Q2 2023 Donaldson Company Inc Earnings Call
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<unk> senior director of Investor Relations you May begin your conference.
Good morning, Thank you for joining Donaldson's second quarter fiscal 2023 earnings conference call with me today are Tod Carpenter, Chairman, CEO , and President and Scott Robinson, Chief Financial Officer. This morning, Tod and Scott will provide a summary of our.
Quarter performance and an update on our outlook for fiscal 2023 as a reminder, we are now reporting our results under three segments <unk>.
<unk> solutions industrial solutions and life Sciences on January 25, we provided an 8-K showing select historical financial performance under this new segment structure. This 8-K as well as our regular supplemental quarterly earnings presentation can be found on our Investor relations website at IR.
<unk> got Donaldson dotcom.
During today's call, we will discuss non-GAAP or adjusted results for the second quarter of fiscal 2023, non-GAAP results exclude $9 3 million of nonrecurring pre tax restructuring and other charges largely related to our previously announced organizational redesign as well.
As costs associated with the exiting of our lower margin customer program. A reconciliation of GAAP to non-GAAP metrics is provided within the schedules attached to this morning's press release. Additionally, please keep in mind that any forward looking statements made during this call are subject to risks and uncertainties, which.
Are described in our press release and SEC filings with that ill now turn the call over to Tod Carpenter. Please go ahead.
Thanks, Scott Good morning, everyone I am pleased to report Donaldson company's strong second quarter earnings results.
Significant gross margin expansion driven by favorable pricing and the continued stabilization of input costs resulted in an operating margin above 15% for the second quarter in a row, we achieved an operating margin at a six year quarterly high.
This quarter also operated under our new organization structure designed to better serve our end market customers and I am confident and excited about the direction in which we are heading we are now positioned to manage the organization more efficiently with our three segments supported by our operational capabilities.
Strong balance sheet and targeted strategic investments.
For example, we now have a more straightforward path to sharpen our focus on the newly created life Sciences segment and pursue accelerated growth.
In February we added to our life sciences portfolio by acquiring Eissler bio and early stage Biotechnology company for approximately $63 million based in Durham, North Carolina isolated developed novel and proprietary reagents and accompanying filtration processes used.
For the purification and streamlined manufacturing of biopharmaceutical. This technology is designed to substantially improve product quality and purity with faster timelines compared to competing solutions, enabling accelerated and more affordable delivery of life changing therapies to patients globally.
One of the most compelling components of this acquisition is the ability for Donaldson through our portfolio of offerings, including those from Soliris and <unk> to provide customers a full suite of products, which can be integrated into the downstream bio manufacturing process.
This highlights the string of pearls approach, we have taken to grow the life Sciences segment.
As we execute our go to market strategy for these combined solutions. We are building a biopharma focused sales force to capitalize on the opportunities ahead.
I'll talk more about dialysis path forward a little later, but first we will cover second quarter highlights.
Sales were up 3% year over year, driven by pricing of 10% and offset by a currency translation headwind of approximately 4%.
Volume decreased slightly this quarter, primarily due to the softness in our aftermarket and disk drive businesses.
Adjusted EPS of <unk> 75.
It was up 32% versus the second quarter of fiscal 2022.
We continue to see topline and margin benefits from our pricing actions and while input costs undoubtedly remain elevated many are slowly coming off peak levels.
Overall end market demand remains solid and with improvements in global supply chain conditions. This quarter, we improved our fill rates reduced our backlog and are returning to more normalized on time delivery rates.
Each quarter, while we focus on near term execution, we also thoughtfully plant seeds for future profitable growth through our investments, including those in M&A and R&D.
I am pleased with the pieces of the life Sciences business, we have put together and with the integration progress we are making with Soliris <unk>.
However, we still have a long way to go in building this business and are actively pursuing other opportunities both organic and inorganic in this space.
We are also investing in other higher margin areas such as services.
For example, within the industrial solutions segment. This quarter, we added onto our service offering through the rollout of managed filtration services through this offering Donaldson provides complete and customizable service plans for industrial filtration equipment.
These range from condition based maintenance plans that leverage our proprietary IQ technology to traditional time based maintenance and repair services needed to keep critical industrial equipment in compliance and online.
From a capital expenditure standpoint, our investments are also heavily weighted towards growth with capacity expansion, particularly in North America accounting for the largest portion to.
To summarize we are encouraged by the ongoing improvements we are seeing from an operational standpoint and excited about the groundwork we are laying for balances future now.
