Woodward, Inc. (NASDAQ:WWD) Q4 2022 Earnings Call Transcript

Rob Spingarn: Okay. And then, Chip, just in terms of commercial OE, can you talk about what kind of rates you’ve embedded in your Aerospace guide for the major programs, the MAX, the 87, the neo?

Chip Blankenship: We’ve just taken what the airframers are publicly talking about as their rates were capacitized to deliver at those OEM rates and we don’t see a big challenge in front of us to achieve those. We’ve been doing pretty well on those programs as far as delivery goes.

Rob Spingarn: And what’s your rough lead time to when an aircraft gets delivered to the customer?

Chip Blankenship: Well, it’s hard to say that in these days where our €“ especially our engine OEM customers have the same problems that we do in terms of they have engines that have most of the hardware on them. So we don’t have a great visibility to win the serial number of, say, our fuel metering unit is put on an engine serial number and then it gets attached to an engine at an airplane at Boeing or Airbus. Back in the day, we would’ve said it’s a six-month or so cycle time. But as of now, it’s hard to see how that’s been going.

Rob Spingarn: Okay. And just the last thing, just given your background, Chip, is it fair to assume that structural €“ large structural castings, well, there may be a major problem here, there are a lot of other issues. Is it unfair to pin this whole thing on that the OE delays?

Chip Blankenship: So for us, the castings isn’t our biggest issue. I know you’re asking that broadly. I just want to make sure I can clear about Woodward versus industry. From a Woodward standpoint, electronic components and machine parts are really our big two that we’re tackling. There are €“ we have a few casting issues that are the smaller type castings, but really machine parts and electronic components are our biggest issues at Woodward. Across the industry, there’s €“ there are labor issues and materials issues at every step of the supply chain. So, I think that the large structural and other investment casting is just one of the many issues out there. And some may be hiding in the shadow of those as those take center stage. And when you pull those constraints off, you’ll find the others struggling. So I think it’s a €“ my experience so far says this is an industrywide multi-level of tier issue in the supply chain.

Rob Spingarn: Okay. Thanks very much.

Chip Blankenship: You bet.

Operator: The next question is from Gautam Khanna with Cowen. Your line is open.

Unidentified Analyst: Hey guys. This is Jack on for Gautam today.

Chip Blankenship: Hello, Jack.

Unidentified Analyst: I guess just kind of piggybacking. Hi there. Yes, so kind of just piggybacking off Rob’s question there, digging deeper into the aerospace guide for next year, wondering if you can square, just quantify maybe some of the puts and takes of the 14% and 19% revenue growth by end of market like commercial OEM versus aftermarket. And I think your customer called out at one point last year, 2,000 LEAP deliveries at one point. It’s probably stale given the recent castings issues, but wondering if you could provide some perspective there with maybe initial provisioning starting to ramp and then further off of commercial aftermarket. I think is it safe to assume that we get close to a pre COVID sort of run rate revenue profile there?