Again, the original guidance that we gave on our business was 13% to 14% for that Industrial business and sort of the mid-15%s. And as we look longer-term, Sheila, we're still sort of in that mid-teen range for Industrial.

Okay. And then similarly on Aerospace, if we could talk about profitability there? Just up nicely year-on-year, but work to do to get to the guide. So, how do we think about that progressing through the year, especially in light of some of those early comments, the productivity you guys have in place and the price capture?

Yeah. As you mentioned, Sheila, we saw a nice 300 basis points improvement versus Q1 a year ago. As we discussed at Investor Day, the margin rate increase that you'll see in Aero is mainly driven by volume in our OEM business. As we mentioned, the OEM growth outpacing the aftermarket growth will cause a mix pressure at our [CM] (ph) level, but as that volume comes through, we'll get leverage and we'll see that increase. As Chip mentioned, we understand what we understand as it relates to the Boeing announcement. And based on what we understand right now, our confirmation of our 18% to 19% Aero is still good and we will keep monitoring. And if something changes, we will communicate that, but really that volume increase throughout the year being levered is what will get us to higher margin rates.

And is the defense aftermarket accretive or dilutive to segment Aero margins?

Yeah. Our defense aftermarket is good margins. We'll take it all day.

It's accretive, yes.

Okay. Thank you.

You're welcome.

Your next question comes from the line of Gavin Parsons from UBS. Please state your question.

Thanks. Good afternoon.

Good afternoon.

Hey, Gavin.

Guys, how much visibility you have into the other industrial businesses besides OH in terms of revenue?

So, we have some really close long-term forecast work that we do with our customers in areas where we can freeze volumes and understand what the expectations are from customers, whether that is in the gas turbine arena or the reciprocating engine arena and across all three of our sub-segments for that Industrial segment. So, pretty good visibility and pretty good stability and we continue to burn down past dues as well internally. So, we're getting closer to the customer demand directly affecting our -- what we plan for in our factories.

Was Industrial backlog up for the quarter?

We don't really measure it that way and we talked about that on another conference call. We have a way of looking at that, but because we are building to a forecast as well as their actual orders, when the orders come in sometimes, that doesn't exactly represent what we've built.

Makes sense. And then maybe if I just go back to the Investor Day slide showing the engine service value 5 times higher on this generation of engine which is greater than your content gains. Can you just remind us when the majority of your engine aftermarket occurs and kind of how that's spread over regular service versus heavy checks?

So, we still -- we forecast the 2026 long-term view that we shared at Investor Day is that 2026 is before some of that really I think volume of the aftermarket shows up on the engine side. So, the guide for Aerospace margins and all of our cash flow and the like really is before the wave of that engine aftermarket that we expect from the GTF and the LEAP engines on the 737 MAX and the A320 Neos. So, there's a lot of goodness outside that forecast that we've already given.

Thank you.

Your next question comes from the line of Pete Skibitski from Alembic Global. Please state your question.

Yeah, good afternoon, guys. Nice quarter.

Hey, Pete, thank you.

On the $75 million of China on-highway, I recall you guys were expecting closer to $50 million in the quarter. Could you maybe validate that? And then now you're expecting $50 million in the second quarter. And I just wanted to get maybe a little more fidelity on the back half of the year when you talk about minimal activity. Is that closer to zero or is that closer to kind of a $25 million to $50 million range? I just wanted to get more fidelity there.

So yes, you're exactly right, we were expecting more like $50 million in the first quarter and the customer has plans to meet the demand in their country for what they believe as a demand for more natural gas trucks versus diesel. And so, we responded as best we could to that increased demand. We did have some inventory available, but we did have to exercise our supply chain and assembly and test to get them -- that material, and it wasn't outperformance. The team did a fantastic job up and-down the line to deliver on that customer demand. So, as we sit here in the second quarter, we don't have any further information to share other than we really think it's going to be in the neighborhood of $50 million. And for the rest of the year, Bill, I don't know how you want to describe that.

Yeah. Minimal amounts in the second half.

Okay. And then just want to follow on the oil and gas up 2% in the quarter, is the outlook there kind of slowing substantially? Is the rest of the year in Industrial kind of dependant on the power gen side?

So I did sort of tongue in cheek say that a week ago, I'd have been telling you that natural gas and -- look, especially the natural gas side of oil and gas looks strong, because I had met with a couple of our different engine OEMs and they all said they were seeing strong investment, especially in the oil patch and fracking where natural gas was involved and companies were investing in additional new engines to get better output. But I just don't know if that's going to hold with this latest announcement from the administration that they're putting a pause and really how that makes people feel about further investments and whether they'll take all those engines they supposedly have on orders. So, I think it's still early to tell on that side. It's been steady for us, but not as high growth as the transportation and the power gen segments, but we'll just have to see how this plays out.

Understood. Thanks, guys.

Thanks, Pete.

Your next question comes from the line of Christopher Glynn from Oppenheimer. Please state your question.

Thank you. Good afternoon. I was curious to hear the comment about guided weapons showed some growth in the quarter. Were you surprised by that? And do you expect the trend there?

