When I think of the word enabling, I think of somebody being set up for success. The opportunity to be part of the solutions that drive a better tomorrow. Getting together to make things happen. We all enable each other. If I can do it, you can do it. Whenever they ask me what I do, I say I'm enabling engineering breakthroughs that lead to a better tomorrow. Parker's purpose is all about finding ways to improve the world around us. We're taking math and science, combining it with some imagination to come up with a product that solves a customer's problem. We use continuous improvement and everything at our disposal to do the best job for our customers. The safety of our parts is the most important thing. It's every time, always safe and reliable. My greatest achievement in life is knowing that when a plane goes by, I can look up and think, "We've done that." I take a lot of pride in that. Engineering breakthroughs come about when you have a dynamic team working together, bringing a diverse range of opinions, backgrounds, ideas to the table. Kaizens are a very good avenue to make step gains in a process in order to get to that top level performance. It enables us to run more efficiently, and it enables us to deliver to our customers a lot more efficiently and keep them even happier than they already are. Parker allows me to have that voice to say, "Hey, what can we do better?" I take a lot of pride in that. As the technology moves forward, Parker's products need to move with it. If you're not challenging yourself to improve, most likely you're going backwards. We're always striving to do better, lowering emissions, cutting costs, making everything safer. We understand our purpose in the business is to grow the business, and they reward us for that. It kind of makes you feel personally accountable for the company's growth. The best thing about working for Parker is the people. It's almost like an extension of your own family. It gives you a sense of fulfillment that you've done a good job. The best thing I like in Parker is gender equality. Parker culture is a speak-up culture where everyone is allowed to speak. They really empower us to make our department better, which in turn makes the whole company better. They're receptive to the younger generations, and I think more than anything, the younger generation really wants to learn from them. An idea is an idea, no matter how big, no matter how small. One single seed of a thought could turn into something which could make a big change. I enjoy coming into a work environment surrounded by dynamic people who have that same passion for solving problems. I can be curious, and I'm free to be curious. That creates that atmosphere of competition, but it's a good competition. The culture never differentiates the people. They're giving opportunities to everyone to grow simultaneously. My interpretation of a better tomorrow is a world that we live in that's continually improving. That what we did yesterday was good at the time and maybe the best effort we had, but that we're looking to take that next step. A world where everything that we do is safer, more efficient. People living longer, healthier, and therefore happier lives. Equality, it means inclusion, it means look after the planet. Parker is Parker is enabling. Engineering- Breakthroughs- That leads to a better tomorrow. To a better tomorrow. Good morning, everyone. I'm Robin Davenport, Vice President of Corporate Finance. I'm very happy to welcome you to Parker- Hannifin's 2022 Investor Meeting. Wasn't it great to hear the comments from our Parker team members in the opening video? In a word, energizing. I can't think of a better way to launch today's program. They truly embody Parker's culture of ownership and engagement. Speaking of engagement, here we are virtual again. We had every intention of being in person meeting with you today, and yet, as recent as a few weeks ago, with continued concerns around the Omicron spike and travel restrictions that remain for many of you, we took the decision to pivot back to a virtual program this year. I can assure you that the content has not been compromised at all, and we very much look forward to seeing you in person at future events. Let me start by directing your attention to our forward-looking statements and non-GAAP financial measures. We will be making forward-looking statements throughout the course of the presentations today, and we will also reference certain non-GAAP financial measures. They have been reconciled and will appear disclosed in the appendix of the presentation. Please take a minute to read through the statement in its entirety. Throughout the course of the morning, you will be hearing from Tom Williams, Chairman and Chief Executive Officer, Lee Banks, Vice Chairman and President, Jennifer Parmentier, Chief Operating Officer, and Todd Leombruno, Executive Vice President and Chief Financial Officer. The program has been designed today with more of a longer-term focus, a focus on Parker's strategies and the introduction of our new fiscal year 2027 five-year targets. To that end, we will not be making any comments about our fiscal 2022 guidance, nor will we be providing any updates on performance in the current quarter. You'll see here the agenda that is outlined. Throughout the morning, Tom, Lee, Jenny, and Todd will be covering the following topics respectively: Parker's promising future, secular growth trends, financial performance, and ESG. We have scheduled a brief recess, and after that, we will convene a Q&A session with the office of the chief executive. With that, let's get started. It is my pleasure to introduce our Chairman and Chief Executive Officer, Tom Williams. Thank you, Robin. It's very exciting to be here. Good morning, good afternoon, good evening to everybody that's watching live, and for those of you that are watching the replay that'll show later on today. We are really excited to be here. This is a great opportunity for us to share the promising future of the company with all of our shareholders and stakeholders. Before I get into that, I wanna talk about a little bit about who we are and what we do. We are the global leader in motion control technologies. We help control motion, create motion, control the flow of fluids and gases, and in pieces of equipment that fly, things with wheels underneath them, and stationary equipment in a very diverse set of end markets around the world. At a glance, if you look at us, we are number one in the motion control space. It's about a $135 billion space. We are, by a factor of two, the largest player within it. $16 billion of revenue, about a $40 billion market cap in round numbers. 11% market share. You can see huge opportunities to grow organically as well as inorganically with the opportunity to go above 20% from a market share standpoint. We have a fantastic suite of technologies that is interrelated, interconnected, which I'll talk about more in the next couple slides. We have the envy of the space when it comes to distribution channels. 17,000 outlets around the world creating all kinds of value to our customers. Took us 60 years to build, very hard to replicate. We have a history of being great generators and deployers of cash. To the right-hand side of this slide, you can see how we report externally by segment. Now also, we've given you color by region, how our sales profile looks. At the bottom, this is our purpose: enabling engineering breakthroughs that lead to a better tomorrow. This has been our North Star, our guiding light throughout the last several years. Very inspirational for our team and our colleagues. I mentioned that breadth of technologies. Across the top, so that motion control content is these eight motion control technologies. They play in an interrelated basis to drive value, a distinguishing value for our customers, saving weight, saving assembly time, total cost of ownership, quality, et cetera. To the left, you can see that our customers see that as well. 2/3 of our revenue comes from customers that buy from four or more of these technologies. To the right, you can see the benefit of our sustainable technologies. Roughly 2/3 and growing are clean technologies that are helping our customers. When you think about how we provide value, we help our customers drive productivity, profitability, and we're gonna be a big part of helping them on their sustainability journey. I'm gonna summarize what you're gonna hear today. I'll bring this up again at the end when I close things. The key message is we'd like you to take away. We have a highly engaged global team living up to our purpose. You saw that in the video that opened things up. It's our people, the culture, the values. The purpose of the company is really what makes us successful. Win Strategy 3.0 is the strategic powerhouse behind the last couple years of improvement, and more importantly, early days to the next several years of improvement going forward with the Win Strategy. The portfolio is dramatically different. I'll show you this when you look at the technology platform. Significantly different, longer cycle, better growth dynamics, better margin dynamics going in the future. We are positioned for growth. We're gonna spend a fair amount of time between myself, Lee, and Jenny to take you through the secular trends and how they're gonna impact our end markets and the success of the company going forward. We've got new five-year targets. Now, these targets are not final destinations. These are parts of our continuous improvement, and we're gonna continue to move beyond these as we get to them eventually over the next several years. The clean technology profile that we have is gonna help the world be much more sustainable. The main thing I want you to take away is this takeaway at the bottom of this page, a transformed Parker with a promising future. The first part of this, a transformed Parker, I'm gonna show you objective evidence that when you look at how we compare to other companies within our peer group, arguably the most improved diversified industrial over the last several years when you look at the performance indicators. The promising future between what we've done portfolio-wise, Win Strategy 3.0, the secular trends, we have a fantastic future in front of us. When you think about the value of the company, we should be valued as a company on the company that we've become and where we're going, and not the company that we used to be, that we're quite different from today. Speaking of that transformation, this is a look at our technology platforms. Then if you're not familiar with what that means, I'm gonna explain what those four are. Aerospace, filtration, engineered materials, flow and process control, and motion systems. What we try to contrast for you is up here over time how they've evolved. In FY 2015, you can see the concentration between the four technology platforms. You've heard me talk about the desire that we wanted to add to and invest in and deploy capital in aerospace, engineered materials, and filtration. We've done that. You can see what's happened from FY 2015 to 2019 before COVID, before a couple other acquisitions. Now with FY 2022 guidance, we've added in Meggitt, and we use Meggitt's calendar 2021 results, the ones they just announced, $2.1 billion in revenue, round numbers in dollars. You can see what's happened to those areas we wanted to invest in. Aerospace, filtration, and engineered materials used to be $5 billion, and we've doubled that to where we're gonna go once we close Meggitt to $10 billion. A tremendous transformation of the company. It's gonna act and feel much different going into the future. Better margins, better growth trajectories, better cash flow. A couple of our performance indicators to talk about how the portfolio and the performance has changed. This is a better Parker. If you look at adjusted operating margin on the left, 640 basis points better than we were from FY 2016 to our current guide. In the middle on EPS, a 2.5% factor increase. Fantastic improvement there. Then our free cash flow, almost doubled free cash flow in terms of dollars. Free cash flow margins have gone from the low teens to the mid-teens. A different, more resilient, a better Parker. What drives us? The things that have framed the strategic changes to the company that we've made over the last number of years are really these three items on this page. Living up to our purpose, that higher calling, the inspiration behind what we do and how we help society. Being great generators and deployers of cash, and being a top quartile company versus our proxy peers. That all those things I just talked about show up in the strategy of the company. The strategy of the company is the Win Strategy. It's our business system. Hopefully, everybody's familiar with it, but if you're not, it's a one-page document. On the front are the four goals. Underneath them, the strategy as a company and the foundation being our culture and values. On the back are the measures of success and the purpose statement. What I'm gonna try to do today is I'm gonna take you through the four goals, and I'm gonna try to give you some insight into what we've been doing, more importantly, where we're going on the Win Strategy. The kind of things I can't necessarily get to in a short discussion at a conference or in an earnings call, we're gonna go into more detail with it right now. Engage people is first and not by accident, because everything happens as a result of our people being engaged and caring about the company. Starts with safety. Our performance on safety has been fantastic. To give you an idea what this indicator is, this is recordable incident rates, so the number of incidents we have per 100 team members around the world. You can see the significant reduction here, 73%. We're trying to get to zero, and zero is not an aspirational target. Zero is an expectation. We will get to zero. The significance behind this, if those of you who've heard me talk about this before, there's a very strong link between safety, engagement, and business performance. As we continue to improve on safety, it's not by accident you've seen our engagement scores go up and our business performance go up as well. If you want people to care about the company, you need to demonstrate that you care about them. Best way to do that is demonstrate you care about their safety. This was a big help during the pandemic because during the pandemic, everybody's learning the safety protocols. Nobody had the world figured out, but our people gave us the benefit of the doubt. They trusted us because they knew we had their back when it came to safety. I wanna talk about Kaizen. I'm gonna get to Kaizen, but I'm gonna talk about our brand of Kaizen, which is unique because of the foundation we've built around a couple key engagement vehicles. The first is safety, as I just talked about. Now, Lean is a big part of engagement, and we've been doing Lean for 20 years. Lean has created how we flow, how we think about scheduling, how we engage our people. It's created a visual management system on the factory floor, team improvement boards, that we will use for the high-performance teams and for Kaizen. The high-performance teams I'll talk about, it's how we organize and engage all the people in the company, and Kaizen's all about continuous improvement. Why Kaizen works so effective for us is because we've been working for 20 years on Lean, 15 years on high-performance teams, and forever on safety. That foundation is allowing us to be much more efficient when it comes to Kaizen. Let's talk about high-performance teams. Think of this as how do we engage 55,000 people in the company. Now, 55,000 people strong, they are all leaders in their own respect. How do we get their thoughts, their ideas, their voice heard? Because the people closest to the action, whether they're in the factory or the warehouse, know best how to make the company better. The idea here is let's create a structure around engagement at the natural team level. You take any typical plant, there's natural work streams, value streams, if it's a very large value stream, cells within that value stream, and let's organize the people around a framework of responsibility. We use a geometric symbol, a star, to kinda outline that. On those star points are the four metrics you see that are tied to the team improvement boards regarding Lean, safety, quality, cost, and delivery, then we added engagement as a fifth star point. This hypothetical example here, a 10-person team. Let's put two team members at each star point. One is the point person with the primary responsibility, but the whole team is responsible for all the areas that they're underneath the star system. You get two levels of engagement here, the natural teams with their respective area, and then the star point leaders can cut across an entire plant. Let's say this plant has seven teams. You can take all the safety star point leaders, all the quality star point leaders, and have a cross-plant meeting. Very, very powerful. The engagement that happens, the idea of flow, this is a big part of what's made us successful the last decade or so. You take this infrastructure on Lean, safety, and high-performance teams, and then you put in Kaizen, and Kaizen is a way of life for us now. We're in our third full year of doing this. Think of Kaizen as continuous improvement, change for the better. The key thing here is the operator is the focus. Whether I'm at a Kaizen event, Lee or Jenny, the operator is the boss. The operator is the CEO for that particular event. All of us are there to help the operator be successful. We think about a step change in mentality here. It's if it's a good metric, how do we double it? If it's a metric we want to lower, how do we cut it in half? Have the team think about that in a sort of real-time action-oriented basis. The takeaway at the bottom here shows the amount of people that are involved in this. Just in the last calendar year, we had 10,000 team members part of a Kaizen event. If I add up all the cumulative Kaizens we've done to date since it was launched with 3.0, roughly half the company has been involved in a Kaizen event. A big part of our success, again, that linkage between safety, engagement, and Kaizen and business performance. To kind of frame all of our efforts around engaged people, there's three broad areas that we're focused on. The first is teamwork, which I've talked a lot about that, high-performance teams, star point teams, Kaizen, going to Gemba, going to where the action is, going to work where the work's being done. The whole point here underneath the teamwork side is making people feel like they belong. Under trust, safety creates that kind of trust. Caring about people's careers, everybody's careers, all 55,000 people. Skip-level meetings to get the communications out. What