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Charles Blankenship

Thank you, Dan, and thanks to everyone for joining us today.
I'm pleased to report that the first quarter of 2025 was a strong start to our year with robust market demand from most corners and results that highlight the strength of our strategy, continued improvement and execution and our members' commitment to serving our customers. While our first quarter reported results are down slightly compared to last year, we delivered strong growth in both our aerospace segment and core industrial business.
While our aerospace team managed through a pause in deliveries of some product lines to Boeing, we were able to balance the labor across other product lines in both aerospace and industrial. We made the most out of the situation with additional Kaizen events and workstation rearrangement for improved flow in the facility prior to Boeing's restart of 737 MAX production. Woodward now has clear demand signals from airframe and engine OEMs that represent growth, and we will be ready to meet that demand.
We have some direct labor hiring to do ourselves, and we have a lot of work to do with suppliers to support the increased demand signal. As other companies have acknowledged, there are still some suppliers struggling with output and quality. We remain forward deployed, working with our suppliers on problem solving to ensure we are able to serve customers.
Core industrial performance was strong in the quarter with sustained robust demand across power generation, oil and gas, and marine transportation markets. The $65 million year over year decline in China on highway sales overshadowed the 7% core industrial growth. Across industrial and aerospace, I'm pleased to see tangible results of our operational improvements and the acceleration of our lean transformation.
This progress is enabling us to achieve stable operations and disciplined rate increase planning to keep pace with customer demand. As I visit our sites, I see a shift in mindset as our members build lean muscle and apply their problem-solving skills to improve in areas such as safety, quality, delivery, and cost.
I'm also pleased with the progress we're making on our automation journey. The team at Rock Cut Campus commissioned an industry-leading bank of automated deburring stations last quarter with multiple cobots and a myriad of end effect tools to accomplish tasks that we earlier dismissed as likely impossible.
I'm extremely proud of our Rockford team and all our members contributing to automation across our Woodward production sites.
I'd like to take a moment to highlight some strategic decisions that we made in the first quarter. These will contribute to shareholder value creation, strengthen our competitive position, and expand our technology offerings for the next single aisle aircraft. In December, we signed a definitive agreement to acquire Safran's Electronics & Defense electromechanical actuation business. This includes technology, operational assets, and long-term customer agreements for the Horizontal Stabilizer Trim Actuation or HSTA system.
The acquisition also includes electromechanical components for braking, steering, de-icing, and auxiliary power, and importantly, increases our shipset content on the Airbus A350. While this acquisition significantly bolsters our existing electromechanical flight controls capabilities, we're also investing organically in hydraulic flight control actuation. These investments enhance our ability to participate in single-aisle aircraft trade studies and development programs with airframe OEMs and provide valuable insight with design experience and product pedigree on both sides of the trade study.
Woodward can remain technology agnostic regarding the winning architecture as we offer electromechanical, hydraulic, or a hybrid system approach, whichever is best for the aircraft. In the quarter, we also announced that we were selling our build to print industrial fuel nozzle product business in Greenville to GE Vernova. The Greenville plant serves one customer which owns all service revenues.
The divestiture allows us to concentrate on industrial products that create the most shareholder value while supporting our customers' goals. We remain focused on our gas and liquid fuel control systems for aeroderivative and heavy frame gas turbine genset applications. These are industry leading product lines, critical to our customers' ability to deliver gas turbine power generation growth.
We've made additional progress on industrial product rationalization by selling certain small product lines, primarily legacy small engine diesel products. We're also strengthening our product management discipline by inserting it directly into our Woodward operating system.
This will enable us to allocate resources more directly to the highest return opportunities throughout the life cycle of our products and actively manage our product offerings in a timely fashion.
These actions support our strategy of building a stronger, more focused Woodward, that's both well equipped to compete in the near term and well-positioned to drive future growth.
Moving to our markets. In aerospace, commercial passenger traffic continues to grow. While market demand remains robust, industry supply challenges continue to affect OEM build rates. As I stated earlier, we see a stronger OEM demand signal starting in our second quarter, and we will respond accordingly. Our plan is designed to be flexible and responsive to actual product dynamics.
Commercial aftermarket activity remains healthy, driven by high utilization rates of legacy aircraft and engines. This has resulted in high shop visit rates for extended periods. Low delivery rates of newer aircraft and early engine durability issues contributed to extending the legacy fleet, high shop visit rate and in some cases, increased the level of investment that airlines have been willing to make in engine and LRU work scopes.
In defense, geopolitical developments continue to drive demand for defense products. For 2025, we continue to anticipate robust growth and smart defense driven by substantial increase in order activity and production which will fulfil the remaining open lots. We expect margin expansion from improved pricing in late 2025 or early 2026 depending on delivery rates.
Turning to industrial. Global demand for power generation capacity remains robust. Investment in gas-fired power generation equipment is increasing for both primary and backup power to enhance grid stability and support the expansion of renewable energy. Additionally, demand for data center power generation is expected to increase significantly.
In transportation, the global marine market remains healthy. Elevated ship build rates support strong OEM engine demand and future aftermarket opportunity. And high utilization rates continue to drive current aftermarket revenue. Demand for alternative fuels across marine transportation continues to increase as an industrywide strategy to support emissions reduction goals.
As expected, demand for heavy duty trucks in China remains subdued due to local economic challenges. In oil and gas, while production remains at record levels in the US, this is not translating into upstream service growth due to efficiency improvements and low commodity prices. Optimism is being fueled by sustained investment in refining and petrochemical activities in China, the Middle East, and India.
In summary, we continue to see robust demand across most of our end markets, providing significant opportunities that we are effectively leveraging and will continue to capitalize on. As we seize these opportunities, we remain diligently focused on pursuing profitable growth, operational excellence, and innovating for the future to deliver on our purpose.
We're on track to deliver our 2025 guidance and create long-term shareholder value.
And now, I'll turn it over to Bill who will share our financial results.

