Core Insights - Donaldson Company, Inc. (DCI) reported adjusted earnings of 99 cents per share for Q3 fiscal 2025, surpassing the Zacks Consensus Estimate of 95 cents, marking a year-over-year increase of 7.6% [1][8] - Total revenues reached $940.1 million, exceeding the Zacks Consensus Estimate of $939 million, with a year-over-year growth of 1.3% [2][8] Revenue Results - DCI's net sales in the United States/Canada rose by 0.9% year over year, while Europe, the Middle East, and Africa saw a decline of 0.6%. Latin America experienced a 2.3% increase, and the Asia Pacific region improved by 5.2% [2] - The Mobile Solutions segment, which accounts for 62% of net sales, reported sales of $582.6 million, down 0.4% year over year, with Off-Road and On-Road businesses declining by 8.3% and 24.5%, respectively. Aftermarket sales increased by 3.3% [3] - The Industrial Solutions segment generated revenues of $283.3 million, up 5.3% year over year, driven by a 27.1% increase in Aerospace and Defense sales [4] - The Life Sciences segment reported revenues of $74.2 million, a 0.7% increase year over year, benefiting from volume growth in the Disk Drive business [4] Margin Profile - DCI's cost of sales increased by 3.4% year over year to $618.2 million, leading to a gross profit decline of 2.5% to $321.9 million. The gross margin decreased by 140 basis points to 34.2% due to higher manufacturing costs [5] - Operating expenses rose by 25.7% year over year to $234.5 million, resulting in a 39.1% decrease in operating profit to $87.4 million, with an operating margin of 9.3%, down 620 basis points year over year [5] Balance Sheet & Cash Flow - As of the end of Q3 fiscal 2025, DCI's cash and cash equivalents were $178.5 million, down from $232.7 million in Q4 fiscal 2024. Long-term debt increased to $638.8 million from $483.4 million [7] - In the first nine months of fiscal 2025, DCI generated net cash of $251.0 million from operating activities, a decrease of 31.5% year over year. Free cash flow decreased by 36% to $192.4 million [8][9] FY25 Outlook - For fiscal 2025, DCI expects adjusted earnings per share to be in the range of $3.64-$3.70, compared to $3.42 in fiscal 2024, with sales anticipated to grow by 1-3% [10] - Segment-wise, Mobile Solutions sales are expected to be flat to increase by 2%, while Industrial Solutions sales are projected to rise by 2-4%. Life Sciences sales are expected to grow in the high single-digit range [11] - Capital expenditure is anticipated to be between $75 million and $90 million, with free cash flow conversion expected to be in the range of 80-90% [12]

Core Viewpoint - Donaldson Company, Inc. reported its third quarter fiscal 2025 earnings, highlighting both performance metrics and an updated outlook for the fiscal year [3]. Financial Performance - The third quarter non-GAAP results exclude pre-tax charges totaling $62 million for impairment of intangible assets related to two upstream bioprocessing businesses, Univercells Technologies and Solaris [4]. - Additional exclusions in the non-GAAP results include $4.2 million for restructuring, $800,000 for business development, and a $1.2 million gain on the sale of fixed assets [4]. Management Commentary - The earnings call featured insights from key executives, including Tod Carpenter, Chairman, President and CEO, and Brad Pogalz, Chief Financial Officer, who provided a summary of the company's performance and future outlook [3].