we've found over time, the most important leader we have as part of this process is the site leader. When we have the right site leaders in place, it makes a huge difference. That makes people feel that they matter. The pride that people have about what we do for the communities that we're in, our purpose in action, our technologies and products that are helping the world be better, the customer experience that we create, and the recognition and celebrating success makes you feel that you're making a difference. This is all about creating owners. If you think about maybe the first apartment you rented versus the first house you owned, there's a difference. There's a big difference in when you own something. There's a level of energy, passion, caring, and results that happen when you're an owner, and that's what we're creating. This is what makes Parker distinctively different. Let's move to customer experience. This formula looks easy, but it's hard to do in practice. Great levels of engagement and customer experience create growth. We talked a lot about engagement, and I could talk a lot about customer experience. I'm gonna cover two areas today, digital leadership and Zero Defects and how that's gonna help our customer experience. Digital leadership is a multipronged process for us. It starts with digital customer experience, recognizing that most of the interface between a customer and distributor today is gonna happen digitally. How do we make sure we have the right kind of content, the quality there, the ability to navigate it, the speed, et cetera, to do things that people want? We're continuing to invest in and grow and improve upon our digital customer experience. Digital products. We don't need to light up every single product, but we need to light up the right products as far as how do we communicate and create insightful data for our customers. Digital operations, think of that as Industry 4.0 within our factories, automation, digital day by the hours, digital process capability evidence at our machine centers, et cetera. Lastly, digital productivity. It's this last one I wanna spend a few minutes on and give you a little more color on. Digital productivity, the first one, is what we're experiencing right now. It's that collaborative event of being able to do this and talk to hundreds and hundreds of people around the world virtually, and we've all experienced this, especially in the pandemic. In the middle, robotic process automation, RPAs. Things, these are taking routine, repetitive tasks, whether in supply chain or finance, as example, and doing them virtually, digitally with robotic type of techniques. The last one, which is the one I really wanna spend time on, data analytics and the use of AI. All three of these are driving a step change in productivity. You've seen it in our results, step change in productivity and how we've performed the last number of years. What's been exciting about data analytics, and I'm very proud of what you see on this slide, we've gone from a complete standstill, not doing anything on AI, we were doing some basic, business intelligence type of things. We've gone from zero to a team of 800 people working on this. Let me describe the infrastructure here. There's a steering committee, business leaders providing oversight and guidance. Data champions, one per operating group and one per region with a leader. The importance here is if your data integrity and architecture's not right, you have a hard time having the machine learn, so making sure the data's in the right kind of format and accurate, and high integrity is important. The communities of practice is how do we get the people that are not data scientists up the learning curve on data analytics? Think of it very much as what we did with Lean Bootcamp at the beginning of our Lean days. This is AI Bootcamp, and we have 770 people that have gone through it to date, and it will continue to do this just like we continue to do Lean Bootcamps today, 20 years later. Lastly is the PACE team, the analytics center of excellence for us. This is the data scientists, which this team sits within IT, but it's embedded in every respective function we have in the company. Virtually every function has a data scientist or two supporting them. Add this all up, we're roughly 800 people and growing. Really think about this as Lean in the office, the ability to see the interrelated nature of information and to make sense out of it, which in the past was very hard to do because you couldn't see flow, and the human brain couldn't process this level of data. What are we doing with all this? I have five examples to show you that are very meaningful and successful to date. The first is financial forecasting, use of AI to help us with that. The second is really the commercial pipeline, opportunities to a final sale and helping the sales team think about account strategies, et cetera. Claims. Now we'd like to have no claims with a customer, but how do we process them more efficiently and timely for our customers? Bid response. This is processing orders, quotes, and from simple orders to how to and quotes, to how do we look at more complex things to help people. There's a very high correlation between speed and accuracy and win rate. When we do things well on speed and accuracy, we win the quotes at a much higher percentage level, and this is helping us think through that process. The use of it for demand forecasting, supply chain. How do we schedule our shops, and then how do we help our suppliers by how do we create demand signals to them? Very powerful to date, and we'll continue to use this as we roll out into the future. I wanna move to a topic that I really haven't covered much externally, but we've been working on for a number of years internally. It's the concept of Zero Defects. Zero Defects is going to drive improved quality and experience for our customers, but it's a margin expansion as well, and I'll explain why here in a second. There's three main tenets to this. The first is ownership, engage people, and the whole discussion we were just having. Designing more robust products, which I'll cover with Simple by Design, then having capable processes. What we mean by capable process is having a process that's repeatable and stable, where you don't use the entire tolerance, and you have a very repeatable process out there when you generate characteristics. You can use process capabilities, design FMEAs, process FMEAs. There's a lot of Zero Defects tools. What we've seen is there's a very high correlation between the number, as you plot the number of dimensions that have process capabilities on them, the number of defects goes down dramatically. For shareholders, without making you Six Sigma experts, what this means to you is that the hidden factory of cost is gonna get addressed. When we think about quality, we see scrap, we see customer claims, but that hidden factory around rework, lower first pass yields that require secondary operations or extra work at assembly, extra work at test, all those things get done much more efficiently. That hidden factory starts to get eliminated. Very similar to Simple by Design, Zero Defects will be a long-term, multi-year margin contributor going into the future and very exciting for us as we roll it out. Let's switch to profitable growth. Of all the presentations you're gonna hear this morning between myself, Lee, and Jenny, we will spend more time on the growth side than probably any other particular topic. I'm gonna talk to it at a higher level. When Lee and Jenny come up, they're gonna get into more details, in particular about the secular trends. If we wanna grow differently into the future, we have to look at organic growth differently. It's not like we just woke up and started thinking about this. We've been working at this for a number of years. It's gonna take organic performance changes. It's gonna take portfolio changes. I'm gonna talk to each one of these over the next several slides. Let's start with the first one underneath the organic side. New to Win Strategy 3.0 is this concept of strategic positioning. When people think about strategy, they sometimes get spooked around how do I do it? What is it? It's this formula here. It's operational effectiveness plus strategic positioning. Historically, the Win Strategy focused a lot on operational effectiveness. Not bad, but not really covering the whole gamut. By making the change of adding strategic positioning to the Win Strategy, it sent a very loud message to all the general managers about the importance of this. Now what is strategic positioning? Think of it as this little football diagram on the right-hand side. It's how do we as a team, the Parker team, compete against our competitors? How do we position ourselves? What end markets, what sub-segments, what products, what strategies vis-à-vis the competitors to win? How we strategically position ourselves. This discussion has become a big part of how we run the company. By adding this to the Win Strategy, we now formed an operating cadence around this. We take three divisions every month, we spend an hour a piece, and we ask them to present their strategic positioning. A very powerful concept. What it's doing is driving critical thinking into thinking about growth for the company in a way we haven't maybe historically. Our stage gate process around innovation, we call Winovation. We've made a couple key process changes and a key metric change that I wanna talk about. On the process side, we've focused on how do we have better ideas coming into the pipeline. New product blueprinting is what we call it. Think of it as outside-in ideation. How do we spend time with the customers and the end users to better understand their pain points, their unmet needs? How do we help them be more successful? We've trained every one of our engineers in new product blueprinting, and every new product idea that we have has to go through that process. How do we design products more robustly? Design excellence. I'm gonna come to that. That's Simple by Design. A new metric that we just rolled out in 2015 that we're gonna disclose today is Product Vitality Index. Not necessarily a new metric to industrial companies, it's a familiar metric. This measures the percent of new products launched over the last five years, and it's an indicator in innovation ownership. This stage gate process, which is depicted in this pictorial on the bottom here, is taking ideas to launch. Obviously, better quality ideas create better commercialization going out. Our PVI, our percentage of products that we've sold in the last five years that are new to the world, new to the market, has grown dramatically. We were at 9% in FY 2015. We've doubled it to today, 20%. We're gonna look to increase it 100 basis points every year as we go out to this next forecast time period to try to get a quarter of our revenue come from new products. The significance again for shareholders, if you've ever had to make a sales call, it's a lot easier to sell an innovative product. It's differentiated. It's part of that positioning that we just talked about. It's not a me-too. Pricing's different. Margins are different. Margins are typically 10-15 points higher for a product that's a new product. Most of our PVIs can support the secular trends that we're gonna talk about in more detail here. You've heard us talk about this for the last number of years. How do we change the mix on distribution internationally? When we first started talking to you about this in 2015, we were 35% distribution, 65% direct. The last investor day last fiscal year, we were 40%, 60%, and now we're 42% distribution, 58% direct. We keep making that 100 basis points a year improvement, and that's what we're looking for to do going forward in the future. We've now created and added a thousand new distributors internationally. We've moved over 300 of our Parker team members that now work for distribution, that are in leadership positions, in some cases are in ownership positions. This has changed the mix dramatically. It's made our growth more resilient. Ironically, this mix shift distribution has a 10 - 15 point higher margin than direct does. Now, how do we wanna incentivize people? We talk about all these organic changes we wanna do. We wanna incentivize the right kind of behaviors. Historically, for us, it was return on net assets. It worked well for a long time. It's over a 30-year incentive plan, and I'm talking specifically around short-term incentive. Our long-term incentive plan is in good shape around EPS revenue and ROIC, but we wanted to focus on the short-term side because RONA acts a lot like a long-term incentive, and we felt it was not driving the kind of growth intensity that we wanted from our team members. We're going to a very simple formula here. The other part of it is when you try to explain RONA to people, their eyes start to glaze over because it's a calculation. Remember that we had about 95% of our team members, so 95% of 55,000 people are on this short-term incentive. This is a big, big change management process. We're gonna go to what we call ACIP, annual cash incentive plan. Earnings, revenue, and cash, very simple, tied to each respective business against the target we'll establish for that particular year. We've rolled out about half the company to date, and we're gonna do the rest of the company starting in July of this calendar year and be complete in FY 2023. Very impactful. It's gonna, again, drive the right kind of behaviors, a stronger growth intensity for the company. I wanna move to the secular trends, which are really exciting for the company. Lee and Jenny are gonna go through this in a lot more detail, but I wanna talk about it at a high level and what it means to us and how it's gonna change the company. I wanna start by looking at the portfolio and how the secular trends start to impact them. We try to give you three segments of the company to describe the company in more color for you. Industrial aftermarket, longer cycle end markets, shorter cycle end markets. Contrast for you over a period of time and then into the future how this is gonna look. If you look in FY 2015, you can look at the sales mix. The largest portion of the company was tied to shorter cycle end markets. When you add in the acquisitions we've done, so the portfolio changes that we've done, and if you put in Meggitt, and they're, again, using their most recent sales for calendar 2021, you can see that we get all three pretty equally balanced between aftermarket, longer cycle, and shorter cycle. What's really interesting as you go out into the future and the impact that the secular trends have on top of these portfolio changes we've had, you get that the longer cycle secular impacted part of the end markets is now over half of the company. Add the aftermarket, which is 1/3, and roughly you get 85% of the company is tied to longer cycle or aftermarket. I would argue that pie on the far right is dramatically different than the far left, and the far right pie does not look like a PMI company to me. Let's talk about the far right pie in more detail. Now let me try to give you some content before I go through the details here. Orient you to the slide. The bright blue is longer cycle end markets. The gold is aftermarket. The dark blue is shorter cycle. The comments I'm gonna make, I'm not gonna try to make comments to pretend like I know everything about all these end markets, but what I do know is how Parker's products and technologies are gonna evolve over this period of time because of these secular trends. What we did with this is we took the FY 2022 sales mix by end market, so that's as is today. We added Meggitt in there, so that's the only difference. We added Meggitt, $2.1 billion in revenue. You can see if I just take the top two big ones, Aerospace and Defense now becomes 1/3 of the company, 33%, and the industrial aftermarket is 33%. Bang. Two big things, very positive, markets and dispositions, 2/3 of the company. Now let's walk through the longer cycle piece. I'm gonna walk you down that bright blue segment on the middle of the page here. Take agriculture, construction, and mining. You see 4% by that, so 4% of our sales tied up there. If you go across there to the shorter cycle, see so 4% as well. What we mean by that is the total market exposure today is 8%. Over time, because of the demand for this equipment, the investment that's gonna happen, again, Lee and Jenny will give you more content here, the investment's gonna happen in these secular trends. The fact that our bill of material goes up anywhere from 1.5x-2x is gonna create this very strong floor and a more resilient, longer demand cycle for these respective end markets. Go to the next one, automotive. See 3% underneath long, 1% under short. Again, automotive today, 4%. We think automotive is influenced a little more aggressively than the other markets I just mentioned because it's up the electrification curve at a much steeper incline than the other markets are to date. Our exposure on EV, our content, our material science content, the changes that are gonna happen in the factories, the battery production, et cetera, is all gonna make automotive a longer cycle, stronger bill of material for us. Let's go to semiconductor and telecom. Telecom with smartphones, and obviously, long-term trend and everything we do tied to that. But semiconductor, historically a short-cycle business that was highly cyclical. All the investment that's going on that we've all read about that's gonna happen at the fab level and at the tool level is gonna make our semiconductor content longer cycle. Demand is gonna be much longer. Again, our bill of material content going up. Let's take truck, which is a classic shorter cycle, highly cyclical end market. 2% underneath the long, 3% under the short, so 5% in total today. What we see with truck, and when Lee goes through digital, everybody's buying patterns has changed dramatically. The fact that truck is such an integral part of getting products to customers is gonna create, again, an underlying demand, longer demand for truck and our content, again, there being stronger over a longer period of time. HVAC and refrigeration, 2% of the company. Long-term demographics helping us here. The need to preserve food, the quality of air in factories, offices, and homes, especially in light of coronavirus, et cetera, and those kinda needs makes this a longer cycle on market. Life sciences and medical have been a long cycle market for us forever. Material handling is a good example. 