Donaldson Company (NYSE:DCI) Q2 2026 Earnings call February 26, 2026 10:00 AM ET Speaker5Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to Donaldson Company's second quarter fiscal year 2026 earnings webcast and conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a quest ...

Financial Data and Key Metrics Changes - Mativ's full year 2025 net sales were just under $2 billion, up 2.5% organically and modestly on a reported basis compared to the prior year [18] - Adjusted EBITDA for 2025 was $225 million, up 3% versus the prior year, with a favorable price to input cost ratio and lower SG&A expenses contributing to this growth [18][19] - Free Cash Flow reached a record $94 million in 2025, more than doubling the previous year's result, driven by operating cash flow of nearly $134 million, which increased by over 40% compared to the prior year [24] Business Line Data and Key Metrics Changes - In Q4, net sales for the Filtration and Advanced Materials (FAM) segment were $177 million, up over 5% year-over-year, with adjusted EBITDA increasing by 26% to $33 million [20] - The Sustainable & Adhesive Solutions (SAS) segment saw net sales of $285 million, largely flat year-over-year on an organic basis, with adjusted EBITDA of nearly $39 million, increasing by more than 8% year-over-year [21] Market Data and Key Metrics Changes - The company faced headwinds in the SAS segment, particularly in automotive tapes and release liners in Europe, but remains optimistic about overcoming these challenges [12][35] - The FAM segment experienced growth in transportation and industrial filtration, indicating resilience despite market volatility [36] Company Strategy and Development Direction - Mativ's strategy is built on three pillars: enhancing commercial excellence, strengthening the balance sheet, and optimizing the portfolio [6][30] - The company is focusing on cash flow generation and disciplined capital deployment, with an expectation of $15 million-$20 million in additional cost savings in 2026 [28] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of agility in navigating a complex macroeconomic environment characterized by geopolitical instability and trade dynamics [13] - The company is optimistic about its ability to adapt and grow, with a focus on profitable growth and execution in 2026 [15][30] Other Important Information - Mativ's cultural transformation has fostered agility, speed, and accountability, which are seen as critical to navigating market challenges [5] - The company plans to leverage AI as a foundational enterprise capability to enhance productivity and operational efficiency [16] Q&A Session Summary Question: Can you provide more detail on the specific businesses under pressure in SAS and potential catalysts for improvement? - Management noted weakness in automotive labels and release liners in Europe but is optimistic about growth opportunities in North America and Europe [35][36] Question: How sustainable is the momentum in FAM given the current demand backdrop? - Management expressed confidence in the sustainability of growth in FAM, particularly in transportation and industrial filtration, supported by strategic investments [36][37] Question: What is the expected cadence of free cash flow in 2026? - Management anticipates a small decline in free cash flow from 2025's record levels, primarily to fund growth initiatives, with a seasonal pattern expected [39][40]

Financial Data and Key Metrics Changes - IDEX delivered better-than-expected Q4 results with organic revenue growth of 1% and adjusted EBITDA margin expanding by 40 basis points year-over-year [16][17] - Free cash flow for the full year 2025 was $617 million, a 2% increase compared to the previous year, with a free cash flow conversion rate of 103% of adjusted net income [19][23] - Adjusted EPS for Q4 came in higher than the guided range, reflecting strong performance across segments [16][17] Business Line Data and Key Metrics Changes - Health & Science Technologies (HST) segment saw organic orders increase by 34% and revenue grow by 5%, driven by demand in data center applications and semiconductor consumables [12][20] - Fluid & Metering Technologies (FMT) reported organic orders growth of 4% and organic sales growth of 1%, with strong performance in municipal water and mining sectors [13][20] - Fire & Safety / Diversified Products (FSDP) experienced flat organic orders and a 5% decline in organic sales, impacted by external pressures outside the U.S. [15][22] Market Data and Key Metrics Changes - The municipal water-facing businesses within FMT grew mid-single digits, supported by increased capital spending on infrastructure refurbishment [90] - The industrial landscape remains flattish, with no significant signs of demand improvement, although there is an emerging consensus that 2026 may see a return to growth after three years of PMI contraction [14][15] - Demand in chemical, energy, and agriculture markets remains soft, contributing to challenges in FMT [21][22] Company Strategy and Development Direction - IDEX is focusing on a