Woodward : Second Quarter 2024 Press Release

Contact: Dan Provaznik	NEWS RELEASE
Director, Investor Relations
Woodward, Inc.
970-498-3849
1081 Woodward Way
[e-mail]
Fort Collins, CO, 80524, USA

Woodward Reports Second Quarter Fiscal Year 2024 Results

Raises Full-Year Guidance

Fort Collins, Colo., April 29, 2024 - Woodward, Inc. (NASDAQ:WWD) today reported financial results for its second quarter of fiscal year 2024.

All amounts are presented on an as reported (U.S. GAAP) basis unless otherwise indicated. All per share amounts are presented on a fully diluted basis. All comparisons are made to the same period of the prior year unless otherwise stated.

Second Quarter Overview

• Net sales were $835 million, compared to $718 million, an increase of 16 percent.
• Net earnings were $98 million, or $1.56 per share, compared to net earnings of $36 million, or $0.58 per share.
• Adjusted net earnings1 were $101 million, or $1.62 per share, compared to adjusted net earnings of $62 million, or $1.01 per share.
• Net cash provided by operating activities was $144 million for the first half of fiscal 2024, compared to $40 million. Free cash flow1 for the first half of fiscal 2024 was $88 million, compared to negative $4 million. Adjusted free cash flow1 was $90 million for the first half of fiscal 2024, compared to negative $1 million.

"Our focus on operational excellence continues to enable significant sales growth and margin expansion, thanks to the efforts of all our members," stated Chip Blankenship, Chairman and Chief Executive Officer. "In Aerospace, both original equipment and aftermarket demonstrated strong growth, and our Industrial segment benefited from growth of our China on-highway business and strong demand in power generation.

"Our improving operational performance allows us to capitalize on robust demand for Woodward products and services across both aerospace and industrial markets. Based on these improvements and better visibility, we are raising certain aspects of our full-year guidance. As we drive profitable growth, operational excellence, and innovation, we remain well positioned to deliver long term shareholder value."

Second Quarter Company Results

Net sales for the second quarter of fiscal 2024 were $835 million, compared to $718 million, an increase of 16 percent.

Net earnings were $98 million, or $1.56 per share, for the second quarter of 2024, compared to $36 million, or $0.58 per share. Adjusted net earnings for the second quarter of 2024 were $101 million, or $1.62 per share, compared to $62 million, or $1.01 per share.

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EBIT1 was $131 million for the second quarter of 2024, compared to $53 million. Adjusted EBIT1 was $135 million for the second quarter of 2024, compared to $87 million.

The effective tax rate was 19.1 percent for the second quarter of 2024, compared to 11.8 percent. The adjusted effective tax rate1 for the second quarter of 2024 was 19.3 percent, compared to 17.8 percent.

Segment Results

Aerospace

Aerospace segment net sales for the second quarter of fiscal 2024 were $498 million, compared to $437 million, an increase of 14 percent.

Commercial aerospace sales increased significantly, driven by increased aircraft utilization as a result of continued growth in passenger traffic, and price realization. Overall defense sales grew modestly.

Segment earnings for the second quarter of 2024 were $98 million, compared to $73 million. Segment earnings as a percent of segment net sales were 19.8 percent for the second quarter of 2024, compared to

16.8 percent. The increase in segment earnings was primarily a result of higher volume and net price realization.

Industrial

Industrial segment net sales for the second quarter of fiscal 2024 were $338 million, compared to $281 million, an increase of 20 percent. The increase in Industrial segment net sales was driven primarily by growth in transportation, particularly in the on-highway natural gas truck business in China, as well as strong sales in power generation and price realization, partially offset by decreased oil and gas sales.

Industrial segment earnings for the second quarter of 2024 were $65 million, or 19.3 percent of segment net sales, compared to $38 million, or 13.4 percent of segment net sales. The increase in Industrial earnings was a result of higher volume, largely due to the heightened demand for our China on-highway business, net price realization, and operational improvements including increased output and efficiency gains.

Nonsegment

Nonsegment expenses were $33 million for the second quarter of fiscal 2024, compared to $58 million. Adjusted nonsegment expenses1 were $29 million for the second quarter of 2024, compared to $23 million.

Year-to-Date Results

Net sales for the first half of 2024 were $1.62 billion, compared to $1.34 billion. Net earnings for the first half of 2024 were $188 million, or $3.02 per share, compared to $65 million, or $1.07 per share. Adjusted net earnings for the first half of 2024 were $191 million, or $3.07 per share, compared to $91 million, or $1.50 per share.

The effective tax rate was 18.6 percent for the first half of 2024, compared to 9.5 percent. The adjusted effective tax rate for the first half of 2024 was 18.6 percent, compared to 14.5 percent.