William Lacey

Thank you, Chip, and good afternoon, 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.
Net sales for the first quarter of 2025 were $773 million, a decrease of 2%. Earnings per share for the first quarter of 2025 were $1.42 compared to $1.46. Adjusted earnings per share for the first quarter of 2025 were $1.35 compared to $1.45. Aero segment sales for the first quarter of 2025 were $494 million compared to $461 million, an increase of 7%.
Commercial OEM sales were down 10% largely due to the impact from the Boeing work stoppage. This impact was more than offset by higher sales with commercial aftermarket up 19%, defense OEM up 21% and defense aftermarket up 8%. Aerospace segment earnings for the first quarter of 2025 were $95 million or 19.2% of segment sales compared to $79 million or 17.2% of segment sales.
The increase in segment earnings was primarily a result of price realization partially offset by inflation, unfavorable mix and lower volumes.
Turning to industrial. Industrial segment sales for the first quarter of 2025 were $279 million compared to $326 million, a decrease of 15%. Transportation was down 33% due to a decline in China on highway sales, which we had anticipated because of local economic challenges. China on highway sales were $10 million in the first quarter. Our core industrial sales, which excludes China on highway, were up 7%, driven by broad-based strength across the business, with marine transportation, power generation, and oil and gas, each up 7%.
Industrial segment earnings for the first quarter of 2025 were $40 million or 14.4% of segment sales compared to $67 million or 20.5% of segment sales. Industrial segment earnings decreased primarily due to lower China on highway volume and unfavorable mix, partially offset by price realization and favorable foreign exchange rates.
Margins for our core industrial business were approximately 15% in the first quarter. We continue to expect core industrial margins of 14% to 15% of sales for the year. Non-segment expenses were $22 million for the first quarter of 2025 compared to $26 million. Adjusted non-segment expenses were $28 million for the first quarter of 2025 compared to $27 million.
At the Woodward level, R&D for the first quarter of 2025 was $30 million or 3.9% of sales compared to $31 million or 3.9% of sales. SG&A for the first quarter of 2025 was $70 million or 9% of sales compared to $75 million or 9.5% of sales. The effective tax rate was 14.5% for the first quarter of 2025 compared to 17.9%. The adjusted effective tax rate for the first quarter of 2025 was 14% compared to 17.7%.
Looking at cash flows. Net cash provided by operating activities for fiscal 2025 was $35 million compared to $47 million. Capital expenditures were $34 million for fiscal 2025 compared to $42 million. Free cash flow was $1 million for the first quarter compared to $5 million which is in line with our typical first quarter levels. The decrease in free cash flow was primarily due to lower earnings, partially offset by lower capital expenditures.
As of December 31, 2024, debt leverage was 1.5 times EBITDA. Our capital allocation strategy remains unchanged. We continue to prioritize investing in organic growth, returning cash to stockholders, and pursuing strategic M&A.
During the first quarter, we returned $50 million to stockholders comprised of $35 million of share repurchases and $15 million of dividends. In aggregate, we are currently planning to return approximately $215 million in 2025, including approximately $150 million of share repurchases and $65 million in dividends.
Turning to our 2025 guidance. We are reaffirming our guidance for 2025 with the exception of adjusted effective tax rate and adjusted earnings per share. Based on the favorable tax rate in the first quarter, we now expect the adjusted effective tax rate for 2025 to be approximately 19%.
As a result, we are narrowing our adjusted earnings per share range and now expect it to be between $5.85 and $6.25.
This concludes our comments on the business and results for the first quarter of fiscal year 2025.
Operator, we are now ready to open the call to questions.

