Donaldson (DCI) 3 Dec 242025 Q1 Earnings call transcript

Thank you for standing by, and welcome to the Donaldson Company First Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Sarika Dhadwal, Senior Director of Investor Relations.

You may begin.

Good morning. Thank you for joining Donaldson's First Quarter Fiscal 2025 Earnings Conference Call. Tod Financial President Officer. are Brad CEO; today Chief Pogalz, me Carpenter, and Chairman, and With Brad summary Also former and Strategic and CFO the reaffirm and provide on call fiscal current Adviser. This is our outlook morning, XXXX. quarter our first of Scott for Robinson, will performance a Tod

non-GAAP During discuss results. or today's call, we adjusted will

Sciences of For XXXX non-GAAP reduction other to million, $X.X of to is first the results cost and provided reconciliation release. quarter schedules this primarily in initiatives segment. non-GAAP metrics Life attached the charges GAAP morning's exclude pretax A related within restructuring press to

filings. Additionally, are that, turn now any call subject please forward-looking I are over that and the call to risks SEC this which uncertainties during press With keep to our mind described will statements in Tod. in made and release

Thanks, Sarika. morning. Good

years. the Before of the thank Robinson behalf for Board his want Directors and X we on over to get Company, I Scott started, contributions of Donaldson past

organization He We improved as of initiatives, shareholder Company performance undoubtedly team, has resulted best built world-class the led significant several ever finance value are global and a an us financial He in through Donaldson also which better because creation. had. him.

enjoy your Scott, retirement. So

continued his his for and success of enable role. Relations decade, Head fishing, Many including of forward you look Donaldson. hearing You've been and Pogalz, CFO. our confident former current his want Brad earned our nearly I as it, we to already new traveling of his like. With also Brad stories adventures, about business deep organization that, experience Investor to a with the your hunting, and formally from He's acknowledge positions, know and in I'm understanding will the for

quarter Now results. on to the first

we strong to took gained optimization the to and ongoing earnings part Our began higher In maintain in margin our fiscal summary, actions strong technology-led foundation share quarter. and margins. all to mark key footprint is segments, X expense XXXX. the in optimize Also, elevate the We program work record of solutions of to focus market units and business response structure This our increased gross our continuing as the sales in through first company, start work profile quarter for quarter, within executed segment laid profitability. we cost last of the pressures. and we Life Sciences this part a

machines services higher our with business to speed benefits Olive our Branch, excellent, as Now weak segment segments. We of and notable in transportation. support we launches. as food from from as year-over-year part the In in In distribution mix the digits strong Solutions, development and sales our Early our towards share by including through we increase connected continued and penetrating culture efficient Universe quarter, conditions, multiple of Europe. With a progress of facilities. are disk end number Germany end system customer and well sales Sales aftermarket delivered In market and some and part a of a fixed in and increase each process to Industrial bioprocessing driven presence our and Life sales improved reliability stage filtration profitability expanded further launched growth, and performance This products remain aftermarket double through we brings business. rose our Mobile acquisitions, connected Austria. business, miniature market and center highlights ability Solutions, agriculture for in gains markets locations. our sales, while expansion we with customer volumes strengthening and the respect with drive industrial market making deliver improved strength a in to the product Sciences, Defense bed new beverage small as France, strong. Connected Donaldson's increased to in also and To new food in from cell process Solutions significantly Aerospace still scale-X share we product designed growth expansion in this customers. conditions achieved nexo backdrop the both the launch our across be It bioreactor replacement for opened to specialists integrity Technologies beverage of Mississippi, work conditions and sets modalities. our gains across our and the the directly market in

reduces makes more addition represents leap research-grade therapies cost purification tag reagent. solution latest its the purity in accelerating reagent the platform forward to purification effective. of process, This the Bio media Iso and enhancing significant AAV Our for biomanufacturing and isotag-AAV availability reagent yield, and Isolere quality. gene consumption announced a

reagent manufacturing XXXX. on bioprocessing available the businesses be Our grade have few technologies to just is been in track are calendar exciting These of our solutions a developing.

our We about acquired businesses. are focused scaling growth markets in optimistic remain our on and prospects these

