Good afternoon, everyone. Thanks for joining us. Pleased to welcome here today, Donaldson. We have the CFO, Scott Robinson, with us, and Sarika Dhadwal, Senior Director of IR. So thank you both for joining us. Thanks for having us. Thank you. So I'd like to start maybe a little bit more higher level because I think, you know, Filtration business, you know, I don't know about everybody here, but it's a little bit, perhaps not as well understood or not, not as many peers out there, doing the same thing that kind of understand. So maybe at a high level, we just love to understand, as we think about secular themes or bigger picture, macro things that are taking place, right? Infrastructure, public-private spending. Wanted to get a high-level view from you. How do, how does that impact the Donaldson business? And, you know, just your general outlook, as to how maybe that benefits or, might have, you know, impacts on your business. Sure. The first thing I would start with is there's just this been this general trend to want to improve productivity, you know, increase mileage, reduce pollution, improve air conditions for people, increasing regulations- Mm-hmm. for things like sustainability and emissions, and all of those things require improved filtration. So the world is moving to a place where things need to be cleaner, run more efficient, produce less harmful gases or emissions, and those things are all tailwinds for filtration. Mm-hmm. That's kind of the highest level. If you think about some of the other things that have been done with maybe some of the acts that have been passed, those are generally also favorable, whether it's the infrastructure bill or, or bringing production to the U.S. So I think that the trends for us line up well for helping the world improve itself, and, and there's a lot of opportunities for filtration in that regard. Sorry. There's a little fly right here. Okay, no, that's very helpful. I apologize for that. But, you know, maybe as we think about the timing, are you seeing any of this already flow through the portfolio in terms of, you know, the underlying kind of orders or demand? Sure. I mean, we've had pretty strong demand growth coming out of COVID and have been able to deliver some pretty strong revenue growth. We recently had an Investor Day in April, and we gave three-year targets. In the midpoint of other growth rate, compounded annual growth rate is 6%. So 4% Mobile Solutions, 6% Industrial Solutions, and 20% Life Sciences, total 6% annual growth for the next three years, and those are the targets that we provided. So we feel pretty good about where we sit. We're just entering the first of our three-year on our fiscal targets. We just, you know, had our year-end. We're a July 31 calendar year, so we just recently released our year-end results and our guidance for next year. Maybe that's a good segue, I guess, particularly for the Mobile Solutions, maybe if we could kind of focus in on that. Maybe first start with, how do the different kind of alternative fuel sources impact your business, within that? And maybe what kind of assumptions are you embedding for fiscal year 2024? Sure. So what, what we said at Investor Day was we were, we were comfortable that we could easily grow revenues for at least the next 10 years in our Mobile Solutions business. There's several alternative powertrains currently under review, from hydrogen fuel cells, to hydrogen fuels, to synthetic fuels, to kinda hybrids, and then full electrification, okay? And those are all solutions that people are working on, and we have the benefit of working with our large OE customers on their next set of programs. And so we do get a bit of a view as to what they're worried about, and we're always trying to get with them to understand what problems are they trying to solve. And we have been investing for years on alternative powertrain solutions- Mm-hmm. And we feel we're in good position to help our customers. So we'll see what they're gonna bring forward. I would say, while all of them have currently some sort of prototype, I would say they're in the very early stages of development. We ultimately believe there's gonna be a variety of solutions that are gonna come forward. And if you're talking hydrogen fuel cells or hydrogen fuels, those actually require enhanced filtration. If you go to full electrification, there's less filtration there. So there's a range of possible outcomes, but we don't really see that impacting, you know, any of our business in the very short term. Yeah. And maybe, you know, sticking with the short term for now, to your point, I think the OE destocking was maybe a factor that was highlighted in the fiscal fourth quarter. Can you talk about what you're seeing there in terms of August, September trends? You know, I think, one, how that's evolving, and maybe is it just kind of this normalization from, you know, concerns around supply chain, or is there something bigger there that you can maybe glean into underlying demand? Sure. So I mean, I think everyone has seen supply chains improve. Donaldson, for example, reduced its inventory balance by $84 million last fiscal year. So we certainly took a lot of inventory out of our supply chain because we had increased it during COVID, and we decided it was time to bring that back out. We see some of our customers doing the same thing, and we just, you know, gave our guidance at the end of last month. But we do see some OE destocking happening in our first and second quarters this year, and we baked that into our guidance. So we see some really strong numbers coming from some of our large customers, but we can see their revenue pull-through from us is not equating to that. And so we can see them destocking. Most of our big customers, our systems are linked, so