Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Investor Presentation (May 2023)
60 slides from Parker-hannifin's investor presentation, May 2023
Slide 1: Investor Overview May 2023
Investor Overview May 2023 4th Quarter & Fiscal Year 2020 Earnings Release August 6, 2020
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: The Strength & Interconnectivity of the Parker Portfolio
The Strength & Interconnectivity of the Parker Portfolio Fortune 250 global leader in motion and control technologies and solutions Robust business model with interconnected technologies and unparalleled distribution network Aligned by our purpose statement and executing The Win Strategy™ 3.0 Histor
Slide 4: The Global Leader in Motion & Control Technologies
The Global Leader in Motion & Control Technologies 4
Slide 5: Parker Hannifin at-a-Glance (NYSE: PH)
Parker Hannifin at-a-Glance (NYSE: PH) Engineering Customer Success in Motion & Control Markets for over 100 Years Operations in 45 countries across six continents § #1 Position in $135B Motion & Control Industry Sales by Segment § ~13% market share; goal to reach 20% § A technology powerhouse of in
Slide 6: Unmatched Breadth of Core Technologies
Unmatched Breadth of Core Technologies HYDRAULICS PNEUMATICS ELECTRO- FILTRATION FLUID & GAS PROCESS ENGINEERED CLIMATE MECHANICAL HANDLING CONTROL MATERIALS CONTROL of Our of Our ~ 2/3’s ~ 2/3’s Revenue: Portfolio: From customers who buy Enables clean technologies 4 or more Parker technologies Part
Slide 7: Our People, Portfolio & Strategy Transform Performance
Our People, Portfolio & Strategy Transform Performance A More Resilient, Better Parker Adjusted EPS1 Adjusted EBITDA § Reduced safety incidents by 73%2 Margin1 $18.72 22.6% § Top quartile engagement scores § Great generators & deployers of cash § >$25 billion in capital deployed2 >2.6x +790 bps 14.7
Slide 8: Positioned for Growth Opportunities from Secular Trends
Positioned for Growth Opportunities from Secular Trends Aerospace Digital Electrification Clean Technology 8
Slide 9: Expanding Longer Cycle and Secular Trend Exposure
Expanding Longer Cycle and Secular Trend Exposure Revenue Mix Reflects Transforming Portfolio FY15 FY23E FY27 Illustration Longer Cycle Industrial Longer Industrial Aftermarket Cycle Industrial Longer Cycle Aftermarket Longer Aftermarket + + Cycle Secular Trends Secular Trends Shorter Shorter Shorte
Slide 10: Portfolio Evolution with Secular Trends
Portfolio Evolution with Secular Trends Expected End Market Impact FY27 Sales Mix Markets Markets Markets Illustration § Aerospace & Defense ~33% § Industrial Aftermarket ~33% § General Industrial ~3% § Ag, Construction, Mining ~4% § Ag, Construction, Mining ~4% § Automotive ~3% § Automotive ~1% § S
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Slide 12: Parker and Meggitt
Parker and Meggitt A Powerful Aerospace Combination § Highly complementary technologies and platforms on premier programs § Increases Aerospace aftermarket mix by 500bps § Highly engaged team with similar heritage and culture § Poised to benefit from Aerospace market recovery § Well positioned to dr
Slide 13: Office of the Chief Executive
Office of the Chief Executive 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 13
Slide 14: The Win Strategy
14 The Win Strategy Our Vision: Engineering Your Success STRATEGIES * Safety #1 * Environment, Social & Governance * Ownership - Entrepreneurial + High Performance Teams & Leaders ¢ Culture of Kaizen Customer Experience STRATEGIES * Quality Solutions On Time * Digital Leadership * Ease of Doing Busi
Slide 15: Parker's Core Values
Parker’s Core Values We insist on integrity and We are empowered – every We partner with our We lead by example, ethical behavior and we idea counts and every role customers to increase their demonstrating our values in value compassion, respect has a voice. We are productivity and all circumstances
Slide 16: Sustainability Targets Announced July 2021
Sustainability Targets Announced July 2021 Enabling a More Sustainable Future 16
Slide 17: ESG Strategy Framework
ESG Strategy Framework Overview Purpose Environment Social Governance § Climate Action § Safe Workplace § Strategy, Purpose & Values § Water Conservation § Diversity & Inclusion § Board of Directors § Product Stewardship § Social Responsibility § Enterprise Risk Management Communications & Reporting
Slide 18: Our Purpose
Our Purpose 18
Slide 19: What is Parker's purpose?