$XXX in prior highlights. were by added was $X.XX, driven and X% of cover year. quarter I'll X% company a XX% the Pricing Adjusted million consolidated primarily tailwind. up up growth. EPS some was Now year-over-year, X% volume Sales currency versus

on-time XXXX operating We on customers, delivery higher rates. sales. Our versus our to through delivered down backlog worked and services our leverage and improved our margin products improved

more business, areas conditions. are While we normalized some of constraints overall, supply chain from benefiting continue in our

in expenditures and profitable invest During the including and to quarter, capacity. future Sciences new talent technologies, retention segment for and R&D investments. Capital growth we investments in CapEx our and included Life through products thoughtfully continued recruitment

Our Sciences part R&D driven year-over-year, large in projects. investments by increased Life

position to technology-led in strong ahead, generation and leader years a invest continue puts cash the sheet remain for to Looking balance come. filtration free Donaldson's and flow strategically great robust in us to

will of were increase we up mixed. quarter, prior Within quarter against sales total detail year-over-year. sales were continue year XXXX. were as intrasegment weak some global agriculture million in sustained XX% million, a down production, on largely the channel in equipment more market utilization mid-teens $XXX destocking X% were lower In performance first provide a due $XX down Sales OE aftermarket, versus ago. gains $XXX demand to market. mid-single cycle sales end X% million to year and predominantly we from by sales $XX levels Mobile quarters, I'll Beginning rates. to vehicle were share of channel Independent and high up second in digits compare normalized against grew the On-Road Aftermarket Solutions, the recent in period. of XX%, China. market Similar in driven sales. sales Now million, conditions, was U.S. the Off-Road

China Sales Now X% on Mobile a within by aftermarket. XXXX, whole driven I'll increased touch in versus double-digit growth as Solutions.

declines. X were performance, Off-Road side, first-fit sales offset which quarters by On-Road of partially On the weak positive turned after

long our largely in continue business importantly, supported which, committed has growing are in-region been and Over to our China, term, will by we manufacturing. the to be

Industrial sales X% Industrial to million. Turning to $XXX Sciences Life Solutions the increased segments. and

generation earlier, million, X% sales had very power Aerospace driven Defense by and XX% to noted or were timing. million, and strong Life rose sales growth grew Filtration Sciences $XXX As $XX XX%. sales Industrial IFS, project Solutions, year-over-year. up

mentioned, record value Drive sales shareholders Disk first Overall, year, to and with drivers. sales As the food to pleased once our I beverage through our were and fiscal earnings. quarter again XXXX deliver am and previously This we expect results.

Brad? the it turn Brad, more financials to XXXX. who Now for on fiscal over and details provide our outlook I'll will

everyone. Tod. Good morning, Thanks,

opportunity to the the and weeks. the the I'm build and first lead the past Donaldson quarter to that work smooth Before at leadership IT been moment want several a his results, has upon discussing transition for excited to thank functions and I for all over our to finance take done. Scott great

Sarika Note earlier. that referenced full year. to quarter our outlook and results my of for the will the comments for on Now restructuring impact exclude charges the the profit

First and to investments quarter were the customers, $X.XX was our cost ago. total leverage year-over-year. input also X% in partially XX.X% had higher prior an were select up we in on company points was versus distribution, which a sales as margin a XX% of XXXX. higher people-related Leverage Gross by year by basis serve operating better costs. manufacturing, EPS year. increased of Benefits labor to XX.X% flat Operating expense sales to in allow deflation was costs, offset increase up rate XXXX. Operating XX.X% costs. expense increased offset sales This with XX.X% us margin margin of including was XX from compared XX.X% and efficiency from increased and

footprint Solutions an Mobile optimization Now margin profit parts and increased replacement pretax initiatives, profit few Industrial XX.X%, We year-over-year, margin points our with comments to select basis those sales points driven basis due was segment XXX XX.X%, XXX things. a Solutions pretax related combined down of to by costs. up costs, to input was related a on favorable mix sales. mix unfavorable profitability. including of lower volume, couple had higher

our backlogs high. industrial Importantly, remain

from higher $X year, sales. Sciences we As through those approximately the loss was headwind to we million of as as improve in balance businesses a the of work X% a to versus a on loss acquisitions backlog our we loss a profitability X.X% we of quarter, had get expect ago. continue a of up. year leverage this margin down including Life Pretax ramp pretax

quarter difficult we As expanding backdrop. towards the given our opportunities Sciences, in attractive ability market. to focus remain Life took this this in our market our change confident actions no highly to win expenses we Tod and is mentioned, the top There in to in commitment

