Financial Data and Key Metrics Changes - In Q2 of fiscal 2024, the company's sales were nearly $8 billion, reflecting a decline of 2.6% compared to the previous year, impacted by nearly 500 basis points from optimization actions [14][15] - Adjusted EBITDA grew by 23% to $179 million, with an adjusted EBITDA margin of 2.3% of net sales, up about 50 basis points year-over-year [18] - Free cash flow increased by $50 million to $243 million, enabling a reduction in net debt to its lowest level since fiscal 2018 and lowering the net leverage ratio to 2.7x [20][21] Business Line Data and Key Metrics Changes - Natural product sales grew by 7%, outperforming the market, while conventional product sales declined by 12%, primarily due to network optimization efforts [15][16] - Retail sales fell by 8%, largely due to strategic store closures, although same-store sales improved sequentially by 100 basis points, declining by 2% during the quarter [16] Market Data and Key Metrics Changes - The company continues to target a $90 billion addressable market, with expectations for low single-digit average sales growth from fiscal 2024 through fiscal 2028 [11][12] - The majority of the customer base showed resilience despite some softness in food retail, with wholesale sales growth in line with target addressable market growth rates [10] Company Strategy and Development Direction - The company is focused on a value creation strategy aimed at achieving shared, profitable growth with customers and suppliers, enhancing capabilities in areas such as supply chain, technology, and private brands [5][9] - The implementation of an AI-powered supply chain planning platform, Relex, is expected to improve customer service and inventory management, contributing to better free cash flow [7] Management's Comments on Operating Environment and Future Outlook - Management remains confident in long-term expectations for low single-digit average sales growth, emphasizing the importance of differentiation among grocers for sustained growth [11][12] - The company is adjusting its full-year sales outlook to a range of $31 billion to $31.4 billion, reflecting optimization work and deceleration in food retail sales trends [22] Other Important Information - The company repurchased nearly 750,000 shares for approximately $25 million, reflecting confidence in long-term value creation potential [21] - A voluntary $115 million prepayment on senior notes was made, reducing annualized net interest expense by over $2 million [21] Q&A Session Summary Question: Impact of network optimization on conventional sales - The company noted a 500 basis point headwind from network optimization, primarily due to the exit from the Allentown facility, which was executed faster than anticipated [28][30] Question: Underlying business trends in conventional sales - Excluding network optimization impacts, the underlying business showed low single-digit growth, driven by inflation and volume trends [32] Question: Composition of the new business pipeline - The majority of the pipeline consists of incremental categories with existing customers, reflecting healthy relationships and value addition [37] Question: Future of productivity gains - Productivity increased by 6%, driven by automation and lean methodologies, with expectations for continued improvements [39] Question: Impact of SNAP changes on guidance - The company believes the impact of SNAP changes is manageable and has been factored into the guidance for the remainder of the year [49] Question: Progress on free cash flow and working capital - The company generated nearly $190 million of free cash flow in the first half, with ongoing efforts to improve working capital management [53] Question: Vendor-funded promotions and inflation outlook - Vendor promotions have become more selective, with a focus on peak holiday moments, while inflation is modeled at low single digits for the remainder of the year [64][66]

2nd Quarter Fiscal 2026 March 10, 2026 Disclaimer Certain information in this presentation and discussed on the conference call which this presentation accompanies constitutes forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this presentation regarding the Company's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties and are based on current expectations and management estimates; act ...

