Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q3 2023 Earnings Presentation
34 slides from Parker-hannifin's earnings presentation, May 4, 2023
Slide 1: Fiscal 2023 Third Quarter Earnings Presentation
Parker Hannifin Corporation Fiscal 2023 Third Quarter Earnings Presentation May 4, 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 Q3: Outstanding Performance
FY23 Q3: Outstanding Performance § Top quartile safety performance; 17% reduction in recordable incidents § Record sales $5.1B, an increase of 24% vs. prior year; organic growth 12%1 § Strong performance driving full year guidance increase § Increased the quarterly dividend 11% § Meggitt integration
Slide 4: Meggitt Integration & Synergies Ahead of Schedule
Meggitt Integration & Synergies Ahead of Schedule § Focusing on safety & engagement § Key leaders & structure in place § Win Strategy deployment underway § Working capital opportunities § Increasing FY23 synergies from $60m to $75m Ansty Park, UK Lean Kaizen Event (Feb 2023) Committed to $300M of Co
Slide 5: Parker Well Positioned for Long Cycle Aerospace Growth
Parker Well Positioned for Long Cycle Aerospace Growth § Significant content on premier commercial and military programs § Long lifecycle programs with growing aftermarket annuity § Aerospace market recovery continues § Comprehensive offering provides a more compelling value proposition for customer
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: Portfolio Transformation Drives Record Backlog
Portfolio Transformation Drives Record Backlog 13.0 ~55% 60% 11.0 50% $10.9 9.0 § Q3 Backlog +3% sequentially 40% 7.0 $7.9 27% 30% § ~3x increase in backlog dollars since FY16 5.0 $4.2 20% § ~2x increase in backlog coverage since FY16 3.0 $3.2 1.0 10% § Consistent growth over time -1.0 FY16 FY19 FY2
Slide 8: Built for the Present & Future
Built for the Present & Future
Slide 9: Built to Perform
Built to Perform Present § The Win Strategy™ 3.0 § Top quartile safety & engagement § Lean, Kaizen, Supply Chain & Simplification § ~ 30% Aerospace exposure § Expanded international distribution 800 bps § Innovation sales 2x previous decade § New annual incentive plan Better Top Line Resilience 9
Slide 10: Significant Opportunities Ahead
Significant Opportunities Ahead Future Secular Trends § Longer cycle & more resilient portfolio: ~85% § Meggitt growth & synergies § Win Strategy performance acceleration Aerospace Digital § Supply Chain leadership § Simple by Design™ § Zero Defects § Mega capital projects & secular trends Electrifi
Slide 11: Summary of Fiscal 2023 3rd Quarter Highlights
Summary of Fiscal 2023 3 Quarter Highlights rd
Slide 12: FY23 Q3 Financial Summary
FY23 Q3 Financial Summary $ Millions, except per share amounts FY23 Q3 FY23 Q3 FY22 Q3 YoY Change As Reported Adjusted¹ Adjusted¹ Adjusted Sales $5,062 $5,062 $4,086 +24% Segment Operating Margin 18.8% 23.2% 22.7% +50 bps EBITDA Margin 22.4% 24.2% 22.6% +160 bps Net Income $591 $772 $630 +22% EPS $4
Slide 13: FY23 Q3 Adjusted Earnings per Share Bridge
FY23 Q3 Adjusted Earnings per Share Bridge 1. FY22 Q3 As Reported EPS of $2.67. FY23 Q3 As Reported EPS of $4.54. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 13
Slide 14: FY23 Q3 Segment Performance
FY23 Q3 Segment Performance Segment Segment Sales Operating Operating As Reported $ Margin Margin Organic %1 As Reported Adjusted1 Order Rates2 Commentary Diversified • Solid broad-based growth continues $2,343M 20.9% 22.9% (4%) • Productivity improvement and volume Industrial +11.7% Organic Flat Yo
Slide 15: FY23 Q3 YTD Cash Flow Performance
FY23 Q3 YTD Cash Flow Performance § Cash Flow from Operations of 12.8% • An increase of 16% YoY 12.8% 13.3% 10.9% 11.9% § Free Cash Flow of 10.9%1 • Capex of 2.0% of sales $1,795 $1,548 $1,522 § Transaction expenses: $1,390 • A use of cash of ~1.5% of sales § Free Cash Flow Conversion of 111%1 Cash
Slide 16: Capital Deployment & Leverage Highlights
Capital Deployment & Leverage Highlights § 11% quarterly dividend increase: 3.8x Gross Debt / Adj. EBITDA1 • $1.48 declared on April 27, 2023 3.6x • 67 fiscal years of increasing annual 3.2x dividends per share paid Q1 FY23 Q2 FY23 Q3 FY23 § Leverage at FY23 Q3: Net Debt / Adj. EBITDA1 3.6x • $615M
Slide 17: FY23 Adjusted Guidance Increased
FY23 Adjusted Guidance Increased EPS Midpoint: $14.90 As Reported, $20.75 Adjusted FY23 Q4 FY23 Reported Sales Growth ~18% ~19% Organic Sales Growth1 ~4% ~10% Adjusted Segment Operating Margin1 ~22.6% ~22.5% Adjusted EPS1 $5.32 $20.75 ($5.17 - $5.47) ($20.60 - $20.90) 1. Adjusted numbers include cer
Slide 18: Parker's Promising Future
