Woodward, Inc. (WWD) Q2 2025 Earnings Call Transcript

Thank you for standing by. Welcome to the Woodward, Inc. second quarter fiscal year 2025 earnings call. At this time, I would like to inform you that this call is being recorded for re-broadcast and that all participants are in listen-only mode. Following the presentation, you're invited to participate in a question-and-answer session. Joining us today from the company are Chip Blankenship, Chairman and Chief Executive Officer, Bill Lacy, Chief Financial Officer, and Dan Proveznik, Director of Investor Relations. I would now like to turn the call over to Dan Proveznik.

Thank you, Operator. We'd like to welcome all of you to Woodward's second quarter fiscal year 2025 earnings call. In today's call, Chip will comment on our strategies and related markets. phil will then discuss our financial results as outlined in our earnings release at the end of our presentation we will take questions for those who have not seen today's earnings release you can find it on our website at woodward.com we've included some presentation materials to go along with today's call that are also accessible on our website and a webcast of this call will be available on our website for one year all references to years in this call our references to the company's fiscal year unless otherwise stated i would like to highlight our cautionary statement as shown on slide two of the presentation materials are forward-looking including our guidance and are based on our current outlook and assumptions for the global economy and our businesses more specifically those elements can and do frequently change our forward-looking statements are subject to a number of risks and uncertainties surrounding those elements including risks related to potential changes in the macroeconomic environment and risks related to tariffs retaliatory trade actions in addition to the risks we identify in our filings with the sec these statements are made as of today and we do not intend to update them except as required by law in addition we're providing certain non-us gap financial measures. We direct your attention to reconciliations of non-US GAAP financial measures which are included in today's slide presentation and our earnings release. We believe that additional financial information will help in understanding our results. Now I'll turn the call over to Chip.

