Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q4 2023 Earnings Presentation
32 slides from Parker-hannifin's earnings presentation, Aug 3, 2023
Slide 1: Fiscal 2023 Fourth Quarter & Full Year Earnings Presentation
Parker Hannifin Corporation Fiscal 2023 Fourth Quarter & Full Year Earnings Presentation August 3, 2023
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements and Non-GAAP Financial Measures Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. Often but
Slide 3: FY23 Q4: Outstanding Performance
FY23 Q4: Outstanding Performance ▪ Top quartile safety performance; 20% reduction in recordable incidents ▪ Record sales of $5.1B, +22% vs. prior year, +6% organic growth1 ▪ Record adjusted segment margin of 24.0%, +110 bps vs. prior ▪ Backlog coverage2 remains resilient at ~55%; backlog +1% sequent
Slide 4: FY23 – A Transformational Year
FY23 – A Transformational Year FY23 Highlights ▪ Top quartile safety & engagement $19B Sales ▪ ~30% exposure to Aerospace & Defense 11% Organic Sales Growth1 ▪ Meggitt exceeding expectations +60bps Adjusted Segment Margin1 ▪ Great cash generation and debt paydown 15% Adjusted EPS Growth1 $3B Operati
Slide 5: Expanding Longer Cycle and Secular Trend Exposure
Expanding Longer Cycle and Secular Trend Exposure Revenue Mix Reflects Transforming Portfolio FY15 FY23 FY27 Update Illustration Longer Longer Cycle Cycle + Industrial Industrial Industrial Aftermarket Secular Longer LongerCycle Aftermarket Trends Aftermarket + + Cycle Secular Trends Secular Trends
Slide 6: Future Sales Growth Drivers
Future Sales Growth Drivers Our Business Macro CapEx Innovation Acquisitions Secular Growth System Investment Strategic ▪ Address last decade ▪ New Product ▪ CLARCOR ▪ Aerospace Growth under investment Blueprinting ▪ LORD ▪ Digital Drivers ▪ Supply chain ▪ Simple by development DesignTM ▪ Exotic ▪ E
Slide 7: Enabling Engineering Breakthroughs that Lead to a Better Tomorrow
Enabling Engineering Breakthroughs that Lead to a Better Tomorrow Climate Action Parker Teams & Communities Clean Technologies ▪ On Track - Carbon Neutral ▪ 20% Safety Incident ▪ Continued Technology by 2040 Reduction in FY23 Advancement ▪ 20% Carbon Reduction in ▪ 10,000+ volunteer hours in ▪ 2/3 o
Slide 8: Parker's Promising Future
Parker’s Promising Future Adjusted EPS1 Adjusted Segment Operating Margin1 ▪ Growth from secular trends $30.00 25% ~40% +210 ▪ Building on transformation with Meggitt Growth bps $21.55 22.9% ▪ Acceleration from Win Strategy 3.0 ▪ Top quartile performance ▪ Organic growth 4-6% over the cycle FY23 FY2
Slide 9: Summary of Fiscal 2023 4th Quarter Highlights
Summary of Fiscal 2023 th 4 Quarter Highlights
Slide 10: FY23 Q4 Financial Summary
FY23 Q4 Financial Summary $ Millions, except per share amounts FY23 Q4 FY23 Q4 FY22 Q4 YoY Change As Reported Adjusted¹ Adjusted¹ Adjusted Sales $5,096 $5,096 $4,188 +22% Segment Operating Margin 22.1% 24.0% 22.9% +110 bps EBITDA Margin 24.9% 24.4% 23.1% +130 bps Net Income $709 $791 $671 +18% EPS $
Slide 11: FY23 Q4 Adjusted Earnings per Share Bridge
FY23 Q4 Adjusted Earnings per Share Bridge $6.08 $6.13 $5.16 $5.16 1. FY22 Q4 As Reported EPS of $0.99. FY23 Q4 As Reported EPS of $5.44. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 11
Slide 12: FY23 Q4 Segment Performance
FY23 Q4 Segment Performance Segment Segment Sales Operating Operating As Reported $ Margin Margin Organic %1 As Reported Adjusted1 Order Rates2 Commentary Diversified • Backlog coverage supported growth $2,301M 21.3% 23.5% (8%) • Productivity & supply chain improvement Industrial +4.9% Organic +60 b
Slide 13: Record FY23 Cash Flow Performance
Record FY23 Cash Flow Performance ▪ Cash Flow from Operations of 15.6% Cash Flow from Operations Free Cash Flow1 • $3 Billion - an increase of 22% YoY 15.6% 13.6% ▪ Free Cash Flow of 13.6%1 15.4% 13.9% • Capex of 2.0% of sales $2,980 $2,599 ▪ Transaction expenses: $2,442 $2,212 • A use of cash of ~1
Slide 14: Debt & Leverage Reduction Ahead of Schedule
Debt & Leverage Reduction Ahead of Schedule Gross Debt / Adj. EBITDA1 ▪ ~$850M debt reduction during Q4 3.8x 3.6x • $1.4B since Meggitt acquisition close 3.2x • Paid down ~35% of total deal 2.8x consideration since announcement FY23 Q1 FY23 Q2 FY23 Q3 FY23 Q4 ▪ Achieved ~1x leverage reduction Net De
Slide 15: FY24 Guidance
FY24 Guidance EPS Midpoint: $18.55 As Reported, $22.40 Adjusted Guidance Metric FY24 Full Year Key Assumptions ▪ Backlog coverage continues to support growth Reported Sales 3% - 6% ▪ ~$460M net sales from acquisitions and divestitures ▪ Reported sales split: 1H: 49%, 2H: 51% ▪ Expect HSD organic gro
Slide 16: FY24 Adjusted Earnings per Share Bridge
FY24 Adjusted Earnings per Share Bridge $22.40 $21.55 2 1. FY23 As Reported EPS of $16.04. FY24 As Reported midpoint guidance EPS of $18.55. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 2. Interest income is included in other
