Woodward, Inc.

Thank you for standing by. Welcome to the Woodward, Inc. third quarter fiscal year 2024 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 Pravosnik, Director of Investor Relations. I would now like to turn the call over to Dan Pravosnik.

Thank you, Operator. We'd like to welcome all of you to Woodward's third 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. And 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 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 on our website through August 13th, 2024. All references to years in this call are references to the company's fiscal year unless otherwise noted. Now I'd like to highlight our cautionary statement as shown on slide two. As always, elements of this presentation are forward-looking and 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, Woodward is providing 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 and related schedules. We believe this additional financial information will help in understanding our results. Now, I'll turn the call over to Chip.

Thank you, Dan, and good afternoon, everyone. As you may recall, we shared our three interconnected value drivers of growth, operational excellence, and innovation at our Investor Day last December. Before we begin our discussion on financial performance, I would like to share some highlights on the topic of innovation. Designing precise energy and motion control solutions within our customers' complex and challenging product environment is in our DNA, as our current product offerings demonstrate. In fact, it is our purpose to design and deliver energy control solutions our partners count on to power a clean future. We are building on the innovations of our predecessors with a technology roadmap that aligns our purpose and our growth strategy with evolving customer requirements for their next generation platforms. This active engagement ensures we can meet the current and future needs of the end markets we serve. Today, I'll share some of our R&D and new product development investments that are helping prepare Woodward and our customers for the future. I'll start with some recent news. During the Farnborough International Air Show last week, we announced that Boeing selected Woodward to design and manufacture advanced low-profile hydraulic controls for thin-wing applications on its transonic truss-braced wing demonstrator, now dubbed the X-66, thankfully. This project is a collaboration between Boeing and NASA that pioneers a low-drag configuration to reduce fuel burn and emissions. It has the potential to revolutionize single-aisle aircraft design. Woodward has demonstrated concepts that will enable precision motion control and feedback for actuation of control surfaces yet fit within the envelope of this advanced wing design. Another area where Woodward has invested and achieved leading technical maturity is component design and materials compatibility for control systems delivering alternate fuels known as power to X or P to X. P to X fuels such as hydrogen, ammonia, and methanol are being evaluated for various applications. These alternative fuels have potential to contribute toward the ambitious carbon reduction targets in aviation, transportation, and power generation driven by changing regulations and the global quest for a cleaner future. Alternative gas and liquid fuels pose new challenges from a materials durability standpoint. Woodward has invested in significant compatibility testing and analysis to develop robust material selection criteria as each new fuel is identified by customers for specific applications. We have established a state-of-the-art P2X research center in Stuttgart, Germany, where we're testing hydrogen-compatible components for the Airbus Zero-E hydrogen-powered aircraft demonstrator. Another one of our newer and very exciting programs is an advanced fuel control system for the next generation of aircraft engines. To achieve the fuel burn reduction targets for an open fan or an ultra-high bypass ratio ducted engine, the core will have to be quite small, and the temperature inside the core compartment will be significantly higher than previous engines. To meet the reduced core compartment volume and corresponding fuel system envelope, We've designed and manufactured housings using additive technology to achieve more than 50% reduction in weight and volume compared to current fuel systems in service. In addition, we're developing high temperature, robust electrical and servo hydraulic components designed to deliver motion control and position sensing in this demanding environment. We're currently demonstrating technology that allows 10 times better confidence and fuel flow accuracy for combustion management. This will enable our customers to optimize the core size to the mission, delivering substantial improvements in fuel burn. I'm confident that our technology and product roadmaps are on track to maintain Woodward's competitive edge through further innovation and alignment with our customers' evolving requirements. Moving to our markets, in aerospace, strong commercial, domestic, and international passenger traffic continues, though as you heard in recent earnings calls, some airlines discussed overcapacity in the U.S. domestic market and lower yields, which they believe to be short-term in nature. While the macro environment remains strong, as you heard from other companies, the players in the supply chain, from aircraft OEM down to the raw materials supplier, and all the tiers in between, are not yet performing in synchronization. With that in mind, I'd like to update you on two lines of effort Woodward launched in 2022 to help our supply chain recover. We deployed resources to suppliers that were struggling, and we invested in rapid complex machining centers to offload suppliers and give them a faster path to recovery. We continue to run our tiered escalation management system that I described in detail previously. And we currently have engineers and operations experts forward deployed to support suppliers that are impacting or likely to impact our build rates. We have seen numerous suppliers graduate from this list, but we have seen new ones enter the list as well. We will continue to invest resources to collaborate with our suppliers with a goal of taking action sooner and solving problems before they impact build rates. We continue to reap benefits from our investment in rapid, complex machining centers as we have temporarily insourced thousands of parts to allow suppliers breathing room to recover. We have invested in additional machines this year to provide even more capability and flexibility. There is a third line of effort, our lean transformation, where we're focused on reducing lead times and improving flow. This most basic body of work is delivering benefits associated with efficiency, but also flexibility and resilience. Back to the bigger picture, the lack of synchronization across the aerospace supply chain is creating part shortages from struggling suppliers and a buildup of inventory from those that can perform. We detect that our inventory is building in the system, and we are monitoring progress and communicating with our customers as we want to manage smooth flow through our operations and offer the same opportunity to our suppliers. We are working together as an industry to better align production and support each other on a path to smoother connected flow. Aerospace aftermarket activity remains healthy due to continued high utilization, and in particular, high utilization of legacy aircraft and engines that is resulting in additional shop visits and repair activity with a longer horizon than we would have predicted just a few years ago. Overall, we continue to be pleased with the outlook of our aerospace business. In industrial, rising global power demand is driving increased investment in gas-fired power generation. We're also seeing increased demand for more efficient, lower-emission, and alternative fuel-ready installations to support grid stability. Data centers and associated demand for backup power are forecast to grow sharply, driven by increasing artificial intelligence and other computing demands. In transportation, the marine market remains healthy, with elevated shipbuild rates driving OEM engine demand and high utilization rates fueling current and future aftermarket activity. Demand for alternative fuels across the marine industry continues to increase. Demand for heavy-duty trucks in China softened this quarter. However, industry data indicate that natural gas engines are taking share from diesel engines in heavy-duty truck applications in China. Discussions with our customers revealed elevated inventory levels, and they expect to cycle through their stock in the near term. This resulted in lower China on highway orders for Q4, and we've revised our full year industrial sales guidance accordingly, which Bill will go through in his section. Regarding oil and gas markets, U.S. natural gas production continues to be pressured by low gas prices, although global demand for natural gas infrastructure remains strong. Positive sentiment in the space is driven by strong performance and outlook in domestic shale oil, as well as refining and petrochemical activities in China, the Middle East, and India. In summary, I would like to thank our members for their hard work and dedication to serving customers and improving our business results. We're on track for a solid year with sales growth of 12%, 200 basis points of margin expansion, and generating approximately $90 million of incremental free cash flow. Overall, We are well positioned to capitalize on the robust demand across our end markets, and we remain focused on profitable growth, operational excellence, and innovation to maximize shareholder value. I'll now turn it over to Bill to share our financial results.