All right. Good morning, everyone. Thank you for joining us. My name is Mig Dobre. I cover machinery for Robert W. Baird. It is my pleasure to introduce to you today Parker Hannifin. As you probably know, Parker is a global leader in industrial and aerospace motion, process control, and materials technologies. Joining us today, we have Chief Financial Officer Todd Leombruno. Todd, I'm gonna turn it to you, and then we'll do some Q&A. Mig, it's a pleasure to be here. It's great to see you. I know it's been a while since we've seen you, not in a Zoom screen, but it's really a pleasure to see so many people in the audience, and I'm blessed to be able to talk about Parker Hannifin and what we're doing. Mig said this, but we are the global leader in motion control. We have been around for over 100 years, really focusing our technologies on solving complex application issues for our customers. There's a few things that are very important for Parker Hannifin. Number one, we have the broadest breadth of technologies in the space. We have the greatest distribution network from an industrial product standpoint on the planet. We have a fiercely decentralized operating structure. We believe the more people that can be part of a P&L and own the results have been. Our operating system, we call it the Win Strategy. Who doesn't like winning? We're on version 3 of that now, and it's been extremely successful. Really, there's 3 things that the company is focused on. 1, it is living up to our purpose, enabling engineering breakthroughs that lead to a better tomorrow, generating top quartile performance against our proxy peers, and being great generators and great deployers of cash. If you've seen what the company has done over the last 10 years, I think we've filled the bill on a lot of those things. One of the things that we've been focused on is really changing the portfolio within the company, and we've done this really through a series of really transformational acquisitions, but also where we focused our organic growth and our resources across all of our businesses within the portfolio. You could see what we have laid out here is the transformation from FY 2015 all the way through what we hope to be when we get to FY 2027, and it really is moving the company into more of a longer cycle position. We've done that with the acquisitions of Clarcor, LORD, Exotic, and most recently, Meggitt. But also, we're poised to benefit from really some secular trends that we think over the long term are great tailwinds for growth, and this will help us grow differently as a company. These are things around aerospace, CapEx demand, digitization, clean tech, and electrification. So the portfolio is very balanced and very poised to benefit from a growth in these areas. Couldn't be more proud of this slide. This is really the results of all of our team members around the globe working extremely hard for a long period of time. You could see from FY 16, we've grown at an 8% CAGR. Over time, our goal organically, we've lifted that organic growth goal to be 4%-6%, over the cycle. The EBITDA margin expansion has been tremendous, right? Almost 900 basis points of EBITDA margin expansion. And I'm proud to say that that has been experienced really across all aspects of our business. It hasn't been one or two things, it's really been across the whole portfolio. You look at EPS, we've grown EPS at a CAGR of 17%, and of course, free cash flow, there's been a step change in the amount of cash we've generated as a company. We think that has served our shareholders well. This is a TSR chart. You could see over the last 10 years, we've beat all of our proxy peers, all of the S&P 500 industrials, and we've generated over 300% return for our shareholders. That's something that's very meaningful for us, and we're very proud of. Lastly, looking towards the future, we're not done yet. We have set FY 2027 targets for the company. We have that 4%-6% growth target, EBITDA and segment operating margins of 25%. We expect free cash flow to be in the mid-teens. And what I like here is this EPS growth. We feel like we can get to a $30 earnings per share by FY 2027. All the items listed here are the main elements that are what are gonna drive us in that direction. And I can tell you, the company has never been more aligned, and we've never been more proud of our results, but we've never been more focused on what our promising future holds. So Mig, with that, I'll turn it over to you and anyone else in the crowd, and we'll take some questions. That, that's great. Speaking of that, if you'd like to contribute to the discussion, you can email sessiontwo@rwbaird.com. That was a great intro. Appreciate that, Todd. I think where I wanna start is with a question that I've been getting more and more from investors of late. There's a generational change going on- Yeah ... within Parker, as we have seen with a number of leadership retirements and new and folks stepping up to fill those roles. So talk a little bit about that and, you know, where there is change to be noted, where