Now I'll provide some detail on second quarter sales.
Total company sales were $828 million up 3% compared with 2022.
In mobile solutions total sales were $522 million up about 2% pricing added 12% and FX was an approximate 4% headwind sales.
Sales in off road of $106 million were up 16% elevated equipment production levels and strengthen our exhaust and emissions business in Europe drove sales.
On road sales were $35 million up 4% increase from prior year benefiting from strong medium and heavy duty truck production.
Excluding currency sales in both of our first fit businesses were up in all regions.
Mobile solutions aftermarket sales were $382 million down approximately 2% versus prior year excluding.
Excluding currency sales were up <unk>.
Roughly 2% as pricing was partially offset by customer inventory reductions in both the OE.
And independent channels.
Not surprising the improvement in global supply chain conditions has allowed to return to more normalized channel inventory levels.
Lastly for mobile solutions I would be remiss, if I did not talk about China broad based market pressures negative impacts from the end of zero Covid and the timing of Chinese new year, which fell in January this year versus February last year, all weighed heavily on second quarter, China results.
Sales declined 30% year over year and 25% in constant currency the environment in China has certainly been challenging.
However, given the share market size, and our differentiated technology and high quality offerings, we continue to view, China as a long term growth opportunity.
Now I'll turn to the industrial solutions segment.
Industrial sales increased 13% to $246 million pricing added, 6% and FX was a 4% headwind.
Industrial filtration solutions or ISS grew 11% to $212 million driven by dust collection, new equipment and replacement parts sales and power generation project timing.
Aerospace and defense sales, which now fall within the industrial segment continue to benefit from the recovering commercial aerospace industry and were up 28% versus prior year.
Now on the life Sciences segment.
Life Sciences sales were $59 million down 16% as continued disk drive market weakness weighed heavily on segment sales.
Excluding disk drive life Sciences sales would have increased approximately 7%.
We are seeing encouraging sales trends in food and beverage and bio processing equipment.
These remain key strategic growth areas for Donaldson, and we look forward to providing updates on our progress in the future.
Overall, our first half fiscal 2023 results were robust and I am confident we will continue to deliver on our financial and strategic commitments for the balance of the year.
As such we are tightening our full year EPS guidance range to the high end of our previous range to reflect our conviction.
We are proud of our performance and remain on pace to achieve another year of record sales.
Record earnings and multi decade high operating margins now.
Now I'll turn it over to Scott for more details on the financials and a more detailed update on our outlook for fiscal 'twenty three Scott.
Thanks, Bob Good morning, everyone.
Our results this quarter were solid.
In our view this is a reflection of how well our employees around the globe maintained their focus on delivering to our customers while working through the completion of the organizational redesign.
This redesign was certainly a heavy lift for the company, but I truly believe we are now better positioned than ever for future profitable growth and I. Thank our teams for their contributions in this regard.
I will provide color on our outlook for the balance of the year a few minutes, but first I will give more details on second quarter results.
Summarize the quarter.
<unk>, 3%.
Operating income was up 31%.
And adjusted EPS of <unk>, 75 increased 32% year over year.
Gross margin of 34, 5% improved 340 basis points versus 2022.
It was worth noting that gross margin in the second quarter of fiscal 2020 to 31, 1% a very low level for the company as the timing of our pricing actions lagged historic levels of inflation.
<unk> now of course plays a significant role in our year over year improvement as the stabilization of input costs.
From a sequential standpoint gross margin did not follow our typical seasonal pattern and increased 60 basis points due mainly to inventory valuation as a result for the third quarter. We are forecasting gross margin to step down sequentially. However, we still anticipate a year over year improvement.
Operating expenses as a percent of sales were 19, 3% slightly above 19, 2% a year ago. This slight increase was due in large part to the comparison of the prior year as we are still in the early days of the pandemic related recovery.
Operating margin was 15, 2% up 330 basis points versus prior year, resulting from gross margin expansion.
Operating margin was up 20 basis sequentially.
Again this does not follow our typical seasonal pattern further given our third quarter gross margin expectations. We also anticipate a corresponding step down in sequential operating margin in the third quarter and a year over year improvement.
Now I will touch on segment profitability.
<unk> solutions pre tax profit margin was 15% up 360 basis points of year over year and industrial solutions pre tax margin was 18, 8% up 640 basis points from prior year.
Gross margin expansion, along with operating expense leverage or the drivers in both segments.
