Q2 2024 Donaldson Co Inc Earnings Call

February 28, 2024

Good morning, My name is Dennis and I will be your conference operator today at this time I would like to welcome everyone to the Donaldson Company second quarter 2024 earnings call.

Operator: Good morning, my name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Donaldson Company second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press *1 again. I would now like to turn the conference over to Sarika Dadwal, Senior Director, Investor Relations and ESG. Please go ahead. Good morning. Thank you for joining Donaldson's second quarter fiscal 2024 earnings conference. With me today are Tod Carpenter, Chairman, CEO, and President, and Scott Robinson, Chief Financial Officer. This morning, Todd and Scott will provide a summary of our second quarter performance and details on our outlook for fiscal 2024. During today's call, we will discuss non-GAAP or adjusted results. For the prior year period, second quarter fiscal 2023, non-GAAP results exclude free tax restructuring and other charges of 9.3 million dollars.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press Star then the number one onto a telephone keypad to withdraw your question Press Star one again.

Operator: I would now like to turn the conference over to Sarika Dadwal, Senior Director, Investor Relations and ESG. Please go ahead. Good morning. Thank you for joining Donaldson's second quarter fiscal 2024 earnings conference. With me today are Tod Carpenter, Chairman, CEO, and President, and Scott Robinson, Chief Financial Officer. This morning, Todd and Scott will provide a summary of our second quarter performance and details on our outlook for fiscal 2024. During today's call, we will discuss non-GAAP or adjusted results. For the prior year period, second quarter fiscal 2023, non-GAAP results exclude free tax restructuring and other charges of 9.3 million dollars.

Speaker Change: I would now like to turn the conference over to Saka Dog Wall Senior director of Investor Relations and ESG. Please go ahead.

Speaker Change: Good morning, Thank you for joining Donaldson's second quarter fiscal 2024 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 second quarter performance and details on our outlook for fiscal 2020.

Sarika Dhadwal: Good morning. Thank you for joining Donaldson's second quarter fiscal 2024 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 second quarter performance and details on our outlook for fiscal 2024. During today's call, we will discuss non-GAAP or adjusted results. In the prior year period, second quarter fiscal 2023, non-GAAP results exclude pre-tax restructuring and other charges of $9.3 million dollars. 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 filing. With that, I'll now turn the call over to Tod Carpenter. Please go ahead.

Speaker Change: During today's call, we will discuss non-GAAP or adjusted results in the prior year period second quarter fiscal 2023, non-GAAP results exclude pre tax restructuring and other charges of $9 $3 million.

Sarika Dadwal: 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 filing. With that, I'll now turn the call over to Tod Carpenter. Please go ahead.

Speaker Change: 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 I'll now turn the call over to Tod Carpenter.

Tod E. Carpenter: Please go ahead. Thanks.

Tod E. Carpenter: Thanks, Sarika. Good morning, everyone. I am pleased to report our strong second quarter, in which all three operating segments contributed to our overall sales growth, demonstrating the benefits of our diversified business model. This quarter, despite ongoing macro uncertainty, we worked to deliver Donaldson's technology-led filtration products and services to our customers. We grew on the top line and, once again, delivered robust gross margin and earnings. Through the hard work and dedication of the Donaldson team, we are well on our way to a record fiscal 2024. In mobile solutions, overall volumes rebounded this quarter, despite pockets of ongoing in-market weakness, driven by strength in our aftermarket business, where we continue to gain share. Mobile profitability hit an all-time high, with a pre-tax profit margin in the quarter of 18%, up 300 basis points year-over-year.

Tod E. Carpenter: Thanks, Erica and good morning, everyone.

Tod E. Carpenter: I am pleased to report our strong second quarter in which all three operating segments contributed to our overall sales growth.

Tod E. Carpenter: Demonstrating the benefits of our diversified business model.

Tod E. Carpenter: This quarter, despite ongoing macro uncertainty, we work to deliver donaldson's technology led filtration products and services to our customers.

Tod E. Carpenter: We grew on the top line and once again delivered robust gross margin and earnings.

Tod E. Carpenter: Through the hard work and dedication of the Donaldson team, we are well on our way to a record fiscal 2024.

Tod E. Carpenter: In mobile solutions, overall volumes rebounded this quarter, despite pockets of ongoing in-market weakness, driven by strength in our aftermarket business, where we continue to gain share. Mobile profitability hit an all-time high, with pre-tax profit margin in the quarter of 18%, up 300 basis points year-over-year. Mixed benefits, strategic pricing, as well as freight and select material cost deflation, drove the results in the quarter. Our industrial solutions business continues to see broad-based sales strength driven by our create, connect, replace, and service model. Solid end-market conditions and our ability to gain share and win programs in key areas such as dust collection, power generation, and aerospace and defense have enabled our success in this segment. In life sciences, our sales growth was driven by an expected rebound in disk drive sales as market conditions improved over prior years. We're focused on growing our legacy businesses through new program wins and market share gains. We are also maintaining our commitment to investing in our acquired businesses and have made progress on the integration and scaling of these businesses. Overall, I'm excited about our current technologies and the pipeline of highly attractive, higher-margin opportunities, and I'll provide additional details on some of these opportunities in a few minutes. Now, I will cover some consolidated highlights. Sales of $877 million were up 6% year-over-year driven by an increase in volume prices and currency with a marginal tailwind.

Tod E. Carpenter: In mobile solutions overall volumes rebounded this quarter, despite pockets of ongoing end market weakness driven by strength in our aftermarket business, where we continue to gain share.

Tod E. Carpenter: Mobile profitability hit an all time high with pre tax profit margin in the quarter up 18% up 300 basis points year over year.

Tod E. Carpenter: Mixed benefits, strategic pricing, as well as freight and select material cost deflation drove the results in the quarter. Our industrial solutions business continues to see broad-based sales strength driven by our create, connect, replace, and service model. Solid end market conditions and our ability to gain, share, and win programs in key areas such as dust collection, power generation, and aerospace and defense have enabled our success in this segment. In life sciences, our sales growth was driven by an expected rebound in disk drive sales as market conditions improved over prior years. We're focused on growing our legacy businesses through new program wins and market share gains. We are also maintaining our commitment to investing in our acquired businesses and have made progress on the integration and scaling of these businesses. Overall, I'm excited about our current technologies and the pipeline of highly attractive, higher-margin opportunities, and I'll provide additional details on some of these opportunities in a few minutes. Now, I will cover some consolidated highlights. Sales of $877 million were up 6% year-over-year driven by an increase in volume prices and currency with a marginal tailwind.

Tod E. Carpenter: Mixed benefits strategic pricing as well as freight and select material cost deflation drove the results in the quarter.

Tod E. Carpenter: Our industrial solutions business continues to see broad based sales strength driven by our create a max replace and service model.

Tod E. Carpenter: Solid end market conditions, and our ability to gain share and win programs in key areas such as dust collection power generation and aerospace and defense have enabled our success in this segment.

Tod E. Carpenter: In life sciences, our sales growth was driven by an expected rebound in disk drive as market conditions improved over prior years. We're focused on growing our legacy businesses through new program wins and market share gains. We are also maintaining our commitment to investing in our acquired businesses and have made progress on the integration and scaling of these businesses. Overall, I'm excited about our current technologies and the pipeline of highly attractive, higher-margin opportunities, and I'll provide additional details on some of these opportunities in a few minutes. Now, I will cover some consolidated highlights. Sales of $877 million were up 6% year-over-year driven by an increase in volume prices and currency with a marginal tailwind. The volume growth and market share gains in the quarter underscore the value our customers see in Donaldson's technology, and we believe tremendous growth opportunities remain across our diversified portfolio. While price was a contributor, we are seeing more normalized pricing and expect this to continue through the balance of the year. That said, our pricing discipline remains critical as we are still experiencing pockets of inflation.

Tod E. Carpenter: In life Sciences, our sales growth was driven by an expected rebound in disk drive as market conditions have improved over prior year.

Tod E. Carpenter: We're focused on growing our legacy businesses through new program wins and market share gains.

Tod E. Carpenter: We're also maintaining our commitment to investing in our acquired businesses and have made progress on the integration and scaling of these businesses.

Tod E. Carpenter: Overall, I'm excited about our current technologies and the pipeline of highly attractive, higher-margin opportunities, and I'll provide additional details on some of these opportunities in a few minutes. Now, I will cover some consolidated highlights. Sales of $877 million were up 6% year-over-year driven by an increase in volume prices and currency with a marginal tailwind. The volume growth and market share gains in the quarter underscore the value our customers see in Donaldson's technology, and we believe tremendous growth opportunities remain across our diversified portfolio. While price was a contributor, we are seeing more normalized pricing and expect this to continue through the balance of the year. That said, our pricing discipline remains critical as we are still experiencing pockets of inflation.

Tod E. Carpenter: Overall I'm excited about our current technologies and the pipeline of highly attractive higher margin opportunities and I'll provide additional details on some of these opportunities in a few minutes.

Tod E. Carpenter: Now I will cover some consolidated highlights.

Tod E. Carpenter: Now, I will cover some consolidated highlights. Sales of $877 million dollars were up 6% year-over-year driven by an increase in volume and pricing. Currency with a marginal tailwind. The volume growth and market share gains in the quarter underscore the value our customers see in Donaldson's technology, and we believe tremendous growth opportunities remain across our diversified portfolio. While price was a contributor, we are seeing more normalized pricing and expect this to continue through the balance of the year. That said, our pricing discipline remains critical as we are still experiencing pockets of inflation.

Tod E. Carpenter: Sales of $877 million were up 6% year over year, driven by an increase in volume pricing.

Tod E. Carpenter: Currency was a marginal tailwind the volume growth and market share gains in the quarter underscore the value of our customers seeing donaldson's technology, and we believe tremendous growth opportunities remain across our diversified portfolio.

Tod E. Carpenter: The volume growth and market share gains in the quarter underscore the value our customers see in Donaldson's technology, and we believe tremendous growth opportunities remain across our diversified portfolio. While price was a contributor, we are seeing more normalized pricing and expect this to continue through the balance of the year. That said, our pricing discipline remains critical as we are still experiencing pockets of inflation.

Tod E. Carpenter: While price was a contributor we are seeing more normalized pricing and expect this to continue through the balance of the year.

Tod E. Carpenter: That said our pricing discipline remains critical as we are still experiencing pockets of inflation.

Tod E. Carpenter: EPS in the quarter was 81 and.

Tod E. Carpenter: EPS in the quarter was $0.81 cents, an 8% increase versus the prior year as gross margin improvement and favorability in other income and tax were partially offset by investments in long-term growth, including in our life sciences business. Backlogs remain strong and give us confidence in our outlook through the balance of the year. While overall supply chain conditions have improved, we are seeing some challenging areas, such as certain material shortages. That said, our customers come first, and through our global operations teams, we are continually working to improve our on-time delivery rates and work down our backlog. We are striving for optimal execution today and are also building for tomorrow through our investments in R&D and capital expenditures. As of the end of the second quarter, we remain on track to increase R&D investments by double digits this fiscal year, ensuring we remain the leader in technology-led filtration for decades to come. CapEx this quarter included investments in capacity, IT and infrastructure, as well as new products and technology, including for the support of the further commercialization of our life sciences acquisitions.

Tod E. Carpenter: An 8% increase versus prior year as gross margin improvement and favorability in other income impacts were partially offset by investments in long term growth.

Tod E. Carpenter: Including in our life Sciences business.

Tod E. Carpenter: Backlog remained strong and give us confidence in our outlook through the balance of the year.

Tod E. Carpenter: While overall supply chain conditions have improved we are seeing some challenging areas such as certain material shortages that said our customers come first and through our global operations team is we are continually working to improve our on time delivery rates and work down our backlog.

Tod E. Carpenter: We are striving for optimal execution today and are also building for tomorrow through our investments in R&D and capital expenditures.

Tod E. Carpenter: We are striving for optimal execution today and are also building for tomorrow through our investments in R&D and capital expenditures. As of the end of the second quarter, we remain on track to increase R&D investments by double digits this fiscal year, ensuring we remain the leader in technology-led filtration for decades to come. CapEx this quarter included investments in capacity, IT and infrastructure, as well as new products and technology, including for the support of the further commercialization of our life sciences acquisitions.

Tod E. Carpenter: As of the end of the second quarter, we remain on track to increase R&D investments by double digits. This fiscal year, ensuring we remain the leader in technology led filtration for decades to come <unk>.

Tod E. Carpenter: CapEx this quarter included investments in capacity, IT and infrastructure, as well as new products and technology, including for the support of the further commercialization of our life sciences acquisitions. Now I'll provide some detail on second quarter sales. Total company sales were $877 million, up 6% compared with the prior year. Pricing was a benefit of approximately 2%. In mobile solutions, total sales were $550 million, a 5% increase versus 2023.

Tod E. Carpenter: Capex this quarter included investments in capacity.

Tod E. Carpenter: It infrastructure as well as new products and technology, including for the support of the further commercialization of our life Sciences acquisitions now.

Speaker Change: Now I'll provide some detail on second quarter sales.