What is Parker’s purpose? Enabling Engineering Breakthroughs that Lead to a Better Tomorrow
Slide 20: Our Purpose Creates Inspiration for our Team Members
Our Purpose Creates Inspiration for our Team Members ► The Power of Purpose • Purpose is a platform for growth, change & positive impact • Team members who take ownership of their work are more engaged and enjoy higher levels of job satisfaction ► Enabling • Our team members enable the breakthroughs
Slide 21: Bringing our Purpose to Life
Bringing our Purpose to Life Quick Coupling Technology Enabling Technology Engineering Breakthrough A Better Tomorrow Threaded connection (60 seconds) Quick coupling solutions designed for Firefighter safety and more time Quick connection solution performance under pressure to rescue survivors (2 se
Slide 22: Our Robust Business Model
Our Robust Business Model 22
Slide 23: What Drives Parker?
What Drives Parker? Living Up to Our Purpose Great Generators and Deployers of Cash Top Quartile Performance vs. Proxy Peers 23
Slide 24: Parker's Competitive Differentiators
Parker’s Competitive Differentiators ▶ The Win Strategy™ ▶ Decentralized business model ▶ Technology breadth & interconnectivity ▶ Engineered products with intellectual property ▶ Long product life cycles ▶ Global distribution, service & support ▶ Low capital investment requirements ▶ Great generato
Slide 25: #1 Position within the Motion & Control Industry
#1 Position within the Motion & Control Industry $135 Billion Addressable Market Top 10 Competitors ▶ Highly fragmented market; ~13% market share ▶ Long-term opportunity to achieve ~20% market share ▶ Organic Growth Strategy – Strategic Positioning – Innovation – Winovation™ PVI + NPB – Simple by De
Slide 26: Interconnected Parker Technologies
Interconnected Parker Technologies Utility Lift Vehicle NON-CONDUCTIVE CABIN AIR FILTER HVAC SEALS CYLINDER ROD & PISTON HYDRAULIC HOSES SEALS IQAN HYDRAULIC ROTORARY HYDRAULIC HOSE ACTUATOR ASSEMBLIES Electromechanical Engineered Materials Filtration Fluid & Gas Handling Hydraulics Pneumatics FAN M
Slide 27: Parker Solutions for Manufacturing
Parker Solutions for Manufacturing NITROGEN GENERATOR CONTROLLER & HUMAN MACHINE INTERFACE (HMI) HVAC HYDRAULIC DUST FILTER PUMP WATER SENSO NODE CONDITION FILTRATION COLLECTION EMI MONITORING FILTERS SHIELDING HYPERCHILL WATER CHILLER Electromechanical Engineered Materials Filtration Fluid & Gas Ha
Slide 28: Expertise Supporting Semiconductor Manufacturing
Expertise Supporting Semiconductor Manufacturing Applications Parker Technologies • Liquid & gas mobile transport • Valve manifold boxes Process Control • Bulk gas distribution at facility • Semiconductor tool hookup • Ultra high purity (UHP) valves • Specialty chemical delivery • Fabrication tools
Slide 29: Light On-Road Electric Vehicle Technology
Light On-Road Electric Vehicle Technology Applications Parker Technologies • Battery Pack & Housing • Infotainment & Driver Assistance Safety • Motor & Gear Box • Power Electronics • Flame-resistant coatings • Charger & Inverter • Lightweight Assembly • High temperature materials • Environmental & h
Slide 30: Motion & Control Market Channels
Motion & Control Market Channels Industrial Distribution Industrial Stationary Industrial Mobile Aerospace Industrial Stationary • Chemical Processing • Agriculture • Engine & Power Generation • General Industrial • Food & Beverage • Automotive • Commercial Transport • Life Sciences & Medical • HVAC
Slide 31: Strategies to Grow & Expand Margins
Strategies to Grow & Expand Margins Performance Portfolio The Win Strategy 3.0 TM Acquire companies with higher growth trajectory and resiliency: ► Simplification: 80/20 + Simple by Design TM ► Innovation: Winovation Updates ► CLARCOR ► LORD ► Digital leadership ► Exotic ► Expand and grow distributi
Slide 32: Global Independent Distribution Network: At-a-Glance
