[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) This section provides an overview of Donaldson's record-breaking fiscal year 2025 performance and outlines the financial guidance for fiscal year 2026 [Fourth Quarter Fiscal Year 2025 Highlights](index=1&type=section&id=Fourth%20Quarter%20Fiscal%202025%20Highlights) Donaldson achieved record results in Q4 FY2025, with sales growing **4.8%** to **$981 million** and adjusted EPS increasing **9.6%** to **$1.03**, returning approximately **$95 million** to shareholders Key Financial Data for Fourth Quarter Fiscal Year 2025 | Metric | Amount/Percentage | | :--- | :--- | | Sales | $981 million (up 4.8%) | | GAAP EPS | $0.97 (up 7.8%) | | Adjusted EPS | $1.03 (up 9.6%) | | Shareholder Returns | Approximately $95 million | [Full Year Fiscal Year 2025 Highlights](index=1&type=section&id=Full%20Year%20Fiscal%202025%20Highlights) For the full fiscal year 2025, Donaldson's sales grew **2.9%** to **$3.7 billion**, with adjusted EPS increasing **7.6%** to **$3.68**, while returning approximately **$465 million** to shareholders Key Financial Data for Full Year Fiscal Year 2025 | Metric | Amount/Percentage | | :--- | :--- | | Sales | $3.7 billion (up 2.9%) | | GAAP EPS | $3.05 (down 9.8%) | | Adjusted EPS | $3.68 (up 7.6%) | | Shareholder Returns | Approximately $465 million | - The company made progress in optimizing its business portfolio and cost efficiency, alongside investments in the Life Sciences segment[2](index=2&type=chunk) [Fiscal Year 2026 Guidance Overview](index=1&type=section&id=Fiscal%202026%20Guidance%20Overview) Donaldson anticipates fiscal year 2026 to be another record year, projecting sales of **$3.8 billion** and EPS of **$4.00**, driven by record sales, operating margin, and net earnings Fiscal Year 2026 Guidance | Metric | Expectation | | :--- | :--- | | Sales | Approximately $3.8 billion | | EPS | Approximately $4.00 | - Record levels are anticipated for sales, operating margin, and net earnings[1](index=1&type=chunk) [CEO Commentary](index=2&type=section&id=CEO%20Commentary) CEO Tod Carpenter highlighted strong FY2025 performance, progress in business model efficiency, and projected record sales and higher operating margins for FY2026, alongside continued investment in growth and shareholder returns - Strong fourth quarter fiscal year 2025 results concluded a record fiscal year 2025[3](index=3&type=chunk) - The company made progress in building higher structural business model efficiency through portfolio and cost optimization initiatives, alongside operating expense management[3](index=3&type=chunk) - Fiscal year 2026 is projected to achieve **$3.8 billion** in sales, with gross margin expansion and record operating margin[4](index=4&type=chunk) [Fiscal Year 2025 Operating Results](index=2&type=section&id=Fiscal%202025%20Operating%20Results) This section details Donaldson's fiscal year 2025 operating performance, including overall sales, segment-specific results, profitability, expenses, and shareholder returns [Overall Sales Performance](index=2&type=section&id=Overall%20Sales%20Performance) Total sales for Q4 FY2025 increased **4.8%** to **$980.7 million**, driven by volume, favorable currency translation, and pricing, with full-year sales growing **2.9%** to **$3,690.9 million** Sales Performance (YoY) | Period | Sales (million USD) | Growth Rate | | :--- | :--- | :--- | | Q4 FY2025 | $980.7 | 4.8% | | Full Year FY2025 | $3,690.9 | 2.9% | - Fourth quarter sales growth was primarily driven by increased volume, favorable currency translation, and pricing benefits[5](index=5&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) In Q4 FY2025, Mobile Solutions sales grew **2.3%**, Industrial Solutions **7.7%**, and Life Sciences **14.1%**, with varied drivers including strong off-road and aftermarket performance, offset by declining on-road sales [Mobile Solutions Segment](index=3&type=section&id=Mobile%20Solutions%20Segment) Mobile Solutions segment sales increased **2.3%** in Q4, driven by strong off-road (**5.1%** growth) and aftermarket (**3.3%** growth), partially offset by a **20.1%** decline in on-road sales, with full-year sales up **1.8%** Mobile Solutions Segment Sales Growth (YoY) | Sub-Segment | Q4 FY2025 Growth Rate | Full Year FY2025 Growth Rate | | :--- | :--- | :--- | | Off-Road | 5.1% | (5.6)% | | On-Road | (20.1)% | (20.9)% | | Aftermarket | 3.3% | 5.2% | | **Total** | **2.3%** | **1.8%** | - Off-road sales growth was driven by increased sales in Europe and Asia Pacific; aftermarket sales growth benefited from OE and independent channels' strong performance; on-road sales declined due to reduced equipment production, primarily in the U.S[7](index=7&type=chunk) [Industrial Solutions Segment](index=3&type=section&id=Industrial%20Solutions%20Segment) Industrial Solutions sales grew **7.7%** in Q4, primarily driven by a **10.5%** increase in Industrial Filtration Solutions (IFS) due to higher demand for new dust collection equipment in Europe and the U.S., and power generation project timing, while Aerospace and Defense sales declined **5.9%** due