Tod E. Carpenter: Now I'll provide some detail on second quarter sales. Total company sales were $877 million dollars, up 6% compared with prior year. Pricing was a benefit of approximately 2%. In mobile solutions, total sales were $550 million dollars, a 5% increase versus 2023. Pricing added 3%, and volumes grew year over year. Within the mobile segment, strength and aftermarket offset declines in the first-fit businesses. Aftermarket sales of $425 million dollars were up 11% year-over-year, driven by market share gains in both the independent and OE channels and by elevated levels of global equipment utilization. In the independent channel, sales continue to be solid and increased in high single digits. OE channel sales grew mid-teens. As we mentioned last quarter, we believe destocking is largely behind us. The destocking began in Q2 of last year, and we are now seeing a return to more normalized growth rates. Sales in on-road of $34 million declined 3% due to lower levels of equipment production in APAC. Off-road sales of $92 million dollars were down 13% as weaker end market conditions, including in agricultural markets and in China, persist. We are generating solid overall growth and strong profitability in the mobile solutions segment, despite softer first-bit performance, and I would like to highlight a few ways in which our strategic execution is driving these results, first on the aftermarket side. We are developing and expanding our relationships with key customers in both channels. Our relationship with NAPA, which we announced in August of 2023, is a great example. Through this relationship, our heavy-duty air filtration products are being sold through NAPA's extensive U.S. network. As a reminder, Donaldson is focused on heavy-duty applications and is not targeting the light truck or car market.

Speaker Change: Total company sales were $877 million up 6% compared with prior year.

Tod E. Carpenter: Pricing was a benefit of approximately 2%.

Tod E. Carpenter: In mobile solutions total sales were $550 million a.

Tod E. Carpenter: A 5% increase versus 2023.

Tod E. Carpenter: Pricing added, 3% and volumes grew year over year.

Tod E. Carpenter: Pricing added 3%, and volumes grew year over year. Within the mobile segment, strength and aftermarket offset declines in the first-fit businesses. Aftermarket sales of $425 million were up 11% year-over-year, driven by market share gains in both the independent and OE channels and by elevated levels of global equipment utilization. In the independent channel, sales continue to be solid and increased in high single digits. OE Channel Sales Group Mid-Teen, As we mentioned last quarter, we believe destocking is largely behind us. The destocking began in Q2 of last year, and we are now seeing a return to more normalized growth rates. Sales in on-road of $34 million declined 3% due to lower levels of equipment production in APEC.

Tod E. Carpenter: Within the mobile segment strengthen aftermarket offset declines in the first fit businesses.

Tod E. Carpenter: Aftermarket sales of $425 million were up 11% year over year, driven by market share gains in both the independent and OE channels and by elevated levels of global equipment utilization.

Tod E. Carpenter: In the independent channel, sales continue to be solid and increased in high single digits. OE channel sales grew mid-teens. As we mentioned last quarter, we believe destocking is largely behind us. The destocking began in Q2 of last year, and we are now seeing a return to more normalized growth rates. Sales in on-road of $34 million declined 3% due to lower levels of equipment production in APAC. Off-road sales of $92 million dollars were down 13% as weaker end market conditions, including in agricultural markets and in China, persist. We are generating solid overall growth and strong profitability in the mobile solutions segment, despite softer first-bit performance, and I would like to highlight a few ways in which our strategic execution is driving these results. First, on the aftermarket side. We are developing and expanding our relationships with key customers in both channels. Our relationship with NAPA, which we announced in August of 2023, is a great example. Through this relationship, our heavy-duty air filtration products are being sold through NAPA's extensive U.S. network. As a reminder, Donaldson is focused on heavy-duty applications and is not targeting the light truck or car market.

Tod E. Carpenter: In the independent channel sales continue to be solid and increased high single digits.

Tod E. Carpenter: OE channel sales grew mid teens as.

Tod E. Carpenter: As we mentioned last quarter, we believe destocking is largely behind us.

Tod E. Carpenter: Destocking began in Q2 of last year, and we are now seeing a return to more normalized growth rates.

Tod E. Carpenter: Sales in on road of $34 million declined 3% due to lower levels of equipment production in APAC.

Tod E. Carpenter: Off-road sales of $92 million were down 13% as weaker end market conditions, including in agricultural markets and in China, persist. However, we are generating solid overall growth and strong profitability in the mobile solutions segment, despite softer first-bit performance, and I would like to highlight a few ways in which our strategic execution is driving these results, first on the aftermarket side. We are developing and expanding our relationships with key customers in both channels. Our relationship with NAPA, which we announced in August of 2023, is a great example. Through this relationship, our heavy-duty air filtration products are being sold through NAPA's extensive U.S. network. As a reminder, Donaldson is focused on heavy-duty applications and is not targeting the light truck or car market.

Tod E. Carpenter: Off road sales of $92 million were down, 13% as weaker and market conditions, including in agricultural markets and in China persist.

Tod E. Carpenter: We are generating solid overall growth and strong profitability in the mobile solutions segment, despite softer first-bit performance, and I would like to highlight a few ways in which our strategic execution is driving these results. First, on the aftermarket side. We are developing and expanding our relationships with key customers in both channels. Our relationship with NAPA, which we announced in August of 2023, is a great example. Through this relationship, our heavy-duty air filtration products are being sold through NAPA's extensive U.S. network. As a reminder, Donaldson is focused on heavy-duty applications and is not targeting the light truck or car market.

Tod E. Carpenter: We are generating solid overall growth and strong profitability in the mobile solutions segment. Despite softer first fit performance and I would like to highlight a few ways in which our strategic execution is driving these results.

Tod E. Carpenter: First, on the aftermarket side. We are developing and expanding our relationships with key customers in both channels. Our relationship with NAPA, which we announced in August of 2023, is a great example. Through this relationship, our heavy-duty air filtration products are being sold through NAPA's extensive US network. As a reminder, Donaldson is focused on heavy-duty applications and are not targeting the light truck or car market. While we have not provided specifics on the financials around this partnership, this has been and will continue to be a meaningful driver of performance and market share gain. On the OE side, while first-fit results have been impacted by weaker end-market conditions, our customers value our technology and innovation. In air filtration, our power core intake filters provide high-quality, compact solutions in demanding commercial applications.

Tod E. Carpenter: First on the aftermarket side.

Tod E. Carpenter: We're developing and expanding our relationships with key customers in both channels our relationship with Napa, which we announced in August of 2023 is a great example, through this relationship our heavy duty air filtration products are being sold through Napa is extensive U S network.

Tod E. Carpenter: As a reminder, Donaldson is focused on heavy duty applications and are not targeting the light truck or car market.

Tod E. Carpenter: While we have not provided specifics on the financials around this partnership, this has been and will continue to be a meaningful driver of performance and market share gain. On the OE side, while first-fit results have been impacted by weaker end-market conditions, our customers value our technology and innovation. In air filtration, our power core intake filters provide high-quality, compact solutions in demanding commercial applications.

Tod E. Carpenter: While we have not provided specifics on the financials around this partnership this has been and will continue to be a meaningful driver of performance and market share gains.

Tod E. Carpenter: On the OE side.

Tod E. Carpenter: On the OE side, while first-fit results have been impacted by weaker end-market conditions, our customers value our technology and innovation. In air filtration, our power core intake filters provide high-quality, compact solutions in demanding commercial applications. Our ability to meet stringent customer requirements recently yielded a significant commercial win in Europe, increasing share in this important category. In China, while the broader market remains weak, we have gained traction with our power core investments and are optimistic about our ability to gain share in the future. In liquids, we are expanding our position with our Syntec XP Advanced Fuel Filtration Technology.

Tod E. Carpenter: While first fit results have been impacted by weaker end market conditions, our customers value our technology and innovation.

Tod E. Carpenter: In air filtration, our power core intake filters provides high quality compact solutions and demanding commercial applications.

Tod E. Carpenter: Our ability to meet stringent customer requirements recently yielded a significant commercial win in Europe, increasing share in this important category. In China, while the broader market remains weak, we have gained traction with our power core investments and are optimistic about our ability to gain share in the future. In liquids, we are expanding our position with our Syntec XP Advanced Fuel Filtration Technology.

Tod E. Carpenter: Our ability to meet stringent customer requirements recently yielded a significant commercial win in Europe, increasing share in this important category.

Tod E. Carpenter: In China, while the broader market remains weak we have gained traction with our power core investments and are optimistic about our ability to gain share in the future.

Tod E. Carpenter: In liquids, we are expanding our position with our Synteq XP Advanced Fuel Filtration Technology. This is a specific area in which we see tremendous opportunity, and we are seeing growth with OEM customers, particularly in India and Japan. Across the entire mobile business, we're focused on our profitability enablers, which remain consistent with what we outlined at Investors Day last April. These include continually optimizing our footprint while efficiently managing costs, refining our supply chain while maintaining quality for our customers, optimizing prices--in other words, consistently managing the price equation--and consistently striving for operational excellence through ongoing initiatives to eliminate waste and improve performance.

Tod E. Carpenter: In liquid we are expanding our position with our syntech XP advanced fuel filtration technology.

Tod E. Carpenter: This is a specific area in which we see tremendous opportunity, and we are seeing growth with OEM customers, particularly in India and Japan. Across the entire mobile business, we're focused on our profitability enablers, which remain consistent with what we outlined at Investors Day last April. These include continually optimizing our footprint while efficiently managing costs, and refining our supply chain while maintaining quality for our customers. Optimizing prices, in other words, consistently managing the price equation and consistently striving for operational excellence through ongoing initiatives to eliminate waste and improve performance.

Tod E. Carpenter: This is a specific area in which we see tremendous opportunity and we are seeing growth with OEM customers, particularly in India and Japan.

Tod E. Carpenter: Across the entire mobile business, we're focused on our profitability enablers, which remain consistent with what we outlined at investors day last April.

Tod E. Carpenter: These include continually optimizing our footprint while efficiently managing costs.

Tod E. Carpenter: Finding our supply chain, while maintaining quality for our customers.

Tod E. Carpenter: Optimizing prices in other words consistently managing the price equation.

Tod E. Carpenter: And consistently striving for operational excellence through ongoing initiatives to eliminate waste and improve performance.

Tod E. Carpenter: Now, before moving to the industrial segment, I'll take this opportunity to make a few comments about performance in China. The market continues to be very challenging. Sales were approximately flat versus 2023 and increased 3% in constant currency. The aftermarket showed particular strength in the quarter, offsetting significant declines in first fit. It is important to note that while year-over-year performance improved this quarter, the prior year's results were negatively impacted by COVID lockdowns and the inclusion of Chinese New Year a year ago. This resulted in fewer shipping days in the prior year period.

Speaker Change: Now before moving to the industrial segment I'll take this opportunity to make a few comments about performance in China.

Speaker Change: The market continues to be very challenging sales were approximately flat versus 2023 and increased 3% in constant currency.

Speaker Change: Aftermarket showed particular strength in the quarter offsetting significant declines in first fit it is important to note that while year over year performance improved this quarter. Prior year's results were negatively impacted by Covid lockdowns and the inclusion of Chinese new year, a year ago. This reis.

Speaker Change: <unk> had a fewer shipping days in the prior year period.

Tod E. Carpenter: Turning to the industrial solutions segment, industrial segment sales increased 7% to $263 million dollars, with our project-based products driving much of the growth. Industrial filtration solutions, or IFS, sales grew 6% to $225 million dollars. Market share gains and supportive end-market conditions continue to drive IFS sales strength. Aerospace and defense sales rose 12% to $39 million dollars from program wins in defense. On the life sciences segment, life sciences sales were $63 million dollars, a 6% year-over-year increase driven by a rebound in disk drive performance. As expected, sales are slowly recovering, supported by stronger data center and cloud computing demand. With the first half of fiscal 2024 behind us, I'm pleased with our performance, which reflects ongoing efforts and progress on delivering on our commitments to all of our stakeholders, including our global customers and shareholders. Given our strong year-to-date performance and our expectations for the balance of the year, we remain on track to deliver record sales, record operating margin, and record earnings in fiscal 2024. Now, I will turn it over to Scott, who will provide more details on the financials and our outlook for fiscal '24. Scott.

Speaker Change: Turning to the industrial solutions segment.

Speaker Change: Industrial segment sales increased 7% to $263 million with our project based products driving much of the growth.

Speaker Change: Industrial filtration solutions or ISS sales grew 6% to $225 million market share gains and supportive and market conditions continues to drive <unk> sales strength.

Tod E. Carpenter: Aerospace and defense sales rose, 12% to $39 million from program wins in defense.

Tod E. Carpenter: On the life Sciences segment life Sciences sales were $63 million, a 6% year over year increase driven by a rebound in disk drives performance.

Tod E. Carpenter: On the life sciences segment, life sciences sales were $63 million, a 6% year-over-year increase driven by a rebound in disk drive performance. As expected, sales are slowly recovering, supported by stronger data center and cloud computing demand. With the first half of fiscal 2024 behind us, I'm pleased with our performance, which reflects ongoing efforts and progress on delivering on our commitments to all of our stakeholders, including our global customers and shareholders. Given our strong year-to-date performance and our expectations for the balance of the year, we remain on track to deliver record sales, record operating margin, and record earnings in fiscal 2024. Now, I will turn it over to Scott, who will provide more details on the financials and our outlook for fiscal 24. Thanks, Todd. Good morning, everyone.

Tod E. Carpenter: On the life sciences segment, life sciences sales were $63 million dollars, a 6% year-over-year increase driven by a rebound in disk drive performance. As expected, sales are slowly recovering, supported by stronger data center and cloud computing demand. With the first half of fiscal 2024 behind us, I'm pleased with our performance, which reflects ongoing efforts and progress on delivering on our commitments to all of our stakeholders, including our global customers and shareholders. Given our strong year-to-date performance and our expectations for the balance of the year, we remain on track to deliver record sales, record operating margin, and record earnings in fiscal 2024. Now, I will turn it over to Scott, who will provide more details on the financials and our outlook for fiscal '24. Scott.

