Woodward, Inc.

Global Business Conditions

As global trade dynamics continue to evolve, the impact of increased trade tensions and related tariffs with U.S. trading partners remains a key factor in shaping global economic activity, supply chains, and market stability. Future tariff adjustments may emerge as countries negotiate trade agreements, respond to geopolitical shifts, and address the challenges of inflation and global competition. We expect increased cost pressure resulting from the already announced tariffs and there are uncertainties surrounding future tariff policy changes and enforcement. However, the Company’s production and supply bases are largely in the same regions where our products are sold, which we believe will mitigate our exposure. Woodward is closely tracking costs from our supply base and customer forecasts regarding the potential impact of currently announced tariff levels, changes to such levels, and actual and potential retaliatory trade actions. We have experienced and are expecting, minimal levels of cost pressure as a result of recently implemented tariffs. We are proactively working to mitigate this cost pressure, potential sales risks, and potential supply chain disruptions.

On July 4, 2025 “One Big Beautiful Bill Act” was signed into law. This new law made changes to various U.S. federal income tax items that have effective dates in fiscal years 2025, 2026, and 2027. Woodward is still assessing the impacts of this Act on our consolidated financial statements.

Operational Highlights

Quarter and Year to Date Highlights

Adjusted net earnings, adjusted effective tax rate, adjusted earnings per share, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity Highlights

Net cash provided by operating activities for the first nine months of fiscal year 2025 was $237,976, compared to $297,329 for the first nine months of fiscal year 2024. The decrease in cash provided by operating activities for the first nine months of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to an increase in working capital.

For the first nine months of fiscal year 2025, free cash flow was $159,439, compared to $225,136 for the first nine months of fiscal year 2024. We define free cash flow as net cash flow provided by operating activities less payments for property, plant, and equipment. The decrease in free cash flow for the first nine months of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to an increase in working capital and higher capital expenditures. Free cash flow is a non-U.S. GAAP financial measure. A description of this measure as well as a reconciliation of this non-U.S. GAAP financial measure to the most directly comparable U.S. GAAP financial measure can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At June 30, 2025, we held $473,159 in cash and cash equivalents and had total outstanding debt of $932,871. We have additional borrowing availability of $639,138, net of outstanding letters of credit, under our revolving credit agreement. At June 30, 2025, we also had additional borrowing capacity of $21,353 under various foreign lines of credit and foreign overdraft facilities.