Financial Performance - Net sales for the three months ended April 30, 2025, were $940.1 million, a 1.3% increase from $927.9 million in the same period of 2024[106]. - Net sales for the nine months ended April 30, 2025, were $2,710.2 million, an increase of $59.3 million, or 2.2%, compared to $2,650.9 million for the same period in 2024[122]. - Net earnings for the three months ended April 30, 2025, were $57.8 million, a decrease of $55.7 million, or 49.1%, from $113.5 million in the same period of 2024[117]. - Net earnings for the nine months ended April 30, 2025, were $252.7 million, a decrease of $51.6 million, or 16.9%, compared to $304.3 million in 2024[130]. - Diluted earnings per share (EPS) decreased to $0.48 for the three months ended April 30, 2025, down from $0.92 in the prior year, a decline of 48.0%[117]. Segment Performance - The Industrial Solutions segment saw a sales increase of $14.2 million, or 5.3% growth, while the Mobile Solutions segment experienced a decline of $2.6 million, or 0.4%[108]. - The Mobile Solutions segment reported net sales of $1,702.6 million for the nine months ended April 30, 2025, an increase of $27.1 million, or 1.6%, compared to $1,675.5 million in 2024[140]. - Net sales for the Industrial Solutions segment for the three months ended April 30, 2025, were $283.3 million, an increase of $14.2 million, or 5.3%, compared to $269.1 million for the same period in 2024[146]. - Aerospace and Defense net sales increased by $11.0 million due to ongoing strength in the end markets, while Industrial Filtration Solutions (IFS) net sales increased by $3.2 million driven by replacement part sales[147]. - Net sales for the Life Sciences segment for the three months ended April 30, 2025, were $74.2 million, an increase of $0.6 million, or 0.7%, compared to $73.6 million for the same period in 2024[160]. Expenses and Costs - Gross margin as a percentage of net sales decreased to 34.2% for the three months ended April 30, 2025, down from 35.6% in the prior year, primarily due to higher manufacturing costs[109]. - Selling, general and administrative expenses decreased by $10.6 million, or 6.5%, to $151.1 million, representing 16.1% of net sales[110]. - Research and development expenses decreased by $3.4 million, or 14.0%, to $21.4 million, representing 2.3% of net sales[112]. - Selling, general and administrative expenses were $476.4 million, or 17.6% of net sales, for the nine months ended April 30, 2025, compared to $473.5 million, or 17.9% in 2024[124]. - Research and development expenses decreased by $2.9 million, or 4.4%, to $65.3 million, representing 2.4% of net sales for the nine months ended April 30, 2025[126]. Impairment and Tax - The company reported a loss on impairment of intangible assets of $62.0 million, or 6.6% of net sales, compared to no expense in the same period of 2024[111]. - Loss on impairment of intangible assets was $62.0 million, or 2.3% of net sales, for the nine months ended April 30, 2025, compared to no expense in 2024[125]. - The effective tax rate increased to 33.6% for the three months ended April 30, 2025, compared to 21.2% in the same period of 2024, primarily due to the impairment loss[115]. - The effective tax rate increased to 26.2% for the nine months ended April 30, 2025, compared to 23.1% in 2024, primarily due to the impairment loss[129]. Cash Flow and Debt - Cash provided by operating activities for the nine months ended April 30, 2025, was $251.0 million, a decrease of $115.5 million compared to $366.5 million for the same period in 2024[170]. - Cash used in investing activities for the nine months ended April 30, 2025, was $129.8 million, an increase of $62.0 million compared to $67.8 million for the same period in 2024[171]. - Total debt as of April 30, 2025, was $638.8 million, an increase of $130.4 million from $508.4 million as of July 31, 2024[177]. - Cash and cash equivalents as of April 30, 2025, were $178.5 million, down from $232.7 million as of July 31, 2024[174]. - Dividends paid for the nine months ended April 30, 2025, were $96.9 million, compared to $90.3 million for the same period in 2024[173]. Foreign Currency and Interest Rates - The estimated impact of foreign currency translation for the nine months ended April 30, 2025, resulted in a decrease in reported net sales of $10.1 million and a decrease in reported net earnings of $3.4 million[187]. - The overall stronger U.S. dollar negatively impacted the Company's international net sales and net earnings due to foreign-denominated revenues translating into less U.S. dollars[187]. - As of April 30, 2025, the total notional amount of foreign currency forward contracts designated as hedges was $32.4 million, while those not designated as hedges amounted to $194.3 million[189]. - The total notional amount of net investment hedges as of April 30, 2025, was €80 million, or $88.8 million, with maturity dates ranging from 2027 to 2029[190]. - Assuming a hypothetical 0.5 percentage point increase in short-term interest rates, interest expense would have increased approximately $1.7 million in the nine months ended April 30, 2025[192].