Tod E. Carpenter: As expected sales are slowly recovering supported by stronger data center and cloud computing demand.

Tod E. Carpenter: With the first half of fiscal 2024 behind us, I'm pleased with our performance, which reflects ongoing efforts and progress on delivering on our commitments to all of our stakeholders, including our global customers and shareholders. Given our strong year-to-date performance and our expectations for the balance of the year, we remain on track to deliver record sales, record operating margin, and record earnings in fiscal 2024. Now, I will turn it over to Scott, who will provide more details on the financials and our outlook for fiscal '24. Scott.

Tod E. Carpenter: With first half of fiscal 2024 behind Us I am pleased with our performance, which reflects ongoing efforts and progress on delivering on our commitments to all of our stakeholders, including our global customers and shareholders.

Tod E. Carpenter: Given our strong year to date performance and our expectations for the balance of the year, we remain on track to deliver record sales record operating margin and record earnings in fiscal 2024.

Tod E. Carpenter: Now I will turn it over to Scott, who will provide more details on the financials and our outlook for fiscal 'twenty four.

Tod E. Carpenter: Scott.

Scott J. Robinson: Thanks, Tod. Good morning, everyone. I would like to start by expressing my gratitude to our employees around the globe, who once again came together and helped Donaldson deliver a strong quarter. I am continually impressed by their ongoing efforts, which are driving the company forward. I will provide color on our outlook for fiscal 2024 in a few minutes, but first will give additional details on the results for the second quarter.

Scott James Robinson: Thanks, Todd good morning, everyone.

Scott James Robinson: I would like to start by expressing my gratitude to our employees around the globe, who once again came together and helped Donaldson deliver a strong quarter. I am continually impressed by their ongoing efforts, which are driving the company forward. I will provide color on our outlook for fiscal 2024 in a few minutes, but first, we'll give additional details on the results for the second quarter.

Scott James Robinson: I would like to start by expressing my gratitude to our employees around the globe, who once again came together and helped Donaldson deliver a strong quarter.

Scott James Robinson: I'm continually impressed by their ongoing efforts, which are driving the company forward.

Scott James Robinson: I will provide color on our outlook for fiscal 2020 for a few minutes, but first we'll give additional details on our results for the second quarter.

Scott James Robinson: In summary.

Scott J. Robinson: In summary, sales increased 6% versus 2023. Operating income increased 3%, and EPS of $0.81 cents was up 8% year over year. Gross margin was 35.2%, a 70 basis point improvement versus prior year. Benefits from pricing, combined with deflation of freight and select material costs, were the largest drivers of the year-over-year income. Operating expenses as a percent of sales were 20.4%, compared with 19.3% a year ago. Expense deleveraging in the quarter was driven by increased people-related expenses, due in part to higher headcount, and approximately half of the year-over-year increase in operating expense dollars was related to the scaling of our life sciences acquisitions. Operating margin was 14.8%, 40 basis points below 2023 as the operating expense deleveraging more than offset the gross margin increase.

Scott James Robinson: Sales increased 6% versus 2023.

Scott James Robinson: Operating income increased 3%.

Scott James Robinson: And EPS of <unk> 81 was up 8% year over year.

Scott James Robinson: Gross margin was 35, 2%, a 70 basis point improvement versus prior year.

Scott James Robinson: Benefits from pricing combined with deflation of freight in select material costs were the largest drivers of the year over year increase.

Scott James Robinson: Operating expenses as a percent of sales were 24%.

Scott James Robinson: With 19, 3% a year ago.

Scott James Robinson: Expense deleveraging in the quarter was driven by increased people-related expenses, due in part to higher headcount, and approximately half of the year-over-year increase in operating expense dollars was related to the scaling of our life sciences acquisition. Operating margin was 14.8%, 40 basis points below 2023 as the operating expense deleveraging more than offset the gross margin increase. Now I'll discuss segment profitability. Mobile Solutions' pre-tax profit margin was 18.0 percent, up 300 basis points from the prior year, as the segment benefited from mixed pricing and deflation of freight and select material costs. Industrial Solutions' pre-tax profit margin was 18.0%, down 80 basis points year-over-year. We are pleased with the ongoing strength of the industrial segment, and while margins declined versus 2023 due to a sales mix shift towards lower margin products, they remain at a high level. Life Sciences' pre-tax loss was roughly $6 million, including a headwind from acquisitions of approximately $15 million.

Expense deleveraging in the quarter was driven by increased people-related expenses, due in part to higher headcount, and approximately half of the year-over-year increase in operating expense dollars was related to the scaling of our life sciences acquisition. Operating margin was 14.8%, 40 basis points below 2023 as the operating expense deleveraging more than offset the gross margin increase.

Scott James Robinson: <unk> deleveraging in the quarter was driven by increased people related expenses due in part to higher head count and approximately half of the year over year increase in operating expense dollars was it related to the scaling of our life Sciences acquisitions.

Scott James Robinson: Operating margin was 14, 8% 40 basis points below 2023, as the operating expense deleveraging more than offset the gross margin increase.

Scott J. Robinson: Now I'll discuss segment profitability. Mobile solutions' pre-tax profit margin was 18.0%, up 300 basis points from the prior year, as the segment benefited from mixed pricing and deflation of freight and select material costs. Industrial solutions' pre-tax profit margin was 18.0%, down 80 basis points year-over-year. We are pleased with the ongoing strength of the industrial segment, and while margins declined versus 2023 due to a sales mix shift towards lower margin products, they remain at a high level. Life sciences' pre-tax loss was roughly $6 million, including a headwind from acquisitions of approximately $15 million. Our life sciences profitability targets have not materially changed, and we are confident in the profitable growth potential of our acquired businesses. Turning to a few balance sheet and cash flow statement highlights, second quarter capital expenditures were approximately $22 million.

Scott James Robinson: Now I'll discuss segment profitability.

Scott James Robinson: Mobile solutions pre tax profit margin was 18.0% up 300 basis points from prior year.

Scott James Robinson: The segment benefited from mix pricing and deflation of freight in select material costs.

Scott James Robinson: Industrial solutions pre tax profit margin was 18.0% down 80 basis points year over year.

Scott James Robinson: We are pleased with the ongoing strength of the industrial segment and while margins declined versus 2023 due to a sales mix shift towards lower margin products. They remain at a high level.

Scott James Robinson: Life Sciences pretax loss was roughly $6 million, including the headwind from acquisitions of approximately $15 million.

Scott James Robinson: Our life sciences profitability targets have not materially changed, and we are confident in the profitable growth potential of our acquired business. Turning to a few balance sheet and cash flow statement highlights, second quarter capital expenditures were approximately $22 million.

Scott James Robinson: Our life Sciences profitability targets have not materially changed and we are confident in the profitable growth potential of our acquired businesses.

Scott J. Robinson: Turning to a few balance sheet and cash flow statement highlights, second quarter capital expenditures were approximately $22 million. Cash conversion in the quarter was 67%, versus 78% in 2023. Conversion was lower year over year due to an increase in working capital, including higher receivables as a result of January sales strength. In terms of other capital deployment, we returned approximately $63 million to shareholders, inclusive of $30 million in the form of dividends and $33 million in share repurchases. We ended the quarter with a net debt to EBITDA ratio of 0.7 times. Now moving to our fiscal 24 outlook. For response... We are reiterating our full year sales guidance of an increase between 3% and 7%, which includes pricing of approximately 2% and a currency translation benefit of about $1. For mobile solutions, we are forecasting a sales increase of between 1% and 5%, consistent with our previous expectations. However, within mobile, we are now expecting operative sales to be down low double digits, versus our previous guidance of down mid-single digits, as in-market conditions in agricultural markets and in China continue to soften. Unknown sales are forecast to be flat, in line with previous expectations.

Scott James Robinson: Turning to a few balance sheet and cash flow statement highlights.

Scott James Robinson: Second quarter capital expenditures were approximately $22 million.

Scott James Robinson: Cash conversion in the quarter was 67% versus 78% in 2023. Conversion was lower year over year due to an increase in working capital, including higher receivables as a result of January sales strength. In terms of other capital deployment, we returned approximately $63 million to shareholders, inclusive of $30 million in the form of dividends and $33 million in share refurbishments. We ended the quarter with a net debt to EBITDA ratio of 0.7 times. Now moving to our fiscal 24 outlook. For response... We are reiterating our full year sales guidance of an increase between 3% and 7%, which includes pricing of approximately 2% and a currency translation benefit of about $1. For mobile solutions, we are forecasting a sales increase of between 1% and 5%, consistent with our previous expectations. However, within mobile, we are now expecting operative sales to be down low double digits, versus our previous guidance of down mid-single digits, as in-market conditions in agricultural markets and in China continue to soften. Unknown sales are forecast to be flat, in line with previous expectations.

Scott James Robinson: Cash conversion in the quarter was 67% versus 78% in 2023 conversion was lower year over year to an increase in working capital, including higher receivables as a result of January sales stream.

Scott James Robinson: In terms of other capital deployment, we returned approximately $63 million to shareholders inclusive of $30 million in the form of dividends and $33 million in share repurchases.

Scott James Robinson: We ended the quarter with a net debt to EBITDA ratio of <unk> seven times.

Scott J. Robinson: Now moving to our fiscal '24 outlook. First on sales, we are reiterating our full year sales guidance of an increase between 3% and 7%, which includes pricing of approximately 2% and a currency translation benefit of about 1%. For mobile solutions, we are forecasting a sales increase of between 1% and 5%, consistent with our previous expectations. Within mobile, we are now expecting operative sales to be down low double digits, versus our previous guidance of down mid-single digits, as in-market conditions in agricultural markets and in China continue to soften. On-road sales are forecast to be flat, in line with previous expectations.

Scott James Robinson: Now moving to our fiscal 'twenty four outlook first time sheets.

Scott James Robinson: We are reiterating our full year sales guidance of an increase between three and 7% which includes pricing of approximately 2% and a currency translation benefit of about 1%.

Scott James Robinson: For mobile solutions, we are forecasting a sales increase of between 1% and 5% consistent with our previous expectations within mobile we are now expecting <unk> sales to be down low double digits.

Scott James Robinson: Previous guidance of down mid single digits as end market conditions in agricultural markets and in China continue to soften.

Scott James Robinson: Annual sales are forecast to be flat in line with previous expectations.

Scott J. Robinson: Our outlook for aftermarket is unchanged at mid-single-digit growth as market share gains and elevated levels of equipment utilization continue to benefit results. In industrial solutions, sales are expected to increase between 3% and 7%, with IFS sales and aerospace and defense sales forecast to grow mid-single digits, consistent with our previous guidance. Within IFS, demand strength and market share gains in dust collection and power generation are expected to continue. Within aerospace and defense, defense sales strength and support of overall end market conditions are forecasted to drive results. In like sciences, we continue to expect sales to increase approximately 20% with a notable step-up in sales in the second half of the year. We have started to see a return to growth in our disk drive business and anticipate continued improvement. We are also anticipating sales momentum through the balance of the year in food and beverage as we expand geographically, and in bioprocessing equipment and consumables with the scaling of those businesses. With respect to the profitability of the segment, we expect it to be approximately break even.

Scott James Robinson: Look for aftermarket is unchanged with mid single digit growth as market share gains and elevated levels of equipment utilization continued to benefit results.

Scott James Robinson: In industrial solutions sales are expected to increase between three and 7% with Iff's sales at aerospace and defense sales forecast to grow mid single digits consistent with our previous guidance.

Scott James Robinson: With NII SaaS demand strength and market share gains in dust collection and power generation are expected to continue.

Scott James Robinson: Within aerospace and defense, defense sales strength and supportive overall end market conditions are forecast to drive results. And like sciences, we continue to expect sales to increase approximately 20% with a notable step-up in sales in the second half of the year. We have started to see a return to growth in our disk drive business and anticipate continued improvement. We are also anticipating sales momentum through the balance of the year in food and beverage as we expand geographically, and in bioprocessing equipment and consumables with the scaling of those businesses. With respect to the profitability of the segment, we expect it to be approximately break even.

Scott James Robinson: In aerospace and defense defense sales strength as supportive overall end market conditions are forecast to drive results.

Scott James Robinson: In life Sciences, we continue to expect sales to increase approximately 20% with a notable step up in sales in the second half of the year.

Scott James Robinson: We have started to see a return to growth in our disk drive business and anticipate continued improvement.

Scott James Robinson: We are also anticipating sales momentum through the balance of the year in food and beverage as we expand geographically.

Scott James Robinson: And in bioprocess equipment, and consumables with the scaling of those businesses.

Scott James Robinson: With respect to profitability of the segment, we expect to be approximately breakeven.

Scott J. Robinson: On a consolidated basis, with the benefit of our first half operating performance, we are increasing total company operating margin guidance to a record level of between 15.0% and 15.4%, from the previous range of between 14.7% and 15.3%. The midpoint of our guidance rate represents a 60 basis point year-over-year improvement from adjusted operating margin of 14.6% in fiscal 2023. Gross margin expansion is expected to be the driver of the improvement. With respect to gross margin, we are pleased with our performance through the first half of the year and expect our second half gross margin rate to approximate that of the first half. For the full year, higher operating expenses as a rate of sales should partially offset the gross market increase as we continue investing for future profitable growth. We are expecting additional benefits for the full year from non-operating items, including higher other income and a tax rate at the lower end of our previously guided range. Overall, we are increasing our EPS guidance range to between $3.24 and $3.32, a 24 cents or 8% increase at the midpoint from adjusted EPS of $3.04 for fiscal 2023.

