Good morning, everyone, and welcome to this fireside chat discussion with the executive management team of Woodward. I am Noah Poponak, the aerospace and defense equity research analyst at Goldman Sachs, and I will be your host today for this discussion. Before moving ahead, we are required to make certain disclosures and public appearances about Goldman Sachs' relationships with companies that we discuss. The disclosures relate to investment banking relationships, compensation received, or 1% or more ownership. These disclosures are available in our most recent reports, available to you as clients on our firm portals, and disclosures and updates to those disclosures are also available by ticker on the firm's public website. That's gs.com/research/hedge. So with that, it's my pleasure to introduce from Woodward, the CEO, Chip Blankenship, and the CFO, Bill Lacey. Chip is the chairman and CEO, a role he started in May of 2022. Prior to that, built a lot of experience in the aerospace industry, including over 20 years at GE, including in their engine business. And Bill became the Woodward CFO in May of 2023, and also had a long tenure at GE, along with other aerospace and industrial roles. So, gentlemen, thank you so much for your time today and for being with us. Excited to have this conversation with you. And Bill, I know you now also need to provide your cautionary statements. I'll turn it over to you. Yes, Noah, I think we have some similar friends in the company, and I do have a brief cautionary statement. Elements of this presentation are forward-looking, based on our current outlook and assumptions for the global economy and our businesses, more specifically. These can and do frequently change. Forward-looking statements are subject to a number of risks and uncertainties, including the risks we identify in our filings. These statements are made as of today, and we do not intend to update them except as required. Noah, I hand it back to you. Great. Thank you, Bill, so from my perspective, it's a management team of the company that's still fairly new. Call it a blended two years, give or take. We've seen the operating performance and margins of the company definitively improve in that window, so I think, you know, the market wants to hear more about what you've done to drive that, what's left to do, so we'll talk about that. In aerospace, we have strong demand, but certainly some supply side challenges. Woodward, I think, has some pretty unique positions. It's unclear to me that that's all fully understood. Let's talk through that, and then on the industrial side, certainly a lot of focus on China truck, among some other things. One could argue maybe too much focus, given its size as a percentage of the company, but maybe also some confusion around the numbers there, including the last earnings call. So, perhaps part of today can be kind of a level setting there. So with that overview and, and the backdrop of what we want to discuss, let's start in aerospace. And Chip and Bill, let's start by walking us through your content gains. And on the current generation of airplanes and engines, what are the content gains versus the prior generation? Discuss them, size them, and what do they mean for the forward rates of growth in the aerospace business, compared to what you're seeing today? First of all, thank you, Noah, for hosting us and for the opportunity to share progress we're making at Woodward, as well as our views about our company's growth profile. Thanks for making your first question a growth question. We've just about tripled the shipset content on both 737 MAX and A320 versus their predecessors. For the 737 MAX, that equates to around $350,000 of shipset content, 12 components on the LEAP engine versus one small component on the CFM56-7, so big change there. On the A320neo, that equates to around $250,000 per shipset. We also have around 12 components on the GTF engine, versus two to three components on the V2500 and the CFM56-5 engines, which powered the A320 Classic, the predecessor. So the bulk of the content gains are, in fact, propulsion system-related. This high level of content on the MAX and neo drives Woodward OE and aftermarket sales growth long-term. Having significant content on all the engine choices results in a forecast of about five times the service content of the legacy narrow body fleet for Woodward, which is a big gain that should bode well for us well into the next decade. Excellent. And perhaps we could talk a little bit about the nearer-term or sort of real-time activity in aerospace original equipment. Maybe level set us on where you're producing today on the current generation of aircraft. What's the latest you're hearing from the OEMs? What are they pulling? What do they wanna do into the end of the year and into next year? And Chip, I know on the call you commented about the possibility of maybe some inventory de-stock in aerospace original equipment. Curious to kind of follow up, how much of that was, you know, you're really, truly seeing that as a definitive red flag versus, you know, you were just kind of being balanced around all the different things, you know, going on in the sector? Yeah, thanks, Noah, for the opportunity to address this one. On the earnings call, I didn't really directly come at a destocking comment. It was more of a just a statement that inventory is building in the system, and we see ours building. As everyone online knows, the airframe and engine companies have announced production target reductions this year, as well as pushouts of their build rate breaks. A rate break is a planned, stepped increase or decrease in production rate, where the airframer has to align the entire supply chain and prepare for such an activity and stock inventory and prepare to achieve the new rate. All these pushouts, reductions and pushes to the right have been attributed to supplier performance. Woodward is now producing to our customer demand on all platforms, and this is great news for Woodward and our customers. It's taken some heavy lifting to stabilize our supply chain and increase our