Woodward : 2023 Annual Report

LEADING THE WAY

A L W A Y S I N N O V A T I N G F O R A B E T T E R F U T U R E

2023 ANNUAL REPORT

WOODWARD

SHAREHOLDERS

Woodward built greater resilience and agility in 2023, delivered strong performance in challenging environments, and continued to lead the way on energy control solutions for aerospace and industrial customers.

The company delivered solid growth and ended the year with a strong balance sheet:

$2.9B of revenue, a 22% increase

Adj EPS1 increased 53% to $4.21

Adj Free Cash Flow1 increased 65% to $238M

This year we focused on increasing capacity and output to meet strong demand across the end markets we serve. We made strategic investments in areas such as Rapid Response Machining centers, accelerated training programs, and predictive capabilities to identify and proactively address supply chain disruptions.

We also renewed our focus on our lean transformation and launched our first two deep-dive value stream transformations. We reinforced our commitment to safety by launching the Human and Organizational Performance model. Our work will enable us to initiate several more value stream transformations in the coming year and continue to build competitiveness through operational excellence.

Our members made these things possible through their unwavering dedication to innovation, operational excellence, and customer satisfaction.

We welcomed our new CFO, Bill Lacey, who hit the ground running and is making a positive impact. We thank our entire Board of Directors for their many contributions to our company. We also added two new board members, Tana Utley and Mary Petryszyn, who are both adding tremendous value to our strategy and governance.

We continued our strong tradition of investing in value creation for all stakeholders, including our customers, members, shareholders, and the communities where we operate.

VALUE CREATION FOR CUSTOMERS

Over the past year, our segment leaders and I spent time with our customers to listen, understand their needs, and proactively resolve issues. Our customers' ongoing trust and confidence in Woodward are paramount, and we have been working to recover on all delivery commitments and maintain our leadership position.

In 2023, global passenger traffic recovered to near 2019 levels. Our teams worked diligently to meet demands for current programs and growth platforms, such as LEAP, GTF, GEnx, F-35, 737 MAX and A320neo, while partnering with

customers on solutions for next generation aircraft. We are also continuing to invest in capacity to serve the expected aftermarket growth in the years ahead.

Our Industrial segment experienced growth across its end markets, including transportation, oil & gas, and power generation. This also placed additional demand on the supply chain.

This past year we took necessary measures to improve on delivery times. Our customers know we maintain unwavering commitment to delivering quality products on time, even when conditions test us as they did over the past few years.

We're working in close collaboration with our key suppliers to improve our ability to quickly identify and resolve any disruptions and best serve our customers. We are grateful for our customers' continued partnership and trust in Woodward, and remain steadfast in our commitment to their long-term success.

TALENT DEVELOPMENT

We amplified efforts to make Woodward a talent powerhouse and a great place to work. We expanded training and development for members to further develop their skills and capabilities, set rewarding career paths, and feel a sense of inclusion and belonging. We want every current and future Woodward member to have the opportunity to reach their greatest potential.

In 2023 we expanded collaboration with universities and technical schools for internships and early career programs. This included establishing a dedicated University Relations program. Whenever I talk with students, I feel inspired by their energy and passion to join our mission to innovate for a better future.

CREATING SHAREHOLDER VALUE

Woodward's long-term shareholders recognize that we are an exceptional company. This past year we built upon our long-time legacy of innovation to show resiliency and agility in overcoming challenges in inflation, supply chain disruptions and labor constraints. I believe our countermeasures and learnings will make us stronger.

We started the year in post-pandemic recovery mode and finished strong in the second half as we gained traction on output and margin expansion. We improved productivity, streamlined product portfolios, drove strong price realization, and proactively managed the supply chain. Our teams also delivered on a sharp uptick in demand for our China on-highway gas truck business.

FINANCIAL

HIGHLIGHTS

We returned $177M to shareholders in the year through dividends and share repurchases. We look forward to continuing to deliver strong returns for shareholders. Thank you for investing in Woodward.

SUPPORTING COMMUNITIES

In addition, I'd like to mention the communities where we operate, which are also important Woodward stakeholders. We serve and support them through our ongoing outreach programs, member volunteer efforts, and annual grants through the Woodward Charitable Trust. Contributing to our communities reflects our values and is a rewarding aspect of being part of Woodward.

AN EXTRAORDINARY YEAR

In 2023, we harnessed the power of Woodward's legacy of innovation, while building the next generation of solutions for the energy transition. We worked closely with customers to prioritize and deliver on their critical needs today, while also creating technologies for tomorrow. We embraced lean thinking to empower our members to problem solve and transform value streams. We also delivered on key fi nancial performance targets for the year.

