Next presentation, Parker Hannifin. Obviously, been one of the more compelling stories in the space the last few years. I don't need to give you a bigger head right now, but obviously, you know, what's transpired in the last few years, and, you know, we're just trying to dive in today to get a better understanding of what we could expect from the company. You've got a May sixteenth analyst meeting coming up. Yep. So we're gonna try to pry into that a little bit, not to front run it, but get a little perspective. When you talk about the framework of a 20% market share goal- Yeah. Right? David, before you, before you jump into that, I've just got a couple of slides we could run through real quick. Oh, I'm sorry. Sure. Yeah. Go ahead. We'll be real quick with this. I think most people are familiar with the company, but, you know, to your point, we play in a large space. It's a $135 billion market space. We do have an aspirational goal. It'll be 20%. I think you've got a question on that. We'll. Well, I'll save my response for that. What makes the company unique is the fact that we love this motion and control space. We have all the technologies that you need to serve motion control applications and customers, whether that's in the industrial or aerospace end markets. Our distribution network that you know, David, is second to none, in the space, and that really helps expand our reach from an application engineering expertise. Over 50% of our industrial sales go through that distribution network. It's an extremely powerful competitive advantage, and it is something that we're going to continue to maintain and expand internationally. We're fiercely decentralized. We love that our team members own the P&L, and they know where they're at. They're competing against great companies globally, and we think that we have a better chance to win when they own a P&L. We are focused on being a top quartile performers. You kind of mentioned that a little bit. We are very proud of our cash generation performance and our history, and we want to be great generators and great deployers of that cash going forward. The performance that we've had so far across the company, you were mentioning this, David, it's been extremely transformational. It has been driven by The Win Strategy, and ultimately, what binds us all together is really trying to live up to our purpose statement, which is enabling engineering breakthroughs that lead to a better tomorrow. So that's where the company sits today. If you look at our performance, David, I think you were kind of highlighting to this. This is really. We kind of took a snapshot pre-COVID to try to take out all the noise of the last couple of years, and you can see we have grown the top line by a CAGR of 7%. About 4% of that has been through acquisitions, about 3% of that has been organic. You can see 570 basis points of segment operating margin expansion. There's no secret to this. This is a lot of hard work. This is executing and implementing the Win Strategy over and over and over across the global footprint of our businesses. That has resulted in us generating an EPS CAGR of 13% over that time period, and we've more than doubled our cash flow generation from $1.5 billion to $3 billion. So while we're very proud of that, we're not done. We are very much focused on the future. I know you've got some questions on that, but we have current targets that go out to our FY 2027. We are committing to $30 of earnings per share. That is a 25% increase from where we're sitting at our full year guide today. Then, of course, we're going to continue to grow cash another $500 million, to get above $3.5 billion. That's another 20% increase. And these are all the things that are gonna guide us and drive us forward. With that, David, I'll turn it over to you, and we can jump right into the questions. I figured we all knew Todd, but I just- Yes. Say Todd Leombruno, CFO, Parker Hannifin. Pleasure to be here. You're very well known- Yeah at this point. But that 15%-20% market share? Yes. Seriously, you're about 15 right now with the math. Correct. I know you're trying to hitch your wagon to the fastest-growing markets- Sure So you can gain share of a bigger pie. But between organic and inorganic, I'm curious, the organic opportunities, do you see it more through OEMs or more through distribution? Yep. I'll start there first. Yeah. So let me start with that 20% target. That really is an aspirational goal of ours. We play in this huge space. It's a growing space. It's a broad space. We love that space. We don't feel like we need to go out of that space to continue to grow, and that 20% is our target. If you look at historically how we have grown, it's been about 50/50, about 50% organic, about 50% acquisition. If you go back to that slide I just showed, it was a little bit more acquisition growth over the last 5 years. That's just because we had Lord, Exotic, and Meggitt in that mix. But to answer your question directly, do we think we would have growth from the distribution network or through OEMs? It's really gonna be both. It really is a combination of both. When you look at the industrial business, 50% of that business goes through the distribution network. Both of those channels have to grow for us to be successful. Honestly, with all of these secular trends that you were referring to, there's gonna be tremendous growth on the OEM side of that. We do believe that the distribution growth can come faster just because it's not tied to product cycles. The distribution network is gonna attack aftermarket