productivity and capacity to improve our delivery performance. Thanks to our team for delivering such market improvement over these past two years. As I mentioned on the earnings call, and other companies have as well, the aerospace supply chain currently has some elements and players that are out of sync with the airframe demand signal. What this does is it causes certain inventories to pile up of certain components and systems, while there are gaps in other components and systems and supply, that causes the airframer to have, you know, different production rates than they want to achieve. We believe this disconnect is temporary in nature, and because the demand is so solid, based on passenger travel growth and efficiency of the new equipment, we have confidence that the supply chain will align over time. Okay. So my interpretation and read on that, just to, I guess, make sure I have it correct, is, you know, Boeing and Airbus were pulling from the supply chain for higher rates. Clearly, they are ramping to those higher rates slower than recently previously expected, and we've all felt on our side like that was a risk to the OE business of suppliers. Yet, we've seen in a lot of the financial results recently that the OE revenue growth numbers are still pretty good, and that companies are talking about producing at rates that aren't really down from where, you know, you kind of entered twenty twenty-four, and so I guess it sounds like Boeing, especially Boeing, but also Airbus, are pulling from the supply chain because they don't wanna slow the supply chain down because they have so much higher to go. As long as they are able to actually now ramp into the end of 2024 and really make a lot of progress in 2025, and then obviously beyond, they can sort of, you know, thread the needle of, yes, there will be periods where they're moving faster than the supply chain, but not necessarily a huge variance, and everybody keeps growing and eventually just kind of link up somewhere on the path, and then everybody keeps growing from there. That's sort of- Yeah, I think- I guess, the best case. Obviously- Yeah ... there's, you know, there's risk if there's further setbacks. Yeah, I think, Noah, that's a good way to characterize it, and that's kind of what I'm trying to say is, I don't know what the top level of the supply chain will do with their demand signals going forward. But again, that's a management and judgment and risk management kind of decision to make about whether they're willing to keep building some inventory from some suppliers and let that level out over time, or they'll take different actions. And we'll just have to wait and see. We're prepared to meet the demand, and we're currently producing to the demand, and we're ready to manage to whatever the leaders of the supply chain decide to do. Okay, great. That makes a lot of sense. All right, let's maybe move over to the aftermarket side on aerospace. I guess, you know, the question is, today, what's the unit versus the price within the growth rate that you're seeing right now? And how are you thinking about the normalization of unit growth as we recover all of the pre-pandemic air travel? If Boeing and Airbus successfully ramp, does that mean we're retiring things out of the back end of the fleet? And then on the pricing side, we know pricing was... it's a business that always prices well, but pricing was elevated in the, you know, near peak inflation. As inflation has decelerated, how do we expect the pricing to decel? Maybe walk us through those moving pieces in the aftermarket. Yeah, thanks, Noah. The aftermarket, as you've seen, as we've reported it, and others have reported it in the commercial aerospace business, has been performing very well. Passenger demand has been strong, and that's really the linchpin that starts the entire demand equation for all of us suppliers. While the OEMs work to ramp production, this legacy fleet is flying longer than forecast, longer than any of us thought it would, because it has to, based on the production rates for the new equipment. It may even do this through the end of the decade. What we and others are seeing is that with continued utilization of this legacy fleet and the fact that the MRO shops are actually quite full, this related aftermarket business associated with the legacy fleet has probably achieved a plateau. It may hold this level for a while, and we'll just have to wait and see how long that plateau can hold. In this environment, we do see opportunities for continued price realization. And as I indicated in our earnings call, the Woodward LEAP and GTF activity is increasing. In fact, last quarter, year-over-year, that work doubled for us, albeit from a low base, but we anticipate it to continue to increase. And won't be really that meaningful till around fiscal year 2027 for us, but it's an important element of our future growth. You know, the pace of retirements that you brought up, among the legacy fleet, the way we think about that is it's really a combined effect of continued passenger demand, as well as the ramp rate that the OEs achieve. These two factors will, you know, collaborate to decide what retirement rate of the old equipment fits the airline's demand profile. So over time- Okay ... you know, the aftermarket opportunity for Woodward is much larger on the current generation due to the engine content wins you and I talked about just a few questions ago. So we believe Woodward can achieve outsized growth compared to the market in general, as the LEAP and GTF volume picks up. Have you guys ever put any numbers around, or is there an opportunity to put some numbers around the current generation aftermarket contribution as it ramps? You, you just alluded to the year where it starts to really move the needle. It has a very high growth rate right now off of a low base. You know, in that- Yeah, we- Yeah, yeah. If you can take that. So we shared that at our Investor Day, and we showed sort of notional blocks of business from the legacy fleet and the GTF LEAP aftermarket. And where they sort of become equal is sort of in