Everyone, we're gonna stay on schedule here. We have the team in from the Twin Cities from Donaldson here with us. Been great and loyal supporters over the years, so I appreciate all that. Sarika Dhadwal runs IR, does a great job there. Brad Pogalz the CFO, and then Rich Lewis, day- Three ... three of, in the CEO seat. Should have some good conversation there. I think we'll start with some slides and then get into. Perfect ... into Q&A. Thank you again, Rich, and, over to you. Well, welcome to Donaldson Company presentation. My name's Rich Lewis. I'm the President and CEO, day three, but I've been with the company 24 years, you know, we'll be interested in hearing your questions. Thanks for joining us today. I know you've seen this before, our safe harbor statement. Everything we talk about today will be as of our Q2 fiscal year 2026 earnings, which was just released last week. Let me start by just telling you a little bit about Donaldson. We'll get into these points in a little bit more detail, but if you take away five things, these are the things I'd like you to take away. We are the global leader in filtration. We've been solving our customers' toughest problems for over a century. We lead and invest in innovation, and we deliver best-in-class technology. That is one of our main differentiators. We use that technology ultimately to deliver value for our customers in two ways. The filtration is a small part of the cost structure of the vast majority of our customers, and we're protecting their most valuable assets, their products, their people, and their processes. Secondly, we enable them to make more money using our products than the competition's. We allow them to lower their overall total cost of ownership. We have a balanced growth strategy. It's anchored in delivering growth in our core markets, where we've invested heavily over the last century and have durable competitive advantage while we're laying the foundation for the next century of growth through expanding our addressable market share. Finally, to that point, if you look at our life science business, that really is around high purity filtration that spans advanced industrials all the way into bioprocessing. We are laying a foundation of technology that can be used in multiple applications and multiple market segments. At our core, that is Donaldson. This is a good leave behind. You can look at this later, if you wanna know a lot about Donaldson. It's a lot of information on one page. I'm not gonna drain it. I'll just give you a couple data points. As I mentioned, we're a 111-year-old enterprise. We operate in three reporting segments. We've continued to deliver top line and bottom line growth through all three of those segments. Our anchor is innovation. We have 3,000 active patents, and we have two-thirds of our revenue in recurring revenue. Sticky through innovation and a lot of recurring revenue makes us a very resilient and reliable business. We operate throughout the world. We leverage our investments in both operations and in innovation across multiple markets, multiple applications, and we do that throughout the world. We have our in-region-for-region strategy. We manufacture 75% of our products in the regions that it's consumed, which also makes us resilient to global disruptions, which we've had obviously plenty of those here lately. We talk a lot about our growth. You know, historically, we have been growing mid-single digits. In F2026, we have a top line growth projection of 3%. We'll grow EPS 8%. Our goal is very simple. On higher levels of sales, we wanna expand margin and grow our bottom line faster. I wanna talk a little bit about Q2. We just released Q2. As you can see on the chart, you know, coming out of last year, we were running at record operating profit levels. Q1 was pretty much in line with that, and then we had a step down in Q2. Q2 is always a little bit of an anomaly for us. We have a lot of customers that manage their balance sheet at the very end of the calendar year, which would be their fiscal year. We also have significant holiday periods where we have customer shutdowns. Q2 is always a bit of a little bit of a wild card. If we look at this year, we had a step down, that was actually not just due to those issues. We had three specific short-term issues that we're working through. The first one was we have a significant ramp-up in our power gen business. When we think about data centers, we have multiple products that touch those, the power gen business being the most significant one. A lot of our customers are ramping up capacity. We're ramping up capacity, to help satisfy them and get in-region content. We moved a significant product line from a facility in the Middle East to a facility in Mexico. We've hired, we've basically doubled our workforce going through the learning curve and the training on that new product. Second item was timing issues on orders, specifically in our OE business and our Aerospace and Defense business. Backlogs in both of those businesses are very strong right now. Coming out of the shutdown, our OE backlog stepped up double digits, and after Q1, our A&D backlogs are at significantly higher levels. Incoming orders are good. Backlogs are good. We expect those to be significantly better in the second half. Lastly, we had a lot of footprint optimization work. In the last couple years, we've accelerated our gross margin expansion initiatives. One of those initiatives was closing several plants. We're in the throes of that right now, and we saw a lot of cost pressure from that in Q2. Two of those plants are closed. We'll