1% there. You cut across to the right side of this page, you see 1% under the short. So material handling being impacted by 5G, all the changes around telecommunications, et cetera, the demand for material handling type of trucks and the ones that we have very dense bill of materials on, is gonna make this, again, a longer cycle, higher demand, stronger bill of material type of a process for us. Power gen has always been a longer cycle. The evolution here is gonna be migrating from fossil fuels over time, this will be decades to more renewables, etc. So again, if you add up all the blue segment there, you're gonna get to slightly over 50%. Take the aftermarket at 33%. Again, my point, you get almost 85% of the company tied to longer cycle secular trends in the aftermarket. Again, this is not a PMI company. Let's move to financial performance. I'm gonna start with simplification, which was launched as part of 2.0, and it's a big part of 3.0 as well. This has been a huge margin expansion for us, and we'll continue to do that for us into the future. Four areas we've focused on. The structure and the footprint, we've done a lot of work there. You can see 33% of the reporting units have been consolidated, and we'll continue to look at that. It won't be quite as big in masses that we've had in the past, but we always wanna make sure that we're optimizing the footprint. The organization design never is done. We're gonna continuously look if we have the right structure for the strategy, the business, the strategic positioning that we just talked about earlier. 80/20 for us is still early days. Huge opportunity is how we segment things, what channels we go to market, the pricing, how do we better serve customers with the right kind of service levels, product optimization, et cetera. Early days of that. Then Simple by Design, as you know, we just launched as part of 3.0. Let's talk about the journey to Simple by Design, and really kinda what got us onto this. Most companies focus, rightly so, on operational excellence. How do you make things? How do you buy things better? Commercial excellence is equal to or importance to operational excellence. How do you sell? How do you market? How do you price things better? In our mind, you know, design excellence was maybe not getting the same level intention as the other two, and design excellence impacts every function in the company, so it has a big domino effect. 70% of our product cost, in our minds, and most people that have studied this, is influenced by product design. However, you look at where we spend most of our time, it's on taking that design and trying to convert it, the material, the labor, and overhead. Not a bad thing, but could we spend more time on the design side to help ourselves? Think about design decisions like pouring concrete. Once you pour it's pretty hard to change it. Let's pour the concrete the best way we can when we design it in the first place. Simple by Design is our tool, our process, to driving design excellence. There are four guiding principles here, and I'm gonna give you examples of some real products that went through these four principles. How do we design with forward thinking? How do we design with where we think the customer or the market's going, and to allow us iterative changes to design without having to go back to square one? How do we design to reduce the bill of material, reduce the stocking location, design to reduce the complexity? How do we design to reuse material? We have designed thousands and thousands of part numbers. It's impossible for our engineers to know all that. The use of AI allows them to see that much more efficiently to reuse things, design with flow, design with the operator in mind to make it easier for them to assemble it, easier for them to test it. Again, AI makes this come to life because it makes the engineers capable of not being overwhelmed with all the data here. I'm gonna give you three examples to make this come to life for you. This is a fuel water separator filter. I'm gonna really focus on the four design principles, the four blue circles going down the middle of the page here. If you look on the left though, you can see nine head designs go into four. Those four different designs are really driven by difference in horsepower requirements for the application. We've on the reduce side, from nine head designs to four. We're using existing media and existing pump technology. We have a common filter head with that interface being patented to protect the aftermarket, and we've standardized a lot of the attachments. If you go to the very first bullet on the upper left here, this eliminated 45 assemblies on 30 different components, reduced the complexity in the value stream, reduced the complexity scheduling this and scheduling our suppliers. This yielded a 20% product cost reduction. If you take. This is a de-icing valve that you see on the left here for the LEAP engine. It's in an A320. Again, go down to four principles. We simplified the actuator. It was a two-part actuator. We went to a one part. We went from a servo valve that had multiple parts to a solenoid valve. We make these de-icing valves for other applications, other engines, and we now have 60% of the parts common across the de-icing valves, and we made it easier to assemble. 15% cost reduction here. Then on semiconductor, this is a pressure regulator which is controlling the flow of gases for a tool application. We went to a standard body. You can see the various ones we had on the left and how we shrank those. 80% what we're using as far as material. An important part, besides just the design, is the material specs. We went to a standard grade of stainless steel. When you do those kind of things, it gives you buying power. It makes it simpler as far as scheduling and inventory stock location. It makes it easier on the factory floor as well. This yielded a 10% product cost reduction. In general, we've seen typically anywhere from 10%-20% product cost reduction with simplified design. Doesn't mean every single time that that's what we're gonna get. Sometimes we might get a little more. Sometimes the design was pretty good at the beginning, and we didn't yield that much. But I think you can think of this as a 10%-20% product cost reduction done over many, many years. Similar to Zero Defects, we yield margin enhancements for a long time. We spent a lot of time on the organic side. We move to capital deployment. The three acquisitions that we've completed, you're gonna see a theme here. CLARCOR, doubled filtration. LORD, doubled engineered materials. When I get to Meggitt, doubled aerospace. 80% aftermarket with CLARCOR. LORD took us right to the top of the building when it comes to the electrification offering, put us in a fantastic position to be in position to capitalize on these secular trends. Then Exotic Metals Forming added to our engine content on the aircraft. Again, all three of these well positioned for the secular trends. You've seen the success here and how they've done, and Todd will give you more insight to that in his presentation. On the pending Meggitt acquisition, it's gonna double Aerospace. Again, complementary technologies, 70% sole sourced. The recurring revenue is significantly higher. It's gonna drive our aftermarket mix. There's two big wins that are backed with this. We're buying a fantastic property at the beginning of a commercial aerospace recovery, and we have $300 million of synergies that's gonna propel us. Two great tailwinds for us. Our strategy in a nutshell, when we think about capital deployment, first and foremost, our dividends and continuing that annual increase record, and we're targeting a 30%-35% of net income. Todd will show you where that's going. It's pretty powerful. Our net income's gonna grow, and you're gonna see the dividends grow very nicely with it. We're gonna fund organic growth and productivity. It is the best investment on behalf of our shareholders. We're gonna do the 10b5-1. We're gonna pay down debt. As the debt curve goes down, we're gonna look at M&A and discretionary share purchases we've historically done and make the best decision we can on behalf of all of you to get the best kind of returns. I wanna come back to a comment I made at the beginning. A transformed Parker, and arguably the most improved diversified industrial the last number of years. I'm gonna give you objective evidence because you're probably figuring every CEO says that. This is a performance scorecard looking at a key metric to back up what I just said. Let me orientate you to the slide. We're in gold. The blue, the dark blue or medium blue is the top quartile of our peer group, so the best-in-class performance. The turquoise is the peer median. We took three pretty important metrics: How'd you do on growth, how'd you do growing EBITDA dollars, how'd you do on growing EPS? We looked at it from a calendar 2016 to calendar 2021 because most companies are not on our fiscal year, so we wanted to make this apples and apples. You can see that we were equal to or better than the top quartile performance of our peer group over this period of time. This is the backup to most improved diversified industrial out there. We improved at an extremely fast pace in the top quartile of our proxy peers. You've seen this from the earnings call. On the left is EPS, on the right is EBITDA margins. It's pretty hard to do this. Over this period of time, we've had two industrial recessions, a pandemic. Of course, now we're in 40-year high inflation and a war in Europe, and we continue to perform extremely well. You can draw pretty much a 45-degree angle on there, and if you put anything else underneath there, PMIs, whatever other metric you wanna look at, you can see there's clearly not a correlation between our performance and what's going on in the market, and it's because of what we've been doing with the Win Strategy and what we've been doing with capital deployment. I wanna get to the 2027 goals. This gets to the promising future part of it with specific targets as well as all the things I've been talking about to date around what we're gonna do going into the future. These are the new five-year targets. Organic growth in the 4%-6% range. I'll give you more color as to why I think that's a good target. Operating margin and EBITDA margin of 25%, the largest improvement that we've ever done. We've announced a new change to a five-year target, going from 21% - 25%. Free cash flow margin of 16%. Historically, we've used free cash flow conversion. That is still a very important metric, but we think free cash flow margin is probably a better metric, and the feedback we've got from shareholders is they felt the same. Adjusted EPS growth of 10%+. Let's talk about that organic growth. What's gonna propel that 4%-6%? 'Cause that's coming off of 2022, so we have a nice growth in 2022, but it's 4%-6% from 2022 and beyond to 2027. It's gonna be these five buckets. It's the business system, the Win Strategy, and all the things I've been talking about this morning to you. It's the fact that industrial companies, there's gonna be a CapEx reinvestment. The last decade, there's been an underinvestment, and there's gonna be the need to strengthen supply chains, add dual sources, improve robustness. That's gonna add to equipment spend, infrastructure spend, and it's gonna lead to higher levels of machine automation. Where we play in this whole evolution of factory automation, we are the machine automation go-to supplier. As people have labor challenges, availability, wages, et cetera, we're gonna be the source that they're gonna come to help them solve their machine automation. That's all gonna drive higher levels of CapEx. The channel needs to restock. Two different thoughts here. One, our distributors need to restock. Then the second bullet there, de-risking supply chain. Our OEMs. Right now, our OEMs have inventory because they're having trouble getting things out the door. Once things get normalized, they're gonna probably run with a little higher level of inventory than they have historically done because they wanna de-risk the supply chain. The acquisitions, great companies with better growth rates, better trajectories in the future, will be accretive to us. Then the secular growth, which I gave you an indicator how that's gonna influence the total company and become a significant part of our future, and you're gonna get a lot more content from me and Jenny specifically on that to back that up. You roll all this in, and we feel very strongly that 4%-6% organic growth over the cycle is a compelling number. If you look at us historically, that would be, for us, a 2%-3% number. This would be a 2x improvement, and we feel very good about being able to do that. I get asked a lot, "How are you gonna get to your margin target? How are you gonna grow margins?" Everything on the Win Strategy drives margins. Every single one. It's all the way from the things we've been doing 20 years, like Lean, to things we're doing that are relatively new to the Win Strategy, like Kaizen, like digital leadership, like Zero Defects, like the changes to innovation, strategic positioning, distribution mix, Simple by Design. You get my point. It's gonna take all of them, and we feel very good. We have a very high, as you've seen, say-do ratio. When we say something, we do it, and we're confident we can hit these margins. Let me just wrap up with a summary of the strategy. On the left-hand side is why we win. It's been our business system and the changes we've made to it. We're a decentralized and entrepreneurial organized company. We have the most compelling breadth of technologies out there, and about 85% of our products go out with some kind of intellectual property. We have long product life cycles. We're not at the mercy of the next widget that comes out. That's a positive. We have the best distribution channel in the world. Took us 60 years to build that. We have relatively low CapEx needs to do what we gotta do to run the business model, and we're great generators and deployers of cash. You go to the right, we're gonna add to why we've won with 3.0, our purpose, the growth strategies that I spent time with you on, those four secular trends, and that significant portfolio change that we described, the acquisitions plus the secular trends moving us to longer, more accretive growth and markets. We feel we're well positioned for a future that'll put us in the top quartile. I thank you for your time. I'll come back up at the end, and I'm gonna turn it over to Lee Banks, who's our Vice Chairman and President of the company. Thank you, Lee. Thank you, Tom. Well, good morning, everybody in virtual land out there. I can't believe I was still on time last night. I can't believe it's already been two years since the last time we've done an Investor Presentation like this. I think this is our fourth doing this together. Big milestone for me in December. I celebrated 30 years with Parker- Hannifin. Over that 30 years, I have followed a lot of attractive market activities over a long time horizon. I will tell you, arguably, I think the secular trends that are taking place right now are the most impactful that I've seen during that time. Aerospace aside, what we're seeing in digitalization, electrification, and decarbonization is impacting almost every industry that we serve, and it's impacting it from a standpoint of new product development, a renaissance in traditional equipment, and it's really leveraging the product portfolio that Parker- Hannifin has built, that Tom shared with you earlier. I'm gonna take you through the first two buckets of this, these secular trends, and then Jenny Parmentier, our Chief Operating Officer, is going to come up here and take you through the last two. We'll start with aerospace. I would position aerospace as a multiple decade growth story happening going forward. We have come out of the pandemic. Growth is happening as we speak. Commercial aircraft are now being delivered at a rate that is gonna be higher than the pre-COVID levels. We'll be at roughly 1,800 planes during this forecast period a year. These are aircraft commercial transport of 100 passengers or more, and that's building. If you think about it, we've already almost doubled the low of calendar 2020 of 70 aircraft. This is all underpinned by revenue passenger kilometers increasing, what we're forecasting greater than GDP during this time period. Lastly, all this is supported by an increase in military MRO. I've highlighted one here, is the significant increase that we'll see in the F-35 joint strike fighter as an example, but there's more to the story. That aircraft is coming into maintenance service as we go in our forecast period here, which is gonna drive that. We'll talk about Meggitt as we go forward here, but that's gonna really double the activities that have gone on here. What is exciting about this, with that as a backdrop, if you've followed us for a long time, you know that we spent a significant amount of R&D money during the early 2000s to support this huge aerospace megatrend that was taking place. We were pushing 12% for a long time. That positioned us to be on all these new aircraft that are going into service today. We're on the right programs going forward. It's gonna create a very large installed base. These programs will be in service for probably 20+ years. There's an aftermarket annuity that comes with these, and we're very excited about that. As we invested in all those programs, it created a very diverse portfolio for us. This is Parker without Meggitt in here, as we are. I think the two notable things here is the nice content with commercial transport and engine and the military fixed wing. Those are three big buckets that we are forecasting significant growth going forward, and you can see from the balance, of military and commercial going forward. This portfolio is balanced to the point that as we went through the pandemic period, having that military portion there really balanced the group out as we had to cut back on the commercial side of the business. Long cycle, very balanced. Kind of further adding to what's happening in commercial transport, we have some trends here from third-party market information, and we've just put a median line here, but you can see it supports the aerospace commercial transport markets getting back to pre-COVID levels by calendar year 2024, and we're certainly see that evolving as we take place right now. I talked about this being a multiple decade growth story, and it all starts, I think, with the current to 2030 on the fleet shift to more efficient aircraft, and that's what's in production right now. That's where the R&D money was spent. But there's an evolution taking place here as we go to the right. The evolution is around sustainable aviation fuel. So we're working today with Airframers and engine primes on sustainable aviation fuel. The beauty about this is it's not R&D intensive for us with what we supply to the industry today. We can make that change, but this will create an ongoing technology evolution in the industry. To the far right are other technologies that are being