Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q2 2024 Earnings Presentation
29 slides from Parker-hannifin's earnings presentation, Feb 1, 2024
Slide 1: Fiscal 2024 Second Quarter Earnings Presentation
Parker Hannifin Corporation Fiscal 2024 Second Quarter Earnings Presentation February 1, 2024
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 Q2: Exceptional Results
FY24 Q2: Exceptional Results § Excellent operating performance driven by our team FY24 Q2 Highlights members executing The Win StrategyTM § 300bps adjusted segment margin1 expansion 16% $4.8B Reduction in Sales Recordable +3% Reported § Aerospace strength a significant driver Incidents +3% Organic1
Slide 4: A Technology Powerhouse of Interconnected Solutions
A Technology Powerhouse of Interconnected Solutions 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 tech
Slide 5: Significant Content on Leading Aerospace Programs Drives Growth
Significant Content on Leading Aerospace Programs Drives Growth FY24 1H Sales Mix by Application Competitive Advantages Energy & Other Helicopters 5% § Diversified customer base and market segments 5% Regional Transport 8% § Proprietary designs on premier programs Commercial Transport 38% § Comprehe
Slide 6: Competitive Differentiator - Global Distribution Network
Competitive Differentiator - Global Distribution Network ~50% of Diversified Industrial Revenue Through Distribution Distribution vs. Direct Revenue Mix § High margin channel serving aftermarket and small to mid-size OEMs § Integrating Parker technologies to solve North America customer problems ~55
Slide 7: Proven Record of Broad-Based Margin Expansion
Proven Record of Broad-Based Margin Expansion Diversified Industrial Diversified Industrial North America International Aerospace Systems 25.9% 24.0% 22.8% 23.4% 22.3% 22.9% 22.6% 22.9% 22.2% 21.8% 20.5% 21.0% 19.5% 19.3% 19.0% 19.3% 17.5% 17.4% FY19 FY20 FY21 FY22 FY23 FY24G FY19 FY20 FY21 FY22 FY2
Slide 8: Summary of Fiscal 2024 2nd Quarter Highlights
Summary of Fiscal 2024 2 Quarter Highlights nd
Slide 9: FY24 Q2 Financial Summary
FY24 Q2 Financial Summary $ Millions, except per share amounts FY24 Q2 FY24 Q2 FY23 Q2 YoY Change As Reported Adjusted¹ Adjusted¹ Adjusted Sales $4,821 $4,821 $4,675 +3% Segment Operating Margin 21.1% 24.5% 21.5% +300 bps EBITDA Margin 25.4% 25.7% 22.4% +330 bps Net Income $682 $802 $619 +30% EPS $5
Slide 10: FY24 Q2 Adjusted Earnings per Share Bridge
FY24 Q2 Adjusted Earnings per Share Bridge $0.10 $0.12 $0.18 ($0.01) ($0.02) $1.02 $6.15$6.13 $5.96 $5.16 $4.76 $4.74 FY23 Q2 Segment Income Other Interest Corp G&A Share FY24 Q2 Adjusted Operating Tax Expense Expense Count Adjusted EPS¹ Income EPS¹ 1. FY23 Q2 As Reported EPS of $3.04. FY24 Q2 As Re
Slide 11: FY24 Q2 Segment Performance
FY24 Q2 Segment Performance Segment Segment Sales Operating Operating As Reported $ Margin Margin Organic %1 As Reported Adjusted1 Order Rates2 Commentary Diversified • Excellent operational execution $2,110M 21.9% 24.2% (4%) • Softness in off-highway markets Industrial (1.5%) Organic +240 bps YoY N
Slide 12: FY24 Q2 YTD Cash Flow Performance
FY24 Q2 YTD Cash Flow Performance Cash Flow from Operations Free Cash Flow1 § Cash Flow from Operations +26% vs. prior 14.0% 11.9% § Free Cash Flow +29% vs. prior1 12.1% 10.0% § Free Cash Flow Conversion 86%1 $1,352M $1,148M § Increasing FY24 Guidance: $1,076M $890M • Free Cash Flow of $2.8B - $3.1B
Slide 13: Debt & Leverage Reduction Ahead of Schedule
Debt & Leverage Reduction Ahead of Schedule § Since Meggitt acquisition close: Gross Debt / Adj. EBITDA1 Net Debt / Adj. EBITDA1 • ~$2.2B debt reduction • 1.4x leverage reduction 3.6x 3.4x § ~$400M debt reduction during Q2 2.4x 2.3x § Committed to ~$2B debt paydown in FY24 § On track for 2.0x levera
Slide 14: FY24 Guidance Increased
FY24 Guidance Increased EPS Midpoint: $20.30 As Reported, $24.20 Adjusted Guidance Metric FY24 Full Year Key Assumptions § Reaffirming 4% sales growth midpoint Reported Sales 3.0% - 5.0% § Robust Aerospace demand § Split: 1H: 49% | 2H: 51% § Reaffirming organic growth midpoint Organic Sales Growth1
Slide 15: Parker's Promising Future