we can see their orders out quite a ways, and so we get pretty good feel for their, say, their 90-day backlog of orders, and we can see that move up and down. And so there's clearly going to be some destocking, but we've baked that into our guidance for this year. Then how is the lead time on those orders? Where your visibility changed over the last few quarters or year? No, I mean, I think they generally have, say, a year's worth of orders in the system. So we can always see their orders, and we kind of focus on the next—we use the whole 12 months, but we're also doing our own forecast, and we really kind of focus on the hard backlog, which we consider to be our 90-day backlog. And generally, that's not moving around significantly. It's the orders that are further out that really give indications as to what the customer is thinking and what kind of demand we need to be ready for so we can make sure we fulfill our commitments to them. On those later, maybe, you know, beyond the next 90 days, are you seeing any changes in terms of cancellations, pushouts? No, I would say it's, it's been relatively consistent. I mean, we feel pretty comfortable with our guidance for next year. At the midpoint is 5% growth. That's 2% volume, 2% pricing, and 1% FX. So, you know, those aren't massive numbers for us. We are coming off quite strong growth, big pricing, so we feel like pricing is going to normalize a bit, our costs are going to normalize a bit, our supply chain has improved, our customer supply chains are improving. So hopefully, you know, this year is a bit more stable than the last, say, three years. And I do want to remind everyone in the audience, if you have a question, feel free to raise your hand. We can get a mic to you and, you know, want to make sure it's interactive. But maybe another one for me is China, I think, is another area, you know, where you've seen a little bit of weakness, and we'd love to hear, you know, as we think about kind of fiscal 1Q to date, what trends you're seeing in that, in that market. And I think you had talked about gaining market share in that, in that region. What gives you confidence in this kind of geopolitical environment and being able to take market share there? So, we've been in China for about 40 years. We have four factories there. We recently added a PowerCore line there. So we went to China when our big OEs went to China to make sure we could supply them. So we've been. Our Our production is a town called Wuxi, which is not that far from Shanghai, and we've been there for, like I said, 40 years. So we've been operating in that environment for quite a while. And it's been exciting for Donaldson because, say, the last handful of years, we've had the local and the national Chinese companies really become interested in exporting their products. And that's given Donaldson an opportunity to bid on new programs and actually win new programs with our current technology. Prior to that, the manufacturers there were really using old technology, and we really weren't interested in that business. So now, I mean, there's 40% of the world's equipment is manufactured in China, and there's some new and exciting opportunities for us to participate in that production. And so while certainly, the bump out of COVID in China wasn't what people expected, and maybe their economy is struggling a bit, there's still great opportunity for Donaldson. So we're coming off a real low share base with the Chinese national companies, but we have won programs, and they are starting to ramp. So even if they're at lower volumes, there's still opportunity for Donaldson. And so we feel like we're in good position. You know, the economy there is going to be what the economy is going to be, but we still have won programs that will ramp over time. No, that's very helpful. And maybe just pivoting a little bit to Life Sciences, right? There's a lot happening there. A lot of your M&A has been focused in this business, growing the Life Sciences subsegment as well. So maybe let's start with, could you give us a little bit of high level again, remind us why that business makes sense for Donaldson? Again, your expertise that you have not only in, you know, broader, but also even in this drive, right? The technology that you have there and how you were able to leverage it to grow in maybe these more medical or health Sure healthcare-related markets. So Donaldson has been in business for about 107 years, and we have been kind of expanding our technology and our core science of filtration for that whole time. So over the years, we started with engine, which we now call mobile, and we moved into industrial, okay? Then we started a Food & B everage business, we have a Disk Drive business, we have an Ostomy Bag business, we have some Venting Solutions. And with disk drives, ostomy bags, and venting, they're really all membrane-based, and that's a technology that we've really been focusing on. And when we look at some of these Life Sciences opportunities, those are all membrane-based as well. And so we want to expand our science in that regard, and we want to do it organically and inorganically. We found some companies that were interested in teaming with Donaldson that really have some breakthrough technologies that could really help companies, as an example, manufacture drugs much more efficiently. So there's some exciting opportunities with some of our acquisitions, where we're expanding our science and bringing some new breakthrough technologies to market that we think really have great opportunities in the future. This is the first year we've broken out a segment, so we used to have two segments, Mobile Solutions and Industrial, and now we add a third segment called Life Sciences. Mm-hmm. And that kind of all centers