PresentationWithout any further ado, I want to pass it over to you. And just remember, go forward, don't go backwards.Laurence Alexander with the Jefferies Chemicals team. It's my pleasure to introduce the team from Donaldson. We have Tod Carpenter, the CEO; Brad Pogalz; and Sarika from Investor Relations.Tod CarpenterChairman, CEO & President Thanks, Laurence. With me today are Sarika Dhadwal. She is our Director of Investor Relations; Brad Pogalz, he is our Chief Financial Officer; and Rich Lewis, who wil ...

Donaldson Company (DCI) 2025 Conference September 03, 2025 09:30 AM ET Company ParticipantsTod Carpenter - Chairman, CEO & PresidentConference Call ParticipantsLaurence Alexander - Equity AnalystLaurence AlexanderLawrence Alexander with the Jefferies LLC Chemicals team. It's my pleasure to introduce the team from Donaldson Company. We have Tod E. Carpenter, the CEO, Brad Pogalz, Sarika Dhadwal from Investor Relations. Without any further ado, I want to pass it over to you. Just remember, go forward, don't g ...

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Financial Data and Key Metrics Changes - For fiscal year 2025, total sales reached an all-time high of $3.7 billion, with an operating profit margin of 15.7% and earnings per share of $3.68, which was at the higher end of the guidance range [6][17] - In Q4 2025, sales increased by 5% year over year to $981 million, with adjusted EPS of $1.03, up approximately 10% year over year [12][19] - Operating margin for the quarter was a record 16.4%, up 10 basis points from the prior year, with cash conversion at 123% [19][20] Business Line Data and Key Metrics Changes - **Mobile Solutions**: Total sales were $588 million, a 2% increase year over year, with aftermarket sales at $468 million, up 3% [14][15] - **Industrial Solutions**: Sales rose 8% to $310 million, with IFS sales growing 11% to $262 million [16] - **Life Sciences**: Sales increased by 14% to $82 million, driven by strong growth in food and beverage and disk drive segments [16] Market Data and Key Metrics Changes - In China, sales grew 14% year over year, marking the fourth consecutive quarter of growth, with both first fit and aftermarket sales increasing [15] - Aerospace and defense sales decreased by 6% to $47 million due to a decline in defense sales following the completion of large projects [16] Company Strategy and Development Direction - The company is focused on optimizing its cost structure while investing in growth areas such as solvent recovery and new disk drive technologies [13][29] - The strategy includes disciplined investments in R&D and capital expenditures, with a commitment to M&A opportunities primarily in life sciences and industrial businesses [29][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macro uncertainties and cyclical headwinds, with expectations for another record year in fiscal 2026, projecting total sales of $3.8 billion [17][27] - The company anticipates an incremental margin of approximately 40% and a continued focus on margin expansion despite challenging market conditions [27][28] Other Important Information - The company returned $465 million to shareholders through share repurchases and increased dividends by 11% [6][17] - The company is in the heavy lift phase of footprint optimization, expected to be mostly complete by 2026 [13] Q&A Session Summary Question: What is the outlook for agricultural demands? - Management noted that agricultural orders likely bottomed within the quarter, with slight growth expected but not at double-digit levels [36][37] Question: What is the status of bioprocessing solutions commercialization? - Management indicated that traditional life sciences businesses are performing well, but upstream bioprocessing remains muted, with significant growth expected more in fiscal 2027 [39][50] Question: How does the company view the connected products strategy? - Management clarified that the connected products strategy is not subscription-based but aims to deepen customer relationships, leading to increased replacement parts sales [52][53] Question: What is the outlook for the aerospace and defense segment? - Management expects aerospace and defense sales to be flat after cycling against record levels in the prior year, with a solid quote backlog [76][108] Question: How does the company plan to manage capital allocation? - The company maintains a balanced approach to capital allocation, focusing on organic growth, M&A opportunities, dividends, and share buybacks [29][88]

