Thank you for standing by. Welcome to the Woodward, Inc. first quarter fiscal year 2022 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 Mr. Tom Gendron, Chairman and Chief Executive Officer, Mr. Mark Hartman, Chief Financial Officer, and Mr. Dan Provaznik, Director of Investor Relations. I would now like to turn the call over to Mr. Provaznik. Thank you, operator. We'd like to welcome all of you to Woodward's first quarter fiscal year 2022 earnings call. In today's call, Tom will comment on our markets and related strategies, and Mark will discuss our financial results as outlined in our earnings release. At the end of the presentation, we will 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 February 14, 2022. The phone number for the audio replay is on the press release announcing this call, as well as on our website, and will be repeated by the operator at the end of the call. I would like to refer to and highlight our cautionary statement as shown on slide three. As always, elements of this presentation are forward-looking or based on our current outlook and assumptions for the global economy and our businesses more specifically, including the expected and potential effects of the ongoing COVID-19 pandemic. Those elements can and frequently change, do frequently change. Please consider our comments in light of the risks and uncertainties surrounding those elements, including the risks we identify in our filings. In addition, Woodward is providing certain non-US GAAP financial measures. We direct your attention to the reconciliations of the 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. Turning to our results for the first quarter. Net sales for the first quarter of fiscal 2022 were $542 million compared to $538 million for the prior year quarter, an increase of 1%. Net earnings were $30 million or $0.47 per share, compared to $42 million or $0.64 per share. Adjusted net earnings for the first quarter of fiscal 2022 were $36 million or $0.56 per share. Adjustments to earnings for the quarter included costs related to business development activities and a charge related to a non-recurring matter unrelated to the ongoing operations of the business. There were no adjustments to earnings in the prior fiscal year first quarter. Net cash provided by operating activities for the first quarter of fiscal 2022 was $39 million compared to $147 million for the prior year. Free cash flow for the first quarter of fiscal 2022 was $26 million compared to $139 million for the prior year. Adjusted free cash flow was $27 million. Now I'll turn the call over to Tom to comment further on our results, strategies, and markets. Thank you, Dan. Good afternoon, everyone. We continue to see positive signs of recovery across the business despite market volatility. Ongoing COVID-19 related disruptions, including global supply chain challenges, labor shortages, and customer-initiated shipment delays permeated the industry and impacted our revenue in the quarter. Although we expect an uneven market recovery throughout 2022, Woodward's proven resiliency underscores our confidence in our continuing recovery and ability to deliver a solid year. Moving to our markets. The commercial aerospace market continues to improve. We're pleased to see the 737 MAX recertification in China and expect overall build rates to continue to ramp slowly throughout the year. Commercial aftermarket recovery is being fueled by rising passenger traffic and utilization of commercial aircraft fleets that include significantly higher Woodward content. U.S. domestic passenger traffic is nearly at pre-COVID levels, while international travel continues to improve primarily as a result of the easing of travel restrictions between the U.S. and Europe in November. Overall, defense markets remain stable, but as expected, demand for guided weapons is down and is anticipated to remain at lower levels for the foreseeable future. Turning to our industrial market. In power generation, demand for gas turbines remains strong, driven primarily by growth in Asia and the replacement of coal-powered plants. Aftermarket activity has been increasing, and we continue to see strong demand for backup power for data centers. In transportation, the global marine market continues to see increasing orders for new ships and higher utilization, driven primarily by a robust freight market, which will drive future aftermarket activity. Demand for China natural gas trucks remains challenging even though global natural gas prices have trended downward after peaking late last calendar year. The oil and gas market has improved, with pricing above pre-2020 levels, driving increased levels of capital spending. In summary, while we see a significant amount of uncertainty in our markets, we anticipate improvements as we progress through the fiscal year, and we remain confident in our ability to deliver on our previously stated 2022 outlook. As a reminder, for the full fiscal year 2022, we expect further recovery and improved profitability in our aerospace business as OEM build rates increase and passenger air traffic recovers despite the headwinds from softened guided weapon sales. In our industrial business, we anticipate increased demand for industrial gas turbines and related services, continued improvement in marine markets, and stabilization of oil and gas prices, all of which should drive customer investment in the segment. We will continue to navigate the challenges of this market recovery with a focus on operational excellence, delivering value to our shareholders and customers, and positioning Woodward to capitalize on future market opportunities. Now I'll turn the call over to Mark to discuss the financials in detail. Thanks, Tom. Net sales for the first quarter of fiscal 2022 were $542 million, an increase of 1% as compared to the prior year period. Sales for the quarter were negatively impacted by $70 million due to ongoing industry-wide COVID-19 related disruptions, including supply chain constraints, labor shortages, and some customer-initiated shipment delays. Aerospace segment sales for the first quarter of fiscal 2022 were $336 million, an increase of 5% from the prior year quarter. Segment sales were negatively impacted by approximately $42 million of industry-wide COVID-19 related disruptions, which resulted in shipment delays for some orders. Commercial OEM and aftermarket sales were up 38% and 31% respectively, driven by continued recovery in both domestic and international passenger traffic and increasing aircraft utilization. Defense OEM sales