Parker’s Promising Future Adjusted EPS1 Free Cash Flow1 § Performance acceleration from ~$30 >$3.5B The Win StrategyTM ~25% ~20% § Strengthening customer value proposition ~$3B $24.20 § Longer cycle & more resilient portfolio § Growth from secular trends § Organic growth 4-6% over the cycle FY24 FY2
Slide 16: Upcoming Event Calendar
Upcoming Event Calendar FY24 Q3 Earnings Release May 2, 2024 2024 Investor Meeting May 16, 2024 FY24 Q4 Earnings Release August 8, 2024
Slide 17: 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 18: FY24 Guidance Details
FY24 Guidance Details Sales Growth vs. Prior Year As Reported Organic1 Additional Items As Reported and Adjusted1 Diversified Industrial North America (1.5%) - 0.5% ~(1.5%) Corporate G&A ~$235M Diversified Industrial International (2.0%) - 0.0% ~(2.0%) Interest Expense ~$510M Aerospace Systems 19.5%
Slide 19: Reconciliation of Organic Growth
Reconciliation of Organic Growth (Dollars in thousands) (Unaudited) Quarter-to-Date As Reported Adjusted As Reported Net Sales December 31, 2023 Currency Divestitures December 31, 2023 December 31, 2022 Diversified Industrial: North America $ 2,110,203 $ (6,672) $ 3,980 $ 2,107,511 $ 2,140,685 Inter
Slide 20: 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 December 31, 2023 % of Sales Amortization Charges Achieve Di
Slide 21: 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 Gain on Adjusted December 31, 2023 % of Sales Amortization Charges Achieve Divestiture December 31, 2023 % o
Slide 22: Adjusted Amounts Reconciliation Segment Operating Income
Adjusted Amounts Reconciliation Segment Operating Income (Unaudited) (Unaudited) (Dollars in millions) (Dollars in millions) 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months 12 Months ended ended ended ended ended ended ended ended ended e
Slide 23: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Dollars in thousands) Three Months Ended (Unaudited) December 31, 2023 % of Sales 2022 % of Sales Net sales $ 4,820,947 100.0% $ 4,674,811 100.0% Net income $ 682,057 14.1% $ 395,461 8.5% Income taxes 186,108 3.9% 121,282 2.6% Depreciation 85,751 1.8% 87,
Slide 24: Reconciliation of Gross and Net Debt / Adjusted EBITDA
Reconciliation of Gross and Net Debt / Adjusted EBITDA (Unaudited) (Dollars in thousands) December 31, 2022 December 31, 2023 Notes payable and long-term debt payable within one year $ 1,994,333 $ 3,681,167 Long-term debt 12,025,860 8,108,696 Add: Deferred debt issuance costs 83,758 66,098 Total gro
Slide 25: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Six Months Ended December 31, (Dollars in thousands) 2023 2022 Net Income $ 1,333,129 $ 783,498 Cash Flow from Operations $ 1,351,987 $ 1,076,134 Capital Expenditures (204,117) (185,704) Free Cash Flow $ 1,147,870 $ 890,430 Free Cash Flow Conve
Slide 26: Supplemental Sales Information
Supplemental Sales Information Global Technology Platforms (Unaudited) Three Months Ended December 31, (Dollars in thousands) 2023 2022 Net sales Diversified Industrial: Motion Systems $ 917,966 $ 913,415 Flow and Process Control 1,122,400 1,173,260 Filtration and Engineered Materials 1,474,107 1,45
Slide 27: Reconciliation of Forecasted Free Cash Flow
Reconciliation of Forecasted Free Cash Flow (Unaudited) (Dollars in thousands) Fiscal Year 2024 Forecasted cash flow from operations $3,200 to $3,500 Less: Capital Expenditures ~(400) Forecasted free cash flow $2,800 to $3,100 *Totals may not foot due to rounding 27
Slide 28: Reconciliation of Forecasted Segment Operating Margin
Reconciliation of Forecasted Segment Operating Margin (Unaudited) (Amounts in percentages) Fiscal Year 2024 Forecasted segment operating margin 20.7% to 21.1% Adjustments: Business realignment charges 0.3% Costs to achieve 0.2% Acquisition-related intangible asset amortization expense 2.9% Adjusted
Slide 29: Reconciliation of Forecasted EPS
Reconciliation of Forecasted EPS (Unaudited) (Amounts in dollars) Fiscal Year 2024 Forecasted earnings per diluted share $20.00 to $20.60 Adjustments: Business realignment charges 0.54 Costs to achieve 0.27 Acquisition-related intangible asset amortization expense 4.45 Net gain on divestitures (0.20