Okay, we'll move right along. Next up, we are delighted to have Woodward today. Today in attendance, we'll have the Director of Investor Relations, Dan Provaznik, from Woodward. Woodward is based in Fort Collins, Colorado. It manufactures fuel control systems and highly engineered systems for the aerospace and the defense and industrial markets. Woodward has 60 million shares, trades around $162 for almost a $10 billion market cap, with $340 million of net debt for almost a $10 billion enterprise plus enterprise value. Thank you for being here today, Dan, and we'll have a nice discussion. I just to let you know, I got a comment from the audience speaking into the microphone, where we've, I guess, in the back is hard to hear, so I'm gonna keep my microphone close to my mouth. Does this work? I, I- Is this on? I think... Is it good? Is this, is this okay back there? Okay, great. Thank you. Well, Dan, great for you to be here. Woodward's a wonderful company. Maybe tell us a little bit more about Woodward, what Woodward does. Yeah, so Woodward is about 150 years old, and we started with a control or a governor for a water wheel, and now we're doing fuel control systems on both aerospace and industrial applications, and what Woodward does is we're a controls business, a controls company. We do fuel control, air oil management, combustion control, and motion control. We don't want to go very far from that, and so we do that controls piece on both aero applications, commercial and defense, and we do them on industrial applications in both transportation, some applications in transportation, power generation, and oil and gas. That's a nice overview. Maybe let's just talk about, sort of the hot topics, first. China, and I know, we haven't gotten into this yet, but the China on-highway business, the essentially the CNG engines. Can you talk about what's going on in the dynamics there right now? We can sort of maybe just start off with that. Sure. So we do a fuel control system that goes on natural gas engines that are used on heavy-duty trucks in China. We've been in this business for about 15 years. We have a number of customers. Our largest customer there is Weichai Westport. And what happened, the middle part of last year, is there was a share shift that occurred. Previously, you know, just in general, there were about 1 million heavy-duty trucks produced in China on an annual basis. Historically, about 90% of those were diesel, and 10%-15% were natural gas. What happened in the middle of last year is there were a number of factors that kind of caused a share shift, and that went up to about 30% of the share of natural gas, so about 70% diesel, 30% natural gas. A couple of things that we believe drove this is there's a greater more consistent supply of natural gas in China today. China has confirmed their commitment to reduce emissions, and they've always been very long on natural gas to do that. There's a favorable diesel natural gas spread that the natural gas engine is a little bit more expensive, so there needs to be a favorable spread between the two fuel options. And China has continued to invest in their transportation infrastructure for LNG for use in transportation. So all of those kind of came together last year. We saw that share shift, and we saw a business that, for a period of time, was at a very, very low amount from Q1 of 2022 to Q1 of 2023, come back quickly. In the last five quarters, it's been at record levels. And so it's been above $50 million per quarter for each one of the last five quarters. What we recently announced in our Q3 earnings call was our customer said their demand for the upcoming quarter, which is our fiscal Q4, was gonna be between $10 million-$15 million from the highs that we had before, and they were just gonna go through some near-term destocking. So that's what's been going on in that business. It's been. We've seen this resurgence. We've been really working with our customers to try to increase our visibility, increase our understanding of the market, to help us work through the volatility. But this has always been a very volatile business, and just the last, you know, two or three years is a really good example of we went from very low levels, almost zero revenue levels, for about five quarters to record levels, and that transitioned within a quarter. And the one thing I would do is I try to give credit where credit's due, and the team did an incredible job. It's a really small team that manages this business, and they did an incredible job ramping up to these record levels that we saw in a very short amount of time and getting our supply base ramped up to be able to handle it as well. So that's a lot of an increase in production, in demand. Maybe let's go back to the aero story. Obviously, we're seeing in the news right now the criticality of what you do on fuel control with obviously with the 350, which you're not part of at all. But maybe just talk about the fuel control business, maybe some updates on your content wins. You guys had a great run here with this business. Yeah. So Woodward, I would say traditionally, you know, has been a fuel control business, a controls business, like I said, and we do some really critical parts on the LEAP engine currently, which is the only engine option on the 737 MAX. And also, we have. So we're actually on the LEAP engine, both the LEAP-1A, LEAP-1B, and LEAP-1C versions out of GE. And then we also have content on the Geared Turbofan coming out of Pratt. So our preference is the LEAP engine, just because we have more of a systems approach there. We do the fuel metering unit. We do the split control unit. We do a number of different, I think, fuel filters and different actuators that are really critical to the operation of the engine. The fuel metering unit, just for an example, is, there