Question and Answer Session

Operator

(Operator Instructions)
Scott Mikus, Melius Research.

Scott Mikus

Chip, Bill, quick question just on the guidance for the aerospace segment. The sales growth is kind of wide. And last quarter, I think you mentioned that you expected defense OEM to be the fastest end market within aerospace, followed by commercial OEM aftermarket, and then defense aftermarket. I'm just wondering, has there been any change in that pecking order given the strong start you've had in the commercial aftermarket and defense aftermarket?

Charles Blankenship

Yes. Scott, so we're still keeping that wide range because it's still early yet from a Boeing performance standpoint and some of the other supply chain issues to sort of to narrow the upper range yet. Your point is a good one on the strong commercial aftermarket in 1Q. I will remind you that it was a relatively easy compare 1Q to last year 1Q '24.
So as we look forward going on for the rest of FY25, we have more difficult compares. We think that high double digits we showed this quarter will moderate significantly. Sequentially, the performance should be similar. I think it'll be neck and neck between commercial OE and commercial aftermarket for what's second in line. We still expect defense OE to be the largest driver of growth for this fiscal year.

Scott Mikus

And then over the past several years, you've invested quite a bit to alleviate some of the supply chain bottlenecks in your production system. So I just wondering if you could characterize the performance of your supply chain relative to pre-COVID. Is it almost back to normal, and then is there any material difference in the performance of your aerospace supply chain versus the industrial segment supply chain?

Charles Blankenship

So I echo the comments of many of my colleagues on earnings calls recently saying that we really haven't solved the post-COVID supply chain issues yet. I don't know that we do get back to a pre-COVID normal that we wish for. There's still plenty of labor challenges out there and the less experienced labor. We're having challenges across the supply chain with some supplier quality issues that are due to the things people that knew how to do before they retired or left.
As people come up the learning curves, we're solving those problems and we're we're getting more involved. As you noted, we have invested over $10 million in flexible manufacturing equipment to temporarily or permanently insource where our suppliers are having trouble. That is still ongoing. Those machines are pretty much loaded 5 days a week 2 shifts, and we're continuing to add soft capacity to those as the supply chain challenges would dictate.
I'd say we have similar challenges in industrial to aerospace supply chain. We're looking at 15 to 20 suppliers overall on the highly escalated challenged list on performance, and it's about half and half.

Operator

Scott Deuschle, Deutsche Bank.

Scott Deuschle

Chip, is Boeing restarting purchase orders at a very low rate, or are they coming out of the gates relatively strong in terms of the rates they're asking you to ship to?

Charles Blankenship

The Boeing demand signal is pretty strong. So it's pretty strong out of the gate. And as you know, there's some inventory in the system, so we're responding in a disciplined way to bring our line rates up to meet that demand.