that 2027, 2028, 2029 time frame, depending again on how the airframer rates go and passenger demand, but that's our current forecast is those businesses cross over in terms of content in about that three-year time period, somewhere in there, based on the assumptions. Interesting. Okay. And, you know, Chip, I, I guess you also, on the earnings call, referenced what we've seen from some of the airlines, where they've had some supply-demand mismatch and some pricing challenge. I think, you know, again, people in the market interpreted that as, you know, a warning on your aftermarket in the near term, potentially. How much of that was you're seeing red flags in your aftermarket demand, versus, you know, again, just trying to be balanced on all the things you're seeing in the market? Yeah, those comments were in the balance category, Noah. Thanks for bringing that up. I mean, it's important to remember that even in great markets, sometimes the growth rate can flatten out a little bit and provide a one-quarter or two-quarter, you know, less of a growth rate than the prior sequential quarters, so things can be a little bit lumpy. We love the overall demand curve. We think long term, medium term, even near term, this commercial aftermarket is great business, but we've been posting some pretty high comp numbers year-over-year, and we feel like it's more of a plateau than a continued up and to the right at that previous growth rate. Do you guys have the rough number on how much aerospace aftermarket revenue there is in the current fiscal year? I don't know if you have that, Bill, or not. We- Yeah, Chip. I don't have it right offhand, but yeah, we can get you that. 'Cause I just wanted to make sure I understood the comment previously, is basically you're saying that the LEAP and the GTF themselves will become as large as that number in 2027? The aftermarket the commercial aftermarket has more than just the narrow body legacy fleet in it. So there's what we're talking about really is it's just comparing the narrow body fleet, and that crossover happens in that 2027 to 2029 time frame. So the total aero commercial aftermarket, like I said, has a lot more content than just those elements. Okay, sorry. So that comment is the LEAP and the GTF crossover current narrow body aerospace aftermarket? Yeah. Correct. Got it. Okay. And we could then do some math from there. So that's helpful. Okay. Great, so let's talk about the defense input. You know, we have kind of the crosscurrents of the budget authorization growth rate is sort of decelerating, but the outlays are pretty strong. There's been a gap between outlays and authorization. Curious how that, you know, how that's feeding into the business now, what you think the business does moving forward. You've had this, you know, somewhat sizable exposure to precision-guided munitions. Maybe remind us how big that is today. You know, what are you seeing in terms of order flow in that business? And I guess, you know, when you roll it all up, what kind of growth rate do we expect from defense in the medium term? So Noah, we do in fact expect defense to grow in the near term. You know, as JDAM decline turns around, we've seen over the last several years that, on a negative trend, and we believe it's on the upturn. The growth from that and other defense programs, we think will all become visible again in the near future. There's opportunity in guided weapons, like you referenced, specifically JDAM, SDBs, and AIM-9X. There's still a lot of details to be worked out in these order streams, but they should positively impact Woodward. Just not sure how much and when at this point, though, you know, we think it's possible these programs could contribute quite nicely to growth in FY twenty-five. I'd like to highlight that the F-35, F-15, Black Hawk, and M1 Abrams should also contribute to growth in the near term, so it's not just the guided weapons. These other fixed wing, rotary, and ground platforms, we also think, look like good growth in the near term. For Woodward, we also have sort of a unique opportunity in defense. Our aftermarket opportunity, as I've stated before, is a little bit unique. We were our own obstacle to getting more business there. Our focus on operational excellence has opened up more opportunity for Woodward in this space. We continue to reduce our turn times and improve customer satisfaction, which we intend to use as a platform for growth, actually multi-year growth in this space. And in recent periods, your defense aftermarket growth rate has been quite high. Yes. I guess how much of that is that effort specifically versus just what the end market's been doing? I guess quite a bit of it is a result of that. Noah, we've had some in the engine side that is more related to the market, to your point, but all of our airframe defense aftermarket increase has really been our turn time reduction and output increase from our repair and overhaul facility. Okay, great. All right, let's move to industrial. And I guess, you know, I thought of a million different ways to ask about China On-Highway, but maybe I'll just sort of simply put to you, you know, there was clearly confusion on the call around revenue and margin levels for break-even, non-dilutive, and other moving pieces in China On-Highway. Maybe I'll just open-ended, provide you guys the opportunity to clarify and level set, some of the major aspects of the China On-Highway business. Yeah, Noah, let me take a shot at that. Clearly, there was some confusion on the earnings call, and as I look back at the transcript, I think there's a couple areas that we really should clarify, get some good operational definitions, and establish some key benchmarks. First of all, when we talk about the break-even point for the China On-Highway business, meaning at what point is that business at a zero margin? We're talking about sales levels of around $15 million for the break-even point for our China On-Highway business. The second area that I wanted to take the time to define here is, at what level of sales is China On-Highway not accretive or dilutive to