Donaldson Company, Inc.

Head of Investor Relations. Please go ahead.

Good morning. Thank you for joining Donaldson's first quarter fiscal 2024 earnings conference call. With me today are Todd Carpenter, Chairman, CEO, and President, and Scott Robinson, Chief Financial Officer. This morning, Todd and Scott will provide a summary of our first quarter performance and details on our outlook for fiscal 2024. During today's call, we will discuss non-GAAP or adjusted results. In the prior year period, first quarter fiscal 2023, non-GAAP results exclude restructuring and other charges of $7.6 million. A reconciliation of GAAP to non-GAAP metrics is provided within the schedules attached to this morning's press release. Additionally, please keep in mind that any forward-looking statements made during this call are subject to risks and uncertainties which are described in our press release and FCC filings. With that, I'll now turn the call over to Todd Carpenter.

Thanks, Sarika. Good morning, everyone. I am pleased to report our first quarter earnings results, which demonstrate our continued ability to deliver to our customers and shareholders despite overhanging macro uncertainty. This quarter, we reported consolidated gross margin at nearly a decade high, driven by our team's efforts on strategic pricing, deflation in select input costs, mixed benefits, and plant productivity. We focused on executing in and growing each of our three operating segments and laid the groundwork for a record fiscal 2024. In mobile solutions, despite volume weakness from software and market conditions, we delivered strong profit margins driven by strategic pricing, select input cost deflation, mixed benefits, and strong plant performance. Our industrial solutions business continues to outperform from a top and bottom line perspective. Our create, connect, replace service business model has allowed us to first, create high quality, first fit solutions through innovation and the addition of connected features. Second, connect solutions through next generation gateways and controllers. In fiscal 2023, aftermarket sales growth from connected customers outpaced that of non-connected industrial customers, and we launched the connected model in India, Thailand, and China. While we're in the early innings, as of the first quarter, we have seen strong growth in the new connections as compared to prior year. Lastly, we are replacing and servicing equipment through our one-stop shop approach, and service capabilities across the full range of industrial solutions businesses. Overall, we are gaining market share in industrial as we penetrate key end markets and expand geographically. For example, our power generation business drove results this quarter as we benefited from recent customer wins including large turbine projects in Asia and the Middle East. Aerospace and defense also had a strong quarter And we've increased our outlook for the year, which Scott will discuss later, as winds and cabin air filtration, including a major OEM wind, positively impact results. In life sciences, as expected, we saw sequential improvement in our operating performance. We continue to invest and build the foundation needed to gain share in these highly attractive, high-margin markets, by leveraging our competitive strengths and global reach, and our pipeline of opportunities is growing. Now I'll cover some consolidated highlights. Sales of $846 million were flat year-over-year as volume declines were offset by pricing benefits. Currency was also a slight tailwind. Volumes were negatively impacted by OEM aftermarket destocking, off-road and market weakness, and continued pressure in disk drive. Conversely, pricing remained a benefit as we added value for our customers and strategically offset ongoing inflationary pressures such as labor rates and energy costs. EPS in the quarter was 75 cents flat the prior year as gross margin gains and favorability in other income were offset by investments in strategically important growth areas, including our life science business. One of the highlights this quarter was the strength and resiliency of our best in class operations, one of Donaldson's key competitive advantages. As always, our focus remains on working down our backlogs and improving our fill rates and on-time delivery rates. As supply chain conditions have improved, we have been able to return to the company's longstanding focus on operational excellence and effective cost management. While we execute today, we continue to invest for the future through our CapEx and R&D investments. With respect to CapEx, while capacity investments continue to be the largest portion as we prepare for future profitable growth, we are also focused on cost reduction initiatives and the further commercialization of our life sciences acquisitions. Our strong cash flow generation combined with the strength of our balance sheet allows us to continue these exciting investments and drive towards our long-term strategic objectives. Now I'll provide some detail on first quarter sales. Total company sales were $846 million, essentially flat the prior year. Pricing was an approximate 3% benefit. In mobile solutions, total sales were $540 million, a 3% decline versus 2023. Pricing added 3%. Within the mobile segment, performance continued to be mixed. Off-road sales of $95 million were down 9% due to weakening end market conditions, including in China and the agriculture markets within the Americas and India. Aftermarket sales of $408 million were down 2% year-over-year, driven entirely by the OEM channel. As anticipated, Destocking from OEM customers continued in response to normalizing global supply chain conditions. That said, we are now starting to see a stabilization in order patterns and believe that destocking is largely behind us. In our independent aftermarket channel, sales increased 3% year-over-year. Sales in our on-road first-fit business of $38 million grew 5%, driven by elevated levels of on-highway equipment production, particularly in China. Now, I will touch on China as a whole within mobile solutions as it continues to be an important market for us. Sales declined 14% versus 2023 and declined 11% in constant currency. Conditions within the country continue to be very challenging given the weak, broader market conditions. particularly with respect to off-road. Despite this, our long-term view remains positive given the market size and our opportunities to gain share. Turning to the industrial solution segment, the industrial segment had another robust quarter as sales increased 7% to $246 million. Pricing added 2%. Industrial filtration solutions, or IFFs, sales grew 7% to $211 million driven by strong dust collection and power generation sales. Aerospace and defense sales rose 6% due to another quarter of defense sales strength. On the life sciences segment, life sciences sales were $60 million, a 4% year-over-year decrease driven primarily by anticipated ongoing disk drive market weakness. We are seeing early signs of a slow demand recovery and expect a sequential improvement in disk drive sales through fiscal 2024 as data center and cloud computing demand recovers. Along with growing our legacy life sciences businesses, including food and beverage, we are focused on scaling our acquisitions and look forward to detailing how these are contributing to our growth in the quarters to come. As we close the first quarter of the year, I am proud of our hardworking Donaldson employees around the globe. I'm continually impressed with their dedication to our customers, their fellow employees, and to our mission of advancing filtration for a cleaner world. Through our ongoing efforts, we are well poised to deliver value to all of our stakeholders in fiscal 2024. As such, for the full year, our outlook is unchanged as we forecast total sales, operating margins, and earnings at all time high levels. Now I'll turn it over to Scott, who will provide more details on the financials and our outlook for fiscal 24. Scott?