Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — FY2021 Earnings Presentation
37 slides from Parker-hannifin's earnings presentation, Aug 5, 2021
Slide 1: Fiscal 2021 Fourth Quarter & Full Year Earnings Presentation
Parker Hannifin Corporation Fiscal 2021 Fourth Quarter & Full Year Earnings Presentation August 5, 2021 Exhibit 99.2
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements and Non-GAAP Financial Measures 2 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. These st
Slide 3: Outstanding Performance in FY21 Q4
Outstanding Performance in FY21 Q4 3 ▪ Top quartile safety performance; 29% reduction in recordable incidents ▪ Sales growth of 25.3% YoY; Organic growth 21.8% YoY ▪ Six all-time quarterly records: • Sales, Net income, EPS, Segment Margins for Parker, Industrial North America & International ▪ EBITD
Slide 4: A Year of Record Performance - FY21 Highlights
A Year of Record Performance - FY21 Highlights 4 Eight all-time fiscal year records: • Sales, Net income, EPS, ROS, Cash flow from operations • Segment Margins for Parker, Industrial North America & International ▪ Sales growth of 4.8% YoY; Organic sales flat YoY ▪ Achieved FY23 margin targets 2 y
Slide 5: Parker's Transformation
Parker’s Transformation
Slide 6: Drivers of Parker's Performance
Drivers of Parker’s Performance Great Generators and Deployers of Cash Living Up to Our Purpose Top Quartile Performance vs. Proxy Peers 6
Slide 7: What is Parker's purpose?
What is Parker's purpose? Enabling Engineering Breakthroughs that Lead to a Better Tomorrow
Slide 8: Vaccine Production Instead of Soft Drinks
3 Vaccine Production 8 Instead of Soft Drinks…Delivering Sterile Vaccine Ingredients Long lead times Large space requirements Difficult changeovers Challenges Simple Concept
Slide 9: Parker's Inline Dilution System
3 Parker’s Inline Dilution System Proprietary Point of Use Process for Combining Purified Vaccine Ingredients 9 Modular, point-of-use process IoT two-way communication IP protected single use consumables Proprietary software and automation Life Saving Vaccines
Slide 10: Sustainability Targets Announced July 2021
Sustainability Targets Announced July 2021 10 Enabling a More Sustainable Future
Slide 11: Technologies Enabling a Sustainable Future
Technologies Enabling a Sustainable Future 11 ~2/3’s of portfolio enables clean technologies Exciting bill of material expansion opportunities On-board and infrastructure growth potential
Slide 12: Our People, Portfolio & Strategy Transform Performance
$6.99 $8.86 $11.57 $13.10 $12.44 $15.04 FY16 FY17 FY18 FY19 FY20 FY21 Adjusted EPS1 1: Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. $5.89 $7.25 $7.83 $11.57 $9.26 $13.35As Reported EPS Our People, Portfolio & Strategy Transfor
Slide 13: Compelling Strategic Aerospace Combination
13 Compelling Strategic Aerospace Combination Nearly doubles the size of Aerospace Systems Segment with complementary technologies 70% sole-source with proprietary products that expand system and component capabilities Strong recurring revenue – adds 500 bps to Aerospace aftermarket mix Strong growt
Slide 14: Summary of Fiscal 2021 / 4th Quarter Results
Summary of Fiscal 2021 4th Quarter Results
Slide 15: Financial Summary FY21 Q4 vs. FY20 Q4
15 Financial Summary FY21 Q4 vs. FY20 Q4 1. Sales figures As Reported. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. Note: FY20 Q4 As Reported: Segment Operating Margin of 15.8%, EBITDA Margin of 18.5%, Net Income of $289M, EPS
Slide 16: Adjusted Earnings per Share Bridge FY20 Q4 to FY21 Q4
16 Adjusted Earnings per Share Bridge FY20 Q4 to FY21 Q4 1. FY20 Q4 As Reported EPS of $2.23. FY21 Q4 As Reported EPS of $3.84. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations.
