Parker-Hannifin Corporation

Greetings and welcome to the Parker Hannafin Fiscal 2025 First Quarter Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Todd Liam Bruno, Chief Financial Officer. Thank you. You may begin.

Thank you, Saatchi, and welcome to Parker's fiscal year 2025 first quarter earnings release webcast. As Saatchi said, this is Todd Liam Bruno, Chief Financial Officer speaking. Thank you to everyone for joining us this morning. With me today is Jenny Parmentier, Chairman and Chief Executive Officer. We do truly appreciate your interest in Parker. On slide two, we address our disclosures on forward-looking projections and non-GAAP financial measures. Items listed here could cause actual results to vary from our forecast. Our press release, this presentation, and those reconciliations for all non-GAAP measures were released this morning and are available on the investor section on our website at Parker.com. The agenda for today is Jenny is going to start with highlights for our record first quarter performance. She's also going to reinforce how our key market verticals are positioned for longer-term growth. I'm going to follow Jenny with a more detailed look at our strong first quarter results, and then we're going to address the changes to the fiscal year 2025 guidance that we released and increased this morning. We'll then move to the Q&A session, and we're going to try to address as many questions as possible. And with all that, Jenny, we'll begin with you on slide three.

Thank you, Todd, and thank you to everyone for attending the call today. We closed our first quarter of fiscal year 25 with our transformed portfolio driving record performance. We produced top quartile safety performance aligned with our goal to be the safest industrial company in the world. And once again, our balanced and diverse aerospace system segment delivered exceptional performance. We had record Q1 sales of 4.9 billion, organic growth of 1.4%, And consistent execution of the win strategy delivered 80 basis points of margin expansion, resulting in 25.7% adjusted segment operating margin. Adjusted earnings per share grew 4%, and cash flow from operations increased 14% to $744 million. Another quarter of impressive margin expansion. The team is off to a good start. Next slide, please. I want to spend a few minutes reminding everyone why we win. First, the wind strategy is our business system. We have a decentralized operating structure, 85 divisions run by general managers with full P&L responsibility, all acting like owners, close to their customers, and executing the wind strategy every day. We have innovative products that solve customer problems, 85% covered by intellectual property. Our application engineers provide the expertise that allows us to have a competitive advantage with our interconnected technologies that provide solutions for our customers. And finally, our distribution network, the envy of the competition, and the best in the world. It took us over 60 years to build it, and it is truly an extension of our engineering team, providing solutions to all of those small to mid-sized OEMs that are participating in the secular trends in Mega CapEx projects. These partners are experts at applying our interconnected technologies. Next slide, please. We have the number one position in the $145 billion motion and control industry, a growing space where we continue to gain share. These six market verticals represent greater than 90% of the company's revenue. Our interconnected technologies cut across these market verticals and give us a clear competitive advantage. Two-thirds of our revenue comes from customers who buy four or more technologies. And our growth is focused on faster growing, longer cycle markets, and secular trends. Next slide, please. Both a secular trend and our largest market vertical is aerospace. Parker has a balanced and diverse portfolio with significant content on leading aerospace programs. We have a comprehensive product offering across our diversified customer base with proprietary design on premier programs. On the upper left-hand side of this page is our sales mix by application. You see a nice balance of commercial and military, as well as business jets, regional transport, and helicopters. This diverse aerospace and defense exposure allows us to have multiple products and technologies on every major aircraft program globally, many of them seen on the bottom of this page. We have a balanced narrow-body, wide-body sales mix and the MEGIT acquisition significantly expanded our aftermarket sales. Today, aftermarket represents approximately 50% of our total aerospace sales. All of this adds up to be a compelling value proposition for all of our aerospace customers. Next slide, please. Our second largest market vertical is in plant and industrial equipment. We have a comprehensive suite of critical motion and control technologies that enable manufacturing all around the world. As depicted on this slide, Parker provides solutions for both factory equipment and factory infrastructure. Next slide, please. Although we are experiencing some near-term pressure right now, this slide highlights how we are positioned for growth in the in-plant and industrial market vertical. Mega CapEx projects, industrial CapEx investment, and demand associated with semiconductor fabs and data centers will continue to drive long-term growth. The chart at the bottom left shows the $1 trillion of megaprojects that have been announced since 2021. Our powerhouse of interconnected technologies and independent distribution network are differentiators that allow us to benefit throughout a project's lifecycle as depicted in the sales mix chart on the bottom right. We win with new construction, new equipment and retooling, and our aftermarket supports ongoing operations. I will now turn it over to Todd to go through the summary of our Q1 results.