developed around hydrogen and really advanced air mobility, which is mostly around electrification. Just adding to that, this electrification story, we are investing in today. It's a portfolio of electrified products to give us flight in conventional takeoff and landing aircraft and vertical takeoff and landing aircraft. The technology we're developing here today is gonna be applicable across the company for the motion systems businesses we do, but also applicable for the military. Lastly, just talking about military growth drivers. Certainly the F-35 F135 engine production, we are only in the first quarter of delivering product for these planes to be delivered to the 14 nations that have them on order. We're 25%, 770 aircraft into it. There's a long runway there to be had. Just flipping over to the right side, that aftermarket of what's already been delivered is gonna start to ramp up. There's gonna be a little bit of an amplification here on the F135. We are investing in the two new helicopter programs that will start in 2030. As you know, we have a significant bill of material on the Apache and the Black Hawk helicopter, which gives us a lot of pedigree. We're working closely with the OEMs on these next generation helicopter. I'm certain we'll be successful, and we're excited about that going forward. Lastly, our technology, we've been able to take programs that have been in service for 40 years and bring life to them through new technology. The F-15 here has got new life with our fly-by-wire technology, which goes into service by 2030. Supported on the right side with product improvements and retrofits and military depot repair partnerships, this is gonna continue to give us support on the military aftermarket. These military depot repair hubs, we work very closely with them on the repair and overhaul of our product, and it allows us to do product improvements and retrofits to upgrade the aircraft as it's being repaired. You take all that, and then you add Meggitt on top of it, and you get an even more compelling story. There's three things when I think about Meggitt. I think great team, great culture, very complementary technology, and really complementary aftermarket business. I'll start with the aftermarket. You can see the mix on Meggitt between OEM and aftermarket and take it over the combined business with Parker Hannifin. It's gonna be a 500-basis improvement in the aftermarket business for Parker. That is a positive. Then when it comes to technology, there's no overlap here. If you look at the technology on the airframe, braking systems, electric power, fuel tanks, and bladders, very complementary. This gives us the opportunity of that one plus one equals three of the two companies coming together. Lastly, what's not to like about this? Increased content on the engine. This is the most maintenance-intensive part of the aircraft. The content that we've got on the engine is significant. It's gonna give us a greater value add on the engine as we go forward. Some takeaways on aerospace. Resilient launch cycle, balanced from a military and commercial standpoint. The commercial transport market is just recovering now, and it is accelerating. We're only in our 2022 guide at 70% of pre-COVID levels. There is continued investment taking place in low carbon investments, for next generation aircraft, which we're on the forefront of, and I think everything, the technology being developed for advanced air mobility, not only is it gonna be a nice market unto itself, but is a technology transfer opportunity as we go across, and I talked about Meggitt. I'm gonna switch over to digital trends now. I think for all of us it's just obvious, the pandemic changed everything. It changed the way we live, it changed the way we communicate, such as we're doing today, and the amount of activity has really been unprecedented. You take all of that, and what we've learned is we need a significant amount of investment in semiconductor capital spending around the world, and we need investment around telecommunications and the 5G network so things act faster. This semiconductor investment and 5G network investment has got an amplifying effect. You know, one story I was telling our team earlier is I had dinner with the senior leadership team of Ohio, just this past week. If you've been keeping up on the paper, Intel announced a $20 billion investment in the Columbus area, which could go to $100 billion, according to Intel sources. The $20 billion was the biggest investment in the United States in recent time for Intel. As I was talking to the senior leadership team from Ohio, they said, "Lee, that's a great part of the story, but that's not the only part of the story. Since we've done that, the phone is ringing off the hook for complementary investments that wanna come into Ohio to support this Intel capital spend that they're doing." That's a story that's gonna repeat itself around the country and around the world as these investments are made. What does Parker Hannifin do in these areas? Let me orientate you to the slide if I can. On the top are the applications that we would do in semiconductor manufacturing. Down the right-hand side are the technologies that we manufacture that marry into those applications. What is nice is we've got a multiplying effect with the technologies we have and the content that we can supply into these fabs going forward. The same thing with 5G infrastructure. We have always done a lot on 4G and 5G today, specifically with our engineered materials around thermal management and magnetic interference capabilities. Tom talked about the knock-on effect of what's happening with core customers to support all this infrastructure build. You can see a cable laying machine here is a perfect example of the kind of investment taking place. Data centers. Traditionally in data centers we've been involved on the air conditioning side. These are centers that house the microprocessors for cloud computing, et cetera, and there's hundreds of millions of dollars invested every year in the build-out of data centers. What's happening is microprocessors are becoming smaller, heat is going up, the density is higher, and they're having a hard time getting the cooling out, the heat out. Traditional HVAC is not enough. We've been working with key customers to supply liquid cooling through these processors to take the heat out. A brand-new market that's developed using not only engineered materials capability, but traditional fluid and gas handling capabilities. Lastly, factory machine automation. Tom talked about it. We are not at the enterprise level, but we are at the machine level. This is an area that we are investing in heavily inside Parker-Hannifin. This is an area our customers are investing in. This is really addressing people and it's addressing productivity. What you've got here is you've got a Parker-Hannifin automated system doing wafer handling. I wanna thank you for your time. I'd like to just invite up Jennifer Parmentier, our Chief Operating Officer. Thank you. Thank you. Thank you, Lee, and good morning to everyone out there. Thank you for joining today. I'm happy to talk about the remaining two secular trends, electrification and clean technologies. It's hard to believe that it's been two years since our last investor meeting when I talked to you about the electrification of mobile equipment. Since that time, the pull for electric products to support global production of electric passenger vehicles and mobile equipment has increased greatly. In 2021, over 6 million electric passenger vehicles were produced, double the amount of 2020, and expected to reach 25 million by 2028. This demand will increase the annual battery cell production by 4 x by the year 2030. In the past, where we saw the lighter machines being modified to electric battery, we are now having OEMs want to explore cleaner combustion and hydrogen to the heavier equipment. This is a very important slide. You heard Tom open with the fact that we are the leader in motion and control. It's very important to remember that no matter what the energy source is, from diesel to electric to hybrid, the primary Parker content that we have today on the work and propel functions will increase 1.5x-2x with electrification. We are well-positioned today, even better for tomorrow, and are truly energy agnostic. This example of a passenger electric vehicle really highlights the strength of the LORD acquisition. If you look at the applications above the car on the left, you can see the change from a combustion engine to an electric vehicle. You have heard Tom comment that the LORD bill of material content is 10x from a combustion engine to an electric vehicle. For Parker, that is an overall increase of 2x, as we've traditionally had more content on the internal combustion vehicle. Whether it's a Parker technology of safety, weight reduction, thermal management, or critical protection systems, we have a significantly larger bill of material. We are on every electric vehicle produced today. We're gonna share a video with you after the break of this very exciting new technology on an all-electric tractor. Parker technologies are all over this tractor. Whether it's propelling the wheels to the electrohydraulic work functions, to power takeoff units, and what we refer to as the electronification of mobile controls, which adds software, intelligence, and connectivity to better perform the work functions in this vehicle. Again, the content increases by 1.5x-2x from a combustion engine to an electric vehicle. Parker has always supported the agricultural industry, and as this industry evolves to smarter and more productive farming, Parker technologies are enabling them to be successful. This vehicle is not only electric, it is autonomous. Parker is also serving the truck market as it electrifies. With over 250,000 work-type utility trucks on the road in the U.S. alone today, this is a good example of dense application of Parker technologies. Whether the truck is hybrid electric or fully electric, once again, the Parker bill of material increases. Mobile hydraulics aren't going away, but they are becoming more electric, and Parker has the right technology to enable cleaner and quieter trucks. Our electrification technology enables hybrid trucks to charge batteries when the engine is running, and then enable the electrohydraulic systems to run off the battery power when the engine is turned off. Again, the content increases by 1.5x-2x from a combustion engine to an electric vehicle or a hybrid vehicle. In summary, key electrification messages are consumer adoption continues to increase with increased clean energy regulations and incentives. The rapid pace of electronic technology development is converging with consumer preference, public policy, and technology advancement. Parker technology enables wide range of electrified machines serving all of our core markets. Moving on to the global clean technology trends. Both public and private support today are driving carbon neutral pledges. Parker has pledged to be carbon neutral by 2040, and as you know, many other companies have pledged to do the same. All of these net zero pledges will require $275 trillion of investments by 2050. With this, growth in global renewable energy will require 3 x the energy sources to meet demand and support the grid load. We've already talked about battery electric power, and this alone will increase the global lithium demand by 5 x within the next eight years. With the drive towards more sustainable energy production, both wind and solar on the next slide will play an increasing role in the production of electricity. Parker technologies are already in use today on brake and actuation systems as well as blade positioning. The anticipated growth in both onshore and offshore wind farms is a tremendous opportunity for Parker clean technologies that you see on the right side of this page. Solar power is forecast to become the largest source of renewable energy, and solar energy production is anticipated to surpass wind by the year 2040. This is a very attractive market for Parker. In addition to the adhesives and motion and control used in the production of solar panel, Parker actuation can allow a panel to track the sun, and when the panel can track the sun, it yields a 40% increase in energy produced. Earlier, I mentioned that there would be additional energy sources required to support the grid. Hydrogen is one of those energy sources, and this slide speaks to the infrastructure that will be needed for hydrogen production, storage, and dispensing. This is a great example of existing technologies being applied at a higher level. In addition, we have teams dedicated within the operating groups developing technology roadmaps and certification plans that will support the growing hydrogen economy. We have joined the Hydrogen Council, and we are currently engaged with several customers on infrastructure technology products. For our most obvious technology that supports a cleaner world, Parker Filtration. We have the broadest portfolio of filtration solutions in the industry, from engine and mobile to hydraulics, industrial air, and process and water. When we view our filtration clean solutions, we think of them in three segments. When you think of Parker Filtration, the most obvious segment is on and off-road transportation. We are engaged on product and technology development opportunities in hydrogen combustion engines, fuel cell, electric machines, and alternative fuels, and even battery electric vehicles where the intake air has to be protected. Lesser known perhaps, is our ability to leverage our existing process and gas filtration separation capabilities into clean energy applications associated with the infrastructure that will be needed. Then our final segment is green industrial, where we leverage our filtration capabilities to help our customers become more green and efficient. The example on the top is a hydrogen generation system that helps in the production of synthetic diamonds, which greatly reduces and sometimes eliminates the need to mine for the diamonds. At the bottom of the page is a very exciting project in our water filtration business, lithium extraction. As mentioned earlier, as EV production increases, the demand for lithium batteries will grow. We have modified our reverse osmosis solutions to retain the lithium in the water, and therefore recycle and send back into the ground. If you look at the picture on the left side of the page, this is a picture of traditional lithium extraction. Each one of these rectangles is the size of about a football field, and it's considered an evaporation pond. These are not efficient. They deplete groundwater. They're environmentally unfriendly, and quite frankly, an eyesore. Parker's proprietary and modular system, the size of a shipping container, rapidly extracts lithium in days versus up to a year and returns filtered water to the environment. In summary, clean technologies impacting our end markets in power generation, renewable energy, HVAC, life science, and infrastructure are the future. We have the clean technology that enables our customers to achieve their sustainability goals and contribute to a better tomorrow. I'd now like to introduce Todd Leombruno, Executive Vice President and Chief Financial Officer. Thank you, Jenny. Hello, everyone. As Jenny said, I'm Todd Leombruno, Chief Financial Officer for Parker-Hannifin. I couldn't be more proud of our global team, and I couldn't be more excited about being able to talk to you today about our financial performance. We are very proud of our recent history, and we're very excited for our future. I wanna leave you with just a few key messages with my time that I have with you today. All of the things that Tom, Lee, and Jenny talked about today have really driven stronger performance across the company and they've created higher expectations internally within the company. We have worked extremely hard to build a track record of proven EPS, segment operating, and EBITDA margin expansion. The acquisitions that we've talked about truly have been transformational. Not only have they made our portfolio longer in cycle, they've been accretive to growth, they've been accretive to margins, and they've been accretive to cash flow. In addition, they have created significant synergy capture opportunities that have been meaningful for our transformation. This improved performance has been added to our long history of being able to generate cash across all business cycles, and we're very proud of that. As you saw Lee and Jenny talk about the secular trends, we're very well positioned for growth as we look out to our FY 2027 targets. We have a strong balance sheet. We've put that balance sheet to work. We've been very active with our capital deployment strategy, and I'll share some of those actions with you today. I feel very confident in those targets that Tom shared, that we have the right strategy, the right plan, and the right team to achieve those. What I'm most excited about is those targets will help us compound EPS and deliver top quartile performance for our shareholders. How do we make that happen? We have a very simple value creation formula that has allowed us to generate a five-year CAGR of 17% EPS growth across that time period. It starts with our attention towards organic growth, and you heard Tom talk about us re-energizing that and driving that even more forward. We are lucky that we serve a number of diverse markets, and we have benefits coming from all of the secular trends that we talked about today. The Win Strategy has been our margin-driving tool. It has been meaningful, and it is early days in Win Strategy 3.0, and we feel very confident that that's gonna help us propel to that 25% segment operating margin target. Our acquisitions have been fantastic. We couldn't be happier with the financial performance that those businesses have added to us. They have made us longer cycle. They've been accretive to growth. They've been accretive to margins. They've been accretive to cash flow, and they've brought a significant amount of talent into our company. I've talked a little bit about our long history of cash flow. I'll spend some more time on that today. We see that further expanding into the future, and we've been very disciplined about returning capital to our shareholders. All of that is really the formula of how we create value at Parker-Hannifin, and you ask, how have we done? If you look at the last five years, we have been able to sizably outpace the S&P 500 industrial peers that we have, and we've generated a total shareholder return of 149%. We're very proud of that number. When it goes to achieving targets, you know, if you followed us for a long time, you know that we had a long-standing over 15-year target of 15% segment operating margins. We raised