business and small regional niche players. So we really expect both to grow, and it might just be a timing issue of distribution starts first before the OEM. Yeah, you would think the shift from short cycle to longer cycle, you would naturally think maybe a little less in distribution, more on OEM, potentially. Yeah, I- You're saying it's pretty balanced. From what we're hearing- To grow the international part of distribution. Absolutely. We've been trying to grow the international, part of the business. We have a target of 100 basis points increase in the mix between direct and, OEM.... or excuse me, direct and distribution shipments, in the international business, we're now 44%. So we're below the North American target, but in total, it's 50. We see no reason why that can't and shouldn't be the same mix. Yeah, I think what's interesting about the international push, I mean, I'm dating myself here a little bit, but Parker was always pretty adamant with distributors staying small. That's changed, and private equity- Sure. has built up some of your North American distribution. Mm-hmm. I think they're also getting a crack at some of the opportunities in Europe. True. As the CFO, when you hear that, obviously, I like the acceleration of distribution as a% of sales. Yes. Any negative implications we've seen so far in private equity becoming a little bit bigger in your distribution ownership? No, you know, this is an unbelievable partnership we have with our distributors. We, because we have such a broad product offering, we make up a significant amount of their bill of material, their cost of sales, if you will. These are all annual agreements. We want to protect the channel. We feel like that's our responsibility. There has been instances where we have done that. And I won't get into that, but we have protected the channel because we know it's so important. And, you know, ultimately, we have a little bit of say in this. So our team is on it. Succession planning is a critical element in that nature, but so far, it hasn't been a negative for us at all. Okay. The cyclical aspect of Parker in the past- Yeah to what it is today, we know there's a ton of macro versus micro correlations that have seemed to have broken down in the cycle. Sure, yeah. You know, how much is a Parker versus just what's going on broadly? Right. But at the same time, there's no denying your order resiliency versus where the ISM is, the PMIs are. On the way up, though. Yeah ... at the same time, should we expect then less of, you make the number of ISM at a certain high level, that you won't have the same strength and a strong ISM, just the nature of the business? Yeah. Because you're less exposed on the way up, the way you're less exposed on the way down. You know, David, it's a great question. We have been more resilient than we've ever been in the past. And I think when you look at the depth of where the order decline has come from in the industrial businesses, it's really manageable. It's not very deep. And if you look at the time frame on historically, how far that this has lasted, you know, on average, it's about six quarters. We're four quarters through it. You know us better than anybody. Historically, when our orders went negative, we would have been guiding and delivering organic growth that was very much in line with those negative order numbers. That has been different, right? And I think a little bit of that is the change in the portfolio. A little bit of that has been our aerospace exposure, when you look at the aerospace technologies that we have in sealing and shielding and filtration. And it's also been some of these mega- cap projects that you're talking about. There really has been activity that has been helping the industrial business kind of stay healthier than I think it would have been in the past. Well, what I'm trying to back into a little bit is, like- Yeah ... when do you think your orders turn positive in North America? Well- 100%, if somebody watches the ISM go back above 50- Sure. It's like, "Hey, that's a Parker train right there. We're going back. Yeah. So I want to be clear, I don't want to—I'm not forecasting a bottom here, but historically, you know, it's been six quarters. We're through four quarters through December, right? Yeah. So I don't see any reason why it should be any different now. It doesn't feel like it should be any different. What I think we take pride in is that the decline has been much, much shallower. We've been able to expand margins in a low-to-soft growth environment, and that's really what we're focused on. It's really the power of our strategy, it's the power of our people, and it's the power of that portfolio transformation that is still taking place. We know the orders have been shallower on the decline versus the ISM. Yeah. We don't have to then pay the other side of that, when the ISM turns back up, your orders will take longer to turn positive? Is that fair to say? I don't think so. I think when sentiment turns positive and activity turns positive, I think Parker will benefit from that, just like we always have. I think the one thing to note is our backlog is dramatically different than what it's been historically, both on the aerospace side of the business and the industrial side of the business. It's basically two times what it used to be. So, it just gives us comfort. We have verified that backlog. We feel really good about that. That's a constant process that we do across the businesses every day. And it gives us a little bit more comfort in forecasting, a little