Financial Data and Key Metrics Changes - For fiscal year 2025, total sales reached an all-time high of $3.7 billion, with an operating profit margin of 15.7% and earnings per share of $3.68, which was at the higher end of the guidance range [5][16][18] - In Q4 2025, sales increased by 5% year over year to $981 million, with adjusted EPS of $1.03, up approximately 10% year over year [11][18] - Operating margin for the quarter was a record 16.4%, up 10 basis points from the prior year [18][22] Business Line Data and Key Metrics Changes - **Mobile Solutions**: Total sales were $588 million, a 2% increase year over year. Aftermarket sales were $468 million, up 3%, while off-road sales increased by 5% [13][14] - **Industrial Solutions**: Sales rose 8% to $310 million, with IFS sales growing 11% to $262 million [15] - **Life Sciences**: Sales increased by 14% to $82 million, driven by strong growth in food and beverage and disk drive segments [15][22] Market Data and Key Metrics Changes - In China, sales grew 14% year over year, marking the fourth consecutive quarter of growth, with both first fit and aftermarket sales increasing [14] - Aerospace and defense sales decreased by 6% to $47 million due to a decline in defense sales following the completion of large projects [15] Company Strategy and Development Direction - The company is focused on optimizing its cost structure while investing in growth areas such as solvent recovery and new disk drive technologies [12][29] - The strategy includes disciplined growth investments and maintaining a strong balance sheet to support potential M&A opportunities [29][86] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macro uncertainties and cyclical headwinds, with expectations for another record year in fiscal 2026, projecting total sales of $3.8 billion [16][27] - The company anticipates an incremental margin of approximately 40% and a continued focus on margin expansion despite challenging market conditions [27][28] Other Important Information - The company returned $465 million to shareholders through share repurchases and increased dividends by 11% [5][16] - The company is committed to maintaining its position in the S&P high yield dividend aristocrat index, with a forecasted repurchase of 2% to 3% of outstanding shares in fiscal 2026 [30][86] Q&A Session Summary Question: When did agricultural orders bottom for your team? - Management indicated that agricultural orders likely bottomed within the quarter, with slight upticks observed, but not significant growth expected in the near term [35] Question: What is the outlook for bioprocessing solutions? - Management noted that while traditional life sciences businesses are performing well, the upstream bioprocessing segment remains muted, with expectations for growth more likely in fiscal 2027 [38] Question: How is the first fit versus aftermarket revenue growth expected to trend? - Management expects first fit sales to rebound, particularly in the U.S. and Europe, while aftermarket sales are anticipated to grow due to continued market share gains [39][41] Question: What is the outlook for the power generation super cycle? - Management confirmed that the power generation business remains strong, with no signs of cooling in the super cycle, and backlog coverage is at its longest [95] Question: How does the company view its M&A pipeline? - Management expressed a strong appetite for M&A, with a good pipeline of opportunities, particularly in life sciences and industrial businesses [86]

Financial Data and Key Metrics Changes - For fiscal year 2025, total sales reached an all-time high of $3,700,000,000, with an operating profit margin of 15.7% and earnings per share of $3.68 [5][16][18] - In Q4 FY 2025, sales increased 5% year over year to $981,000,000, with adjusted EPS of $1.03, up approximately 10% year over year [11][18] - Operating margin for the quarter was a record 16.4%, up 10 basis points from the prior year [18][22] Business Line Data and Key Metrics Changes - **Mobile Solutions**: Total sales were $588,000,000, a 2% increase year over year, with aftermarket sales up 3% to $468,000,000 [13][14] - **Industrial Solutions**: Sales rose 8% to $310,000,000, with IFS sales growing 11% to $262,000,000 [15] - **Life Sciences**: Sales increased 14% to $82,000,000, driven by strong growth in food and beverage and disk drive segments [15] Market Data and Key Metrics Changes - In China, sales grew 14% year over year, marking the fourth consecutive quarter of growth [14] - Aerospace and defense sales decreased by 6% due to a decline in defense sales following the completion of large projects [15] Company Strategy and Development Direction - The company is focused on optimizing its cost structure while investing in growth areas such as solvent recovery and new disk drive technologies [12][29] - The strategy includes disciplined investments in R&D and capital expenditures, with a commitment to M&A opportunities primarily in life sciences and industrial businesses [29][85] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macro uncertainties and cyclical headwinds, with expectations for another record year in fiscal 2026 [5][16] - The company forecasts total sales of $3,800,000,000 for fiscal 2026, with an operating margin target of 16.4% [16][27] Other Important Information - The company returned $465,000,000 to shareholders through share repurchases and increased dividends by 11% [5][16] - Cash conversion was strong at 123%, with gross margin at 34.8%, down 140 basis points from the previous year due to tariff-related inflation [19][20] Q&A Session Summary Question: When did