Parker-Hannifin Corporation

Please be advised that today's conference is being recorded, and if you should need any operator assistance, please press star zero. I would now like to turn the call over to Todd Liam Bruno, Chief Financial Officer. Please go ahead.

Thank you, Katie. Good morning, everyone, and thank you for joining Parker's Fiscal Year 2026 Second Quarter Earnings Release Webcast. As Katie said, this is Todd Liam Bruno, Chief Financial Officer, speaking, and with me today... is Jenny Parmentier, our Chairman and Chief Executive Officer. We both appreciate your interest in Parker as well as your time today. Before we begin the call, I'd like to our forecast, our press release, this presentation, and reconciliations for all non-GAAP measures. were released this morning and are available under the investor section on Parker.com. The agenda for the call today has Jenny starting with an overview of our record FY26 second quarter performance. She then will reiterate the strengths of our interconnected technologies. And this quarter, she's going to highlight the distinct value we bring to one of our market verticals. That is the off-highway market. Jenny will also make a few comments on the recently announced agreement to acquire Filtration Group Corporation, and then I'll follow with some details on our strong second quarter financial results. We will both provide some details on the increase to our guidance that we released this morning, and then we'll move on to Q&A, and we'll try to address as many questions as possible within the hour. We know it's a busy day to everyone, so we will stick to the one-hour time slot. Now, I call your attention to slide number three, and Jenny, I'll hand it over to you.

Thank you, Todd, and thank you to everyone for attending the call today. Q2 was another great quarter where our team and our strategy demonstrated our ability to compound performance. We achieved top quartile safety performance with an 8% reduction in our recordable incident rate. This performance is aligned with our goal to be the safest industrial company in the world. Our team delivered record Q2 sales of $5.2 billion, organic growth of 6.6%, and 150 basis points of margin expansion. resulting in 27.1% adjusted segment operating margin. Adjusted earnings per share grew 17%, and cash flow from operations was $1.6 billion. And in the quarter, we announced the acquisition of Filtration Group Corporation. Moving to slide four. Many of you on the call today have seen this slide before, why we win. The win strategy is our business system. We have innovative products that solve customer problems. Our application engineers provide the technical expertise that creates a competitive advantage. And our distribution network serves global aftermarket and small to midsize OEMs. Today, I would like to highlight the interconnected technologies that provide efficient solutions for our customers across all of our market verticals. I'm on slide five now. 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. We have a focused portfolio, creating distinct value for our customers. Our powerhouse of interconnected solutions cuts across these market verticals and gives 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. Moving to slide six. On this slide, I would like to highlight how our interconnected technologies come to life in the off-highway market vertical. Parker is a market-leading provider of highly engineered solutions for equipment used in construction, agriculture, and mining applications. Our comprehensive offering of interconnected technologies, deep application expertise, and embedded engineering relationships with OEMs are key to our success. We win with innovative and differentiated product technology, subsystems, and full system capabilities designed to increase the capability and productivity of our customers. Our global footprint allows for in-region delivery and expertise for OEMs, and our extensive distribution network provides aftermarket support for end users. I'm now on slide seven. We are making continued progress on the filtration group acquisition. Integration planning is underway using our proven integration playbook. We expect to close in six to 12 months from our November announcement date. This is a great company with a great culture, and we really look forward to welcoming everyone to the Parker team. The acquisition of Filtration Group adds complementary and proprietary technologies for critical applications while expanding our presence in life sciences, HVAC and refrigeration, and in-plant industrial market verticals. The combination of Parker Filtration and Filtration Group creates one of the largest global industrial filtration businesses and increases Parker Filtration aftermarket sales by 500 basis points. We will leverage our business system, the WIN strategy, to achieve approximately $220 million in cost synergies, and we expect this deal to meet our disciplined acquisition criteria of being accretive to organic growth, synergized EBITDA margin, adjusted EPS, and cash flow. This strategic transaction continues our investment in high-quality businesses that continue to transform our portfolio, accelerate sales growth, improve profitability, and drive shareholder value. Moving to slide eight. Clarkor, Lord, Exotic, and Megit have been a big part of our transformation. Curtis is still early days, and as I just mentioned, we are very excited about Filtration Group. Over the time period you see on this slide, we have compounded EPS at 16%, and approximately 60% of this has come from the wind strategy and our legacy businesses. while approximately 40% has come from the acquisitions. The acquisition of Filtration Group will continue our track record of accretive acquisitions. I'll turn it back to Todd to review the second quarter highlights.