there's continuity, and how the company's evolving in that regard. Yeah, Mig, that's a great question. So obviously, I think everyone's probably aware, Tom Williams, who was our CEO last year, retired from that position last year. Jenny Parmentier has been our CEO for now coming on, one full year. Tom, and this was already announced in the plan, he will... He was chair for one year, and that was his plan. He is retiring from chairman of the board as of December 31st, and Jenny will take the role of chairman and also CEO. So that has been going unbelievably smooth... But also we have Lee Banks, who's been our, vice chair and president for many, many years, I think over 30, 32 years. He is retiring effective December 31st, and Andy Ross will take the role of, COO and president for the company. I would tell you, this has been a long, thought-out plan. Tom will tell the story that when he became CEO almost, you know, nine years ago, that not the very first thing, but probably the second thing that he started doing, was thinking about who could be, his successor. I would tell you, Lee and Tom spent, a significant amount of time over those last nine years trying to figure out, what would be best for the company. Jenny Parmentier became CEO, and I would tell you, she has excelled in every opportunity that she's had within the company. She is a unbelievably inclusive, leader. People love to work for Jenny, and I would tell you, she is aggressive, and she runs fast. She's an operator at heart, so one of the things that we're very proud of in the company is our attention to operating excellence. We feel really important, that is a very important driver for us to generate consistent, resilient results, no matter what's going on with the top line, and Jenny is a firm believer of that. Andy's been with the company for a tremendous amount of time as well. He has run multiple businesses within our company, and he's been the president of two of our operating groups. So I would tell you, they're big shoes to fill with Tom and Lee, but they couldn't be better filled with Jenny and Andy. So we're really excited to see what they do for the company. I think Lee said this best on the earnings call, you know, we've had the pleasure of having great leadership within the company. We take talent development as one of the most serious things we can do, and every CEO that has taken the job has taken the baton and run a little bit faster than the person before them. And that's what we're really is focused on doing, is continuing the transformation of the company, not only achieving but surpassing those FY 2027 targets and making sure that we do Tom and Lee proud in everything that we do. You know, you set me up for my follow-up- Yeah pretty well, in that given everything that you talked about in this change, does it sort of make sense to revisit and revamp this fiscal 27 strategy under the guise of- Yeah the new folks? Well, I would tell you, both Andy and Jenny, and Lee and Tom, and really the entire senior leadership team, they've had their fingerprints on the strategy changes that we've made, on the portfolio changes that we've made, on the agreement, on the targets, and are they reasonable targets, and are they meaningful targets? So you're not gonna see us change strategy, you're not gonna see us change direction, you're not gonna see us change targets until we achieve those numbers, and then we'll set a new set of targets. But you're not gonna see us do any kind of pivot far and to the right with any of these leadership changes. All right. Yeah. That's helpful. It's good. Maybe let's pivot a little bit and talk about demand and business conditions. Yeah. You reported recently. I think one of the things that stood out to folks was industrial. Yeah. Like, with that's behaving a little bit different than it has in prior cycles. Sure. So give us a little bit of insight there, and I think Industrial North America, in particular, has been kind of the area of focus. So- Yeah ... let's dig into that. Well, you know, it goes back to that slide that I had about, you know, changing our portfolio and making sure that we remain resilient and that we can really grow differently. We're very proud of all the results that we've been able to post. One of the challenges that we still have yet to conquer is: Can we grow differently? You know, so before I get to or to industrial, I'll talk a little bit about aerospace. Aerospace, unbelievable, stellar quarter, right? 