agricultural orders bottom for your team? - Management indicated that agricultural orders bottomed within the quarter, with slight upticks but not significant growth expected in the early part of fiscal 2026 [35] Question: What is the outlook for bioprocessing solutions? - Management noted that traditional life sciences businesses are performing well, but upstream bioprocessing remains muted, with growth expected more in fiscal 2027 [38] Question: How is the aftermarket business performing? - The aftermarket business is expected to grow, particularly in the independent channel, with share gains factored into the guidance [92] Question: What is the outlook for the power generation super cycle? - Management confirmed that the power generation business is full, with no signs of cooling in the super cycle, and they are executing well on projects [95] Question: How does the company view M&A opportunities? - The company maintains an appetite for M&A, with a strong balance sheet and a good pipeline of strategic opportunities [85][86]

Financial Performance - Fourth Quarter Fiscal Year 2025 - Sales reached $981 million, a 5% increase year-over-year, or 3% on a constant currency basis[6] - Adjusted EPS increased by 10% year-over-year to $1.03[6] - Adjusted operating margin increased by 10 bps year-over-year[6] - Adjusted free cash flow conversion was strong at 123%[6] Financial Performance - Full Year Fiscal Year 2025 - Sales reached $3691 million, a 3% increase year-over-year on a constant currency basis[8] - Adjusted diluted EPS increased by 8% year-over-year to $3.68[8] - Adjusted operating margin increased by 30 bps year-over-year to 157%[8] Fiscal Year 2026 Guidance - Sales outlook centered on $38 billion, representing growth between 1% to 5%[6] - Operating margin is projected to be between 161% and 167%[6] - EPS guidance is bracketing $400, within a range of $392 to $408[6]

Core Insights - Donaldson (DCI) reported quarterly earnings of $1.03 per share, exceeding the Zacks Consensus Estimate of $1.02 per share, and up from $0.94 per share a year ago, representing an earnings surprise of +0.98% [1] - The company posted revenues of $980.7 million for the quarter ended July 2025, surpassing the Zacks Consensus Estimate by 2.82%, and an increase from $935.4 million year-over-year [2] - Donaldson has outperformed the S&P 500, gaining about 12.3% since the beginning of the year compared to the S&P 500's gain of 9.9% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.93 on revenues of $923.02 million, and for the current fiscal year, it is $3.90 on revenues of $3.78 billion [7] - The estimate revisions trend for Donaldson was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Pollution Control industry, to which Donaldson belongs, is currently ranked in the top 11% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) This section provides an overview of Donaldson's record-breaking fiscal year 2025 performance and outlines the financial guidance for fiscal year 2026 [Fourth Quarter Fiscal Year 2025 Highlights](index=1&type=section&id=Fourth%20Quarter%20Fiscal%202025%20Highlights) Donaldson achieved record results in Q4 FY2025, with sales growing **4.8%** to **$981 million** and adjusted EPS increasing **9.6%** to **$1.03**, returning approximately **$95 million** to shareholders Key Financial Data for Fourth Quarter Fiscal Year 2025 | Metric | Amount/Percentage | | :--- | :--- | | Sales | $981 million (up 4.8%) | | GAAP EPS | $0.97 (up 7.8%) | | Adjusted EPS | $1.03 (up 9.6%) | | Shareholder Returns | Approximately $95 million | [Full Year Fiscal Year 2025 Highlights](index=1&type=section&id=Full%20Year%20Fiscal%202025%20Highlights) For the full fiscal year 2025, Donaldson's sales grew **2.9%** to **$3.7 billion**, with adjusted EPS increasing **7.6%** to **$3.68**, while returning approximately **$465 million** to shareholders Key Financial Data for Full Year Fiscal Year 2025 | Metric | Amount/Percentage | | :--- | :--- | | Sales | $3.7 billion (up 2.9%) | | GAAP EPS | $3.05 (down 9.8%) | | Adjusted EPS | $3.68 (up 7.6%) | | Shareholder Returns | Approximately $465 million | - The company made progress in optimizing its business portfolio and cost efficiency, alongside investments in the Life Sciences segment[2](index=2&type=chunk) [Fiscal Year 2026 Guidance Overview](index=1&type=section&id=Fiscal%202026%20Guidance%20Overview) Donaldson anticipates fiscal year 2026 to be another record year, projecting sales of **$3.8 billion** and EPS of **$4.00**, driven by record sales, operating margin, and net earnings Fiscal Year 2026 Guidance | Metric | Expectation | | :--- | :--- | | Sales | Approximately $3.8 billion | | EPS | Approximately $4.00 | - Record levels are anticipated for sales, operating margin, and net earnings[1](index=1&type=chunk) [CEO Commentary](index=2&type=section&id=CEO%20Commentary) CEO Tod Carpenter highlighted strong FY2025 performance, progress in business model efficiency, and projected record sales and higher operating margins for FY2026, alongside continued investment in growth and shareholder