to a prior year surge Industrial Solutions Segment Sales Growth (YoY) | Sub-Segment | Q4 FY2025 Growth Rate | Full Year FY2025 Growth Rate | | :--- | :--- | :--- | | Industrial Filtration Solutions (IFS) | 10.5% | 1.5% | | Aerospace and Defense | (5.9)% | 15.0% | | **Total** | **7.7%** | **3.6%** | - IFS sales growth was driven by increased demand for new dust collection equipment in Europe and the U.S., and the timing of power generation projects[8](index=8&type=chunk) [Life Sciences Segment](index=3&type=section&id=Life%20Sciences%20Segment) Life Sciences segment sales increased **14.1%** year-over-year in Q4 and **9.8%** for the full year, primarily driven by strong sales of new equipment and replacement parts in food and beverage and disk drive markets Life Sciences Segment Sales Growth (YoY) | Period | Growth Rate | | :--- | :--- | | Q4 FY2025 | 14.1% | | Full Year FY2025 | 9.8% | - Growth was driven by strong sales of new equipment and replacement parts in the food and beverage and disk drive sectors[9](index=9&type=chunk) [Profitability and Expenses](index=3&type=section&id=Profitability%20and%20Expenses) In Q4 FY2025, gross margin declined due to tariff-related inflation and inventory valuation headwinds, while operating expenses as a percentage of sales improved; GAAP operating margin slightly decreased, adjusted operating margin slightly increased, interest expense rose due to higher rates, and the effective tax rate increased due to fewer net discrete tax benefits [Gross Margin](index=3&type=section&id=Gross%20Margin) GAAP gross margin for Q4 FY2025 was **34.5%**, a **130 basis point** decrease from 2024, primarily due to tariff-related inflation and inventory valuation headwinds, with adjusted gross margin at **34.8%**, down from **36.2%** year-over-year Gross Margin (YoY) | Metric | Q4 FY2025 | Q4 FY2024 | Change (bps) | | :--- | :--- | :--- | :--- | | GAAP Gross Margin | 34.5% | 35.8% | -130 | | Adjusted Gross Margin | 34.8% | 36.2% | -140 | - Gross margin decline was primarily due to tariff-related inflation and associated inventory valuation headwinds[9](index=9&type=chunk) [Operating Expenses and Margin](index=3&type=section&id=Operating%20Expenses%20and%20Margin) Operating expenses as a percentage of sales improved by **110 basis points** to **19.1%** in Q4 FY2025, driven by sales leverage and disciplined expense management; GAAP operating margin was **15.5%** (down **10 bps**), while adjusted operating margin was **16.4%** (up **10 bps**) Operating Expenses and Margin (YoY) | Metric | Q4 FY2025 | Q4 FY2024 | Change (bps) | | :--- | :--- | :--- | :--- | | Operating Expenses as % of Sales | 19.1% | 20.2% | -110 | | GAAP Operating Margin | 15.5% | 15.6% | -10 | | Adjusted Operating Margin | 16.4% | 16.3% | +10 | - Operating expense improvement was driven by sales leverage and disciplined expense management[10](index=10&type=chunk) [Interest Expense and Tax Rate](index=3&type=section&id=Interest%20Expense%20and%20Tax%20Rate) Q4 FY2025 interest expense was **$7.1 million**, up from **$5.3 million** in 2024 due to higher interest rates, and the effective tax rate increased to **23.6%** from **21.3%** due to fewer net discrete tax benefits Interest Expense and Effective Tax Rate (YoY) | Metric | Q4 FY2025 | Q4 FY2024 | Change | | :--- | :--- | :--- | :--- | | Interest Expense | $7.1 million | $5.3 million | 35.1% | | Effective Tax Rate | 23.6% | 21.3% | 2.3% | - Increased interest expense was due to higher interest rates[11](index=11&type=chunk) - The effective tax rate increased due to fewer net discrete tax benefits[11](index=11&type=chunk) [Shareholder Returns](index=3&type=section&id=Shareholder%20Returns) For the full fiscal year 2025, Donaldson paid **$131.9 million** in dividends and repurchased **4.0%** of its outstanding shares for **$333.6 million** Full Year Fiscal Year 2025 Shareholder Returns | Metric | Amount | | :--- | :--- | | Dividends Paid | $131.9 million | | Share Repurchases | $333.6 million (4.0% of outstanding shares) | [Fiscal Year 2026 Outlook](index=3&type=section&id=Fiscal%202026%20Outlook) This section outlines Donaldson's financial projections for fiscal year 2026, including overall financial targets, segment sales forecasts, and capital allocation plans [Overall Financial Projections](index=3&type=section&id=Overall%20Financial%20Projections) Donaldson projects full-year fiscal year 2026 EPS between **$3.92** and **$4.08**, with sales growth of **1% to 5%** (midpoint **$3.8 billion**), including approximately **1%** from pricing benefits Overall Financial Projections for Fiscal Year 2026 | Metric | Forecast Range | | :--- | :--- | | Full-Year EPS | $3.92 - $4.08 | | Sales Growth | 1% - 5% (midpoint $3.8 billion) | | Pricing Benefits | Approximately 1% | [Segment Sales Projections](index=3&type=section&id=Segment%20Sales%20Projections) For FY2026, Mobile Solutions sales are projected flat to up **4%**, Industrial Solutions up **2% to 6%**, and Life Sciences up **1% to 5%**, with specific growth expectations across sub-segments like off-road, on-road, IFS, and food and beverage [Mobile