that target in FY 2016, 200 basis points to 17%. Not only did we raise that target, but we achieved that target in FY 2019, 1 year earlier than we had originally planned. What we did, just like we do with everything else, our continuous improvement culture has driven us to increase that target another 200 basis points to 17%. We did that in FY 2019 with a target of FY 2023 to achieve 19%. After the LORD and CLARCOR acquisitions, we changed our methodology of reporting segment operating margins, and we excluded deal-related amortization. That simply moved that 2019 target to 2021, and we achieved that at the end of our FY 2021. What we're looking at now is we're looking at increasing our target 400 basis points. This is the largest increase in the history of our company, and we're very confident in achieving that. That will soundly put us into the top quartile of our proxy peer group. I'll share a little bit of how we're gonna get there throughout my time with you. If you look at how we plan to expand margins, Tom talked a little bit about this. First of all, our segment operating margin on an adjusted basis target is 25%. Our adjusted EBITDA target on an adjusted basis is also 25%. You could see both of those expanding 400 basis points from our previous target and significantly from where our 2022 guide is as it sits today. You heard a lot of talk about the Win Strategy. It is real. It is early days. Tom mentioned Kaizen. We mentioned international distribution growth. We mentioned all the changes to our innovation process. Our PVI growing as a larger percent of our sales, Kaizen, all of our digital initiatives, these are all important drivers that are gonna help us drive the company to that 25% target. If you look back over the last six years, we've had two recessions and a pandemic. Growth has been difficult. I know we are in uncertain times today, but we feel confident that if you look at the next six years, our opportunities for growth are very, very, very strong. We have benchmark incrementals, and we feel 30% incrementals is the best-in-class performance, and we strive across the globe, all of our team members strive to achieve that 30% target. It is not easy. It is difficult, in fact, and our team members work day in and day out to achieve that 30% target. We have baked that into our estimates going forward. Tom mentioned some capital expenditures. We see a slight increase in investment when it comes to our CapEx spend. We have a target of 2%. That's about 40 basis points higher than where we have been running historically. We see opportunities there with robotics, with automation, with digital to drive productivity that will help offset all of these inflationary pressures that we are all experiencing as we sit today. When you look at acquisition synergies, specifically with the Meggitt transaction, we've already announced this, but we plan to achieve $300 million of synergy savings by the third year of that transaction, and we have included that in our target. We know that this is a challenging target. Four hundred basis points improvement is not easy, but I know that the team is up for it, and we feel confident in achieving these numbers. Let's look at what that does to EPS. Tom made a slight mention of this. Our guide today for FY 2022 is a little over $18. If you model us out to FY 2027, we see that number growing to over $30 per share. That's a 10% CAGR over the time period. If you're wondering how we get there's just a few assumptions that we'd like to share with you on how we built our model. Number one, we are including Meggitt in the transaction, and that is assuming a calendar year 2022 Q3 close. Tom mentioned our target of 4%-6% organic growth. We have accounted for that on the base business. I mentioned earlier the 30% incremental targets. We are forecasting numbers in that range as we go out over the next five years. We're not baking in anything with incremental tax reform. We have kept our tax rate at 23%. As Tom mentioned, one of our strategies on capital deployment is to continue our 10b5-1 program, so we have kept shares relatively constant. This is just a powerful number. We are very excited about it. 10% CAGR over the next five-year period gets us to $30 EPS. That performance is compelling from an earnings standpoint, but it's also compelling from a cash flow generation standpoint. We've had a long history, 20+ years of free cash flow conversion greater than 100%. You heard Tom mention we are changing our target to free cash flow margin. Our target in FY 2027 is 16% of sales. We wanted a more challenging target. We wanted a target that clearly put us in the top quartile of our peer group, and 16% is that target. If you look just over time period here, you can see how powerful the expansion in the company has been. Not just our growth, but our margin expansion has generated a significant amount of cash. If you look at the period FY 2016 through FY 2021, we generated a little over $9 billion of cash. As we look into the future from FY 2022 guide through FY 2027, we see that number almost doubling to $17 billion worth of cash. If you look at it on an annual basis, which the graph shows, you can see cash flow from operations is almost a 3 x improvement from where we were in FY 2016. A lot of great work by the team, a lot of good work on the portfolio, and a lot of cash to deploy. If you're curious how we deployed that cash over that time period, in the last six years, we've deployed approximately $16 billion of cash. That has been heavily weighted towards acquisitions, approximately $10 billion on the CLARCOR, LORD, and Exotic Metals Forming acquisitions. You see how powerful that was for the company, what it did for our margin performance, what it did for our growth, and what it did for our cash flow performance. If you look at those other buckets, those are all the buckets that Tom mentioned. We are committed to our dividend, and I'll talk a little bit more about that. We allocated about $2.5 billion of dividends over that time period. Our capital expenditures, $1.2 billion worth of capital, and then our share repurchases are $2.2 billion. That share repurchase is split almost perfectly evenly between the 10b5-1 program and some discretionary purchases over that time period. Let's take a look at all of these components just individually. When you look at dividends, we are very proud of our 65-year history of increasing our annual dividends paid. There are only a few companies in the S&P 500 that can say that is their record, and we are dedicated to it, and we're committed to growing that record into the future. Our target payout ratio, we've talked about this, is between 30%-35% of our five-year average of net income. If you look at our last 12 months, we are squarely in that target at a little over 30%, with the $4.12 paid. If you look back to FY 2016 to where we see the dividend per share amount going, you can see it's greater than a 3 x improvement going from $2.52 a share to a little over $8 per share. That record will continue in this time period. If we go to the next bucket, capital expenditures. This is really something that we are very positive about. This will help us support growth and productivity across the business. We have a 2% target, which we feel is the right target for Parker-Hannifin. We've worked on this for years. It's part of our lean system and our Win Strategy. That is, like I mentioned before, about 40 basis points higher than where we have averaged over the last five years. It's really focused on things around safety, productivity, automation, robotics, and converting to Industry 4.0. If you look at the dollars, I just wanna call out the change in pure dollar investment. Again, if you go back to FY 2016, it's greater than a 3x improvement with a little over $450 million invested in capital expenditures. As we go to the next leg, these acquisitions, right? We could not be happier with the way these acquisitions have performed. They have changed the company. Tom mentioned about that, how it made us a little bit more longer cycle. It really has been accretive to growth, it's been accretive to margins, and it's been accretive to cash flow. If you look at the synergized deal multiples that we call out there, after synergies, those are extremely attractive. You know, we have a high say-do ratio on achieving these synergies. If I start with CLARCOR, we announced $140 million of synergies at date of close, and we actually achieved $160 million of cost synergies by the end of year three. The CLARCOR business is operating consistently in the mid-25% EBITDA margins. LORD, similar story. We announced $125 million of synergies. We achieved that one year early, just after two years after close. EBITDA margins here are running in the high 20s%. Exotic Metals Forming, what a wonderful acquisition this has been. Not a lot of synergies because it's a standalone unit within our company, but we couldn't be prouder with the way they're performing, especially in light of the commercial aerospace market decline. They did achieve their synergies, and they are accretive to the company with EBITDA margins in the mid-20s% as well. Meggitt we've talked about recently. I know we haven't been able to talk too much about this, but you could see we have a similar synergized EBITDA multiple. The adjusted EBITDA margins are the highest of this group. We've announced $300 million in synergies by the end of year three, and we are excited to welcome Meggitt team members to Parker-Hannifin. This has been a big change. This has been a big part of our margin improvement story, and we're very happy with these transactions. Not only are we happy with those transactions, we're very proud of the way that we've been able to pay for these transactions. We've been very disciplined with our deleveraging strategy. This chart is a little bit busy, so I'll spend some time orientating you to it. This is our gross debt to EBITDA from FY 2016 through our FY 2022 estimate. The blue lines are actual year-end numbers, or forecast in the case of FY 2022, and the yellow bars are the gross debt to EBITDA ratios at the time of close. You can see we stretched a bit when we did CLARCOR, but we very rapidly reduced those ratios as we went throughout the preceding months. In CLARCOR specifically, we reduced $1.7 billion of this debt in the 24 months after the close. If you look at after the LORD and Exotic acquisitions, you can see how our cash flow capacity has expanded, and we paid down $3.4 billion of debt in 20 months. We paid down more debt in a shorter period of time, so we're very proud of that. Our target overall is to be around 2%. We are committed to that. With these acquisitions, we knew that they were going to be so powerful, we thought we'd stretch ourselves and we know we have the capacity to pay this down, and we're very committed to those debt rating levels. When you look at our debt maturity profile, it is very attractive. We have a great mix of short, medium, and long-term debt that we have ample cash flow to service. Our current ratings are Baa1 BBB+, and we are committed to maintaining a strong investment-grade rating. When you look at our weighted average interest rates and the weighted average maturity, these things are very manageable, very attractive. Just one thing I'll note, the yellow bar on this page, the $1.9 billion, is all related to prefunding of the Meggitt transaction. Without the Meggitt transaction, that bar would not be there. We feel very good about our plan, and we're looking forward to the future and moving forward with this. If you look into the future, what makes it exciting for me is, of course, we've announced the Meggitt transaction. We've allocated roughly $10 billion of capital to acquire Meggitt. I talked about our dividend strategy, our capital expenditure plan, and our share repurchases. We have capacity over the next six years to deploy roughly $30 billion of capital. If you look at those buckets, we have between $5 billion and $10 billion of additional capacity that we can deploy in a way that makes the best choice for our shareholders. It's impressive. In the first six years, we deployed $16 billion of capital. We are now moving that to as much as $30 billion of capital. We're very happy about that. Tom shared these targets. We feel that these are the right targets for the company. These targets will compound our EPS growth. They will put us squarely in the top quartile of our peer group, and we are committed to them. I know we have the right team and the right strategy to achieve these. With that, I'll just leave you on the same messages that I started with. We are gonna build on this track record of expanding EPS operating and segment operating margins. We are going to deploy our acquisition, integration, and synergy capture model to welcome Meggitt into the company. We are gonna significantly expand our cash flow generation. We are gonna grow better than we ever have in the past, and we're gonna continue to be active with our capital deployment strategy. $30 billion of capital deployed, $30 billion of EPS. The future looks promising for Parker Hannifin. With that, I'm gonna turn it back over to Tom. Tom's gonna talk about our ESG initiatives and give some summary comments. Thank you. Thank you, Todd, and it's great to be back with you. Hopefully, you can get a sense of why we are so excited about the promising future. Really compelling different Parker with a really bright future. I'm gonna give you some wrap-up comments and then also talk about ESG. I'm right between you and a short break before we get to Q&A. I'll come back to the breadth of technologies, eight motion control technologies, the interconnected relationship and the value proposition of customers, that 2/3 of the revenue piece, and very aligned to the clean technologies and growing 2/3 of our portfolio. Helping our customers, profitability, productivity, and sustainability. We talked a lot about these secular trends, very exciting. You saw the details that we gave you, more content than we typically do. Hopefully, you liked that insight. These drivers, the five buckets that I took you through earlier, that 4%-6% between the business system changes we're making, the CapEx investments, the channel restock, the acquisitions, and the secular growth, feel very good about that 4%-6% range, which will be a step change in what we've done historically from organic growth. I want to move to ESG. ESG very much for us is a business strategy. It's not some side strategy. It's very important to us. It's a part of the total fabric of the company. Sits under our purpose. This is a big part of how we help society, how we create that better tomorrow. I'm gonna take you briefly through a few comments on the E, the S, and the G part of it. Under the E part, in particular, looking at two things, climate-related ratings that we've had and ESG-related ratings. This is an outside perspective on what people think we're doing. This is pretty good recognition. We recognize that we're gonna have to keep working this, and we'll never be done. This is other people looking at what we've done to date and recognizing that Parker is doing the right kind of things for the climate and total ESG responsibility. If I go to what our vision is on climate, and we announced this last summer, the first row that you see there is our Scope 1 and Scope 2 goals, the direct and indirect emissions that we control. We want a 50% reduction by 2023, which, by the way, we did 50% reduction in the last 10 years, so it's not something we are foreign to, and then get to carbon neutral by 2040. Scope 3 is our expectations for our suppliers, and we have targets for them as well, and they're going to contribute. I think more importantly, what we can do to help society, and obviously, we're gonna do our part with our own factories and our own suppliers, is what we can do to help our customers. So our customers' Scope 3 is where Parker-Hannifin plays, and we will be one of their best suppliers when it comes to helping them contribute to their sustainable journey. Moving to the S piece. This is really important. People care about this deeply. It's why people wanna work for companies that we're doing more than just generating earnings and cash flow, that we're giving back to the society. Now, this is very much in line with our strategy as far as how we engage people, how do we attract people, how to retain people. People wanna be part of a company that has a deep social fabric. Our areas of focus are there in the middle. STEM education, we are an engineering-oriented company, so that makes sense for us. The needs of the community, we're in hundreds and hundreds of places around the world, so how we help those local communities. Sustainability and diversity and inclusion. There's a number of key programs that go on to things you do with your time, with treasure, and with the talent we have within the company. I wanna highlight one, disaster relief. This is very timely given what's going on with the war in Ukraine. Just since the war started, we started a disaster relief fundraiser that was matched dollar for dollar by the Parker Foundation. In this relatively short period of time, we've raised $200,000 to give to the International Red Cross to help for humanitarian needs, food, water, hospital, medical needs, et cetera. As all of us have been watching on TV, and the horror that we're seeing visually, this is really important, and we had donations from over 20 countries around the world. Shows you the generosity of our people. Before I get into diversity and inclusion, which sits under the social part, we are doing this webcast on International Women's Day. I wanna give recognition to all the great women that work at Parker, all the great women in our personal lives, the women that have helped lead the company in the past, and the women that are leading the company today, and the important contributions that they've given to us, and we thank them for their leadership, and we obviously wanna continue to have that become a bigger part of the company. Our vision here on D&I is pretty straightforward. It's a difficult topic, difficult to solve, but the vision's not that hard. The vision is we wanna be a company that's reflective of society, and we're gonna use census data, we're gonna use manufacturing peer data to tell us how we're doing. We wanna pay people fairly, so pay equity analysis, which we've done a great job on that. We're right on top of that. We're gonna do that every year. We wanna know how our people feel. There's gonna be two vehicles for that. The engagement survey, which we do every year. We'll get feedback on engagement and empowerment, but there'll be a diversity and inclusion subset of that, eight questions in particular that will give you feedback. If you're a supervisor at Parker, and you have more than five people that work for you will get feedback on engagement, empowerment, and diversity and inclusion, so real-time feedback on how you're doing as a leader and your opportunities to be better. Remember how I started this one around engaging people. It's all around that structure around feeling like you belong, that you matter, that you make a difference. Being great at D&I is gonna be a key enabler for us to being a great company. Now on the governance side, we strengthened our board. Board composition, board refreshment is a big responsibility for myself, for the governance committee, for our lead director, and we take this very seriously. You can see the most recent additions that we've made over the last number of years, adding Jill, Lance, Bill, and Laura, terrific directors that have really contributed to the board composition. If you look at it in aggregate from an independent standpoint, 10 / 12 directors are independent. From a tenure standpoint, we're right around where the S&P 500 average is at 6.8 years. You also look, it's a nice mix. 0-5 years, 6-10 years, 11-17 years, a nice mix of time on the board. When you look at diversity, whether you look at it by gender, race, or ethnicity, we have seven of the 12 directors that are diverse. The success of the company has been a big part because of the success of our directors and how well they function as a team, their contributions and their guidance to the management team. They're equally part of the success of the company. I wanna close with the key messages. Again, a highly engaged global team. They're the heart of the story, our culture, our values, our purpose. That's what's driving the company. 