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Aerospace segment net sales for the first half of 2024 were $958 million, compared to $833 million. Aerospace segment earnings for the first half of 2024 were $177 million, or 18.5 percent of segment net sales, compared to $129 million, or 15.5 percent of segment net sales.

Industrial segment net sales for the first half of 2024 were $664 million, compared to $504 million. Industrial segment earnings for the first half of 2024 were $132 million, or 19.9 percent of segment net sales, compared to $49 million, or 9.7 percent of segment net sales.

Nonsegment expenses were $59 million for the first half of 2024, compared to $83 million. Adjusted nonsegment expenses for the first half of 2024 were $55 million, compared to $48 million.

Cash Flow and Financial Position

Net cash provided by operating activities was $144 million for the first half of 2024, compared to $40 million. Payments for property, plant, and equipment were $56 million for the first half of 2024, compared to $44 million.

Free cash flow was $88 million for the first half of fiscal 2024, compared to negative $4 million. Adjusted free cash flow was $90 million for the first half of fiscal 2024, compared to negative $1 million. The increase in free cash flow and adjusted free cash flow was primarily due to increased earnings, partially offset by higher capital expenditures.

During the first half of fiscal 2024, $28 million was returned to stockholders in the form of dividends.

Total debt was $791 million at March 31, 2024, compared to $859 million at March 31, 2023. Debt-to- EBITDA1 leverage at March 31, 2024, was 1.2 times EBITDA, compared to 2.2 times EBITDA at March 31, 2023.

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Fiscal Year 2024 Guidance

Based on visibility into the third quarter demand for the China on-highway natural gas truck business and anticipated improved operational performance in the second half of fiscal 2024, we are raising certain aspects of our full year guidance.

		Woodward, Inc. and Subsidiaries
		Revised Guidance
	(In millions, except per share amount and percentages)
		Prior	Revised
		FY24 Guidance issued on	FY24 Guidance issued on
		January 29, 2024	April 29, 2024
Total Company
Sales	$3,150-$3,300			$3,250-$3,350
Adjusted Effective Tax Rate	~21%			~20%
Adjusted Free Cash Flow	$300 - $350			$325 - $375
Capital Expenditures	~100			No change
Shares	~62			No change
Adjusted EPS	$5.00-$5.40			$5.70-$6.00
Segment Data
Aerospace
Sales Growth		Up 10% to 14%	Up 12% to 14%
Segment Earnings (% of Sales)		18% to 19%	No change
Industrial
Sales Growth		Up 8% to 10%	Up 13% to 15%
Segment Earnings (% of Sales)	14% - 15%			17% - 18%

Conference Call

Woodward will hold an investor conference call at 4:30 p.m. ET, April 29, 2024, to provide an overview of the financial performance for the second quarter of fiscal year 2024, business highlights, and outlook for the remainder of fiscal 2024. You are invited to listen to the live webcast of our conference call, or a recording, and view or download accompanying presentation slides at our website, www.woodward.com2.

You may also listen to the call by dialing 1-800-715-9871 (U.S. domestic) or 1-646-307-1963 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 2819144. An audio replay will be available by telephone from 7:30 p.m. ET on April 29, 2024 until 11:59 p.m. ET on May 13, 2024. The telephone number to access the replay is 1-800-770-2030 (U.S. domestic) or 1-609-800-9909 (international), reference access code 2819144.

A webcast presentation will be available on the website by selecting "Investors/Events & Presentations". The call and presentation will remain accessible on the website for 14 days.

About Woodward, Inc.

Woodward is the global leader in the design, manufacture, and service of energy conversion and control solutions for the aerospace and industrial equipment markets. Together with our customers, we are enabling

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the path to a cleaner, decarbonized world. Our innovative fluid, combustion, electrical, propulsion and motion control systems perform in some of the world's harshest environments. Woodward is a global company headquartered in Fort Collins, Colorado, USA. Visit our website at www.woodward.com.

