Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q1 2024 Earnings Presentation
30 slides from Parker-hannifin's earnings presentation, Nov 2, 2023
Slide 1: Fiscal 2024 First Quarter Earnings Presentation
Parker Hannifin Corporation Fiscal 2024 First Quarter Earnings Presentation November 2, 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: FY24 Q1: A Standout Quarter
FY24 Q1: A Standout Quarter ▪ Driven by a strong portfolio and our teams FY24 Q1 Highlights executing The Win StrategyTM 16% $4.8B ▪ Record sales, adjusted segment operating margins Reduction in Reported Sales and adjusted earnings per share Recordable 15% Increase Incidents +2.3% Organic1 ▪ All seg
Slide 4: Portfolio Transformation Expands Longer Cycle and Secular Revenue Mix
Portfolio Transformation Expands Longer Cycle and Secular Revenue Mix FY15 FY24 FY27 Guidance Illustration Longer Cycle Longer Industrial Industrial Industrial Longer Cycle Cycle + Aftermarket Longer Aftermarket Aftermarket + + Secular Cycle Trends Secular Trends Secular Trends Shorter Shorter Short
Slide 5: Transformed Portfolio Drives Strong Backlog
Transformed Portfolio Drives Strong Backlog Backlog Remains Resilient Robust Aerospace Demand Longer Term Visibility Parker Aerospace Systems Diversified Industrial 55% 32% 54% 121% 123% 31% 77% 81% 31% 18% 27% 15% FY16 FY19 FY23 FY24 FY16 FY19 FY23 FY24 FY16 FY19 FY23 FY24 Q1 Q1 Q1 % of Next 12-Mon
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: A Powerful Combination
A POWERFUL COMBINATION
Slide 8: Nose to Tail
NOSE TO TAIL A comprehensive portfolio of products and services Avionics . Fuel andFuel . Flight Thermal — WingSealing/ — ; Electric Sealing Hydraulics &Sensors| Tankinerting | Controls | Management Shielding Solutions | Power Solutions Advanced Composites Engine Fuel Nozzles Braking Systems Cameras
Slide 9: Macro Growth Drivers
Favorable Aerospace Secular Trend Drives Future Growth Military OE 21% Commercial Aftermarket Defense budget growth 31% Commercial air traffic recovery FY23 Sales Mix 45% Aftermarket Commercial OE Military Aftermarket Narrowbodies production rate DoD repair depot partnerships and increase 34% 14% re
Slide 10: Summary of Fiscal 2024 1st Quarter Highlights
Summary of Fiscal 2024 st 1 Quarter Highlights
Slide 11: FY24 Q1 Financial Summary
FY24 Q1 Financial Summary $ Millions, except per share amounts FY24 Q1 FY24 Q1 FY23 Q1 YoY Change As Reported Adjusted¹ Adjusted¹ Adjusted Sales $4,847 $4,847 $4,233 +15% Segment Operating Margin 21.3% 24.9% 22.7% +220 bps EBITDA Margin 24.7% 24.8% 23.3% +150 bps Net Income $651 $776 $616 +26% EPS $
Slide 12: FY24 Q1 Adjusted Earnings per Share Bridge
FY24 Q1 Adjusted Earnings per Share Bridge $5.96$6.13 $5.96 $5.16 $4.74 $4.74 1. FY23 Q1 As Reported EPS of $2.98. FY24 Q1 As Reported EPS of $4.99. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 12
Slide 13: FY24 Q1 Segment Performance
FY24 Q1 Segment Performance Segment Segment Sales Operating Operating As Reported $ Margin Margin Order Organic %1 As Reported Adjusted 1 Rates2 Commentary Diversified • Excellent margin expansion $2,230M 22.7% 24.9% (4%) • Distribution rebalancing Industrial +0.5% Organic +150 bps YoY North America
Slide 14: FY24 Q1 Cash Flow Performance
FY24 Q1 Cash Flow Performance ▪ Cash Flow from Operations of 13.4% Cash Flow from Operations Free Cash Flow1 13.4% 11.4% ▪ Free Cash Flow of 11.4%1 • CapEx of 2.0% of sales 10.8% 8.8% ▪ Free Cash Flow Conversion of 85%1 $650M $552M $457M $374M ▪ Committed to FY24 Guidance: • Free Cash Flow1 of $2.6B
Slide 15: Debt & Leverage Reduction Ahead of Schedule
Debt & Leverage Reduction Ahead of Schedule Gross Debt / Adj. EBITDA1 Net Debt / Adj. EBITDA1 ▪ Since Meggitt acquisition close: 3.8x • ~$1.8B debt reduction 3.6x • 1.2x leverage reduction 2.6x 2.5x ▪ ~$370M debt reduction during Q1 ▪ Expect ~$2B debt paydown in FY24 ▪ Target 2.0x leverage during FY
Slide 16: FY24 Guidance Increased
FY24 Guidance Increased EPS Midpoint: $19.13 As Reported, $23.00 Adjusted Guidance Metric FY24 Full Year Key Assumptions ▪ Strong backlog coverage Reported Sales 2.5% - 5.5% ▪ ~$140m currency headwind vs. prior guidance ▪ Split: 1H: 49% | 2H: 51% ▪ Reaffirming full-year organic growth midpoint Organ