16% organic growth, record margins really across the board, really strength in every vertical that we have in the aerospace business, and that has really been fantastic. One year after the Meggitt acquisition, you know, integration, it's really one year in, couldn't be going any better than it's been. We've been very proud with all of those businesses. We've been proud with the growth that's come from those. We've been proud with the margin performance, and of course, we are committed to that synergy plan that we've talked about. Specifically, you mentioned industrial business. Now, the industrial business, you're right, it did perform better than a lot of people expected. Orders did continue to decline. They were -4, but they got better. They were -8 the quarter before. So a little bit of that has been our focus within the industrial portfolio on things that are longer cycle, more margin accretive. And you've seen that in a little bit of our acquisition performance, but also where we've focused our organic investment and our focus within our businesses. We were talking about this on the way here. We focus on things that are hard. We focus on things that add value to our customers. We focus on things that bring value, and those things are sticky, right? So those are the things that have really happened on that. North America, in general, the demand still remains robust. There has been some softness in what I'll call some consumer-facing verticals, construction, HVAC, semicon, believe it or not, we've called out as a softness, but overall, we've been very proud with the performance of North America. Yeah, I think people have been trying to sort of parse out if North America is somehow re-accelerating versus what has happened in the prior quarter. Yeah. Well, I mean, I'll cite the orders, right? The orders were -8. They improved to -4, so that's a little bit of improvement, and we're happy to see that. Orders have been declining over the last couple of quarters. I don't know if I'm ready to call a bottom on that or not yet, but we were positive with the results that we saw there. One of the things that I've personally wondered about within your North America, the mobile component of your business, when I'm thinking of motion control, for instance- Yeah ... specifically, one, I, I'd love to hear you talk about that, directly, but, but I, I do wonder when we're actually looking at the production schedules of those customers. Mm-hmm. Despite what the PMIs or whatever else would indicate, they've been pretty, pretty strong. In fact, they've been trying to increase production rather than decrease production. Correct. So, you know, do you have any inkling for them as to what calendar 2024 might look like, and how that might flow through your orders? Yeah, I mean, you know, obviously, we just gave a full year guide, right? Yeah. So our guide uniquely goes out into June of 2024. So, you know, you look at the comparables, the comparables get a little bit more difficult as you look out into next year. But we feel pretty confident on the guide that we gave, right? It's not a huge growth year, but it's kind of staying positive, right? For the whole company, I think we guided to 1.5-2% organic growth. Aerospace is helping that. But on the mobile side, we talked about some rebalancing, some inventory control, but to be honest with you, I would say we're more positive than negative when it comes to that side of the business. And as far as your North American distributors, can you comment on that? Yeah, you know, North American distribution is a huge part of the North American business. You know, if you look at the weighting of that, it's probably a 60/40 mix distribution to OEM in North America. The sentiment is positive. There has been some channel destock, which is, I think, pretty documented and pretty common across the business. But, you know, overall, like I said, the demand has been fairly positive, so we feel good about that. Do you have a sense, or your commercial teams, that is, when talking to distributors, as to what they view as normal stocking levels? Do they go back to pre-COVID? Yeah, I don't think we're gonna see back to pre-COVID levels. I think that one of the things that I've heard our distributors state as a result of COVID is, "You know, we kinda got caught on a lack of supply. We don't wanna go back to that area." The other thing I would tell you about North America is that, Mig, you mentioned the fluid power, the motion system size of the business. You know, that portfolio has changed tremendously, right? With the Clarcor acquisition, we've got a huge amount of filtration aftermarket. With the Lord business, we expanded our engineered materials business. So that mix of that business isn't as levered towards just fluid power as it might have been 5, 10 years ago. I think that's also helping drive the performance in that business a little differently than it has in the past. Yeah, that's, to some degree, what I was trying to tease out with the prior question, because if... I do wonder if the fluid power business is behaving more consistent with what you've seen in the prior cycles, but- Yeah ... there are these other verticals that are performing also. Yeah, I would say we are seeing that, but then also, the things, the themes that have come up has been this, these mega cap projects, this capital investment, this reshoring, this nearshoring. That coupled with the secular trends of clean tech, electrification, and really, the digital supply chain, those have also been things that have, I think, kept us a little bit more growth-focused than maybe previous cycles. Understood. It's really early days