around these membrane technologies. Maybe help us understand, you know, you've done a number of acquisitions. Univercells, I think, is the latest one, that you've done there. So, a number of that is, is kind of pre-revenue. So help us understand kind of the timeline as you kind of foresee it over, over the next few years, right? I think you laid out, $210 million opportunity in terms of a, kind of a general TAM. Help us understand, I guess, where are you in terms of the process of, again, maybe, trying to get, spec into some of these, some of these projects, and, you know, what kind of market share, what- you know, I think in the last, presentation, maybe there was a conversation around fiscal 2025 being when this starts to actually flow through. Just general details as to how to think about the opportunity here. Sure. So maybe to start, you know, we've completed four acquisitions, and they're all in this Life Sciences arena. And we have some really good technologies that we've partially developed in-house and some acquired capabilities that when we put together, you know, we've been able to generate some pretty significant interest from some pretty large companies, you know, most of which you would know their name off the top of your head. So in our last quarter release, we announced we had a pipeline of $210 million of opportunities. And those are opportunities where we've already identified a customer, some are past approval levels, and we're working on bringing the products to commercialization with the customers. So we have some good opportunities there. We have an annual CAGR of 20% for Life Sciences. After three years, we expect our operating margins to be, you know, above 20%. So we feel like just if some of these opportunities hit, you know, we should be able to deliver that. So we have several different ways to achieve that revenue growth in the operating margin, and a big pipeline, you know, for us to capitalize, and that pipeline will continue to grow. So I can't exactly produce and predict what will hit when, but we feel like we have a lot of ways to get there and a lot of really great opportunities where we have some technologies that can really improve the yields and/or speed with which some of these proteins are harvested or created. I think that's pretty exciting to some of these companies who are used to traditional methods to do that, that are much slower and more cost-intensive. Maybe help us understand, I guess, is there a certain market share you envision that you would need in order to achieve that 20% type CAGR of that $210? No, we really, and we're gonna add to that $210, so we really haven't quantified that, but we feel like there's a lot of different ways to get there. And that $210 will continue to grow. It's not like we've just had this population of opportunities. We're gonna continue to add to that because we're really playing the long-term game here. Maybe sticking with the kind of sub-segment of Life Sciences, is there any more kind of M&A or bolt-on opportunities that you're, you know, help us understand your pipeline, right? Both from a timeline, size, perspective, and particularly where maybe there's white space that you could still continue to bolster that portfolio. Sure. So when we first started, we were kind of building out this business with existing technology, and we have a gentleman named Dave Wood, who has a Ph.D. in oncology and has a venture capital background, and this is all he does every day, is meet companies, study companies, generate relationships with companies. And we've been able to acquire four companies, and generally, the way we are successful acquiring companies is really not through just a bid and auction process. It's by getting to know companies, by understanding their technology, by bringing them to Donaldson's technology facilities, letting them see our technology, maybe forming a commercial relationship with them, getting to know the owners and the founders, letting them getting to know us, and finding companies that really aren't necessarily being acquired by one of the large competitors that we might have. We want to find people who want to continue their passion, but are maybe looking for an event or an ability to help scale. And so those are the kind of companies that we look to form relationships with, and that can take a while, but we're willing to wait that time out to make sure that we know what we're getting, and the company that we're acquiring knows what they're getting. And so it's a relationship where we want to make sure the cultures match and people understand what's gonna happen, and we let the people, the founders, continue to pursue their passion, you know, on behalf of their original company and on behalf of Donaldson. And so we've acquired four companies, and we're not gonna acquire a company on top of a company we've acquired. So again, we're primarily looking at the technologies that are there and that we want to improve on, and we're gonna work on that organically. But if we can find ways to expedite our organic development through acquisition, then we'll do that. As a reminder, if you know, if you have any questions, feel free to raise your hand. But maybe, you know, sticking to or switching to the other side of the Life Sciences segment, disk drive has been under quite a bit of pressure, right? And I think one thing I found interesting, or surprising in the guide was you're still looking for 20% growth this year. And I think part of that, kind of assumed or reflected some recovery within the Disk Drive business. So first, you know, help us understand or could you unpack a little bit more, what are the early signs that you're seeing in terms of stabilization, potential recovery in this business, and just what gives you confidence