Turning to flow a few cash and balance sheet highlights.

the capital XX% expectations. capital of deployment, in with And expanded a us $XX in the our reach stake SpA. expenditures Medica conversion through got within quarter were was million $XX life in sciences terms a investment market XX%, Cash quarter million. First line our we other in that

to $XX returned also share million inclusive shareholders, dividends in in We million approximately $XXX of $XX repurchase. and million

allows Our our evidenced strong capital ratio a deployment healthy net debt-to-EBITDA and generation maintain sheet, X.Xx. of cash us to flow disciplined balance by

'XX outlook. Now fiscal our

First, on sales.

of full X%, We a which increase and sales year approximately includes X% total X%. expect continue pricing between to benefit to

low we're are be On-Road In For driven also by forecast strong vehicle global utilization. to sales double are Mobile and IFS sales expected X%, and grow market flat across due consistent in sales projected low particularly Solutions, to projected digits share and industrial strength with including digits previous X%, Industrial Off-Road versus are are gains, be prior sales dust the down between to digits after forecast and between weak up flat by depressed conditions, strong market year, XXXX. digits lapping truck increase to X% low and projected Solutions, up expectations. comps gains in up previous our Aftermarket sales hydraulics are partially to guidance. line share single end to production. with forecasting gases. businesses, are industrial very be Aerospace market high sales due single agriculture. in offset single with to Defense collection, most sales

our Food and and including Drive growth also Beverage. increases our in forecasting Disk sales Sciences, We're businesses, Life by unchanged. outlook low driven double-digit is For larger

a to expect growth year these Given Life businesses and margin expectations, our breakeven. of sales. range targeted a segment of value of represents increase company about XX.X%. Sciences year, higher within investments, commitment prior continue and for full profitability the be Donaldson higher our midpoint the growing this XX.X% will Total to of unchanged and point through from combined return we profit on XX basis a the shareholders through are strategic pretax The levels record to operating range expectations with

up are our adjusted terms In EPS, guidance XXXX. reaffirming fiscal $X.XX from of of range $X.XX, we $X.XX in to

the to flow balance cash on sheet Now outlook. and

and be company, With capital investing and $XX to averages. towards our XX% expected of historical XX%, through million deployment, M&A. new to as including to to weighted respect is range I organically, products capital first, growth be: just Cash continue and forecast expenditures conversion the outlined, technologies. capacity strategic Our $XXX inorganically in priorities is to is million with the and in to grow line initiatives,

Donaldson's paying the year XXXX XXth in Calendar consecutive of dividend mark a XXth and a quarterly dividends. dividend increases. Second, row cash of year annual will

Yield Index, to We our membership. be are S&P expect High of proud Dividend to the and we a part maintain Aristocrat

X% expect between year and lastly, are X% Overall, shares. outstanding XXXX we of and financial year, to our in strategic repurchase. a we deliver objectives. share Third This position to full strong and repurchase

Tod. call back to Now I'll turn the

to customers. of and market redesign of better deployment commercial to Donaldson X resources we Thanks, intent execution. to organizational did a was ago, Brad. so efficient more enable serve completed our we strengthen years The the end Company When

Our results success. are our proof of

market grown and share diversified technology withstand strong defense have deliver aerospace several record long-term addressable market drive. collection, and businesses, disk of including fundamentals. of filtration We gained Mobile This expanded with Through has our our allowed aftermarket, businesses and in shareholders. our Solutions to we us and have expertise, a earnings portfolio pockets to industrial dust weakness

Now we're focused on on building success. this

all potential optimize we on building our In X we macro growth power investments of our mobile, our While continue business. in expense solutions response teams to base alternative strategic to are our on our in focusing impactful through capitalizing intent conditions, on are segments.

