Parker-Hannifin Corporation

Greetings. Welcome to Parker Hanif Incorporation's Fiscal 2024 Third Quarter Earnings Conference Call and Webcast. At this time all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that today's conference is being recorded. At this time I'll now turn the conference over to Todd Liam Bruno, Chief Financial Officer. Mr. Liam Bruno, you may now begin your presentation.

Thank you, Rob. And good day, everyone. As Rob said, this is Parker's fiscal year 2024 third quarter earnings release webcast. This is Todd Liam Bruno, Chief Financial Officer speaking. With me on the call today is our Chairman and Chief Executive Officer, Jenny Parmentier. We appreciate your interest in Parker and we thank you for joining us today. If we move to slide two, you will find our disclosures on our forward-looking projections and non-GAAP financial measures. Actual results could vary from our forecast based on the items listed here. The press release, this presentation, and reconciliations for all non-GAAP measures that we will discuss today were released this morning and are available under the investor section on Parker.com. We're going to start today with Jenny reviewing the highlights of our strong third quarter performance, and then she's going to highlight how the competitive advantage of our high performance culture is getting our global team members to deliver consistent margin expansion. I will follow up now with some color on the financial results of the quarter and I will provide some assumptions to our increase in the fiscal year 24 guidance. We're going to end the call with a Q&A session and we'll try to take as many questions as we possibly can. Just a reminder, please try to limit your questions to one and a follow up if needed so we can get to all of those in the queue. With that, I now draw your attention to slide three, and Jenny, I'll hand it over to you.

Thank you, Todd. Q3 was another quarter where the team delivered outstanding results executing the win strategy, starting with safety, a 17% reduction in recordable incidents over prior Q3. Safety has been and will remain our top priority. Record sales of $5.1 billion in the quarter, with organic growth of 1.2%. Record adjusted segment operating margin of 24.7%. That's 150 basis point improvement over prior year, with all segments expanding margins. Adjusted EPS growth of 10%, along with 12.6% year-to-date free cash flow margin. Aerospace demand remains robust and was again a significant driver of our performance in the quarter. Our transformed portfolio and strong performance are driving an increase to full-year guidance. Next slide, please. Those of you who know us well know this is the wind strategy. This is our business system focused on the fundamentals. It is a proven strategy. We trust the process, and this is how we deliver results. Very simply put, this strategy works. I first used the wind strategy when I joined Parker 16 years ago as a plant manager. I very quickly learned that it wasn't just words written on a piece of paper. I was trusted, empowered, and expected to use the tools in the WIN strategy to improve my plan. I've since used it as a general manager, group president, and as an executive officer of the company. Based on a solid foundation of culture and values, we pursue four goals, engaged people, customer experience, profitable growth, and financial performance. Engaged people is the first and most important pillar. As I mentioned on the previous slide, safety is our top priority, and it sits in the first position of this first pillar. One of the keys to our success is our decentralized operating structure. High-performance teams at our 85 operating divisions utilize all the tools in the wind strategy to deliver results. Our culture drives an ownership and entrepreneurial mindset, one that I appreciated as a general manager and respect today. We are excited to show you some examples of the wind strategy in action at our upcoming Investor Day on May 16th. Next slide, please. Embedded in the wind strategy is our high performance culture. This is a competitive advantage that has allowed us to build a better and more resilient parker. The structure of high performance teams increases engagement and commitment at all levels of the organization. coupled with a disciplined operating cadence, drives top-quartile performance. Our approach is strength-based, focused on building relationships and team member development. This structure reinforces our customer-centric mindset and drives continuous improvement across the enterprise. Next slide, please. Our people, our high-performance culture that I just spoke about, our strategy, the WIN strategy, and our transformed portfolio have driven the performance you see on this page. This is a snapshot from FY19 through our FY24 guide. 7% revenue CAGR from $14.3 billion to our FY24 guide of $19.8 billion. 600 basis points increase in adjusted operating margin from 18.6% to our guide of 24.6%. 14% adjusted EPS CAGR from $13.10 to our FY24 guide of $24.75, and two times the amount of free cash flow dollars, $1.5 billion in fiscal year 19 to our FY24 guide of $3 billion. A lot of hard work. We are very proud of the global team delivering these results, and we have a very promising future ahead of us. And we're not done. I'll hand it over to Todd for the summary of our third quarter highlights.