our core industrial business that right now, Noah, is trending around 14%, and that number is $25 million. Now, these are guideposts, rules of thumb. Obviously, in any given quarter, these numbers could fluctuate depending on, you know, the mix of product that is being sold. Also, what is the profit rate, the margin rate for the core industrial business? But again, we think these are good rules of thumb to have, break-even at $15 million, and where it's non-dilutive to the core business, $25 million. You know, the China On-Highway business, Noah, is impactful, but it's a small part of our overall industrial business. The reality is, it is volatile quarter to quarter, but as you smooth out that volatility over the longer period, we have seen this business continue to grow nicely. So we think it's a good business for Woodward and for shareholders that generate cash, that we can pipe that back through the core industrial business as well as aerospace. You know, regardless, Noah, we have to do a better job of providing transparency and clarity in our communications about the China On-Highway business in order to reduce the frustration and the confusion, but really also, and most importantly, so that we can focus the conversation on our core industrial business and our aerospace business, where we do allocate the majority of our resource and our investments. Okay, great. That is helpful. I had those numbers wrong until right there, so appreciate that clarification, and hopefully, that's crystal clear this time. So let's go a little deeper on a few of those pieces. You guys had talked about the effort to make this business and the revenue stream more predictable, less volatile, and you know, I don't know if that's through LTAs or what else you can do, but can you talk a little bit more about that? And has there been any progress made, or is that something that's gonna take quite some time? Yeah, Noah, you know, we have done a lot of work in terms of getting closer to the end market, really working tightly with our customer base. And as a matter of fact, we were able to at least get comfortable with three months of visibility. And so we view that as good progress. However, it's a struggle with the dynamics that impact this area of the business for us to get visibility to sustain predictability much beyond that. However, what we can control is our team that supports this China on-highway business is to create a more resilient supply chain that's also more flexible, make sure that we can narrow our lead times as much as we can, so that when we see these high swings up and the swings down, we can either meet the customer's demand or make sure we don't get stuck with a bunch of inventory and not efficiently use our cash. So it is what it is, and so what we're doing is to try and make ourselves as efficient in this volatile area as we can. Okay, that's good. And I guess, you know, as we're sitting here almost September 1, and we're webcasting, any further clarity on fiscal 4Q? And, you know, whether it's just activity or whether or not it is truly just one quarter of a destocking. Any thoughts on fiscal '25? Yeah. So at our Q3 earnings call, we did guide Q4 to be in the range of $10 million-$15 million. As I stand here today, Noah, it looks like that is trending towards the upper end of that range, which means for the total year, that implies China On-Highway to deliver revenue in the $205 million-$210 million range, which would be a record for that business. As it relates to 2025, and again, we're committed to providing you guys with greater transparency, visibility, and concise messaging, so we will talk a lot about this during our guide on 2025, but as I sit here today and think about how I would model it, I consider a few things. First of all, look at the current secular trends. What's the price of natural gas? How is the spread between natural gas and diesel? What are the freight rates doing? And the development of the China infrastructure to support natural gas trucks, as well as the overall heavy-duty truck market. But also have to remember that there's other factors that come into play that can supersede those tangible trends. So the reality is, it's still unpredictable and volatile as we look out in 2025. However, I do think those trends are favorable. And so I don't think it's right, as I'm thinking about modeling, to model this business at that break-even point that we talked about, Noah, $15 million. I think the right point to peg it to right now is that $25 million number per quarter, where it's not accretive or dilutive to our core industrial business when it's around 14%. So right now, as I stand, I would think about that $25 million number a quarter for 2025. We'll continue to monitor the trends, interact with the market, and we'll be back with an update at our Q4 earnings call on what we think the best way to think about the China On-Highway business for fiscal year 2025. Okay, that's super helpful. So, so $15 million in the Q4, so that will be break-even for that business? That's correct, as we currently talked about, and also again, any quarter, there's some things that can fluctuate it but that's the right takeaway from our discussion. That was, that was sort of like a bad joke, and I guess the... If I look at the spread of diesel versus natural gas right now, it, it's inconsistent with $15 million of revenue, if I just look at the correlation of your revenue to that spread over time, which would suggest there is an inventory destock above and beyond just the underlying demand. But I don't know. Yeah, you know, there— Yeah, I mean, you know, China and their current economy, I think, has a, has a impact on the market. Throughout the year, our customers have really were able to get their stock levels in a much healthier shape. We were able to deliver probably better than they thought we would do. Given what we saw in the economy in China, where their inventory levels are, I do believe that this is them getting things back in line, and we don't, we don't foresee that this will continue. However, it is China On-Highway, so we