on a lot of those things. Obviously, aerospace is a secular trend, is clearly booming, and we expect that to stay that way for some period of time. But I would tell you, we're pretty bullish on those things and what they mean for our industrial business. Understood. Maybe moving on to international, let's start with just some commentary as to- Yeah ... what do you see by geographies? Well, you know, we said this on the call last week, all the data that you're reading out of Europe is, you know, are they in a recession? Is it negative? To be honest with you, Europe performed better than we expected in the quarter. That was a nice positive surprise for us, and it wasn't a surprise from September, it really continued throughout July, August, and September for us. China is certainly weak, right? And the comparables are tough with some life science, tough comparables. But you know, China, we thought, would be probably a higher performer than it is today, and we expect that to be soft for the foreseeable future. It really depends on what happens in Germany, and do we get any kind of lift out of Europe. If you saw, we kinda tweaked our international guide just slightly down. But overall, what we're really proud about the international business is their ability to expand margins. So I think that's something that's different about Parker Hannifin today than maybe what you would have seen five or 10 years ago, is the tools of the Win Strategy are real, and they work. No longer do we need, you know, significant growth to grow margins. We think that there is efficiencies to be gained on our shop floors, in our supply chain, that add to our margin expansion story. So we feel really good about that, no matter what the macro sends us. I defer talking about margins for a bit, but I've got five different questions from the audience. Okay - on the topic. That's good. So clearly, it is of in- You know, we like talking about margins. We're really proud of what we've done, and we're really confident in where we're going. So, we'll take all those questions. Well, this first question is quite pointed, talking about the fact that Q1 has been so strong. Great ... margin perspective. Yeah. Yet the guidance obviously implies deceleration- Yeah ... going forward. Yeah, so- Unpack that. So Q1 really was a stellar quarter. Obviously, it was significantly better than our prior year. It was significantly better than our guide. It was really a perfect volume quarter. Everything went perfectly when it comes to volume. And really, I would tell you, our teams are focused on doing everything we can to make sure that we're doing the best thing we can for our customers, but also for our shareholders and our bottom line. When you look at Aerospace, Aerospace was clearly the standout, 26% margins within Aerospace. We had unbelievable volume. We had great performance out of our legacy business and our Meggitt business. We had an unbelievable mix of aftermarket, OEM or commercial OEM, or excuse me, commercial aftermarket business. Obviously, the margin profile of that business is the best, so that was really a plus in the quarter. In addition, we called out on the earnings call, we had a few one-time settlements. That was about 100-150 basis points size-wise. So that is what we don't expect to repeat going on into Q2, Q3, or Q4. When you look at our Q2, there's some seasonality in Q2. It is the lowest volume quarter that we have of the year. It's the lowest number of work days. That's just part of the natural cycle of the business. So that's why we guided the way we did in Q2. If you look at that, if you take out those one-time items and that favorable mix, you'll see that we have progression in that aerospace business as we go into the second half. On the international side, you know, obviously, the orders, the concerns about China, the concerns about Europe drove what we guided to on the margin side. And then North America, we're still gonna remain positive, but you can see that we're not expecting the record levels that we had in Q1. But it's still pretty much margin expansion for the year. For the full year, we did increase our margin guidance. We are now guiding at 23.6% for the full year. That's 70 basis points improvement from prior year, and that's pretty good with a, you know, 1.5% organic growth top-line number, so we feel good about that. I have follow-ups for each segment. Oh, my gosh! Okay, great. So, I'm sorry, but- No, no, no, it's good. ... that's what's coming in, right? That's good. So, on industrial North America- Yep ... so on, on this notion of margin progression, and this is not just a question for today, but one that I've been getting for a while: is there something within your cost structure, whether it's price, cost, or however you want to identify it, that has created sort of a temporary lift, maybe in like Q4 and Q1, that actually starts to normalize as you go forward? And I'm asking about North America specifically. Yeah. You know, when it comes to price cost, obviously, we've been through, as everyone that's in the space