Good evening everyone and thank you for joining us. We are pleased to report strong performance in the second quarter with results in line with our expectations. conditions. Woodward's net sales were up 6% year-over-year, and adjusted earnings per share were up 4%, reflecting steady growth, despite headwinds from China on Highway volume and mix. Excluding China on Highway, our company posted revenue up 12% and operating earnings up 22%. These results are a testament to the outstanding efforts of our Woodward team members worldwide even as we operate in a challenging and uncertain environment as we enter the second half of the year we remain on a steady growth trajectory with our lean transformation continuing to pay dividends our aerospace plants continue to gain ground during the quarter we achieved new highs with significant month over month sales growth at some of our facilities for example the combination of our two plants in Rockford, Loves Park and Rock Cut, achieved record sales to OE and services customers combined, facilitated by accelerated onboarding of new frontline members and model line transformations reaching new levels of performance. Additionally, our Zeeland plant also reached new levels of output in a quarter on total fuel nozzle shipments, thanks to continued growth in gtf oe and service volumes the leap and gtf maintenance cycle continues to develop and lru inputs and return shipments to customers doubled again year over year in the second quarter in smart defense we made significant progress on our challenges with supplier quality which enabled us to align production rates to customer demand Our lean transformation has created the capacity and the forward momentum to deliver on aerospace volume commitments in the second half of the year. Our outlook for aerospace market remains bullish, even in the face of uncertainty. Despite concerns around soft forward bookings in the U.S. and some international routes, passenger traffic continues to grow and OEM build rates continue to increase. We are keeping an eye on inputs to MRO shops and fleet capacity reductions. Like others, we see a slower commercial services growth rate in the second half. We expect to see substantial growth continue in defense OE, driven mainly by smart defense. In industrial, we also achieved operations improvements that translated into financial performance. We increased output by 20 to 50 percent in various gas turbine systems value streams to support our customers' power generation growth plans through lean transformation efforts on our model lines and with select equipment additions for capacity and efficiency improvements. Moving from operational excellence to innovation, we are proud to announce a key milestone reached in the quarter with our Micronet platform, an advanced turbine control system for critical industrial and marine applications. Woodward delivered the first production Micronet XT advanced gas turbine control system for U.S. Navy DDG-51 class destroyer shipboard gas turbine generators. These warships provide a wide range of defense capabilities, and the Navy production contract covers 30 system deliveries through 2027 scaling to 135 systems over 10 to 15 years this collaboration with the naval service warfare center resulted in a significant upgrade in controller technology and capabilities the next phase of the ddg 51 gas turbine control upgrade consists of the same micron micronet xt platform using additional features and capability such as the fully redundant architecture to serve as the propulsion system control for GE LM2500 gas turbines. Low rate production is preliminarily scheduled for 2026 through 2029 with 70 systems plans. Woodward has also been selected as the preferred propulsion control system supplier on the Korean Navy KDDX program. While the industrial end market outlook is mixed, the Woodward opportunity remains strong. Increasing demand for global power generation capacity continues, including data center power requirements, which represents opportunity for Woodward content in both baseload and standby applications. The global marine market remains healthy, with strong shipbuild rates creating OEM engine demand and laying the groundwork for future aftermarket activity. While the fleet utilization remains strong, there is risk that utilization could decrease if trade tensions persist. Demand for heavy-duty trucks in China remains subdued. The recent government stimulus could have a positive impact on demand, although we have not received customer signals to support this connection yet. Looking ahead, a word about tariffs and how they may affect our second-half operations and results. woodward's production footprint is largely in region for region moreover our supply base that serves each production site is largely in region as well this production footprint and supply base strategy results in less exposure to tariffs for woodward compared to some other aerospace and industrial companies however increased cost pressure on any portion of our operations is worthy of attention. We are proactively working to mitigate pressure on cost and any supply chain disruptions. Woodward is closely tracking early indicators from our end markets and customer forecasts. We are putting actions in place to mitigate tariff impacts as well as manage impacts from a slight economic downturn. We are also monitoring whether trade tensions could increase sales risks we have already experienced sales order quantity reductions for spare parts from chinese airlines this month and we are watching china on highway marine transportation and oil and gas market dynamics closely based on our strong first half performance and a better understanding of downside risk of the remainder of the year we are reaffirming the top end of our guidance and pulling up the bottom end of the revenue and adjusted eps ranges the low end of the aerospace sales range assumes current level headwinds from supplier performance boeing rate break delays or moderate woodward inventory destocking in the supply chain and slightly lower commercial aerospace services revenue most likely from lower sales of spare end items the end of the industrial segment sales ranges assumes a sequentially flat or industrial performance. Our guidance ranges for segment margins remain unchanged due to conservative estimates of potential tariff impacts and potential lower commercial aerospace services mix. Our outlook does not assume a further escalation of announced tariff levels or a global recession, both of which could significantly impact demand if extreme scenarios like these develop we will re-examine our guidance and communicate any revisions we remain confident in our long-term prospects as well as our ability to meet the medium-term commitments we shared with you at investor day in december 2023 and now i'll turn it over to bill for more detail on our second quarter financial performance, and the specifics of our refined guidance. Positive news cutting through the noise and uncertainty. Over to you, Bill.