Scott Deuschle

So should we expect commercial OE revenue to return to growth in the second quarter, or could it still be down given the tougher comp you see that in the second quarter?

Charles Blankenship

While we don't give quarterly guidance, I do -- I have more confidence in the second half of this year that we will be in a growth mode from an OE standpoint.

Scott Deuschle

And then have the retrofits for the LEAP engine's new reverse bleed valve system contributed very materially to the company's aftermarket growth over the last few quarters? And then does that normalize at some point if that has been a driver of the aftermarket growth?

Charles Blankenship

The reverse bleed valve fleet program has not contributed significantly to our aftermarket growth.

Operator

Sheila Kahyaoglu, Jefferies.

Sheila Kahyaoglu

But maybe just on the last question, I think last quarter, you guys indicated aftermarket would level off but obviously, first quarter off to a great start, 20%. Can you maybe talk about what drove that just given you said you would level off given shop visits? When we think about the 9,000 engine LEAP fleet, how do we think about those shop visits coming in, your percentage of those shop visits? Any sort of guide you could provide?

Charles Blankenship

So I think the guidance that we sent was about the full year from a commercial aftermarket standpoint. So just pointing back to that it was a relatively easier compare in the first quarter than it is two, three, and four for the year. So just want to draw your attention to that. And it was sort of across the board where our LEAN transformation is allowing us to show better turn times and get more product out back to the customers in the aftermarket, supply chain alleviating some of the issues as well.
So those contributed to our ability to serve the market a little bit better in first quarter '25 than we did in first quarter '24. Of course, there's some price in there as well, which shows up on the top line. And what was the rest of your question, Sheila?

Sheila Kahyaoglu

Just what's the shop visit revenue we could think about? What word is it? Like 10% of your overall content? And like how do we think about when that cadence really picks up just given the current LEAP fleet?

William Lacey

So I'd like to remind you also that much of our aftermarket content is line replaceable units. So while shop visit rate is interesting and some customers do route the LRUs for component repair during a shop visit, we also see about, I'd say just largely a 50-50 split from LRUs, whether it's shop visit or line removal.
And it's really we're better correlated with overall engine hours than we are event-driven shop visits. So I want to make sure everyone still understands that that's the case for Woodward content.
We are seeing LEAP and GTF inputs grow year over year. We're on track for that growth like we've modeled it. So we're very pleased at how that's developing.

Sheila Kahyaoglu

And then maybe if I could ask one on industrial, switching gears a little bit, profitability has come in better. Core margins of 15% plus. Can you walk us through how that improved, what drives the deceleration? And I think in your prepared remarks, you mentioned certain like licensing sales, but I didn't catch if it was industrial and/or aero, if you could clarify that.

Charles Blankenship

I'll clarify that point and then I'll turn it over to Bill. So we did divest of some small product lines in industrial, and that's adjusted out of our earnings. You'll see that in the GAAP results, but it's relatively small amount and not a big driver, not included in that margin number.
Over the Bill on the makeup of the 15%.

William Lacey

So yeah, we are real pleased with the core industrial coming out of the gate at 15%. As you know, Sheila, our guide on core industrial margins is between 14% and 15%. This quarter, we did -- in Q1, we did see some favorability related to foreign exchange rates. And so backing that out, core industrial margins were closer to 14%. And we expect through the quarter, that will -- through the year, we'll see their margin rates go between 14% and 15% with those finishing strong in Q4, depending on sort of the volume and the mix that comes through any given quarter.
So we feel really good about all the work that we've done. I remember when I started here, core industrial margins were in the single -- high single digits, 9%. And so all the work that we've done, in operational excellence, working on price, driving LEAN, we are seeing that improvement, and we really feel good about our guide on core Industrial 14%, 15% for the year.

Operator

Matthew Akers, Wells Fargo.

Matthew Akers

I wanted to ask about the Safran acquisition. Any more color you can give there and maybe what the new A350 content is. I think you said that we boosted that. I think it was like 40,000 to 50,000, previously. And just curious, should we think of this as sort of a one-off opportunity that came up, or do you still see M&A as kind of a decent part of the capital allocation strategy here?