will stay in touch and keep you up to date. Okay. And the last one here, you know, I hear from people in the market, you know, this is volatile. It is volatile. I also hear it's over. You know, in the, in some of these quarters where we've had higher revenue numbers recently, it's over-earning. And that I dispute because, you know, to me, over-earning is above and beyond normalized over a long period of time. Shouldn't this business grow at a pretty good rate on a multi-year basis as we go very far into the future, right? Three years from now, six years from now, nine years from now, isn't this actually under-penetrated in the total fleet there, where... and then on top of that, they have directives to implement this into the fleet as part of the total overall emissions efforts. And therefore, yes, it can be volatile quarter to quarter, but isn't it? Could you actually make the case that it's under-earning?... relative to its longer term potential, or is that, you know, wishful thinking? Yeah, yeah. You know, about probably 18, 24 months ago, as you looked at the share of natural gas trucks in China in the overall heavy-duty truck market, it made its way up to being about a 10%-15% of the total heavy-duty truck production. In the last 18 to 24 months, we've seen that shift to where natural gas is about 30% of the overall heavy-duty truck market. Now, I'm not sure what entitlement is for this, but we do believe there's room to grow in this area. And again, as I look back historically, we have seen, through the volatility, we have seen the trend be positive. We continue to have, again, limited visibility, but we think that, again, it's been a good business for Woodward and for our shareholders, and we'll see how it continues to play out. Okay. If we take the rest of industrial, you know, I guess anything you guys wanna highlight, opportunities or risks? You know, I know the power gen growth rate's been pretty healthy, marine pretty healthy, oil and gas maybe kind of stable off a bigger year last year. Anything that you think has a significant rate of change one way or the other in the medium term here? Yeah, I think, Noah, one of the strengths of our industrial product portfolio is the breadth of the end markets that we and our customer products serve. We see power gen as the biggest opportunity for growth. That's probably not a surprise, based on all the articles that are out there in the news these days. You know, driven in part by data centers. Data centers drive both standby and steady state demand, but also the needs of the global, you know, power situation to support electrification in developing countries, as well as the energy transition everywhere. This offers growth to our turbine business and to our reciprocating engines, both gas and liquid fuel control systems and services. We focused our value stream lean transformations on SOVs and gas turbine control valves for this very reason, to prepare for this growth that we see and our customers see, by reducing our lead times and increasing our capacity to serve. Oil and gas appears kind of flattish, like you mentioned. Some of our customers are actually up quite a bit in oil and gas, but that's offset by other areas being down. We feel like regulatory actions in some cases, and inaction in others, may dampen the actual natural demand signal in the oil and gas market. Marine has been a good segment for us, like you said, over the past few years. The shipyards are booked solid, and the utilization of the fleet that has Woodward content in it remains strong. Our dual fuel injectors are in high demand to provide alternate fuel capability to our customers' customers that they're demanding. So we like all three of these markets, but they're kind of in a little bit different parts of the cycle right now. Okay. That is helpful. Let's talk about margins, and we'll talk about each segment. But first, just at the total company level, you guys are still pretty new in your seats at the company. We've seen a lot of margin improvement already. Talk about what you've done, how much is still left. I don't know if you quantify it, and what inning you're in. You know, you've talked about the SKU reductions in industrial. Are there still a lot of incremental efforts like that, or are you kind of transitioning to the phase of a more steady, continuous improvement? And specifically on pricing, there's been a lot of examples historically of companies in the aerospace supply chain where there is pricing power, and, you know, a given company or management team is maybe not fully utilizing all of that or getting all of the value out of that, and a new team can discover a lot of latent pricing. Is there a lot of latent pricing in Woodward? So we've made a lot of progress in margin expansion over the last two years, largely by focusing on operational excellence. And as you mentioned, we're still in the early innings of this journey. I don't know whether it's inning two or inning three, but we're not at the halfway point, and we're not at the seventh inning stretch by a long shot. You know, we have numerous value streams under transformation, and we're getting the newer members up to speed, and they're becoming more productive. We've greatly improved our sales, inventory, operations, planning process, which will pay dividends in how we reduce waste in our entire business process. It's been challenging work all the way so far, as any of my teammates can attest. The good news is, though, that there's a significant additional opportunity within reach. We believe we can accelerate our improvement over time as our team learns and we mature our lean operating system. The industrial product portfolio rationalization that you referred to, this was sort of a sprint, and it was very effective. We removed 25,000 SKUs from our product offering, and this, you know, eliminated a ton of waste and improved efficiency in our supply chain, as well as inside our plants. Our focus is now shifted to a disciplined product life cycle management to ensure that we're actively managing product offering across its life cycle in a more