On the life science side pre tax profit margin was 10, 6% down notably from 23, 7% a year ago. The decline in disk drive sales. So was the largest driver.
Combined with increased operating expenses as we continue to invest heavily in this segment excluding.
Acquisitions pre tax profit margin would have been 16, 4%.
Turning to a few balance sheet and cash flow statement highlights second quarter capital expenditures were roughly $30 million, mainly driven by capacity expansion investments in North America cash conversion in the quarter was 78% versus about 30% in 2022. This improvement reflects.
A return to more normal levels of conversion following the negative inventory related working capital impacts in the prior year.
In terms of capital deployment, we returned $98 million to shareholders, a 28 million in the form of dividends and $70 million and share repurchases are.
Our balance sheet is in great shape, and we ended the quarter with a net debt to EBITDA ratio of <unk> eight times.
Now moving to our updated fiscal 'twenty three outlook.
For sales given the new segmentation I won't go through the exercise of bridging back to our previous guidance for each segment that said at a high level our outlook for total company sales and legacy engine and industrial segments has not materially changed we expect fiscal 2023 sales to increase between the two.
6% above our previous guidance of between 1% and 5%. This includes a negative impact from currency translation of about 4%, which is an improvement of 100 basis points from what we expected last quarter.
Rice and should contribute about 6% of sales as a reminder, second half year over year sales growth will be lower than first half as incremental pricing benefits begin to fade.
For mobile solutions, we are forecasting a revenue increase of between 1% and 5% given recent trends the composition of mobile sales is now expected to be different from our initial projections as stronger than expected end market demand for our first fit products, mainly off road is forecast to offset weaker than expected.
Aftermarket sales.
On road and off road sales are expected to be up mid single digits and high single digit respectively.
Aftermarket sales are projected to be up low single digits as Todd mentioned customer inventory reductions in response to improve supply chain conditions are impacting sales in both aftermarket channels.
In the industrial solutions segment, we expect sales growth of between eight and 12% driven by continued strength in Iff's dust collection, new and replacement parts in particular and aerospace and defense.
<unk> are forecasted to increase high single digits, and aerospace and defense sales are projected to grow at low double digits for.
For the life Sciences segment, we are forecasting a sales decline of between 5% to 9%.
Disk drive sales have been negatively impacting results. However, we do anticipate a stabilization of sales in the second half of the year. We also expect continued strength in food and beverage and bioprocess equipment are some wire sales.
In terms of operating margin, we're narrowing our guidance to between $14 six and 15.0%. The midpoint of this range reflects a 130 basis point increase from prior year, primarily driven by gross margin improvement from.
From an operating expense perspective, while we continue to exercise discipline, particularly given the uncertain macro environment. We are committed to building for the future through our reinvestments back into the business.
With respect to EPS.
Now expecting results within a range of $2 99.
And $3 seven.
Towards the higher end of our previous range of $2 91 and $3 seven.
The midpoint of our new EPS guidance range represents an approximately 13% increase from a record fiscal 2022.
Now onto our balance sheet and cash flow outlook.
Cash conversion is forecast in the range of 110, and 120% higher than our historical averages and in line with our previous guidance the.
The strong cash conversion from this year is expected to be driven by benefits from improved inventory efficiency as we continue to refine our processes.
And as supply chain conditions normalize.
Our capital expenditures forecast heavily weighted towards growth initiatives is between 115 and $130 million. This includes investments in capacity expansion, along with tooling and equipment for new products and technology.
Our remaining capital deployment priorities include additional investments in dialysis inorganic growth specifically in life sciences, as evidenced by the Isolator acquisition and services as well as our ongoing commitment to dividends and share repurchases.
Now I'll turn the call back to Tod Tod.
Okay.
Thanks Scott.
I would like to express my deep gratitude to our dedicated Donaldson team their commitment to our organization to our customers and their professionalism through the redesign has been truly wonderful.
I am excited about our path forward.
Looking ahead Donaldson's goal is to remain the leader in technology led filtration and to support our people our customers.
And our communities and advancing filtration for a cleaner world.
First on supporting our people.
Building on our strong technological foundation. Our engineers for example are hard at work everyday growing our innovation engine. They are supported by our commitment to R&D and our developing products and services in our higher margin higher growth areas.
Supporting our customers as a corporation, we have our own sustainability goals, however, and not to be understated our products and solutions are inherently well suited to support our customers as they work to achieve their sustainability goals.
And last but not least supporting our communities.