is no backup to it, so it has to work. And that's been our pedigree for a long time, whether it was a hydraulic metering unit or a fuel metering unit. That's our expertise. We have a lot of IP built into that and a lot of history over the years. And so, the fuel control has really been kind of the central part. And then, from about 2008 through 2018, Woodward did four significant acquisitions. Three of them were in the aerospace area. And what that did is it really expanded our content on the different platforms. It helped us. We did an acquisition from MPC. It was a family-owned organization in Northern Illinois that helped us on the flight deck controls, sensors, motors. We also did an acquisition carve out from HR Textron which helped increase our level of activity for hydraulics and then electro- hydraulics as well, so that shift. And then we did an acquisition from GE in, I think it was 2014, where we purchased their TRAS business. It's the thrust reverser actuation system that's critical to used once a flight, but it's what slows you down as you're doing your landing. The cowling opens up, and there's a series of actuators that make that happen, and they have different backups and things like that. Through those acquisitions, we increased our content on the platforms, and so, you know, from the A320ceo to the A320neo, we tripled our content. We have about $250,000 of ship set content per aircraft, and from the 737NG to the 737 MAX, we tripled our content again, and we have about $350,000 of content per MAX. That's a great business. Maybe you can talk about what the OEs have been, as I talked about earlier, what the OEs are doing, about ramp activity. What are you seeing as a supplier to those engines? Yeah, you know, it's a question we get a lot, you know, because you do hear about very stated production rates from Boeing and Airbus, and they have moved a little bit to the right, and keep moving a little bit to the right. We're, on the engine side, in particular, a couple tiers below the airframers. And so our customers would be Pratt & Whitney and GE. And so, you know, they get a little bit disconnected from those production rates because they make choices and decisions on carrying inventory, building spares, and things like that. So what I can tell you is that we are delivering to our customers' demand at this point in time, which has been a big improvement for us coming out of COVID. We, during the supply chain challenges that the whole industry faced, we were not immune to those, and certainly had our challenges, but we have worked very hard over the last two years to stabilize our supply chain, increase the productivity of our labor force, and we are basically on time now with to our customers at this point. Switching to aftermarket, as you said, you're on the Airbus, the GTF. You know, that has yet sort of to see aftermarket, a lot of content in the aftermarket for you guys. When do you expect that to start rolling in? Yeah, for both the geared turbofan and the LEAP engine, you're right, we haven't seen any what we would call meaningful amount. We did note in our last earnings call that we did see our LEAP and Geared Turbofan aftermarket double from 2023 to 2024, albeit on a really low base. And so, what we've had in our investor materials and discussed during our Investor Day in December 2023 was, we're still in the early stages, and where we really see it start to pick up is in kind of the 2026, 2027 time frame. In fact, we noted at that point, during that Investor Day, that in 2028 is our estimate of where we think that our current generation aftermarket will basically be the same size as our legacy generation aftermarket. That sort of inflection point happens in 2028, and then the gap just really widens from there as the current generation, the MAX, the neo, the 787, really start driving higher levels of aftermarket at that point. Can you maybe talk about the legacy fleet a little more? You know, how has that changed now, you know, post-COVID, retirements delayed, these things staying online longer? Could you sort of talk about the legacy fleet and those dynamics? Sure. From the legacy fleet, just looking at kind of narrow body, you know, we didn't have any engine content on the CFM56-7, which was the only option available on the MAX. So our legacy fleet really is coming from the A320ceo, the V2500, and the CFM56-5 engine, and what we're seeing is we have actually a larger kind of installed base now than we had in 2019, and so, as the airframers are behind on the current generation, what we're seeing is they're flying the legacy fleet longer and harder than anybody thought at this point. And what we're seeing is, it has peaked, and rather than dropping off, we're anticipating in others that it's gonna just plateau for a period of time, probably for the next four or five years, until the production gets back up to speed on the MAX and the neo as the replacement. Our legacy aftermarket is doing really well. We've spent the last couple of years, you know, climbing out of the kind of the pandemic hole, getting air traffic back up to normal, the pre-COVID levels or 2019 levels. We're basically there, and so now, you know, after a number of years of generally quarterly double-digit growth in our aftermarket, driven by that legacy fleet, we think it's kind of at its peak, and it's gonna plateau. There'll be some retirements that'll occur, as the production increases on the MAX and the neo. We think that'll largely be offset by price increases over that same time frame. And so we think that legacy piece is kind of peaked, and for us, is gonna plateau or stay at about this level for the next four or five years. Not a bad spot to be in. Switching to defense, you're the guided weapons business. You could maybe update us on the JDAM. I know there's