Slides
Page 1
D O N AL D S O N C O M P AN YSECOND QUARTER FISCAL YEAR 2026F E B R U A RY 2 0 2 6
Page 2
Forward-Looking Statement Safe Harbor 2 Statements in this presentation regarding future events and expectations, such as forecasts, plans, trends, and projections relating tothe Company’s business and financial performance, are forward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995 and are identified by words or phrases such as “will likely result,” “are expected to,” “will continue,” “willallow,” “estimate,” “project,” “believe,” “expect,” “anticipate,” “forecast,” “plan” and similar expressions. These forward-lookingstatements speak only as of the date such statements are made and are subject to risks and uncertainties that could affect theCompany’s performance and could cause the Company’s actual results for future periods to differ materially from any opinions orstatements expressed. These factors include, but are not limited to, challenges in global operations; impacts of global economic,industrial and political conditions on product demand; impacts from unexpected events; effects of unavailable raw materials,significant demand fluctuations or material cost changes; inability to attract and retain qualified personnel; inability to meet customerdemand; inability to maintain competitive advantages; threats from disruptive technologies; effects of highly competitive markets withpricing pressure; exposure to customer concentration in certain cyclical industries; inability to manage productivity improvements;inability to achieve commitments related to sustainability; results of execution of any acquisition, divestiture and other strategictransactions; vulnerabilities associated with information technology systems and security; inability to protect and enforce intellectualproperty rights; costs associated with governmental laws and regulations; impacts of foreign currency fluctuations; and effects ofchanges in capital and credit markets; and ability to close and recognize the expected benefits of the Facet acquisition. These andother factors are described in Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year endedJuly 31, 2025. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise, unless required by law. The results presented herein are preliminary, unauditedand subject to revision until the Company files its results with the United States Securities and Exchange Commission on Form 10-Q.Non-GAAP Financial MeasuresThis presentation contains non-GAAP financial measures, such as adjusted diluted EPS, adjusted gross margin, adjusted operatingexpense, adjusted EBITDA, adjusted operating income, adjusted operating margin, and free cash flow, which exclude the impact ofcertain matters not related to ongoing operations. See the Reconciliation of Non-GAAP Financial Measures schedules in theappendix for additional information.
Page 3
Invest with Donaldson 3 3Best-in-class technology and strategic organizational redesign strengthens ability to drive long-term profitable growth1Enablers of a greener modern economy by helping customers achieve their sustainability goals through advanced filtration2Clear strategic and balanced growth strategy focused on expanding leadership position in legacy markets and further penetrating new marketsProgress towards Life Sciences market leadership and exposure to mega trends provides significant addressable market and long-term profitable growth potential4Leader in filtration with long history of solving the most difficult filtration problems and forming mission critical partnerships across global customer base 5
Page 4