purposeful evolution, expanding capabilities in targeted advantage markets through organic growth and M&A, supported by their 80/20 playbook [7][28] - The company aims to leverage cross-business unit collaboration to drive growth and margin expansion, particularly within the HST segment [11][28] - M&A strategy will focus on integrating recently acquired businesses and pursuing bolt-on acquisitions, while maintaining a disciplined approach to capital allocation [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the macroeconomic environment, noting that while there are signs of improvement, they have not yet observed a significant inflection point in demand [15][36] - The outlook for 2026 includes expected organic growth of 1%-2%, with HST anticipated to grow mid-single digits, while FMT and FSDP are expected to remain flat to slightly down [25][26] - Management highlighted the importance of maintaining a strong balance sheet and disciplined capital allocation to support growth initiatives [23][24] Other Important Information - The company completed a small acquisition of Micro-LAM, which is expected to enhance their optics capabilities and contribute to growth in 2026 [10] - IDEX ended the year with strong liquidity of approximately $1.1 billion and repurchased nearly $250 million worth of shares in 2025 [19][23] Q&A Session Summary Question: Thoughts on demand outlook based on PMI data - Management noted that while they were pleased to see PMI above 50, they have not yet seen a corresponding inflection in demand across their businesses [34][36] Question: Fresh perspective on priorities from new CFO - The new CFO emphasized the strength of IDEX's franchise and the focus on M&A strategy and execution to drive growth [38][40] Question: Price contribution to top line in 2025 and outlook for 2026 - Price contributed around 3% to revenue in 2025, with expectations for a decrease to 0.0 to 0.2% in 2026 [45][46] Question: Disconnect between order strength and revenue conversion - Management explained that typical seasonal factors and larger orders from HST are contributing to the disconnect, with expectations for normalization in the coming quarters [54][56] Question: Insights on Life Sciences segment and growth expectations - The Life Sciences segment is expected to continue low single-digit growth, with some uncertainty due to external factors like government funding [60][61] Question: Order activity in HST and sustainability of growth - Management confirmed that January has shown strong order activity, indicating momentum beyond year-end budget spending [82] Question: Capital intensity for new markets like data centers - The capital intensity for new markets is expected to remain light, with opportunities to leverage existing equipment and resources [70][71]

Financial Data and Key Metrics Changes - IDEX reported organic revenue growth of 1% in Q4 2025, with adjusted EBITDA margin expanding by 40 basis points year-over-year [15][18] - Free cash flow for the full year 2025 was $617 million, a 2% increase compared to the previous year, with a free cash flow conversion rate of 103% of adjusted net income [18][21] - Adjusted EPS for Q4 exceeded guidance, reflecting strong financial performance [15][18] Business Line Data and Key Metrics Changes - Health and Science Technology (HST) segment saw organic orders increase by 34% and revenue grow by 5%, driven by demand in data centers and semiconductor applications [19][12] - Fluid and Metering Technologies (FMT) reported organic orders growth of 4% and organic sales growth of 1%, with strong performance in municipal water but softness in chemical and agricultural markets [19][20] - Fire and Safety Diversified Products (FSDP) experienced flat organic orders and a 5% decline in organic sales, with growth in North America offset by weakness outside the U.S. [20][12] Market Data and Key Metrics Changes - The municipal water-facing businesses within FMT grew mid-single digits, supported by increased capital investment in infrastructure [90] - The general industrial landscape remains flattish, with expectations for a return to growth in 2026 after three years of PMI contraction [12][13] - Demand for precious metals in mining continues to be a strength for FMT [12] Company Strategy and Development Direction - IDEX is focusing on a strategic evolution through organic growth and M&A, leveraging its 80/20 playbook to optimize resources and drive growth in targeted markets [5][27] - The company aims to maintain a balanced capital deployment strategy, prioritizing organic investments, M&A, and returning capital to shareholders [21][23] - IDEX is committed to integrating recently acquired businesses and exploring bolt-on acquisitions to enhance its portfolio [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the macroeconomic environment, noting that while there are signs of potential growth, current indicators do not yet show a significant inflection point [12][13] - The company anticipates organic growth of 1%-2% for 2026, with mid-single digit growth expected for HST and flat to