been a lot of issues there with, you know, with obviously, you know, orders, but maybe you could walk us through that. Sure. So, you know, in our defense business, one piece of it is what we call guided weapons. It includes three different products. It's the JDAM, as you mentioned, the Small Diameter Bomb, and the AIM-9X missile, which I think is the Sidewinder. Those came to us through an acquisition back in, you know, 2009 from HR Textron, and we've done—they've done really well. What we have seen is the JDAM program, as some of the conflicts ended, mainly Iraq, Syria, Afghanistan, the level of demand for JDAM declined, as they weren't, as it wasn't being used as frequently. And so we went from some really peak levels, and over the last five years roughly, have seen a decline every year since. In 2024, we were expecting to be the trough, kind of the very bottom point, and then it would just flatten out from here. Interestingly enough, then in late May, the Boeing and the Air Force signed up to $7.5 billion IDIQ related to JDAM. So we think this will definitely be positive for our JDAM business. We're the sole supplier of the back half, the actuation piece that does the guidance component. We're waiting to see what the details are. So, you know, with that IDIQ, it was an indefinite quantity, indefinite time. They're still working out delivery schedules, quantities, pricing. And so we're waiting to get orders to hear from Boeing specifically on kind of what the order pattern will be, but we think it will definitely be a positive for us going forward. So ironically, after ramping it down after five years, we're potentially gonna be ramping it back up and working with our supply base to get them back up to higher levels of quantities than we had been predicting. Is there any potential demand, or is there already demand from, obviously, the geopolitical volatility in Eastern Europe and Israel? Is any of that coming from that? I think some of it, certainly from the conflict in Israel, is. There is some demand that's being driven off of that. I don't know that there's a lot out of Ukraine. These are gravity-based bombs, so you really have to control the airspace, and I don't think that really exists in Ukraine at this point. They have been used in the conflict in Israel, and I think we are seeing some levels of demand related to that. As you know, some of the other programs, you're on quite a few military aircraft. Could you just give us an update on, obviously, F-35, F-15, the Black Hawk, and then some of the ground combat vehicles? Yeah. So, you know, we're, as you mentioned, we're on a lot of good, long-lasting programs that have been around for a while. They have a really good installed base that feeds the aftermarket. You mentioned some of them, the F-35, the F-15, the Apache, the Black Hawk, the Sea Stallion, the T-7 Trainer, the KC-46 refueling tanker. And then we're also on, as you mentioned, we have some components on the M1 battle tank, which had been declining as well for a number of years, but there's been a lot of increased interest. I think we've seen orders, or the M1 has seen orders driven from Poland, Taiwan recently that have been announced as well. So all of those programs are doing well. We're continuing to excited about the... They've been talking about increasing the production level on the F-35. The F-35 is, was limited to roughly about, it had a capacity of about 110, 120 a year, and I think they've been looking at expanding that based on increased demand. It'll take a while for that to come into, to be put into place, but we're seeing a lot of opportunity there. And then on the military side, I believe for the AH-64 Apache and the UH-60 Black Hawk, there's a new engine that's coming out. They're going from the T700 to the T901. So we're excited about our opportunity that that offers us there. And so, yeah, the military side is doing well. It's not a, you know, we definitely see the commercial side of our aerospace business growing at a faster pace, but we do have a commercial business that performs well, and it's a good way for us to bring technology to market, to look for commercial applications for that technology. And so it's served us really well, but it is only about 30% of our total aerospace business. And then what about the aftermarket piece for the defense business? What can you give us an update there? Yeah. We, we've seen some really good growth recently. The last couple of quarters, double-digit growth, kind of mid-teens, and that's really been driven off of easy compares. So back in early 2023, our Aftermarket organization and our defense was not performing well. We were having supply chain problems, and we were having our own internal execution issues. And we really focused in 2023 on improving that, and so we're back to the level that we should be performing at, which is roughly about $60 million a quarter. And we think with continuing to work on improvements in there, in that organization from a productivity standpoint and from an efficiency standpoint, that we'll have some additional capacity that will allow us to pursue additional opportunities and additional work. So we're, we've seen a lot of improvement, and that's, you know, getting back to where it should be, and now we're looking at kind of some incremental growth going from here. We've heard a lot of comments on supply chain from other presenters today. What's your view on the supply chain? Obviously, your critical component, and what are you seeing as far as going down range and then for your people that are, you know, supplying you? Yeah. So what we've seen is, you know, we were, as I mentioned earlier, there were the supply chain challenges that were in early kind of 2021 or 2022, coming out of the pandemic. We were certainly not immune to that. And what I would