continue to ramp up in the new facilities, here coming up in the second half, and two more close this quarter. They'll close here in the next 60 days. As we look forward, we expect those short-term issues to moderate, and you'll see in our guide, we're expecting sizable increases in the second half. When we're done with the year, we'll have record sales, we'll have record operating profit margins, and we'll have record levels of EPS. Talk a little bit about our durable competitive advantages. These span pretty much all of our markets. If you think about how we go in, we tend to go into industries very early on. We solve very difficult problems, and we start to build trust. The moats that we create in almost every one of our markets are pretty consistent. We have a deep innovation bench, so we have technologies that span multiple applications. We develop the engineering expertise. If you think about some of the markets we're in, our sales force are essentially trained engineers that are out selling because the applications are so technical. We have that deep application experience. Around that, we invest globally to support our customers all around the world with very, very broad product portfolios, and it's all underpinned by a very strong culture of operational excellence. It's not really one item that is our differentiator. It's really linked and stacked competitive advantages that frankly are hard to replicate. As we look across all of our segments, we have headroom and opportunities to grow in each one of these. If you think about our mobile business, we've been investing for over a century in that business. We're continuing to harvest those investments. We're clearly the leader in that space. Industrial, we've acquired significantly in this space over the last 30 or 40 years. We have opportunities to continue to scale and drive synergy in that business, and we're seeding our life science business with investments that really broaden the addressable market and our technology base. Little bit on capital allocation. We're gonna continue to have a disciplined approach. We expect that we'll continue to invest aggressively in organic and inorganic growth, and then we'll return cash to our shareholders. We've been increasing our dividends for the last 30 years. We'll continue to do that, and we'll use share buybacks as a temporary lever, depending on how our M&A work is going. Maybe I'll just end here, talk a little bit about FACET. We just announced our largest acquisition. This is not closed yet. We're going through the regulatory process as we speak. Facet is one of just a small handful of companies that do fuel filtration in the aviation space. It's a highly sticky, highly regulated, highly safety-driven industry. Facet brings margins and growth rates higher than Donaldson Company average. Think EBITDA two times our company average and growth rates in the high single digits. It also brings broad adjacencies for us, as they go from the refinery to the wing of the vehicle in filtering the fuel in multiple stages, sometimes up to seven times. We also have products that can sell into that from our other industrial businesses. If you look on the vehicle, they're very strong in fixed wing and naval applications. We're strong in ground vehicle and commercial aircraft. There's a very complementary product portfolio from our products, and there's... We're really excited about Facet joining the Donaldson family. We hope to close this over the next quarter or two. This is margin accretive, cash accretive year one, and it'll be accretive to EPS in year two. Maybe I'll just end here, and 'cause then we'll get to the Q&A. Just the five points that we just talked about, you know, leader in filtration, high degree of innovation and technology, really solving our customers' main priorities, which is giving them peace of mind, protecting their assets while we help them lower their cost of ownership. Growth opportunities across all three segments, harvest, grow, and seed across the three segments. Then finally, we're laying the foundation for higher margin, higher growth opportunities in the heavy industrial or specialized industrial and life science space. That's Donaldson in a nutshell. I think I kept it on time, Tim, so, yeah. We'll let you. We'll switch. Yeah. Yeah. That's good. Maybe, that's good way to start us off. Rich, maybe just, think about at high level. You know, Tod put a number of initiatives in place under. Mm-hmm ... during his leadership. You've obviously worked with him for a number of years. As you think, you know, are there areas of emphasis or, you know, initiatives within the organization that maybe you'll take a different slant towards? Anything that investors should think about in terms of where you wanna put a little different stamp on how you lead the company? We'll, you know, we're gonna have an investor day later this year in New York. We'll clearly lay out our strategy in very good depth at that point. I think if you look at the foundation of the company, the strategy's not fundamentally gonna change. We're gonna lead with technology, lead in innovation, try to find markets where those technologies make a difference in the way our customers do business. I think where we press maybe, you know, as far as the aggressiveness of the investment, that may pivot somewhat. 