Thank you, Chip. And good evening to everyone. As a reminder, all references to years are references to the company's fiscal year unless otherwise stated, and all comparisons are year-over-year unless otherwise stated. As Chip highlighted earlier, we have a strong second quarter in line with our expectations. Net sales for the second quarter of 2025 were $884 million, an increase of 6%. Earnings per share for the second quarter of 2025 were $1.78 compared to $1.56. cents. Adjusted earnings per share were $1.69 compared to $1.62. Net cash provided by operating activities for the first half of 2025 was $112 million compared to $144 million. Capital expenditures were $52 million for the first half compared to $56 million. Pre-cash flow was $60 million dollars for the first half of 2025, in line with our expectations, compared to $88 million. The decrease in free cash flow was primarily due to an increase in working capital caused by a slow start to the quarter. As Chen mentioned, we exited the second quarter with strong sales, which will be collected in the third quarter. As of March 31st, 2025, debt leverage was 1.5 times EBITDA. Regarding capital allocation, our strategy is unchanged. We continue to prioritize investing in organic growth, returning cash to stockholders, and pursuing strategic M&A. During the second quarter, we returned over $61 million to stockholders, including $44 million dollars in share repurchases and 17 million dollars in dividends through the first half of 2025 we've returned 111 million dollars to stockholders including 79 million dollars in sharing purchases and 31 million dollars in dividends we are on track to achieve our goal of returning approximately 215 million dollars to stockholders in 2025 150 million dollars of sharing purchases and $65 million in dividends. We will continue to manage this with flexibility as conditions evolve. We have $130 million remaining on our $600 million stock repurchase authorization. Returning capital to stockholders is a key component of our capital allocation strategy, reflecting our confidence in the business and our ability to generate strong cash flow. Turning to aerospace. Aerospace segment sales for the second quarter of 2025 were $562 million compared to $498 million, an increase of 13%. Defense OEM sales were strong in the quarter, up 52% primarily due to increased demand for our smart defense programs. Commercial aftermarket sales were up 23% in the quarter due to both price and higher volume. As Chip mentioned, we anticipate that commercial aftermarket sales growth will moderate in the second half of the year. Commercial OEM sales were down 9%, primarily due to a measured production ramp to customers' demand following the Boeing work stoppage. We anticipate that commercial OEM sales will return to growth in the second half. Defense aftermarket sales were down 8%. Earnings in the second quarter for the aerospace segments were the highest on record at $125 million. Margins expanded 240 basis gains over the previous year to 22.2% of segment sales. The increase in segment earnings was primarily a result of price realization and higher volume, partially offset by inflation and unfavorable mix. Turning to industrial. Industrial segment sales for the second quarter of 2025 were $322 million compared to $338 million, a decrease of 5%. Transportation was down 18% due to the expected decline of China on Highway sales. China on Highway sales were $21 million in the second quarter, a $45 million decrease from the prior year. Our core industrial sales, which exclude China on Highway, were up a healthy 11%, with oil and gas up 21%, marine transportation up 13%, percent and power gen up four percent industrial segment earnings for the second quarter of 2025 are 46 million dollars or 14.3 percent of segment sales compared to 65 million dollars or 19.3 percent of segment sales industrial segment earnings decrease primarily due to lower China-on-highway volume and unfavorable mix, partially offset by price realization. Margins for our core industrial business were 14.8% in the second quarter, in line with our expectations. We continue to expect core industrial margins of 14 to 15% of sales per year. Non-segment expenses were $27 million for the second quarter of 2025, compared to $33 million. Adjusted non-segment expenses were $34 million for the second quarter of 2025, compared to $29 million. Turning to our 2025 guidance. We are raising the low end of our sales and adjusted EPS guidance while reaffirming the other elements of our four-year outlook. This updated guidance reflects our strong year-to-date performance and the expected impact of announced tariffs. Our revised guidance does not incorporate potential effects from further escalation of announced tariffs levels, significant changes in customer demand or a recession in the U.S. or globally. For fiscal year 2025, we now expect consolidated sales of $3.375 to $3.5 billion, which includes aerospace sales growth between 8% and 13% and a decrease in industrial sales from 7% to 9%. We now expect adjusted EPS between $5.95 and $6.25. All other aspects of our guidance remain unchanged. This concludes our comments on the business and results for the second quarter of fiscal year 2025. Operator, we are now ready to open the call to questions.

Thank you. The question and answer session will begin at this time if you're using a speaker phone please pick up the handset before pressing any numbers should you have a question please press star one on your push button phone should you wish to withdraw your question press the pound key your question will be taken in order it is received please stand by for the first question our first question comes from scott deutschland with deutsche bank please stage your questions hey good evening nice results hey scott thanks chip can you further decompose the commercial aftermarket growth in the quarter a bit further in terms of the platforms or

customer geographies that drove that strength it was uh you know scott really it was across the board growth there um if this the the jump that we that we saw late in the quarter were some drop-in spare parts orders from MRO facilities. So we had some quick ship opportunities for spare parts to serve the MRO network. The rest of the ways we serve customers, whether spare end items or our own repair and overhaul, was fairly strong. But I think that some of the contributed to that 23 percent was the was the spare and the spare parts at the end.