Parker’s Promising Future § Highly engaged global team living up to our purpose § Continue performance acceleration from The Win Strategy™ 3.0 § Strategic portfolio transformation - longer cycle & more resilient § Committed to FY27 Targets § Continue to be great generators and deployers of cash Focu
Slide 19: Upcoming Event Calendar
Upcoming Event Calendar 4Q FY23 Earnings Release August 3, 2023 Annual Meeting of Shareholders October 25, 2023 1Q FY24 Earnings Release November 2, 2023
Slide 20: Appendix
Appendix § FY23 Guidance Details § Reconciliation of Organic Growth § Adjusted Amounts Reconciliation – Consolidated § Adjusted Amounts Reconciliation – Business Segment § Reconciliation of EBITDA to Adjusted EBITDA § Reconciliation of Gross and Net Debt to Adjusted EBITDA § Reconciliation of Free C
Slide 21: FY23 Adjusted Guidance Increased
FY23 Adjusted Guidance Increased EPS Midpoint: $14.90 As Reported, $20.75 Adjusted Sales Growth vs. Prior Year Reported Organic1 Earnings Per Share As Reported Adjusted1 Diversified Industrial North America ~15% ~11% Range $14.75 - $15.05 $20.60 - $20.90 Diversified Industrial International ~3% ~9%
Slide 22: Reconciliation of Organic Growth
Reconciliation of Organic Growth (Dollars in thousands) (Unaudited) Quarter-to-Date As Reported Adjusted As Reported Net Sales March 31, 2023 Currency Divestitures Acquisitions March 31, 2023 March 31, 2022 Diversified Industrial: North America $ 2,342,590 $ (590) $ - $ (92,415) $ 2,249,585 $ 2,014,
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 As Reported Intangible Asset Realignment Costs to Related of Inventory Net Loss on Adjusted March 31,
Slide 24: 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 2022 Acquired Business Lord Acquisition Loss on As Reported Intangible Asset Realignment Costs to Related Deal-Contingent Russia Adjusted March 31, 2022 % of
Slide 25: Adjusted Amounts Reconciliation Business Segment Information
Adjusted Amounts Reconciliation Business Segment Information (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2023 Acquired Business Meggitt Acquisition Amortization As Reported Intangible Asset Realignment Costs to Related of Inventory Net Loss on Adjusted March 31, 2023 % of Sales Amortizatio
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 Loss on As Reported Intangible Asset Realignment Costs to Related Deal-Contingent Russia Adjusted March 31, 2022 % of Sales Amortization Charges
Slide 27: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Dollars in thousands) Three Months Ended (Unaudited) March 31, 2023 % of Sales 2022 % of Sales Net sales $ 5,061,665 100.0% $ 4,086,387 100.0% Net income $ 590,960 11.7% $ 348,088 8.5% Income taxes 165,421 3.3% 85,901 2.1% Depreciation 80,194 1.6% 63,832
Slide 28: Reconciliation of Gross and Net Debt / Adjusted EBITDA
Reconciliation of Gross and Net Debt / Adjusted EBITDA (Unaudited) (Dollars in thousands) March 31, 2023 Notes payable and long-term debt payable within one year $ 1,992,919 Long-term debt 11,412,304 Add: Deferred debt issuance costs 79,018 Total gross debt $ 13,484,241 Cash and cash equivalents $ 5
Slide 29: Reconciliation of Gross and Net Debt / Adjusted EBITDA
Reconciliation of Gross and Net Debt / Adjusted EBITDA (Unaudited) (Dollars in thousands) December 31, 2022 Notes payable and long-term debt payable within one year $ 1,994,333 Long-term debt 12,025,860 Add: Deferred debt issuance costs 83,758 Total gross debt $ 14,103,951 Cash and cash equivalents
Slide 30: 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 31: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Nine Months Ended (Dollars in thousands) March 31, 2023 Net Income $ 1,374,458 Cash Flow from Operations $ 1,794,894 Capital Expenditures (272,603) Free Cash Flow $ 1,522,291 Free Cash Flow Conversion (Free Cash Flow / Net Income) 111% (Unaudit
Slide 32: Supplemental Sales Information
Supplemental Sales Information Global Technology Platforms (Unaudited) Three Months Ended March 31, (Dollars in thousands) 2023 2022 Net sales Diversified Industrial: Motion Systems $ 1,017,974 $ 895,839 Flow and Process Control 1,298,204 1,197,590 Filtration and Engineered Materials 1,550,927 1,360
Slide 33: Reconciliation of EPS
Reconciliation of EPS Q4 Fiscal Year 2023 Guidance (Unaudited) (Amounts in dollars) Q4 Fiscal Year 2023 Forecasted earnings per diluted share $4.18 to $4.48 Adjustments: Business realignment charges 0.08 Costs to achieve 0.10 Acquisition-related intangible asset amortization expense 1.12 1 Tax effec
Slide 34: Reconciliation of EPS
Reconciliation of EPS Fiscal Year 2023 Guidance (Unaudited) (Amounts in dollars) Fiscal Year 2023 Forecasted earnings per diluted share $14.75 to $15.05 Adjustments: Business realignment charges 0.23 Costs to achieve 0.69 Acquisition-related intangible asset amortization expense 4.00 Acquisition-rel