'Cause it really is harvesting the growth and the investments in our mobile business, which we are clearly the market leader. As we scale up our industrial business to drive greater operational efficiencies while we're seeding our long term. All three of those will continue to be part of the strategy. Where we press from a financial standpoint and management attention may shift a little bit, but fundamentally it's not a major change. Got it. Got it. Maybe this is probably more relevant for the Mobile Solutions business, but one of the themes at this conference is amongst industrial companies and even just to broader cyclicals or, you know, in general is just this idea of starting to see a little bit more green shoots in the market. You know, you have certain aspects and certain pieces of Mobile that presumably would be more, you know, on the front end of that. Maybe just talk to what your conversations with OEM and Yeah distributor customers, what you're hearing. I think, if you think about the replacement side, that business is north of 70% recurring replacement parts. Strong utilization rates across all four markets. Really nothing has changed there. We continue to grow our market share. Pricing has been good. Really stable performance on the replacement side. The first-fit side, I think construction and mining sort of mid-cycle build rates. I would expect that to continue. The possible green shoots are on the ag and on the commercial truck side. We are seeing some early signs. We get long range forecasts from our customers, sometimes 12 months of EDI signals through when our computers talk to each other. We're seeing expected build rates in the truck market in the summer. We'll see if that comes to fruition. We're actually seeing actual orders in some of our ag customers that are elevated over what they had been the last, you know, couple years. Yeah. I would call them early indicators of maybe there's some positivity, but I would not suggest that we're there yet, so. Yeah. You know. Okay. Tim, as you know, I mean, when these markets come back, they come back fast. Yeah. In a hurry. That's why we're watching really carefully because we wanna be prepared. We have the capacity, so we're gonna lever well when it does come back. The main thing is making sure they can build all their vehicles and supporting them. Yeah. Mm-hmm. On the mobile side, the aftermarket being obviously such a big piece for you've outperformed in, you know, last couple years and on a handful of at least what you've provided externally in terms of some big customer wins. Maybe underneath that, talk about is there something, you know, you've kind of pushed through the sales arm in terms of the outgrowth has been pretty notable on the aftermarket side. Maybe talk about that. That business is, it's a business we've been doing for a long time from a commercial, operational, and product side. It's a very robust, very capable business. As you said, part of the market share gains that we've seen in the last couple years is coming out of COVID. There was significant supply chain disruptions. We performed very well in that. There was a point in time where we had spent a lot of money investing in inventory just to buffer our customer service levels. What we saw was not everybody performed well, and there was some upset customers, and they wanted a change. Mm-hmm. We picked up a lot of share due to competitors struggling. That was probably a one-time, you know. That doesn't happen every day. The more basic daily, share gains are really selling our technology. We bring a lot of value to our distributors 'cause we go out and we help train them so they can go out and grow their businesses. They really are partnerships. The better we train them, the better they can grow their business. Got it. One of the charts that sometimes gets a little bit overlooked or forgotten is just the globality of Donaldson and, you know, sub 50% of the business in North America. Maybe talk about trends outside North America, maybe where you're more or less optimistic. You know, maybe focus on Asia and Europe in terms of. Europe and Asia have been strong points for us for some time now. We mentioned in our earnings call, you know, six quarters in a row of growth in China. We probably haven't been sort of over flagging that 'cause it would had been a while since we'd seen growth there. Really, we're seeing really strong economic performance in Europe and Asia, and frankly, most of the weakness has been in Latin America and a little bit in the U.S. on some of the CapEx projects. Yeah. When you think CapEx, you know, I'm going out and I'm building a plant, I need a new dust collector, a new industrial hydraulic system, those have been a little bit muted. Yeah. Which I think is interesting 'cause if you poll 10 companies on that idea of or that notion of maybe we're starting to see early signs of a industrial renaissance- Mm-hmm ...You know, reshoring and all these buzzwords that we talk about within industrials, and that kind of, you know, throws a bit of cold water on that. Is it just the idea of just this hitting the pause button, waiting for more clarity? What do you hear from your, you know, big projects? I think there's two things. I think there's a lot of uncertainty out in the market, the quoting activity for some of our capital projects. I think if you're on the data center side, it's just full steam ahead. You know, our Power Generation business is just cranking along. The non-Power Generation side, a lot of quoting activity. Utilization rates are okay. Our aftermarket businesses continue to grow there, so they are using the equipment in the field. As far as new projects or retrofitting old systems, I think everybody's just sort of pushing their decisions out. The reshoring, I think, is very narrow. It's in targeted industries where, you know, there's support from the