Okay is that mostly shipments to China?

No in fact China is looking a little bit slower. They're you know I think moderating what their the quantities that they're purchasing at least that's what we see in their activity with us.

Okay and Chip how far does the backlog run in marine transportation at this point? Just trying to get a sense for what your visibility looks like in that market if we see a reduction in global shipping and trade activity?

The OE is quite extended, as you might imagine. You know, it's out into the 2029 type shipbuild slot from an order standpoint right now. But as far as utilization of the fleet, it still has looked strong up to this point. But I would point out that, you know, extended trade tensions between the U.S. and China would see some of that drop off. And that's probably the biggest risk in marine aftermarket that we face right now. There have been some calls, you know, have you seen the news about, you know, the West Coast port activity maybe getting to be softer? So these are the type of signals we're looking at.

Okay, thank you.

You bet. your next question comes from the line of scott mickas with milius research please state your question good afternoon good afternoon chip bill um the past couple of years a larger portion of the earnings call and the woodward story is kind of focused on the outlook for china on highway natural gas truck market it's also created a lot of volatility in the financial results just given that woodward is an aerospace company and the broader trade tensions between the us and china does it make sense to maybe find a different owner for that product line we're always uh examining our portfolio scott and and trying to decide exactly you know what

makes sense for us and our shareholders and our customers going forward um so i don't have any comments at this time about any actions that we might consider it'll be i can assure you we continue to look at the portfolio as we go forward like i said in prior earnings calls what we're focused on operationally is trying to make sure that we're in the best position to serve our customers there with the best technology when that when that market is good we generate a lot of cash and a lot of earnings and we want to be in a position to do that on an uptick and right now we're focused on managing through this downturn as efficiently as we can with them okay and then

on the commercial oe side when hexel reported they noted some changes in planned ship set deliveries on the 787 in contrast rtx said heat exchangers on that program are now where they need to be but can you just give us color on what rate you were shipping on the 787 in this most recent quarter and are you receiving orders from boeing to support the production rate hike to seven per month later this year so we're in you know close contact with with boeing because we provide a number of chipset materials directly to them on certain programs uh on the 787 largely we're supplying through ge on the genx powered 787 so we have a lot less direct visibility to how our order

book correlates to their build rate but i can tell you that we are satisfying the ge order rate on the genx and it you know looks the outlook looks good um i'm i'm bullish on that program get into those kind of you know seven rates that you're talking about uh where we have the capacity and the ability to deliver that all right thanks for taking the questions you bet thank you Your next question comes from the line of David Strauss at Barclays.

Please state your question.

Thanks, Jeff. Good afternoon, David. Chip, could you maybe touch on the aftermarket in terms of what's come through? I mean, I think going back to your initial guidance call for this year, you kind of downplayed the aftermarket growth you might see this year, and it's obviously come through really you know, really strongly, particularly in Q2, when you had a really tough comp. So, can you maybe just talk at a high level what's come through better than what you were anticipating?

Yeah, David, I think, you know, you're right in that our call was we thought it would get a little bit softer in 2Q with that tough compare. What came through a little bit ahead of our, you know, in addition to our forecast were these spare parts orders to satisfy MRO facilities. that look like potentially they're getting a better throughput and higher volume through their shops and thus had, you know, sort of a little bit of a short cycle demand on spare parts from us. And so that helped us have quite a good second quarter. Those kind of things don't often repeat. So I think I'm going to just move one quarter to the right on our prediction that it's going to be a little bit softer going forward with tough compares, as well as probably some spare end items softness. As you look at two factors for that, one, the China part of the equation. um we're we're now thinking that there's going to be less you know lru orders to support provisioning of those fleets as well as um we'll probably see the u.s customers pull back a little bit on their order of of the lru spare end items because that's the easiest thing to defer and push to the right really when you think about it um if there's an engine in the shop and the lru's are routed for repair they're probably going to finish that activity so it's the spare end items and the and the China East that I think, you know, we could see some softness in the second half plus the tough compare.