Scott James Robinson: On a consolidated basis with the benefit of our first half operating performance. We are increasing total company operating margin guidance to a record level of between 15.0 and 15, 4% from the previous range of between 14, 7% and 15, 3%.

Scott James Robinson: <unk>.

Scott James Robinson: The midpoint of our guidance range represents a 60 basis point year over year improvement from adjusted operating margin of 14, 6% in fiscal 2023.

Scott James Robinson: Gross margin expansion is expected to be the driver of the improvement.

Scott J. Robinson: With respect to gross margin, we are pleased with our performance through the first half of the year and expect our second half gross margin rate to approximate that of the first half. For the full year, higher operating expenses as a rate of sales should partially offset the gross market increase as we continue investing for future profitable growth. We are expecting additional benefits for the full year from non-operating items, including higher other income and a tax rate at the lower end of our previously guided range. Overall, we are increasing our EPS guidance range to between $3.24 and $3.32, a $0.24 cent or 8% increase at the midpoint from adjusted EPS of $3.04 for fiscal 2023. In summary, we are on track to deliver higher levels of profitability on higher levels of sales to our shareholders in fiscal 2024. Now on to our balance sheet and cash flow outlook. Consistent with previous expectations, we plan to deliver cash conversion above historical averages fiscal year and with a range of between $95,000 and $100,000 and 105%. Additionally, we are tightening our capital expenditures forecast to between $95 million and $110 million from a range of $95 million to $115 million previously.

Scott James Robinson: With respect to gross margin, we are pleased with our performance through the first half of the year and expect our second half gross margin rate to approximate that of the first half.

Scott James Robinson: For the full year higher operating expenses as a rate of sales should partially offset the gross margin increase as we continue investing for future profitable growth.

Scott James Robinson: We are expecting additional benefits for the full year from non operating items, including higher other income and a tax rate at the lower end of our previously guided range overall.

Scott James Robinson: We are increasing our EPS guidance range to between $3 24.

Scott James Robinson: And $3 32.

Scott James Robinson: A <unk> <unk>.

Scott James Robinson: Or 8% increase at the midpoint from adjusted EPS of $3.04.

Scott James Robinson: 2023.

Scott J. Robinson: In summary, we are on track to deliver higher levels of profitability on higher levels of sales to our shareholders in fiscal 2024. Now on to our balance sheet and cash flow outlook. Consistent with previous expectations, we plan to deliver cash conversion above historical averages fiscal year and with a range of between $95,000 and $100,000 and 105%. Additionally, we are tightening our capital expenditures forecast to between $95 million and $110 million from a range of $95 million to $115 million previously.

Scott James Robinson: In summary, we are on track to deliver higher levels of profitability.

Scott James Robinson: Higher levels of sales to our shareholders in fiscal 2024.

Scott J. Robinson: Now on to our balance sheet and cash flow outlook. Consistent with previous expectations, we plan to deliver cash conversion above historical averages fiscal year and with a range of between 95% and 105%. We are tightening our capital expenditures forecast to between $95 million to $110 million, from a range of $95 million to $115 million previously. Capital expenditures are weighted towards growth investments, including capacity, and new products and technologies across all three things. In terms of strategic capital deployment, our strategy has not changed. Our first priority is to reinvest back into Donaldson, either organically, as I just outlined, or inorganically through M&A, primarily in life sciences or industrial services, both areas in which our pipeline remains strong. We are also steadfast in our commitment to returning value to our shareholders through our dividends, which we have been increasing for 28 consecutive years and paying for 68 years, and also through our share repurchase. Now, I'll turn the call back to Todd.

Speaker Change: Now onto our balance sheet and cash flow outlook.

Scott James Robinson: Consistent with previous expectations, we plan to deliver a cash conversion above historical average this fiscal year.

Scott James Robinson: And with a range of between 95.

Scott James Robinson: And 105%.

Scott James Robinson: We are tightening our capital expenditure forecast to between $95 million to $110 million from a range of 95 million to $115 million previously.

Scott James Robinson: Capital expenditures are weighted towards growth investments, including capacity and new products and technologies across all three things. In terms of strategic capital deployment, our strategy has not changed. Our first priority is to reinvest back into Donaldson, either organically, as I just outlined, or inorganically through M&A, primarily in life sciences or industrial services, both areas in which our pipeline remains strong. We are also steadfast in our commitment to returning value to our shareholders through our dividends, which we have been increasing for 28 consecutive years and paying for 68 years, and also through our share repurchase. Now, I'll turn the call back to Todd.

Scott James Robinson: Capital expenditures are weighted towards growth investments.

Scott James Robinson: Adding capacity and new products and technologies across all three segments.

Scott J. Robinson: In terms of strategic capital deployment, our strategy has not changed. Our first priority is to reinvest back into Donaldson, either organically, as I just outlined, or inorganically through M&A, primarily in life sciences or industrial services, both areas in which our pipeline remains strong. We are also steadfast in our commitment to returning value to our shareholders through our dividends, which we have been increasing for 28 consecutive years and paying for 68 years, and also through our share repurchases. Now, I'll turn the call back to Tod.

Scott James Robinson: In terms of strategic capital deployment, our strategy has not changed.

Scott James Robinson: Our first priority is to reinvest back into Donaldson either organically as I just outlined are inorganically through M&A, primarily in life Sciences, our industrial services.

Scott James Robinson: Both areas in which our pipeline remains strong.

Scott James Robinson: We are also steadfast in our commitment to returning value to our shareholders through our dividends, which we have been increasing for 28 consecutive years and pain for 68 years.

Scott James Robinson: And also through our share repurchases now I will turn the call back to Tom.

Tod E. Carpenter: Thanks, Scott. Donaldson Company is in as strong a position as ever to remain the leader in technology-led filtration while fulfilling our purpose of advancing filtration for a cleaner world. I am confident in our ability to achieve our investor day targets. We are committed to our fiscal 2026 financial and strategic goals, including in life sciences, and our 2030 ESG ambitions, and I'd like to close with some progress we've made on both fronts. First, on life sciences, and in particular, our Opportunity Pipeline for Advanced Therapy. We are presently supporting the development of over 100 therapies across cell and gene therapy, mRNA vaccine, and traditional vaccine modalities. However, most of these therapies are in the preclinical stage.

Tom: Thanks, Scott Donaldson company is in as strong a position as ever to remain the leader in technology led filtration, while fulfilling our purpose of advancing filtration for a cleaner world.

Scott James Robinson: I am confident in our ability to achieve our investor day targets.

Tom: We are committed to our fiscal 2026 financial and strategic goals, including in life Sciences, and our 2030, ESG ambitions and I'd like to close with some progress we've made on both fronts.

Scott James Robinson: First on life Sciences, and in particular, our opportunity pipeline for advanced therapies.

Tod E. Carpenter: First, on life sciences, and in particular, our opportunity pipeline for advanced therapies. We are presently supporting the development of over 100 therapies across cell and gene therapy, mRNA vaccine, and traditional vaccine modalities. Most of these therapies are in the preclinical stage, however we do have some that are in clinical trials, and a few that will likely be entering commercial production this calendar year. Importantly, these include projects originated organically and from our Univercells, Purilogics, and Isolere Bio acquisitions. While the therapy development process can take over a decade, we are extremely happy with the pace at which we are building and executing our pipeline. Our technology significantly increases bioprocessing productivity and purity and is helping bring more affordable, life-changing therapies to those in need. Donaldson is creating long-term value for our stakeholders through our products and also our practice. Through our ESG strategy, we aim to have a positive impact today and create a thriving future for people and the planet. To that end, as of the end of fiscal 2023, we reduced our scope one and scope two greenhouse gas emissions by 25% from our fiscal 2021 baseline, grew our renewable energy usage by approximately 20% over the same period, and in fiscal 2023, we donated $1.2 million through the Donaldson Foundation to benefit communities with a focus on educational initiatives.

Scott James Robinson: We are presently supporting the development of over 100 therapies across the cell and gene therapy.

Scott James Robinson: <unk> vaccine and traditional vaccine modalities most.

Scott James Robinson: Most therapies are in the preclinical stage. However, we do have some that are in clinical trials and a few that will likely be entering the commercial production this calendar year.

Tod E. Carpenter: However, we do have some that are in clinical trials and a few that will likely be entering commercial production this calendar year. Importantly, these include projects that originated organically and from our universe cells, PureLogix, and Isolair BioAcquisition. While the therapy development process can take over a decade, we are extremely happy with the pace at which we are building and executing our pipeline. Our technology significantly increases bioprocessing productivity and purity and is helping bring more affordable, life-changing therapies to those in need. Donaldson is creating long-term value for our stakeholders through our products and also our practice. Through our ESG strategy, we aim to have a positive impact today and create a thriving future for people and the planet. To that end, as of the end of fiscal 2023, we reduced our scope one and scope two greenhouse gas emissions by 25% from our fiscal 2021 baseline, grew our renewable energy usage by approximately 20% over the same period, and in fiscal 2023, we donated $1.2 million through the Donaldson Foundation to benefit communities with a focus on educational initiatives.

Scott James Robinson: Importantly, these include projects originated organically and from our universe cells, Virologic and Eissler bio acquisitions, while the therapy development process can take over a decade, we're extremely happy with the pace at which we are building and executing our pipeline.

Scott James Robinson: Our technology significantly increases bio processing productivity and purity and is helping bring more affordable life changing therapies to those in need.

Scott James Robinson: Donaldson is creating long term value for our stakeholders through our products and also our practices.

Tod E. Carpenter: Donaldson is creating long-term value for our stakeholders through our products and also our practices. Through our ESG strategy, we aim to have a positive impact today and create a thriving future for people and the planet. To that end, as of the end of fiscal 2023, we reduced our Scope 1 and Scope 2 greenhouse gas emissions by 25% from our fiscal 2021 baseline, grew our renewable energy usage by approximately 20% over the same period, and in fiscal 2023, we donated $1.2 million dollars through the Donaldson Foundation to benefit communities with a focus on educational initiatives. We look forward to publishing our full fiscal 2023 sustainability report in the spring, which will provide additional details on our progress. To close, I would like to thank all of the Donaldson employees who are critical every day to our customer success and in building Donaldson's future. With that, I will now turn the call back to the operator to open the line for questions. At this time, I would like to remind everyone that in order to ask a question, simply press star then the number one on your telephone keypad. Your first question is from the line of Nathan Jones with People. Please go ahead. Good morning, everyone. Good morning, Nathan. I'll start off on life sciences.

Scott James Robinson: Our ESG strategy, we aim to have a positive impact today and create a thriving future for people and the planet.

Scott James Robinson: To that end as of the end of fiscal 2023.

Scott James Robinson: Reduced our scope, one and scope two greenhouse gas emissions by 25% from our fiscal 2021 baseline.

Scott James Robinson: Grew our renewable energy usage by approximately 20% over the same period.

Scott James Robinson: And in fiscal 2023, we don't need $1 $2 million through the Donaldson Foundation to benefit communities with a focus on educational initiatives.

Tod E. Carpenter: We look forward to publishing our full fiscal 2023 sustainability report in the spring, which will provide additional details on our progress. To close, I would like to thank all of the Donaldson employees who are critical every day to our customer success and in building Donaldson's future. With that, I will now turn the call back to the operator to open the line for questions. At this time, I would like to remind everyone that in order to ask a question, simply press star then the number one on your telephone keypad. Your first question is from the line of Nathan Jones with People. Please go ahead. Good morning, everyone. Good morning, Nathan. I'll start off on life sciences.

Scott James Robinson: We look forward to publishing our full fiscal 2023 sustainability report in the spring, which will provide additional details on our accomplishments.

Tod E. Carpenter: To close, I would like to thank all of the Donaldson employees who are critical every day in our customer success and in building Donaldson's future. With that, I will now turn the call back to the operator to open the line for questions. At this time, I would like to remind everyone that in order to ask a question, simply press star then the number one on your telephone keypad. Your first question is from the line of Nathan Jones with People. Please go ahead. Good morning, everyone. Good morning, Nathan. I'll start off on life sciences.

Scott James Robinson: To close I would like to thank all of the Donaldson employees, who are critical every day in our customer success and in building donaldson's future.

Scott James Robinson: With that.

Speaker Change: I will now turn the call back to the operator to open the line for questions.

Operator: At this time, I would like to remind everyone in order to ask a question, simply press star then the number one on your telephone keypad. Your first question is from the line of Nathan Jones with Stifel. Please go ahead. Good morning, everyone. Good morning, Nathan. I'll start off on life sciences.

Speaker Change: At this time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad.

Speaker Change: Your first question is from the line of Nathan Jones with Stifel. Please go ahead.

Nathan Hardie Jones: Good morning, everyone.

Nathan Hardie Jones: Good morning Nathan.

Operator: Good morning, everyone. Good morning, Nathan. I'll start off on life sciences. Obviously, you know, there's quite a big ramp in the back half of fiscal 24. We've been expecting that for a few quarters, based on the guidance and based on the ramping up of some of these acquisitions. So I'm just initially hoping to get some color on how that ramps up in the back half of the year, is it kind of a linear ramp up as we go in the back half, or there's some step up in 3Q and flattens out in 4Q. And then just the contribution of the acquisitions ramping up versus rebounding the distributor business versus expansion of the food and beverage business. Just any additional color you can give us on how you see the back half playing out? Yeah, sure. So this is Todd.

Nathan Jones: Good morning, everyone.