in the ability to turn that? Yeah. So there was quite a buildup of inventory of drive inventory in the world coming through COVID and the supply chain constraints, and so we could see that building, and we could see our main customers, and there's really only three or four big drive producers in the world, starting to run into revenue issues on their end. So we knew that was coming to us, and we're obviously in contact with them, and they were talking about the supplies they had and the pull-through of their customers. So when you think of the main customer for these drives, you can think of big storage farms, Amazon, Google, cryptocurrency farms, things like that. There was quite a buildup of inventory, of drive inventory, that had been accumulated, and that needed to be worked through. So we've started to see signs that things are loosening up, that the inventories are being depleted, and we can see our revenues kind of starting to bottom up. So, you know, that was a business that got about cut in half, and we had to stomach those declines and the profitability associated with that. But we feel like it's at bottom now. So, you know, sequentially, you know, we've flattened out and the big revenue drag should stop now, and we feel like we're in better position. The whole market is in better position, and it should start to improve as we go forward. So maybe as we think about, the bottoming of that business, you know, maybe I think within the $450 million in sales for this overall Life Sciences by 2026, that target, I think, contemplated 10% from, I think it was digitization and electrification. Is that, I guess, part of the disk drive piece and in what I mean, what gets you from maybe a stabilization to an actual kind of 10% CAGR from here? Is it some other aspect of Life Sciences or, you know, yeah, just can you just bridge that for us? Yeah. No, go ahead. Oh, sure. I think what you're referring to, so the digitization and electrification, a piece of that is the disk drive. And then you also have our Venting Solutions that's baked in. You also have our Membranes business that's baked in. And so I think that those pieces together will contribute to that 10% that you're thinking about. Got it. And so, you know, I mean, you gave these targets at Investor Day, so they're, they're fairly fresh. So, but any changes in how you're thinking about them based on what you've been seeing with this drive? No, we're- No, I think, over the last couple of quarters on our calls, we've been talking about a, a demand recovery, in disk drive that we were projecting in the second half of calendar 2023. And we're starting to see signs of that, so we're happy with that. What about the Food & Beverage business? What kind of growth do you contemplate there for F&B, and how do you see that between now and 2026? Yeah, I mean, we started in Food & Beverage several years ago, and we've been talking about this for quite a while. So that's another business where we had some industrial, industrial air applications in various Food & Beverage processes. Think a yogurt production or, you know, a beer production facility, and we could see opportunities within those customers to provide additional Filtration Solutions. And so, you know, with some of the membrane technologies that we had in the engineering capacities, we developed a line of filters called LifeTec, which is primarily, would sell into a Food & Beverage facility, and have really been investing in that hard. We're up to about 130 salespeople now in Food & Beverage. It's become a $100 million business, and I think that was a great organic growth activity that has higher than average margin, opportunity versus traditional Donaldson products, and we've really been able to grow. And that's just a great example of the Donaldson technology that we got pretty good at, and we're able to couple that with good service and inventory availability and really find some opportunities, to grow that business. Mm-hmm. Maybe switching gears to industrial. You know, this is one that's been fairly robust for the last few years, and I think the guide for fiscal year 2024 assumes more of a mid-single digits move, right? Totally makes sense, I guess, from a difficult compares perspective, but help us understand, I guess, the underlying demand of that business. Why, you know, why maybe that doesn't persist, given that you're seeing pretty robust outlook for the rest of- Yeah your business. So we've come off two very strong years of industrial. We grew almost 12% last year. Without currency, almost 15%, so that's really strong industrial growth for us in terms of Industrial Filtration Solutions. So we've had some really strong performance two years in a row. You know, I think that the general consensus is that maybe things in those areas are starting to slow, but we feel like we're in very strong positions in many of those markets. We're working really hard to implement a strategy whereby we increase our connectivity with the customers. Most of the dust collection equipment that we send out today now comes with automatic connected solutions offerings implanted in the machine. So we have the ability to light up those dust connectors from a remote source, and we don't have to go chase connectors for connectivity. And our, our customers are often finding a lot of the technology that comes along with that to be, intriguing and helpful to help them run their operations. And, and for us, most importantly, it really gives us the ability to service those equipment and make sure we know when replacement parts are needed, and even alert the customers in advance of when replacement parts are needed. So it's really helping our aftermarket business, you know, grow at a rate faster than we traditionally have, and we feel like