Solutions Segment Outlook](index=3&type=section&id=Mobile%20Solutions%20Segment%20Outlook) Mobile Solutions segment sales are projected to be flat to up **4%** in FY2026, with mid-single-digit growth in off-road, high-single-digit growth in on-road (a modest rebound from FY2025 decline), and low-single-digit growth in aftermarket, driven by market share gains and sustained strong fleet utilization - Mobile sales are projected to be flat to up **4%**[14](index=14&type=chunk) - Off-road sales are expected to achieve mid-single-digit growth[14](index=14&type=chunk) - On-road sales are projected for high-single-digit growth, representing a modest rebound from the fiscal year 2025 decline[14](index=14&type=chunk) - Aftermarket sales are anticipated to see low-single-digit growth, benefiting from market share gains and continued strong fleet utilization[14](index=14&type=chunk) [Industrial Solutions Segment Outlook](index=4&type=section&id=Industrial%20Solutions%20Segment%20Outlook) Industrial Solutions sales are projected to grow **2% to 6%** in FY2026, with mid-single-digit growth in Industrial Filtration Solutions (IFS) across all businesses including dust collection and power generation, while Aerospace and Defense sales are expected to remain largely flat after a record FY2025 - Industrial sales are projected to grow **2% to 6%**[15](index=15&type=chunk) - IFS sales are expected to achieve mid-single-digit growth, with strong performance across all businesses including dust collection and power generation[15](index=15&type=chunk) - Aerospace and Defense sales are anticipated to remain largely flat following a record fiscal year 2025[15](index=15&type=chunk) [Life Sciences Segment Outlook](index=4&type=section&id=Life%20Sciences%20Segment%20Outlook) Life Sciences segment sales are projected to grow **1% to 5%** in FY2026, primarily driven by continued sales growth in the food and beverage and disk drive sectors - Life Sciences sales are projected to grow **1% to 5%**[15](index=15&type=chunk) - Growth drivers include continued sales growth in the food and beverage and disk drive sectors[15](index=15&type=chunk) [Profitability and Capital Projections](index=4&type=section&id=Profitability%20and%20Capital%20Projections) For FY2026, Donaldson forecasts operating margin between **16.1%** and **16.7%**, driven by gross margin expansion and sales leverage, with specific projections for interest expense, other income, effective tax rate, capital expenditures of **$65 million to $85 million**, free cash flow conversion of **85% to 95%**, and plans to repurchase **2% to 3%** of outstanding shares [Operating Margin Outlook](index=4&type=section&id=Operating%20Margin%20Outlook) Operating margin for FY2026 is projected between **16.1%** and **16.7%** (compared to FY2025 GAAP **13.4%** or adjusted **15.7%**), primarily driven by gross margin expansion and sales leverage Fiscal Year 2026 Operating Margin Forecast | Metric | Forecast Range | | :--- | :--- | | Operating Margin | 16.1% - 16.7% | - Growth drivers include gross margin expansion and sales leverage[16](index=16&type=chunk) [Interest, Other Income, and Tax Rate Outlook](index=4&type=section&id=Interest%2C%20Other%20Income%2C%20and%20Tax%20Rate%20Outlook) For FY2026, interest expense is projected between **$22 million** and **$23 million**, other income between **$14 million** and **$18 million**, and the effective income tax rate between **23.5%** and **25.5%** Fiscal Year 2026 Interest, Other Income, and Tax Rate Forecast | Metric | Forecast Range | | :--- | :--- | | Interest Expense | $22 million - $23 million | | Other Income | $14 million - $18 million | | Effective Income Tax Rate | 23.5% - 25.5% | [Capital Expenditures and Free Cash Flow Outlook](index=4&type=section&id=Capital%20Expenditures%20and%20Free%20Cash%20Flow%20Outlook) FY2026 capital expenditures are projected between **$65 million** and **$85 million**, with free cash flow conversion between **85%** and **95%**, and plans to repurchase **2% to 3%** of outstanding shares Fiscal Year 2026 Capital Expenditures and Free Cash Flow Forecast | Metric | Forecast Range | | :--- | :--- | | Capital Expenditures | $65 million - $85 million | | Free Cash Flow Conversion | 85% - 95% | | Share Repurchases | 2% - 3% of outstanding shares | [Company Information & Disclosures](index=5&type=section&id=Company%20Information%20%26%20Disclosures) This section provides details on Donaldson's webcast information, forward-looking statements, and an overview of the company's global operations and mission [Webcast Information](index=5&type=section&id=Webcast%20Information) Donaldson will webcast its Q4 and full-year FY2025 earnings call on August 27, 2025, at 9:00 AM CT, with a replay available on its investor relations website by 12:00 PM CT the same day - The webcast for the fourth quarter and full year fiscal year 2025 earnings call is scheduled for **August 27, 2025, at 9:00 AM CT**[18](index=18&type=chunk) - A replay of the webcast will be available on IR.Donaldson.com by **12:00 PM CT** on the same