returns - Strong fourth quarter fiscal year 2025 results concluded a record fiscal year 2025[3](index=3&type=chunk) - The company made progress in building higher structural business model efficiency through portfolio and cost optimization initiatives, alongside operating expense management[3](index=3&type=chunk) - Fiscal year 2026 is projected to achieve **$3.8 billion** in sales, with gross margin expansion and record operating margin[4](index=4&type=chunk) [Fiscal Year 2025 Operating Results](index=2&type=section&id=Fiscal%202025%20Operating%20Results) This section details Donaldson's fiscal year 2025 operating performance, including overall sales, segment-specific results, profitability, expenses, and shareholder returns [Overall Sales Performance](index=2&type=section&id=Overall%20Sales%20Performance) Total sales for Q4 FY2025 increased **4.8%** to **$980.7 million**, driven by volume, favorable currency translation, and pricing, with full-year sales growing **2.9%** to **$3,690.9 million** Sales Performance (YoY) | Period | Sales (million USD) | Growth Rate | | :--- | :--- | :--- | | Q4 FY2025 | $980.7 | 4.8% | | Full Year FY2025 | $3,690.9 | 2.9% | - Fourth quarter sales growth was primarily driven by increased volume, favorable currency translation, and pricing benefits[5](index=5&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) In Q4 FY2025, Mobile Solutions sales grew **2.3%**, Industrial Solutions **7.7%**, and Life Sciences **14.1%**, with varied drivers including strong off-road and aftermarket performance, offset by declining on-road sales [Mobile Solutions Segment](index=3&type=section&id=Mobile%20Solutions%20Segment) Mobile Solutions segment sales increased **2.3%** in Q4, driven by strong off-road (**5.1%** growth) and aftermarket (**3.3%** growth), partially offset by a **20.1%** decline in on-road sales, with full-year sales up **1.8%** Mobile Solutions Segment Sales Growth (YoY) | Sub-Segment | Q4 FY2025 Growth Rate | Full Year FY2025 Growth Rate | | :--- | :--- | :--- | | Off-Road | 5.1% | (5.6)% | | On-Road | (20.1)% | (20.9)% | | Aftermarket | 3.3% | 5.2% | | **Total** | **2.3%** | **1.8%** | - Off-road sales growth was driven by increased sales in Europe and Asia Pacific; aftermarket sales growth benefited from OE and independent channels' strong performance; on-road sales declined due to reduced equipment production, primarily in the U.S[7](index=7&type=chunk) [Industrial Solutions Segment](index=3&type=section&id=Industrial%20Solutions%20Segment) Industrial Solutions sales grew **7.7%** in Q4, primarily driven by a **10.5%** increase in Industrial Filtration Solutions (IFS) due to higher demand for new dust collection equipment in Europe and the U.S., and power generation project timing, while Aerospace and Defense sales declined **5.9%** due to a prior year surge Industrial Solutions Segment Sales Growth (YoY) | Sub-Segment | Q4 FY2025 Growth Rate | Full Year FY2025 Growth Rate | | :--- | :--- | :--- | | Industrial Filtration Solutions (IFS) | 10.5% | 1.5% | | Aerospace and Defense | (5.9)% | 15.0% | | **Total** | **7.7%** | **3.6%** | - IFS sales growth was driven by increased demand for new dust collection equipment in Europe and the U.S., and the timing of power generation projects[8](index=8&type=chunk) [Life Sciences Segment](index=3&type=section&id=Life%20Sciences%20Segment) Life Sciences segment sales increased **14.1%** year-over-year in Q4 and **9.8%** for the full year, primarily driven by strong sales of new equipment and replacement parts in food and beverage and disk drive markets Life Sciences Segment Sales Growth (YoY) | Period | Growth Rate | | :--- | :--- | | Q4 FY2025 | 14.1% | | Full Year FY2025 | 9.8% | - Growth was driven by strong sales of new equipment and replacement parts in the food and beverage and disk drive sectors[9](index=9&type=chunk) [Profitability and Expenses](index=3&type=section&id=Profitability%20and%20Expenses) In Q4 FY2025, gross margin declined due to tariff-related inflation and inventory valuation headwinds, while operating expenses as a percentage of sales improved; GAAP operating margin slightly decreased, adjusted operating margin slightly increased, interest expense rose due to higher rates, and the effective tax rate increased due to fewer net discrete tax benefits [Gross Margin](index=3&type=section&id=Gross%20Margin) GAAP gross margin for Q4 FY2025 was **34.5%**, a **130 basis point** decrease from 2024, primarily due to tariff-related inflation and inventory valuation headwinds, with adjusted gross margin at **34.8%**, down from **36.2%** year-over-year Gross Margin (YoY) | Metric | Q4 FY2025 | Q4 FY2024 | Change (bps) | | :--- | :--- | :--- | :--- | | GAAP Gross Margin | 34.5% | 35.8% | -130 | | Adjusted Gross Margin | 34.8% | 36.2% | -140 | - Gross margin decline was primarily due to tariff-related inflation and associated inventory valuation headwinds[9](index=9&type=chunk) [Operating Expenses and Margin](index=3&type=section&id=Operating%20Expenses%20and%20Margin) Operating expenses as a percentage of sales improved by **110 basis points** to **19.1%** in Q4 FY2025, driven by sales leverage and disciplined expense management; GAAP operating margin was **15.5%** (down **10 bps**), while adjusted operating margin was **16.4%** (up **10 bps**) Operating Expenses and Margin (YoY) | Metric | Q4 FY2025 | Q4 FY2024 | Change (bps) | | :--- | :--- | :--- | :--- | | Operating Expenses as % of Sales | 19.1% | 20.2% | -110 | | GAAP Operating Margin | 15.5% | 15.6% | -10 | | Adjusted Operating Margin | 16.4% | 16.3% | +10 | - Operating expense improvement was driven by sales leverage and disciplined expense management[10](index=10&type=chunk) [Interest Expense and Tax Rate](index=3&type=section&id=Interest%20Expense%20and%20Tax%20Rate) Q4 FY2025 interest expense was **$7.1 million**, up from **$5.3 million** in 2024 due to higher interest rates, and the effective tax rate increased to **23.6%** from **21.3%** due to fewer net discrete tax benefits Interest Expense and Effective Tax Rate (YoY) | Metric | Q4 FY2025 | Q4 FY2024 | Change | | :--- | :--- | :--- | :--- | | Interest Expense | $7.1 million | $5.3 million | 35.1% | | Effective Tax Rate | 23.6% | 21.3% | 2.3% | - Increased interest expense was due to higher interest rates[11](index=11&type=chunk) - The effective tax rate increased due to fewer net discrete tax benefits[11](index=11&type=chunk) [Shareholder Returns](index=3&type=section&id=Shareholder%20Returns) For the full fiscal year 2025, Donaldson paid **$131.9 million** in dividends and repurchased **4.0%** of its outstanding shares for **$333.6 million** Full Year Fiscal Year 2025 Shareholder Returns | Metric | Amount | | :--- | :--- | | Dividends Paid | $131.9 million | | Share Repurchases | $333.6 million (4.0% of outstanding shares) | [Fiscal Year 2026 Outlook](index=3&type=section&id=Fiscal%202026%20Outlook) This section outlines Donaldson's financial projections for fiscal year 2026, including overall financial targets, segment sales forecasts, and capital allocation plans [Overall Financial Projections](index=3&type=section&id=Overall%20Financial%20Projections) Donaldson projects full-year fiscal year 2026 EPS between **$3.92** and **$4.08**, with sales growth of **1% to 5%** (midpoint **$3.8 billion**), including approximately **1%** from pricing benefits Overall Financial Projections for Fiscal Year 2026 | Metric | Forecast Range | | :--- | :--- | | Full-Year EPS | $3.92 - $4.08 | | Sales Growth | 1% - 5% (midpoint $3.8 billion) | | Pricing Benefits | Approximately 1% | [Segment Sales Projections](index=3&type=section&id=Segment%20Sales%20Projections) For FY2026, Mobile Solutions sales are projected flat to up **4%**, Industrial Solutions up **2% to 6%**, and Life Sciences up **1% to 5%**, with specific growth expectations across sub-segments like off-road, on-road, IFS, and food and beverage [Mobile Solutions Segment Outlook](index=3&type=section&id=Mobile%20Solutions%20Segment%20Outlook) Mobile Solutions segment sales are projected to be flat to up **4%** in FY2026, with mid-single-digit growth in off-road, high-single-digit growth in on-road (a modest rebound from FY2025 decline), and low-single-digit growth in aftermarket, driven by market share gains and sustained strong fleet utilization - Mobile sales are projected to be flat to up **4%**[14](index=14&type=chunk) - Off-road sales are expected to achieve mid-single-digit growth[14](index=14&type=chunk) - On-road sales are projected for high-single-digit growth, representing a modest rebound from the fiscal year 2025 decline[14](index=14&type=chunk) - Aftermarket sales are anticipated to see low-single-digit growth, benefiting from market share gains and continued strong fleet utilization[14](index=14&type=chunk) [Industrial Solutions Segment Outlook](index=4&type=section&id=Industrial%20Solutions%20Segment%20Outlook) Industrial Solutions sales are projected to grow **2% to 6%** in FY2026, with mid-single-digit growth in Industrial Filtration Solutions (IFS) across all businesses including dust collection and power generation, while Aerospace and Defense sales are expected to remain largely flat after a record FY2025 - Industrial sales are projected to grow **2% to 6%**[15](index=15&type=chunk) - IFS sales are expected to achieve mid-single-digit growth, with strong performance across all businesses including dust collection and power generation[15](index=15&type=chunk) - Aerospace and Defense sales are anticipated to remain largely flat following a record fiscal year 2025[15](index=15&type=chunk) [Life Sciences Segment Outlook](index=4&type=section&id=Life%20Sciences%20Segment%20Outlook) Life Sciences segment sales are projected to grow **1% to 5%** in FY2026, primarily driven by continued sales growth in the food and beverage and disk drive sectors - Life Sciences sales are projected to grow **1% to 5%**[15](index=15&type=chunk) - Growth drivers include continued sales growth in the food and beverage and disk drive sectors[15](index=15&type=chunk) [Profitability and Capital Projections](index=4&type=section&id=Profitability%20and%20Capital%20Projections) For