Operator: Good morning, Nathan. I'll start off on life sciences. Obviously, you know, there's quite a big ramp in the back half of fiscal 24. We've been expecting that for a few quarters, based on the guidance and based on the ramping up of some of these acquisitions. So I'm just initially hoping to get some color on how that ramps up in the back half of the year, is it kind of a linear ramp up as we go in the back half, or there's some step up in 3Q and flattens out in 4Q. And then just the contribution of the acquisitions ramping up versus rebounding the distributor business versus expansion of the food and beverage business. Just any additional color you can give us on how you see the back half playing out? Yeah, sure. So this is Todd.

Tod E. Carpenter: Good morning, Nathan.

Nathan Hardie Jones: I'll start off and on life Sciences.

Operator: I'll start off on life sciences. Obviously, you know, there's quite a big ramp in the back half of fiscal 24. We've been expecting that for a few quarters, based on the guidance and based on the ramping up of some of these acquisitions. So I'm just initially hoping to get some color on how that ramps up in the back half of the year, is it kind of a linear ramp up as we go in the back half, or there's some step up in 3Q and flattens out in 4Q. And then just the contribution of the acquisitions ramping up versus rebounding the distributor business versus expansion of the food and beverage business. Just any additional color you can give us on how you see the back half playing out? Yeah, sure. So this is Todd.

Nathan Jones: I'll start off on life sciences. Obviously, you know, there's quite a big ramp in the back half of fiscal '24. We've been expecting that for a few quarters, based on the guidance and based on the ramping up of some of these acquisitions. So I'm just initially hoping to get some color on how that ramps up in the back of the year, is it kind of a linear ramp up as we go in the back half, or there's some step up in 3Q and flattens out in 4Q. And then just the contribution of the acquisitions ramping up versus rebound in the disk drive business versus expansion of the food and beverage business. Just any additional color you can give us on how you see the back half playing out?

Nathan Hardie Jones: Obviously, you know, there's quite a big ramp in the back half of fiscal 24. We've been expecting that for a few quarters, based on the guidance and based on the ramping up of some of these acquisitions. So I'm just initially hoping to get some color on how that ramps up in the back half of the year, is it kind of a linear ramp up as we go in the back half, or there's some step up in 3Q and flattens out in 4Q. And then just the contribution of the acquisitions ramping up versus rebounding the distributor business versus expansion of the food and beverage business. Just any additional color you can give us on how you see the back half playing out? Yeah, sure. So this is Todd.

Nathan Hardie Jones: Obviously, there is quite a big ramp in the back half of fiscal 'twenty four.

Nathan Hardie Jones: We've been expecting that for a few quarters based on the guidance and based on the ramping up of some of these acquisitions.

Speaker Change: I am just.

Speaker Change: Initially hoping to get some color on.

Speaker Change: How that ramps up in the back of the year is it kind of a linear ramp up as we go into the back half or there is some step up in <unk> and flattened out in <unk>.

Speaker Change: And then just the contribution of.

Speaker Change: The acquisitions ramping up versus rebounded in the disk drive business.

Speaker Change: <unk> initiated in beverage business, just any additional color you can give us on how you see the back half playing out.

Tod E. Carpenter: Yeah, sure. So this is Tod. So when you really look across the whole portfolio in life sciences, everyone is contributing. They're contributing as expected, as we have really planned out the full year, and that's the contribution of the acquisitions to the extent that we plan them to, with a mix, as well as our overall traditional base businesses. I would tell you that to support the second half ramp up, that it is important that we are ramping up those businesses, and they'll contribute in the second half, that our backlogs do support the second half projections and the math that you properly call out. And additionally, the way to look at that is we have some very large projects, bioreactor-based projects out of our Solaris acquisition that go in the second half. And then it's really a myriad of different technologies that will really combine to deliver the outlook. Okay, now I guess my follow-up question is around the investments that you've made, as I said, primarily in life sciences. We're seeing some increase in SG&A as a percentage of sales. I'm just wondering about how that plays out going forward. Like, are you continuing to make investments in 2025? Will they kind of be ramping up at the same pace as 2024?

Tod E. Carpenter: Yeah, sure. So this is Tod. So when you really look across the whole portfolio in life sciences, everyone is contributing. They're contributing as expected, as we have really planned out the full year, and that's the contribution of the acquisitions to the extent that we plan them to, with a mix, as well as our overall traditional base businesses. I would tell you that to support the second half ramp up, that it is important that we are ramping up those businesses, and they'll contribute in the second half, that our backlogs do support the second half projections and the math that you properly call out. And additionally, the way to look at that is we have some very large projects, bioreactor-based projects out of our Solaris acquisition that go in the second half, and then it's really a myriad of different technologies that will really combine to deliver the outlook.

Speaker Change: Yeah sure. So this is Todd.

Tod E. Carpenter: So when you really look across the whole portfolio in life sciences, everyone is contributing. They're contributing as expected, as we have really planned out the full year, and that's the contribution of the acquisitions to the extent that we plan them to, with a mix, as well as our overall traditional businesses. I would tell you that to support the second ramp up, that it is important that we are ramping up those businesses, and they'll contribute in the second half, that our backlogs do support the second half projections and the map that you correctly call out. And additionally, the way to look at that is that we have some very large projects, bioreactor-based projects out of our solaris acquisitions that go in the second half.

Todd: When you really look across the whole portfolio in life Sciences is contributing there.

Todd: They are contributing as expected as we have really <unk>.

Todd: Planned out the full year.

Todd: And thats the contribution of the acquisitions to the extent that.

Todd: We plan them too.

Todd: With the mix as well as our.

Todd: Our overall traditional base businesses.

Todd: I'd tell you that.

Todd: To support the second half ramp up.

Todd: That that it is important that we are ramping up those businesses and they all contributed in the second half that our backlogs do support.

Todd: The second half projections and the math that you properly callout.

Todd: And Additionally, the way to look at that is we have some very large projects by our reactivation projects out of our Solaris acquisition that though in the second half and then it's really a myriad above.

Tod E. Carpenter: And then it's really a myriad of different technologies that will really combine to deliver the outlook. Okay, now I guess my follow-up question is around the investments that you've made, as I said, primarily in life sciences. We're seeing some increase in SG&A as a percentage of sales. I'm just wondering about how that plays out going forward. Like, are you continuing to make investments in 2025? Will they kind of be ramping up at the same pace as 2024?

Todd: Different technologies.

Todd: That will really combined to deliver the outlook.

Nathan Jones: Okay, then I guess my follow-up question is around the investments that you've made, like I said, primarily in life sciences. We're seeing some increase in SG&A as a percentage of sales. I'm just wondering about how that plays out going forward. Like, are you continuing to make investments in 2025? Will they kind of be ramping up at the same pace as 2024? Should we start to see, you know, a time where we start to see some leverage on the SG&A line rather than building expenses to support this growth? But just how do you see that playing out, I guess, maybe '25 and beyond?

Speaker Change: Okay. Then I guess my follow up is around the investments that you've made like I said, primarily in life Sciences. We've said, we're seeing some increase in SG&A as a percentage of sales.

Speaker Change: I'm just wondering about that.

Speaker Change: How that plays out going forward like are you continuing to make investments in 2025 will be ramping up at the same pace as 2024 should we start to see.

Scott James Robinson: Should we start to see, you know, a time when we start to see some leverage on the SG&A line rather than building expenses to support this growth? But just how do you see that playing out, I guess, maybe 2025 and beyond? Yeah. Hi Scott. Hi Nathan.

Should we start to see, you know, a time when we start to see some leverage on the SG&A line rather than building expenses to support this growth? But just how do you see that playing out, I guess, maybe 2025 and beyond? Yeah.

Speaker Change: A time, where we start to see some leverage on the SG&A line rather than building expenses to support this growth, but just how you see that playing out I guess, maybe 25 and beyond.

Scott: Yeah, Hi, Scott Nathan This is Scott.

Hi Scott. Hi Nathan.

Scott J. Robinson: Yeah, hi Scott--or, hi Nathan, this is Scott. You know, certainly we're seeing an increase in OpEx associated with the acquisitions this year as we lap the initial completion of the acquisitions. We want to continue to deploy capital into the life sciences business, and as you know, we've bought some pre-revenue companies that are beginning to scale. So, I mean I think the trends will become less stark in the future. As the business scales, we certainly are going to continue to invest in life sciences, but, you know, we reiterated our investor day targets for operating margin today. So, we still see higher levels of profitability on higher sales. So, I think we're going to continue to invest, but I think over time as the revenues start to come at a good rate, the rate of increases will slow, and our margins will mix up. And so, we'll be able to deliver higher levels of profitability on higher sales.

Hi Nathan. This is Scott. You know, certainly we're seeing an increase in OPEX associated with the acquisitions this year. As we approach the initial completion of the acquisitions, we want to continue to deploy capital into the life sciences business. And as you know, we've got some pre-revenue companies that are beginning to scale. So, I think the trends will become less stark in the future as the business scales. We certainly are going to continue to invest in life sciences.

Scott James Robinson: This is Scott. You know, certainly we're seeing an increase in OPEX associated with the acquisitions this year. As we approach the initial completion of the acquisitions, we want to continue to deploy capital into the life sciences business. And as you know, we've got some pre-revenue companies that are beginning to scale. So, I think the trends will become less stark in the future as the business scales. We certainly are going to continue to invest in life sciences.

Scott: Certainly we've seen an increase in the opex associated with the acquisitions. This year as we lap. The initial completion of the acquisitions, we want to continue to deploy capital into the life Sciences business.

Scott: And as you know we've got some pre revenue companies that are beginning to scale.

Scott: I think the trends will become less dark in the future.

Scott: As a business scale, we certainly are going to continue to invest.

Scott: In life Sciences, but we reiterated our investor day targets for operating margin today, So we still see higher levels of profitability on higher sales.

Scott James Robinson: But, you know, we reiterated our investor day targets for operating margin today. So, we still see higher levels of profitability on higher sales. So, I think we're going to continue to invest. But I think over time, as revenues start to come in at a good rate, the rate of increases will slow, and our margins will mix up.

Scott: I think we're going to continue to invest.

Scott: Over time as the revenue start to come in at a good rate the rate of increases will slow.

Scott: And our margins will mix up until we'll be able to deliver higher levels of profitability of hires.

Scott James Robinson: And so, we'll be able to deliver higher levels of profitability on higher. Yeah, and I think Nathan, just kind of building on that, I would suggest to you that the plateau of those investments is ahead of us. Great, thanks for taking my question. Your next question is from the line of Angel Castillo with Morgan Stanley. Please go ahead. Hi, this is Grace from Andrew.

And so, we'll be able to deliver higher levels of profitability on higher.

Yeah, and I think Nathan, just kind of building on that, I would suggest to you that the plateau of those investments is ahead of us. Great, thanks for taking my question. Your next question is from the line of Angel Castillo with Morgan Stanley. Please go ahead. Hi, this is Grace from Andrew.

Tod E. Carpenter: Yeah, and I think, Nathan, just kind of building on that, I would suggest to you that the plateau of those investments is ahead of us.

Scott: Nathan just kind of building on that.

Nathan Hardie Jones: I would suggest to you that the plateau of those investments is ahead of us.

Nathan Hardie Jones: Great. Thanks for taking my questions.

Great, thanks for taking my question. Your next question is from the line of Angel Castillo with Morgan Stanley. Please go ahead. Hi, this is Grace from Andrew.

Nathan Jones: Great, thanks for taking my question.

Operator: Your next question is from the line of Angel Castillo with Morgan Stanley. Please go ahead. Hi, this is Grace from Andrew.

Operator: Your next question is from the line of Angel Castillo with Morgan Stanley. Please go ahead.

Nathan Hardie Jones: Your next question from the line of the Angel Castillo with Morgan Stanley. Please go ahead.

Angel Castillo: Hi, this is Grace on for Andrew. Thank you for the question. So you lowered off-road equipment [inaudible] digit to low double digit. So can you help us unpack that a bit more and talk about what you're seeing in the various off-road markets you serve? Thank you.

Angel Castillo: Hi, This is grace on for Andrew Thank you for the question.

Grace: Thank you for the question. So you lowered off-road equipment all the way from Michigan digit to low double digit. So can you help us unpack that a bit more and talk about what you're seeing in the various off-road markets you serve? Thank you. Sure. And across that end market, as a reminder, we consider off-roads to comprise construction, agriculture, and mining. Construction and mining had no change within the quarter.

Thank you for the question. So you lowered off-road equipment all the way from Michigan digit to low double digit. So can you help us unpack that a bit more and talk about what you're seeing in the various off-road markets you serve? Thank you.

Speaker Change: So you lowered off break when all up from mid <unk> to low double digits. So can you help us unpack that a bit more and talk about what you're seeing in the various auto Marcus you Sir Thank you.

Speaker Change: Sure and across that end market.

Speaker Change: As a reminder, we consider off road to comprise construction agriculture, and mining construction and agriculture construction and mining had no change within the quarter. This is an agricultural story and it's a broad based story globally and Thats really why.

Tod E. Carpenter: Sure. And across that end market, as a reminder, we consider "off-road" to comprise construction, agriculture, and mining. Construction and agri--construction and mining had no change within the quarter. This is an agricultural story, and it's a broad-based story, globally, and that's really why we have reduced the outlook within that category. It's well-publicized across our customer base in ag, if you just continue to follow the stories that they're telling, we have done everything to bake what we know into this particular guide.

Tod E. Carpenter: This is an agricultural story, and it's a broad-based story globally, and that's really why we have reduced the outlook within that category. It's well-publicized across our customer base in ag, so if you just continue to follow the stories that they're telling, we have done everything to bake what we know into this particular guide.

Speaker Change: We have reduced the outlook.