government to essentially, you know, we have to build these capabilities up. Some of those play in our favor. You know, if you think about trying to become more independent in, you know, semiconductor manufacturing. Well, we have a business in Asia that supports that industry. Mm-hmm. We sell to all the chip manufacturing, companies. As far as general manufacturing, we, yeah, we haven't seen it, and overall the economic conditions are a little depressed right now. You touched on it a little bit, but, data center exposure for Donaldson, I know that can be a little tricky because it's... Yeah. you have the kinda second or third derivative impacts. How do you size it and how would you say how would you kinda frame your competitive positioning across the relevant services? Yeah. We're touching it multiple ways. We have businesses that sell into micro chip manufacturing. The computers that go in there, we support that through them. The vast majority of the hard drives that go in there have a Donaldson filter on them. Through those OEMs, we're seeing strong demand. We're seeing data centers convert from air filtration, which we don't participate 'cause it's more HVAC in nature, over to water filtration, which we have products, and we're seeing an uptick in interest there. Finally, and the main piece of it is on the Power Generation side. A lot of the Power Generation customers, you know, the small turbine, they're essentially taking the natural gas from source to, you know, point of demand. They're using the turbines to compress the gas and move it. We have a good position there. That business is in strong demand. Because the data centers don't have enough ability to tap into the grid, there's a lot of peak and base load systems being put on site with the data centers until that becomes available. That would be on the larger turbine side. Yeah, we've got four access points to that market, and I'd say the Power Generation is significantly the largest. Yeah. ballpark. You know. High single digit kinda? Yeah. You know, we talked about this in one of our one-on-ones earlier. It's probably, you know, it's gonna continue to grow. I would say if our customers put on a tremendous amount of more capacity, they would surge in demand. I think how much capacity they wanna bring on is yet to be proven. I do think we're seeing an elongated, you know, upcycle for sure. Mm-hmm. Instead of maybe a couple-year upcycle, we're talking multi-years of very, very high demand with incremental, sort of think mid- to maybe high-single-digit growth rates as they incrementally expand capacity. Within the, in-industrial segment, something we talked a lot about with Todd a year ago was just how you're working to connect more of the assets. Yeah. Connect more of the machines in the factory. Yeah. Maybe spend a minute on that. There could be a pretty powerful driver, I would assume, in terms of if those are your machines, you have visibility into the filter life. You kinda get the first shot in terms of that replacement sale. Yeah. talk about kinda the interplay between the OE side versus what that brings from an aftermarket standpoint. Yeah. Connected Solutions, it really is part of our overall strategy in Industrial, which is to increase customer intimacy. If you think about some of our OEM businesses, we're interacting with our OEM customers every day, all day long. Power gen is an OE business. You know, our disk drive business is an OE business. Our Mobile business is a large portion of it's an OE business. You have a natural customer intimacy. Some of our Industrial businesses, they'll do a project, and they'll buy replacement parts every two years. They might buy a new system every 10 years. You lose that connection with the customer. Mm-hmm. until they have a need. We're trying to recreate the same level of intimacy we have with the OEs, number one, with data. We've connected their solutions. That allows us to monitor their system, which helps us design better systems in the future. You know, the long-term outlook would be to use that data to optimize how their system is running at any given moment, 'cause a little bit of change in how the system runs can save them a lot of money in electricity. Mm-hmm. The second piece of that is that data allows us to have reach-out points to the customers. "Hey, look, we see a problem with your filter, your system. Can we come out and check it for you?" When we come out and check it for you, not only do we sell filters into our systems, but we can also sell it into our competitors' systems. It's really a holistic strategy to improve the first-fit design, have more touch points. We started as a subscription model. We were trying to sell the data, and we quickly realized that's not the value. Mm-hmm. The value is that customer intimacy. We see higher win rates. When we are out touching customers that are connected and we service their units, when they need first-fit systems, our win rate is probably 15 points higher, and we see a much higher retention rate on replacement parts. Yeah. So- Hmm. It's a long-term strategy. We've put a lot of money and time into it. We bought several service companies, and we're really doing a full evaluation now that we've been into it for three or four years. We continue to press forward. We should connect another. You know, we're in the thousands on the number of assets that we have collected, and we should keep increasing that at a rate of about 500 to 1,000 a year. relative, what's. Brand new. denominator? I mean, is- Well, you know, I think you're talking, if you go back 50 years, there could be 100,000 units