were down 20% in the quarter, primarily due to lower sales of guided weapons. Defense aftermarket sales were down 18% compared to the prior year quarter, primarily due to supply chain disruptions. Aerospace segment earnings for the first quarter of 2022 were $51 million, or 15.2% of segment sales, compared to $46 million or 14.4% of segment sales for the first quarter of 2021. The increase in segment earnings was primarily a result of significantly higher commercial OEM and aftermarket sales volume. Turning to Industrial. Industrial segment sales for the first quarter of fiscal 2022 were $205 million compared to $216 million in the prior year period, a decrease of 5%. Segment sales were negatively impacted by approximately $28 million of industry-wide COVID-19 related disruptions, as well as weakness in China natural gas engines, partially offset by higher marine sales. Industrial segment earnings for the first quarter of 2022 were $24 million, or 11.5% of segment sales, compared to $33 million, or 15.2% of segment sales in the prior year. Industrial segment earnings decreased primarily as a result of lower sales volume as well as product mix and net inflationary impacts. Non-segment expenses were $29 million for the first quarter of 2022, compared to non-segment expenses of $23 million for the same period last year. Adjusted non-segment expenses for the first quarter of 2022 were $21 million. There were no adjustments to non-segment expenses for the first quarter of 2021. Adjusted non-segment expenses for the first quarter of 2022 exclude costs related to business development activities and charges associated with non-recurring matter unrelated to the ongoing operations of the business. At the Woodward level, R&D for the first quarter of 2022 was $25 million, or 4.7% of sales, compared to $32 million or 6.0% of sales for the prior year quarter. SG&A for the first quarter of 2022 was $62 million, compared to $56 million for the prior year quarter. The effective tax rate was 19.7% for the first quarter of 2022, compared to 12.6% for the prior year quarter. The adjusted effective tax rate for the first quarter of 2022 was 20.6%. Looking at cash flows. Net cash provided by operating activities for the first three months of fiscal year 2022 was $39 million, compared to $147 million for the prior year period. Capital expenditures were $13 million for the first quarter of 2022, compared to $7 million for the prior year quarter. Free cash flow was $26 million for the first three months of fiscal 2022, compared to free cash flow of $139 million for the prior year period. Adjusted free cash flow is $27 million for the first three months of fiscal 2022. Adjustments to free cash flow for the quarter included payments related to business development activities and restructuring activities. There were no adjustments to free cash flow in the prior year first quarter. The decrease in free cash flow and adjusted free cash flow was primarily related to working capital increases to support this year's anticipated growth. Leverage was 1.7 times EBITDA at the end of the first quarter. During the first quarter of fiscal 2022, $37 million was returned to stockholders in the form of $10 million of dividends and $27 million of repurchased shares under a board-authorized share repurchase program. In addition, today, we announced a dividend of 19 cents per share, up from a prior quarter's dividend of 16.25 cents per share, an increase of approximately 17%. Further, today we announce that our board of directors authorized its two-year stock repurchase program, under which up to $800 million in stock may be purchased in the open market and private transactions. This authorization replaces the previously authorized stock repurchase program. Our stock repurchase program is an important part of our balanced capital deployment strategy. Given our strong financial position and positive financial outlook, including our ability to generate robust cash flow, we remain committed to returning capital to shareholders via stock repurchases and cash dividends, while concurrently investing in our business to support future growth. Lastly, turning to our fiscal 2022 outlook. COVID-19 related disruptions persisted in the quarter, although improvement is anticipated in the remainder of fiscal year 2022. Net sales for the fiscal 2022 are expected to be between $2.45 billion and $2.65 billion. Aerospace and industrial sales growth percentages are each expected to be in the low double-digit teens. Sorry, low double digits to mid-teens. Aerospace segment earnings as a percent of segment net sales are expected to increase over last fiscal year by approximately 200-300 basis points, primarily due to increased sales volume in both commercial OEM and aftermarket, partially offset by lower guided weapon sales and the anticipated return of annual variable incentive compensation costs. Industrial segment earnings as a percent of segment net sales are expected to be approximately flat to up 150 basis points over last fiscal year, primarily due to the increased sales volume, partially offset by the anticipated return of annual variable incentive compensation costs. Growth and profitability in both segments could be negatively affected if COVID-19 and supply chain disruptions do not improve, or if the pace of inflation puts additional pressure on labor and material costs. The adjusted effective tax rate is expected to be approximately 21%. Adjusted free cash flow is expected to be approximately $315 million, generating an adjusted free cash flow conversion rate of greater than 100%. As the anticipated sales growth returns, we expect higher working capital requirements, primarily driven by accounts receivable. Capital expenditures are expected to increase over last fiscal year by approximately $30 million. Adjusted earnings per share is expected to be between $3.55 and $3.95, based on approximately 66 million of fully diluted weighted average shares outstanding. The favorable impacts of sales growth and productivity improvements in both segments are being partially offset by the expected return of annual variable compensation costs, inflationary pressures, and a higher tax rate. This concludes our comments on the business and the results for the first quarter of 2022. Operator, we are now ready to open the call to questions. 