3.0 being a strategic powerhouse behind our future. You saw the portfolio transformations, that $5 billion-$10 billion for Aerospace, Filtration, Engineered Materials, dramatically different portfolio. The secular trends, and when you add them all up between longer secular and aftermarket, 85% of the company will be tied to that. Definitely not a PMI company. five-year targets that are compelling and will continue to get better, and we're positioned with our clean technologies to drive a more sustainable world. Hopefully by now you've figured this is a different Parker, a better, more resilient, transformed Parker with a very promising future, and a company that should be valued based on what we've become and where we're going, not the company we used to be. With that, I'm gonna say thank you for your attention and your time. We're gonna take about a 10-minute break. We might go to 15 minutes. Let's plan on 15 for you to come back. We'll start with a video, and then we'll go into Q&A. This starts the 15-minute break. Thank you. I grew up in India in a long line of rice farmers. The first steering wheel that I held was a tractor steering wheel, so I got to see how hard farming was. I found myself in America, got a master's in mechanical engineering, and with all of that knowledge, that led to our first electric tractor back in 2015, with the goal of making our food ecosystem sustainable. The key to Monarch's technology is what we call our single motor architecture. Thanks to Parker's GVM motor, that single motor powers our whole tractor. The GVM is a global vehicle motor, which was designed from the outset to be a highly efficient power dense solution for electrification applications. GVM is able to drive the tractor forward, but it's also able to drive a pump, which provides hydraulic power for some of the implements that are attached to the tractor. The combination of electrified motors and battery systems that are driving motors, driving pumps, is actually a renaissance for hydraulics being re-envisioned in a green way. The GVM motor and the electronic motor control solutions that Parker's producing are being used in a number of these different applications in electrified buses, construction vehicles, refuse trucks, electric utility vehicles. We're part of a solution that has really got an eye to the future, and there's a great deal of innovation that comes from that focus. Farmers recognize Parker. It provides a certain amount of credibility, certain amount of comfort to the farmer knowing that this is a technology that is robust, that is proven, and that is going to be supported long term. The fantastic thing about Parker is, while they're extremely large organization, they were also very supportive of a startup that only had a few people at that point. Having a partner that has seen us grow over the last three years and having that strong relationships on the technical side and business side are key to success. Out in the fields, on the roads, and even in the skies above, Parker's clean technologies are at work shaping the world around us. Innovation should always lead to impact, and if you look closely, you'll find that Parker's impact is everywhere. If you've driven one of the millions of electric vehicles on the road today, you've experienced it. From adhesives to reduce weight to thermal gels that extend battery range, we make electric vehicles safer and more efficient. With electric vehicles generating less than half the emissions of a gas-powered car or truck, each time an electric vehicle rolls off the lot, our future gets a little brighter. If you've marveled at modern aircraft and the rapid pace of innovation in air travel, you have a sense of what Parker makes possible. There are nearly 10,000 aircraft in the air at any given moment. From nose to tail, our highly efficient solutions are on board, helping to reduce the environmental impact of flight. Our engine fuel nozzles alone improve fuel efficiency by an average of 90 MPG per passenger, 66% less fuel than a person would use if they chose to drive instead of fly. If you've ever flown a kite on a breezy day, then you can imagine the powerful potential of wind energy on a global scale. It takes a single wind turbine less than two hours to capture enough clean electricity to power an average household for an entire month. Following unprecedented growth, the total capacity of all wind farms is now enough to meet 7% of global energy demand. From critical gearbox sensors to hydraulics that control the massive spinning blades, Parker technologies are not only accelerating the adoption of wind energy, but helping to ensure that turbines can address the world's growing need for energy with renewable and reliable power. Put simply, our solutions make the world cleaner, smarter, and safer. Do our actions. Since 2010, we have reduced energy intensity within our own operations by more than 40% and greenhouse gas intensity by 50%. As we look ahead, we're holding ourselves accountable with a commitment to achieve carbon neutrality by 2040, and we'll continue doing our part to protect the environment. Across our global portfolio of nearly 1 million products and systems, 2/3 are solutions that enable electrification, lightweighting, the adoption of cleaner and more efficient energy sources, and other innovations with a positive environmental impact. Our customers rely on Parker technologies to reduce their own resource consumption and carbon emissions. Every day, our team members have a role to play in helping to improve the lives of people everywhere. Monarch Tractor, what we are trying to do is to give tools to farmers that is all electric, driver optional, whether they're running multiple thousands of acres or running a 10-acre farm. We start this virtuous cycle, which is gonna make the farms more profitable, which is gonna make the consumer happier. Both of those are gonna lead to more sustainable practices out on the farm, better soil, and better planet health. Parker, enabling engineering breakthroughs that lead to a better tomorrow. Welcome back. We hope that you have enjoyed the presentations thus far today and the video as well, which really showcases just a few powerful examples of our engineering breakthroughs focused specifically on clean technology innovation and the real solutions that are being generated for our customers. It's time now to shift over to Q&A with Tom, Lee, Jenny, and Todd. We have two dimensions that are organized for today. We have the sell-side analysts that are in queue for and will join us via Zoom. We also have a chat feature this year and invite you, if you have a question, please submit that during the chat. We're gonna do our best to get through everyone's questions. Anne is online to facilitate the analyst queue. Anne, let me toss to you, and let's get started with our first question. For those of you who will be asking questions in the interactive Zoom meeting, you should have the webcast turned off. When called upon, you can unmute yourself and proceed with your question. The first question is from Jamie Cook with Credit Suisse, who will be followed by Joe Ritchie from Goldman Sachs. Jamie Cook, you may proceed. Hi, good morning, and thank you for the opportunity today. I guess, you know, my first question, understanding the 4%-6% top line growth and secular growth tailwinds that you guys should benefit from, what's sort of embedded in your outlook in terms of pricing? Where are you sort of in the pricing journey as you move towards sort of some of these higher-end, higher value add product offerings? Jamie, it's Tom. I'll start. My colleagues can chime in if they want. We don't typically disclose what pricing would be in our top line number. You've heard us talk about our strategy on the pricing side. It's to maintain margin neutral position. Now, clearly, as we are more innovative going forward in these secular markets, they'll be more attractive, probably from a margin standpoint. Their growth rates and everything else are built into that 4%-6%, but we're not gonna pop out X amount of that as pricing, just like we don't disclose that on a current basis as well. I guess I'm just trying to find out more so where are you in the journey versus what's embedded in the 4%-6%. Okay. Like, is there a lot more opportunity, I guess, was where more of my question was coming from. Sorry. Okay. On the opportunity side, I would tell you traditionally, we've looked at pricing tied to material, and that's what we've been doing. You know, as material goes up, we've been looking at pricing, and we would be using all of our productivity to offset any kind of wages or logistics. What we've seen in the last, say, 12 months is that inflation between material, logistics, and wages has been too high to try to cover with normal pricing and productivity. Obviously, we're going to keep driving productivity, but we've had to look at inflation more holistically, looking at all the inflation that's influenced our pricing strategies the last few months. That will continue. We'll continue to look at that. We'll continue to drive productivity. I think you're familiar, Jamie, with our process around selling price index and purchase price index division by division. We do a good job of keeping track of that. I would say the new wrinkle on pricing is pricing more to the value that we create. As we launch more new products, disclosure is at the PVI number. A big part of the pricing for that, since they should not be benchmarked against an existing price, is what price are we creating for our customers. Now, yes, we would like to share in that value creation, so our customers will get part of that value, but that should change the pricing. It's also what's driving the margins for the new products versus existing. Okay. I guess just my follow-up question. You had the slide in there, the 11% market share with the longer-term goal of getting to the 20%, which I feel like has been out there for as long as I covered you guys. So, you know, what's you know, why hasn't the market share progressed, I guess, at a greater pace? Where do we think market share could sort of be as we approach the 2027 targets? Yeah. You're right, Jamie. The market share numbers stood at 20%. Part of what's changed over time is we've acquired companies. Our addressable market has grown over this period of time. It used to be, if you remember years ago, when we're talking about this, it was $120 billion, now it's $135 billion, and that will continue to grow as we add things as well. The market share is a good target, but the 4%-6% is what we're trying to drive. As we drive that, yes, we'll move up the market share curve, as we continue to grow the 4%-6%. Part of what'll help us there, the 4%-6% would be about a 2x improvement versus where we historically. If you look at prior five-year periods of time, kind of historically for us, our organic growth has been in that 2%-3% range. With the things we talked about in our presentation, you move that to 4%-6%, some of that is gonna show up in market share. Some of it also is hard. The share gain, as we continue to buy companies and look at the total space that we're in, it's okay to keep adding to the motion control space, as long as we keep growing at a 4%-6% rate. Okay. Thank you. Joe Ritchie, you may proceed. Thanks, good morning, everybody. Appreciate all the details today. My first question, if you can hear me okay, is really just around framing the organic growth, the 4%-6%. It's interesting, Tom, historically, you guys have indexed your growth rates to industrial production. I don't think I've ever seen you guys actually put out a target growth rate. I'm curious, you know, what kinda gave you the comfort to throw out a 4%-6% range? Then secondly, you know, just there wasn't a lot of discussion, obviously, around the current environment, but I'm just curious, you know, you guys sounded very, very bullish around the CapEx opportunity. Has any of the kind of external events impacted your thoughts to any degree? It's a great question, Joe. You know, we thought a lot about this, but the company is so different now and less aligned to PMI and global industrial production index that it made sense to put a growth target that was not tied to that. If you look at what we've done with the portfolio, doubling Aerospace, Filtration, Engineered Materials over this period of time, the discussion I had around the longer secular trends and what they're gonna do for us, it felt more and more as we're becoming less tied to a PMI type of index, and that we could go with a target that would stand out as being, hey, we wanna go after this in a more aggressive fashion. Again, you compare to where we've been, it's quite a step change. It'd be a combination, the portfolio changes we made over the last number of years, and the fact that that portion is so significantly bigger, that gave us confidence. The secular trends gave us confidence. To your point on the CapEx side, I think it's early days, and I made this comment before to some of the conferences I've been in. You know, CapEx, when we were having this whole discussion about reshoring over the last number of years, it was tied to the Trump tariffs and all that. With the Trump tariffs, you could still get material. You could still get product. You just paid more for it. What's happening today is supply chains are so disrupted, you can't get the things that you'd like to get. I think other CEOs like myself, other leadership teams like the ones you see here, are making decisions around we need to change that risk profile. We need to develop more suppliers. That's gonna require a domino effect, just like what Lee was talking about with Intel's investment around that particular investment, also the sub-tier investments around it. Then the experience we're all having with labor availability and the fact that you're gonna need to add to machine automation. As I mentioned in my discussion, and Lee highlighted in his, we are the go-to source for machine automation. You've got people that play at the total factor enterprise, but a factory can't be totally automated if the machines still are labor-intensive. We'll be a big part of that. It's really rolling up that one slide I had with the five buckets that we felt that we're uniquely different than we were back in 2015. That growth metric that made sense in 2015 doesn't make sense anymore. That's super helpful, Tom. I guess maybe my one follow-up, maybe it is for Lee. It's a good segue into that discussion around the complementary investments around, you know, what you're hearing in Ohio and the semi fab investment that's occurring there. Lee, is there a way to try to contextualize, you know, either from a dollar standpoint or from a content standpoint, what the opportunity is from the investment that is occurring, either in Ohio or additional investments in the U.S. on the semi side? You know, Joe, I don't think I can off the cuff right now. I can just tell you there's a multiplying effect taking place. It was an incredibly interesting conversation that I was having with this leadership team here in Ohio about what was happening there. It was probably the closest real example on a larger scale of what I've kinda witnessed. I'm not in a position to really put a number on that, but I can tell you it's greater than the $1.3 trillion that we put down there on global investment in those two areas. Great. Thank you all. Mm-hmm. The next question will be from Mig Dobre, followed by Nigel Coe. Mig, you may proceed. All right. Good morning. Thank you for taking the question. I appreciate all the detail around the growth trajectory here. Tom, I guess if history teaches us anything is that nothing is linear when it comes to growth and how the business progresses. I guess my question is how should we all think about your cost structure in any potential downturn here? How do you plan to manage the business? What are normal decremental margins? I ask this recognizing that what we have seen in the COVID downturn might not necessarily serve as the proper blueprint on anything that might be coming down the line. Well, Mig, I'll start, but I'm gonna ask Jenny to chime in because when you think about what we've done historically, and this is we used to get this question a lot. How will Parker perform in a down cycle? We remember years ago, we used to show the cycle that we used to have a 60% decremental and a 40% decremental, and then we've been at 30%. You see some of these downturns, we actually grew margins during the pandemic. I think still holding a 30% decremental is still very relevant target. I would hope over time we've proven to people that we can do that. We've done this in a variety of environments, financial crises, pandemics, industrial recessions. We'll do it if there's a war-induced recession. I'll let Jenny comment because she's running all the factories as to what we typically do when we're in there. I guess the comment I would make before I hand it off is you're preparing for your next recession by the strength of your operating team today. All the things we've been doing to make ourselves stronger, more nimble, is what sets us up for a better downturn if and when it happens. Jenny, if you wanna add