Financial Data and Key Metrics Changes - For the third quarter of fiscal 2025, consolidated sales rose 1% year over year to $940 million, with modest volume growth offset by currency translation headwinds [11][19] - Adjusted EPS was $0.99, up approximately 8% compared to the prior year [12][19] - Operating margin improved by 80 basis points over the previous year, driven by expense leverage [11][22] Business Line Data and Key Metrics Changes - In Mobile Solutions, total sales were $583 million, roughly flat with the prior year, with aftermarket sales increasing by 3% to $460 million [15][16] - Industrial Solutions sales rose 5% to $283 million, with IFS sales increasing by 1% to $232 million [17][18] - Life Sciences sales grew 1% to $74 million, with double-digit growth in disk drive and food and beverage replacement parts [18][19] Market Data and Key Metrics Changes - Mobile Solutions in China saw a 27% increase in sales, driven by growth in both first fit and aftermarket [16] - Aerospace and defense sales reached a record $52 million, largely due to robust market demand [10][18] Company Strategy and Development Direction - The company is focused on long-term investments in technology opportunities and capital expenditures while maintaining a strong balance sheet [6][30] - The appointment of Rich Lewis as Chief Operating Officer is expected to strengthen execution across the organization [8] - The company aims to navigate dynamic market conditions while advancing innovation and growth initiatives [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver long-term value despite macro uncertainties, including tariff policies and end market pressures [5][6] - The company forecasts another record year for fiscal 2025, with expectations of record sales, operating margin, and adjusted earnings [19][29] Other Important Information - The company announced an 11% increase in its quarterly dividend, marking the 30th consecutive year of annual dividend increases [33][34] - During the third quarter, the company repurchased 2.4% of its outstanding shares for a total of $192 million [34] Q&A Session Summary Question: Can you discuss the gross profit margin dynamics and inflation impacts? - Management indicated that the majority of the decline in gross margin was due to footprint optimization initiatives, and they remain confident in maintaining price-cost neutrality [38][40][42] Question: What is driving the lowered CapEx outlook? - Management stated that the focus is on executing business for customers amid supply chain pressures, leading to a more cautious approach to launching CapEx projects [43][44][45] Question: Can you provide insights on Industrial Solutions top line trends? - Management noted that while the equipment side is pressured, aftermarket growth and share gains in stationary hydraulics are offsetting headwinds [50][54] Question: What is the visibility like in the aerospace and defense segment? - Management confirmed long visibility on projects, but noted supply chain uncertainties could affect predictability [66][72] Question: How should we think about tariff impacts moving forward? - Management expects tariff impacts to be negligible and believes they can offset costs through pricing and supply chain adjustments [88][90][102]

Financial Data and Key Metrics Changes - For the third quarter of fiscal 2025, consolidated sales rose 1% year over year to $940 million, with modest volume growth offset by currency translation headwinds [9][20] - Adjusted EPS was $0.99, up approximately 8% compared to the prior year [10][21] - Operating margin improved by 80 basis points over the previous year, driven by expense leverage [9][21] Business Line Data and Key Metrics Changes - In Mobile Solutions, total sales were $583 million, roughly flat with the prior year, with aftermarket sales increasing by 3% to $460 million [13][14] - Industrial Solutions sales rose 5% to $283 million, with IFS sales at $232 million, a 1% increase from the prior year [15][16] - Life Sciences sales grew 1% to $74 million, with double-digit growth in disk drive and food and beverage replacement parts [16][17] Market Data and Key Metrics Changes - Mobile Solutions in China saw a 27% increase in sales, driven by growth in both first fit and aftermarket [15] - Aerospace and defense sales reached a record $52 million, largely due to robust market demand [7][16] - The impact of tariffs on net results was deemed immaterial for the quarter, with an annualized estimate of $35 million expected to be offset through supply chain and price adjustments [10][12] Company Strategy and Development Direction - The company is focused on long-term investments in technology opportunities and capital expenditures while maintaining a strong balance sheet [5][30] - A new COO was appointed to strengthen execution across the organization [6] - The company aims to navigate dynamic market conditions while advancing innovation and growth initiatives [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver long-term value despite macro uncertainties [4][35] - The company anticipates fiscal 2025 to be another record year, with record sales, operating margin, and adjusted earnings [17][34] - Management acknowledged ongoing market headwinds in bioprocessing but remains committed to strategic