We helping more In modern our committed and growth. sustainability Industrial, economy of their customers efficient are will are connectivity a and filtration. future achieve support through and enablers advanced greener goals to services

smart, customer our to In information, are Life by strengthening cost bioprocessing like total the real-time our investments ability decreasing are performance ownership, connected relationships We beverage. solutions provide businesses businesses and of providing reducing including and of we downtime food gain Sciences, that strengthening scaling targeting maintenance. share in and equipment in

for call of questions. this which well the XXXX on the to is I the strategy, that, underpinned back to growth position operator financial talent combined All targets. the balanced us With of to open team, with fortitude will by our our and line turn deliver Donaldson now the fiscal

Angel Castillo Morgan Stanley. first of Your comes from [Operator today Instructions] from the line question

here. Congrats on strong another quarter

touch maybe start just base to flow the conversion. Just wanted on on cash to free

about kind -- give year. on of You drivers And of But that's kind you the XX% get your just how that bit think expectations. little us back capital, conversion? you was like to those maybe for with XX% of mentioned maybe you line more a in it seems just just can that, color XX% working and maybe the more it to kind as

is working little I Tod both as get and about the for in inventory Yes, this make capital deliveries good And delivering Brad. right. on-time customers. shape investments. and touched It's a bit, we're in on especially sure investments, to Angel, you're

through typical of story. it And the sales cascades working just more the second we in So -- of the we through as cap working year sort then go and more the half the expect use stronger really better and build year. that's as

on then And you more. break helpful. Sciences, little if bit I out That's of was could Okay. a Life wondering kind

is? about just expansion, much And for those Just the drive think on particularly maybe life as vertical And then you much of kind how 'XX. underlying FMBs, color the as the well, that. of up much on of disk piece kind last remind could more us how fiscal you international if makes likewise, of provide of kind how kind each sciences

out details that we on very our but mind collapsed, market Drive bottom. specific documented We Disk which I the would say in businesses, about a big That thing years typically don't created ago, with break is publicly is well the the businesses. the X.X keep on remember to off created pressure

growth the just are and of some the continuation rates along year so with growth gains this that, And share there.

normal a is overall maybe within Drive just the Yes, as little bit more. It's taking place. just end what's Disk market

the comes from question next Your of Bryan from Blair line Oppenheimer.

contemplating drive that I wanted channel is encouraging side? that gains independent channel, are the what Was of front growth we've on And share And double-digit reiterated you continues it lapping all that to on results strictly We're a still we're mobile from or guidance? the on there? been growth in that aftermarket set destocking OE source on little to lapping year. last the bit of level there.

Yes, Tod. is Bryan, this

share when NAPA all we big pretty by at It's destocking share the returning growth regions the large also It's across gains back normal performance, is they're OE slight organization look our evidenced world. levels, before. talked with almost share story our on independent story is gains. across customer as the that and but the aftermarket and the about of a share you pull-through It's a lapping gains So channel. let's double-digit side broad the to aftermarket gains within say, of

team about the quarters? that over and cadence you've the thinking detail, price is assuming in I realization sorry on impact current cost costs? And QX? price color. And How X% did I cost, and shake price missed the your on visibility guided coming appreciate that if the out how

Bryan, Brad. it's

it the the the The year. year, is is So cost, quarter. was that the pricing keep thing single-digit to rest low you for price to level in X% for full pointed in quarter. typically normal range. of X% more We This now. expect out, we'd much in And see about in we is is would guided about X% the what a mind that

The it's point kind out similarly. of averages on cost that mixed a bag. pretty is So still

up, some certain up, Labor are is are costs are Some input down. certain up, down. costs are input

our the balance And obviously, we too. that. say I are hard our relationships So good from to working would teams side, really customers, with want

have that's the well way to into now, we think take it's something So us, But equation. -- the sit right we pretty balanced. for we it's

Brian from Your Drab next from of the comes Blair. question line William

again. you Scott, have And back. congrats to nice Brad,

a there you but Just the election? maybe there are Tod, your elaborate get then or You about you're the it election and seeing challenges potential from thinking that you project just environment some of have I been seeing other And of how on you're you're thinking you just bit, released what situation? touched or business how can concerns And delays. questions. tariff customers mentioned kind a the up and and or any on to project the leading delays like couple about the you're that I'm wondering you situation that environment? power post overall have in might think little think, now

Yes, Brian.