on. Thanks, Tom. Well, I would say that the approach we take, and we took this at the beginning of COVID, was focus on what we can control. What we can control is how we use the Win Strategy in our operations. No matter what may come at us or what new challenge we may face, that first pillar of the Win Strategy, some of the key themes that Tom talked about earlier this morning around engaging our people, having a strong high-performance team culture, Kaizen just continues to drive out costs. It just ensures that not only are we ready, but we can continue to perform. Mig, if I would take you back. Okay. You probably have a follow-up. I would take you back. That one slide I showed on simplification, we have 1/3 less reporting units. We've done a lot of infrastructure changes, footprint, SG&A, et cetera, to put ourselves in a lot better position for whatever comes at us. Yeah. I mean, that's kind of what I was trying to get at. I mean, is there any meat left on the bone, if you would, in terms of restructuring or changes that you guys normally make to the cost structure in a downturn? Or is most of this at this point just kind of baked into the pie? It sounds to me like you still have flexibility if the need arises. Yep. No, we will, we'll still do what we need to do to flex to the environment that we're in. Okay. You know, Tom, if I could add just one more comment to that question. We've become much more scientific with our forecasting. We have AI tools now in place that give us a better look into the future. Maybe in the past, sometimes, Lee says this all the time, our teams were too optimistic on the downturn and too pessimistic on the upturn. I think that's helped our incremental performance, these new tools. Yep. Understood. My follow-up is on the product vitality index that you disclosed, and I hope I'm getting these figures correct. You know, you cited 20% vitality. In 2015, I think it was only 9%. I guess I'm curious as to how you got to 20%. How much did aerospace contribute to that given the investment that you've made over the past decade? As you look at your fiscal 2027 target of 25%, I'm curious what needs to happen with R&D here in order for you to deliver that. Because I think R&D is still running below 2% of sales. Thank you. Yeah. Part of what's changed is that whole Winovation process, that stage gate process, 'cause that was rolled out a little bit before FY 2015, but that's helped us a lot. The new product blueprinting that I just talked about, where we just had better quality of ideas coming into the funnel, things that had more commercial value. You could have a great funnel, but nobody wants to buy what comes out of the funnel. It, you know, doesn't really matter. That was a big part of the change, and establishing a metric on it and tracking it. We've had a lot of growth. Pretty much every group, every division's contributed. Yes, aerospace was a big part of that, but if I look at about every group, every group showed significant improvement, at least 100 basis points or better over that time period. It was really kind of all technologies, contributing. Now, regarding the R&D levels, you know, what we found with innovation, yes, you need to invest enough, but it's not really tied purely to innovation, to investment dollars. It's more tied to having a process. That's the Winovation process, having a structure where you have engineers dedicated to certain areas, you know, areas you wanna target or, design engineers are dedicated, not trying to do, sustaining engineering as well, doing just new product development engineering. The structure's important. Having the talent to put in there, and then having stronger application engineers to where we better understand the end users and that domain expertise that we wanna bring in to help with the development process. You do those things well, which is part of why you see better numbers. You need enough dollars, but I guess the punchline for Mig will be, you will not see a step change in R&D investment. It'll be basically the same. The only thing that would be unique is if we see something change around aerospace. But the thing with aerospace going forward, you won't see the same super cycle that we had before. I mean, that super cycle that we started basically 15 years ago is unique in, you know, my career. What you're gonna see is more targeted things like the next gen helicopter that'll be much more manageable, easier to digest from an R&D standpoint. Great. Appreciate the detail. Next question is from Joe O'Dea, Wells Fargo. Joe, you may proceed. Hi, good morning. First question is just on the margin expansion side of things, and you give a number of different buckets that will contribute to margin expansion over the next several years. Can you give any context around what are the largest contributors to that if we think about some of the secular trends, think about Simple by Design, digital, or we think about the volume side or the revenue mix side? You know, ultimately trying to understand how much of the margin expansion do you feel like is in your control versus how much of it is more macro dependent? Joe, it's Tom. I'll start, and again, my colleagues can chime in. Most of it's in our control. Obviously, we might need some volume. It's pretty hard to do it in a static environment, so we'll assume you have some nominal volume, but most of it's in our control. It's all those things that I mentioned, and I wasn't trying to be clever by saying everything on the Win Strategy drives margin. It's a fact. Everything on that page drives margin enhancement. Yes, some of the newer ones we introduced, like Kaizen, like Zero Defects, Digital Leadership, particularly the AI portion of that, international distribution mix, you know, strategic position, I can go on and on, Simple by Design, they all are big contributors. You have a mix of what I would say are long-term continuous improvement things like managing supply chain well, pricing, and lean with a layer of new things that will continue to propel us. I think, hopefully, the confidence here, every time we've rolled out a target, we've hit it. We have no intention of missing this one. I think you can take it to the bank that we will deliver on this. You know, Joe, real quick, I'll just add, you know, we've looked at this very detailed and, you know, we're going out five years, so a lot can change across those five-year periods. But if you look at what we did historically, we had significant margin expansion in an environment that really didn't lend itself towards positive growth. The acquisitions that we have added have been powerful. We have those same intentions for the Meggitt transaction. But, you know, if you had to ask me, I would say volume, I think, is really a powerful driver. I wanted to ask on the strategic positioning that you discussed and rolling that out across kind of division reviews. Can you give any examples of a meeting and kind of coming in and where things were prior to this approach, and then how things changed post the approach and what that did to the overall growth algorithm? I'll start, and I would like Lee and Jenny, 'cause well, all four of us sit in those reviews, but Lee and Jenny happen to run respective businesses, they can comment as well. What was interesting is we would do growth reviews or strategy reviews with the different divisions as the four of us would travel. We would get the Win Strategy, which was good, but we would not get the kind of growth dynamics that we wanted, the kind of depth around the channels you need to be in, what markets are you picking, what products you're developing, and why, and how are you setting yourself up different than the competition. It was a lot on the operational effectiveness side of the equation, which is good because if you don't do quality, cost, delivery, the operational effectiveness right, you don't get to have any kind of meetings with customers. However, we saw a gap there, and that's why we put it on the Win Strategy, and it sent a very loud message. The benefit of the Win Strategy, for those of you that are listening in, it is like the Bible within the company. Everybody has it. Everybody looks at it. Everybody follows it. It's a very impactful document. What happens now, Joe, is we get a much more holistic discussion. We get a discussion around what targets they wanna go after, what products they wanna develop, sub-segmenting their markets deeper. This is a muscle we're developing. This is a muscle that I would say was not the strongest muscle. I would say our muscle was probably stronger on operating-related things, but this is the muscle we're getting much better at. This is why my comment during my presentation, it's gonna drive critical thinking around growth. Some of those meetings go really well, and some of them don't go so well. Almost every one of them, Joe, has a homework assignment on things we gotta do better. This is a constructive discussion. We're not beating people up. It's, it's all of us together working on how to position ourselves to win versus the competition and how we can help our general managers win. You know, the Win Strategy isn't trying to create more work for the GMs. It's trying to help the general managers run their businesses. I'll let the team tag on 'cause they sit through these reviews, and plus, Jenny and Lee are out in the field all the time talking to the businesses. Yeah. I would just echo Tom's comments. You know, the Win Strategy has always been, and when I was a general manager, your guiding strategy for operational excellence. With the addition of strategic positioning, it really drives that entrepreneurial spirit of deciding who you wanna be, but more importantly, who don't you wanna be. The whole goal of segmenting your business into the markets and looking at your products is really to figure out where can you differentiate, where can you add that value and get that higher margin. It's really been a nice addition to the suite of tools that we've built our success on up to this point. Okay, I'll pile on. I'll give you one more. I think the key, Joe, is as we go through these, it's the segmentation of the business. So not all products are created equal, not all products under a certain noun description create the same value to the end customers. So it's teaching them how to peel back the onion and find out where we're winning, and then where we can place some bets to win some more. So a perfect example, I'll take a simple air-driven cylinder. You know, we've got an air-driven cylinder that is the number one cylinder in the world used in aluminum smelters, and it's what they call a crust breaker. So there's a crust that builds up on top of the aluminum as it's being processed. This cylinder the team designed was remarkable and different from everything else. It makes and saves our end customers money, and it's the number one cylinder used in that industry. It's a small industry. Everybody knows that Parker Hannifin is the leader in that. And as they went through this exercise, they positioned themselves to win in that area, and they win today. That's a good example. You know, Joe, I don't wanna be left out, so I'll just say, you know, from my standpoint, it really is the best time we spend each month. You know, at the corporate level and at our segment level and our group levels, we spend a lot of time thinking about longer term forecasts, longer term plans. This really gives a lot of linkage, and it gives a lot of fidelity together when I can sit here and tell you how confident I am about achieving these FY 2027 targets because it's purely linked to all of our operating businesses. It's, you know, we call it strategic positioning. It really is that, and it's been a very powerful tool. Thanks very much. Thanks, Joe. The next question will be from Stephen Volkmann, Jefferies, followed by Julian Mitchell with Barclays. Steve, you may proceed. Great. Hi, guys. Thanks for taking the question. I appreciate it. Maybe a semi-new topic. We didn't talk too much about digital or recurring revenue, and I'm curious if you have any targets in your five-year plan for, you know, recurring revenue that might be, you know, software or SaaS type recurring revenue, as opposed to the recurring revenue you get from your distribution channel. Yeah. Steve, it's Tom. It's a good question. Yes. Our best recurring revenue is what you just said, our distribution channel. The fact that, you know, 1/3 of the company, basically half of the industrial portion of the company, has that recurring revenue. On the digital side, we will continue to look at digital products and recurring revenue tied to that, but it'll be mostly a margin enhancement and a differentiator versus some big new revenue stream. Today it's relatively minor. Our assumption in the future is it will still be, you know, relatively minor. On the digital side, if I look at digital customer experience, that's probably a bigger growth enabler. Digital productivity, bigger margin enabler. Digital products, you know, it's gonna be around fluid conditioning, location logistics of where the products are. We're participating with Airbus on Skywise. Those are some longer term things we're doing to take our technologies and help customers with insightful information. We're not planning on that being a huge part of the 4%-6%. All the other things that I talked about are bigger ingredients. You know, for us, it's making sure we pick the right areas to digitize. We don't need to digitize 800,000 part numbers. We need to digitize the right ones that create the right kind of insights for customers, and that's what we're focusing on. Okay. Great. Just briefly on the capital deployment side. You know, you talked about having $5 billion-$10 billion, I guess, in sort of discretionary capital to deploy, Todd. I noted specifically that you have a much lower forecast for share repurchase in your chart that you showed us relative to the last five years. I'm curious if that's really the message, if you just think there's so much opportunity out there on M&A that you wouldn't do share repurchase. And also related is, do you need to do some digestion of Meggitt for a couple of years, so this capital deployment gets sort of pushed out further? Go ahead, Todd. Yeah. Steve, you know, what we put on that chart was simply what we've committed to for the 10b5-1 program. That's roughly $200 million a year. That's why it shows, I think it's $1.2 billion on the chart. We're not forecasting any additional discretionary purchases. It would be in that bucket that you called out, that $5 billion-$10 billion of additional optionality. You know, our preference is to do acquisitions, but only, you know, the right acquisitions and only when, to your point, we think we can digest them and that they could add to our portfolio and add to our longer cycle business and our higher margin and our higher cash. The intention of that $5 billion-$10 billion bucket was to show you that, as the company gets bigger, as we continue to generate more cash, we've got options on deploying capital. I just wanted to highlight that we weren't done with the Meggitt transaction. We're very clearly focused on that today. You know, we expect that to close in calendar year 2022 or 2023. We've got options on capital going forward as well. Thank you, guys. Good luck. Thank you. The next question is from Julian Mitchell with Barclays. Julian, you may proceed. Thanks. Good morning. Maybe just the first question around the revenue growth outlook. So I was curious, on slide 61, you have those three secular trends aside from Aerospace, you know, digital, electrification, clean tech. You know, maybe help size for us approximately the exposure Parker has to those three, or any sense around, you know, how much of a contributor to that 4%-6% organic growth target they provide. Sort of allied to that, should we think about Aerospace as being at the top end or above that 4%-6% guide for the next few years? Julian, I could start, but we've got Lee and Jenny here to help since they presented those four trends. You know, Aerospace, when I showed you that 2027 sales mix, would be 1/3 of the company. That very specifically tells you that secular trend, how big it is and the impact of the company. Yeah. The hard part with the other ones is they are so much involved in everything else that it's hard to just punch them out separately. That's why we tried to put them into the three buckets: aftermarket, shorter, and longer. To show you that really the impact of the secular trends is on creating a longer cycle dynamic for the company, and that becomes now, you know, roughly half the company, versus where it was before. The shorter cycle part of the company becoming now the smallest piece, where in fact in the past it used to be the biggest part. I think aerospace, you know, is gonna be right in between that 4%-6% range. Obviously, here in the near term, you got commercial aerospace recovery, which will be stronger than that, but you got military that'll probably be in the low to mid-single digits. I think a 4%-6% is still a good number for Aerospace overall. I don't know if Lee or Jenny wanna tag on anything. No, I would just say, Julian, that you know, there was a time as we were preparing this, can we be more granular, and you absolutely drive yourself crazy. It's not worth the exercise. These trends, as I punched out earlier, are incredibly real. I mean, I can't call on a customer today where these aren't front and center, and there's not engineering being spent. I can't really when you talk about where they are in the value chain, CapEx, either in-house or CapEx on new facilities. I mean, they're real, and they weren't there before. I would just say that, you know, just in the last couple of years, as we've looked at, estimates on where we'd be with just even electric, passenger vehicles, you know, used to be looking out to 2035, 2030, and now we see that coming forward to, you know, 25 million units by 2028. While we can't pinpoint the exact number, we feel that there's, you know, tremendous upside there. As Tom said, the longer-term portion of automotive will be around 3% and shorter, around 1%. Thank you. My follow-up would just be around the margin goal. You have the 25% goal, five years out. I just wondered if there was anything you could call out around maybe the different technology platforms, you know, the four that you call out on slide 10, in terms of sort of across those where there might be more or less margin expansion opportunity. Just wanted to clarify, Tom, that the margin rate today across those four isn't that different. Right. Julian, as you and I discussed, I'll let Todd chime in, you know, last time we were together, they're pretty close to each other. I think I used the expression, they're within spitting distance of each other as far as margins. That'll be true going in the future. That 