FY2026, Donaldson forecasts operating margin between **16.1%** and **16.7%**, driven by gross margin expansion and sales leverage, with specific projections for interest expense, other income, effective tax rate, capital expenditures of **$65 million to $85 million**, free cash flow conversion of **85% to 95%**, and plans to repurchase **2% to 3%** of outstanding shares [Operating Margin Outlook](index=4&type=section&id=Operating%20Margin%20Outlook) Operating margin for FY2026 is projected between **16.1%** and **16.7%** (compared to FY2025 GAAP **13.4%** or adjusted **15.7%**), primarily driven by gross margin expansion and sales leverage Fiscal Year 2026 Operating Margin Forecast | Metric | Forecast Range | | :--- | :--- | | Operating Margin | 16.1% - 16.7% | - Growth drivers include gross margin expansion and sales leverage[16](index=16&type=chunk) [Interest, Other Income, and Tax Rate Outlook](index=4&type=section&id=Interest%2C%20Other%20Income%2C%20and%20Tax%20Rate%20Outlook) For FY2026, interest expense is projected between **$22 million** and **$23 million**, other income between **$14 million** and **$18 million**, and the effective income tax rate between **23.5%** and **25.5%** Fiscal Year 2026 Interest, Other Income, and Tax Rate Forecast | Metric | Forecast Range | | :--- | :--- | | Interest Expense | $22 million - $23 million | | Other Income | $14 million - $18 million | | Effective Income Tax Rate | 23.5% - 25.5% | [Capital Expenditures and Free Cash Flow Outlook](index=4&type=section&id=Capital%20Expenditures%20and%20Free%20Cash%20Flow%20Outlook) FY2026 capital expenditures are projected between **$65 million** and **$85 million**, with free cash flow conversion between **85%** and **95%**, and plans to repurchase **2% to 3%** of outstanding shares Fiscal Year 2026 Capital Expenditures and Free Cash Flow Forecast | Metric | Forecast Range | | :--- | :--- | | Capital Expenditures | $65 million - $85 million | | Free Cash Flow Conversion | 85% - 95% | | Share Repurchases | 2% - 3% of outstanding shares | [Company Information & Disclosures](index=5&type=section&id=Company%20Information%20%26%20Disclosures) This section provides details on Donaldson's webcast information, forward-looking statements, and an overview of the company's global operations and mission [Webcast Information](index=5&type=section&id=Webcast%20Information) Donaldson will webcast its Q4 and full-year FY2025 earnings call on August 27, 2025, at 9:00 AM CT, with a replay available on its investor relations website by 12:00 PM CT the same day - The webcast for the fourth quarter and full year fiscal year 2025 earnings call is scheduled for **August 27, 2025, at 9:00 AM CT**[18](index=18&type=chunk) - A replay of the webcast will be available on IR.Donaldson.com by **12:00 PM CT** on the same day[18](index=18&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations, with no obligation to update or revise unless legally required, and detailed risk factors found in the company's FY2024 Form 10-K - Statements involve future events and expectations, such as projections, plans, trends, and forecasts of the company's business and financial performance[19](index=19&type=chunk) - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from any opinion or statement[19](index=19&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements unless required by law; risk factors are detailed in the company's fiscal year 2024 Form 10-K annual report[19](index=19&type=chunk) [About Donaldson Company, Inc.](index=5&type=section&id=About%20Donaldson%20Company%2C%20Inc.) Founded in 1915, Donaldson (NYSE: DCI) is a global leader in technology-led filtration products and solutions, serving diverse industries and advanced markets across 140+ locations on six continents, addressing complex filtration challenges through its Mobile Solutions, Industrial Solutions, and Life Sciences segments - Donaldson, founded in **1915**, is a global leader in technology-led filtration products and solutions[20](index=20&type=chunk) - The company operates in over **140 locations** across six continents, serving a wide range of industries and advanced markets[20](index=20&type=chunk) - Complex filtration challenges are addressed through three primary segments: Mobile Solutions, Industrial Solutions, and Life Sciences[20](index=20&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents Donaldson's unaudited condensed consolidated financial statements, including statements of earnings, balance sheets, and cash flows for specified periods [Condensed Consolidated Statements of Earnings](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) This section provides unaudited condensed consolidated statements of earnings for the three and twelve months ended July 31, 2025, and 2024, detailing key financial metrics such as net sales, cost of sales, gross profit, operating expenses, operating income, net earnings, and earnings per share Condensed Consolidated Statements of Earnings Summary (million USD, except per share amounts) | Metric | July 31, 2025 (3 Months) | July 31, 