Second Quarter 2026 Update and Overview 1 All EPS figures refer to diluted EPS.2 Adjusted for restructuring and other and business development charges. See the reconciliation of Non-GAAP Financial measures appendix for additional information.3 Free cash flow = cash from operations minus capital expenditures; Adjusted free cash flow conversion = free cash flow / adjusted net earnings.4 FY 2026 Guidance Positioning for Long-Term GrowthDelivered on strong customer demand and made further progress on footprint optimization initiativesAnnounced acquisition of Facet Filtration, expanding portfolio with high-performance fuel and fluid filtration for mission-critical applicationsReturned $51Min second quarter to shareholdersin dividends and share repurchasesRichard Lewis, COO, to succeed Tod Carpenter as President and CEOKey Updates Second Quarter FinancialsDelivered Sales Growth Across all Business SegmentsSales of $896M increased 3% YoY•FX +3%, pricing +2% Adjusted EPS(1,2) of $0.83 flat YoY •Adjusted gross margin(2) decreased 150 bps from volume deleverage, operating inefficiencies and footprint optimization costs•Adjusted operating margin(2) decreased 120 bps Adjusted free cash flow conversion(2,3) of 18%Updating Fiscal 2026 Guidance Sales outlook of 1% to 5% growthAdjusted operating margin of 16.0% to 16.4%Adjusted EPSguidance within a range of $3.93 to $4.01
Page 5
Second Quarter FY26 Overview & Highlights 5 Sales ($M)Down 0.1% YoY Constant Currency BasisHighlights•+2% YoY contribution from price •Segment Performance YoY:•Mobile Solutions +2%•Industrial Solutions +2%•Life Sciences +16% Adjusted Operating Margin(1)Highlights•Adjusted gross margin(1) down versus prior year due to volume deleverage, operational inefficiencies and footprint optimization costs •Adjusted operating expenses as a percent of sales(1) improved 30 bps YoY Adjusted Diluted EPS(1)Highlights•Adjusted operating income(1) decreased5% YoY$870$896+3%Q2’25 Q2’2614.0%15.2%Q2’25 Q2’26$0.83 $0.83 Q2’25 Q2’261 Adjusted for restructuring and other and business development charges. See the reconciliation of Non-GAAP Financial Measures appendix for additional information. -120bpsFlat
Page 6
YoYQ2’25Q2’26+2%$548$557Sales -2%$96$94EBT-60 bps17.4%16.8%% of sales Mobile Solutions Segment Second Quarter FY26 Results EBT = earnings before income taxes6 Second Quarter OverviewSales•Total Sales YoY: +2% reported and -1% on a constant currency basis•Sales increased as currency and pricing more than offset volume declines •Aftermarket sales driven by solid independent channel sales, partially offset by declines in OE channel following significant stocking in the prior year quarter•Off-road sales increased due to improving end market conditions •On-road sales decreased due to lower truck production•Performance by region YoY:•US/CA -4%•EMEA +13%•APAC +8%•LATAM -6%•China Sales YoY:•+18% reportedMargins and Key Updates•Segment EBT margin -60 bps YoY primarily due to volume deleverage, particularly related to Aftermarket OE channel sales, and higher operating costs related to footprint optimization initiatives
Page 7
YoYQ2’25Q2’26+2%$254$260Sales -24%$41$31EBT-420 bps16.1%11.9%% of sales Industrial Solutions Segment Second Quarter FY26 Results 7 Second Quarter Overview EBT = earnings before income taxes Sales•Total Sales YoY: +2% reported and flat on a constant currency basis•Sales increased as currency translation and pricing were partially offset by volume declines, particularly in Aerospace and Defense, following significant stocking in the prior year quarter •Industrial Filtration Solutions sales increased due to robust growth in Power Generation new equipment sales•Performance by region YoY:•US/CA -9%•EMEA +22%•APAC +5%•LATAM +6%•Performance by end-market YoY: •Industrial Filtration Solutions +7%•Aerospace and Defense -19%Margins and Key Updates•Segment EBT margin -420 bps YoY due to operational inefficiencies, including those related to elevated customer demand in Power Generation, and footprint optimization costs
Page 8
Life Sciences Segment Second Quarter FY26 Results 8 YoYQ2’25Q2’26+16%$69$80Sales NM-$1$7EBTNM-0.7%9.3%% of salesSales•Total Sales YoY: +16% reported and +10% constant currency basis•Higher sales driven by strong new equipment sales in Food and Beverage and Disk Drive, combined with benefits from currency translation •Performance by region YoY:•US/CA +28%•EMEA +15%•APAC +14%•LATAM -1%Margins and Key Updates•Segment EBT margin expansion YoY driven by strong sales in Food and Beverage and Disk Drive businesses and benefits from expense optimizationSecond Quarter Overview EBT = earnings before income taxes