day[18](index=18&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations, with no obligation to update or revise unless legally required, and detailed risk factors found in the company's FY2024 Form 10-K - Statements involve future events and expectations, such as projections, plans, trends, and forecasts of the company's business and financial performance[19](index=19&type=chunk) - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from any opinion or statement[19](index=19&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements unless required by law; risk factors are detailed in the company's fiscal year 2024 Form 10-K annual report[19](index=19&type=chunk) [About Donaldson Company, Inc.](index=5&type=section&id=About%20Donaldson%20Company%2C%20Inc.) Founded in 1915, Donaldson (NYSE: DCI) is a global leader in technology-led filtration products and solutions, serving diverse industries and advanced markets across 140+ locations on six continents, addressing complex filtration challenges through its Mobile Solutions, Industrial Solutions, and Life Sciences segments - Donaldson, founded in **1915**, is a global leader in technology-led filtration products and solutions[20](index=20&type=chunk) - The company operates in over **140 locations** across six continents, serving a wide range of industries and advanced markets[20](index=20&type=chunk) - Complex filtration challenges are addressed through three primary segments: Mobile Solutions, Industrial Solutions, and Life Sciences[20](index=20&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents Donaldson's unaudited condensed consolidated financial statements, including statements of earnings, balance sheets, and cash flows for specified periods [Condensed Consolidated Statements of Earnings](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) This section provides unaudited condensed consolidated statements of earnings for the three and twelve months ended July 31, 2025, and 2024, detailing key financial metrics such as net sales, cost of sales, gross profit, operating expenses, operating income, net earnings, and earnings per share Condensed Consolidated Statements of Earnings Summary (million USD, except per share amounts) | Metric | July 31, 2025 (3 Months) | July 31, 2024 (3 Months) | July 31, 2025 (12 Months) | July 31, 2024 (12 Months) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $980.7 | $935.4 | $3,690.9 | $3,586.3 | | Gross Profit | $338.8 | $334.8 | $1,286.2 | $1,274.4 | | Operating Income | $151.7 | $146.2 | $495.4 | $544.1 | | Net Earnings | $114.3 | $109.7 | $367.0 | $414.0 | | Diluted EPS | $0.97 | $0.90 | $3.05 | $3.38 | | Dividends Per Share | $0.30 | $0.27 | $1.11 | $1.02 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents unaudited condensed consolidated balance sheets as of July 31, 2025, and 2024, detailing the composition of assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets Summary (million USD) | Metric | July 31, 2025 | July 31, 2024 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $180.4 | $232.7 | | Total Current Assets | $1,461.7 | $1,438.1 | | Total Assets | $2,977.2 | $2,914.3 | | Total Current Liabilities | $757.2 | $782.5 | | Total Liabilities | $1,523.7 | $1,425.2 | | Total Shareholders' Equity | $1,453.5 | $1,489.1 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section provides unaudited condensed consolidated statements of cash flows for the twelve months ended July 31, 2025, and 2024, detailing cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Summary (million USD) | Activity Type | July 31, 2025 (12 Months) | July 31, 2024 (12 Months) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $418.8 | $492.5 | | Net Cash Used in Investing Activities | ($150.4) | ($86.9) | | Net Cash Used in Financing Activities | ($321.7) | ($355.9) | | Cash and Cash Equivalents (End of Period) | $180.4 | $232.7 | [Supplemental Financial Data](index=9&type=section&id=Supplemental%20Financial%20Data) This section offers additional unaudited financial data, including consolidated ratio analysis (GAAP and adjusted), segment details, and geographical sales changes, both as reported and at constant currency [Consolidated Ratio Analysis (GAAP & Adjusted)](index=9&type=section&id=Consolidated%20Ratio%20Analysis%20%28GAAP%20%26%20Adjusted%29) This section provides unaudited consolidated ratio analysis for the three and twelve months ended July 31, 2025, and 2024, including GAAP and adjusted gross margin, operating expenses, operating margin, EBITDA, and effective tax rate, offering a comprehensive view of financial performance Consolidated Ratio Analysis Summary (July 31, 2025) | Metric | 3 Months (GAAP) | 12 Months (GAAP) | 3 Months (Adjusted) | 12 Months (Adjusted) | | :--- | :--- | :--- | :--- | :--- | | Gross Margin | 34.5% | 34.8% | 34.8% | 35.0% | | Operating Expenses | 19.1% | 21.4% | 18.3% | 19.3% | | Operating Margin | 15.5% | 13.4% | 16.4% | 15.7% | | EBITDA | 18.5% | 16.7% | 19.4% | 19.0% | | Effective Tax Rate | 23.6% | 25.4% | 23.7% | 23.3% | - Adjusted ratios exclude the impact of certain items unrelated to ongoing operations, providing a