Global Independent Distribution Network: At-a-Glance DISTRIBUTION PARTNERS ► High margin channel serving aftermarket and small to mid-size OEM’s ► Over 60 years in the making ► Global reach, local presence ~50% of Industrial Segment Revenue ► 800 bps increase in international through Independent Dis
Slide 33: Distribution Strategy – Multiple Channels
Distribution Strategy – Multiple Channels Multiple Single Product Line Technologies, Technology Focus Market Focus MRO Focus Systems Focused Focus COMPETITIVE ADVANTAGES PARTNERSHIPS INTERNATIONAL GROWTH • Integrating multiple Parker technologies • Extension of Parker’s sales team, finding • Dedicat
Slide 34: Strategy Summary
Strategy Summary Why We Win Where We Are Going § The Win Strategy § The Win Strategy 3.0 § Decentralized business model § Purpose Statement § Technology breadth & interconnectivity § Growth strategies § Engineered products with IP § Capitalize on 4 secular trends: § Long product life cycles • Aerosp
Slide 35: Parker's Transformation
Parker’s Transformation 35
Slide 36: Parker Transformed by Portfolio & Performance Actions
Parker Transformed by Portfolio & Performance Actions ▶ Two major enhancements to the Parker Business System: • The Win Strategy™ 2.0 • The Win Strategy™ 3.0 ▶ Simplification has streamlined organization structure: • 130 to 95 divisions inclusive of acquisitions ▶ Acquired companies with higher grow
Slide 37: Transformative Acquisitions
Transformative Acquisitions Longer Cycle, Accretive to Growth, Margins & Cash Flow Synergized Deal Announced Acquisition Realized Synergies Multiple1 Synergies $140M $160M Cost Synergies, 10.9x Cost Synergies $100M Revenue (FY 2017) EV/EBITDA in year 3 Synergies in year 3 $125M $125M 9.9x Cost Syner
Slide 38: The Win Strategy 3.0 Expands Growth & Simplification
The Win Strategy™ 3.0 Expands Growth & Simplification The Win Strategy 3.0 & Our Purpose Propel Our Future 38
Slide 39: Cultivating a Zero Incident Safety Culture
Cultivating a Zero Incident Safety Culture 1.43 Focus Areas ► Safety HPTs 78% reduction ► Training ► Machine guarding 0.31 ► Energy control ► Ergonomics FY15 FY23 YTD ► Non-routine work Recordable Incident Rate (RIR) High Performance Teams Driving Ownership & Improvement Note: FY23 YTD includes Megg
Slide 40: Higher Engagement Level Drives Results
Higher Engagement Level Drives Results % Engagement – Team Member Survey Results 73% 67% 64% 61% 2017 2018 2019 2022 2022 Engagement Survey Results in the Top 8% of Industrials1 1. Source: Korn Ferry 40
Slide 41: A Culture of Continuous Improvement
A Culture of Continuous Improvement Parker’s Brand of Kaizen Safety ► Ownership ► Speed High Top Quartile Performance Lean ► Productivity Teams Engagement ► Customer Experience Kaizen Compelling Combination Drives Elevated Performance 41
Slide 42: Parker's Simplification Initiative
Parker’s Simplification Initiative Structure & Footprint Division consolidation mostly complete Organization Design Continual optimization of spans and layers for efficient operations Revenue Complexity 80/20 Leveraging our channels; Product optimization Simple by Design Focus on product design and
Slide 43: Simple by Design - Expansion of Simplification Initiative
Simple by Design - Expansion of Simplification Initiative ™ Product Cost Decisions Made Here • Hundreds 30% • Limited impact Labor & OH • Easier to change Decisions Made Here 70% Design driven • Relatively few material and purchased cost • Significant/lasting impact • Difficult to change Enables Spe
Slide 44: Simple by Design Guiding Principles
Simple by Design™ 4 Guiding Principles Design with Design to Design to Design to Forward Thinking Reduce Reuse Flow Made Possible by Artificial Intelligence (AI) 44
Slide 45: Spin-on Filter Complexity Reduction
Spin-on Filter Complexity Reduction Applying Simple by Design™ Principles • Eliminates over 45 assemblies & 130 components Design Principles • Patented design creates aftermarket protection Forward • Eliminate overlap in product offering • Smaller package size fits into more applications Thinking •
Slide 46: A History of Strong Financial Performance & Capital Deployment