Got it. Thanks. And Bill, on currency, you know, the weakening in the dollar that we've seen here, how could that impact you guys going forward given, you know, I think a decent footprint in Europe?

Yeah, we have seen a slightly higher fluctuation. As we think about the translation piece, we obviously will get hit on the top line, but that gets offset down in the cost area. So we typically see that get balanced out and not hit us too much at the operating earnings level. And then there are some cash over in outside the U.S. that we have to watch the translation, sorry, the transactional aspect of it. But again, it will not be a major factor on our results.

All right. Thanks very much. You're welcome.

Our next question comes from Noah Boponik with Goldman Sachs. Please state your question.

Hey, everyone. Bill, I'm surprised you left the aerospace segment margin guidance unchanged. It looks like that would require closer to a 25% incremental in the back half versus the over 40% you did in each of the first and second quarter. Can you talk about what drives the aerospace segment margin in the second half?

Sure. Yeah, we're really great and happy that we got over 40% incremental in the second quarter at NOAA. As we look to the back path, we do expect defense OE to be a much greater share of the volume. So that will moderate the incremental that we saw in the second quarter. We've always stated that we'd like to see our incrementals around 30% to 35%, and so we would expect that to moderate in the second half. Additionally, you know, we talked about tariffs, and it's not a major issue, but we are cautious in that it may impact us some. So we felt it was proven, Noah, to keep that margin guide where it is currently.

Okay.

What have you seen for LEAP aftermarket through the first half, and what are you expecting in the back half and into 26?

So, as I said in the remarks, you know, we've been a few quarters in a row of seeing that volume double year over year. So, you know, as we look at what our model was for performance of the LEAP fleet, we're very pleased with the progress on that. So, new so far, and we feel like that trend will continue for a bit this year, the rest of this fiscal year for us. Of course, that curve may turn over a little bit as the compares get bigger because it's doubling off a fairly small base. But we feel like we're on track for the outlook that we gave at the investor day where, you know, in the 27 to 28 timeframe, we could be seeing the similar volumes of aftermarket activity from the LEAP GTF compared to the legacy narrow body fleets.

Okay. And what was the unit, just unit growth in the aerospace segment in the quarter?

Yeah, no, we saw good growth from both the price. Overall price was about 7% at the, sorry, yeah, 7% at the Woodward level. Errol's price was a little bit stronger than industrial price, but both contributed. And so we didn't see good volume as Errol delivered at 13%.

Okay, great. Thank you so much. You're welcome.

Our next question comes from Matthew Eckers with Wells Fargo. Please state your question.

Hi, good afternoon, guys. Thanks for the question. Chip, I think you had talked last quarter within aerospace, I think, commercial OE versus aftermarket kind of similar growth for the year. Can you kind of update on where those stack up or has one of those changed relative to the other for the year?

Yeah, thanks for that question, because, you know, second quarter was a little bit out of the ordinary in terms of us seeing higher commercial aftermarket growth than we forecast, and then OE being a bit down due to the way we responded to the Boeing return to work challenge. So those two things made the second quarter look a little bit unusual, but I think for the fiscal year 25, we're still going to be in about the same zone for OE and aftermarket growth in the commercial space. However, defense OE, we think that's going to continue to be a very strong growth for the second half.

Yeah. Okay. Thanks. And I may have missed this, but what's the latest full year China on highway expectation? Has that changed at all?

Yeah. We came out with around $40,000, and with the Q2 performance being roughly $10 million more than we expected, we're moving it up to around $50 million.

Okay. Great. Thank you.