25% target will be pretty much across the tech platforms, across the reporting segments, and across the regions. We showed you kind of the company sliced by reporting segments, by region, and by technology platforms, and the 25% is gonna be pretty close for all of them, as we get out there. It's the only way you move a company of our size is everybody needs to move. If you don't move, you're not gonna be part of the team anymore. Everybody gets the drill. We're fortunate because everybody is pretty close, and we don't have any major type of divestitures that we wanna look at, or somebody's a weak part of the family that needs to go. Everybody's pulling their weight. I don't know, Todd, if you had any. No, Tom, I would agree. You know, I think, Julian, if you go back historically and look at the company, there certainly was a little bit more variation. I think it's been the power of the Win Strategy, and it's been the power of that margin expansion that you've seen. It has been equally shared across those tech platforms, across our segments, and we think all of them will benefit from all of the things that we've talked about today. You know, the one slide that I had on the acquisitions, I think is maybe a little bit of a hint, as far as representation on some of those transactions, but it's, to Tom's point, it's very, very little variation across those businesses. Great. Thank you. Great. I see that we have a few questions that have come through the chat, so let's pivot over to address those. The first question is, it's great to see how Parker's portfolio has evolved from historically short cycle to one that is becoming increasingly longer cycle. Do you have a target longer cycle sales mix? I'll start, and if anybody wants to chime in, please feel free. We don't have a specific number. We just think about how we're gonna evolve, you know. We were shorter was the largest part of the company. As we take this sales mix, and we project out the capital deployment changes, so the portfolio changes and all the other capital investments are gonna happen, the secular trends, et cetera, you know, we see us being a little over 1/2 of the company being longer cycle, then 1/3 being aftermarket, and then that balance of basically your 85% round numbers is longer or aftermarket. That feels like a pretty good mix, to me. I don't really think, you know, I'd be very happy to see us continue to move in that direction, and I don't see us really needing to move off of it. I think that would change the growth dynamics dramatically, which is what we're articulating to you, is you're gonna see the company grow differently than what it has in the past. I think a consistent 4%-6% over a cycle would be best in class. You put that, 'cause that's organic only, on top of our ability to generate cash and deploy cash, and we're gonna do quite well when it comes to the top line. Which even in tough times, I showed you that one slide, our performance scorecard, and why I was arguing that, you know, we're one of the most improved companies the last number of years, is we were top quartile on growth, and of course, we did a lot of that through capital deployment. But as we change and the muscle of the company gets stronger organically, we haven't forgotten how to deploy capital. I look to see us stay in that top quartile from a revenue growth standpoint. I don't know if my colleagues wanna add on to that. I think silence means no. Okay. Let's go to the next question. What is it about Parker that creates such strong engagement? Okay, I'm not gonna answer this one 'cause I spent a lot of time. I'm gonna let Lee and Jenny talk about this so you can hear from somebody else on what's driving the engagement. I'll let you start, Jenny. Okay. Well, you know, I would just look back to when I joined Parker about 14 years ago. You know, at that time, I came in and right away I went into a safety orientation. It was explained to me just how important it was, even coming into a leadership role, how important it was that I was safe every day when I walked out onto the plant floor, and what my responsibility was as a leader in keeping everyone safe. Tom hit on this earlier, but it's that first pillar of the Win Strategy and your introduction into Parker around safety and the fact that, you know, also we say we want you to be part of a high-performance team. This is just the way we do business. From the beginning, our desire is that everyone has a voice in that team, and that you could be a star point owner, and you can rise up, you know, as high in the organization as you want to contribute. It's just that strong culture that's different from anywhere that I've worked that I think really drives engagement. Yeah. Maybe I'll just take it up here higher, too. You know what and I was saying earlier about being 30 years with the company. What has always stuck with me, this is an open-door policy company. I mean, management is incredibly engaged. We go to Gemba constantly, Tom, myself, Jenny, Todd, always out at Kaizen activities. You know, there's no problem that's too small for us to weigh in on if asked and we do that. We're very knowledgeable about what's happening inside the company, and we do that. You know what? It's a culture that says thank you. I mean, it's very common for any of us to send a thank you note several layers down in the organization, the people that we've met when we're out walking. It's very collegial, but it is a high-performance winning culture inside the company. Yeah. I would just add on to what Tom, Lee, and Jenny said. It is something special, right? I've been at the company now a little over 28 years. What Lee said is correct. We do have a very open door policy. We have a competitive culture. Our strategy is named the Win Strategy for the simple reason that we wanna win and we wanna win together. You know, we feel that having the 55,000+ team members aligned and pushing in the same direction is the best way to win. I think, again, if you look at our financial results over the last seven years, it's been a fantastic place to share in that success. I'm very positive on what we look like going forward as well. Great. I think we have one more question in chat before going back to the analyst queue, and that is: why do you think Parker will be able to grow differently the next five years versus the last five years? Again, I'll start. My colleagues can add on. This was a big part of what we spent this morning covering. I won't necessarily try to recite all those slides, but there's a lot of things. That one slide that I had had the five areas on the levers that will drive that 4%-6% organic growth around the business system changes, so the changes to Win Strategy, which I went through a fair amount of detail that will drive organic growth. The CapEx needs within the industrial system around just reinvestment to catch up, supply chain de-risking and machine automation. We've got the channel that needs to be rebuilt from an inventory standpoint. We've bought companies, and here shortly, we'll deploy $20 billion buying companies that are accretive on growth and totally changing the composition of the company. Then we spent a lot of time on those secular trends and how they're going to change shorter cycle markets to longer cycle. What was interesting, every time we studied this on the secular trends, it wasn't by accident. It was by accident it happened, but our bill of material goes from 1x to 1.5x to 2x on almost every one of these applications. You get the benefit from secular investment and secular demand. As that demand grows, our bill of material is bigger. We have lots of opportunities to grow differently than we had in the past. The last five years were not that wonderful for us, for really a lot of people, two industrial recessions and a pandemic. The next five, chances are it will be a hair better. I don't know if my team wants to add to that or not. It's good. I think you covered it. Yeah. Very good. All right. Let's go back to the analyst queue. The next question is from Jeff Sprague with Vertical Research, who will be followed by David Raso, Evercore. Jeff, you may proceed. Hey. Thank you. Good day, everybody. Tom, thanks for that slide 38. I think I tried to tease that out of you on an earnings call a few quarters back, but of course, you're showing us where you think you'll be in 2027. If I think about just the path from 2022 to 2027 and that shift in the mix, quite clear, as you said earlier, that Aerospace should be the primary driver. If I think about those, you know, other end markets that you've bifurcated, you know, you've got automotive in both buckets, you know, ag, construction, mining in both, truck in both, where do you foresee the biggest movement, you know, in those end markets that are going through some type of transformation, whether it's lightweighting or, you know, electronics, electric content and the like? Jeff, yes, you and everybody else has tried to tease that slide out of me for years. I finally produced it, so hopefully, I hope people felt it was helpful to try to describe the company better. I guess I would characterize that shift from 2020 to 2027. I'll let Lee and Jenny chime in. In the earlier part of that, I see, you know, automotive and semi probably moving more aggressively because of the investment into that kind of mix shift. Now they're gonna be long-term doing that because the investment tied to, you know, EVs, batteries, the whole semiconductor investment that we're all aware of is gonna be a multi-decade, you know, lift on the whole thing. I see them kind of progressing. They're a little faster up the curve right now, investment's starting to be deployed. Of course, we know the EV story on the automobiles. Probably in the middle part of that term, you know, I see ag, construction, mining, truck. Obviously, truck's being impacted today. I probably should put truck in that near term because the digital revolution and what the pandemic done, basically pull 'em forward probably that whole experience by maybe a factor of 10 years, has put what was historically a very volatile end market in trucking, and will create some kind of a floor based on the digital demand. I'm not pretending it's not gonna be cyclical, but it created some kind of a floor based on the digital demand. Then I think the larger equipment, which is what I'm kind of bifurcating on, you know, ag, construction, mining, will take a little bit longer. In all my conversations with my counterparts, with our OEMs, one of the first things they talk about is, "Please help me with my journey on clean tech. Help me with my next platform." It's opening up lines of discussions that we've never had before because we are the go-to supplier for a lot of those solutions. I know that Lee and Jenny have had those conversations as well, if they wanna add anything. Yeah, I would just add, I'm just in agreement with Tom that, you know, automotive and some of the mobile equipment, we see the OEMs reorganizing themselves internally around those technologies. Like Tom said, every conversation starts with it, and really a big pull for our engineering expertise on how to apply these electric components. I think those are the two areas that we'll see the most. Great. You know, maybe just on supply chain, Tom. You just, as you said, two recessions and a pandemic. Hopefully, we're not adding World War III to, you know, that equation you've been dealing with. You know, you've fared very well up to this point on supply chain, given your, you know, localized manufacturing and the like. Maybe you could give us just a little bit of a real-time assessment of, you know, A, where the pinch points might be given the developments of the last couple weeks. And B, you know, whether or not you are in fact seeing some, you know, acceleration in customers, you know, really reevaluating how and where they have their supply chain set up. I'll start. I'll ask Jenny to chime in because she's probably the one closest to it. Jeff, she spent time with you before on all the supply chain things. You know, our local-for-local strategy is really what's helped us. The fact that yes, we have some cross-continent type of work, but we are truly local- for- local. We are looking for every division, every group to tell us what they need to increase from a dual sourcing standpoint. We have specific targets, and I'm not gonna get into that level of detail with this, that every division, every group is working to de-risk what we think is a less risky supply chain versus most people. We're gonna continue to work that. This is part of why I say this whole thing around supply chain development is gonna add to capital investment, both equipment and infrastructure. Let me specifically answer your point around near-term pinch points. What's going on with Ukraine and Russia, we have no facilities in Ukraine. The material impact of all that is de minimis to us. However, obviously, the human impact is tragic and our hearts go out to everybody that's being impacted by that. Supply chain-wise, we're in good shape. Anything we might have going between Russia, Belarus or Ukraine, we've got dual source capabilities. We do not see a pinch point with the near-term type of issues. I don't know, Jenny, if you wanna add on at all. Just as when you and I talked a few months ago, you know, our local-for-local strategy, as Tom said, and as you commented, has really helped us tremendously to have an edge, I think, over some of our competition. But we're, you know, we're not absent of issues, right? This is a very challenging environment. We continue to w ork our way through the chip shortage. We have a lot of Parker team members working hard to procure chips and get ahead of that. All in all, you know, we think we're gonna be in this for a little while longer, and you know, we look forward to coming out on the other side, but we're in a good position. Great. Best of luck. Thank you. The next question will be from David Raso with Evercore. David, you may proceed. Hi. Thank you. I apologize if I missed it. The 5% sales CAGR, did you provide your thoughts on the three buckets, shorter cycle, industrial aftermarket, and longer cycle, the composition of that 5% between those three? David, you didn't miss it this time. We didn't bifurcate that 4%-6%. We just kinda talked to the five areas between secular acquisitions, inventory, CapEx, and the Win Strategy cumulatively contributing to that 4%-6%. The only thing I would kinda orientate you, David, is that that's 2x what we've historically done in organic growth. That gives you an idea of our confidence. I think you know us well enough. We would not put out a number like that if we didn't have a pretty good degree of confidence that things are gonna be different. When you say that, I would think your confidence is it's more logical to be confident in some of the longer cycle businesses in the industrial aftermarket than the short cycle. On my math, if short cycle was flat from here to 2027 and industrial aftermarket grew just a 2% CAGR, the implied longer cycle businesses, the secular trends, are about a 12% CAGR. Is that sort of how you're thinking about it and why you have the confidence that you're not assuming much from short cycle, you know, understandably some steadier growth out of the aftermarket, but it's really relying heavily on the longer cycle and secular at that magnitude? It's just not to pin you to numbers, but- Yeah. Is that sort of how you're thinking about it and why you got that confidence? Yeah. I wouldn't necessarily agree with your numbers. I would agree with your logic and hierarchy, that short cycle is probably gonna grow more at the market, the aftermarket grows at the market plus, and the longer cycle, you know, has the benefit of the market, the secular trends, the CapEx, and a lot of those other things. So you're right. Yeah, I'm just trying to put it more. Your hierarchy's right. I wouldn't necessarily agree with the numbers specifically. Just the magnitude. Yeah. Okay. In the industrial aftermarket, when I think about the margins over the next five years, given private equity's become a bigger piece of your distribution network, but also it seems like maybe some might go international with you, which can really jump-start the mix of international being distribution, can you take us through your thoughts on the growth in industrial aftermarket margins over time? Is it more about similar margins, but I can grow it quicker internationally, taking private equity with me? Just curious to get your thoughts on that framework. I'm gonna let Lee tag on, but you know, you saw, I don't know if you caught this part of it, David, but the international mix has grown pretty significantly, 100 bp s a year, and pretty consistently at that 100 bp s a year. We expect that to continue. You're right. If we do find some people that are strategic partners that are global in nature, they may have the capital to invest more aggressively internationally, that could ramp that up. We've added so many people and so many distributors, you know, 1,000 distributors, 300 people into that, we can do a lot on our own with that, and we'll continue to do that. I would say the aftermarket margins are gonna be equal to or better. So I think they're gonna mimic the overall growth. The reason for that is we're gonna continue to do more system application type of work, which in general provides better margins for our distributor partners. I don't know, Lee, if you have anything you wanna add on. No, I would only say, you know, David, you follow this so well. One of the big enhancements to distribution, whether it's international or domestically, is when there's a lot of CapEx in the system at that local level, that helps drive a lot of the systems work. There's enhanced margins with that system work. So, you know, I think it's still gonna be that 10-15 bp s higher, but it's gonna be good growth. You know, the international team is doing great, but you're right. There may be opportunities to partner with some people globally. Okay. Thank you very much. I appreciate it. Great. Thank you. This puts us at the conclusion of the Q&A. I hope that you've all found today's presentation and discussions to be informative and that you've come away with a shared enthusiasm for Parker's promising future and the compelling value proposition that we're generating today but is only gonna get more significant as time goes on. Our videocast and slides will be posted to our investor website, parker.com, later today. You're certainly welcome to follow up with Jeff Miller or myself if you have further questions. I'd just like to say on behalf of the five of us, together with the broader investor relations, corporate communications team, we really have appreciated your participation. It's been our pleasure to host you, and thank you so much for your engagement. Have a great day.