meaningful representation of core business performance[29](index=29&type=chunk) [Segment Detail (Sales & Earnings before Income Taxes)](index=10&type=section&id=Segment%20Detail%20%28Sales%20%26%20Earnings%20before%20Income%20Taxes%29) This section provides unaudited segment details for the three and twelve months ended July 31, 2025, and 2024, including net sales and earnings before income taxes for Mobile Solutions, Industrial Solutions, and Life Sciences segments, along with their respective percentages Segment Sales and Earnings Before Income Taxes Summary (million USD) | Segment | July 31, 2025 (3 Months) Sales | July 31, 2025 (3 Months) Earnings Before Income Taxes | July 31, 2025 (12 Months) Sales | July 31, 2025 (12 Months) Earnings Before Income Taxes | | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | $588.4 | $112.1 | $2,291.0 | $417.6 | | Industrial Solutions | $309.8 | $64.6 | $1,104.4 | $197.7 | | Life Sciences | $82.4 | $4.4 | $295.5 | $4.4 | | **Total** | **$980.7** | **$149.7** | **$3,690.9** | **$492.2** | [Segment Sales Percent Change by Geography (As Reported)](index=11&type=section&id=Segment%20Sales%20Percent%20Change%20by%20Geography%20%28As%20Reported%29) This section presents unaudited segment sales percentage changes by geographic region (U.S./Canada, EMEA, Asia Pacific, Latin America) for the three and twelve months ended July 31, 2025, reflecting regional sales performance July 31, 2025 (3 Months) Segment Sales Geographic Change (As Reported) | Segment | Total | U.S./Canada | Europe/Middle East/Africa | Asia Pacific | Latin America | | :--- | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | 2.3% | (2.7)% | 11.1% | 4.5% | (0.2)% | | Industrial Solutions | 7.7% | 4.4% | 15.1% | 6.1% | (8.0)% | | Life Sciences | 14.1% | 27.5% | 8.8% | 13.7% | 21.6% | | **Total Company** | **4.8%** | **0.7%** | **12.3%** | **6.6%** | **(0.7)%** | July 31, 2025 (12 Months) Segment Sales Geographic Change (As Reported) | Segment | Total | U.S./Canada | Europe/Middle East/Africa | Asia Pacific | Latin America | | :--- | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | 1.8% | 0.6% | 1.5% | 3.6% | 3.7% | | Industrial Solutions | 3.6% | 6.7% | 1.8% | (0.2)% | (13.2)% | | Life Sciences | 9.8% | 13.0% | (0.4)% | 19.8% | 6.5% | | **Total Company** | **2.9%** | **3.1%** | **1.4%** | **5.7%** | **1.8%** | [Segment Sales Percent Change by Geography (Constant Currency)](index=12&type=section&id=Segment%20Sales%20Percent%20Change%20by%20Geography%20%28Constant%20Currency%29) This section provides unaudited segment sales percentage changes by geographic region (U.S./Canada, EMEA, Asia Pacific, Latin America) at constant currency for the three and twelve months ended July 31, 2025, to reflect underlying business performance by excluding currency fluctuations July 31, 2025 (3 Months) Segment Sales Geographic Change (Constant Currency) | Segment | Total | U.S./Canada | Europe/Middle East/Africa | Asia Pacific | Latin America | | :--- | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | 0.7% | (2.7)% | 4.6% | 3.5% | 0.9% | | Industrial Solutions | 5.8% | 4.4% | 9.8% | 5.1% | (7.3)% | | Life Sciences | 8.5% | 27.5% | 1.9% | 7.1% | 23.0% | | **Total Company** | **2.9%** | **0.7%** | **6.1%** | **4.5%** | **0.3%** | July 31, 2025 (12 Months) Segment Sales Geographic Change (Constant Currency) | Segment | Total | U.S./Canada | Europe/Middle East/Africa | Asia Pacific | Latin America | | :--- | :--- | :--- | :--- | :--- | :--- | | Mobile Solutions | 1.9% | 0.6% | (0.4)% | 4.3% | 6.6% | | Industrial Solutions | 3.1% | 6.7% | 0.0% | 0.2% | (11.1)% | | Life Sciences | 7.9% | 13.0% | (2.3)% | 16.5% | 10.6% | | **Total Company** | **2.7%** | **3.1%** | **(0.5)%** | **5.6%** | **4.7%** | - Constant currency presentation excludes the impact of foreign currency exchange rate fluctuations, providing valuable supplemental information about operating results[36](index=36&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=13&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides reconciliation tables for non-GAAP financial measures (including free cash flow, EBITDA, adjusted EBITDA, adjusted gross profit, adjusted operating expenses, adjusted operating income, adjusted net earnings, and adjusted diluted EPS) to their most directly comparable GAAP measures for the three and twelve months ended July 31, 2025, and 2024 Non-GAAP Financial Measures Reconciliation Summary (million USD, except per share amounts) | Metric | July 31, 2025 (3 Months) | July 31, 2024 (3 Months) | July 31, 2025 (12 Months) | July 31, 2024 (12 Months) | | :--- | :--- | :--- | :--- | :--- | | Free Cash Flow | $149.7 | $106.9 | $342.0 | $407.6 | | EBITDA | $181.2 | $169.6 | $615.9 | $655.1 | | Adjusted EBITDA | $190.7 | $176.0 | $701.0 | $661.5 | | Adjusted Net Earnings | $121.4 | $114.5 | $442.8 | $418.8 | | Adjusted Diluted EPS | $1.03 | $0.94 | $3.68 | $3.42 | - Non-GAAP financial measures (such as free cash flow, EBITDA, and adjusted metrics), while not GAAP compliant, are considered by the company to be useful in understanding financial performance, reflecting management's operation of the company, and providing a meaningful representation of core business performance[41](index=41&type=chunk) - These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures[41](index=41&type=chunk)

