Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q1 2023 Earnings Presentation
35 slides from Parker-hannifin's earnings presentation, Nov 3, 2022
Slide 1: Fiscal 2023 First Quarter Earnings Presentation
Parker Hannifin Corporation Fiscal 2023 First Quarter Earnings Presentation November 3, 2022
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 Q1: Impressive Performance & Meggitt Close
FY23 Q1: Impressive Performance & Meggitt Close § Safety is our top priority, leveraging high-performance teams, lean and kaizen • 17% reduction in incidents vs. prior year § Sales were $4.2B, an increase of 12% vs. prior year; organic growth 14% vs. prior year § Segment operating margin was 19.8% a
Slide 4: Parker Welcomes Meggitt: Day 1 Events
Parker Welcomes Meggitt: Day 1 Events Miami, Florida Tucson, Arizona Shanghai, China McMinnville, Oregon Saltillo, Mexico Queretaro, Mexico Ansty Park, UK Akron, Ohio Archamps, France Rockmart, Georgia Fribourg, Switzerland Milwaukie, Oregon Xiamen, China San Diego, California 4
Slide 5: Clear Path to Expand Meggitt EBITDA Margins
Clear Path to Expand Meggitt EBITDA Margins ~ 30% Adj. EBITDA Synergies and Operational Excellence Margin 16.5% of Sales Safety, Lean, Kaizen, HPT’s, SG&A ~ 20% Simplification Adj. EBITDA $300 Margin $250 $240 $200 Footprint Supply Chain $150 $150 Optimization $60 $70 FY23E FY24E FY25E FY26E Synergi
Slide 6: Expanding Longer Cycle and Secular Trend Exposure
Expanding Longer Cycle and Secular Trend Exposure Revenue Mix Reflects Transforming Portfolio FY27 FY15 FY23E Illustration Longer Cycle Industrial Longer Industrial Aftermarket Cycle Industrial Longer LongerCycle Aftermarket Aftermarket + + Cycle Secular Trends Secular Trends Shorter Shorter Cycle S
Slide 7: Our People, Portfolio & Strategy Transform Performance
Our People, Portfolio & Strategy Transform Performance 22.6% 1 1 21.3% Adjusted EPS $18.95 Adjusted EBITDA Midpoint $18.72 > 2.7x EPS $15.04 Increased 790 18.3% 19.3% growth bps 17.5% $13.10 16.7% $12.44 $11.57 14.7% $8.86 $6.99 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23G FY16 FY17 FY18 FY19 FY20 FY21
Slide 8: Summary of Fiscal 2023 1st Quarter Results
Summary of Fiscal 2023 Ist Quarter Results
Slide 9: Financial Summary
Financial Summary FY23 Q1 vs. FY22 Q1 $ Millions, except per share amounts Q1 FY23 Q1 FY23 Q1 FY22 YoY Change As Reported Adjusted¹ Adjusted¹ Adjusted Sales $4,233 $4,233 $3,763 +12.5% Segment Operating Margin 19.8% 22.7% 22.0% +70 bps EBITDA Margin 18.3% 23.3% 22.1% +120 bps Net Income $388 $616 $5
Slide 10: Adjusted Earnings per Share Bridge
Adjusted Earnings per Share Bridge FY22 Q1 to FY23 Q1 1. FY22 Q1 As Reported EPS of $3.45. FY23 Q1 As Reported EPS of $2.98. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 10
Slide 11: FY23 Q1 Segment Performance
FY23 Q1 Segment Performance Segment Segment Sales Operating Operating As Reported $ Margin Margin Organic %¹ As Reported Adjusted1 Order Rates2 Commentary Diversified • Volume leverage on robust growth $2,132M 21.2% 23.4% +3% Industrial +17.9% Organic +210 bps YoY • Resilient supply chain management
Slide 12: FY23 Q1 YTD Cash Flow Performance
FY23 Q1 YTD Cash Flow Performance $ Millions % to Sales § Cash Flow from Operations of 10.8% 10.8% 11.3% § Free Cash Flow of 8.8%1 8.8% 10.0% • Capex of 2.0% of sales § Transaction expenses: • A use of cash of ~4.5% of sales § Free Cash Flow Conversion of 96%1 1. Adjusted numbers include certain non
Slide 13: Capital Deployment & Leverage Highlights
Capital Deployment & Leverage Highlights § Quarterly dividend of $1.33 declared on October 26th • 66 consecutive years of increased dividends paid § Leverage at FY23 Q1: • 3.8x Gross Debt / Adjusted EBITDA1 • 3.6x Net Debt / Adjusted EBITDA1 • Expect leverage to improve as EBITDA from Meggitt is add
Slide 14: FY23 Adjusted Guidance Increased
FY23 Adjusted Guidance Increased EPS Midpoint: $13.20 As Reported, $18.95 Adjusted Sales Growth vs. Prior Year Reported Organic Earnings Per Share As Reported Adjusted1 Diversified Industrial North America 9% - 12% 6% - 9% Range $12.85 - $13.55 $18.60 - $19.30 Diversified Industrial International (9
Slide 15: FY23 Adjusted EPS Guidance Bridge
FY23 Adjusted EPS Guidance Bridge Reconciliation of Q1 Beat and Guidance Increase 1. FY23 As Reported midpoint guidance EPS of $13.20. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. AWB = Aircraft Wheel & Brake business divested
Slide 16: Leadership Transition
Leadership Transition
Slide 17: Jennifer A. Parmentier
Jennifer A. Parmentier Chief Executive Officer ▪ Currently Chief Operating Officer, will succeed Tom Williams as CEO on January 1, 2023 ▪ Responsibility for all of Parker’s operating groups as COO since 2021 ▪ Joined Parker in 2008, with extensive strategic and financial experience across Parker’s o
Slide 18: Office of the Chief Executive
Office of the Chief Executive Effective January 1, 2023 Jenny Parmentier Lee Banks Todd Leombruno Andy Ross Chief Executive Officer Vice Chairman & President Executive Vice President & Chief Operating Officer Chief Financial Officer Strong Continuity & Seasoned Leadership Team 18