say is we really benefited from. We had a change in leadership. Our Tom Gendron and our longtime CEO retired and Chip Blankenship joined Woodward, and Chip had a an extensive operations background. And so if ever there was a story of kind of right guy at right time, it would be Chip joining Woodward, right? And we were in the middle of all of that supply chain challenges. And so we've done a number of things that have stabilized our supply chain. It's not fixed, but it's pretty stable. We've been forward deployed at a lot of our suppliers that were having issues. And what we found is having Woodward people there, helping them through those problems, is we were also able to identify issues way earlier and actually put into place a mitigation or a proactive plan to resolve them, as opposed to, you know, suddenly your supplier calls and says, "I know I was supposed to deliver 100 this week, but I'm only delivering 10." So now we're identifying those issues six months in advance and are able to work to resolve them. And that's worked extremely well. The other thing that has been really key to us stabilizing our performance and improving our performance is we spent about $10 million of capital on to build some Rapid Response Machining centers. So Woodward is a world-class machining center, but we do buy a lot of machine components. This was dedicated capacity that if we saw a supplier that was falling behind and it was a machine part, we could. The goal was we could move it in-house within two weeks and produce it ourselves for a period of time until that supplier kind of got back on their feet, and we got them back on track. That has been key to our a lot of our improved performance, as we have run thousands of parts through these Rapid Response Machining centers. There's four of them around the U.S., and that is what it's allowed us to do: maintain continuity of supply. And just ensuring that we've got a good regular flow through, which is the most optimal production process, as opposed to batching it and falling behind. And so we've seen a lot of improvement again in our performance related to the Rapid Response Machining Centers. They've performed really, really well. I guess along that line, speaking of additional capacity, how do you view, you know, there's obviously going to be a huge ramp coming here in 2025, 2026, 2027, 2028. How are you prepared to handle this large ramp? Yeah, on the, you know, specifically, you know, on the aerospace side, related to the content wins on the, the, the Geared Turbofan and the LEAP engine, you know, when we won all of that business, we had a, a moment where we realized we were gonna have to produce it, and we had never produced at volumes that high. And so about 10 years ago, we recapitalized the company, meaning we built three new campuses, renovated one for the aerospace side, and made. It was an investment of about $600 million that we did roughly back then, that we self-funded through our own annual cash flow. We didn't borrow a dime to do it. And so all of that capacity is in place. So as we look forward, at least, you know, at least for the next five years, we believe we have the physical facilities and the equipment capacity to perform at, and produce at those higher rates. We're only running a partial second shift at this point, so it would be a labor component of adding a full second shift, or a third shift. And then, so that would allow us to ensure we hit that growth, and production increases. Another area that we're looking at as a growth enabler for us is automation. So when we opened our... The primary campus that's dealing with the engine content, it, or what we call our Rock Cut facility in Rockford, Illinois, we designed and built it from the ground up and started, over 10 years ago, with a certain level or a fair amount of automation to produce at the volume that we were gonna have to. We're looking at increasing that level of automation as we grow, and it's primarily, as I mentioned, a growth enabler. It's a good quality aspect as well. But as we look at the level of growth, and I talked about adding, you know, a full second shift, as we look out 10 years, and these are just hypothetical numbers, right? Woodward might be. We're about 9,000 members today. We may say we may have to add, you know, 5,000 people to hit the level of growth. We're saying we don't know where we're gonna find those in the markets that we're in. We just spent the last couple of years, you know, getting hiring and the labor force back on track. Rather than having to grow that level, we believe that we can grow at a smaller number of people from a people perspective, but through automation, we can enable a lot of that additional growth. We've spent a lot on automation. It's been a big focus of Chip since he joined about trying to automate as much as we can because as he says, you know, "Machines don't take vacations, they don't call in sick, they produce all the time," and we can be more efficient in how we run through a lot of our products. And we've actually done some really cool things on innovating different processes that were repetitive that caused some sometimes repetitive injuries. We've been working with vendors on figuring out how to automate those to make it safer for employees, we get better throughput, and it's just a more constant flow. It seemed like your systems and your components would be perfectly aligned for that. Highly engineered, very, you know, very, very precise, be good for automation. Maybe I'll take a question from the audience. Sir? Hi. From what countries, principally, do the vendors for the automation equipment tend to come from Japan, maybe, or where, where? I think a lot of our vendors are primarily from the U.S., is my understanding. Anybody else? I'm sorry. Okay. Maybe we talk about margin