sustainable way. I, I guess, Bill, do you wanna talk about pricing for us? Absolutely. You know, when the management team came into place here, it was just after the post-COVID hyperinflation was running rampant, and we were in a position where our LTSAs were not flexible enough to allow us to offset that inflation with pricing, and we did see our margins erode. Pricing became a critical must-do initiative for us, and we took a war room mentality to it. First of all, we worked on our catalog pricing process to make it more nimble, and secondly is we looked at our LTSAs, and we kind of laid out all the LTSAs that were under stress because of the environment. And we calendarized every one of these negotiations and when they were gonna come due, and we took a strategy to make sure that in those negotiations, that we were able to recoup the margin that did erode, and also create some flexibility to not be in the same position, if we saw inflation in the future. Now, based on the results that we've seen in fiscal year 2023 and in what we've seen so far in fiscal year 2024 on pricing, I would say we've been pretty successful in running that play. Having said that, you know, we've been through most of our LTSAs, but in 2025, we still have some that we have to get to. We'll continue to focus on this pricing initiative through our catalogs, through value pricing initiatives, and maintaining our disciplines as we negotiate LTSAs. So we feel that continued focus on pricing, also continued focus on the operational excellence initiative that Chip spoke about, we've made good progress. We feel like there is more to do, and that will carry us to our margin goals and objectives that we laid out in December at our investor day. Excellent. Okay, appreciate all of that detail. Really helpful. Maybe let's talk about where the margins can go in each of the segments. So I guess, you know, in aerospace, the last quarter pre-pandemic was just under 25 at the segment operating level. There were a few, you know, 21 to 22s, a little more consistently just prior to that. You've now made it back to just under 20. You've had a 40% or 50% incremental the last two quarters. You know, I debate, should I go into my model and just punch in 35% incrementals and, you know, you sort of slowly get into the low 20s and kind of hang around in the low 20s? Or is the entitlement of this business higher? I mean, actuations, controls, moving parts, decent amount of aftermarket, pricing power. We certainly know of businesses in the supply chain, well clear of 20% on the segment operating margin with similar characteristics. So I guess, you know, should I just use a 30-35% incremental, or is the entitlement of this business something much higher than what we're at today? Yeah, let me jump in on this, Noah, real quick. First, let me speak to that 24.8%, just under 25% that we saw during that quarter. There's a lot of things that came together positive in that quarter. Some of those items were one-time benefits or not recurring, so I would not have said that was sort of the run rate margin level. It was really still, the run rate was around that 21-22%. Now, I do wanna give the team a lot of credit for the margin expansion that we've seen coming out of COVID. In 2023, the aero business improved margins by 120 basis points. And then, based on our guide for FY 2024, that implies that we'll see about 260 basis points improvement. So, first, we feel very good that we're on track to get to our investor day call of the aero business being at the 20%-22% plus range. And so, Chip, I'm not sure if you wanna add anything else to this point. Sure, Bill, thanks. I'll just like to add that there are not any structural obstacles to achieving margins as good as the best of our peers, Noah, to the point I think you're trying to make there. We'll simply continue to mine the productivity that our lean journey is going to uncover and deliver post-2026. These results will complement the beneficial growth in LEAP and GTF aftermarket that we forecast ramping up in that timeframe. Okay. So the 26, 20 to 22, you know, we're kind of flirting with 20 right now. Still have volume growth ahead, clearly have the LEAP in the GTF shop visits ahead. We're talking about early innings of productivity. So, you know, without putting a timeframe on it, it sounds like you feel like you have the potential to go north of the 22 beyond, you know, whenever you achieve that. Yeah, I think it's fair to say- Yes. Yeah, right? I think it's fair to say, Noah. Okay. And then on the industrial side, you've referenced the 14X China On-Highway, and so I think we all do the math of, you know, let me use 14 for a while, and then figure out how to model China On-Highway. But what should we expect to happen with the 14? I assume you're not sitting still on the 14. What can you do and where can you take the 14, while we then also model China On-Highway? Sure. As I think about the 14% margin, I do wanna take a moment, 'cause we're talking about an industrial business. I know you've covered us, and so you know this industrial business was hanging in that 8%-10% margin range for a period of time. So I do wanna take, give the team credit, for showing a 200 basis points improvement on margins in 2022, as well as another 200 basis points in 2023, getting us to this range of 14%. It's also a testament to those operational excellence initiative that we just got through talking about, and showing that we are making progress, and that they are working. We believe there's plenty of room left in those initiatives, and so we expect our ability to hit our Investor Day guide of this industrial business being in the mid-teens, as being very much in our grasp, and we'll continue to work and push towards that. Okay, excellent. I wanna spend the last fifteen minutes before the end of the hour on balance sheet, cash flow, how you wanna deploy capital. I do have an emailed question from an investor that I think is a good one that's worth clarifying, so I'm gonna. Which is in the aerospace aftermarket. So I'm just gonna jump to that really quickly. And