Core Viewpoint - Analysts expect Donaldson (DCI) to report quarterly earnings of $1.02 per share, reflecting an 8.5% year-over-year increase, with revenues projected at $953.79 million, up 2% from the previous year [1] Earnings Projections - There have been no revisions in the consensus EPS estimate for the quarter over the last 30 days, indicating stability in analysts' forecasts [1][2] - The average prediction for 'Net Sales- Industrial Solutions segment' is $303.83 million, showing a year-over-year increase of 5.6% [4] - 'Net Sales- Mobile Solutions' is expected to be $570.73 million, indicating a slight decline of 0.8% year over year [4] - The consensus estimate for 'Net Sales- Life Sciences segment' is $76.93 million, reflecting a year-over-year increase of 6.4% [4] Segment Analysis - 'Net Sales- Industrial Solutions- Industrial Filtration Solutions' is projected to reach $258.14 million, an increase of 8.7% from the prior year [5] - 'Net Sales- Industrial Solutions- Aerospace and Defense' is expected to be $46.49 million, indicating a decrease of 7.8% from the previous year [5] - 'Net Sales- Mobile Solutions- Off-Road' is forecasted at $92.60 million, showing a year-over-year increase of 3% [6] - 'Net Sales- Mobile Solutions- On-Road' is estimated at $29.90 million, reflecting a decline of 9.1% from the prior year [6] - 'Net Sales- Mobile Solutions- Aftermarket' is projected to reach $449.24 million, indicating a slight decrease of 0.7% year over year [7] Earnings Before Income Taxes - 'Earnings / (loss) before income taxes- Mobile Solutions' is expected to be $105.78 million, compared to $105.20 million reported in the same quarter last year [7] - 'Earnings / (loss) before income taxes- Industrial Solutions' is projected at $59.17 million, up from $57.80 million reported in the same quarter last year [8] Market Performance - Donaldson shares have returned +3.7% over the past month, outperforming the Zacks S&P 500 composite's +1.1% change [8]

Industry Overview - The Zacks Pollution Control industry is experiencing strong demand for air pollution control products due to increasing greenhouse gas emissions and associated health risks [1] - Stringent regulations and emission standards globally are expected to continue driving demand for industry participants [1][5] Major Trends - Rapid urbanization and rising greenhouse gas emissions from the industrial sector are increasing the demand for air quality control systems [4] - Public awareness of health risks related to air pollution is fueling market growth [4] - The expansion of infrastructure projects in developing countries is boosting demand for pollution abatement equipment [4] - Strict emission standards and laws implemented globally are augmenting demand for pollution-control equipment [5] - The adoption of AI and IoT in industrial processes is enabling real-time monitoring of air pollution sources, driving demand for pollution abatement technologies [5] Challenges - The growing preference for renewable energy sources is restraining demand for industrial emission-abatement products [6] - Supportive government policies for renewable energy and the rapid adoption of electric vehicles are negatively impacting the industry's prospects [6] Industry Performance - The Zacks Pollution Control industry has underperformed the broader Industrial Products sector and the S&P 500 index over the past year, declining 7.3% compared to the sector's increase of 9.6% and the S&P 500's increase of 15.5% [9] Valuation - The industry is currently trading at a forward P/E ratio of 20.20X, compared to the S&P 500's 22.85X and the sector's 19.81X [12] Key Companies - **Atmus Filtration**: A leader in industrial filtration with a Zacks Rank 2 (Buy), has seen a 32.3% share price increase over the past year [17][18] - **Donaldson Company**: Engaged in manufacturing filtration systems, holds a Zacks Rank 2, and has gained 1% in the past year [21][22] - **Fuel Tech**: Develops air pollution control technology, with a Zacks Rank 2 and a 163.9% share price increase over the past year [25][26] - **Tetra Tech**: Provides consulting and engineering services, holds a Zacks Rank 3 (Hold), and has seen a 20.1% increase in shares over the past six months despite a 23.5% decline over the past year [29][30]