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Cautionary Statement

This press release contains forward-looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995 that involve risks and uncertainties. These forward-looking statements include, but are not limited to, our prioritization of growth, operational excellence and innovation, including to the outcome of such efforts on our long-term success and shareholder value; demand for our products and services and our ability to capitalize on such demand, trends in our markets and statements regarding our business and financial guidance for the remainder of fiscal year 2024, including our guidance for sales, adjusted earnings, adjusted earnings per share, segment sales growth, segment earnings as a percent of sales, adjusted effective tax rate, adjusted free cash flow, capital expenditures, and diluted weighted shares outstanding, as well as our assumptions and expectations regarding our guidance. Factors that could cause actual results and the timing of certain events to differ materially from the forward-looking statements include, but are not limited to: (1) global economic uncertainty and instability, including in the financial markets that affect Woodward, its customers, and its supply chain; (2) risks related to constraints and disruptions in the global supply chain and labor markets; (3) Woodward's long sales cycle; (4) risks related to Woodward's concentration of revenue among a relatively small number of customers; (5) Woodward's ability to implement and realize the intended effects of any restructuring efforts; (6) Woodward's ability to successfully manage competitive factors including expenses and fluctuations in sales; (7) changes and consolidations in the aerospace market; (8) Woodward's financial obligations including debt obligations and tax expenses and exposures; (9) risks related to Woodward's U.S. government contracting activities including potential changes in government spending patterns; (10) volatility with respect to the China on- highway natural gas truck market; (11) Woodward's ability to protect its intellectual property rights and avoid infringing the intellectual property rights of others; (12) changes in the estimates of fair value of reporting units or of long-lived assets; (13) environmental risks; (14) Woodward's continued access to a stable workforce and favorable labor relations with its employees; (15) Woodward's ability to manage various regulatory and legal matters; (16) risks from operating internationally; (17) cybersecurity and other technological risks; and other risk factors and risks described in Woodward's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended September 30, 2023, any subsequently filed Quarterly Report on Form 10-Q, as well as its Quarterly Report on Form 10- Q for the second quarter ended March 31, 2024, which we expect to file shortly, and other risks described in Woodward's filings with the Securities and Exchange Commission.

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Woodward, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited - in thousands, except per share amounts)

		Three Months Ended March 31,		Six Months Ended March 31,
		2024			2023			2024			2023
Net sales	$	835,343		$	718,214		$	1,622,073		$	1,336,833
Costs and expenses:
Cost of goods sold		600,954			559,149			1,183,335			1,051,812
Selling, general, and administrative expenses		81,447			75,578			155,958			138,765
Research and development costs		36,465			37,777			67,259			66,411
Restructuring charges		-			5,172			-			5,172
Interest expense		11,530			12,845			22,966			23,987
Interest income		(1,293)		(508)		(2,766)		(874)
Other (income) expense, net		(14,384)		(12,040)		(35,023)		(20,430)
Total costs and expenses		714,719			677,973			1,391,729			1,264,843
Earnings before income taxes		120,624			40,241			230,344			71,990
Income taxes		23,068			4,730			42,744			6,873
Net earnings	$	97,556		$	35,511		$	187,600		$	65,117
Earnings per share amounts:
Basic earnings per share	$	1.61		$	0.59		$	3.12		$	1.09
Diluted earnings per share	$	1.56		$	0.58		$	3.02		$	1.07
Weighted average common shares outstanding:
Basic		60,427			59,807			60,223			59,736
Diluted		62,365			61,227			62,106			61,083
Cash dividends paid per share	$	0.25		$	0.22		$	0.47		$	0.41

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Woodward, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - in thousands)

			March 31,			September 30,
			2024			2023
Assets
Current assets:
Cash and cash equivalents	$	316,932	$	137,447
Accounts receivable		831,777			749,859
Inventories		580,377			517,843
Income taxes receivable		32,816			14,120
Other current assets		50,072			50,183
Total current assets		1,811,974			1,469,452
Property, plant, and equipment, net		921,355			913,094
Goodwill		796,706			791,468
Intangible assets, net		443,414			452,363
Deferred income tax assets		58,911			58,550
Other assets		333,899			325,276
Total assets	$	4,366,259	$	4,010,203
Liabilities and stockholders' equity
Current liabilities:
Short-term debt	$	141,300	$	-
Current portion of long-term debt		699			75,817
Accounts payable		258,670			234,328
Income taxes payable		54,242			44,435
Accrued liabilities		236,944			262,616
Total current liabilities		691,855			617,196
Long-term debt, less current portion		649,039			645,709
Deferred income tax liabilities		135,022			132,819
Other liabilities		560,930			543,490
Total liabilities		2,036,846			1,939,214
Stockholders' equity		2,329,413			2,070,989
Total liabilities and stockholders' equity	$	4,366,259	$	4,010,203

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Woodward, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