slightly down outlooks for FMT and FSDP [24][25] - Management highlighted the importance of maintaining operational excellence and leveraging growth opportunities in data centers and life sciences [12][19] Other Important Information - IDEX completed a small acquisition of Micro-LAM, which is expected to enhance its capabilities in optics [9] - The company ended 2025 with strong liquidity of approximately $1.1 billion and repurchased nearly $250 million worth of shares during the year [18][21] Q&A Session Summary Question: Thoughts on demand outlook based on PMI data - Management noted that while they were pleased with the PMI reading, they have not yet seen a corresponding inflection in demand across their businesses [34][35] Question: Insights from a new CFO's perspective - The new CFO emphasized the strength of IDEX's franchise and the focus on capital allocation to drive growth, particularly in M&A strategy [36][37] Question: Contribution of price to top line growth - Price contributed approximately 3% to overall growth in 2025, with expectations for a lower contribution in 2026 [43][44] Question: Disconnect between order strength and revenue conversion - Management explained that typical seasonal patterns and larger orders from HST are influencing the timing of revenue recognition [52][53] Question: Insights on life sciences growth - Life sciences experienced low single-digit growth, with expectations for normalization as government funding uncertainties resolve [58][59] Question: Order cadence in FMT and HST - Management indicated that sectors like energy and chemicals remain pressured, while HST is seeing strong order momentum, particularly in data centers [75][76]

公司拟向拓展投资、袁建华、Yuan Ye James、Dannie Yuan 合计收购洁科膜70%股权，交易金额为人民 币791.99万元。本次交易完成后，公司将直接持有洁科膜70%股权，洁科膜将成为公司的控股子公司， 纳入公司合并报表范围。本次交易涉及的股权转让协议尚未签署。 格隆汇12月30日丨洁特生物(688026.SH)公布，公司致力于为生物实验与生物制药提供整体解决方案， 而生物过滤是生物实验与生物制药环节中不可或缺的环节，过滤膜与过滤包是相关环境不可或缺的耗材 和装备。此前，公司的过滤相关产品主要向海外供应商采购。2021 年起，公司实际控制人设立洁科膜 负责研发公司所需的过滤产品。目前，洁科膜已初步完成了对过滤产品基础技术研究并完成了部分基础 型产品的开发。本次收购完成后，洁科膜仍将整体负责公司过滤产品和相关技术的研发工作，提升公司 在过滤产品领域的独立自主性、降低生产成本。 ...

Company Overview - Donaldson Company, established in 1915, focuses on solving complex filtration needs for global customers, with operations in over 40 countries and more than 100 laboratories worldwide [5][6] - The company provides advanced dust collection equipment and related spare parts, along with professional technical guidance and high-quality after-sales service, tailored to customer requirements [6] Industry Highlights - Donaldson is recognized as a leader in filtration technology, continuously innovating and investing in research and development to enhance product performance and environmental protection [6] - The company's filtration products are widely used in industrial markets and engine markets, including dust collectors, power generation, hard disk drives, compressed air purification, construction equipment, mining, compressors, and trucks [6] Recent Developments - In March 2020, Donaldson's ultra-low emission filtration technology won the "2019 Blue Award," highlighting its comprehensive strength in dust collection technology and commitment to environmental responsibility [6] Event Information - The 2026 Silicon-based Anode and Solid-State Battery Summit will focus on breakthroughs in silicon-based anodes and the future of solid-state batteries [10] - The event will feature various sponsors and exhibitors from the new energy and materials sectors, showcasing advancements in silicon-based anode technology and solid-state battery innovations [12] Conference Agenda - The conference will take place on November 12-13, featuring discussions on topics such as the development of new silicon-based anode products, porous graphite-silicon-based anode materials, and the current state and trends of the solid-state battery market [13]

Financial Data and Key Metrics Changes - The company achieved record Q1 sales of $5.1 billion, with organic growth of 5% and a 170 basis points margin expansion, resulting in a 27.4% adjusted segment operating margin [5][10] - Adjusted earnings per share grew 16% to reach a record of $7.22 per share, with adjusted net income at $927 million, representing an 18.2% return on sales [11][12] - Cash flow from operations was $782 million, up 5% year-over-year, and free cash flow reached $693 million, up 7% year-over-year [17][18] Business Line Data and Key Metrics Changes - Diversified industrial North America businesses saw sales over $2 billion with positive organic growth of 2%, marking the first positive growth in seven quarters [14][15] - Aerospace systems delivered record sales of $1.6 billion, a 13% increase with organic growth of 13%, and adjusted segment operating margins reached 30% for the first time [16][17] - International diversified industrial businesses recorded sales of $1.4 billion, up 3% with organic growth of 1%, while Asia-Pacific was the strongest region with a 6% increase [15][16] Market Data and Key Metrics Changes - Orders increased by 8% year-over-year, with positive organic growth across all