Speaker Change: Within that category.

Speaker Change: It's well publicized across our customer base and add if you just continue to follow the stories that theyre telling.

Speaker Change: We have done.

Speaker Change: Everything to bake, what we know into this particular guidance.

Speaker Change: Got it got it thank you.

Tod E. Carpenter: Thank you. And can you also talk about your M&A pipeline and whether we should pursue any incremental opportunities as more imminent? We continue to work on the M&A portion, and the intergovernmental portion of our strategy really quite well. We'd suggest to you that our pipeline remains strategic, robust, and we'll continue to work on it directly aligned with our strategies. Then, as Scott correctly called out in the script, we primarily lean toward life sciences and industrial-based service acquisitions at this point. All right, thank you. Your next question comes from the line of Brian Blair with Oppenheimer. Please go ahead. Thank you. Good morning, everyone.

Angel Castillo: Got it, thank you. And can you also talk about your M&A pipeline and whether we should view any incremental opportunities as more imminent?

Speaker Change: I'll also talk about your M&A pipeline or whether we should be any incremental opportunities on asthma.

Speaker Change: We continue to work the M&A portion of the unit revenue portion of our strategy really quite well, we would suggest to you that our our pipeline remain strategic.

We continue to work on the M&A portion, and the intergovernmental portion of our strategy really quite well. We'd suggest to you that our pipeline remains strategic, robust, and we'll continue to work on it directly aligned with our strategies. Then, as Scott correctly called out in the script, we primarily lean toward life sciences and industrial-based service acquisitions at this point. All right, thank you. Your next question comes from the line of Brian Blair with Oppenheimer. Please go ahead. Thank you. Good morning, everyone.

Tod E. Carpenter: We continue to work the M&A portion, and the [inaudible] portion of our strategy really quite well. We'd suggest to you that our pipeline remains strategic, robust, and we'll continue to work on it directly aligned with our strategies. And, as Scott correctly called out in the script, we primarily lean toward life sciences and industrial-based service acquisitions at this point.

Speaker Change: Robust.

Speaker Change: And we will continue to work on it.

Speaker Change: Directly aligned.

Speaker Change: With our strategies and as Scott properly called out in the script, we primarily leaned toward.

Speaker Change: Life Sciences, and industrial base service acquisitions at this point.

Speaker Change: Alright, thank you.

All right, thank you. Your next question comes from the line of Brian Blair with Oppenheimer. Please go ahead. Thank you. Good morning, everyone.

Angel Castillo: All right, thank you.

Your next question comes from the line of Brian Blair with Oppenheimer. Please go ahead. Thank you. Good morning, everyone.

Operator: Your next question comes from the line of Bryan Blair with Oppenheimer. Please go ahead.

Speaker Change: Your next question comes from the line of Bryan Blair with Oppenheimer. Please go ahead.

Brian C. Sponheimer: Thank you and good morning, everyone.

Bryan Blair: Thank you. Morning, everyone.

Speaker Change: Okay.

Brian Blair: Morning, morning. Todd, you offered quite a bit with regard to the bioprocessing pipeline and the exciting opportunities ahead, and I'm sorry if I missed this within the detail provided, but is there any way to quantify the continued ramp-up of the opportunity set if we look forward, however many years is appropriate to factor in? You know, Brian, as you know, we follow them directly where they're at preclinical, phase 1, phase 2, phase 3. We aren't publicizing where they are, frankly, out of contractual obligation not to do so.

Multiple: Morning, Bryan.

Speaker Change: Alright.

Bryan Blair: Tod, you offered quite a bit with regard to the bioprocessing pipeline and the exciting opportunities ahead, and I'm sorry if I missed this within the detail provided, but is there any way to quantify, you know, the continued ramp in the opportunity set if we look forward however many years is appropriate to factor in? You know, Brian, as you know, we follow them directly where they're at preclinical, phase 1, phase 2, phase 3. We aren't publicizing where they are, frankly, out of contractual obligation not to do so.

Brian C. Sponheimer: Hi, Jeff quite a bit with regard to the bioprocess and pipeline and the exciting opportunities ahead, and I am sorry, if I missed this within the detail provided but is there any way to quantify.

Brian C. Sponheimer: The continued ramp in.

Brian C. Sponheimer: The opportunity set equivalent.

Speaker Change: However, many years as appropriate to.

Speaker Change: To factor in.

Jeff: Yes, Brian is as you know we follow them.

Tod E. Carpenter: You know, Bryan, as you know, we follow them directly where they're at preclinical, Phase 1, Phase 2, Phase 3. We aren't publicizing where they are, frankly, out of contractual obligation not to do so. That portion of what we're supporting is really not our story to tell at this point, it's usually our customer-based story. We'll do everything in our power to help you understand where we are as far as quantity as we ramp up our opportunity backlog, and that, we feel, is the best way to approach this.

Speaker Change: Directly where they are where they are at preclinical phase one phase II phase III.

Speaker Change: Publicising, where they are frankly at a contractual obligation not to do so that's that portion of what we're supporting is really not our store yourself at this point it's usually.

Tod E. Carpenter: That portion of what we're supporting is really not our story to tell at this point. It's usually our customer-based story. We'll do everything in our power to help you understand where we are as far as quantity, as we ramp up our opportunity backlog. And that, we feel, is the best way to approach it. Okay, I understand. That's fair. And your fiscal 2QB and the guidance areas were based on margin strength, so solid execution from your team overall.

That portion of what we're supporting is really not our story to tell at this point. It's usually our customer-based story. We'll do everything in our power to help you understand where we are as far as quantity, as we ramp up our opportunity backlog. And that, we feel, is the best way to approach it.

Speaker Change: Our customer base story, but we will do everything in our power to help you understand where we are as far as quantity as we ramp our opportunity backlog.

Speaker Change: And Thats that we feel is the best way to approach it.

Speaker Change: Okay understood Thats fair.

Okay, I understand. That's fair. And your fiscal 2QB and the guidance areas were based on margin strength, so solid execution from your team overall. Noted, please correct me if I'm wrong, the life sciences business should be about even for the year at the level set on the new margin outlook. How should we think about, you know, the level of margin in mobile and industrial in the back half and then circling back to life sciences? What's a reasonable exit rate to assume for the jumping off point going into fiscal 2024? Yeah, so there's quite a bit there in the soup, Brian.

Bryan Blair: Okay, understood, that's fair. In your fiscal 2QB and the guidance areas were based on margin strength, so solid execution from your team overall. I believe it was noted, please correct me if I'm wrong, the life sciences should be about break even for the year. To the level set on the new margin outlook, how should we think about, you know, the level of margin in mobile and industrial in the back half, and then circling back to life sciences, what's a reasonable exit rate to assume for jumping off point going into fiscal '25?

Speaker Change: And your fiscal <unk> and <unk>.

Speaker Change: Guidance range based on margin strength.

Speaker Change: Solid execution from your team overall.

Speaker Change: Fleet It was.

Scott James Robinson: Noted, please correct me if I'm wrong, the life sciences business should be about even for the year at the level set on the new margin outlook. How should we think about, you know, the level of margin in mobile and industrial in the back half and then circling back to life sciences? What's a reasonable exit rate to assume for the jumping off point going into fiscal 2024? Yeah, so there's quite a bit there in the soup, Brian.

Speaker Change: Noted please correct me if I'm wrong it life science it can be about breakeven.

Speaker Change: For the year.

Speaker Change: To level set.

Speaker Change: On.

Speaker Change: Margin outlook, how should we think about.

Speaker Change: The level of margin in mobile and industrial in the back half and then circling back to life Sciences, Whats a reasonable exit rates to assume our jumping off point going into fiscal 'twenty.

Speaker Change: Yes.

Scott J. Robinson: Yeah, so there's quite a bit there in the soup, Brian, but we, you know, I said in the script that we expect our gross margins in the back half to be relatively flat as compared to the first half. If you think about our operating margin guidance you know for the year at the midpoint of 15.2, you'll see there's a bit of a ramp up in terms of operating margin in Q3 and Q4. In terms of our revenues, you know, I would say we've kind of returned to normal seasonality, kind of the 48%, 52% range. If you look at the first half and then the total guidance, you know, we mentioned that we expected life sciences to be about break even.

Speaker Change: There's quite a bit there and assume Bryan.

Speaker Change: Brian but I.

Scott James Robinson: But we, you know, I said in the script that we expect our gross margins in the back half to be relatively flat as compared to the first half. But if you think about our operating margin guidance for the year at the midpoint of 15.2, you'll see there's a bit of a ramp up in terms of operating margin in Q3 and Q4. In terms of our revenues, you know, I would say we've kind of returned to normal seasonality in the 48, 52% range. If you look at the 1st half and then the total guidance, you know, we mentioned that we expected life sciences to be about break even.

Speaker Change: <unk> said in his script that we expect our gross margins.

Speaker Change: In the back half to be.

Speaker Change: Relatively flat as compared to the first half if you think about our operating margin guidance.

Speaker Change: For the year at the midpoint of $15, two youll see theres a bit of a ramp up.

Speaker Change: In terms of operating margin in Q3, Q3, and Q4 in terms of our revenues that you know I would say, we've kind of returned to normal seasonality and kind of the 48, 52% range. If you look at the first half and then the total guidance.

Scott J. Robinson: If you look at the first half and then the total guidance, you know, we mentioned that we expected life sciences to be about break even. So clearly, you know, as we ramp there, the profitability will improve. And then, kind of for the future, I would kind of direct you back to the investor day targets for operating margin. I mean, we're still committed to, you know, achieving 16% at the midpoint, you know, from a current guidance of 15.2, so we're on a three year journey to deliver higher levels of profitability and higher sales and, you know, going from 14.6 to 15.2 this year with a goal of 16 after the next two years, I think would be a good achievement for the company and something that we're definitely focused on.

Speaker Change: We mentioned that we expected life sciences to be about breakeven, but clearly as we ramp their profitability will improve and then kind of for the future I would kind of directly back to the Investor day targets for operating margin I mean, we're still committed to it.

Scott James Robinson: But clearly, you know, as we ramp there, the profitability will improve. And then, kind of for the future, I would kind of direct you back to the investor day targets for operating margin. I mean, we're still committed to, you know, achieving 16% at the midpoint. You know, from a current guidance of 15.2, so we're on a 3 year journey to deliver higher levels of profitability and higher sales and, you know, going from 14.6 to 15.2 this year with a goal of 16 after the next 2 years, I think would be a good achievement for the company and something that we're definitely focused on. Okay, all understood. I appreciate the detail. Thanks again.

But clearly, you know, as we ramp there, the profitability will improve. And then, kind of for the future, I would kind of direct you back to the investor day targets for operating margin. I mean, we're still committed to, you know, achieving 16% at the midpoint. You know, from a current guidance of 15.2, so we're on a 3 year journey to deliver higher levels of profitability and higher sales and, you know, going from 14.6 to 15.2 this year with a goal of 16 after the next 2 years, I think would be a good achievement for the company and something that we're definitely focused on.

Speaker Change: <unk>, 16% at the midpoint.

Speaker Change: Our current guidance of 15 to around a three year journey to deliver higher levels of profitability on higher sales.

Speaker Change: Loan from 14, 6% to 15, two this year.

Speaker Change: With the goal of 16 after the next two years I think is a.

Speaker Change: It would be a good achievement for the company and something that we're definitely focused on.

Speaker Change: Okay.

Speaker Change: Okay no understood I appreciate the detail thanks again.

Bryan Blair: Okay, all understood, appreciate the detail. Thanks again.

Speaker Change: Okay.

Speaker Change: Your next question is from Noah. Your next question is from the line of Brian Drab with William Blair. Please go ahead.

Brian Blair: Your next question is from the line of Brian Drab with William Blair. Please go ahead. Hey, good morning. This is Tyler Hooten on for Brian.

Operator: Your next question is from the line--your next question is from the line of Brian Drab with William Blair. Please go ahead.

Brian Drab: Hey, good morning. This is Tyler Hooten on for Brian. Thanks for taking my questions. Just really quick, you mentioned a discussion with larger customers about pricing before. How have those discussions gone since you're still seeing some material inflation, and are those same discussions still going on with some of your new China and India customers?

Speaker Change: Hey, Good morning. This is Tyler hooton on for Brian Thanks for taking my questions.

Tyler Hooten: Thanks for taking my questions. They were just really quick. You mentioned a discussion with larger customers about pricing before. How have those discussions gone since you're still seeing some material inflation? And are those same discussions still going on with some of your new China and India customers? Yeah, so when you look, you're right; when you look across the macro situation that we have across our raw materials and such, it's really quite mixed. We certainly have not seen that abating significantly to the point where pricing discussions are changing. We are, we've returned to a more normal pricing cadence, whereby we still have the need to increase prices. This year, we have said that pricing will be an add of about 2% across the corporation. We did take pricing actions in January. Again, we're back to a more normal cadence, and the conversations really have not changed at all from just trying to deal with what's out there in the world. I appreciate the color on that.

Thanks for taking my questions. They were just really quick. You mentioned a discussion with larger customers about pricing before. How have those discussions gone since you're still seeing some material inflation? And are those same discussions still going on with some of your new China and India customers?

Tyler Hooton: Just really quick you mentioned discussion with larger customers about pricing before how are those discussions gone. Since you are still seeing some material inflation and are those same discussions still going on with some of your new China and India customers.

Speaker Change: Yes. So when you look you are right when you look across the macro.