bit more comfort in looking at the outlook. Can you help us with what you're seeing on the incoming orders, the pricing for that versus what we were seeing? Let's say, relatively speaking, what's in the backlog versus the kind of price cost we're getting on the new orders? Well, you know, I would say we continue to be focused on making sure that we're getting value. We have engineered products. These products are wrapped in IP. They bring value to the end customer. We have been fiercely focused on making sure we don't lose value based on what's going on in the cost structure that we cannot control. We do believe productivity is our responsibility, but some of these other things need to be passed on. We do feel it's a normal, more normal pricing environment versus the last year and a half, two years, but that still is a positive pricing environment for us, so I think it's gonna be a plus for the company. In aggregate, are your costs trending as you would have expected, or are there some areas maybe a little- I would say they are trending as we expected. It, it's certainly become a more normal environment. You know, the industrial supply chain is certainly healing. It's near pre-COVID levels. The aerospace supply chain certainly has a long way to go. The one thing I would say, though, the aerospace supply chain is dealing with double-digit organic growth, whereas the industrial supply chain is, you know, basically dealing in a flat environment, so it's a little bit easier. Yeah, before we dive into the meeting, May sixteenth- Yeah And then think about the margin progression, maybe we get new targets, we'll see. Hmm. Historically, Parker would take us around the horn a little bit on 3/12 pressure. Yeah. Open, open mic night here. Take us through what you're seeing on- Well, yeah, I again, I guess- On the very segment, even, even geographically as well. I think we're- Yeah. So first, let's start with Aerospace. Aerospace, unbelievably robust. We started the year with 8% growth expectations. After Q1, we moved it to 10. After Q2, we moved it to 12. Aerospace is gonna be double-digit growth this year. When you look at the Industrial side of the business, we are forecasting full year, just slightly negative, 1.5% negative on the Industrial side of the business. When you look at the world, if you look at the international segment, Europe is certainly most of the macroeconomic signals in Europe are still negative. It has been slower than we had thought. If you move to China, China, the recovery has been choppy and also, you know, slower and taking longer than we had estimated. Teams are doing a great job managing with what they can control over there, and they're still posting unbelievably good, strong margin performance, and that has been a plus. If you look at North America, it just turned negative from an organic growth standpoint. Most of these things are driven by what we'll classify as off-highway markets. This would be construction, this would be ag, a little bit of forestry. But you know, there are signs of positivity out there. We just had a large distribution meeting in December. Lots of positive sentiment there, so we feel really good about that. I'm sure you got some insight from that meeting, Devid. But overall, what we're trying to do is we're trying to make sure that we serve our customers. We're working on lead times and delivery, and I think we're making progress on that, and we're managing what we can control. When I think about the meeting coming up and your margin guide- Yeah —for this year is already, what? 24.3 or 25, something like that. 24 3, yep, exactly. The long-term target, fiscal 2027 is 25%. Yeah. Just to level some people's expectations in some meetings, you know, people are probably looking for a bump up. Well, you know- Not far away from 27. Like I said before, we- Twenty-five percent. We have- How should we- Well, we've been- Go into that meeting. We've been very proud about our ability to expand margins, and it has been a combination of our team members. It's been our strategy that you're well-versed in, and it has been the portfolio changes that we have made. When you look at the margin expansion that we've generated, 80% of that has come from the core business, and 20% of that has come from acquisitions that we've brought into the portfolio. I think the full-year guide is 140 basis points of margin improvement, which is unbelievably stellar. This is, you know, high levels of margin expansion. We're not guiding to 25 yet, right? We're 24.3. You know, we did a lot of this margin expansion in an unbelievably positive growth environment. As you've seen, the international side of the business soften a bit, we're just being a little bit, little bit cautious there. But I would tell you that we are not finished. You know, 25 is not the end destination. The team is very much focused on expanding margins. And I, I guess I would tell you, you're gonna... We'll, we'll spend a little bit more time on that on the sixteenth of May, when we do the Investor Day. We'll talk about how we plan to expand margins even more. When I walk out of the meeting, am I more, in my head, the revenue splits on the secular tailwinds? W- Is it more the revenue story, or will we walk away with still the margin story? Well, I, I hope you walk away with a little bit of both. We're gonna try to shed some light on what these secular trends mean for us. It is gonna be a powerful change for us. Obviously, aerospace is the biggest secular trend that's having an immediate impact on us. The conversion to clean