A History of Strong Financial Performance & Capital Deployment 46
Slide 47: The Win Strategy Drives Sustainable Value Creation
The Win Strategy Drives Sustainable Value Creation +17% Adj. EPS CAGR Capital Returns FY16–FY22 Shareholder Cash Flow Value Creation Acquisitions Margin Expansion Organic Growth Value Diverse end The Win Strategy Longer cycle, Resilient cash flow 66-year record of Top Quartile Creation markets and d
Slide 48: Performance
Performance Our People, Portfolio & Strategy Transform Performance 22.6% 1 1 21.3% Adjusted EPS Adjusted EBITDA $18.72 > 2.6x EPS $15.04 Increased 790 18.3% 19.3% growth bps 17.5% $13.10 $12.44 16.7% $11.57 14.7% $8.86 $6.99 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY16 FY17 FY18 FY19 FY20 FY21 FY22 As Re
Slide 49: Significantly Expanding Cashflow Dollars
Significantly Expanding Cashflow Dollars $2.1 >$4B § Step change in cash flow generation ~ 3x CFOA >$3.5B § 20+ years of FCF conversion >100% § Increased capital deployment capacity growth $2.4B ~18% ~16% $2.2B Cumulative Free Cash Flow $1.4B FY16 – FY21 FY22 – FY27 $1.3B 15.4% 13.9% 11.1% 12.4% >$9
Slide 50: Future Capital Deployment ~$30B
Future Capital Deployment 6 Year Period FY22 - FY27 Dividends Capital Deployment ~$5B Optionality 16% ~$5B-$10B 35% ~$30B Capital Expenditures 9% ~$3B Potential Capital 5% Share Repurchases Deployment ~$1B 35% Acquisition ~$10B Meggitt Acquisition represents transaction value announced August 2021.
Slide 51: Capital Deployment Priorities
Capital Deployment Priorities § Dividend: Maintain record and target 5-year average payout 30-35% of net income § CapEx: Target 2% of sales to fund organic growth and productivity § 10b5-1 share repurchase program § Near term: Debt reduction § Strategic acquisitions and/or discretionary share repurc
Slide 52: FY27 Five-Year Targets
FY27 Five-Year Targets FY27 TARGETS Organic Growth 4 – 6% Adjusted Segment Operating Margin 25% Adjusted EBITDA Margin 25% Free Cash Flow Margin 16% Adjusted EPS Growth 10%+ 52
Slide 53: FY16 – FY22 Transformation
FY16 – FY22 Transformation Accelerated Execution Launched The Win StrategyTM 2.0 & 3.0 Launched Parker’s Purpose Statement CLARCOR, LORD, Exotic acquisitions: Reduced incident rate by >70% Strategic portfolio transformation Acquisition of Meggitt PLC Achieved first quartile engagement scores Increas
Slide 54: Focused on Achieving Sustainable Top Quartile Performance
Focused on Achieving Sustainable Top Quartile Performance Fortune 250 global leader in motion and control technologies and solutions Market leadership driven by breadth of technologies, accelerated innovation, unparalleled scale and global distribution with strong service and support network 4-6% ta
Slide 55: Listed NYSE: PH
PH LISTED NYSE
Slide 56: Appendix
APPENDIX
Slide 57: Reconciliation of EBITDA margin to Adjusted EBITDA margin
Reconciliation of EBITDA margin to Adjusted EBITDA margin (Unaudited) (Dollars in millions) 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months ended ended ended ended ended ended ended 6/30/16 6/30/17 6/30/18 6/30/191 6/30/201 6/30/21 6/30/22 Net sales $ 11,361 $ 12,029 $ 14,302 $
Slide 58: Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share (Unaudited) (Amounts in Dollars) 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months ended ended ended ended ended ended ended 6/30/16 6/30/17 6/30/18 6/30/19* 6/30/20* 6/30/21 6/30/22 Earnings per
Slide 59: Reconciliation of Cash Flow from Operations to Adjusted Cash Flow and Free Cash Flow
Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations and Free Cash Flow Cash Provided by Operating Activities Reconciliation to GAAP (Unaudited) (Dollars in millions) FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Slide 60: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Twelve Months Ended (Dollars in thousands) June 30, 2022 Net Income $ 1,316,186 Cash Flow from Operations $ 2,441,730 Capital Expenditures (230,044) Free Cash Flow $ 2,211,686 Free Cash Flow Conversion (Free Cash Flow / Net Income) 168% 60