Slide 19: Focus on Continuity & Priorities Ahead
Focus on Continuity & Priorities Ahead § Meggitt integration & delivering a record FY23 § Continue performance acceleration from The Win Strategy™ 3.0 § Bright future ahead driven by our business system The Win Strategy, a transformed portfolio, and secular growth trends § Confident in achieving FY2
Slide 20: Upcoming Event Calendar
Upcoming Event Calendar 2Q FY23 Earnings February 2, 2023 3Q FY23 Earnings May 4, 2023 4Q FY23 Earnings August 3, 2023
Slide 21: Appendix
Appendix § Reconciliation of Organic Growth § Adjusted Amounts Reconciliation § Reconciliation of EPS § Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin § Reconciliation of EBITDA to Adjusted EBITDA § Reconciliation of Gross and Net Debt to Adjusted EBITDA
Slide 22: Reconciliation of Organic Growth
Reconciliation of Organic Growth (Dollars in thousands) (Unaudited) Quarter-to-Date As Reported Organic As Reported Net Sales September 30, 2022 Currency Divestitures Acquisitions September 30, 2022 September 30, 2021 Diversified Industrial: North America $ 2,131,760 $ 4,064 $ — $ (20,952) $ 2,114,8
Slide 23: Adjusted Amounts Reconciliation Consolidated Statement of Income
Adjusted Amounts Reconciliation Consolidated Statement of Income 23
Slide 24: Adjusted Amounts Reconciliation Consolidated Statement of Income
Adjusted Amounts Reconciliation Consolidated Statement of Income 1 1 1 1Amounts have been reclassified to reflect the income statement reclassification 24
Slide 25: Adjusted Amounts Reconciliation Business Segment Information
Adjusted Amounts Reconciliation Business Segment Information (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2023 Acquired Loss on Deal- Gain on As Reported Intangible Business Integration Acquisition Contingent Aircraft Wheel Amortization Adjusted September 30, Asset Realignment Costs to Rela
Slide 26: Adjusted Amounts Reconciliation Business Segment Information
Adjusted Amounts Reconciliation Business Segment Information (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2022 Acquired Business Lord Acquisition As Reported Intangible Asset Realignment Costs to Related Adjusted 2 September 30, 2021 % of Sales Amortization Charges Achieve Expenses Septembe
Slide 27: Reconciliation of Earnings per Diluted Share to Adjusted EPS
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share 1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective ta
Slide 28: Reconciliation of Forecasted Adjusted EBITDA
Reconciliation of Forecasted Adjusted EBITDA (Unaudited) (Dollars in millions) ~9 Months FY231 Acquisition of Meggitt Forecasted Net Sales $ 1,800 Forecasted net income $ (305) Income taxes (91) Depreciation 70 Amortization 218 Interest Expense 237 Forecasted EBITDA 129 Estimated Adjustments: Amorti
Slide 29: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended September 30, (Dollars in thousands) 2022 2021 Net sales $ 4,232,775 $ 3,762,809 Net income $ 388,037 $ 451,463 Income taxes 115,308 120,282 Depreciation 66,967 65,751 Amortization 87,014 79,771 Interest expense 117,794 59,35
Slide 30: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA 1 Amounts have been adjusted to reflect the change in inventory accounting method. *Totals may not foot due to rounding 30
Slide 31: Reconciliation of Gross and Net Debt / Adjusted EBITDA
Reconciliation of Gross and Net Debt / Adjusted EBITDA (Unaudited) (Dollars in thousands) September 30, 2022 Notes payable and long-term debt payable within one year $ 1,725,077 Long-term debt 12,238,900 Add: Deferred debt issuance costs 87,934 Total gross debt $ 14,051,911 Cash and cash equivalents
Slide 32: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Three Months Three Months Ended Ended (Dollars in thousands) September 30, 2022 September 30, 2021 Net income $ 388,037 $ 451,463 Cash flow from operations $ 457,358 $ 424,359 Capital Expenditures (83,555) (48,203) Free cash flow $ 373,803 $ 37
Slide 33: Supplemental Sales Information
Supplemental Sales Information Global Technology Platforms (Unaudited) Three Months Ended September 30, (Dollars in thousands) 2022 2021 Net sales Diversified Industrial: Motion Systems $ 906,014 $ 828,672 Flow and Process Control 1,204,464 1,085,423 Filtration and Engineered Materials 1,376,295 1,2
Slide 34: Reconciliation of EPS: FY23 Initial Guidance
Reconciliation of EPS FY23 Initial Guidance Issued August 2022 (Unaudited) (Amounts in dollars) Fiscal Year 2023 Forecasted earnings per diluted share $16.13 to $16.93 Adjustments: Business realignment charges 0.26 Acquisition-related intangible asset amortization expense 2.30 Tax effect of adjustme
Slide 35: Reconciliation of EPS: FY23 Revised Guidance
Reconciliation of EPS FY23 Revised Guidance Issued November 2022 (Unaudited) (Amounts in dollars) Fiscal Year 2023 Forecasted earnings per diluted share $12.85 to $13.55 Adjustments: Business realignment charges 0.27 Costs to achieve 0.54 Acquisition-related intangible asset amortization expense 4.0