2024 (3 Months) | July 31, 2025 (12 Months) | July 31, 2024 (12 Months) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $980.7 | $935.4 | $3,690.9 | $3,586.3 | | Gross Profit | $338.8 | $334.8 | $1,286.2 | $1,274.4 | | Operating Income | $151.7 | $146.2 | $495.4 | $544.1 | | Net Earnings | $114.3 | $109.7 | $367.0 | $414.0 | | Diluted EPS | $0.97 | $0.90 | $3.05 | $3.38 | | Dividends Per Share | $0.30 | $0.27 | $1.11 | $1.02 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents unaudited condensed consolidated balance sheets as of July 31, 2025, and 2024, detailing the composition of assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets Summary (million USD) | Metric | July 31, 2025 | July 31, 2024 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $180.4 | $232.7 | | Total Current Assets | $1,461.7 | $1,438.1 | | Total Assets | $2,977.2 | $2,914.3 | | Total Current Liabilities | $757.2 | $782.5 | | Total Liabilities | $1,523.7 | $1,425.2 | | Total Shareholders' Equity | $1,453.5 | $1,489.1 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section provides unaudited condensed consolidated statements of cash flows for the twelve months ended July 31, 2025, and 2024, detailing cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Summary (million USD) | Activity Type | July 31, 2025 (12 Months) | July 31, 2024 (12 Months) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $418.8 | $492.5 | | Net Cash Used in Investing Activities | ($150.4) | ($86.9) | | Net Cash Used in Financing Activities | ($321.7) | ($355.9) | | Cash and Cash Equivalents (End of Period) | $180.4 | $232.7 | [Supplemental Financial Data](index=9&type=section&id=Supplemental%20Financial%20Data) This section offers additional unaudited financial data, including consolidated ratio analysis (GAAP and adjusted), segment details, and geographical sales changes, both as reported and at constant currency [Consolidated Ratio Analysis (GAAP & Adjusted)](index=9&type=section&id=Consolidated%20Ratio%20Analysis%20%28GAAP%20%26%20Adjusted%29) This section provides unaudited consolidated ratio analysis for the three and twelve months ended July 31, 2025, and 2024, including GAAP and adjusted gross margin, operating expenses, operating margin, EBITDA, and effective tax rate, offering a comprehensive view of financial performance Consolidated Ratio Analysis Summary (July 31, 2025) | Metric | 3 Months (GAAP) | 12 Months (GAAP) | 3 Months (Adjusted) | 12 Months (Adjusted) | | :--- | :--- | :--- | :--- | :--- | | Gross Margin | 34.5% | 34.8% | 34.8% | 35.0% | | Operating Expenses | 19.1% | 21.4% | 18.3% | 19.3% | | Operating Margin | 15.5% | 13.4% | 16.4% | 15.7% | | EBITDA | 18.5% | 16.7% | 19.4% | 19.0% | | Effective Tax Rate | 23.6% | 25.4% | 23.7% | 23.3% | - Adjusted ratios exclude the impact of certain items unrelated to ongoing operations, providing a meaningful representation of core business performance[29](index=29&type=chunk) [Segment Detail (Sales & Earnings before Income Taxes)](index=10&type=section&id=Segment%20Detail%20%28Sales%20%26%20Earnings%20before%20Income%20Taxes%29) This section provides unaudited segment details for the three and twelve months ended July 31, 2025, and 2024, including net sales and earnings before income taxes for Mobile Solutions, Industrial Solutions, and Life Sciences segments, along with their respective percentages Segment Sales and Earnings Before Income Taxes Summary (million USD) | Segment | July 31, 2025 (3 Months) Sales | July 31, 2025 (3 Months) Earnings Before Income Taxes | July 31, 2025 (12 Months) Sales | July 31, 2025 (12 Months) Earnings Before Income Taxes | | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | $588.4 | $112.1 | $2,291.0 | $417.6 | | Industrial Solutions | $309.8 | $64.6 | $1,104.4 | $197.7 | | Life Sciences | $82.4 | $4.4 | $295.5 | $4.4 | | **Total** | **$980.7** | **$149.7** | **$3,690.9** | **$492.2** | [Segment Sales Percent Change by Geography (As Reported)](index=11&type=section&id=Segment%20Sales%20Percent%20Change%20by%20Geography%20%28As%20Reported%29) This section presents unaudited segment sales percentage changes by geographic region (U.S./Canada, EMEA, Asia Pacific, Latin America) for the three and twelve months ended July 31, 2025, reflecting regional sales performance July 31, 2025 (3 Months) Segment Sales Geographic Change (As Reported) | Segment | Total | U.S./Canada | Europe/Middle East/Africa | Asia Pacific | Latin America | | :--- | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | 2.3% | (2.7)% | 11.1% | 4.5% | (0.2)% | | Industrial Solutions | 7.7% | 4.4% | 15.1% | 6.1% | (8.0)% | | Life Sciences | 14.1% | 27.5% | 8.8% | 13.7% | 21.6% | | **Total Company** | **4.8%** | **0.7%** | **12.3%** | **6.6%** | **(0.7)%** | July 31, 2025 (12 Months) Segment Sales Geographic Change (As Reported) | Segment | Total | U.S./Canada | Europe/Middle East/Africa | Asia Pacific | Latin America | | :--- | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | 1.8% | 0.6% | 1.5% | 3.6% | 3.7% | | Industrial Solutions | 3.6% | 6.7% | 1.8% | (0.2)% | (13.2)% | | Life