You're welcome. your next question comes from christopher glenn with oppenheimer please take your question thank you good afternoon um good afternoon i had a question on industrial um you know oil and gas was was very strong uh wondering if there are any one-time volume benefits or otherwise pulled forward given across the industrial segment given you know even at the high end of the full year guide you're running about 20 million a quarter lower than the second quarter i realize uh china is about a 10 million diminution of the run rate i'll kick it off and maybe hand it over to bill

on the last part of your question but um as far as oil and gas goes i think we've said this before it's a bit lumpy for us because um quite a bit of uh what we do in oil and gas is project related uh and so it was a strong quarter a lot of the delivery uh material that we provide to oil and gas is also power gen related um whether it's uh you know uh powering pumping stations or it's uh part of power generation for a platform or for a LNG site. So the 21% is a big increase, but I think it moderates through the year and it, in fact, is, like I said, quite lumpy. Okay, that makes sense.

I think that covers it, Bill. I think China would be the other piece for the industrial segment bridge in the two quarter second quarter absolute revenue versus the implied back half um if i could switch to the commercial aftermarket i think you know that was really a nice spike in the quarter so i think in the guidance if i'm hearing everything correctly you're probably looking at second half run rates a little lower sequentially for the commercial aftermarket but still up moderately year over year do i have that correct we still think it's Yes, that's correct.

We still think it's going to grow, but it's in the single-digit regime, you know, high single-digit regime versus the 20% that you saw in the second quarter.

Okay. And just a little bookkeeping, the corporate expense a little higher. We're still talking 3.3% I think you cited last year, last quarter for the full year.

Yeah, Chris, we are still calling that level. We'll have slightly higher sales in the back half, and so we do expect for us to hit that in the full year that we got it earlier in the year.

Thanks. And if I could sneak one more in, I think pricing outperformed in the second quarter probably what you implied previously for the year. Is that just a learning curve on value pricing toolkit across the organization?

Yeah, we've had two solid quarters of pricing this year, and I think it is us continuing to get a better understanding of our value pricing, and we had some volumes come through in the right place that also helped to push up the price that we achieved.

Understood. Thanks, guys.

You're welcome. our next question comes from michael from roley which are with securities please take your questions hey uh good evening guys thanks for taking the questions um chif could we just dig into that um i just want to make sure i under understand that aero the commercial oe and aftermarket so aftermarket track into maybe high single digits for that second half that implies something like 14 to 15 growth did i hear you earlier say that that oen aftermarket should grow at the same rate i mean those would be pretty heroic growth rates to get commercial oe up on par with the same growth as aftermarket no i don't think i don't think they'll what i meant

was that they'll over the year it'll come back to this what we said at the beginning of the year that uh we kind of we kind of gave a an order of battle if you will in terms of how things would stack up with defense OE being the biggest growth followed by commercial aftermarket followed by commercial OE. But we don't expect commercial OE to be down, which it was this quarter. So sorry about the confusion, but that's just sort of the order.

That's helpful. And then maybe just back to the incrementals. I mean, you did that 40% plus like Noah was talking about. I mean, You did that in the face of really strong OE. You're going to get the commercial OE ramping, which, you know, has never really been truly dilutive to your margins. Is it really just a function of aftermarket kind of normalizing in the second half that that's giving you some pause on those high incrementals?

You know, again, the commercial on our commercial OE, we do make money. But to the 40 percent incremental, it is to the 40 percent. As we talk about, we look to have 30 to 35 in error, and so what happens in the second half is, again, in Q2, we didn't have as much commercial OE, which helped incrementals. We will have more commercial OE in the second half, and we'll have greater defense OE, and And that will translate into still really good incrementals in our 30 to 35, but it will not sustain at the 40% level.

Got it. That's fair. Perfect. Thanks, guys. I'll turn it back in the queue. Thank you. You're welcome.

Our next question comes from Shigala Kayalglou with Jeffries. Please take your question. Shilal, your line is open.

Oh, sorry. Good afternoon, guys. How are you? Maybe just first half versus second half, $3 at essentially both midpoints when you look at the first half and the second half. How are you thinking about the tariff impact? I know you've mentioned in the prepared remarks localized production largely. How is that embedded into your guidance?