Financial Data and Key Metrics Changes - Woodward's net sales increased by 6% year over year, reaching $884 million in the second quarter of fiscal year 2025, while adjusted earnings per share rose by 4% to $1.69 [7][20] - Net cash provided by operating activities for the first half of fiscal year 2025 was $112 million, down from $144 million in the previous year, with free cash flow at $60 million compared to $88 million [20][21] - Debt leverage as of March 31, 2025, was 1.5x EBITDA [21] Business Line Data and Key Metrics Changes - Aerospace segment sales increased by 13% to $562 million, with defense OEM sales up 52% and commercial aftermarket sales up 23% [23][24] - Industrial segment sales decreased by 5% to $322 million, with transportation down 18% due to a decline in China on highway sales, while core industrial sales excluding this segment rose by 11% [25][26] Market Data and Key Metrics Changes - China on highway sales were $21 million, a decrease of $45 million from the prior year, indicating subdued demand in that market [25] - The aerospace market outlook remains bullish despite concerns about soft forward bookings in the U.S. and some international routes [10][11] Company Strategy and Development Direction - The company is focused on organic growth, returning cash to stockholders, and pursuing strategic mergers and acquisitions [21][22] - Woodward's lean transformation efforts have led to operational improvements and increased output in various gas turbine systems [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term prospects despite potential risks from tariffs and economic downturns, reaffirming the top end of their guidance [17][18] - The company is closely monitoring early indicators from end markets and customer forecasts to mitigate potential impacts from tariffs and trade tensions [16] Other Important Information - The company achieved record sales in aerospace, with the highest segment earnings recorded at $125 million and margins expanding to 22.2% [24] - Woodward's production footprint and supply base strategy result in less exposure to tariffs compared to other aerospace and industrial companies [15] Q&A Session Summary Question: Can you further decompose the commercial aftermarket growth in the quarter? - The growth was broad-based, with a notable increase in spare parts orders from MRO facilities contributing to the 23% growth [32] Question: What is the backlog in marine transportation? - The OE backlog is extended into 2029, but trade tensions could impact fleet utilization [34] Question: Given trade tensions, does it make sense to find a different owner for the China on highway product line? - The company is continuously examining its portfolio but has no immediate comments on potential actions [41] Question: What is the outlook for the commercial OE side? - The company is in close contact with Boeing and is meeting order rates, with a positive outlook for the program [43] Question: What drove the 52% increase in defense OE growth? - The increase is largely attributed to smart defense programs, with overall good health in other programs as well [94]

Financial Data and Key Metrics Changes - Woodward's net sales increased by 6% year over year, reaching $884 million, while adjusted earnings per share rose by 4% to $1.69 [9][21] - Net cash provided by operating activities for the first half was $112 million, down from $144 million, and free cash flow decreased to $60 million from $88 million [21][22] - Debt leverage as of March 31, 2025, was 1.5x EBITDA [22] Business Line Data and Key Metrics Changes - Aerospace segment sales increased by 13% to $562 million, with defense OEM sales up 52% and commercial aftermarket sales up 23% [24] - Industrial segment sales decreased by 5% to $322 million, with transportation down 18% due to a decline in China On Highway sales [27] - Core industrial sales, excluding China On Highway, increased by 11% [27] Market Data and Key Metrics Changes - China On Highway sales were $21 million, a decrease of $45 million from the prior year [27] - The aerospace market outlook remains bullish despite concerns about soft forward bookings in the U.S. and some international routes [12][15] Company Strategy and Development Direction - The company is focused on lean transformation and operational excellence to support growth in aerospace and industrial segments [10][13] - Woodward is actively monitoring tariff impacts and managing supply chain disruptions while maintaining a localized production strategy to mitigate risks [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term prospects and reaffirmed guidance for revenue and adjusted EPS, reflecting strong first-half performance [19][20] - Concerns were raised about potential impacts from tariffs and economic downturns, but the company remains optimistic about defense OE growth [15][20] Other Important Information - The company plans to return approximately $215 million to stockholders in 2025, including $150 million in share repurchases and $65 million in dividends [23] - The Micronet platform for advanced turbine control systems was highlighted as a key innovation milestone [13][14] Q&A Session Summary Question: Can you further decompose the commercial aftermarket growth in the quarter? - Management noted that growth was broad-based, with a significant contribution from spare parts orders to MRO facilities [34] Question: How far does the backlog run in marine transportation? - The backlog is extended into 2029, but trade tensions could impact fleet utilization [37] Question: Given trade tensions, does it make sense to find a different owner for the China On Highway product line? - Management is continuously evaluating the portfolio but has no immediate comments on potential actions [45] Question: What drove the 52% increase in defense OE growth? - The increase was largely attributed to smart defense programs and overall health in other programs [98] Question: What is the latest full-year China On Highway expectation? - The expectation has been raised to around $50 million due to better-than-expected Q2 performance [72] Question: How is the tariff impact embedded into guidance? - The company anticipates $10 to $15 million of pressure from tariffs, which has been factored into the updated guidance [96]