Charles Blankenship

So taking the last part first, I mean I think we still see M&A strategy as a good opportunity to bolt on when we're looking for technology adds, market or customer adds to the Woodward portfolio. So we're very excited about this one. It brings us some unique additions to our electromechanical actuation business from a technology standpoint, and we do look forward to having the horizontal stabilizer trim actuation system for the A350, and that's the content add for the A350 that I was referring to.
We didn't quantify what that means from a shipset standpoint though.

Matthew Akers

And then I guess as a follow up, I think you called that $215 million of cash you plan to return this year. I was just curious that your free cash flow is above that or are you -- is the remainder kind of earmarked for something, or should we think of that as maybe potential upside to deployment kind of depending on market opportunities?

Charles Blankenship

Yeah, Matt, again, we do think that we have capacity. There's a possibility for us to do more, and we don't have it earmarked right now. We're going to see how things progress. We feel good about our where we are from -- on our shares, and if there's opportunity to buy some more, we will take a look at it. If there aren't, the other areas of organic growth investment, we will look at potentially doing some more.
So $215 million right now represents about $150 million of share repurchases that deal with offsetting or dilution, and then we'll see how things develop over the rest of the year.

Operator

Pete Skibitski, Alembic Global Partners -- Advisors.

Pete Skibitski

Yeah. Hey, Chip, just wondering, the ongoing CR in defense, has that impacted your bookings at all, or are the OEMs being pretty forward leaning in order flow?

Charles Blankenship

We haven't seen any impact on that, Pete.

Scott Deuschle

And just to follow up, I get the sense that maybe your multi-year visibility in guided weapons and maybe that's improving. And I mean the current outlook for defense funding is sort of low double -- or low single digits. Should we expect guided weapons on a multi-year basis to kind of meaningfully exceed that? Is that kind of a -- the target that you put out there or is the visibility just not there yet?

Charles Blankenship

I don't think we have much visibility past early 2026, and that's kind of what we've limited our public comments on.

Operator

Christopher Glynn, Oppenheimer.

Christopher Glynn

So powergen markets have had a pretty steady consistent drumbeat. Curious if you could just go into some of the long term demand signals a little bit. I think Caterpillar announced the substantial capacity plans for recip and gas turbines. Is that pretty telling of how you're looking at the market over the next handful years?

Charles Blankenship

Yeah, it is. I mean our customers are all pushing us to demonstrate what our capacity actions would be to meet the investments that they're making, and we're aligned pretty darn well with both our reciprocating engine and gas turbine customers. We're very bullish on that market.
Just the math alone tells us that there should be a gas renaissance in terms of the power demands both for grid stability due to renewables, but also just for base gigawatts per year growth required to support industry, but also the data center and AI demand.
I mean all of the Deepseek turmoil aside, we still see big demand and growth for gas power generation and we're poised to take part in that.

Christopher Glynn

Also wanted to ask about the guided weapons JDAM area. Is that expected a pretty steady cadence through the year? Looks like maybe you had some load in the fourth quarter and I don't know what -- how the seasonality comes to bear on a program that's ramping up, but is that a consistent ramp through the year or kind of level loaded?

Charles Blankenship

Yeah. I'll start and then turn it to Bill. We plan it pretty level, but there's a lot of supply chain issues in that part of the world too. It's not limited just to commercial aircraft or industrial. So there can be some puts and takes from a production rate standpoint based on supplier performance and also other suppliers of our customers can cause them to not pull as high of a demand as they initially transmit for that month or that quarter.

Operator

David Strauss, Barclays.

David Strauss

Chip, has there been any change in your thinking around China on highway and how that develops this year?

Charles Blankenship

Unfortunately, I report no change to my thinking. It's a -- it's just a volatile product line that we're in. Our team is working hard to control fixed costs when volumes are down and ready to respond should there be an uptick. I think we'll also be mindful in terms of how we respond to demand signals from customers. We don't want to get in a position where we load up a lot of inventory like we did last year.
So we're going to be very mindful of that. I think the other thing is we'll try to level load, so we can better amortize our fixed costs when volume comes back. So I guess those are refinements to the thinking but not changes.