			Six Months Ended March 31,
			2024			2023
Net cash provided by operating activities	$	144,118		$	40,150
Cash flows from investing activities:
Payments for purchase of property, plant, and equipment		(56,301)		(44,046)
Proceeds from sale of assets		51			199
Proceeds from business divestiture		600			-
Payments for business acquisition, net of cash acquired		-			878
Payments for short-term investments		(3,723)		-
Proceeds from sales of short-term investments		9,732			7,733
Net cash used in investing activities		(49,641)		(35,236)
Cash flows from financing activities:
Cash dividends paid		(28,327)		(24,537)
Proceeds from sales of treasury stock		43,087			14,067
Payments for repurchases of common stock		-			(26,369)
Borrowings on revolving lines of credit and short-term borrowings		1,539,100			1,031,800
Payments on revolving lines of credit and short-term borrowings		(1,397,800)		(968,100)
Payments of debt financing costs		-			(2,236)
Payments of long-term debt and finance lease obligations		(75,472)		(288)
Net cash provided by financing activities		80,588			24,337
Effect of exchange rate changes on cash and cash equivalents		4,420			(7,668)
Net change in cash and cash equivalents		179,485			21,583
Cash and cash equivalents at beginning of year		137,447			107,844
Cash and cash equivalents at end of period	$	316,932		$	129,427

Woodward, Inc. and Subsidiaries

SEGMENT NET SALES AND NET EARNINGS

(Unaudited - in thousands)

	Three Months Ended March 31,		Six Months Ended March 31,
		2024			2023			2024			2023
Net sales:
Aerospace	$	497,512		$	437,017		$	958,268		$	832,702
Industrial		337,831			281,197			663,805			504,131
Total consolidated net sales	$	835,343		$	718,214		$	1,622,073		$	1,336,833
Segment earnings*:
Aerospace	$	98,451		$	73,314		$	177,453		$	128,748
As a percent of segment net sales		19.8%		16.8%		18.5%		15.5%
Industrial		65,244			37,571			132,125			48,973
As a percent of segment net sales		19.3%		13.4%		19.9%		9.7%
Total segment earnings		163,695			110,885			309,578			177,721
Nonsegment expenses		(32,834)		(58,307)		(59,034)		(82,618)
EBIT		130,861			52,578			250,544			95,103
Interest expense, net		(10,237)		(12,337)		(20,200)		(23,113)
Consolidated earnings before income taxes	$	120,624		$	40,241		$	230,344		$	71,990
*This schedule reconciles segment earnings, which exclude certain costs, to consolidated earnings before taxes.
Payments for property, plant and equipment	$	14,489		$	19,656		$	56,301		$	44,046
Depreciation expense	$	20,607		$	20,535		$	40,833		$	40,661

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Woodward, Inc. and Subsidiaries

RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS1

(Unaudited - in thousands, except per share amounts)

			Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
								Per Share,										Per Share,
			Before			Net of			Net of			Before			Net of				Net of
		Income Tax		Income Tax		Income Tax		Income Tax		Income Tax			Income Tax
Net earnings (U.S. GAAP)	$	120,624	$	97,556	$	1.56	$	40,241		$	35,511	$	0.58
Non-U.S. GAAP adjustments:
Non-recurring gain related to a previous acquisition			-			-			-			-				-				-
Business development activities			1,664			1,256			0.02			-				-				-
Certain non-restructuring separation costs			2,666			2,013			0.04			2,208				1,661				0.03
Specific charge for excess and obsolete inventory			-			-			-			11,995				9,016				0.15
Product rationalization			-			-			-			10,504				7,896				0.13
Restructuring charges			-			-			-			5,172				3,874				0.06
Non-recurring charge related to customer
collections			-			-			-			4,997				3,761				0.06
Total non-U.S. GAAP adjustments			4,330			3,269			0.06			34,876				26,208				0.43
Adjusted net earnings (Non-U.S. GAAP)	$	124,954	$	100,825	$	1.62	$	75,117		$	61,719	$	1.01

Woodward, Inc. and Subsidiaries

RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS1

(Unaudited - in thousands, except per share amounts)

			Six Months Ended March 31, 2024			Six Months Ended March 31, 2023
								Per Share,									Per Share,
			Before		Net of		Net of		Before			Net of				Net of
		Income Tax	Income Tax	Income Tax	Income Tax		Income Tax			Income Tax
Net earnings (U.S. GAAP)	$	230,344		$	187,600		$	3.02		$	71,990		$	65,117	$	1.07
Non-U.S. GAAP adjustments:
Non-recurring gain related to a previous acquisition			(4,803)		(3,433)		(0.06)		-				-				-
Business development activities			5,902			4,456			0.07			-				-				-
Certain non-restructuring separation costs			2,666			2,013			0.04			2,208				1,661				0.03
Specific charge for excess and obsolete inventory			-			-			-			11,995				9,016				0.15
Product rationalization			-			-			-			10,504				7,896				0.13
Restructuring charges			-			-			-			5,172				3,874				0.06
Non-recurring charge related to customer
collections			-			-			-			4,997				3,761				0.06
Total non-U.S. GAAP adjustments			3,765			3,036			0.05			34,876				26,208				0.43
Adjusted net earnings (Non-U.S. GAAP)	$	234,109		$	190,636		$	3.07		$	106,866		$	91,325	$	1.50

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