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, press star one on your push-button phone. Should you wish to withdraw your question, press the pound key. Your question will be taken in the order it is received. Please stand by for your first question, sir. Our first question is from Sheila Kahyaoglu with Jefferies. Please state your question. Hi, good afternoon, guys. Thank you for the time, and maybe we'll blame this quarter on Don. In terms of aerospace margins, can you maybe talk about some of the moving pieces as we progress through the year and the improvement? Mark, you mentioned a few things like incentive comp, and, you know, military was down quite a bit, double digits. If you could talk about the moving pieces there. As you heard us in our prepared remarks, we did talk about strength on both commercial OEM and aftermarket, and we're anticipating that sales volume strength to continue. You also heard us mention the COVID-related disruptions that impacted aerospace $42 million in the quarter. As those abate and we're able to pick up on that sales volume, that will flow through, which will then, as you mentioned, will be offset partially by the annual incentive compensation coming back into the business. Okay. I just wanted to maybe ask Tom a bigger picture question on the industrial segment. I've seen it ebb and flow over the years. Kind of what are your thoughts there on bigger picture? Well, right now I think we're in this beginning of an upcycle. As we're highlighting, you know, we definitely see power generation demand increasing. We see the industrial turbo machinery market recovering. You know, orders are picking up. Upgrades are happening. Both on the new and service side, we see that increasing. As we highlighted, the marine market is coming back, and we're starting to see good aftermarket activity there. The oil and gas market, you know, is with the prices, you know, we start seeing prices at these levels, you know, there will be more capital investment. I know the oil oil majors are being cautious, but we are seeing some increases in the aftermarket there, so that bodes well for us. If you wanna say the wild card for us right now is in China and, in particular, in the China truck market for natural gas engines. We anticipate a recovery more in the second half of the year in that market. The dynamics of the market are all pointing towards recovery. We're seeing that as we move through the fiscal year, the industrial market looks to be picking back up. You know, that's kind of part of our guidance. With the volume increases we see, we should be able to leverage that increase, you know, through into the bottom line. Okay, great. Thank you. Thanks, Sheila. Our next question is from Robert Spingarn with Melius Research. Hey, everybody. Hey, Rob. Good afternoon. Tom, I guess unless your initial guide was really conservative, I'm just struggling to see, you know, how you hold the guide with the soft quarter, given that nothing good has really happened since the prior quarter. We've had, you know, supply chain got worse, Omicron came in, all things you've talked about. Are there sources of upside that you can highlight here that provide true offset? Or are you just thinking the timing and the recovery is gonna be there? Yeah. Well, as you know, you can see that there's no doubt that COVID impacted, you know, Woodward definitely in our markets. We are seeing the demand increase, you know, if you go in particular when we talk on the Aerospace segment. We are seeing the aftermarket increasing. With China recertifying the MAX, we're seeing IP orders, you know, and spares orders come in. I don't see that falling off. I think there's a huge demand for travel coming. Our anticipation is we were impacted by COVID and had disruptions as we highlighted, but you know, we're seeing some of that turn. We've got a lot of work to do, so there's no doubt about that, to recover, as we highlighted. We're starting to see some improvement opportunities. You know, we're seeing production rates increasing where the demand is there. We're confident the order book and the demand is out there. We do have to work, and that's our, you know, that's our responsibility to deliver on that, and there's gonna be a challenge there. We're working all the disruptions. We think that within our company, we've passed the worst of the COVID impact. What I mean by that is the absenteeism that was related to illnesses, we could see and track that that's moving down. You know, we anticipate over the next couple months that that'll drop off and that, you know, we'll have better utilization of our factories with full, you know, full staffing. In addition to that, you know, with our outlook and the demand, we do have a need to hire a lot of direct numbers. We've put in enhanced hiring personnel to support that as well as training. You know, we're anticipating, you know, the need to add about 100 direct numbers a month through the fiscal year. We're working hard on that, and that's a reflection that the demand's there. You know, we gotta perform and work hard to deliver on that demand. Can you put some color around this charge with the non-recurring matter that was unrelated to the operations of the business? Yeah. You know, it's just a, like, a non-operational one that we're calling out, but we really can't go into the details of it at this time. The only other thing, the shipment delays you talked about in the opening remarks that were customer initiated. Anything else there? Yeah. You know, and a lot of you that have been following us for a while, you know that we have, you know, the lean production systems at our customers and, you know, which equates to pull systems, that as they've been disrupted, they haven't pulled, you know, material. Same reason that we've had some disruptions, you know, other suppliers, labor shortages. It's a combination, you know, that we saw where, if you wanna say labor disruptions, meaning, whether people don't have the workforce or, COVID-related absenteeism and the like, has disrupted our suppliers, it's disrupted our customers, it's disrupted Woodward operations. That's where those numbers come from. You know, we're anticipating that everybody will, you know, start to recover on that and that we'll make up those shipments and that revenue as we move through the fiscal year. Okay. All right. Thanks for all the help. You bet. Our next question is from Christopher Glynn with Oppenheimer. Hey, thanks. Good afternoon. Good afternoon. Tom, I wanted to ask about the marine market a little bit there. You, the way you talk about it, sounds like it's in the process of starting to ramp up, taking shape. I'm just curious, how do you see that curve playing out in, you know, the process of tilting towards a full swing aftermarket