the genesis of the question is, when you were discussing the aerospace aftermarket, you referenced a plateau in some context, and the question is asking: did you mean your aerospace aftermarket business is plateauing in the near term, or that it doesn't grow next year? I interpreted, Chip, your comment there to be referencing specifically the age of fleet, lack of retirement, vis-à-vis Boeing and Airbus inability to deliver, that that dynamic's favorability to the aerospace aftermarket is plateauing. I guess, you know, in a way, we sort of all hope that that's plateauing. Right. Is that all you meant, or did—or maybe just clarify how you meant that. Yeah, that's, that is all I meant. Just there's a natural situation where the MRO shops are full, and the fleet utilization is at its peak that the airlines can utilize for those legacy narrow body aircraft. And so that produces a plateau, which is a great plateau, by the way. We're very excited about that. But there's plenty of other opportunity in our commercial aftermarket business to capture additional shop visits of our LRUs, as well as to take pricing and other opportunities to keep growing that commercial aftermarket business. While we bet on the come on the GTF and LEAP, there'll be additional business for that next year, and that'll play in as well, although, you know, not as meaningfully as it will in the 2027, 2028 timeframe, but we'll have that business growing next year compared to this year. Got it. Okay, so the guidance for this year is now below 100% free cash flow net income conversion. Obviously, there's movement in working capital, but maybe just walk us through the drivers that are pulling it below, and sort of how and when you get back to a 100 or better. Yeah, no, as we laid out on our Investor Day, our objective is to deliver $1.2 billion of cash over the period of 2024 through 2026, and to be greater than 100% free cash flow conversion. Our original guide for 2024 had us right at, slightly below the 100% cash conversion number. And what our current guide sort of hints towards in the midpoint is, as you spoke, we're gonna be lower than that 100% conversion. And the primary driver that pulled us back from that 100%, Chip mentioned at our earnings call, we saw some customer shipments slip to the right. We will still recognize those sales in Q4, but the associated cash slight timing move shifted into Q1. That was the primary driver that caused us to slip below that 100%. In terms of talking about getting back to it, you know, we look at again our operational excellence initiatives as it relates to improving our earnings, but also those initiatives go towards us improving our working capital, specifically inventory. Finally, as we look at these OE build rates continuing to grow, we think all that comes into play to help us get back to that 100%, as well as Noah allowing us to hit those targets that we laid out at the Investor Day of delivering the $1.2 billion. Okay, great. And then maybe talk about your framework for deploying that capital as you generate it. Are we simply looking at, you know, mostly share repurchase, unless acquisition opportunities come up? Have you been buying back stock with this pullback in the stock or not? And what is your appetite to do acquisitions? How do you see the M&A landscape and opportunity for Woodward? Yeah, Noah, let me take the first couple of ones, then I'll pass it over to Chip to talk a little bit more about our acquisitions and our thoughts there. First of all, Woodward has, and we continue to have a philosophy of being disciplined and balanced in our capital deployment framework. We focus on returns. We also want to make sure that we are funding our strategies, and that where we're putting our money aligns with the strategies that we have set up. That creates a lot of optionality for us and some really good opportunities. So as you mentioned, we do have a good track record of returning capital back to our shareholders. Over the last six years, we have deployed about $1.3 billion to our shareholder, $1.1 billion of that being through share repurchases. Acquisitions, we will use it to fill technology gaps, also work with our product offering, and if it help us to open up markets as well as gain access to new customers. Also, in the area of R&D investments, especially those that are related to us, being able to deliver on the next-generation narrow body and enabling us through this energy transition. Finally, we're working through capital CapEx investments, especially we've seen good opportunities and good returns at working on improving our production capability, as well as automation. Chip, I know you've been spending a lot of time in the automation space. Would you wanna jump in here and talk a little bit about what we're seeing there? Sure, Bill. Thank you. You know, in the continuation of our strategic planning process, we're seeing a good number of automation and other productivity projects brought forward that offer attractive returns. We're evaluating these projects against other uses of capital, of course, but we like betting on ourselves, as we did with the Rapid Response Centers, the insourcing efforts, and some of the early automation projects. So I'd say investing in automation will be a priority for us in 2025. Excellent. Noah, I'm sorry, if I just jump back in and talk a little bit about, are we in the market there? You know, again, another key part of our framework is to offset dilution, and you saw that in our Q3. Woodward historically has been a heavy option house, and as a result, there's many members out there with our shares. So in the Q3, you saw us buy about $300 million of shares, which equates to about 1.7 million shares, and that was really to deal with dilution. As we saw record stock prices, and with those options out there, that also created a lot of dilution. Now, when we bought those shares, it was towards the H1 of Q3, so those 1.7 million, we only got credit for about half of that. And so that pretty much just sort of offset the dilution that we saw in the quarter. As we head into Q4, we'll get