Core Viewpoint - The article emphasizes the importance of shareholder yield as a key metric for investors, combining dividend yield, share buybacks, and net debt reduction to assess how effectively a company returns capital to its shareholders [2][4][5]. Shareholder Yield Components - Dividends provide a steady income stream and signal management's confidence in financial health, contributing significantly to total equity returns, especially in sideways or bear markets [3][6]. - Share buybacks reduce share count, enhancing per-share metrics like earnings and cash flow, which is particularly beneficial in low-growth environments [3][4]. - Debt reduction improves balance sheet strength and reduces default risk, enhancing resilience during economic downturns, thus benefiting investors through both capital returns and improved financial positioning [4][5]. Investment Opportunities - Companies with high shareholder yield, such as Eni, BanColombia, Columbia Banking System, Donaldson, and W.P. Carey, are highlighted as attractive options for investors seeking income and capital appreciation [4][8][18]. - Eni offers a competitive dividend yield of approximately 4.46%, with a 10-time increase in dividend payout over five years, reflecting a 28.1% annualized growth rate [9][10]. - BanColombia, with an 11.49% dividend yield, has increased its payout eight times in five years, showing a 71.36% annualized growth rate [12][13]. - Columbia Banking System provides a 5.62% dividend yield, with a 7.2% annualized growth rate over two increases in five years [14][15]. - Donaldson has a 1.64% dividend yield, with a 6.26% annualized growth rate over five increases in five years [16][17]. - W.P. Carey offers a 5.53% dividend yield, having increased its payout 20 times in five years despite a negative annualized growth rate of 4.64% [18][19][20]. Financial Stability and Management - Companies with high shareholder yield tend to exhibit disciplined capital allocation and align management interests with those of investors, avoiding expensive acquisitions and value-destructive expansions [5][7]. - Empirical studies indicate that portfolios focused on shareholder yield outperform broader market indices over the long term, often with lower volatility [5][6].

Group 1: Company Performance - Donaldson Company, Inc. (DCI) is experiencing solid momentum across all segments, particularly in Mobile Solutions and Industrial Solutions, driven by increased demand and market share expansion [1] - The Life Sciences segment is benefiting from rising demand for disk drives and food & beverage products in the Asia Pacific region [1] - DCI's shares have gained 6.3% year-to-date, outperforming the industry which has seen a decline of 2.1% [5] Group 2: Acquisitions and Growth Strategy - DCI has strengthened its product portfolio through strategic acquisitions, including a 49% stake in Medica S.p.A. and Univercells Technologies, enhancing its capabilities in filtration and life sciences [2] - The acquisition of Medica allows DCI to diversify its offerings in medical devices and water purification [2] Group 3: Shareholder Returns - DCI is committed to rewarding shareholders, having paid dividends of $96.9 million and repurchased shares worth $273.8 million in the first nine months of fiscal 2025 [3] - The company has increased its quarterly dividend by 11.1% in May 2025 and has raised dividends for 29 consecutive years [3] Group 4: Financial Challenges - DCI faces challenges from high selling, general, and administrative expenses, with the cost of sales increasing by 3% to $1.76 billion in the first nine months of fiscal 2025 [10] - The overall operating expenses rose by 11.4% year-over-year to $603.7 million, impacting profit margins [11] - Sales in the on-road and off-road segments declined significantly, with on-road sales down 24.6% and off-road sales down 8.3% year-over-year in the third quarter of fiscal 2025 [9]

Core Insights - Mighty Distributing System of America has formed a strategic partnership with Donaldson Company, Inc. to enhance its heavy-duty product offerings, combining Donaldson's filtration expertise with Mighty's inventory management services [1][3] - The heavy-duty parts aftermarket in the U.S. is projected to exceed $92.7 billion in 2025, prompting Mighty to expand its product lineup to cater to the trucking, construction, and agricultural industries [2] - The collaboration aims to provide premium filtration solutions and tailored inventory management to meet the demands of heavy-duty operators, focusing on minimizing downtime and extending equipment life [5] Company Overview - Mighty Distributing System of America, based in Peachtree Corners, GA, specializes in inventory management and distribution services for commercial vehicle operations, with over 60 years of experience [7] - Donaldson Company, founded in 1915, is a global leader in filtration solutions, serving various industries through its three primary segments: Mobile Solutions, Industrial Solutions, and Life Sciences [8] Product and Service Offerings - The partnership will deliver Donaldson's OE-grade filtration technology, which is designed to protect equipment, reduce maintenance costs, and increase uptime in heavy-duty environments [3][4] - Mighty provides high-touch inventory management services, offering weekly or bi-weekly support to reduce surplus stock and ensure necessary products are readily available [4]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores are indicators that assist investors in selecting stocks likely to outperform the market within 30 days, rated from A to F based on value, growth, and momentum characteristics [2][3] Value