Yeah, so when you look, you're right; when you look across the macro situation that we have across our raw materials and such, it's really quite mixed. We certainly have not seen that abating significantly to the point where pricing discussions are changing. We are, we've returned to a more normal pricing cadence, whereby we still have the need to increase prices. This year, we have said that pricing will be an add of about 2% across the corporation. We did take pricing actions in January. Again, we're back to a more normal cadence, and the conversations really have not changed at all from just trying to deal with what's out there in the world. I appreciate the color on that.

Tod E. Carpenter: Yeah, so when you look--you're right, when you look across the macro situation that we have across our raw materials and such, it's really quite mixed. We certainly have not seen that abating significantly to the point where pricing discussions are changing. We are, we've returned back to a more normal pricing cadence, whereby we still have the need to increase pricing. This year, we have said that pricing will be an add of about 2% across the corporation. We did take pricing actions in January. Again, we're back to a more normal cadence, and the conversations really have not turned at all from just trying to deal with what's out there in the world.

Speaker Change: Situation that we have across our raw materials and such its really quite next week.

Speaker Change: Certainly have not seen that.

Speaker Change: Abating significantly to the point of where pricing discussions are changing.

Speaker Change: We are we've returned back to a more normal pricing cadence.

Speaker Change: Thereby.

Speaker Change: We still have.

Speaker Change: The need to increase pricing of this year, we have said that pricing will be.

Speaker Change: <unk> of about 2% across the corporation.

Speaker Change: We did take pricing actions in January again, we're back to a more normal cadence.

Speaker Change: Conversations really have.

Speaker Change: Not.

Speaker Change: Turned at all.

Speaker Change: From just trying to deal with what's out there in the world.

Brian Drab: I appreciate the color on that. And then my final question is just a little more broad. Obviously, artificial intelligence has been a big focus for several industries. How could applications within Donaldson's portfolio benefit from AI, and have you guys been having those discussions? And then, kind of along with that, can you just kind of describe your opportunity with data center solutions? Thank you.

Speaker Change: Okay.

Speaker Change: Alright, I appreciate the color on that and then my final question is just a little more broad obviously artificial intelligence has been a big focus for several industries.

Tod E. Carpenter: And then my final question is just a little more broad. Obviously, artificial intelligence has been a big focus for several industries. How could applications within Donaldson's portfolio benefit from AI?

Speaker Change: How could applications within donaldson's portfolio benefit from AI and have you guys been having those discussions and then kind of along with that can you just kind of describe your opportunity with data center solutions. Thank you.

Tod E. Carpenter: And have you guys been having those discussions? And then, kind of along with that, can you just kind of describe your opportunity with data center solutions? Thank you.

Speaker Change: Sure. So so we continue you obviously talk about AI.

Tod E. Carpenter: Sure. So, we continue to obviously talk about AI within the company, and there's two approaches to that. One is, as you alluded to, what would we be able to put inside our product families. And then the other one is, is there operations or process efficiencies that we, can we gain by using AI inside the corporation.

Speaker Change: And there's two approaches to that one is as you alluded to what would we be able to put inside of our product families.

Speaker Change: And then the other one is as their operations or process efficiencies that can we can we gain by.

Speaker Change: By using AI inside the Corporation I would say our focuses more on the internal looking one relative to process improvement inside the company using AI rather than on the product based activities. The product based activities will likely be more in the sense of supporting our connected based products.

Tod E. Carpenter: I would say our focus is more on the internal-looking one, relative to process improvement inside the company using AI, rather than on the product-based activities. The product-based activities will likely be more in the sense of supporting our connected-based products for quicker analysis in our industrial-based segments for performance and outcomes of those industrial-based systems that we put out in the world. That's the way we look at it. Overall, AI is likely still early innings for us. Much like so many other corporations in the industrial space, we'll continue to invest and learn about it.

Speaker Change: For quicker analysis.

Speaker Change: In our industrial based segments for performance.

Speaker Change: <unk>.

Speaker Change: And outcomes of those industrial base.

Speaker Change: System that we've put out in the world. That's the way we look at it overall AI is likely still early innings for us much.

Tod E. Carpenter: Much like so many other corporations in the industrial space, we'll continue to invest in and learn about it. I appreciate it. I'll pass it on. Once again, if you would like to ask a question, simply press star, then the number one on your telephone keypad.

Much like so many other corporations in the industrial space, we'll continue to invest in and learn about it.

Speaker Change: Much like.

Speaker Change: Much like so many other corporations in the industrial space, we will continue to.

Speaker Change: To invest and learn about it.

I appreciate it. I'll pass it on. Once again, if you would like to ask a question, simply press star, then the number one on your telephone keypad.

Brian Drab: Appreciate it. I'll pass it on.

Speaker Change: I appreciate it I'll pass it on.

Once again, if you would like to ask a question, simply press star, then the number one on your telephone keypad. For next questions from the line of Lawrence Alexander with Jeffries, please go ahead. Good morning. Two quick ones. Could you tease out a little bit? You know how you're thinking about, sequentially, the development of the on-road market and, secondly, given how the life sciences business is evolving, how has your thinking changed, if at all, around the opportunity set for acquisition targets? Sure, so I'll take OnRoad

Operator: Once again, if you would like to ask a question, simply press star, then the number one on your telephone keypad. Your next question is from the line of Lawrence Alexander with Jefferies. Please go ahead.

Speaker Change: Once again, if you would like to ask a question simply press Star then the number one on your telephone keypad.

Speaker Change: Our next question is from the line of Laurence Alexander with Jefferies. Please go ahead.

Laurence Alexander: For next questions from the line of Lawrence Alexander with Jeffries, please go ahead. Good morning. Two quick ones. Could you tease out a little bit? You know how you're thinking about, sequentially, the development of the on-road market and, secondly, given how the life sciences business is evolving, how has your thinking changed, if at all, around the opportunity set for acquisition targets? Sure, so I'll take OnRoad

Laurence Alexander: Good morning, two quick ones could you tease out a little bit.

Good morning. Two quick ones. Could you tease out a little bit? You know how you're thinking about, sequentially, the development of the on-road market and, secondly, given how the life sciences business is evolving, how has your thinking changed, if at all, around the opportunity set for acquisition targets? Sure, so I'll take OnRoad

Laurence Alexander: Good morning, two quick ones. Could you tease out a little bit, you know, how you're thinking about, sequentially, the development of the on-road market, and, secondly, given how the life sciences business is evolving, how has your thinking changed, if at all, around the opportunity set for acquisition targets?

Laurence Alexander: How youre thinking about sequentially the development of the on road market and.

Laurence Alexander: Secondly.

Laurence Alexander: Given how the life Sciences business is evolving how has your thinking changed if at all.

Laurence Alexander: Around the opportunity set for acquisition targets.

Speaker Change: Sure. So I'll take on road first I would tell you on road for US as you kind of move around the world.

Tod E. Carpenter: Sure, so I'll take on-roads first. I would tell you on-road for us, as you kind of move around the world, the US remains as we would have expected it year over year. It's comfortable in higher rates. We expect to kind of bounce along where it is. In Europe, we have expected on-road to be, say, a bit more guarded than the United States, probably more of a, bit more of a negative outlook, but not dramatically so. And then over in Asia, obviously, we still have a lot of headwinds in China, as everyone does, and then Japan is also a bit more of a down market in the on-road sector. And so we've combined that geographical look and baked that within the guide, and that's how we see it going forward. As far as the life sciences acquisition piece, we have a pretty complicated puzzle. I think we showed many pieces of that to you in the Investor Day deck. If you follow along in the Investor Day deck and kind of look where we've added technology or process type of improvements, you'll be able to see where we believe we still have gaps. We are focused on filling out that puzzle, either organically or inorganically. We do not believe we have changed anything material in our approach to what we still have to buy, and we will remain active to fill out that puzzle either organically or inorganically and build on our life sciences segment.

Tod E. Carpenter: I would tell you OnRoad for us, as you kind of move around the world, the U.S. remains as we would have expected it year over year. It's comfortable at higher rates. We expect to kind of bounce along where it is. In Europe, we have expected OnRoad to be, say, a bit more guarded than in the United States, probably more of a negative outlook, but not dramatically so. And then over in Asia, obviously, we still have a lot of headwinds in China, as everyone does. And then Japan is also a bit more of a down market in the OnRoad sector.

Laurence Alexander: U S remains.

Laurence Alexander: We wouldn't have expected year over year, it's comfortable.

Laurence Alexander: In in higher rates.

Laurence Alexander: We expect it to kind of bounce along where it is.

Laurence Alexander: In Europe, we have expected on road to be safe.

Laurence Alexander: Say a bit more guarded than.

Laurence Alexander: And then the United States.

Laurence Alexander: Probably more of a.

Laurence Alexander: A bit more of a negative outlook, but not dramatically so.

Laurence Alexander: And then over in Asia, obviously, we still have a lot of headwinds in China as everyone does.

Laurence Alexander: And and then Japan is also.

Laurence Alexander: A bit more of a bit more of a down market in the on road sector and so we've combined that geographical look and bake that within the guide and that's how we see it planning.

Tod E. Carpenter: And so we've combined that geographical look and baked that within the guide, and that's how we see it going forward. As far as the life sciences acquisition piece, we have a pretty complicated puzzle. I think we showed many pieces of that to you in the Investor Day deck. If you follow along in the Investor Day deck and kind of look where we've added technology or process type of improvements, you'll be able to see where we believe we still have gaps. We are focused on filling out that puzzle, either organically or inorganically. We do not believe we have changed anything material in our approach to what we still have to buy, and we will remain active to fill out that puzzle either organically or inorganically and build on our life sciences segment. This is a follow-up from the line of Nathan Jones with Stiegel. Please go ahead.

And so we've combined that geographical look and baked that within the guide, and that's how we see it going forward. As far as the life sciences acquisition piece, we have a pretty complicated puzzle. I think we showed many pieces of that to you in the Investor Day deck. If you follow along in the Investor Day deck and kind of look where we've added technology or process type of improvements, you'll be able to see where we believe we still have gaps. We are focused on filling out that puzzle, either organically or inorganically. We do not believe we have changed anything material in our approach to what we still have to buy, and we will remain active to fill out that puzzle either organically or inorganically and build on our life sciences segment.

Laurence Alexander: Going forward.

Tod E. Carpenter: And as far as the life sciences acquisition piece, so we have a pretty complicated puzzle. I think we showed many pieces of that to you in the Investor Day deck. If you follow along in the Investor Day deck and kind of look where we've added technology or process type of improvements, you'll be able to see where we believe we still have gaps. We are focused on filling out that puzzle, either organically or inorganically. We do not believe we have changed anything material in our approach to what we still [inaudible] to buy, and we will remain active to fill out that puzzle, either organically or inorganically, and build out our life sciences segment.

Laurence Alexander: As far as the life Sciences acquisition a piece. So we have a pretty complicated puzzle I think we showed many pieces of that to you in the investor day deck.

Laurence Alexander: If you followed along in the Investor day back in kind of look where we've added technology or process.

Laurence Alexander: Improvements.

Laurence Alexander: You'll be able to see where we believe we still have gaps.

Laurence Alexander: We are focused on filling out that will either organically or inorganically, we do.

Tod E. Carpenter: We do not believe we have changed anything material in our approach to what we still have to buy, and we will remain active to fill out that puzzle either organically or inorganically and build on our life sciences segment. This is a follow-up from the line of Nathan Jones with Stiegel. Please go ahead.

Laurence Alexander: I do not believe we have changed anything material in approach to what we still come to mind.

Laurence Alexander: And we will remain active.

Laurence Alexander: Hello, either organically or Inorganically.

Laurence Alexander: And build on our life Sciences segment.

Speaker Change: Thank you.

Operator: Thank you. This is a follow-up from the line of Nathan Jones with Stifel. Please go ahead.

Laurence Alexander: Thank you.

Operator: This question is a follow-up from the line of Nathan Jones with Stifel. Please go ahead.

Speaker Change: And as a follow up from the line of Nathan Jones with Stifel. Please go ahead.

Nathan Hardie Jones: Hi, guys couple of follow ups on the mobile segment, specifically on the margins obviously quarterly record.

Nathan Hardie Jones: Hi guys, couple follow-ups on the mobile segment, specifically on the margins, obviously a quarterly record. So very well done there. I just, you called out, you know, price, lower freight, and Mix. It doesn't seem like any of those should change in the short term. So is there any reason why margins at that kind of level are not sustainable in the short term? And then, as a follow-up to that, you know, the pricing gains that you've made in mobile solutions were very hard fought during COVID and during the inflationary period. Is there a threat to the pricing on that as your OEM customers are starting to see volume declines, particularly in places like agriculture? And how do you go about defending those price gains? I'll leave it there, thanks. First, Nathan, on your first question, relative to do we see anything short term that's going to be changing pricing outlooks or margin outlooks? And we agree with you, there is nothing really short term. I think it's important to understand the mixed components of all of that. However, the mixed component is very important, right?

Nathan Jones: Hi guys, couple follow-ups on the mobile segment, specifically on the margins, obviously a quarterly record, so very well done there. I just, you called out, you know, price, lower freight, and mix. It doesn't seem like any of those should change in the short term, so is there any reason why margins at that kind of level are not sustainable in the short term? And then, as a follow-up to that, you know, the pricing gains that you've made in mobile solutions were very hard fought during COVID and during the inflationary period. Is there a threat to the pricing on that as your OEM customers are starting to see volume declines, particularly in places like ag, and how do you go about defending those price gains? And I'll leave it there, thanks.

Nathan Hardie Jones: Very well done there.

Nathan Hardie Jones: You called out.

Nathan Hardie Jones: Price lower freight.