David Strauss

So you're still thinking minimal sales in the second quarter and then $10 million to $15 million a quarter in Q3, Q4?

Charles Blankenship

Right. We still feel best about the $40 million estimate that we've put out there for China on highway.

Scott Deuschle

And Chip, tariffs, I don't think you have any manufacturing in Canada and Mexico other than maybe it looks like the Safran business has some. Any exposure if these preferences that you have?

Charles Blankenship

Well, as it turns out, we're largely in regions for regions. We've got some things that go back and forth globally, but mostly we're -- our manufacturing footprint and supply chain is in the region that it serves. So we don't see any substantial tariff risk at this moment on this day at this time, but as you know, it's a fairly fluid environment.

Operator

Gavin Parsons with UBS.

Gavin Parsons

Hey.Good afternoon.

Charles Blankenship

Hey Gavin.

Gavin Parsons

Appreciate the color on the Aero guide, but just wanted to kind of ask what pieces might take you to the high versus low end, and it sounds like you have some destocking considered in there. And is that just airframe or is that also on the engine side?

Charles Blankenship

So I think the things that take us towards the high side is the supply chain performance, quite frankly, on the commercial and the defense OE side of the business that, that could take us to the high side. The things that would take us to the low side are nonperformance or additional headwinds from a supply chain standpoint.

Gavin Parsons

Great. And then on Aero revenue, I guess you guys called out price with volume down, you still have good visibility into price for the rest of the year. Does that start to lap?

Charles Blankenship

Yes. Gavin, as we talked about last quarter, we're expecting price at the total Woodward level to be around 5%. And we expect Aero to be -- to deliver stronger price than industrial. So we've got pretty good visibility. As you remember, we were dealing with a number of 6 contracts that came due last year that got renegotiated.
So we'll see some of that continue to come through the year. And we're mostly through those contracts, but we still have a few to deal with this year.

Gavin Parsons

Thanks.

Operator

Noah Popleak with Goldman Sachs.

Noah Poponak

Hello everyone. What was the LEAP and GTF aftermarket revenue contribution in the quarter?

Charles Blankenship

Yes. No, it continues to grow real nice -- very nicely, and we're seeing very strong growth there. Again, no, it is still off of a lower base. But obviously, as we continue to see these very strong growth rates as we get into '26, '27, we won't be talking about a low base. And as we see in these early quarters, continuing to grow.
So it's performing as we have expected it to perform, and we're really pleased with what we're seeing.

Noah Poponak

Is it correct to assume that the full year guidance doesn't actually assume a ton of growth contribution from that because even though you have very specific 2027 guidance or a framework, that's because you know you'll have reached critical mass by then, whereas right now, you're kind of waiting to see when you flip to critical mass. So you're just not sure what it contributes to '25? Or do you have a very specific assumption in the '25 guidance?

William Lacey

Yes. I'll jump -- I'll speak on that, Noah and then turn it over to Chip. The team has a good feel for -- from a range standpoint, of what we expect LEAP and GTF to contribute to the aftermarket. So far, the team who have -- are very experienced with this. Have been pretty accurate with their estimates so far.
So again, I feel comfortable that we have a good range of what we expect that piece of the business to deliver in '25. Chip?

Charles Blankenship

Yes, I think it's fair to say that we're pretty good at modeling it and that we're tracking, as Bill said. And what we shared at Investor Day was it's really more like the 2028 time frame where we would see LEAP and GTF be equal to legacy fleet in terms of their contributions to our market. Now we think legacy will come down some by that time also. But that's where we would see maybe a changeover in the '28 plus time frame. LEAP and GTF is starting to contribute and be less of a footnote and more of a baseload into our shop.
So I don't want you to think it's not meaningful yet. But as Bill said, the numbers really aren't moving the needle in a big way from a growth standpoint yet.