strength for that? Yeah. You know, the utilization rates are up. We're seeing, you know, the biggest part that's increasing is our aftermarket in the marine market. That's just highly tied to utilization, also what I would say bringing back. You know, during the worst part of the pandemic, you know, bringing the freighter stock online, making up for previous maintenance that was pushed out. That's happening, and we have a robust forecast going into the fiscal year. Behind that we see new ship builds increasing. We also see quite a bit on LNG carriers coming. We see the increase in what we call dual fuel ships, which that's a real positive for the company because that means you have multiple fuel systems per engine and, you know, higher content. All of those are positive signs. You know, with the lead times in the industry, that's really looking out, you know, the aftermarket will build out this year and provide, you know, good growth as we move into the next several years. The new builds and the like will also add to the growth. I think it's on a good upcycle, and we see that carrying forward here. Great. Just a little bookkeeping on that. I believe you said the aftermarket piece is a little bit bigger within L'Orange. You see OE timing starting to kick in in fiscal 2023? Yeah. It really will start, you know, with new builds coming in and what's on the order book. The order book's strong and, you know, that with the long lead times that'll be, you know, kicking in fiscal 2023, 2024 timeframe. Great. Then a lot of positive commentary on your IGT markets. I know there's a lot of pockets in there, whether aeroderivative or utility scale and various other markets. It sounds like it's all taking shape pretty uniformly. Just wanna make sure I wasn't missing any layering of your commentary for the IGT markets. No, we're seeing, you know, IGT, so, you know, all segments that are increasing. I always like to still refer to Turbo Machinery in total. That adds, you know, gas turbines, steam turbines, compressors. You know, we're seeing, you know, all those picking up as we move through 2022 and on into 2023. There's also good aftermarket activity tied to those in service activity, where we're seeing upgrades, movement to cleaner fuel. We're seeing activity for some people upgrading their turbines, you know, especially in the Middle East, from running on, you know, burning oil to going to natural gas. We're also seeing customers wanting to prepare for hydrogen. Woodward's one of the few out there that have a hydrogen-ready fuel system, so we're helping our customers with that. We're seeing activity around those types of initiatives, and we think that'll carry through for the next several years. It's, you know, again, a long lead time, long cycle business, but it's moving in a real positive direction. Great. I think. Oh yeah, last one for me, if I could. The customer-initiated shipment delays, was that sort of the part that broadened the most in the quarter, or was it just- No. Kind of a cross explanation? No. I would say the largest still was what we would call supplier disruptions. In supplier disruptions, you could look at it, you know, in two ways. One would be capacity constraints, the other would be labor disruption. To give an example, you know, capacity is really around our electronics and, you know, integrated circuits. You know, I think everybody's a little aware of the capacity. The difficulty we have in that area is we use several of the critical chips that are used by the automotive industry and by the cell phone industry. As you guys know, there's a pent-up demand there. That's capacity. The labor disruptions, I think is a combination of, people coming out of the pandemic, adding enough resources, and then also this high absenteeism that we've seen from some supply base. Also, you know, we've seen at Woodward, and as I mentioned, previously here, we see that starting to drop. You know, for a period there we were seeing some really high absenteeism numbers, and that's beginning to come down. Thanks for all the color. You're welcome. Our next question is from Michael Ciarmoli with Truist Securities. Hey. Good evening, guys. Thanks for taking the questions. Maybe, Tom, just to go back to Rob's question on the guidance. I mean, this $70 million, you know, how should we be thinking, you know, flowing back into results? I mean, we're obviously still dealing with a, you know, kind of currently challenged quarter here, your second quarter. I imagine sequential ramp up in the March quarter is probably gonna be fairly tepid. I mean, do you guys have good line of sight, you know, on how you'd recoup this $70 million revenue? Yeah, no, I'm glad you asked the question. It is a good question. It's gonna be more in the second half of our fiscal year, third and fourth quarters. You know, we're working hard to try to recover in second. We still, you know, our absenteeism and labor disruptions and some of the supply constraints are still there. We're working them hard and we're seeing progress. It won't be. That $70 million won't be recovered in the second quarter. It'll be back-end loaded. You know, we're confident we can pick that up, but there is a risk to that. You know, there is some uncertainty. That's why we highlighted that in the prepared remarks. Got it. Just on that, on the component that was aerospace, the $42 million, was that more on the commercial side, more on defense? Was it equally split? Any color there? Yeah. It's generally equally split. It's across the whole aerospace industry. Okay. Got it. Just, I guess, on the last one for me here. What are you guys seeing on the, you know, obviously you mentioned some of the inflation-related headwinds, but what about on the pricing side for you guys and the ability to pass through? You know, I think we just were talking about- Sure. L'Orange, and they've got more of an aftermarket. Ability to price on both industrial and aerospace and confidence level there. Yeah. No, that's. It's always a good question. You know, in parts of our business, and aftermarket being one, we have better control of pricing, so we are able to move pricing there. You know, on our OE, on our OEM side, the majority of our OEM sales are on long-term agreements. Those agreements generally all have escalation clauses in them. You know, that usually comes to an annual escalation. We will see some recovery there. It's a timing issue on that, on the OE side. The aftermarket side, we have a little more flexibility. We will see some price realization, but we won't get all of that