Nathan Hardie Jones: And mix it doesn't seem like any of those should change in the short term.

Speaker Change: Is there any reason why the margins at that kind of level are not sustainable in the short term.

Speaker Change: And then as a follow up to that the pricing gains that you've made in mobile solutions were very hard during calibrated during the inflationary period.

Speaker Change: Is there a threat to the pricing on that as your OEM customers are starting to see volume declines, particularly in places like AG.

Speaker Change: And how you go about defending those price downs and I'll leave it there. Thanks.

Speaker Change: Okay.

Speaker Change: First Nathan on your first question relative to do.

Tod E. Carpenter: First, Nathan, on your first question, relative to do we see anything short term that's going to be changing pricing outlooks or margin outlooks, and we agree with you. There is nothing really short term. I think it's important to understand the mix component of all of that, however. The mix component is very important, right, because we have volume gains, market share gains, and we have pricing working at our backs on the replacement part business, in the independent channel, particularly, and that mixes up the overall margins. And then to the other tailwind to us, as far as the percentage basis, the OE business is down, particularly in ag, and when we ship less ag, obviously, our margins are going up. So, as ag would come back whenever that market does turn, obviously, we feel some margin-based pressures, but like you mentioned, we don't see that as imminent. And so, in the short term, we would not expect that to change. Looking forward, though, the price gains across the OE, look, we're just trying to have fair relationships with our customer base. And, yes, they were long and hard-fought battles.

Speaker Change: Do we see anything short term, that's going to be changing pricing outlooks or.

Speaker Change: And outlooks and we agree with you there is nothing really short term.

Speaker Change: <unk>.

Speaker Change: Yes, I think I think it's important to understand the mix component of all of that however, the.

Speaker Change: The mixed component is very important right because we have we have.

Tod E. Carpenter: Because we have volume gains, market share gains, and we have pricing working at our backs on the replacement part business, in the independent channel, particularly. And that mixes up the overall margins. And then there is the other tailwind for us, as far as the percentage basis, the OE business is down, particularly in agriculture. And when we ship less ag, obviously, our margins are going up. So, as ag would come back whenever that market does turn, obviously, we feel some margin-based pressures, but like you mentioned, we don't see that as imminent. And so, in the short term, we would not expect that to change. Looking forward, though, the price gains across the OE, look, we're just trying to have fair relationships with our customer base. And, yes, they were long and hard-fought battles.

Speaker Change: Volume gains market share gains and we have pricing working.

Speaker Change: At our backs on the replacement part business in the independent channel, particularly.

Speaker Change: And that mixes up the overall margins.

Speaker Change: And then to the other tailwind to us as far as a percentage basis. The OE business is down and particularly in <unk> and when we shipped less the AG, obviously, our margins growing up so as Ed wood.

Speaker Change: Good.

Speaker Change: Would come back whenever that market does turn obviously, we feel some margin pressures, but Mike you mentioned, we don't see that as imminent.

Speaker Change: And so in the short term, we would not expect that to change.

Tod E. Carpenter: Looking forward, though, the price gains across the OE, look, we're just trying to have fair relationships with our customer base. And, yes, they were long and hard-fought battles, but I think we've achieved a good end for both our customer base as well as Donaldson Company, and so far, our customers believe that, too. We're not trying to maximize margins here, we're just trying to have fair relationships, and that's where, for the most part, where we sit today. And so we would expect it to be able to hold. And so the headwind we would feel is, to your first point, is more of a mix-based conversation rather than a pricing-based conversation.

Speaker Change: Looking looking forward, though the pricing across the OE look we're just shown in a fair relationships with our customer base.

Speaker Change: Yes, they were they were long and hard fought battles.

Tod E. Carpenter: But I think we've achieved a good end for both our customer base as well as Donaldson Company, and so far, our customers believe that too. We're not trying to maximize margins here. We're just trying to have fair relationships, and that's where, for the most part, we sit today. And so we would expect it to be able to hold. And so the headwind we would feel is, to your first point, more of a mixed conversation rather than a pricing-based conversation. Thank you. Your next question is from the line, Joseph Donahue with Baird. Please go ahead. Hi guys, how are you doing?

But I think we've achieved a good end for both our customer base as well as Donaldson Company, and so far, our customers believe that too. We're not trying to maximize margins here. We're just trying to have fair relationships, and that's where, for the most part, we sit today. And so we would expect it to be able to hold. And so the headwind we would feel is, to your first point, more of a mixed conversation rather than a pricing-based conversation.

Speaker Change: But I think we've achieved a good end of.

Speaker Change: For both our customer base as well as Donaldson company and so for our customers believe that too.

Speaker Change: There is.

Speaker Change: Not trying to maximize margins here. We're just we're just trying to have their relationships in and that's where that's where for the most part where we sit today.

Tod E. Carpenter: We're just trying to have fair relationships, and that's where, for the most part, we sit today. And so we would expect it to be able to hold. And so the headwind we would feel is, to your first point, more of a mixed conversation rather than a pricing-based conversation. Thank you. Your next question is from the line, Joseph Donahue with Baird. Please go ahead. Hi guys, how are you doing?

Speaker Change: <unk>.

Speaker Change: And so we would expect it to be able to hold.

Speaker Change: So the headwind we would feel as to your first point is more of a mixed based conversation rather than a pricing based compensation.

Speaker Change: Thank you.

Speaker Change: Okay.

Thank you. Your next question is from the line, Joseph Donahue with Baird. Please go ahead. Hi guys, how are you doing?

Nathan Jones: Thank you.

Speaker Change: Yes.

Your next question is from the line, Joseph Donahue with Baird. Please go ahead. Hi guys, how are you doing?

Operator: Your next question is from the line of Joseph Donahue with Baird. Please go ahead.

Speaker Change: Your next question is from the line.

Speaker Change: Donahue with Baird. Please go ahead.

Hi guys, how are you doing? Bye. All right, cool. So just looking ahead, you mentioned these large bioreactor winds potentially shipping in the second half. Does that mean that when we start thinking about the first half of next year, we shouldn't necessarily run rate revenues from this second half? And then I'll just get my second question now. Can you give a little bit more color on what specifically is pushing up R&D spend in the second half to meet the 20% growth? Yeah, so as far as next year, you know, we're going to be a lot smarter when we guide next year in about, gosh, maybe seven, eight weeks from now. It does make it, when you have large projects like we have, it makes it a bit lumpy.

Joseph Donahue: Hi guys, how are you doing? Bye. All right, cool. So just looking ahead, you mentioned these large bioreactor winds potentially shipping in the second half. Does that mean that when we start thinking about the first half of next year, we shouldn't necessarily run rate revenues from this second half? And then I'll just get my second question now. Can you give a little bit more color on what specifically is pushing up R&D spend in the second half to meet the 20% growth?

Joseph Donahue: Hi guys, how are you doing?

Speaker Change: Okay.

Donahue: Hi, guys how are you doing.

Tod E. Carpenter: Hi.

Joseph Donahue: All right, cool. So just looking ahead, you mentioned these large bioreactor wins potentially shipping in the second half. Does that mean that when we start thinking about the first half of next year, we shouldn't necessarily run rate revenues from this second half? And then I'll just get my second question now. Can you give a little bit more color on what specifically is pushing up R&D spend in the second half to meet the 20% growth?

Joseph Donahue: Bye. All right, cool. So just looking ahead, you mentioned these large bioreactor winds potentially shipping in the second half. Does that mean that when we start thinking about the first half of next year, we shouldn't necessarily run rate revenues from this second half? And then I'll just get my second question now. Can you give a little bit more color on what specifically is pushing up R&D spend in the second half to meet the 20% growth? Yeah, so as far as next year, you know, we're going to be a lot smarter when we guide next year in about, gosh, maybe seven, eight weeks from now. It does make it, when you have large projects like we have, it makes it a bit lumpy.

Speaker Change: Alright.

Speaker Change: Just looking ahead you mentioned these large bioreactor wins potentially shipping in the second half does that mean that when we start thinking about the first half of next year, we shouldnt necessarily can run rate revenue from the second half and then I'll just get my second question now can you give a little more color on what specifically, it's pushing up R&D spend in the second.

Speaker Change: Have to meet the 20% growth.

Speaker Change: Yes, so as far as next year, we're going to be a lot smarter.

Tod E. Carpenter: Yeah, so as far as next year, you know, we're going to be a lot smarter when we guide next year in about, gosh, maybe seven, eight weeks from now. It does make, when you have large projects like we have, it makes it a bit lumpy. So we'll [inaudible] do it kind of appropriately looking forward at that time. As far as the R&D spend, the overall R&D spend is a ramping up of acquisitions so that we can continue to bring those products to market, et cetera. And that's as we would have expected it. We are intentionally being aggressive in order to bring those products to market as quickly as we can. And the reason why we feel like we can do that is because that's a macro if you just step back at our company, we are, we have just told you in the last quarter, we put up record top line, record bottom line, and we're aggressively investing for tomorrow and building out a new leg for our corporation. And so consequently, strategically, we're very proud of what we're accomplishing, and what you're calling out in the R&D spend for life sciences, we feel is building a stronger company for our shareholders and for our future. That's about it. Thank you.

Speaker Change: Yes.

Speaker Change: When we guide next year and Bob.

Speaker Change: Gosh.

Speaker Change: Maybe seven.

Speaker Change: From now.

Speaker Change:

Speaker Change: It does make when you have large projects like we have it makes it a bit lumpy.

Tod E. Carpenter: So we'll do it kind of appropriately looking forward to that time. As far as the R&D spend, the overall R&D spend is a ramping up of acquisitions so that we can continue to bring those products to market, et cetera. And that's as we would have expected it. We are intentionally being aggressive in order to bring those products to market as quickly as we can. And the reason why we feel like we can do that is because that's a macro.

Speaker Change: So we will as we go account appropriately looking forward at that time.

Tod E. Carpenter: As far as the R&D spend.

Speaker Change: Overall I am eastern is the ramping up of the.

Speaker Change: Acquisitions.

Tod E. Carpenter: So that we can continue to bring those products to market.

Speaker Change: Et cetera.

Speaker Change: As we would've expected it.

Speaker Change: We are intentionally.

Speaker Change: <unk> been aggressive in order to bring those products to market as quickly as we can and the reason why we feel like we can do that is because at the macro if you just step back at our company. We are we have just told you in the last quarter, we put up record top line record bottom line and we are aggressively investing.

Tod E. Carpenter: If you just step back at our company, we are, we have just told you in the last quarter, we put up record top line, record bottom line, and we're aggressively investing for tomorrow and building out a new leg for our corporation. And so consequently, strategically, we're very proud of what we're accomplishing, and what you're calling out in the R&D spend for life sciences, we feel is building a stronger company for our shareholders and for our future. That's about it. Thank you. At this time, there are no further questions. I will now turn the call over to Todd Carpenter for his closing remarks. That concludes the call today. Thanks to everyone who participated, and I look forward to reporting our third quarter fiscal 2024 results in June. Have a great day! Goodbye. This concludes the Donaldson Company second quarter 2024 earnings call. Thank you for your participation. You may now disconnect.

If you just step back at our company, we are, we have just told you in the last quarter, we put up record top line, record bottom line, and we're aggressively investing for tomorrow and building out a new leg for our corporation. And so consequently, strategically, we're very proud of what we're accomplishing, and what you're calling out in the R&D spend for life sciences, we feel is building a stronger company for our shareholders and for our future. That's about it. Thank you.

Speaker Change: For Tomorrow and building out a new leg to a corporation and so consequently strategically we're very proud of what we're accomplishing.

Speaker Change: And what you are calling on in the R&D spend for life Sciences.

Speaker Change: We feel is building a stronger company for our shareholders and for our future.

Speaker Change: Got it thank you.

Joseph Donahue: Got it, thank you.

At this time, there are no further questions. I will now turn the call over to Todd Carpenter for his closing remarks. That concludes the call today. Thanks to everyone who participated, and I look forward to reporting our third quarter fiscal 2024 results in June. Have a great day! Goodbye. This concludes the Donaldson Company second quarter 2024 earnings call. Thank you for your participation. You may now disconnect.

Operator: At this time, there are no further questions. I will now turn the call over to Tod Carpenter for closing remarks. That concludes the call today.

Operator: At this time, there are no further questions. I will now turn the call over to Tod Carpenter for closing remarks.

Speaker Change: At this time there are no further questions I will now turn the call over to Carpenter for closing remarks.

Carpenter: That concludes the call today, thanks to everyone, who participated and I look forward to reporting our third quarter fiscal 2024 results in June and have a great day Goodbye.

Tod E. Carpenter: That concludes the call today. Thanks to everyone who participated, and I look forward to reporting our third quarter fiscal 2024 results in June. Have a great day! Goodbye.

Thanks to everyone who participated, and I look forward to reporting our third quarter fiscal 2024 results in June. Have a great day! Goodbye. This concludes the Donaldson Company second quarter 2024 earnings call. Thank you for your participation. You may now disconnect.

Thanks to everyone who participated, and I look forward to reporting our third quarter fiscal 2024 results in June. Have a great day! Goodbye.

Operator: This concludes the Donaldson Company second quarter 2024 earnings call. Thank you for your participation. You may now disconnect.

Speaker Change: This includes the Donaldson company second quarter 2024 earnings call. Thank you for your participation you may now disconnect.

Carpenter: Thank you.

Tod E. Carpenter: Okay.

Carpenter: Okay.

Tod E. Carpenter: Okay.

Q2 2024 Donaldson Co Inc Earnings Call

Request a DemoDemo

DCI

Donaldson Company

Earnings