These accomplishments will help us continue to create value for all our stakeholders. Thank you for being part of our journey.

Chip Blankenship

Chairman, CEO and President

	NET SALES		ADJ. EARNINGS PER SHARE1	ADJ. FREE CASH FLOW1
DOLL ARS IN BILLIONS		DILUTED		DOLL ARS IN MILLIONS
$2.5			$2.9	$3.96			$4.21		$427
	$2.4
$2.2			$3.24
					$302
				$2.75
										$238
										$144
'20	'21	'22	'23	'20	'21	'22	'23	'20	'21	'22	'23

1 Adjusted earnings per share and free cash fl ow are non-U.S. GAAP fi nancial measures and are defi ned in our 2023 annual report on Form 10-K

Chip Blankenship	Bill Lacey
Chairman, CEO and President	CFO

LEADING THE WAY // ANNUAL REPORT 2023 // 1

AEROSPACE 2023 HIGHLIGHTS

During 2023, our Aerospace segment continued its leading position in energy control solutions as the markets recovered to near post-pandemic levels. Across our Aerospace operations, we achieved many accomplishments and launched several initiatives that we will fully execute in the coming year.

Notable among these were transformation of our Loves Park, Illinois, and Prestwick, Scotland, sites, which along with capacity across our other sites, prepares us to deliver on continued strong demand for fuel controls and further growth in Maintenance, Repair and Overhaul (MRO) services. Our Aerospace teams delivered on current programs, including LEAP, GTF, GEnx, F-35, 737 MAX and A320neo, and partnered with our customers on next generation technologies, such as the Airbus ZEROe demonstrator for hydrogen-powered aviation.

Across our Aerospace sites, we're also expanding automation capabilities with advanced robotic, Rapid Response Manufacturing, and machine vision technologies. The segment put our lean transformation into action, setting the stage for focused Kaizen activity in fi scal 2024.

In addition, our Aerospace teams have successfully implemented accelerated training programs to get new members up and running, while maintaining product quality and safety.

Ultimately, it was another strong year for our Aerospace team, preparing us to deliver on additional growth in 2024.

INDUSTRIAL 2023 HIGHLIGHTS

2023 was a year of accelerated improvement in our Industrial segment. We began to see positive impacts from our streamlined structure, new segment leadership, supply/ demand planning, and pricing discipline. We navigated continued strong demand, a signifi cant uptick in the China on-highway gas market, supply chain challenges and labor constraints to end the year strong.

We delivered major programs for our Industrial customers across end markets, including power generation, oil & gas, and transportation. We also continued to innovate and collaborate with customers to help them meet their energy

transition goals. In addition, we completed integration of our PM Control acquisition, which supports continued global expansion of our services offerings.

The industrial gas flow value stream transformation is underway reducing lead time and reinforcing members' enthusiasm for problem solving.

Our improvements and accomplishments in Industrial position us well to meet customer demands and realize the full potential of this segment in coming years.

LEADING THE WAY // ANNUAL REPORT 2023 // 3

2023 BOARD OF DIRECTORS

STANDING (from left to right)			SITTING (from left to right)
Ronald M. Sega	Mary D. Petryszyn	David P. Hess
Emeritus Professor and Director, Systems	Former Corporate Vice President,	Former Chief Executive Offi cer,
Engineering, Colorado State University	President Defense Systems,	Arconic Corporation
Eileen P. Drake	Northrop Grumman Corporation	Gregg C. Sengstack
Former Chief Executive Offi cer	Rajeev Bhalla	Chairman, Chief Executive Offi cer
and President, Aerojet Rocketdyne	Former Operating Partner, Cerberus	and President, Franklin Electric Co., Inc.
Holdings, Inc.	Operating and Advisory Company	Tana L. Utley
Charles Blankenship, Jr.	Daniel G. Korte	Former Vice President, Large Power
Chairman, Chief Executive Offi cer	Global Vice President, Aerospace	Systems, Caterpillar, Inc.
and President, Woodward, Inc.	PPG Industries, Inc.
John D. Cohn

President, CrossBorder Strategic Solutions, LLC

LEADING THE WAY

A L W A Y S I N N O V A T I N G F O R A B E T T E R F U T U R E

F O R M 10  K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2023

or

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____

Commission file number 000-08408

WOODWARD, INC.