Slide 17: Lee Banks
Lee Banks Transformational Leadership & Countless Significant Contributions to Parker’s Success ▪ Retiring as Vice Chairman and President effective December 31, 2023 ▪ Joined Parker in 1991; Officer since 2006 & Director since 2015 ▪ During his tenure, sales grew at a 7% CAGR to nearly $20B1 ▪ EPS h
Slide 18: Key Messages and Outlook
Key Messages and Outlook ▪ Focus on safety and engagement Consistent ▪ Continue performance acceleration from The Win Strategy™ 3.0 Performance ▪ Proven track record - our people and performance through cycles ▪ Successful first full year with Meggitt Portfolio ▪ ~30% exposure to Aerospace & Defense
Slide 19: Upcoming Event Calendar
Upcoming Event Calendar FY24 Q2 Earnings Release February 1, 2024 FY24 Q3 Earnings Release May 2, 2024 FY24 Q4 Earnings Release August 8, 2024
Slide 20: 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 21: FY24 Guidance Details
FY24 Guidance Details Sales Growth vs. Prior Year As Reported Organic1 Additional Items As Reported and Adjusted1 Diversified Industrial North America 0.0% - 3.0% ~0.5% Corporate G&A ~$240M Diversified Industrial International (5.0%) - (2.0%) ~(3.0%) Interest Expense ~$515M Aerospace Systems 16.5% -
Slide 22: Reconciliation of Organic Growth
Reconciliation of Organic Growth (Dollars in thousands) (Unaudited) Quarter-to-Date As Reported Adjusted As Reported Net Sales September 30, 2023 Currency Divestitures Acquisitions September 30, 2023 September 30, 2022 Diversified Industrial: North America $ 2,229,906 $ (10,944) $ 543 $ (77,384) $ 2
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 2024 Acquired Business Meggitt As Reported Intangible Asset Realignment Costs to Gain on Adjusted September 30, 2023 % of Sales Amortization Charges Achieve D
Slide 24: Adjusted Amounts Reconciliation Segment Operating Income
Adjusted Amounts Reconciliation Segment Operating Income (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2024 Acquired Business Meggitt As Reported Intangible Asset Realignment Costs to Net Gain on Adjusted September 30, 2023 % of Sales Amortization Charges Achieve Divestiture September 30, 20
Slide 25: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Dollars in thousands) Three Months Ended (Unaudited) September 30, 2023 % of Sales 2022 % of Sales Net sales $ 4,847,488 100.0% $ 4,232,775 100.0% Net income $ 651,072 13.4% $ 388,037 9.2% Income taxes 169,363 3.5% 115,308 2.7% Depreciation 84,867 1.8% 66
Slide 26: Reconciliation of Gross and Net Debt / Adjusted EBITDA
Reconciliation of Gross and Net Debt / Adjusted EBITDA Reconciliation of Gross and Net Debt / Adjusted EBITDA (Unaudited) (Dollars in thousands) September 30, 2022 September 30, 2023 Notes payable and long-term debt payable within one year $ 1,725,077 $ 3,594,425 Long-term debt 12,238,900 8,596,063
Slide 27: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Three Months Ended September 30, (Dollars in thousands) 2023 2022 Net Income $ 651,072 $ 388,037 Cash Flow from Operations $ 649,959 $ 457,358 Capital Expenditures (97,746) (83,555) Free Cash Flow $ 552,213 $ 373,803 Free Cash Flow Conversion (
Slide 28: Supplemental Sales Information
Supplemental Sales Information Global Technology Platforms (Unaudited) Three Months Ended September 30, (Dollars in thousands) 2023 2022 Net sales Diversified Industrial: Motion Systems $ 942,314 $ 906,014 Flow and Process Control 1,181,461 1,204,464 Filtration and Engineered Materials 1,494,753 1,3
Slide 29: Reconciliation of Forecasted Segment Operating Margin
Reconciliation of Forecasted Segment Operating Margin (Unaudited) (Amounts in percentages) Fiscal Year 2024 Forecasted segment operating margin 20.0% to 20.4% Adjustments: Business realignment charges 0.3% Costs to achieve 0.2% Acquisition-related intangible asset amortization expense 2.9% Adjusted
Slide 30: Reconciliation of EPS
Reconciliation of EPS (Unaudited) (Amounts in dollars) Fiscal Year 2024 Forecasted earnings per diluted share $18.73 to $19.53 Adjustments: Business realignment charges 0.53 Costs to achieve 0.27 Acquisition-related intangible asset amortization expense 4.36 Net gain on divestitures (0.10) Tax effec