has gone through over the last two years, it has been an unbelievably difficult inflationary environment. Logistics, energy, freight, labor, those have all been challenges for everyone to overcome. I think we fared better than most when it comes to that, and it's really a testament to our team, really, all around the world. What we try to do from a pricing standpoint is we tried to remain margin neutral. We didn't try to leverage that. We didn't try to drive anything extra to the bottom line. We really tried to cover our cost in that manner, and that's really what the focus has been. So I don't see price cost being a margin negative going forward. And if we have to continue with price, if we continue in this inflationary environment, we'll continue to do the same. I guess the way I was thinking, it's not so much that it's a negative, but it's less of a positive, if that makes sense. Well, yeah, we're not gonna go to, you know, pricing over the last two years has been really significant. I'd say, you know, once in a lifetime type pricing environment. We would expect pricing to be more of a normal, environment going forward, and that's kinda what we're forecasting. Understood. International, as you, as you mentioned a few minutes ago, it's been just quite a margin story. It has. It really, over a longer period of time, it has been great. But the mix here, it's still adverse relative to North America, meaning you have less... More, more sales to OEM rather than distribution. Yeah. So what have you done? What's been the method through which you've narrowed the margin? Well, you know, one of the things we have worked on, Mig, over many years is expanding that mix of, distribution versus OEM in the international business. We've had a goal of 100 basis points a year, improvement in that mix. We've done that for the last seven years, seven or eight years. And we see that that certainly can't continue. That's been part of the margin story. If you followed us for a long time, international margins were always lower than North American margins. Considerably, actually. We actually closed that gap significantly. It hasn't just been that mix of business. It really has been a really focused attempt at the cost structure and really trying to leverage synergies across the region, and the team has really done an unbelievable job doing that. So that has been great. In Asia Pac, it's also been wonderful to see the team in China perform, and really, all of those countries outside of China have helped improve margins as well. So that's kind of been the international margin expansion story. It's really been the Win Strategy, just good, solid execution of the Win Strategy. Maybe asking the question differently, is this mostly a cost effort, or is it, you know, better pricing or strategic pricing, things that you've done on that side? You know what, Mig? It's all of the above, right? There isn't a one, two, or three items that have made that margin change. It's really been over a long period of time. It's been changing the portfolio, right? Those acquisitions that we've done, both Clarcor and LORD, obviously have a presence in the international business as well. It's been changing that mix, it's been working the cost structure, and it's been focusing our organic investments and our organic growth in markets that grow better, that have better margin profiles, and that appreciate the expertise of the Parker applications. So it's been a combination of all of those things. That's sustainable? That is certainly sustainable, and we think we can improve on it. Is there a world in which international is more profitable, for whatever reason, than North America? Well, you know, we did have a couple quarters where international margins did surpass North American margins. I think that was more driven on certain regional supply chain challenges within the North American region. But we've always said this: there's no reason why these businesses can't have similar margin profiles. It's the same technologies. They're very similar customers. They're different applications. And you know, when you go to Europe, everything costs a little bit differently than it does here at home, and we've tried to make sure that we get value in a similar manner. ... moving on to aerospace. Yeah. Maybe we can talk a little bit about the Meggitt integration. It sounds like it's going quite well. The costs to achieve are coming down- Yes in this fiscal year. Yeah. Talk a little bit about what was done last year, what's gonna get done this year, and the type of synergies that you're expecting. Well, obviously, we committed to $300 million of synergies by the full third year of ownership. That was about 10% of pre-COVID sales. We are on track to achieve that $300 million of synergies. We couldn't be happier with the way this is going. It has really been. Timing has been perfect. You know, a lot of times we buy an acquisition and something turns, and all of a sudden, the economy goes through some kind of cycle. We knew this when we were doing the due diligence, that there was