inflation recovery that we're seeing in this year because of the timing of the agreements. Got it. Helpful. Thanks, guys. I'll jump back in the queue here. Yep. You're welcome. Our next question is from Matt Akers with Wells Fargo. Yeah. Hi, good afternoon, guys. Thanks for the question. Could you touch on international military demand? Is it something that you guys had mentioned a little bit last quarter? You're starting to see a little bit of activity. Has that translated to orders at all yet? Yeah. We do see some of that coming through, you know, in our foreign military sales. Some of that's in military aftermarket, where we see some upgrades in the activity. There have been some recent orders for guided weapons coming from foreign military. We've seen a little bit there. We anticipate more of that coming, but it's hard to forecast exact timing on that. There is some. It's not huge numbers, but we are seeing, you know, some positive orders coming from foreign militaries. Okay. Got it. I guess if you could just touch quickly on provisioning and sort of what impact you're seeing there and maybe with some of the rate increases. Yeah. Essentially from volume this year. Is there room for that to move higher? Yeah. You know, we've called out before with the provisioning, you know, the first and the biggest opportunity is the recertification of the MAX in China, and those airlines starting to take those planes. You know, that provisioning, you know, is starting to see. Tom mentioned earlier that you know, we are starting to see some orders there. You know, as the narrow body get delivered, you know, as we always talk about with provisioning, really it's a matter of which airlines are taking the deliveries and then which routes they're actually flying. If an airline's flying the same route, you may not see initial provisioning sale for that. If an airline that already has a MAX, for example, but they're starting to fly new routes, that's when initial provisioning opportunity will come up also. We are starting to see initial provisioning pick up overall. You know, we talked before that 2018, 2019 was a very large initial provisioning years for us. You know, we're not anticipating we're gonna return to those levels this year, but we are gonna have a nice increase from last year. Great. That's helpful. Thanks. Our next question is from Pete Skibitski with Alembic Global. Hey, Good afternoon, guys. Afternoon. Yeah, I just wanna dig back into the supply chain issue. I know you were expecting it to impact the first quarter. Is it fair to say it came in a good deal more negative than you thought? I think you were thinking that maybe the second quarter would be kind of the last of it and maybe de minimis. Are we talking maybe you know continued kind of chunky negative impact in 2Q, and maybe it trails off in the third quarter? Yeah. I guess we first, you know, reflect on the first quarter. The COVID impacts and, you know, the disruptions were larger than we anticipated. I would say most of that was labor disruptions, you know, in terms of at Woodward and at, you know, our suppliers of, I'm gonna say shortages, but also absenteeism. That kind of played through. We have seen some of that still here in January. So we anticipate it'll start tapering off, you know, as we move into February. You know, it's kind of the Omicron has moved through a lot of our sites and states that we operate in. You know, so we see that going down. As we move, we are seeing, as I mentioned earlier, some improvements in some of the supply disruptions we had. It will take into the third and fourth quarter to fully recover. Okay. I guess, are you feeling an impact on the defense side from the, I don't know if you can tease this out or not, but the ongoing continuing resolution for defense, maybe it's hard to kind of differentiate that with the COVID and supply chain issues going on, but do you think you've had any discernible negative impact from the ongoing CR? You know, we're not really seeing, you know, it's when we said it's stable, you know, to flat, but there are opportunities, you know, in the defense budget and, you know, we're definitely gonna highlight more of this at our investor day, upcoming investor day. We are securing programs in hypersonics and some of the other areas where we're seeing increase in activity. There, you know, depends what programs you're on and what activity you're in, but overall, you know, we see picking up some new business, throughout there. You know, we'll go over that more in March with the investor day. Okay. Just the $800 million share repurchase authority, is that, do you guys intend to use all of that over the next few years, or are you just saying you're gonna be opportunistic? Well, you know, we're being opportunistic in the market, but we put a two-year horizon on that, as that's our intention. Okay. Okay, great. Thanks, guys. Okay. Our next question is from David Strauss with Barclays. Thanks. Good afternoon. Just to follow up on that, I guess at this point, you're pivoting away from kind of 50% cash flow, free cash flow return to shareholders to something 100%, 100% plus based on the share repurchase authorization? That's correct. Okay. Tom, on defense, you know, you guys called out double digit. It looks like it was down close to 20% in the quarter. I don't know the split OE versus aftermarket yet, but does that decline improve as we go throughout the year or is that kind of the right level for the full year, something down close to 20% for your total defense business? Yeah. That's not our anticipation for the full year. You know, as we've talked about with the COVID-related disruptions, that did hit the defense side of our business hard. You know, our outlook for the defense side is still the same as it was previously. You know, we've talked about softness in the guided weapons side of the business, you know, which will be a headwind. You know, the rest of the defense business, you know, we're anticipating to be pretty stable. Could you size, you know, the total cost savings level you think you've been able to pull out of the business during, you know, during the pandemic here? What proportion of that do you see coming back over time? Yeah. We've mentioned the early stages of the pandemic that we did take out over $100 million of costs. Now some of that was related to the variable compensation cost incentive plans that we've had that, you know, we haven't had in 2020 or 2021, and that we're talking about some of that coming back in 2022. Generally what we've said is about half of that