investments [23][24] Other Important Information - The company announced an 11% increase in its quarterly dividend, marking the 30th consecutive year of annual dividend increases [32][33] - Share repurchases totaled 2.4% of outstanding shares for $192 million during the quarter, with expectations to increase the full-year repurchase to between 3-4% [33] Q&A Session Summary Question: Can you discuss the gross profit margin dynamics and inflation impacts? - The decline in gross margin was primarily due to footprint optimization initiatives, with expectations to remain price-cost neutral [37][39][41] Question: What is driving the lowered CapEx outlook? - The company is prioritizing executing business operations over launching new CapEx projects due to supply chain pressures [42][44] Question: Can you provide insights on Industrial Solutions top-line trends? - The equipment side is pressured, but aftermarket growth and share gains in stationary hydraulics are offsetting challenges [49][51] Question: What is the visibility in aerospace and defense? - The company has long visibility on projects, but supply chain uncertainties make predictions challenging [62][68] Question: How does the company view the impact of tariffs on demand? - The company is managing carefully amidst uncertainties, with aftermarket and service-based businesses performing well [100][101]

Core Insights - Donaldson (DCI) reported revenue of $940.1 million for the quarter ended April 2025, reflecting a year-over-year increase of 1.3% and exceeding the Zacks Consensus Estimate of $938.8 million by 0.14% [1] - Earnings per share (EPS) for the quarter was $0.99, up from $0.92 in the same quarter last year, representing an EPS surprise of 4.21% against the consensus estimate of $0.95 [1] Financial Performance - Net Sales in the Industrial Solutions segment were $283.30 million, slightly below the average estimate of $284.11 million, but up 5.3% year-over-year [4] - Mobile Solutions reported net sales of $582.60 million, surpassing the average estimate of $577.91 million, but down 0.4% compared to the previous year [4] - Life Sciences segment net sales were $74.20 million, below the estimate of $75.23 million, with a year-over-year increase of 0.8% [4] - Industrial Filtration Solutions within Industrial Solutions had net sales of $231.80 million, below the estimate of $239.58 million, reflecting a 1.4% year-over-year increase [4] - Aerospace and Defense within Industrial Solutions saw net sales of $51.50 million, exceeding the estimate of $42.98 million, with a significant year-over-year increase of 27.2% [4] - Off-Road Mobile Solutions reported net sales of $95.60 million, below the estimate of $97.26 million, with a year-over-year decline of 8.3% [4] - On-Road Mobile Solutions had net sales of $26.90 million, significantly below the estimate of $32.98 million, representing a 24.7% year-over-year decrease [4] - Aftermarket Mobile Solutions reported net sales of $460.10 million, exceeding the estimate of $446.85 million, with a year-over-year increase of 3.3% [4] Earnings Analysis - Earnings before income taxes for Mobile Solutions were $105.30 million, slightly below the average estimate of $106.15 million [4] - Industrial Solutions reported earnings before income taxes of $51.20 million, compared to the estimate of $52.13 million [4] - Life Sciences segment earnings before income taxes were $5.80 million, significantly above the estimate of $1.80 million [4] - Corporate and unallocated earnings before income taxes showed a loss of $75.30 million, much worse than the estimate of -$7.78 million [4] Stock Performance - Over the past month, Donaldson's shares returned +3.8%, while the Zacks S&P 500 composite increased by +4.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Company Performance - Donaldson reported quarterly earnings of $0.99 per share, exceeding the Zacks Consensus Estimate of $0.95 per share, and up from $0.92 per share a year ago, representing an earnings surprise of 4.21% [1] - The company posted revenues of $940.1 million for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 0.14%, and an increase from $927.9 million year-over-year [2] - Over the last four quarters, Donaldson has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Outlook - The immediate price movement of Donaldson's stock will depend on management's commentary during the earnings call and future earnings expectations [3][4] - Donaldson shares have increased approximately 2.7% since the beginning of the year, compared to a 0.9% gain for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.98 on revenues of $944.8 million, and for the current fiscal year, it is $3.61 on revenues of $3.66 billion [7] Industry Context - The Pollution Control industry, to which Donaldson belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5][6]

D O N AL D S O N C O M P AN Y THIRD QUARTER FISCAL YEAR 2025 J UN E 2 02 5 Forward-Looking Statement Safe Harbor Statements in this presentation regarding future events and expectations, such as forecasts, plans, trends, and projections relating to the Company's business and financial performance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are identified by words or phrases such as "will likely result," "are expected to," "will continue," "w ...