Being able to leverage our filtration and separation technologies into different verticals is one of the key competitive advantages of Donaldson through our expansion into life Sciences. We have now begun to play an increasingly important role in supporting the improvement of global human health.
In closing we are incredibly optimistic as we look out over the long term, we look forward to providing additional color on balances long term strategy growth drivers and key initiatives, including those related to innovation and ESG at our upcoming investors day on April 4th.
At that time, we will also share our longer term financial objectives.
Now I will turn the call back to the operator to open the line for questions.
Thank you.
As a reminder, if you would like to ask a question press star followed by the number one on your telephone keypad.
Your first question today comes from the line of Bryan Blair with Oppenheimer.
Your line is now open.
Thank you good morning, everyone.
Good morning.
Another very solid quarter.
And I guess as we think about the back half year.
Similar to the victim of your own success, given the stacked comps that you say.
I apologize if I missed this in the bread crumbs provided in the outlook, but how should we think about Q3 Q4 cadence.
Topline.
And EPS is it.
I guess at a high level.
Think of moderate growth in Q3 moderate decline in Q4.
Or is there more nuance to them.
Yes, so it's a slow Brian this is Scott.
We held our guidance for the year in a relatively flat, excluding FX, which had improved for us by 100 basis points.
So that was the largest change in the guidance.
That impacted our back half of the year. It is kind of interesting. This year when you look at our revenue cadence.
If you look at last year, we had a strong ramp throughout the year, starting with first quarter revenues of $761 million and ending the year at $890 million, So a strong and steady ramp.
Throughout the year to get to $3 3 billion. This year. We said we were going to return to more normal level of seasonality and for Donaldson Thats traditionally been $49 51, or $48 52, and so our revenues are much flatter.
The year with a little bit of itself to the second half just like we normally have have historically to get to the $3 4 billion.
So we're not going to give quarterly guidance, but our revenues in the back half of the year are relatively consistent.
And you get the big percentage swings when you compare year over year because of the strong ramp from the prior year.
In terms of profit, we talked a little bit about gross margins and operating margins and we're a little bit.
On seasonal I would say this year and into the future gross margin questions that we're going to get there is really a lot going on in terms of add backs in terms of inflation in terms of accounting variances and you have some staff moving from quarter to quarter to make sure you're matching your variances with.
Inventory and when you look at our margins you really have to look at the first second and third quarters and put them together because you got some stuff moving around and you got a lot of volatility in the income statement and we would hope as we move to the future that inflation stabilize as currency stabilizes.
And we get some more accounting stabilization in our income statement and that will make our our gross margins a little more easy to understand but if you put the quarters together you can see strong gross margin improvement and we're just trying to manage third quarter versus second quarter and Thats why we have the conferences.
Yep, So hopefully that's a few more bread crumbs that out with your puzzle.
And hopefully that helps with your question.
Yeah, absolutely I appreciate the detail.
And in terms of life Sciences, Q2 profit decline Scott you said that the impact was weighted to the decline in disk drive business, which is understandable.
Meaningful percentages of revenue and it's high margin.
Could you specifically parse out what the impact was.
Disk drive declines.
Versus growth investments either in terms of the.
EBIT dollar decline or margin contraction.
We've not.
Brian This is tod, so we've not really disclose that level of detail.
We will give you more forward looking at the investment at our Investor day relative to our strategy on a forward look on life Sciences.
Allative to what we're experiencing right now with disk drive the decline has been very acute it's down between 40 and 50%.
And we would would look for it to have tough comps for a few more quarters think about three.
And then we will have lapped this and then we will be able to start crawling forward. We do believe that it has bottomed in fact it.
It looks like it has bottomed in December .
But it is also going to bounce at these very low levels.
For the foreseeable future.
Okay understood you mentioned Investor day, we're looking forward to that.
Next month's Tonight, I imagine, we'll hear quite a bit more on this front.
At Investor day, but it would be great to hear a little more color on how eissler furthers the string of pearls M&A build out of your life Sciences platform and how Soliris peer logics isolate.
Piece together in terms of the platform capabilities and what that signals in terms of your path forward.
Absolutely we will.
Ill give you that complete story on April four.
Okay I'll leave it.
Thanks, guys.
Your next question comes from the line of Laurence Alexander with Jefferies. Your line is now open.
It's Dan Rizzo on for Laurence. Thank you guys for taking my question.
Mentioned, the China, obviously was down given COVID-19 and in the new year, but as we've exited that are you seeing order trends pick up or is it something you're anticipating in the future.