cost that we took out, the over $100 million, wouldn't return after we got out of the pandemic based on a lot of the cost savings initiatives that we've put in place related to site facility rationalization initiatives that we have. You know, that's what we're still anticipating as we move forward. Great. Thanks very much. Our next question is from Gautam Khanna with Cowen. Hi, guys. Just to follow up on the $70 million of sales that was short, all in, do you have a quantified EBIT impact from the $70 million and the indirect, the COVID disruptions you talked about as well? Because just sort of what's the EBIT decrement on the $70 million of lost sales? Yeah, we haven't quantified it specifically. You know, we just talk over the years that, you know, our flow through is around 30%. You know, so I think you could do the math from there. If you think of generally our, if we'd had that $70 million and getting 30% flow through, we'd been, you know, approximately $20 million, but we didn't really quantify it or calculate it specifically. You know, it's obviously across, you know, all of our businesses, with the impact that Tom's spoken about, both from, you know, supplier disruption and then labor shortages both for us and our suppliers. You know, that would be the ballpark that I would be thinking. Okay. Just as you catch that up later in the year, do you capture all of that 30%, you know, increment back or some of the cost is fixed and if you will, you know, not recoverable even through volume? I'm just wondering if they're gonna have an outsized impact, you know, driving Q1 that doesn't get made up through the year. A lot of that we see, you know, flow through. Where we could potentially have some impacts to the normal flow through would be on expediting overtime freight costs, expedited freight costs. We still think, you know, flow through is a level that Mark's highlighted is pretty normal for when we're coming back to our sales, you know, on the capacity of our facilities. We anticipate most of that will still flow through. Thank you. You're welcome. Our next question is from Chris Howe with Barrington Research. Good afternoon, and thanks for squeezing me in. It's quite the afternoon here for me. I would like to ask another question on the guidance. You reaffirmed the revenue range. There's been a lot of questions surrounding the $70 million impact, which is expected to recover in the second half at some level of cadence. As we think about this environment from a conservative outlook or view, can you talk about the conservative scenario more specifically? What level of ongoing disruptions can you continue to absorb and still feel relatively confident in your guidance range? At this juncture, it seems too early to tell with one quarter in the books. Perhaps the back half of the year points to that commercial aftermarket acceleration, I mean, the acceleration of some of the aftermarket business, offsetting some of the impacts we're seeing here. Sure. You know, without a doubt, there could be risk, you know, if there's a new COVID variant that nobody anticipates that's more severe and really starts impacting air travel and air, you know. That's not in our forecast. We are not anticipating that. We're anticipating a recovery. We're anticipating reduction in absenteeism, and we're anticipating, you know, we're seeing signs of that that we're gonna improve on our supplier disruptions. So that's in our outlook. If that is not the case, then, you know, you would say our guidance is too optimistic. We think we're being prudent with the outlook. We, you know, are anticipating recovering, you know, the late shipments. We do see, you know, we are anticipating, you know, you can see from our customers, you know, if we go to commercial aerospace, you know, as an example, we are seeing the line rates increase. Our customers are, you know, putting that into their demand, and we're seeing that demand flowing through. We're seeing utilization. If you track, you know, the legacy aircraft as well as the new narrow bodies, utilization's up. We're seeing shop visits go up. Mm-hmm. We see the aftermarket not just through 2022, but accelerating into 2023. If you guys recall, we highlighted that we would expect to get back to 2019 levels in 2023, and we see that happening. We expect to move forward from there. The trends in the, you know, as I highlighted earlier on our industrial market are pointing in the right direction. All these are long cycle businesses, so we're seeing, you know, demand forecasts coming from our customers. We're encouraged by that outlook. There is the uncertainty, you know, if we get a really new severe variant of COVID that locks everything up, you know, we're not, you know, we don't know what to do about that. We're not anticipating. That's not in our outlook. Okay. That's helpful. We've been waiting on, and now it's here, the recertification of the 737 MAX in China, and it looks like we're also envisioning route developments, as we move through this calendar year. Can you comment on the 737 MAX, kinda what your expectations are for the near term outlook and? Yeah. When it could become back to what it was type of levels? Yeah. What we're seeing is, you know, Boeing came out with their line rate numbers, and we are seeing that transition to Woodward through, you know, lead times, which, you know, we've highlighted before that, you know, we usually four to six months ahead of their production, you know, so they can ramp up. We're seeing those line rates increase. We're also seeing the Airbus line rates increase. All of that along with, you know, the recertification in China are positives obviously for new OE sales, but that they will drive increased initial provisioning sales. Our outlook this year is up over last year. We anticipate as we go into 2023 and 2024, initial provisioning sales as well as higher aftermarket activity will be happening. All those are in the works and, you know, we're confident that, you know, our customers here are going to get those new rates. Okay. One last one, if I may squeeze it in. I think you mentioned 100 direct members a month as part of your hiring goals to satisfy the influx in demand. Can you comment on the labor environment on its direct impact with Woodward and your level of confidence in ramping up your hiring as we move through different phases of this recovery? Thanks. Yeah. No, it's a good question. You know, definitely, you know, labor markets are tight. You know, we are seeing wage inflation, you know, and we need to stay competitive. You know, as