Slide 17: FY21 Q4 Segment Performance
17 FY21 Q4 Segment Performance Sales As Reported $ Organic %¹ Segment Operating Margin As Reported Segment Operating Margin Adjusted1 Order Rates2 Commentary $1,823M +25.8% Organic 19.8% 22.5% +300 bps YoY +56% • Strong organic growth • Record segment operating margin • Portfolio enhancements $1,506
Slide 18: FY21 Cash Flow Performance
18 FY21 Cash Flow Performance Cash Flow from Operations of 17.9% Free Cash Flow of 16.5% Free Cash Flow Conversion of 135% All serviceable debt repaid, as of June 30th ~$3.4 billion debt reduction in last 20 months Gross debt to EBITDA of 2.1x; Net debt to EBITDA of 1.9x 1. Adjusted numb
Slide 19: FY22 Guidance Issued
19 FY22 Guidance Issued EPS Midpoint: $14.48 As Reported, $16.60 Adjusted Sales Growth vs. Prior Year Diversified Industrial North America ~ 6% - 10% Diversified Industrial International ~ 5% - 9% Aerospace Systems ~ 2% - 6% Parker ~ 5% - 9% Segment Operating Margins As Reported Adjusted1 Diversifie
Slide 20: Adjusted Earnings per Share Bridge FY21 Actual vs. FY22 Guidance
20 Adjusted Earnings per Share Bridge FY21 Actual vs. FY22 Guidance 1: Adjusted for acquired intangible asset amortization, business realignment charges, integration costs to achieve, acquisition-related expenses, gain on sale of land, and the tax effect of such adjustments 2: Adjusted for acquired
Slide 21: FY22 Capital Deployment Strategies
FY22 Capital Deployment Strategies Dividends: Maintain annual increase record • Target 5-year average payout 30-35% of net income Fund organic growth and productivity • Target capital expenditures 2% of sales Offset share dilution through 10b5-1 share repurchase program Accumulation of cash in prepa
Slide 22: Key Messages
Key Messages Highly engaged global team Living up to our Purpose Top quartile performance Achieved FY23 margin targets 2 years early Strategic portfolio transformation 22 The Win Strategy 3.0 & Capital Deployment Accelerate Performance
Slide 23: ESHER
PH ESHER NYSE
Slide 24: 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 Free Cash Flow Conversion • Supplement
Slide 25: Reconciliation of Organic Growth (Quarter-to-Date)
Reconciliation of Organic Growth 25 (Dollars in thousands) (Unaudited) Quarter-to-Date As Reported Currency Organic As Reported Net Sales June 30, 2021 June 30, 2021 June 30, 2020 Diversified Industrial: North America $ 1,823,078 $ (11,821) $ 1,811,257 $ 1,440,263 International 1,505,835 (97,107) 1,
Slide 26: Reconciliation of Organic Growth (Year-to-Date)
Reconciliation of Organic Growth 26 (Dollars in thousands) (Unaudited) Year-to-Date As Reported Currency Adjusted As Reported Net Sales June 30, 2021 Acquisitions June 30, 2021 6/30/2020 Diversified Industrial: North America $ 6,676,449 $ (7,624) $ (187,531) $ 6,481,294 $ 6,456,298 International 5,2
Slide 27: Adjusted Amounts Reconciliation Consolidated Statement of Income
Adjusted Amounts Reconciliation Consolidated Statement of Income 27 (Dollars in thousands, except per share data) (Unaudited) Quarter-to-Date FY 2021 % of Sales Acquired Intangible Asset Amortization Business Realignment Charges Lord Costs to Achieve Exotic Costs to Achieve Acquisition Related Expen
Slide 28: Adjusted Amounts Reconciliation Consolidated Statement of Income
Adjusted Amounts Reconciliation Consolidated Statement of Income 28 *Prior periods have been adjusted to reflect the change in inventory accounting method (Dollars in thousands, except per share data) (Unaudited) Quarter-to-Date FY 2020 Acquired Business Lord Exotic Acquisition Favorable As Reported
Slide 29: Adjusted Amounts Reconciliation Business Segment Information
Adjusted Amounts Reconciliation Business Segment Information 29 (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2021 % of Sales Acquired Intangible Asset Amortization Business Realignment Charges Lord Costs to Achieve Exotic Costs to Achieve Acquisition Related Expenses % of Sales2 As Reported
Slide 30: Reconciliation of Earnings per Diluted Share to Adjusted EPS
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share 30 (Unaudited) Three Months Ended June 30, (Amounts in dollars) 2021 2020* Earnings per diluted share $ 3.84 $ 2.23 Adjustments: Acquired intangible asset amortization expense 0.62 0.62 Business realignment charges 0
Slide 31: Reconciliation of Earnings per Diluted Share to Adjusted EPS
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share 31 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
Slide 32: Reconciliation of Total Segment Operating Margin to Adjusted
32 Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin (Unaudited) Three Months Ended Three Months Ended (Dollars in thousands) June 30, 2021 June 30, 2020 Operating income Operating margin Operating income Operating margin Total segment operating income $ 789
Slide 33: Reconciliation of EBITDA to Adjusted EBITDA
33 Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended June 30, (Dollars in thousands) 2021 2020* Net sales $ 3,958,869 $ 3,160,603 Net income $ 504,969 $ 289,477 Income taxes 151,582 72,879 Depreciation and amortization 146,582 146,582 Interest expense 60,258 74,549 EBITDA 86
Slide 34: Reconciliation of EBITDA to Adjusted EBITDA
34 1Amounts have been adjusted to reflect the change in inventory accounting method. *Totals may not foot due to rounding Reconciliation of EBITDA to Adjusted EBITDA
Slide 35: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion 35 (Unaudited) Twelve Months Ended June 30, 2021 Twelve Months Ended June 30, 2020(Dollars in thousands) Net income $ 1,746,861 $ 1,202,332 Cash flow from operations $ 2,575,001 $ 2,070,949 Capital Expenditures (209,957) (232,591) Free cash flow $ 2,365,04
Slide 36: Supplemental Sales Information Global Technology Platforms
Supplemental Sales Information Global Technology Platforms 36 (Unaudited) Three Months Ended June 30, Twelve Months Ended June 30, (Dollars in thousands) 2021 2020 2021 2020 Net sales Diversified Industrial: Motion Systems $ 883,395 $ 698,684 $ 3,081,366 $ 2,996,645 Flow and Process Control 1,152,43
Slide 37: Reconciliation of EPS Fiscal Year 2022 Guidance
Reconciliation of EPS Fiscal Year 2022 Guidance 37 (Unaudited) (Amounts in dollars) Fiscal Year 2022 Forecasted earnings per diluted share $14.08 to $14.88 Adjustments: Business realignment charges 0.27 Costs to achieve 0.05 Acquisition-related intangible asset amortization expense 2.43 Tax effect o