It would be more future looking.
Were still feeling the pressures across China.
We.
To deliver this quarter, even with the tough China story still.
Present.
And so for us the more positive outlook to China still lies ahead.
Okay, and then with the shrink in A&D, we now back above pre COVID-19 levels.
In terms of demand.
No.
We're still more modest.
In that business.
Performing performing well, but but certainly more modest.
Okay, and then final question.
If we get into a recession I guess towards in the next few months I mean could you still easily not easily but could you still hit.
The low end of your of your outlook.
Based upon what we know.
Well, we think so just simply because that's why we gave the range and we have factored in everything we believe we know everything we're seeing on.
I mean coming into the business.
We've baked in our backlog understandings et cetera. So so we believe that the guidance that we have.
We've really given today really takes all scenarios into account clearly the only headwind that we would see as if it would be much more severe.
Recession than than anyone is currently considering but.
But we've baked into the guidance everything that we believe we know and.
As was indicated by the answer earlier, our second half is a bit more modest.
At this point with our outlook. So so we believe we've taken a very balanced approach and a prudent approach to create this guidance.
Thank you very much.
Okay.
Your next question comes from the line of Rob Mason with Baird. Your line is now open.
Yes. Good morning, Thanks for taking the question Todd.
Todd you made a comment that your overall sales outlook has not really changed but.
Clearly the composition within mobile has changed a bit with first fit being stronger.
Aftermarket aftermarket having slowed a little bit.
Destocking impact.
You had noted.
Isolated incidents of that last quarter in the OED channel and just you speak to where you think that is how when it began how long it may take to run.
Its course.
How independent in the OED channel has actually performed in the quarter if you could.
Yes sure. So when you when you look at where we're at with Destocking, It's clear that it was a bit more.
Then we would have expected at this point, however, I would tell you the OE channel was more severe than the independent channel.
<unk>.
And in the independent channel acted about as we would've expected.
We have had a number of people out at across our distributors.
We feel as though we're at pull through levels there.
And so.
While it could step down a little bit more we've taken that into account within the guide we're pretty comfortable on the independent channel. The one that actually went a little bit further this quarter than we would've expected as the OE channel.
Their inventories down.
Bit more.
Then we would have expected.
Perhaps we should have seen that knowing that they were the most aggressive relative to the inventory buildup last year when it couldn't get parts.
But thats the net results so net net.
It's just a little bit more than we would've expected nothing new nothing to suggest.
There is there is a line here.
To be interpreted into something and we're pretty comfortable with where we are.
Yes.
There was also mentioned of some of the restructuring charge assigned to customer program exits and again.
You've called those out already earlier this year.
Your choice to move away from some business was this incremental or is this just yet.
Catching up to the actions you've already called out the cost restructuring.
I mean this was some actions we took during the quarter.
So we're continuing to stay focused on managing our pricing and managing our margins and we want to have reasonable commercial relationships with our customers and you remember we had one particular program.
We talked about last year. This is another program that we focused on in and work with our customer to work ourselves out of this particular program and I think it's a good move for the company, we want to manage the capital required and we don't want to have our revenues. So this is something that we're going to continue to focus on this one was a little bit.
Bigger than average and we did take a charge in the quarter to account.
For Florida.
But it's something we're focused on and I think our our team is doing a really good job of managing pricing in and working ourselves out of situations that we don't think are acceptable to the company.
Let's see if I could slip one more in real quick just.
Scott, maybe just to return to the margin outlook for the second half of the year.
Touched on some of the moving pieces there with the inventory valuation gross margin, but just.
Again at a high level it looks like margins would step down at the midpoint of your guidance margins would step down on.
Maybe 5% more volume in the second half versus the first half.
How much of the step down should I think is in the gross margin line.
Versus growth in Opex.
I think investments.
Yes fair question.
Thank the opex will be relatively stable.
That's a lot easier to control and as you expand your expense.
I think it all is related to gross margin and I apologize for the volatility in our income statement, but I think it's kind of a function of the times that we live in.
And our finance team does an excellent job of.
Managing the variances and making sure we properly account for those when we have the rolls off.
The inventory rolled off and so it's a little bit volatile I think next year hopefully it will be a lot smoother in terms of gross margin and easier to understand but we do have a little bit of volatility.
And those those quarter, especially the sequential quarter comparisons, which which challenges everyone's ability to understand it. That's why I say I think you want to try to take a little more of a balanced view and look at the first second and third quarters, together and you'll have a better view of the margin just.