expansion, price capture. How have you gone to market, and how is that, you know, that conversation gone with your customers? I'll deal with the price one first. Nobody likes a price increase, but we've also been in a really unusual environment, and that was as Chip joined, it was a big focus of his, because he joined, you know, not only during the supply chain, the middle of the supply chain challenges, but also, and when we were experiencing kind of hyperinflation of, you know, up to 8%-9% in that time frame. And so, he put a really big focus on what he calls building commercial muscle. And so we've been very successful. We started this journey, you know, kind of in late 2022. And, you know, we had several quarters in 2023 where we had 8%-9% year-over-year price realization. We had that for the first couple of quarters this year, and I think it was roughly 7% in our last quarter that we announced Q3. So we've been very successful in increasing and raising prices to recover inflation that had been experienced, but also to ensure that we're, our prices reflect the value we bring to our customers. That's been a big focus of Chip's. And so we've been very successful in increasing price to help expand margins, and we really view the price increase aspect as part of our falling underneath our op- what we call operational excellence umbrella. 'Cause operational excellence really isn't just on the production side, it's on the commercial side, it's in the back office side, and so we've been. It's just one element of that effort. And so we've been very successful in price. It's definitely been a contributor to margin expansion. In both our aerospace and industrial business, we've seen margins expand. On the industrial side, if you just for comparison perspective, if you take out the China on- highway business, for the last several quarters, we've talked about that the core industrial business has been performing at a 14% margin, which is a 200 basis point improvement of where it was in 2023, and 2023 was a 200 basis point of where it was in 2022. In two years, we've seen a 400 basis point improvement in the core industrial margins, and our aerospace margins improved from 2022 to 2023, 120 basis points. And with our latest guidance that we've provided for 2024, that will improve about 260 basis points. We've guided to approximately 19%, for 2024, and that's about a 260 basis point improvement year over year. That puts us well on pace to hit our targets that we provided our last Investor Day, for 2026. We were targeting industrial margins of mid-teens, and so we're well on the way and comfortable with that target still. And on the aerospace side, we guided to 20%+-22%+ for aerospace margins in 2026. We're approximately 19% in 2024 is what we've guided to, and we think we're well on the path to get to that 20%+-22% +. Chip and your team have done really a fabulous job with that. Like, listening to Chip talk about his lean manufacturing skill set. Maybe just lastly, we could just briefly go over capital allocation priorities. I know you guys have invested a lot in R&D. Obviously, M&A has been going on. How do you focus, how do you look at capital return to shareholders and where, how to invest? Yeah, you know, our leadership team and our Board, you know, their approach to capital allocation is a balanced and disciplined approach. We are looking, you know, as we generate cash, we're looking at the opportunities that are available, and we look at what's gonna generate the highest returns. And we have a whole list of options that are available. As you mentioned, and I mentioned earlier, automation, working on our investing in our production facilities to make them more efficient and more productive. Continuing R&D investment. You know, we've had a couple of announcements over the last couple of years, where we're starting to work with some of the airframers on the next generation of aircraft. It probably won't be here until 2035, 2040, but the R&D has already started. We recently announced that we were selected to work with Boeing and their and NASA on their Transonic Truss-Braced Wing thin wing program doing actuation, so we're excited about that. M&A is something that we always look at. I mentioned that we did four acquisitions over a 10-year period, 2008 to 2018. We haven't done an acquisition lately. We're pretty picky. You know, first, we're a controls company. We're not looking to go far from that. We have to see a path to accretion or accretive or a path to accretion. We're not afraid of a fixer-upper, but we have to see how we're gonna get there. We're also. It has to have a strategic element. It has to bring technology. It has to bring fill a gap in technology or product offering, or customer presence. Has to fill kind of something like that to bring to the table. So we just haven't found an asset that's met that. We've been evaluating hundreds of assets over the last six years. We just haven't found any that met the criteria. The good thing is we have a great organic story, and so we're looking at things that will complement that organic story. And then lastly, returning capital to shareholders. Over the last six years, Woodward's returned $1.3 billion to shareholders. We've done about $1.1 billion of that has been through share repurchases and about $250 million through dividends. So we that's part of our capital allocation strategy. We've been pretty successful at it. We did a $300 million share buyback in Q3 of this last year, or Q3 this last quarter, excuse me. It's definitely part of our process, and we've been pretty successful in doing that over the years. It's a great story, easy story to tell. Very well done, Dan, and congratulations on your team and Chip. Hope to have you back next year. Thank you so much. Awesome. Thanks for, thanks for having us. Appreciate it.