Mark has highlighted in you know, questions as well as in the prepared remarks. You know, we needed to get our variable incentive plan back into existence, you know, to be competitive in the labor market. We are right now being able to execute on our hiring plan. It's not without challenge, but you know, it's got full effort. A lot of what we're doing, as other companies are, is we're training people. You know, so we're hiring for aptitude and attitude, and we're training. We've really upped our training capabilities and resources and, you know, so tight labor market. You know, in the locations we have facilities, we are an employer of choice, and we're ensuring that we stay that way through, you know, competitive wages, competitive benefits, and in a great place to work with exciting work. It's a challenge to bring on that many people, but, you know, we've put in all the resources and the processes to do it. We've got high confidence we can deliver on the hiring and which is essential to making sure that we can deliver on sales. Thanks, Tom. I appreciate the color. Our next question is from Michael Ciarmoli with Truist Securities. Hey, thanks, guys. Tom, I wanted to ask specifically about that 100 a month that was just brought up. One area on that, I mean, are these are you tracking sort of, you know, a pool of employees that you had previously laid off, or are you actually having to go out there and find entirely new talent? I mean, based on your comments on training, it sounds like you're looking for people who previously have not been with Woodward. Does that make it more challenging, or is it a little more balanced? I mean, it seems like that could be a pretty big choke point to achieving the full year goal. Yeah. We have hired back a lot of folks that you know, we had to let go during the pandemic. You know, we are also having to fill in for attrition that came through the pandemic. You know, we're just like a lot of other companies, you know, when we've looked at attrition, we've had in the last few years substantial retirements, you know, and just like the rest of the nation. A lot of, I guess, baby boomers, you know, decided this is a good time to retire. We've seen some of that. In addition to bringing back some of the other members that you referenced, we have been doing that. Now we are as we look into continuing to expand and some of our facilities, especially the ones with the higher growth rates, we are having to train people. That's why I said we're putting dedicated resources. We put in dedicated training facilities. We're working really aggressively on being able to bring people online. It's a big challenge, but I think we've got everything in place to do it. Got it. Perfect. Thanks. Maybe follow up. Yeah. Our next question is from Noah Poponak with Goldman Sachs. Howdy. Good evening. Hi, Noah. What are you expecting the second quarter total company organic revenue growth rate and segment margin to look like compared to the first quarter? Yeah. We usually don't give detailed guidance, but we expect it to be up over the first quarter, and then you know. Okay. Accelerating into the fourth quarter. Just maybe I'm overthinking this, but there's a dynamic where the second quarter of last year was actually, like, a pretty strong quarter in the aerospace business. It was up, you know, 10%-12%, I think, sequentially. That has a bit of a tough compare. It, you know, just back to this whole concept of holding this guidance, it just sort of looks like you'll need to exit the year, you know, with the back half growing 20% on the top line and, you know, the aerospace margins well into the twenties and the industrial margins well into the mid-teens. Are those directionally accurate for where you're expecting 3Q and 4Q to be to get to this full year guide, or am I understating the second quarter in that math? Yeah. The first comment I'd make is the order book supports our growth. You know, we have to get the shipments out. We're confident, you know, I'm particularly answering a question on Aero. On the industrial side, we're seeing good recovery in the order book as well. It's both sides. You can tell that by the, you know, the growth rate that we highlighted. There's no doubt that top line and bottom line accelerate as we hit third and fourth quarter with, you know, the numbers getting substantially higher. You know, without commenting too much, but you're directionally in the right ZIP code for sure is what we have to deliver on. Just as a reminder, I know everybody on the call knows this, but I'm gonna say it anyway, is we have the capacity. Once you get the volume through that capacity, you can get really good leverage on it. You know, we're still coming out of you know, below fiscal year 2019 sales. We are capacitated for higher than this. As those sales come through and we can deliver on them and you know, overcome these COVID disruptions, we're gonna get high leverage. The numbers will improve, similar like you're saying, Noah. Okay. With the supply chain driven or just general disruption, I guess, driven revenue slippage. Is there a net number at this point? Because I think you've had that for a few quarters. I remember the quantification being closer to $30 million in the fourth and third quarter last year. I can't remember it went back further than that. I think that third quarter is when it kind of started. Are you delivering on some of that revenue and then having other revenue disrupted, or do you now have a pretty sizable balance of revenue to flow out? And related to that, I'm surprised there isn't more working capital disruption or sizable working capital needs related to all of that. Yeah. Maybe to give a little more color on the disruption, what we highlighted this quarter, which, you know, occurred more, was the addition of customer delayed COVID shipments as well as Woodward labor disruption. If you look and we said supplier disruption from the previous sequential quarters, it was I think as you highlight $35 million. In this quarter, it was approximately $42 million. We did see an increase. And then the rest of that was customer and Woodward labor disruptions. Have you delivered on the disrupted revenue from Q3 to Q4? Yeah, some of that we have. There's been some, you know, you'd have to go with some that has not gotten out. I would use on our industrial side, we've had some electronics shortages, and we're still working to recover those. Some of that, you know, moved from quarter to quarter. Yes, some of it's moving out. We've had some new supplier disruptions in. You