tech, the conversion to electrical both passenger vehicle and construction equipment is very powerful. Hydrogen is a big plus for us. So we're gonna try to do our best to show you how those things fit within our current portfolio and what that means to us from a growth standpoint. So this meeting, we should walk away better understanding that pie chart that took us from how much short, how much mid, and how much long cycle? Correct, yeah. Sort of- We're gonna- Perspective. Yeah, we're gonna continue what we highlighted just two years ago at that Investor Day. Really, we're gonna show you where we're focused on. And I would tell you, the company, it's an exciting time to be a part of Parker Hannifin, and we're really positive that that we're gonna be able to to grow all of those metrics: sales, segment operating margins, EPS, and of course, cash flow. Given the position you put yourself in for inorganic opportunities- Yeah. You've obviously deleveraged- Yep Meggitt probably a little bit faster than most people would have assumed. Yep. So where do you think we are on the landscape matching your timing, your desire to maybe move on to, maybe not everything's the size of Meggitt, but- Yeah ... your appetite, and I remember when you'd do deals like, "Oh, my God, you bought Dayco for $400 million." How big, you know, whatever, 20 years ago. Correct, correct. That, you know, now you seem to have the confidence of, "We're gonna take a swing at something. Well, absolutely. Not shy in doing things in the billions. ... Yeah, I mean, the company's never been bigger. We've never been more profitable. We've never generated more cash. That has given us a lot of optionality. You are right, we're a little bit ahead of schedule as far as what we committed to reduce our leverage to once we did Meggitt. Our target, we've been public with this, our target is to achieve 2x net debt to Adjusted EBITDA leverage by the end of June. We will do that. There is no rush to do a transaction. We're gonna make sure that we remain disciplined. That's what's given us a lot of confidence is the fact that we've been very disciplined with it. We're gonna stay within the space that we love. We love these eight technologies that make up the company. We don't have to do one that's bigger than Meggitt. We wouldn't be afraid to do one that was bigger than Meggitt. What we have really become experts at is really identifying the right targets, making sure we have a clear path to synergies, and then I would say that we have world-class integration skills now. Meggitt is a great example of that. We are beating every number that we had in our model that justified that transaction, and what is really nice is, it is made us bigger with every single aerospace customer that we do business with, and we can do much more for customers now that we have that extension in the portfolio. Do you think you have the scale you need in aerospace? Would I be surprised to see another aerospace acquisition in the next 18 months? I don't think you should be surprised to see any acquisition in any one of those technologies. The beautiful thing about our company is that the aerospace business is really the same technologies that are in the industrial business. They just happen to be things that leave the ground. So we love the aerospace business. We've been in the aerospace business a long time. It's now 30% of the end market exposure for the company, so it's significant for us. We're not trying to drive that percentage to a certain number. We wanna make sure that we do the right transaction, that we can return value to the shareholders, and help the company grow differently, be less cyclical, drive higher earnings per share and greater cash flow. The margins, a lot of initiatives we can go through. Sure. Can you force rank from here to, I don't know if you're gonna extend the target beyond '27, May 16th, but let's talk '27, we'll say. Obviously, Simple by Design- Sure. but not, not the overall impact. Yeah. From today onward, can you force rank where the greatest impact on? Yeah Structural margin improvement should come from in those major initiatives? It's a great question. Like, some people say, "Hey, how did you do that 1,000 basis points of margin expansion over the last 10 years?" It really has been a constant implementation of The Win Strategy over and over and over again. This culture of Kaizen, this continuous improvement thing, is very, very powerful, and that will never stop. So I guess if I had to force rank it, I would still say from a productivity umbrella, whether it's Kaizen, whether it's automation, whether it's zero defects, there still is an ample amount of opportunity that we can do better. I would put Simple by Design right up there with it. That is very still early days as we look at our process, but what that's really helping us do is design products better, but also have a reuse element and certainly a less waste. So it's helping our environmental targets as well. On top of that, we still have Meggitt synergies, right? We just increased the Meggitt synergies from $150 million-$200 million this fiscal year. You would put Meggitt synergies ahead of the international distribution build-out? Well, like I said, it's hard to kind of force rank these things. Yeah. The international distribution build-out is a powerful margin expander as well, right? 