To give everybody a feel if you if you track the margins.
Going back to Q2 of last year of 31, one and a 31, 5% and then a 32 nine in Q4 of last year for 32 six for the full year and then this year. We did a 33 nine in the first quarter and a 34, 5% in the second quarter. So you can see our our pricing actions are coming through as we promised.
The costs that we're experiencing with this and our strong inflation has been.
Capitalized in the inventory and then expense off and this is kind of the peak of that we think are costs seem to have stabilized. So we're happy about that.
And we'll take it forward from there. So hopefully that gives you a little bit more color for both you and Brian .
It does it does thank you.
Your next question comes from the line of Nathan Jones with Stifel. Your line is now open.
Good morning, Matt on for Nathan Jones.
I just wanted to talk.
<unk> talked about life sciences on the.
Outside of the strides.
Can you talk about the growth in food and beverage and bio processing and the opportunities there.
Sure food and beverage Matt.
Through in a quarter.
20%.
And so we continue our real positive momentum within the food and beverage initiatives that we have pressing forward. Unfortunately, obviously the headwind in the disk drive has muted that rather significantly.
Again, I do want to emphasize that when it comes to the life Sciences pieces will give at Investor day.
Forward looking strategic view of how all of the acquisitions that we've made as well as our food and beverage initiatives really contribute to our strategy forward looking.
Okay and then.
Turning back to the mobile aftermarket sales.
Yeah.
With regards to inventory again underlying market starting to contract.
Please.
So actually all due to more inventory than in litigation.
It's more balanced it's more inventory across the overall channel AG still holding very good construction is probably good.
Overrode trucking is good.
Mining is good so.
It's just more a sign of <unk>.
Supply chain.
Really normalizing.
And so people have more confidence.
And Theyre, just walking down slightly.
Inventory management.
Okay, great. Thank you.
Your next question comes from the line of Joanne coming with Morgan Stanley .
Your line is now open.
Yeah.
Hey, good morning, guys. Thanks for the questions.
Perfect sitting on this a little bit I, just wanted to come back to life Sciences, one more time do you start to talk to the.
To include disk drive in life Sciences, I think going forward you talked about how this drug is still soft.
Clearly more challenged market relative to the more positive outlook you have for process filtration.
The margin profile of what really caused the.
I guess impetus to include Australia in life Sciences.
This strategy belongs into the life sciences sector, because the technologies of membranes are all how you are all included in that sector and how you how those technologies really apply directly into the life sciences sector. So expanded polytetrafluoroethylene.
To be able to make membranes is really critical to the long term.
Long term strategy.
We view life Sciences, and when you when you look at what we're inventing out of our disk drive based businesses that has allowed us to go into other medical based applications.
Et cetera, so so.
So it's really a foundational technology view.
And then how that foundation, then builds up directly into the end markets, enabling products to be invented on the in between to solve customer problems and that's why it really belongs in life Sciences.
It happens to delivered the disk drive today and it's been terrific for us investing great membranes that now we can parlay over into into our life Sciences sector and Thats why it's there.
Okay, Yes that makes a lot of sense. If I can just ask on the industrial solutions margin expansion in the quarter I just wonder if you can kind of expand on that a bit I know you called out the inventory valuation that a gross margin tailwind at the company level, but I'm not sure. If that was felt more acutely in industrial but it was a more idiosyncratic price cost benefit or what was actually driving the outsized.
Margin expansion there yes.
Yes.
The industrial business had a really strong quarter.
Sure.
They had good they had good price and they had good volume and so they grew pretty significantly.
12, 8%.
And 16, 7% in local currency.
Our industrial team is hitting their stride and they had strong incremental margins this quarter.
And that includes.
Currency drag so the business performed well and you're coming off of Covid. So admittedly. So we have weaker comps there and we had a cost issue in our last year. So the overall margins for the company were pretty weak.
Last year, and we're coming off of weak comps and really good performance, where the industrial team this quarter and so you see that strong.
<unk> operating margin growth and so we're really pleased and grateful for their performance.
Great very helpful that some time.
Yes.
There are no further questions at this time I'll turn the call back over to Tod Carpenter for closing remarks.
That concludes today's call. Thanks to everyone, who participated and we look forward to seeing you at our Investor Day April 4th and reporting our third quarter results in late May have a great rest of the day Goodbye.
This concludes today's call. Thank you for attending you may now disconnect.
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