credit for that full 1.7 million, and so that's why you saw us hold our guide of 62 million. Chip, at the end of Q2, mentioned that we were gonna prioritize share repurchases. We saw, as we just talked about, we did that in Q3, and so in Q4, we had a plan to be in the market. So yes, we have been in the market, buying shares in Q4. Yes, I recall there were questions on the earnings call about the share count math. I guess, you know, every reported period is a weighted average, so anytime you're buying back stock later in the period, you don't reflect the full number for the weighted average of the period. So I assume that was the explanation for the 3Q, kind of sequentially the same, and then if you simply take 4Q, you know, even slightly below 62, you would average 62 for the year because 2Q and 3Q were above 62. That, that's as simple as that, yes. Simple as that. Now, will Q4 be 1.7 less than three Q, or some portion of that because some of that impacted Q3? Yeah, so again, we'll get full credit for the $1.7, and then we have to just look at the stock price, how that moves, and that will also, the dilution there will also impact that share count, but again, we expect it to be in that 62 million range. Okay. So if 4Q is maybe kinda, I don't know, sub 62, maybe closer to 61, that's kind of the exit rate and the entry rate of 1Q 2025. If you're buying back stock in the Q4, if you, you know, absent major other capital calls on whether it's acquisitions or something else in 2025, you know, we could take the 2025 share count to, you know, I don't know, sub... Maybe I'm getting ahead of myself here, but sub, sub 61, I guess. Yeah. You know, we'll obviously get to that in our Q4 guide, Noah, but kind of the way you laid out, it is logical. But again, we've gotta see where that stock price ends up, how that impacts the options and dilution. But I don't disagree with sort of your line of logic there. Yeah, I'd say the one other item would be option exercises. That would be another variable that would- Right ... create full weighted value for the option. So lots of moving parts, Noah. But I think, you know, between the two of you, you kind of put a bound around it. Right. Okay. Okay, great. All right. Did you want the acquisition? Yeah, yeah. Go ahead, guys. Yeah. So I think, you know, we do have an appetite for acquisition. I guess it's all relative, though. In my view, Woodward has historically been quite acquisitive. We completed four major acquisitions between 2008 and 2018, and these brought us our electromechanical actuation business, our servo-hydraulic flight controls business, thrust reverser actuation system, and a large portion of our diesel fuel systems business, making Woodward much more than a fuel control company over that time period. And the thought process that was used over these years in the past is relevant for us today, and we add some refinements to it. We've got a very active business development team constantly identifying opportunities. But first and foremost, we're a controls company. We wanna stay close to this core heritage. We'd like an acquisition to be accretive or at least have a path to it. We're not afraid of a fixer-upper. But, you know, an acquisition has to bring something to the party. For us, it must bring technology, better customer access, open up a new market, or fill a gap in our product offering that's harder to fill organically than it is to acquire. Also, having a high probability of providing a return to shareholder, that's the important sort of underscoring principle. Look, we have a great organic story, so we're being selective and focused on finding assets that will complement and support this organic story and strategy. That makes a ton of sense. And Chip, in your strategic planning ongoing process, are you always evaluating the current portfolio and the, you know, the opposite of acquiring new and the possibility of an asset that would maybe you determine doesn't fit and is a divestiture candidate? Or would you say that's not really part of the picture right now, you're pretty happy with what you have? Yes, we do that, Noah. In fact, we've been introducing more product management discipline into the company over this past year, and we've identified as part of the... part of that portfolio rationalization process in industrial, some product lines that we have divested of or in the process of divesting of. They're small, they're not material or not meaningful, but we're flexing that muscle and making sure that we've got an eye to managing a portfolio that's well-positioned for profitable growth and good returns for shareholders. Okay, great. Well, we're just two minutes prior to the hour, and I have exhausted all of my questions. So let me thank you both again for spending this time with us. I really appreciate it. This was a great conversation. I learned a lot. Always a pleasure to speak with you both. And Chip, I'll turn it back to you if you know, if there's anything we missed that you wanna touch on or any closing comments you'd like to provide. Thanks, Noah. I'll just close with summarizing the strengths of our segments, which are well-positioned now and for the future. Our members have delivered exceptional improvement over the last couple of years as Bill and I both discussed today, and they're energized to continue the trend, I can assure you. In aerospace, we have a strong portfolio for growth. We're on the right customer platforms, and we're cranking up our margin expansion capability, and our productivity trend is promising. Not only that, we see a future mixed tailwind post this 2026 Investor Day outlook that we've shared. In industrial, the energy transition favors both our current and future next-generation products. Our product portfolio is well positioned to grow. We have plenty of opportunity to mine this productivity, and our lean transformation is not only delivering today, but we're learning about more opportunities as we make progress on this journey. So Noah, thanks again for hosting us today, and thanks to all you who joined us online. Thanks, Noah. Thank you so much.