know, we're managing the delinquent suppliers. We've got folks on their site. You know, we previously talked, you know, in the order of a handful, and now we're in the, you know, 20-something plus suppliers that are disrupting us. You know, we've got action plans with all of them. We're seeing some improvements happening. You know, that's the order of magnitude of ones that are really hurting us. Okay. The guided weapons decline that you cited in the quarter, any ability to quantify, you know, how much of that rate of decline was just kind of what's happening in the core run rate in that business at this point versus how much of it was these disruptions? Yeah. Yeah, definitely we got hit by disruptions in the guided weapons. But, you know, just to clarify, one of our bigger programs in the guided weapons is the JDAM, and the current lot buy from the government is down, that we've been kind of communicating to all of you, and that hasn't changed. On top of that, we have seen some supply disruptions. Is it, you know, the 18 that you cited, is it sort of 50/50 budget versus disruption, or is it very different than that? The question I think is sort of around, if I got it right, how much was supplier disruption, how much was just the lower lot buy? Yeah. Exactly, yeah. Um. Yeah, I would say primarily it's gonna be the lower lot buy. Yeah. Disruptions would be something, but it's primarily gonna be the lower- Yeah. Lower lots. Okay. Yeah. We just don't have the number right here to provide, sorry. No. That's directionally helpful. Yeah. Thanks very much. I appreciate it. Welcome. Welcome. Our next question is from Robert Spingarn with Melius Research. Tom, one thing I wanted to ask you about is the 787 and how you're thinking about that given that the rates. Well, first of all, there's been no activity. I wanna get a sense of what your activity has been and then, you know, what the mechanics are when we think about the joint venture with GE, what inventories look like, and now this latest news that this thing's gonna be at low rates for a couple of years. I understand it's maybe not as profitable as aftermarket, but how should we think about that? Yeah. I mean, you've got it. That's in our outlook that we've brought it down. You know, they're still producing a little bit here and there. But what I would say is, yeah, that OE side is gonna be low for the whole fiscal year. Positive 787 utilization in the field is up, and we are seeing aftermarket from that. But no, that's a really unfortunate situation, but it is part of our outlook. Okay. And then how about inventories on that or anywhere else that we should be thinking about? Are you pretty comfortable that inventories are not built up somewhere? You know, with the engine OEMs, you never know. Yeah. We've got a pretty good handle. I don't think there's a lot of built up inventory that is in the system, you know, that isn't already in built aircraft. I mean, as you know, there's a lot of parked aircraft that's been built. I think once they get the line rates up, we'll be flowing pretty quickly with those. That's the best of our knowledge. We're not seeing, like, huge piles of inventory out there. You know, we track you know what we build and reference that to the you know OE rates are what's parked. We can see that. We're pretty in line with all that. I don't believe there's a whole lot of excess in the supply chain. Okay. I have a question, you know, more on the optimistic side, longer term. I wanted to bring a positive question here. Look, you guys, with this authorization, the dividend, you obviously have a lot of confidence in the business. You have very good positions, and we're gonna get this flow of shop visits on the newest narrow bodies, which you've touched on a little bit here. You're gonna be buying back stock over the next couple of years. Is two years from now when the rubber hits the road on just the big flow of neo and LEAP shop visits coming through? What's the year that you're dreaming about? When is the big bow wave of aftermarket- Yeah. Assuming that the recovery goes the way you think it's gonna go? Sure. Yeah, this is a great question. You know, first I wanna highlight is we've got a lot of pent-up demand, you know, for the current generation, particularly for the current A320 CEO, 777, you know, 787, the units that are in the field. You know, those are gonna generate some really nice aftermarket. And if you look at a lot of the engines, you know, whether it's a CFM56 or dash 5 or the V2500, you know, some of those haven't even had their first shop visit, and they're all coming due. So that's gonna propel us in the next few years. Then as we move, you know, we'll talk about our long range plan at the investor day. You know, that's where we're gonna communicate that. Really what you'll see is the aftermarket really starting to pick up through that five-year period. Then really, I have to use a real word, explodes in the five to ten-year period. You know, that's all content we have. That's all coming. You know, that's when it gets really interesting. The hockey stick that we used to talk about. Yeah. You know, the way I look at our business is, you know, we've got, you know, if you took our trajectory, put it, you know, carve out this two-year pandemic pause, you're gonna see something on the order of that coming back. That's what, you know, we're communicating. That's one way to look at it. Yeah. No, I think we shouldn't lose sight of that, and that's why I wanted to bring it up. I appreciate it. Thank you. Yeah. No, thanks for the questions. Yeah. Mr. Gendron, there are no further questions at this time. I will now turn the conference back to you. Okay. Hey, I really appreciate everybody joining us today. Thanks for the questions and, you know, very informed questions. We always appreciate that. I would like to invite all of you to join us at our investor day. It's gonna be in New York City. We're planning to do it in person. We'll also have a virtual element to it. It's gonna be Wednesday, March ninth, and I'll look forward to seeing you there and talking to all of you in person. Thanks for joining us today. Goodbye. Ladies and gentlemen, that concludes our conference call today. If you would like to listen to a rebroadcast of this conference call, it will be available today at 7:30 P.M. Eastern Standard Time by dialing 1-855-859-2056 for a U.S. call or 1-404-537-3406 for a non-U.S. call, and by entering the access code 6258645. 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 ask that you please disconnect your line.