Noah Poponak

Okay. And then I just wanted to also ask on the aerospace original equipment side. You had provided the guidance with its assumed growth rate, while Boeing had you turned off. So I guess the down 10 isn't a huge surprise. Just curious how the downturn compared to what you were thinking a few months ago.
And then just how much -- I guess, Boeing sort of is speaking to maybe a faster recovery in the back half than a lot of us thought. So yes, I guess, on the one hand, [indiscernible] it needs a lot of growth to get to where your guidance was. But on the other hand, maybe -- is Boeing actually talking about a faster ramp than you anticipated?

Charles Blankenship

There's a lot there, Noah, but I'll do my best. I think -- just to start off our guidance is sort of a wide range at the top end on purpose because Boeing was lined down when we were developing our guidance. So that's why it's sort of a wider range from a revenue standpoint, first and foremost, not really surprised by first quarter being where it is based on them just being turned on and taking a pause in a period of time to get workers back certified for the jobs that they're on and all these kinds of things before they really started back to work and moving move in airplanes on the line.
I'm really impressed with the goals they've set for how they want to come back up and running. And what I understand, based on my experience really well is their 6-month stabilization and rate breaks that they talk about in the out years, how they're going to get from where they are right now to to 38 per month is the thing that we're all watching. We're all rooting for them as an industry, as a customer, as U.S. citizens. We're behind them all the way and hope that they can achieve those aggressive goals they've laid out for the second half of 2025.

Noah Poponak

Okay, thank you.

Charles Blankenship

Yeah, thanks.

Operator

Michael Ciarmoli with Truist Securities.

Michael Ciarmoli

Chip, just on aerospace, the margins in the quarter. I mean, you had a 21% sequential decline there in OE. You held the margins flat. Obviously, you got the strong aftermarket mix. You mentioned just flow and Kaizen events.
But anything else that helped to drive that margin? And then just thinking about when Boeing and OE really starts to ramp up? Do you kind of have to battle that negative mix shift?

Charles Blankenship

So I guess the -- I'll start, and I'll hand it over to Bill for some of the mechanics on the mix because we actually had some mixed headwinds in there. The commercial aftermarket wasn't as useful as you might think. But from a overall standpoint, our lean transformation, our ability to get product flowing and deliver to a customer, we're making progress on our model lines. We have people coming up to speed. They've been on the job now a couple of years instead of the 6 months or 12 months we talked about before.
So our members are more productive. All these things are flowing through to the bottom line. In addition, some healthy price on the aerospace, especially the aftermarket side. I'll hand it over to Bill, if he you want to share --

William Lacey

Yes. I think just, Mike, you talked about the [ 19.2% ] that Aero delivered, and we are also excited about it, 200 basis points improvement over last year, about flat sequentially. And so in kind of year-over-year, good price realization there. We do with the defense OE, it does provide us with a little bit of a mix headwind for now as that volume continues to increase, though, that will provide us with some good volume leverage, which will drive margin expansion. So really, year-over-year, what drove it was price and continue work on the -- our operational excellence initiatives to deliver that margin, which our full year guide of 20% to 21%, we feel good about how this quarter started and allowing us to get to that guide.

Michael Ciarmoli

Okay. Chip, you mentioned there was actually some negative mix, though, with aftermarket. Can you maybe just elaborate on that a bit? What kind of --?

Charles Blankenship

No. I was just saying that the defense OE was a mix down. It wasn't all aftermarket up and no other pressure. So that was what I was mentioning.

Michael Ciarmoli

Got it. And then last one for me. You called out, I think, Chip, in your comments, direct labor and hiring. What are you guys looking at? What do you need to add in terms of headcount to kind of meet the objectives or not really get squeezed here?
And just any color on the hiring efforts?

Charles Blankenship

Yes, nothing really out of the usual challenges that we have in this environment. So we let attrition kind of walk our number -- our staffing numbers down a little bit during the Boeing strike and some of the other softness in demand. And so -- we saw it coming -- we saw the demand signal coming back and plenty of time to return to the staffing levels we need to serve that. But I just want to call it out because it is part of the challenge we all face right now. And we probably have a couple of months' worth of hiring to make up as we look at this demand signal.

Michael Ciarmoli

Okay, perfect. Thanks, guys.