it's, it's got a long ways to go, but it's a really good start and has proven successful, especially in the last year. Maybe taking that into the margin perspective, I think there you're already kind of above your fiscal year 2026 targets. So is there a reason why maybe it doesn't make sense today to raise those targets? Yeah. So we have a really good problem in that we've already achieved our three-year operating margin target last year. Now, we did have really strong growth, and we probably over-leveraged a bit, and we want to continue to support that business and invest in connectivity and really catch up on some of the extreme growth they've had. So they did run probably behind in their expense profile based on the volume that they have, but they performed very well and have had good margin increases. And so obviously, we're pretty comfortable with the target three years from now that we've already met. And we'll have to monitor how that goes, but it's been really good performance, and we're really, you know, proud of our team that's been able to accomplish that. And maybe what are you seeing specifically from the customer in terms of industrial utilization, and then how that impacts your business? Yeah, we're still seeing, you know, relatively robust quoting activity. So we do hear some rumblings of slowdowns, but we haven't quite seen it yet. Our quote-to-order times are still in pretty good shape. So, you know, people keep talking about things slowing down and possible recessions, but, you know, we haven't really seen that yet, and our customers continue to report pretty strong growth prospects. So we feel like we're in pretty good position to meet our guidance for this year. Mm-hmm. No, that's very helpful. If there are no questions from the audience, I did wanna ask one that, you know, we've talked about in the past, but why is one turn of leverage the right number for Donaldson? Yeah, actually, we're at 0.8, so we're less than 0.8 or less than one turn right now. So, you know, Donaldson has historically been a very strong cash-generating company. We've paid a dividend for over 65 years. We've been increasing the dividend for over 25 years. That's allowed us to be added to the S&P High Yield Dividend Aristocrats fund. So that's, an accomplishment that we're quite proud of and one that, you know, as CFO, I don't want to screw that up, so we have to keep that record going. The last several years, we've bought back 2% of our outstanding shares for a net 1% reduction. So we've had pretty strong cash generation and pretty strong, you know, returns to shareholders while we've been investing. You know, we're putting up records on the top line and records on the bottom line, and that's what we project for the next three years, while investing in these Life Sciences. We've spent, you know, on four acquisitions, probably about $250 million while doing all those capital return programs, and yet net debt to EBITDA still sits at 0.8. So we certainly have room to continue to invest. We're gonna look for opportunities to invest, and maybe someday we'll be higher, but right now, you know, we have plenty of available capital for investment opportunities, and we're really pushing a lot in the Life Sciences while still generating record levels of revenues and record levels of profit. So we're still maintaining the ROI of the company by returning cash to shareholders, yet investing some in Life Sciences. We're managing the level of invested capital in the company while putting up record term profits. We feel pretty good about where we're at and the level of debt that we currently have. Is there any, I guess, are you open to something more transformative? You mentioned you've done four, kind of, $250 million overall, but the leverage does provide quite a bit of flexibility, so yeah. So we get that question a lot, and we are certainly open to something more transformative. But there's not that many of those opportunities out there, and so we're open to it, and we have relationships with several larger customers that we're continuing to get to know and meet the founders and the families, and looking for those types of opportunities, and would be glad to complete one if it made the right strategic sense for the company. But in the meantime, there's a lot of smaller companies that we can look at that have really good disruptive technologies, and those are a bit easier to complete. But certainly, we're open to some larger activities, and we would take the debt up pretty significantly if we found the right opportunity, and then we'd have a corresponding plan for reduction. Is that, like, 3x or 4x? I think 3x would be a reasonable number. Okay. And maybe more from an organic standpoint, so we talked a lot about our M&A, and leverage, but what does this all mean from a CapEx standpoint, R&D, SG&A, in terms of investments that you think are needed to deliver on your targets? Yeah, I mean, so we're committed to higher levels of profitability on higher levels of sales. So we're gonna slowly work that operating income up. We've said that we don't expect our CapEx to go over 3.5% of sales, and we think we can easily fund the Life Sciences and run the company at that level. So with those two things in mind, we'll have plenty of cash flows available for dividends and share repurchases and acquisitions. So, you know, we feel like we're in pretty good position with the investments we wanna make and that are required to keep generating these records, you know, while maintaining sufficient return on behalf of the company. Yeah, why don't we, y ou know, that brings us to the time. Why don't we finish on a high note, and, you know, thank you again for joining us today and for your time. So thank you very much. Thank you. you. Thanks for your interest.