Sciences | 9.8% | 13.0% | (0.4)% | 19.8% | 6.5% | | **Total Company** | **2.9%** | **3.1%** | **1.4%** | **5.7%** | **1.8%** | [Segment Sales Percent Change by Geography (Constant Currency)](index=12&type=section&id=Segment%20Sales%20Percent%20Change%20by%20Geography%20%28Constant%20Currency%29) This section provides unaudited segment sales percentage changes by geographic region (U.S./Canada, EMEA, Asia Pacific, Latin America) at constant currency for the three and twelve months ended July 31, 2025, to reflect underlying business performance by excluding currency fluctuations July 31, 2025 (3 Months) Segment Sales Geographic Change (Constant Currency) | Segment | Total | U.S./Canada | Europe/Middle East/Africa | Asia Pacific | Latin America | | :--- | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | 0.7% | (2.7)% | 4.6% | 3.5% | 0.9% | | Industrial Solutions | 5.8% | 4.4% | 9.8% | 5.1% | (7.3)% | | Life Sciences | 8.5% | 27.5% | 1.9% | 7.1% | 23.0% | | **Total Company** | **2.9%** | **0.7%** | **6.1%** | **4.5%** | **0.3%** | July 31, 2025 (12 Months) Segment Sales Geographic Change (Constant Currency) | Segment | Total | U.S./Canada | Europe/Middle East/Africa | Asia Pacific | Latin America | | :--- | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | 1.9% | 0.6% | (0.4)% | 4.3% | 6.6% | | Industrial Solutions | 3.1% | 6.7% | 0.0% | 0.2% | (11.1)% | | Life Sciences | 7.9% | 13.0% | (2.3)% | 16.5% | 10.6% | | **Total Company** | **2.7%** | **3.1%** | **(0.5)%** | **5.6%** | **4.7%** | - Constant currency presentation excludes the impact of foreign currency exchange rate fluctuations, providing valuable supplemental information about operating results[36](index=36&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=13&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides reconciliation tables for non-GAAP financial measures (including free cash flow, EBITDA, adjusted EBITDA, adjusted gross profit, adjusted operating expenses, adjusted operating income, adjusted net earnings, and adjusted diluted EPS) to their most directly comparable GAAP measures for the three and twelve months ended July 31, 2025, and 2024 Non-GAAP Financial Measures Reconciliation Summary (million USD, except per share amounts) | Metric | July 31, 2025 (3 Months) | July 31, 2024 (3 Months) | July 31, 2025 (12 Months) | July 31, 2024 (12 Months) | | :--- | :--- | :--- | :--- | :--- | | Free Cash Flow | $149.7 | $106.9 | $342.0 | $407.6 | | EBITDA | $181.2 | $169.6 | $615.9 | $655.1 | | Adjusted EBITDA | $190.7 | $176.0 | $701.0 | $661.5 | | Adjusted Net Earnings | $121.4 | $114.5 | $442.8 | $418.8 | | Adjusted Diluted EPS | $1.03 | $0.94 | $3.68 | $3.42 | - Non-GAAP financial measures (such as free cash flow, EBITDA, and adjusted metrics), while not GAAP compliant, are considered by the company to be useful in understanding financial performance, reflecting management's operation of the company, and providing a meaningful representation of core business performance[41](index=41&type=chunk) - These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures[41](index=41&type=chunk)

Core Viewpoint - Analysts expect Donaldson (DCI) to report quarterly earnings of $1.02 per share, reflecting an 8.5% year-over-year increase, with revenues projected at $953.79 million, up 2% from the previous year [1] Earnings Projections - There have been no revisions in the consensus EPS estimate for the quarter over the last 30 days, indicating stability in analysts' forecasts [1][2] - The average prediction for 'Net Sales- Industrial Solutions segment' is $303.83 million, showing a year-over-year increase of 5.6% [4] - 'Net Sales- Mobile Solutions' is expected to be $570.73 million, indicating a slight decline of 0.8% year over year [4] - The consensus estimate for 'Net Sales- Life Sciences segment' is $76.93 million, reflecting a year-over-year increase of 6.4% [4] Segment Analysis - 'Net Sales- Industrial Solutions- Industrial Filtration Solutions' is projected to reach $258.14 million, an increase of 8.7% from the prior year [5] - 'Net Sales- Industrial Solutions- Aerospace and Defense' is expected to be $46.49 million, indicating a decrease of 7.8% from the previous year [5] - 'Net Sales- Mobile Solutions- Off-Road' is forecasted at $92.60 million, showing a year-over-year increase of 3% [6] - 'Net Sales- Mobile Solutions- On-Road' is estimated at $29.90 million, reflecting a decline of 9.1% from the prior year [6] - 'Net Sales- Mobile Solutions- Aftermarket' is projected to reach $449.24 million, indicating a slight decrease of 0.7% year over year [7] Earnings Before Income Taxes - 'Earnings / (loss) before income taxes- Mobile Solutions' is expected to be $105.78 million, compared to $105.20 million reported in the same quarter last year [7] - 'Earnings / (loss) before income taxes- Industrial Solutions' is projected at $59.17 million, up from $57.80 million reported in the same quarter last year [8] Market Performance - Donaldson shares have returned +3.7% over the past month, outperforming the Zacks S&P 500 composite's +1.1% change [8]