Yeah, I'll start it off, Sheila, and kick it over to Chip. But as we look at our tariff situation, as Chip mentioned, our manufacturing strategy really does help to mitigate the overall tariff impact on Woodward. Having said that, we have taken an extensive view of the business and have a good handle of the flows that will cause us some challenges. And as we look at those flows, for 25, fiscal year 25, we feel like we have $10 to $15 million of pressure. Now, that's before we put into action our strategies to mitigate those items. So based on that, we have baked it into our guidance that we updated here. until, as long as there's no escalation of those announced tariffs, that we will deliver on the guide. Got it.

Okay. And if I could ask one on aerospace specifically, outside of aftermarket, defense OE growth was pretty phenomenal. What's sure of that 52% increase, and why is aftermarket and defense down?

So, the increase is largely smart defense, but also good health and good growth in the rest of the programs too. So not taking anything away from them, but the large number shows up really due to smart defense and it's across the entire smart defense portfolio as well. So that's the defense OE story. On defense aftermarket, largely it can be a little bit lumpy in defense aftermarket working with our customers. They tend to batch some of their inputs for overall based on how they run the fleet so we don't see any difference in up tempo or anything fundamental that would drive defense aftermarket down um this quarter just looks like we are we're experiencing some delayed inputs uh we don't really think um that it will be that different the rest of this year with some of the logistics and um friction in the system if you will. So we're thinking that defense aftermarket might stay in that type of volume region for the rest of fiscal 25.

Got it. Thank you.

Welcome.

Our next question comes from Spencer Britsky with Teddy Cullen. Please state your question.

Hey, thank you.

I was wondering if you could provide an update on JDAM and where we are with the higher pricing from the new contract rolling through as well as volumes thank you yeah we um uh as we talked about the jdam demand has been strong uh secondly the supply chain has been pretty healthy so we've been shipping out a pretty good uh clip here um if those things uh continue we would expect to get through the older lots of jdam and get to the higher price lots sometimes in Q4.

Our next question comes from Luis Profedo with Wolf Research. Please state your question.

Hey, good evening, Chip, Phil. Hey, Luis. Maybe just to go back to the corporate for a quick second. It was high. Was there anything in there? I know we're adding back the, I think, what is like the industrial benefits. And so I'm just curious, are the industrial – is there a benefit running through the industrial segment and you're backing it out in corporate? And is there any sales impact from those sort of sales that you're doing?

No. No, Lewis. We're not. It's a simple answer.

Okay. I know I think last quarter you guys – last quarter you said you were backing out the product line sale benefits, and I don't know if that's exactly what it was again this quarter.

Yeah, so we just back out those benefits and adjusted them out last quarter, and that doesn't repeat.

It's a one-time gain.

But is there a sales benefit running through somewhere as well? No. No, so, okay, no sales benefit, and then you're just backing out the income. Your question is just on the ninth segment? Yes.

Yeah, so again, on the Greenville, we adjusted that gain out – sorry, we adjusted to sell a Greenville out this quarter out of non-segment.

Okay, but I guess is there a benefit in industrial from the gain, and you're just adjusting it out and unallocated?

No, no, no, no. We moved it out to non-segment, and then we adjusted it out of non-segment. So, aero is clean, industrial is clean.

And so, what caused the step-up in non-segment? It's just a big number that we haven't really seen before.

The non-segment, some of it is the timing of us doing our equity, our long-term incentive program. That gets done in the second quarter. Historically, this switch happened last year from first quarter to second quarter, but other than that, that's it.

All right. No, that's helpful. And I guess one more. I just want to make sure I heard you right. Was China Industrial $20 million in the second quarter or $29 million in the second quarter?

Yeah, $21 million to be exact, to be exact, $21 million. All right, great.

Thank you very much. You're welcome.

Mr. Blankenship, there are no further questions at this time. I will turn the conference back to you.

We'd like to thank everyone for joining today's call.

Ladies and gentlemen, that concludes our conference call Every broadcast will be available at the company's website, www.goodwar.com, for one year. We thank you for your participation in today's conference and ask that you please disconnect your line.