Parker-Hannifin Corporation

Thank you for standing by and welcome to the Parker Hennepin Fiscal 2023 First Quarter Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Mr. Todd Liam Bruno, Chief Financial Officer. Please go ahead, sir.

Thank you, Jonathan. Good morning to everyone, and thank you for joining Parker's fiscal year 2023 Q1 earnings release webcast. As Jonathan said, this is Todd Lee Bruno, Chief Financial Officer, speaking. And joining me today is our Chairman and Chief Executive Officer, Tom Williams, Vice Chairman and President, Lee Banks, and our current Chief Operating Officer and Chief Executive Officer-elect, Jenny Parmentier. We will be addressing forward projections and non-GAAP financial measures today. Slide 2 provides details to our disclosure statement in these areas. Actual results could vary from our projections for the items listed in these forward-looking statements and also detailed in our SEC filings. The presentation today will address non-GAAP measures and reconciliations for those non-GAAP measures are available in this presentation and all of this is available on the investor section at Parker.com and will remain available for one year. Tom is going to begin the call today with a couple highlights on the quarter and also provide an update to the MEGIT integration. I'll follow with a brief summary on the financials and review the increase to our guidance that we issued this morning. And then we'll touch on the leadership transition that we announced last week and we'll finish the call with Q&A. So if I could ask you to reference slide three, and I'll hand it over to Tom to begin.

Thank you, Tony. Good morning, everybody. Thanks for joining the call today. We had an impressive first quarter, seven first quarter records, sales, net income, EPS, and several margin records. And we closed the make it acquisition, which was a big accomplishment. So if you look at this slide, the first bullet, safety is our top priority. We leveraged the high performance teams, Lean and Kaizen. We had a 17%. reduction in incidents versus a prior year. You look at that on a safety incident rate, so that would be number of incidents per 100 team members, that would put us in the top quartile versus our proxy peer group, which is fantastic results. Sales were $4.2 billion, an increase of 12% versus the prior year. Organic was very strong at a plus 14% versus the prior, and we had strength across all regions and segments. Segment operating margin was 19.8%. as reported, or 22.7% adjusted. We had a 70 basis point improvement versus prior year. Again, excellent improvement and in pretty tough conditions. As I mentioned, we completed the MEGA acquisition integrations well underway. We're off to a good start. I'll talk more about that in a second. So if you look at the quarter and really the last several years, it's that takeaway that you see in this slide. The wind strategy, the portfolio changes working together to deliver record performance. Go to slide four. Some pictures from day one. We showed you some of these in our last call, but it was a great day one. We had Parker executives at every mega-site globally, 34 sites around the world. Very positive meetings, and we're off to a good start putting the two companies together. You go to slide five. I went through this in a fair amount of detail on the September 28th investor call, but just to orientate you on the page, on the left-hand side, the blue bars are the synergies, Gold is cost achieved. This is by fiscal year. It shows you the walk to a $300 million worth of synergies in FY26. That would take us to approximately 30% to just deep into that margin over that period of time. So significant improvement in profitability. On the right-hand side is really the how. How we'll get to $300 million synergies. And again, I went through that in a lot of detail. Suffice it to say, it all sits underneath the umbrella of the wind strategy. Those four boxes that you see underneath there. And we're now seven weeks into it. I've had a chance to spend time with the teams. I feel very good about our ability to deliver these synergies. If you go to slide six, really the combination of the portfolio changes that we've made, so the doubling of filtration, the doubling of engineering materials, and the doubling of aerospace over the last eight years, you put that together with our technology offering, which is very much aligned to the secular trends of today and the future, aerospace, digital electrification, and clean technologies. That combination is going to have a profound shift in our sales mix, and that's what you see illustrated on these pie charts at the bottom here. So if you look at where we were in FY15 and you go out to FY27 on an illustrative basis, you'd see that we'd have 85% of the company either industrial aftermarket or longer cycle. That mix shift is what has allowed us to change our FY27 target on growth to grow 4% to 6% organically over the cycle. Go to slide seven. If I was only allowed one slide on these earnings calls, this would probably be the slide I'd show you. It demonstrates that the company is distinctively different and better over quite a period of time here. So on the left is adjusted EPS, and we've updated that for the FY23 guide. You see the 1895 at the midpoint. and the adjusted EBITDA margins on the right-hand side, and almost 800 basis point improvement over this period of time. You know, this slide really speaks for itself. It's hard to make metrics go at a 45-degree angle to the right, but it's a fantastic job by our people, portfolio changes, and the strategy of the company. Arguably the most improved industrial company over this period of time, and a great company to invest in. And with that, I'm going to hand it over to Todd to talk more about the quarter.