Page 9
North AmericaEuropeAsiaSouth AmericaRest of World Facet: Overview 1 CY20259 High-performance fuel and fluid filtration for mission-critical applications $108MSales138%EBITDA Margin1~70%Consumables Sales Sales by End Market1Sales by Geography1 13%13%48%26%3%3%11%26% 57%Commercial AviationMilitary AviationMilitary Marine & LandOther~80%A&DHighlights Manufacturing sites in Oklahoma and Spain 236 employees in 7 countries Trusted in applications where safety, compliance, and uptime are critical Designs and manufactures filter elements, housings, and integrated systems $8B total addressable market across aerospace & defense, power generation, data centers, and other industrials
Page 10
Facet: Transaction Summary 1 0 Price &ValuationFinancialHighlightsLeadership &IntegrationFinancingTiming &Approvals Acquisition of Facet from Filtration GroupPurchase price of $820M in cashRepresents 20.0x CY2025 EBITDA; 16.6x including expected tax benefit and cost synergies Funded through a combination of cash on hand and new debt financingClosing subject to customary closing conditions including required regulatory approvals$108M of revenue in CY2025, growing at high single digits$41M of EBITDA in CY2025, at 38% margin; immediate margin accretion with EPS accretion in FY27Strong cash flow conversion with CapEx <2% of salesFacet leadership team and technical talent provide continuity across customer relationships and certification requirementsTo be integrated with Donaldson’s Industrial Solutions segment
Page 11
Balance Sheet and Cash Flow Overview 1 Adjusted for restructuring and other and business development charges. See the Reconciliation of Non-GAAP Financial Measures appendix for additional information.2 Free cash flow = cash from operations minus capital expenditures; Adjusted free cash flow conversion = free cash flow / adjusted net earnings.1 1 $420$388$4860.7x0.6x0.7x0.3x0.6x0.9x1.2x$0$200$400$600Q2'24 Q2'25 Q2'26 Net Debt to Adj. EBITDA(1) Net Debt(1) ($M)Net DebtNet Debt to Adj. EBITDANet Debt and Financial LeverageConsolidated Results($M)Q2’25Q2’26$90$33Cash from Operations ($19)($15)Capital Expenditures$72$18Free Cash Flow(2) ($32)($35)Dividends($7)($17)Share Buybacks Highlights•Adjusted free cash flow conversion(1,2) of 18% in Q2’26•Lower conversion driven by increased working capital•Returned $51 million to shareholders in dividends and share buybacks in Q2’26•Strong balance sheet supports future growth and strategic investments
Page 12
Total Company Sales Growth Total Company Gross Margin Total Company Operating Margin Adjusted Diluted EPS FCF Conversion Updated Fiscal 2026 Financial Outlook(1) 1 2 No Change+1 to +5%No ChangeYoY ExpansionPrior (Q1’26)Current16.2% to 16.8%16.0% to 16.4%Prior (Q1’26)Current$3.95 to $4.11$3.93 to $4.01No Change85% to 95% Prior (Q1’26)Current+0% to 4%+2% to 6%Total Sales+ Mid-single digits+ Mid-single digitsOff-RoadFlatFlatOn-Road+ Low-single digits+ Mid-single digitsAftermarket Mobile SolutionsPrior (Q1’26)Current+2% to 6%-1% to 3%Total Sales+ Mid-single digits+ Low-single digitsIndustrialFiltration SolutionsFlat- Mid-single digitsAerospace and Defense Industrial SolutionsPrior (Q1’26)Current+1% to 5%+5% to 9%Total Sales Life Sciences Other Assumptions•Tax rate of 22% to 24%•Pricing benefit of approximately 1% •Currency translation benefit of approximately 1%•Interest expense approximately $26M, up from $24M previously•Other income between $17M to $19M, up from $14M to $18M previously Segment Outlook 1 Adjusted for restructuring and other and business development charges. See the Reconciliation of Non-GAAP Financial Measures appendix for additional information. Capital ExpendituresPrior (Q1’26)Current$65M to $85M$60M to $75M
Page 13
Appendix1 3
Page 14
1 4 Reconciliation of Non-GAAP Financial Measures ($ in millions, except per share amounts)(Unaudited)
Page 15
1 5 Reconciliation of Non-GAAP Financial Measures ($ in millions, except per share amounts)(Unaudited)