Donaldson Company, Inc.

by. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the Donaldson Company Q1 FY26 earnings webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, Simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Sarika Dogwal, head of investor relations. Sarika, please go ahead.

Good morning. Thank you for joining Donaldson's first quarter fiscal 2026 earnings conference call. With me today are Todd Carpenter, chairman, president, and CEO, Brad Pogles, chief financial officer, and Rich Lewis, Chief Operating Officer. This morning, Todd and Brad will provide a summary of our first quarter performance and our outlook for fiscal 2026. During today's call, we will discuss non-GAAP or adjusted results. First quarter 2026 non-GAAP results exclude a pre-tax gain on the sale of fixed assets of $9.3 million and a pre-tax charge of $5 million for restructuring and other charges primarily related to footprint optimization and cost reduction initiatives. 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 SEC filings. With that, I will now turn the call over to Todd.

Thanks, Sarika. Good morning, everyone. Donaldson Company's first quarter results were strong. And I'm proud of what our team was able to accomplish. Growing sales, operating profit margin, and earnings. We delivered once again on our commitments to all of our stakeholders, our customers, our shareholders, and our employees. We did this through our leadership position in filtration, which was built on decades of solving our customers' most difficult filtration problems with our razor to sell razor blades model. Our best in class technology, which is uniquely powerful because we focus on filtration capabilities and then leverage these technologies across markets. Our ability to help customers meet evolving environmental and operational goals by helping to protect equipment and maintain cleaner work environments and our clear strategic and balanced growth strategy. That is why our success continues. I will start by discussing our first quarter performance, touch briefly on our expectations for fiscal 2026, then Brad will detail our financials. Lastly, I'll provide some closing remarks before opening the call to questions. In the first quarter, we grew sales to an all-time first quarter high of $935 million, a 4% year-over-year increase, with growth across many key businesses, including mobile aftermarket, power generation, food and beverage, and disk drive. Expanded operating profit margin to a record 15.5%, driven by leverage on higher sales and cost optimization initiatives. delivered record earnings per share of 94 cents, 13% above prior year, returned $127 million to shareholders through share repurchase and dividends, and continued cost optimization initiatives, including our footprint optimization, laying the foundation for higher future profitability. Now a few highlights by segment. In mobile solutions, our razor to sell razor blades model continues to drive through cycle performance. Our aftermarket results are robust. For example, we continue to gain share in the independent channel where sales grew nearly double digits. We have expanded partnerships with customers like Napa. Our distribution centers are performing well. Stock availability is at desired levels and our on-time delivery rates are high. While cyclical headwinds continue, our largest first-fit business, off-road, grew for the second consecutive quarter with supportive end-market conditions in construction more than offsetting muted conditions in agriculture. In industrial solutions, our power generation business is robust, supported by the current electricity demand super cycle, including data center and AI infrastructure build-outs. Our power generation order books are full through the rest of this fiscal year. Dust collection replacement part sales growth was solid, another example of our razor to sell razor blade strategy at work as we continue to build out our service and aftermarket capabilities. To that end, this quarter, over half of our total industrial sales were replacement part sales. In life sciences, we're excited by the market share we are gaining in food and beverage, where sales grew over 20%. We are winning with key OEMs and channel partners, growing first-fit sales and planting seeds for future replacement parts sales. Our disk drive business also grew over 20% through share gains and supportive market conditions, and we are investing in new technologies to support capabilities for HAMR, pronounced hammer short for heat assisted magnetic recording, which will contribute to future growth. Our strong overall results are a testament to the capabilities and agility of the Donaldson team. Our global operations teams in particular continue to deliver for our customers through the changing tariff landscape and with a keen focus on efficiency. Our global region for region footprint is a strong asset for the company and one of our key competitive advantages. Leveraging this decades-long foundation, we have successfully offset residual tariff impacts through pricing and optimized supply chain. I am proud of how we are also stepping up and helping our customers mitigate tariff impacts through collaboration, education, and production transfers. To that end, our current annualized estimate for the impact of tariffs is approximately $25 million, down from $35 million previously. We are also building long-term structural efficiencies through our footprint and cost optimization initiatives. We expect to be mostly complete with our current activities by the second half of this fiscal year. Our commitment to serving our customers through any market conditions while maintaining high on-time delivery rates is driving demand, and our backlogs are reflective of the confidence our customers have in Donaldson. We are also building for our future through our disciplined investments in R&D and capital expenditures. This quarter, these included continued focused investments in growth areas such as solvent recovery, new disk drive technologies, and air and alternative fuels filtration. Now I'll provide some detail on first quarter sales. Mobile Solutions total sales were $598 million, 5% above prior year. Aftermarket sales were $480 million, up 7%, driven by strength in both the OE and independent channel. On the FirstFit side, off-road sales of $95 million increased 6%. Gains in construction offset continued weakness in agriculture. On-road sales of $23 million declined 27% as a result of decreased global truck production. Within mobile solutions, our China business was solid, with overall sales up 15% from strength in off-road and aftermarket. This marks the fifth consecutive quarter of growth, and we recently won another hydraulics program with a top agriculture equipment manufacturer, another sign that customer trust in Donaldson is building in this massive market. Now on to industrial solutions. Industrial sales were $258 million flat to prior year. Industrial filtration solutions, or IFS, sales of $216 million grew 2% from continued strength in power generation, particularly in Europe, and dust collection replacement parts sales in the U.S., Aerospace and defense sales were $42 million, a 7% decrease driven by softer defense sales following the completion of a few large projects. In life sciences, sales of $79 million grew 13% year-over-year as a result of double-digit growth in food and beverage and disk drive bolstered by project timing in our upstream biotechnology businesses. Given our robust start to the year and our confidence in delivering on our financial and strategic objectives through the balance of the year, we are increasing our operating margin and EPS outlook. At the midpoint of our updated guidance ranges, we expect record sales of $3.8 billion and sales growth in each of our segments. operating margin expansion of 80 basis points to a record of 16.5%, which puts our incremental margin above 40%, and all-time high earnings per share of $4.03. With that, I will now turn it over to Brad, who will provide more details on the financials and our outlook for fiscal 2026. Brad?