Yeah, thanks for that question, Christopher. Not surprised by the growth. We have spoken that JDAM was going to get bottomed out. We have also had said that we have seen growth in the other areas, but it was kind of overcome by the decline in JDAM. So, we expect it to start seeing that growth and it did -- and [we're happy] (ph) to say that it came through.

Okay. And is that looking fairly consistent dynamic there?

Currently, yes. We continue to be in conversations with our customers to see if there's any new plans around guided weapons in JDAM. But to date, we sort of expect to see moderate growth in this area.

Great.

Yeah, I would say the conversations with the customers are ongoing as Bill said, and we keep getting questions about our capacity and ability to respond and we've worked with our suppliers as well to make sure they have capacity to respond, but there hasn't been any follow-up regards to anything in addition to that.

Great. Thanks for the additional color. I had a follow-up on Industrial. You called out the backup power demand. Just curious you're seeing more of a secular growth dynamic. Anything interesting by applications or regions, or is it very broad based on the backup power side?

It's fairly broad-based, but in North America with the data centers as well as 5G and some of the large language model stuff coming through, we believe as our customers believe that that's an opportunity for further growth and well under the future, and so we're prepared to respond to that.

Thank you very much.

Yeah, you're welcome.

Your next question comes from the line of Louis Raffetto from Wolfe Research. Please state your question.

Hey, good evening. Thank you very much. Maybe just a follow-up on Matt's earlier question, given the stronger 1Q, does the updated guide and some of that margin pressure you talked about, Bill, does that take into account higher variable comp now?

Yes, it does.

Okay. Thank you. And then also, Bill, just stick with you. The other income was $20 million this quarter versus $8 million. Is that mostly equity interest in JV within Aero or is there anything else going on in there that flowed into the segment?

Yeah. We are seeing some strong JV performance.

Okay. And then just last one, I think, Chip, you mentioned sort of the CapEx. Obviously, it spiked pretty high here in the quarter. Was anything to really note of and would you kind of settle down over the next few quarters given the reiteration?

We confirmed our $100 million guide. It was as we anticipated. And so, no, it's as we expected.

Okay, thank you.

You're welcome.

Your next question comes from the line of Gautam Khanna from TD Cowen. Please state your question.

Hey, good afternoon guys.

Good afternoon, Gautam.

Good afternoon.

First, I had a question on the guidance, just to be clear. Is the entirety of the raise related to the CNG stuff?

Yes, a simple answer. Like we said before, if that particular product line outperforms that will flow through and then we just pass that along from a very strong first quarter to the rest of the year not signaling any other real pressure or problems. So, it's just flowed through.

Got you. And then one of the things that was a bit confounding was truck production in China in calendar Q4 came down quite a bit and the diesel and natural gas spreads compressed. What do you think is actually driving kind of the strength in that business? Why might it not have a longer tail to it since it seems to top the trend?

Yeah. I wish I understood it better and I wish our team -- everybody on the team wishes they understood it better. When we talk with our main customers there, the speech that we receive is really about the secular growth and opportunity of natural gas, cleaner burning, availability, cost is good. So, over the long-term, this business should perform, but it's just -- our experience is that it's lumpy and volatile. And so, it just depends on how long of a term view you take on that growth curve and what can you count on. So, for us, we haven't been able to count on consistent stable growth. That's why you hear us kind of say, we think it's related to the natural gas, diesel cost spread. The availability is kind of a new factor that is positive, but it's hard to say. Some of it is government policy. I'd just leave it at that.

Okay. I appreciate that. And then, switching to Aero to just follow-up on Rob's initial questions, obviously, the FAA on the 737 is kind of restricting the rate hikes at Boeing for some period of time. We've seen some suppliers destocking of whether it be Hexcel or some others. I'm just curious, are you seeing any evidence among your many customers of schedule changes maybe asking for orders to be delivered later than was the case a couple of months ago. And just any perturbations we've seen in your order book on 737 in particular?

I'd say over the last 18 months, we've seen orders being pushed out and pulled in kind of, I won't say, regularly, but periodically. And we haven't seen an uptick in that as of recently, and I'm giving you as of today information. I don't know what could happen tomorrow, but we always see replanting, and end of quarter, end of the year, decisions to push things out or pull things in based on our customers' supply chain activity and their desired inventory positions. But we haven't seen anything that signals to us see, gee, that's a big step change in rate across the board across the customers. Nothing consistent like that.

Okay. And last one, in the past, you guys have provided past dues or some sort of framework to think about those. Do you have an updated figure for that? Thanks.

I don't because I don't think it was really helpful to anyone, because those past dues weren't going to flush through the system in any lumpy kind of way just because right now what it is, is our capacity really limits our ability to ship at a certain rate to each customer based on the product line. And we've also seen some of those past dues evaporate due to folks over ordering when they don't have confidence in a supplier and a supply chain. They tend to put more orders in the system to try and get more priority and we've seen some of those past dues evaporate. So, we're not sure that is really is helpful characterization of our ongoing businesses. It maybe once was early in the supply chain crisis.