Financial Performance - Third quarter fiscal 2025 net earnings were $57.8 million, down 49.1% from $113.5 million a year ago, with diluted EPS of $0.48 compared to $0.92 in 2024[1][23] - Net earnings for the nine months ended April 30, 2025, were $252.7 million, a decrease from $304.3 million in the same period of 2024[28] - The diluted EPS for the nine months ended April 30, 2025, was $2.09, down from $2.48 in the previous year[44] - Adjusted net earnings for the nine months ended April 30, 2025, were $321.4 million, compared to $304.3 million in the prior year[44] Sales and Revenue - Total sales for the third quarter reached $940.1 million, a 1.3% increase compared to $927.9 million in the same period last year, driven by pricing benefits and volume growth[3][23] - Total net sales for the company increased by 1.3% to $940.1 million in the three months ended April 30, 2025, compared to $927.9 million in the same period of 2024[33] - Life Sciences sales are projected to grow high-single digits versus 2024, driven by strong demand in Disk Drive and Food & Beverage replacement parts[17] - The Mobile Solutions segment reported a decline in net sales by 0.4% to $582.6 million, with the Off-Road and On-Road categories decreasing by 8.3% and 24.5% respectively[33] - The Industrial Solutions segment saw an increase in net sales by 5.3% to $283.3 million, driven by a 27.1% increase in the Aerospace and Defense category[33] - Life Sciences segment net sales increased by 0.7% to $74.2 million, reflecting a growth of 8.3% for the nine months ended April 30, 2025[33] - Total company revenue increased by 2.2% for the nine months ended April 30, 2025, with a notable growth of 5.4% in the APAC region[37] - The Aerospace and Defense segment saw a significant revenue increase of 24.2% for the nine months ended April 30, 2025, driven by strong demand[40] - The Industrial Solutions segment experienced a total revenue increase of 2.1% for the nine months ended April 30, 2025, despite a decline in EMEA[40] Margins and Expenses - Gross margin decreased to 34.2% from 35.6% in 2024, attributed to higher manufacturing costs[7] - Operating expenses as a percentage of sales rose to 24.9%, up from 20.1% in the prior year, driven by impairment charges and restructuring costs[8] - Operating margin fell to 9.3% for the three months ended April 30, 2025, compared to 15.5% in the prior year[30] - The company reported a gross profit of $947.4 million for the nine months ended April 30, 2025, compared to $939.6 million in the prior year[43] - The adjusted EBITDA for the nine months ended April 30, 2025, was $510.3 million, an increase from $485.5 million in the previous year[43] Cash Flow and Capital Expenditures - Free cash flow for the nine months ended April 30, 2025, was $192.4 million, down from $300.7 million in the same period last year[43] - Capital expenditures for fiscal 2025 are forecasted to be between $75 million and $90 million, with adjusted free cash flow conversion expected to be between 80% and 90%[18] - The company reported a cash conversion ratio of 126.2% for the three months ended April 30, 2025, up from 105.9% in the prior year[30] Shareholder Actions and Debt - The company repurchased 2.4% of its outstanding shares for $192.4 million during the third quarter, with a year-to-date total of 3.3% repurchased for $273.8 million[11] - Long-term debt increased to $638.8 million as of April 30, 2025, compared to $483.4 million as of July 31, 2024[26] Guidance and Future Outlook - Adjusted full-year EPS guidance for fiscal 2025 is narrowed to between $3.64 and $3.70, reflecting an increase from prior guidance[13] - The company anticipates continued growth in adjusted EPS for fiscal 2025, although specific guidance is not provided due to variable factors[45] - The effective tax rate for the nine months ended April 30, 2025, was 26.2%, an increase from 23.1% in the same period of 2024[30]

Core Insights - Donaldson Company, Inc. (DCI) has announced an 11.1% increase in its quarterly dividend to 30 cents per share, marking its 29th consecutive year of annual dividend increases and 69 years of uninterrupted payouts [1][2][8] Financial Performance - The new dividend will be paid on June 30, 2025, to shareholders of record as of June 16 [1] - DCI's dividend payments totaled $64.6 million in the first six months of fiscal 2025 and $122.8 million in fiscal 2024 [3] - The company repurchased shares worth $81.6 million in the first six months of fiscal 2025 and $162.7 million in fiscal 2024, indicating strong cash flow and commitment to enhancing shareholder wealth [3][8] Market Position - DCI is benefiting from higher volume in the aftermarket business and expanded market share within the Mobile Solutions segment, alongside persistent strength in the aerospace and defense business [4] - Year-to-date, DCI's shares have gained 3.3%, contrasting with a 6.4% decline in the industry [4] Challenges - DCI faces challenges from high selling, general, and administrative expenses, as well as foreign exchange issues due to its diverse presence [6]