reported segments [14] - North American orders increased sequentially by 3% versus the prior year, while international orders rebounded to a 6% increase after a flat Q4 [16] - The energy market vertical is seeing significant growth, particularly in heavy-duty gas turbines for electrical power generation [9] Company Strategy and Development Direction - The company emphasizes its interconnected portfolio and the win strategy, which involves a decentralized operating structure with 85 divisions acting like owners [7][8] - The focus is on faster-growing, longer-cycle markets and leveraging proprietary technologies across various sectors [8][9] - The company is committed to strategic acquisitions, with the recent acquisition of Curtis Instruments expected to enhance its portfolio [19][58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong performance and gradual recovery across market verticals, particularly in aerospace and defense [31][32] - The company anticipates continued strength in commercial OEM and aftermarket segments, while acknowledging challenges in the transportation market [19][31] - The updated fiscal year guidance reflects increased organic sales growth forecasts across key market verticals, particularly aerospace [19][22] Other Important Information - The company repurchased $475 million of shares on a discretionary basis within the quarter [18] - Adjusted segment operating margins are forecasted to increase by 90 basis points versus the prior year, reaching 27.0% for the full year [22][24] Q&A Session Summary Question: Organic sales picture in the DI North America business - Management noted that North America performed better than expected, with positive growth driven by aerospace and defense, distribution, HVAC, and electronics [30] Question: Margin performance and guidance - Management confirmed that the margin performance is expected to remain strong, with Q2 margins projected to be 150 basis points higher than the prior year [33][34] Question: Industrial international orders and growth - Management indicated that orders have been choppy, with expectations for slow recovery in EMEA and positive growth in Asia-Pacific [43][44] Question: M&A pipeline and strategy - Management confirmed an active pipeline for acquisitions, focusing on strategic and disciplined opportunities that enhance growth and margins [58][59] Question: Aerospace margins and outlook - Management stated that aerospace margins are expected to remain strong, with a mix of OEM and aftermarket sales contributing positively [64][65] Question: Data center and liquid cooling market - Management highlighted rapid growth in the liquid cooling segment, although it currently represents less than 1% of total sales [105] Question: North America in-plant investment activity - Management noted selective CapEx spending and gradual recovery in in-plant industrial activities [88][89]

Financial Data and Key Metrics Changes - The company reported a 9.2% increase in consolidated sales year-over-year, with acquisitions contributing 6.3 percentage points to growth, while organic sales growth was 3% [17] - EBITDA increased by 13.4% year-over-year, with EBITDA margins expanding to 12.2%, up 46 basis points from the previous year [21] - Earnings per share (EPS) rose 11.4% to $2.63, benefiting from a reduced share count due to buyback activity [21] Business Line Data and Key Metrics Changes - The service center segment saw organic sales growth of 4.4%, driven by internal initiatives and firming technical MRO demand [22] - The engineered solutions segment experienced a 19.4% increase in sales, primarily due to acquisitions, but organic sales decreased by 0.4% year-over-year [23] - Hydradyne's EBITDA contribution improved by over 20% sequentially, indicating strong progress in integration and synergy initiatives [14] Market Data and Key Metrics Changes - Year-over-year organic sales growth was reported at 3%, the strongest in two years, with 16 out of the top 30 markets showing positive sales growth [6] - Strongest growth was observed in machinery, food and beverage, refining, pulp and paper, metals, oil and gas, and aggregates, while declines were noted in lumber and wood, transportation, chemicals, mining, and utilities [6][7] - The company noted a stable to slightly positive underlying demand backdrop, with positive order momentum across various segments [10][30] Company Strategy and Development Direction - The company aims to leverage ongoing operational initiatives and structural mix tailwinds to achieve mid to high teen incremental annual margin targets [13] - M&A remains a top capital allocation priority, with an active pipeline of mid-sized targets across both segments [15] - The company is focused on enhancing its technical differentiation and value-added service capabilities through strategic acquisitions [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the first quarter performance, highlighting stronger top-line trends and sustained positive order momentum [30] - The company anticipates that industrial activity will remain mixed in the near