(Exact name of registrant as specified in its charter)

Delaware		36-1984010
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1081 Woodward Way, Fort Collins, Colorado		80524
(Address of principal executive offices)	[phone]	(Zip Code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $0.001455 per share	WWD	NASDAQ Global Select Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Aggregate market value of registrant's common stock held by non-affiliates of the registrant, based upon the closing price of a share of the registrant's common stock on March 31, 2023 as reported on The NASDAQ Global Select Market on that date: $3,553,994. For purposes of this calculation, shares of common stock held by (i) persons holding more than 5% of the outstanding shares of stock, (ii) officers and directors of the registrant, and (iii) the Woodward Governor Company Profit Sharing Trust, Woodward Governor Company Deferred Shares Trust, or the Woodward Charitable Trust, as of March 31, 2023, are excluded in that such persons may be deemed to be affiliates. This determination is not necessarily conclusive of affiliate status.

As of November 16, 2023, 60,032,056 shares of the registrant's common stock with a par value of $0.001455 per share were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our proxy statement for the Annual Meeting of Stockholders to be held virtually on January 24, 2024, are incorporated by reference into Parts II and III of this Form

10-K, to the extent indicated.

	TABLE OF CONTENTS	Page
	PART I
	Forward Looking Statements	1
Item 1.	Business	2
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	20
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20
	PART II
Item 5.	Market Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
	Securities	21
Item 6.	Reserved	22
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	89
Item 9A.	Controls and Procedures	89
Item 9B.	Other Information	90
Item 9C.	Disclosures Regarding Foreign Jurisdictions that Prevent Inspections	90
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	91
Item 11.	Executive Compensation	91
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
	Matters	91
Item 13.	Certain Relationship and Related Transactions, and Director Independence	91
Item 14.	Principal Accountant Fees and Services	91
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	92
Item 16.	Form 10-K Summary	95
	Signatures	96

Forward Looking Statements

This Annual Report on Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are statements that are deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of management. Words such as "anticipate," "believe," "estimate," "seek," "goal," "expect," "forecast," "intend," "continue," "outlook," "plan," "project," "target," "strive," "can," "could," "may," "should," "will," "would," variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characteristics of future events or circumstances are forward-looking statements. Forward- looking statements may include, among others, statements relating to:

• the impacts on our business relating to the macroeconomic environment, including ongoing global supply chain disruptions, rising labor costs, commodity price fluctuations, tariffs, and material inflation;
• future sales, earnings, cash flow, uses of cash, and other measures of financial performance, including our assumptions underlying our expectations;
• trends in our business and the markets in which we operate, including expectations for those markets, our customers and their business and products;
• expectations regarding demand for our products;
• our expected expenses in future periods and trends in such expenses over time;
• descriptions of our plans and expectations for future operations, including our strategic initiatives and impact of such initiatives;
• plans and expectations relating to the performance of our joint venture with General Electric Company;
• the expected levels of activity in particular industries or markets and the effects of changes in those levels;
• the scope, nature, or impact of acquisition activity and integration of such acquisition into our business;
• the research, development, production, and support of new products and services;
• restructuring and alignment costs and savings;
• our plans, objectives, expectations and intentions with respect to business opportunities that may be available to us;
• our liquidity, including our ability to meet capital spending requirements and operations;
• future dividends and repurchases of common stock;
• future levels of indebtedness and capital spending;
• the stability of financial institutions, including those lending to us;
• pension and other postretirement plan assumptions and future contributions; and
• our tax rate and other effects of the changes in U.S. federal tax law.
• availability of raw materials and components used in our products;
• expectations relating to environmental and emissions regulations;
• effects of data privacy, data protection, and information security regulations;
• our ability to develop competitive technologies;
• our consolidated customer base;
• expectations regarding U.S. Government defense spending and contracting;
• our ability to attract and retain qualified personnel;
• the impact of our ability to protect our intellectual property on our business, financial condition, results of operations, and cash flows; and
• impact of any potential physical or cybersecurity attacks on our operations, business, including our financial condition, operating results, and reputation.

All these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause actual results and the timing of certain events to differ materially from the forward-looking statements include the factors described in Item 1A, Risk Factors. We undertake no obligation to revise or update any forward-looking statements for any reason, except as required by applicable law.

Unless we have indicated otherwise or the context otherwise requires, references in this Form 10-K to "Woodward," "the Company," "we," "us," and "our" refer to Woodward, Inc. and its consolidated subsidiaries.

Except where we have otherwise indicated or the context otherwise requires, amounts presented in this Form 10-K are in thousands, except per share amounts.

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