you we really the of at if will. macro when and the you the overall So portfolio really kind company look of businesses across election that normalizes, have, the broad-based

generation in the potentially. positives power business some get You

the mention that position we Of to customers product manufactured to to manufactured want Donaldson's support upon have some risks tariffs. relative of do based incoming sense are region. But administration's that XX% region I in course, that, within of potential to

remains when Company, Donaldson for a exporter. not do we U.S. region And Company cross -- Donaldson whole net lot. So a we do, as the

South and pressures clearly, would story to tariff some and what's Mexico -- feel go is we there. us uncertain happen. a North going It's really region, just within more for they of the So should Canada,

manufacturing raw and the that's to improved they happens in would started be have how well. on the sector think would some our supplies us manufacturing bigger sector expansion goes nice Trump used, we clearly and really commodity we what steel overall, to just the expansion, opportunities more relative I bump across last us tariffs comfortable a give U.S. in things. to is we're feel would therefore, its material power #X And really hit for the pretty story as when Donaldson economy the and and administration, steel generalized there. customers, relative generation as But

mentioned you you business, on Okay. IFS this again, -- And then just timing. power the project mentioned

up single the full up this little for you hit, Can you're et a for back You've year. high give a digit year, got seeing or maybe delayed X% quarter, the is going to a was into project this for the of forecast cetera? confidence but what result just us that window half

in to just -- one delivery over It's to projects a backlog business already on is kind support We're the strong. The our cycle the generation just backlogs, solid pretty some our there. of this It's are filling that clearly business for quarter upside always potential float fiscal But forecast, Yes. timing as see next macro, timing has at in in relative point. always year. it. They that we from there's business of hanging power next. at the

company, is that, comps, company, the too. our IFS this this the that's in a rest one one thing whereas comp of result just IFS builds Brad. actually first Unlike as most the IFS year, toughest a of the is of of Brian, on more the of last rest math I'll specifically. of the add quarter easier of is bit

mind, in that keep just please. So

comes next Your from of Laurence line from Jefferies. the Alexander question

This on Laurence. for is Dan Rizzo

win. through is and mean, that mean, restructuring terms When I kind going costs year? that end we I to was -- mentioned be -- the rightsized? within expect continue was I of business where the should are we -- that in to wondering is of that of You Sciences. Life reducing

Yes.

headwinds, So that as Mobile met has typical those business cycle within what overall Life Sciences Solutions X so the conditions slip the really cycle by products sometimes sciences of about, X. been upstream have projects, where or as business bioprocessing have of the we market project really elongates, downstream a by we we've when, but the is larger have will Sciences talking CapEx-based the life that with in macro of then elongated. a end And year quarter are would call say, Donaldson Life the some clearly, and it X a And project really X, projects slowed. slips within --

that took have are where we that we market And solid condition planned. up have this the point, at where consequently, adjustments a adjust and and so it. we all we round and is At the we look made

term, We And work at continue them. Donaldson are, to we're standard as our fiscal feel end plan conditions the to business profitability we should in which Company, there take actions, meet return market like the at to execute our across the longer be good a business point on clearly, every necessary and inside year. this spot within where further time, well. in strategic look to we is we'll But flat deliver guide,

Can Okay. improvement And if once basic to the really from better of macro mean, then within to X for any a -- X you sorry, within beyond need going next bioprocessing, profitability? you footprint gets years? nothing returning just grow to are get smaller to restructure, you I kind

broader really to working bring we a that in What we order market. were can. of had we Yes, base list done is projects to on we've

those if kind those. list choices of were sharpen down on what out from our "Hey, the away and attention than deliver appears we put on elongated starting backed new bit focus list those We our the of to because quicker press really now really we projects, those look, can we in said, to focused those be monetize. and a do we'll we to just order so to our little some the on to that you take will. We relative so we And slow market to pencil opportunities

Okay. last question. finally, And then

is Off-Road better? to of after is point there to really you -- think a actually reached get inflection bit Or soon an start that mentioned rebound some there? X acceleration things too saw you decline. of tell quarters things You we've real a it where if Do little in should

stories this We're first-fit which in aggregating all Yes, get on inputs We base side. news across kind tougher. The point news, agriculture say to is is quarter. a China It bit it feel tough tough will. the of at the the you China customer inflection is that a felt the But But all say. continues muted, a that a we're of the have, if bit to time. line But in little construction we to little one like obviously, moment. just follow like just didn't one more point positive where drawing forward. other a an