I appreciate it. Thank you very much.

Yeah. You're welcome.

Your next question comes from the line of Michael Ciarmoli from Truist Securities. Please state your question.

Hey, good afternoon, guys. Real nice results.

Good afternoon, Mike. Thanks.

Thanks, Michael.

Just back to these industrial margins. I mean, I guess for the remainder of the year, could you help us out with the cadence? I guess, you get some on-highway strength here in the second quarter, but then that will fall off and presumably you'll have down margins year-on-year. Just I mean I guess maybe a little bit surprising with all the good stuff you've got going on from operational excellence, pricing. Is there any just additional drag in those Industrial margins or is it just really carrying the overhead and kind of as you guys said not assuming any on-highway production in second half?

Well, if you remember, kind of -- I just want to take you all the way back to when Industrial margins were single-digits and sort of mid-single digits at times with low on-highway volume. And the fact that we're signaling margins that are in the low to mid-teens here I think represents quite a bit of goodness from both price and operational excellence in the other parts of the business. So, I don't feel like it's out of line, especially when you look at where we've been. It's easy to sort of say, "Oh, we did an 18% and now we do a 20%. How come it is going to go back to 14% or 15%." It's because we've made a lot of progress from where we've been, but it's not the kind of progress that supports 20% margin on an ongoing basis. Does that makes sense?

Yeah. And I guess, I'm just looking at the run rate for the rest of the year being just below 13%. I mean you'll do -- that will take you to the midpoint of your guidance. So, I'm looking at a 13% margin quarter kind of stepping still well above that high single-digit, but obviously a step down.

Yeah. We just -- if you take on-highway down to really not contributing, let's say, because in past times we've seen on-highway be negative when volume is really, really low. But if you take it down to not contributing to sort of a breakeven, then you might believe the numbers that you're seeing.

Okay. Yeah, no, that makes sense. Maybe just shifting gears, can you give us any more color on that 45% growth in defense aftermarket and anything -- I think I've heard you call out vehicles, but anything else and how to maybe think about the trajectory going forward there? I know in the slide, you kind of pointed to I think supply chain and some other items.

Yeah. So, it really is an execution story. We've had a lot of demand and we've disappointed customers for quite a long time by very long turn times in our defense, repair and overhaul portfolio. The really good news -- well, good news that our execution has improved substantially and we've got flow going there and we're planning repair and overhaul just like we plan OEM production with a rigorous process now and we've got good focus on it. The even better news is that the growth is across literally all of the programs that we're involved in. So, there is no one program outlier to lean on or be concerned about. And so, as we continue to put an operational excellence focus on defense, repair and overhaul, I believe that's a good growth lever for us and a margin improvement lever for us for that part of the business. I talked about our value stream transformation efforts and that defense, repair and overhaul value stream is on the list for 2024 to further enhance the performance there and serve those very important customers better.

Got it. Helpful. Thanks, guys.

You bet.

Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Please state your question. Sheila, please state your question.

Yeah. Sorry about that. Chip, I wanted to follow-up on your prepared remarks in terms of -- in your script, you mentioned you went to Zeeland last week and it really focused on the GTF fuel nozzle and how it might come to market even though it is unexpected. I was wondering if you could just comment on what that means? Does this mean additional content, if you could elaborate?

Yeah. So, our assumption and working with the engine OEM on this was that the early shaft business would be more like a clean, check and repair activity, which is fairly low content for us and sort of supporting a quick turn philosophy. But there is some indication that perhaps the build standard might want to focus on ensuring a longer next run of the engine, in which case, we might see more scope and more overhaul type procedures to ensure a longer second run. But a lot of that's going to be airline specific and customer specific and what they want for work scope. We're just trying to make sure we stay ahead of that demand and if that's the direction they want to go with their strategy that we're ready to support it.

Got it. Thank you.

You're welcome.

Your next question comes from the line of Louis Raffetto from Wolfe Research. Please state your question.

Hi. Thanks for the follow-up. So, Chip, I appreciate you, Bill, the sort of openness on China natural gas given where things have been sort of in the past. Maybe just to sort of put a finer point on this, you said the full guidance increase is from China natural gas and you're talking 40% margins on that business. If we assume there's $50 million of sales in 2Q, I mean, it looks like the margins in Industrial in the back half the year kind of step down to low double-digits. Is that kind of what you were just referring to?

Yes, that's what we are discussing.

Yeah.

Okay. Just wanted -- thank you.

Yeah. I know it's a lot of moving parts here. I appreciate your inquisitiveness.

Thank you.

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

Okay. Thank you all for joining us. Have a great day.

Ladies and gentlemen, that concludes our conference call today. If you would like to listen to a replay of this conference call, it will be available today at 7:30 p.m. Eastern Time by dialing 1-888-440-4531 for a U.S. call or 1-646-960-0808 for a non-U.S. call and by entering the access code 4278216. A rebroadcast will also be available at the company's website, www.woodward.com, for 14 days. We thank you for your participation on today's conference call. And with that, please disconnect your lines.