out there. If you think about the percentage of new ones that are going in the field that are connected, it's a much higher ratio. Mm-hmm. Think over half. Yeah. Yeah. Maybe I'll put Brad on the in the hot seat here on the chart that you showed in terms of the operating margin bridge. Mm-hmm. You know, pretty sizable pickup there implied in the back half of the year. You know, maybe talk through your confidence level in terms of that these issues are, will be more short-term in nature? You know, as you think about that, I think it implies something like a, you know, 36%-ish gross margin, you're in that neighborhood as you exit the year. Mm-hmm. You know, you bring Facet online, you've got some of these savings. Maybe just talk to, like, at a high level, kind of how we should think about maybe puts and takes on that? Sure, sure. ... margin side. I wanna underscore a point Rich made that the second quarter, there were a few issues in the quarter that we would view as more temporary, short-term in nature. The second half is bouncing back a bit from that. The part that I think is important is there's two dimensions to that increase. If you think about the step change of 1H versus 2H, a big portion of it comes from this gross margin improvement that you're mentioning, but also a decent portion from operating expense leverage. We have typical seasonality in our business where the second half steps up. It's more activity, especially in some of our mobile markets, and that normal seasonality is what's baked into our guidance. There's nothing heroic about the sales. We would expect our OpEx to stay at about the levels that we've seen the last couple of quarters. We'll get a nice leverage on top of that. Mm-hmm. The gross margin, the first thing that Rich touched on, the volume, that was something very specific to second quarter, first half. We have the backlog, we have the orders, we have a level of confidence of that coming in. There's some execution things there that we'll need to get that product out the door, especially with our supply chain in the Aerospace and Defense business. That's something that we can work through. The projects that we're working on, especially this Power Generation, I mean, these are things that we're doing right now to try and improve the outcome for the second half. Mm-hmm. Exiting the year, you're in the neighborhood. I think we'll come out of the year with a gross margin much stronger than we had in the second quarter. Obviously, the things that we're gonna watch are not just the execution, but what's happening in the market. You know, as the OEs start to rebound, a typical impact we see in the company is the mixed pressure from large OEs, especially first-fit new equipment production that's got a lower than average gross margin. But it's something that we pick up with SGA leverage and earnings growth. There's some dynamics to think about for 2027 that, you know, my hope would be a year from now, we talk about the resurgence in the OE markets and everything's going well, but that's something we'll watch in the meantime. Yeah. The savings from the footprint realignment, have we seen any of it? I mean, is that still on the come there or? It's still on the come. Yeah. We've closed facilities, and we're going through the startup phase in some of their new homes, and then there's facilities still to be closed mostly in this quarter, third quarter. Got it. Is the right way to still think about operating leverage in the kind of low 20s%, I know there's interplay between OE and aftermarket, but is that still kinda the right framework to think about? Yeah, that's certainly in the ballpark too. That's been our historic levels. The second half, we're expecting it to be well north of that for the reasons I mentioned. Got it. Okay. Maybe just in the final minute, Rich, from your lens, what do you think folks miss or underappreciate about the Donaldson story? Yeah, you know, I think it's interesting because I think it's. You look at the products we sell, I think the first assumption is it's a commoditized product. There are portions of the market, if you think about your HVAC filter that goes in your home HVAC system, that's pretty commoditized. Where we sell into filtration matters, it drives a lot of value for our customers, and it's much more technologically deep than most people would understand. I think the resiliency of the recurring revenue, which just continues to grow, as a percentage, insulates us from a lot of the cyclality of the markets, if I can say that properly. Yeah. The cycles. You know, I think the long-term growth prospects across a lot of our markets are really untapped at this point. We still even though we're the leader, our market shares are not 40%, 50%. I mean, there's upside in a lot of these markets. Lastly, I would say if you just look at our incremental margins as we grow, we still have a lot of upside on the operating margin profits. Yeah. Think of it, I mean, like the way you started with, these are revenue generating assets. That filter in my house I'm not generating revenue on my house. Is that what you said? What do I think about What do I think about that? Well, I think when you go to buy your, not that you're not a savvy consumer. Right. When you go to buy a filter for your HVAC system, and it's like whatever you can buy off Amazon. Yeah. When you're protecting a, you know, a $500,000 vehicle that makes you X dollars a day that it's operating, it's important that you know what's going in there. Excellent. All right. I think we'll close it there. Thank you, guys. Great. I appreciate it. Thank you.