And so consequently, we'll anything just keep our too eye on to soon that. China. It's call also on

just uncertainty and So of out bowl on there, it. eyes our there's we'll just a keep

Your next Nathan question the line comes of Stifel. from from Jones

is follow on seeing level wanted to the there? demand on of like the I the eddy? you up question. any aftermarket underlying acceleration question we How This to I aftermarket there Adam gains. for kind are Farley of destocking should -- kind the wanted market Is comps adjusting and the on Or think steady for follow it up Nathan. about share

Yes.

Mobile be steady. to our advantage customers gains. executing you QX, investments November, a of the we're is and extremely result, quarter, an you're uptick. story the Donaldson positioned economic But maybe enter suggest making There's care centers Mobile -- -- Should We're bunch well. well place, our as it's the that we're this Clearly, there so there's that if And to good take move for taking toughest harvesting an story share cycle. really and not standing such because take forward. direct continue Solutions moment and Aftermarket to you really Company as earlier We're take Solutions in that look you're right? new continuing of my up a of the as and up to which business gain do projects of win extremely our at speaks I well. our of typically planting to a is just when not distribution share. on. look not not share more necessary construction whole we take December what's So expansion, going a taking we'll that's place meantime, January, to in of care aftermarket really vehicle comment overall at and utilization, And will, and quarter you if

want So typically a your Company, is that to as to expect softer historically build positive things. we bit for I Donaldson models deliver little do remind QX but do you still out you

from from Your the Rob of line comes next question Mason Baird.

still of kind kind about just down you on versus breaking change Maybe, does Are second year comment. follow first up percentage half, thinking any? the Tod, your last where of to half that XX-XX,

No, build your said to actually you changed. the We about closer XX it hasn't XX-XX. XX and middle right if out. We're last in between time models

or could down it So X/XX swing round X/XX and or up.

the typically right usually year. the XX%, we're and is So model of is that exceptional. there. to your you your because you that's Rob, want I remind toughest of because the XX%, And QX want do do again, I as to holidays to such, look

sense. Yes. Yes. Makes

of of segments. change any outlook didn't -- your you didn't course, the You for

have off -- should start, is Or there's support upside this aerospace a guidance to quarter the is think first shear got -- on you that including but potential and your conservative on looks start. timing really you that? based just visibility Aerospace So to mean, good to defense, we I Defense? do

for Thanks question. the Yes.

there. had that than of that a projects inside strong a first business more What flat the bubbles really So of are we Particularly, quarter. supply parts holding chain we other delivered. X-figure embraces we back Donaldson piece be have any Company, the know to we fact really have guidance is that couple

and in upside, you clearly resolve supply, know, right? recall And it's and get when right than the be they that been able now, some are year. we because a But to we aerospace should those, different so other we there's And defense, have want chasing you incredibly stubborn to as them have. a highly new businesses over for

supply why that challenge. so to upside And should just able to here. try so able taken be down have been we the does it product that's we should to chain long drive get it's be in But to

I'll quarter business mind, around in in this year is this cadence. XX%. last Keep just add was on Rob, fourth the Brad. up

the at story And jump part about. end just back what comp a clearly last that was Tod of talked exactly there's big So year. of

in, as parts it come send our sell these suppliers. of from it as when we we'll shipments Some and get can the we quickly they as

Understood.

And profit? to I'm Science question. that Life helpful. curious, influence in just this That's Okay. How quarter. contributor, overall profit? Was a last detractor did the Medica op was the it results

Yes, for rounds quarter I was X. it was in my thing of remarks, was those. $XX in the mean, quarter, I outflow the immaterial million it the biggest XX% cash in essentially, the that The mentioned neither stake. to

you, Brad. Well, Scott congratulations to and both

will session. our now final that Tod Carpenter I remarks. question-and-answer back turn over the And to concludes some closing for call

everyone call concludes hope That second look a Thanks XXXX to everyone fiscal who today. nice the February. reporting forward we our and holiday season, Goodbye. had in results participated. to We quarter

This for conference Thank you call. today's your participation. concludes

disconnect. may You now