Slide 17: Key Messages and Outlook
Key Messages and Outlook ▪ Top quartile safety and engaged people Top Quartile ▪ Continue performance acceleration from The Win Strategy™ 3.0 Performance ▪ Proven track record - our people and performance through cycles ▪ Successful Meggitt integration, synergies ahead of schedule Portfolio ▪ ~30% e
Slide 18: Upcoming Event Calendar
Upcoming Event Calendar Annual Meeting of Shareholders October 25, 2023 FY24 Q1 Earnings Release November 2, 2023 FY24 Q2 Earnings Release February 1, 2024 FY24 Q3 Earnings Release May 2, 2024 FY24 Q4 Earnings Release August 8, 2024
Slide 19: Appendix
Appendix ▪ FY24 Guidance Details ▪ Reconciliation of Organic Growth ▪ Adjusted Amounts Reconciliation – Consolidated ▪ Adjusted Amounts Reconciliation – Segment Operating Income ▪ Reconciliation of EBITDA to Adjusted EBITDA ▪ Reconciliation of Gross and Net Debt to Adjusted EBITDA ▪ Reconciliation o
Slide 20: FY24 Guidance Details
FY24 Guidance Details Sales Growth vs. Prior Year As Reported Organic1 Additional Items As Reported and Adjusted1 Diversified Industrial North America 0.5% - 3.5% ~1% Corporate G&A ~$242M Diversified Industrial International -3.0% - 0% ~(2.5%) Interest Expense ~$525M Aerospace Systems 15.5% - 18.5%
Slide 21: Reconciliation of Organic Growth
Reconciliation of Organic Growth 21
Slide 22: Reconciliation of Organic Growth
Reconciliation of Organic Growth 22
Slide 23: Adjusted Amounts Reconciliation Consolidated Statement of Income
Adjusted Amounts Reconciliation Consolidated Statement of Income (Dollars in thousands, except per share data) (Unaudited) Quarter-to-Date FY 2023 Acquired Business Meggitt Acquisition Amortization Meggitt As Reported Intangible Asset Realignment Costs to Related of Inventory Early Debt Adjusted Jun
Slide 24: Adjusted Amounts Reconciliation Consolidated Statement of Income
Adjusted Amounts Reconciliation Consolidated Statement of Income (Dollars in thousands, except per share data) (Unaudited) Year-to-Date FY 2023 Acquired Business Meggitt Acquisition Loss on Amortization Meggitt As Reported Intangible Asset Realignment Costs to Related Deal-Contingent Net Gain on of
Slide 25: Adjusted Amounts Reconciliation Segment Operating Income
Adjusted Amounts Reconciliation Segment Operating Income (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2023 Acquired Business Meggitt Acquisition Amortization Meggitt As Reported Intangible Asset Realignment Costs to Related of Inventory Early Debt Adjusted June 30, 2023 % of Sales Amortizat
Slide 26: Adjusted Amounts Reconciliation Segment Operating Income
Adjusted Amounts Reconciliation Segment Operating Income (Dollars in thousands) (Unaudited) Year-to-Date FY 2023 Acquired Business Meggitt Acquisition Loss on Amortization Meggitt As Reported Intangible Asset Realignment Costs to Related Deal-Contingent Net Gain on of Inventory Early Debt Adjusted J
Slide 27: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Dollars in thousands) Three Months Ended (Dollars in thousands) Twelve Months Ended (Unaudited) June 30, (Unaudited) June 30, 2023 % of Sales 2022 % of Sales 2023 % of Sales 2022 % of Sales Net sales $ 5,095,943 100.0% $ 4,187,832 100.0% Net sales $ 19,06
Slide 28: Reconciliation of Gross and Net Debt / Adjusted EBITDA
Reconciliation of Gross and Net Debt / Adjusted EBITDA (Unaudited) (Dollars in thousands) September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Notes payable and long-term debt payable within one year $ 1,725,077 $ 1,994,333 $ 1,992,919 $ 3,763,175 Long-term debt 12,238,900 12,025,860 11
Slide 29: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Twelve Months Ended June 30, (Dollars in thousands) 2023 2022 Net Income $ 2,083,536 $ 1,316,186 Cash Flow from Operations $ 2,979,930 $ 2,441,730 Capital Expenditures (380,747) (230,044) Free Cash Flow $ 2,599,183 $ 2,211,686 Free Cash Flow Co
Slide 30: Supplemental Sales Information
Supplemental Sales Information Global Technology Platforms (Unaudited) Three Months Ended June 30, Twelve Months Ended June 30, (Dollars in thousands) 2023 2022 2023 2022 Net sales Diversified Industrial: Motion Systems $ 992,659 $ 921,265 $ 3,830,062 $ 3,489,431 Flow and Process Control 1,263,428 1
Slide 31: Reconciliation of Forecasted Segment Operating Margin
Reconciliation of Forecasted Segment Operating Margin (Unaudited) (Amounts in percentages) Fiscal Year 2024 Forecasted segment operating margin 19.7% to 20.1% Adjustments: Business realignment charges 0.4% Costs to achieve 0.2% Acquisition-related intangible asset amortization expense 2.8% Adjusted
Slide 32: Reconciliation of EPS
Reconciliation of EPS (Unaudited) (Amounts in dollars) Fiscal Year 2024 Forecasted earnings per diluted share $18.05 to $19.05 Adjustments: Business realignment charges 0.54 Costs to achieve 0.27 Acquisition-related intangible asset amortization expense 4.23 1 Tax effect of adjustments (1.19) Adjust