term, with expectations for order conversion to be more weighted toward the second half of fiscal 2026 [27][28] - Management noted that customer sentiment is gradually improving, with favorable demand signals across traditional and emerging markets [31] Other Important Information - The company ended the quarter with approximately $419 million in cash and a net leverage ratio of 0.3 times EBITDA, indicating a solid balance sheet position [25] - Free cash flow totaled $112 million, representing a conversion rate of 111% relative to net income [25] Q&A Session Summary Question: Insights on holiday shutdowns from customers - Management indicated it is still early to assess customer plans for holiday shutdowns, but some customers are expected to remain active [36] Question: Supplier pricing behavior - Management noted no significant changes in supplier behavior, with price increases being orderly and manageable [39][40] Question: Engineered solutions performance expectations - Management expects engineered solutions to potentially outperform service centers in the second half of fiscal 2026 due to order backlog conversions [44] Question: Order growth dynamics - Management explained that order growth is encouraging, but project conversion times vary based on complexity and scheduling [52] Question: Pricing expectations for the year - Management maintained a cautious outlook on pricing, indicating it may not ramp beyond the current 200 basis points without clearer market activity [55] Question: Capital allocation priorities - Management confirmed that organic growth opportunities and M&A remain top priorities, with a disciplined approach to acquisitions [63]

Summary of Donaldson Company Conference Call Company Overview - Donaldson Company is a 110-year-old filtration company based in Minnesota, with a diverse range of products and applications across global markets, supported by a strong R&D function [3][2]. Financial Performance - The company reported record top-line and bottom-line results for the recent fiscal year, with expectations for another record year in fiscal year 2026 [3][2]. - Historically, Donaldson has grown profits faster than revenues, achieving growth in nine out of the last ten years [4][3]. Aftermarket Business - The aftermarket segment, particularly mobile aftermarket solutions, has shown low single-digit growth driven by intellectual property and market share gains [7][5]. - Donaldson has a strong position in the OEM equipment side, which has allowed it to secure more market share through technology and availability [9][10]. - The company has invested in demand planning and inventory management to address supply chain challenges, contributing to reliability and share gains [10][9]. Market Dynamics - The mobile solutions market is cyclical, with expectations for high single-digit growth in on-road and mid-single-digit growth in off-road segments for fiscal year 2026 [14][15]. - The company anticipates a rebound in equipment demand, with historical patterns indicating significant recovery potential [15][16]. - Donaldson's content per vehicle varies by technology, with higher content in fuel cell applications compared to diesel engines [20][19]. Regulatory Environment - Regulatory changes, such as emissions regulations, have historically benefited Donaldson by increasing the demand for advanced filtration technologies [24][25]. - The company remains committed to technology development despite delays in regulatory timelines [22][23]. Industrial Solutions - The power generation segment is benefiting from increased demand for natural gas-powered solutions, particularly in data centers [26][27]. - Donaldson's utilization rates are high, with a solid backlog in production [26][27]. Life Sciences Segment - The life sciences business includes various units, with differing levels of maturity. The distrive segment is mature, while bioprocessing is still developing [35][36]. - The company expects steady growth in the distrive business and high single-digit growth in food and beverage segments [40][39]. Capital Allocation and M&A Strategy - Donaldson has a disciplined approach to capital allocation, focusing on internal investments and selective M&A opportunities, particularly in life sciences and industrial sectors [49][50]. - The company has a longstanding dividend policy and has increased dividends annually for 30 years [50][51]. Market Share and Growth Outlook - Donaldson is positioned as a leader in most of its markets, with expectations to continue outpacing market growth through strategic operational moves [62][63]. - The company sees potential for consolidation in fragmented markets, particularly in mobile solutions [63][64]. - Overall, Donaldson anticipates mid-single-digit growth and the ability to set new earnings records despite economic challenges [64][63]. Conclusion - Donaldson Company is well-positioned for future growth, leveraging its strong market position, technological advancements, and strategic investments to navigate challenges and capitalize on opportunities in various sectors [64][63].