100 basis points a year. We've been very clear that sales through that channel are 10-15 margin. Yeah ... points better, but- There's that much left in Meggitt beyond what we've been told? Well, I mean, we've committed to $300 million, right? That's $100 million of additional cost out of the business. We are fiercely focused on making sure that we achieve that. And that's really over the next two-year period, right? So, The timing is a little faster. Yeah. Yeah. So, the nice thing here is that there is no shortage of margin expansion initiatives within the company, and I feel really, really positive about it. The team is very happy with where we've come, but very much focused on driving the company forward into the future. Any questions from the audience for Parker? It's a good audience here. Nothing? Nice. Good. I know David's got more if the audience doesn't, so. The margin profile between distribution and OEM- Right. Is it widening or narrowing? Well, we give a range, right? I don't want to hear the range. I want to hear the real number. What... is it widening or narrowing first? You know, I can't say that it's widening or narrowing. I think that we look at the business in total. We don't run the business with an OEM slant and a distribution slant. It really comes about, value. I think the supply chain challenges have driven more conversations with OEMs. That has been a normal cadence on the distribution side of it. But, I can't tell you whether it's widening or normalling. When you look at the expansion of margins, for the company, it's coming really from all elements of the business. Yeah, I was also sure if maybe a little more private equity ownership, a little more shift in how you're focused on a longer cycle, how that could be playing with the, the relativity, but you're saying it's- No, I- Nothing, no. Nothing that has bubbled up- No of significance yet. A little bit about the, like, kind of the Clarcor deal. Yeah. The HVAC business within has been a little bit of a struggle on the margins relatively. Small. Yeah, small. Yeah, but divesting businesses- Yeah Has been maybe a little less than I, I would have thought at this stage? Well, you know, that's maybe something that we could talk about at the Investor Day as well. You know, we have a rigorous process within the company that we challenge ourselves to make sure that we are the best owner of every one of the businesses that we have. We've done more than we've done in the past. It's been small. Yeah. But, we'll give you a little bit more color on that in May, but I would tell you, we are open to making sure that we are the best owner of all of these businesses. That's the reason I asked about the Force Rank order. I was hoping you would throw in an extra one, like- Well... Well, yeah. By selling low-margin businesses, I'm curious if something was bubbling up. No, I would tell you that we're gonna continue our process on that, making sure that there is a path for those businesses that might be below the average to either get to and surpass the average, or, you know, we have a discussion about are we the best owner for those or not? Yeah. A little bigger picture question. We're running out of time shortly, but, I mean, it's not, it's increasingly a smaller part of your business. Mm-hmm. But when I think the electrification trend- Yeah. I think of your content. Right. I don't want to just narrow it down to old school, you know- Sure ... Cat, Deere machines. Yeah, exactly. But the electrification trend, how do you see that? Like, I know when I was with Tom years ago- Yeah ... You bought Lord, and- Right -it's like, oh, this adhesive works on automotive, right? Mm-hmm. So rivet, you know, it's basically- It's a big, big piece of that business, yeah. How do you think about that content on, you name a bucket of end markets or products where- Yeah that content is up or down X, but more importantly, as a CFO. Mm-hmm the margins, the returns on that trend? Yeah, it's been very positive for us. So we've looked at this. Electrification, our content goes anywhere from +1.5-2 times the content on an electrical application. And these are things like passenger vehicles, but they're also things like our traditional business. We are agnostic when it comes to the power source. And, you know, a lot of people think more electric means less hydraulics, and what we have found is that's not the case at all. We have the portfolio today, whether it's electric motors or drives or our traditional power sources that are just being driven by electrical power. It has been a plus for us. It's still early days on that, but, you know, we're bullish for it. From a margin standpoint, there is no worry on the margins, because what these are, you know, if you look at these, these are value-generating applications for our end customers, and there's value in that. Our integrated solutions are preferred because we're able to kinda tie those things together. So I look at electrification as a plus for the company. That's why we talk about it so much, that we do. So it's a plus on growth, and it will be a plus on the margin side as well. Before we wrap up, anybody else have a question or any last parting comments leading us into? No, David, it's been a great conference. Great questions. I think people are excited about Parker. They're happy with where we've come. Obviously, the stock price has been performing unbelievably well, but I would tell you, the company has never been more focused on driving higher top line both organically and via acquisition, and of course, driving bottom line and really generating cash in a way that we've never had before. So it's an exciting time to be part of the company. All right, great. Thank you for your time. Excellent. Thank you, David. Thank you.