this pent-up demand in aerospace, and we knew that COVID was gonna be a temporary thing, and that travel would get back to some normal semblance of what we've seen there. So all of that has been wonderful. What we've done with Meggitt, we've done a lot. It's only been 12 months. We've done quite a bit. We have obviously taken out all the public company costs. We have divisionalized that business into division structures that we see across Parker Hannifin. We have made those businesses look like Parker Hannifin divisions. We have obviously worked on the cost structure as far as indirect spend, leveraging the power that is Parker Hannifin. We have introduced the Win Strategy to the Meggitt operations, and it's early days as that starts to transpire. So, we're happy where we're at. We still have a lot of work to do, there's no doubt. You know, last year, I think we committed to $60 million in synergies. We did raise that. Some stuff got pulled ahead and got done quicker, so we achieved $75 million. We're expecting another incremental $75 million of synergies this year, and we're only 3 months into the year, but we are on track for that as well. Maybe to push you a little bit on this, the $75 million of incremental synergies, I'm looking at your, your margin guide. Yeah. I mean, that kind of accounts for the lion's share of the margin expansion. Yeah, I mean, it's... It feels like the core- ... it's all in there. It's all in there, and it's real, and like I said, we couldn't be happier with the way those teams are performing, the way those businesses are performing. We're benefiting from a lot of volume, right? There's a lot of growth in aerospace. We moved our guidance from 8% full year to 10% organic growth for aerospace, and we feel very confident about that. So we're just doing the right things for that business, and we're taking advantage of the volume levels that we have, and we're benefiting from a lot of good, hard work. Excluding the Meggitt synergies, what are sort of the normal core incremental margins on that volume growth? Well, I mean, obviously, we hold our teams at 30%. You know, we guided to 40% for the full year here. A good chunk of that came from the Q1 performance. But we've benchmarked this, and we think 30%... This is not easy. This has come up in a couple questions earlier today. This doesn't happen automatically. This happens from a lot of hard work, from a lot of our team members around the world, and it doesn't happen without a lot of effort. So, if you're modeling us, we ask you to model us at 30%. That's what we expect out of that business. Obviously, the synergies in Meggitt would be a plus to that. In a world in which, for whatever reasons, volumes get weaker, and I'm not talking about your guidance here, I'm just sort of hypothetically speaking- Yep. I'm curious as to what the Parker playbook looks like now, and I'll be pointed. You know, in the past, call it 2+ decades- Yeah ... you know, you and others have used, you know, things on the labor side to sort of adjust for lower volumes. Yeah. Do you still have the ability to do that in a tight labor market? We absolutely do. I think, obviously, the labor market has gone through a number of challenges. I'm hearing less and less of that as a challenge than I did maybe six months to a year, to a year and a half ago within our businesses. And it's a big plus. You know, we have businesses, some of those mobile markets that you mentioned, that are contracting. We are making adjustments in our business where it needs to be done, right? Obviously, in spaces like aerospace, we are not, right? We are doing, going the opposite direction. So I think one of the things that we do the best is we react to whatever the top line is telling us, and that we have refined that toolbox over many years. You know, you've seen our charts where we try to raise the floor and raise the ceiling on margin performance. You will see that again from Parker Hannifin. We will do that again no matter what happens with the top line. The other thing I would tell you is, if you think about our guide, we're gonna grow margins 70 basis points this year with really a relatively small growth number, right? And most of that is coming out of aerospace. So, you'll see those tools at work. The last thing I would tell you is that what would be totally different from last time is our incentive compensation program has really been levered towards performance on a sales, earnings, and cash flow standpoint. If for some reason, the top line drives those numbers lower, we're gonna have an automatic relief when it comes to incentive comp. That sounds great. Yeah. It sounds like the playbook still works. This is- It certainly still works, and the Win Strategy still works. You know, the company's never been more aligned, we've never been stronger, we've never been bigger. We're very proud of what we've done with the portfolio, and we're committed not just to the FY 2024 guide, but to the FY 2027 targets. Absolutely. Congrats on all of that. Thank you. This is a great place to spot. Please,