Charles Blankenship

You're welcome.

Operator

Louis Refetto with Wolf Research.

Louis Raffetto

Hey, good evening.
Thank you.

William Lacey

Evening Louis, hello Louis

Louis Raffetto

Hey Bill, maybe just a follow-up to the last question or 2 questions ago, just pricing, do you have the pricing amount for the quarter?

William Lacey

Yes. For the quarter, at the total order level, it came in around 6%. Again, total guide for the year is around 5%. And as we talked about for the total year, aero contributed heavily to that 6%, but industrial also provided us with a good contribution.

Louis Raffetto

All right. Great. Appreciate that, Bill. And then maybe just -- this is, I think, the maybe fifth quarter now that we're excluding some sort of business development expenses. I'm just trying to understand exactly what that is, why it's being excluded.

William Lacey

Yes. This quarter, Louis, the business development expenses was related to the activity around the different deals that we talked about. And as always, we're trying to make sure that we provide you with clear operational performance. And so that is what drove that adjustment.

Louis Raffetto

Great. And then maybe -- I may have missed this before, but is the acquisition and the divestiture like cash-wise, are they -- do they offset? Or is one sort of larger than the other? Any way to think about that?

William Lacey

Yes. Obviously, I don't want to get too far. And as these things close, we'll provide you with a little more insight into the financials.

Louis Raffetto

All right. Thank you very much.

William Lacey

You're welcome.

Operator

Gautam Khanna with TD Cowen.

Gautam Khanna

I was wondering if you could comment on what commercial OE level of profitability was prior to the strike at Woodward

William Lacey

We don't really go down at that level of detail, Gautam.

Gautam Khanna

I know. But can you ballpark it like relative to -- is it a profitable; B --

William Lacey

Our commercial OE business is profitable, and it's a good business for sure. And so yes, so hopefully, that is ballpark enough.

Gautam Khanna

Fair enough. And then with respect to the tariffs you mentioned kind of in country, but is there any kind of demand destruction that could come from this in the industrial business that's factored into your guide?

Charles Blankenship

When you say demand destruction, you mean like customers no longer ordering equipment or canceling orders?

Gautam Khanna

Yes. On the margin, because it weakens the demand environment. And is that factored in -- ?

Charles Blankenship

That maybe a better question for one of our customers, but it doesn't jump out at me as a big risk.

Operator

Tony Bancroft with Gabelli Funds.

Tony Bancroft

Great job on the quarter and great job overall. Just with the recent -- you saw the -- obviously, the acquisition today with Triumph and your recent acquisition of Safran's their business. And you mentioned a little bit more about customer adds and where you're focused. Maybe you could just sort of like just give us a lecture on what's the most desirable businesses of customer adds and what that size market, the potential of that market is obviously very broad strokes. But just want to get your view, like 5 years from now, do you see yourselves as sort of on the side of pure play fuel control business with actuation and some of the defense weapon system actuation.
Just maybe you could just give us a picture of that.

Charles Blankenship

I think the simplest way -- and it's broader than this, but I think the simplest way to explain it that I think will shed the most light on our strategy there is, we have a stated strategy to increase our shipset content on the next single-aisle aircraft. So a lot of the activities that you'll see us talk about from an organic investment standpoint, or from a potential bolt-on acquisition standpoint is around making sure we've got a clear path to be very competitive when that competition starts for content on the next single aisle. We love high technology, challenging precision manufacturing kinds of systems and components. And we like components that have a healthy aftermarket opportunity associated with them. So that's kind of how we think about that.

Tony Bancroft

That's great. Thanks so much, great job.

Charles Blankenship

Well, Thank you.

Operator

And ladies and gentlemen, that concludes today's question-and-answer session. Mr. Blankenship, I will now turn the conference back over to you.

Charles Blankenship

I'd just like to thank everyone for joining today's call. I hope you have a great day.

Operator

Ladies and gentlemen, that concludes our conference call today. A rebroadcast will be available at the company's website www.woodward.com for 1 year. We thank you for your participation on today's conference call and ask that you please disconnect your lines.