Score - The Value Style Score identifies stocks trading below their true value by analyzing ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow [3] Growth Score - The Growth Style Score focuses on a company's financial health and future outlook, utilizing projected and historical earnings, sales, and cash flow to find stocks with sustainable growth [4] Momentum Score - The Momentum Style Score helps investors capitalize on price trends by assessing one-week price changes and monthly earnings estimate changes [5] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for stocks with attractive value, strong growth forecasts, and promising momentum [6] Zacks Rank - The Zacks Rank is a proprietary model that leverages earnings estimate revisions to guide investors in building successful portfolios [7] - Stocks rated 1 (Strong Buy) have historically produced an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [8] Stock to Watch: Donaldson Company, Inc. (DCI) - Donaldson Company, Inc. is a filtration systems manufacturer based in Bloomington, MN, with a Zacks Rank of 3 (Hold) and a VGM Score of A [12] - The company has a Value Style Score of B, supported by a forward P/E ratio of 19.31, indicating attractive valuation metrics [12] - Six analysts have raised their earnings estimates for fiscal 2025, with the Zacks Consensus Estimate increasing by $0.05 to $3.66 per share, and an average earnings surprise of 2.5% [13]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market strategies, including daily updates on Zacks Rank and Industry Rank, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores rate stocks based on value, growth, and momentum, serving as complementary indicators to the Zacks Rank, helping investors identify securities likely to outperform the market in the short term [2][3] - Stocks are rated from A to F, with A indicating the highest potential for outperformance [3] Value Score - The Value Style Score focuses on identifying undervalued stocks using financial ratios such as P/E, PEG, and Price/Cash Flow [3] Growth Score - The Growth Style Score assesses a company's financial health and future outlook by analyzing projected and historical earnings, sales, and cash flow [4] Momentum Score - The Momentum Style Score identifies optimal entry points for stocks based on price trends and earnings estimate changes [5] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for evaluating stocks based on value, growth, and momentum [6] Zacks Rank - The Zacks Rank is a proprietary model that utilizes earnings estimate revisions to guide investors in building successful portfolios [7] - Stocks rated 1 (Strong Buy) have historically achieved an average annual return of +25.41%, significantly outperforming the S&P 500 [8] Stock Selection Strategy - To maximize returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [10] - Stocks with a 3 (Hold) rank should also have Style Scores of A or B to ensure potential upside [10] Company Spotlight: Donaldson Company, Inc. - Donaldson Company, Inc. is a manufacturer of filtration systems and replacement parts, currently holding a Zacks Rank of 3 (Hold) with a VGM Score of B [12] - The company has a Momentum Style Score of A, with shares increasing by 3.3% over the past four weeks [12] - Recent analyst revisions have positively impacted earnings estimates for fiscal 2025, with the Zacks Consensus Estimate rising to $3.65 per share [13]

Summary of Donaldson Company (DCI) FY Conference Call - June 05, 2025 Company Overview - **Company**: Donaldson Company (DCI) - **Industry**: Filtration technology, focusing on engine markets, industrial applications, and expanding into life sciences [3][6] Key Points and Arguments 1. **Strategic Positioning**: Donaldson aims to be a technology-led filtration company, emphasizing complex problem-solving for customers, which fosters deeper relationships [6][7] 2. **Revenue Segmentation**: The company has three reporting segments: Mobile Solutions (62% of revenue), Industrial Solutions (30%), and Life Sciences (8%) [8][19] 3. **Revenue Growth**: Donaldson has achieved record revenues and adjusted earnings per share for the past four years, indicating strong financial performance [9][16] 4. **Global Presence**: 75% of revenue is generated within the region it is consumed, providing a natural hedge against tariffs [11][12] 5. **Tariff Impact**: The company anticipates a $35 million headwind from tariffs but believes it can offset this through supply chain pricing and surcharges, although slight gross margin pressure is expected [13][14] 6. **Operating Margin Guidance**: The adjusted operating margin for the current fiscal year is 15.8%, with a target of 16.2% for the next fiscal year [17][50] 7. **Market Dynamics**: Despite headwinds in major end markets like construction and agriculture, Donaldson expects significant rebounds when these markets recover, potentially leading to double-digit growth [62][63] 8. **Aftermarket Revenue**: Approximately 60% of sales come from the aftermarket, which is a higher-margin segment, providing resilience against cyclical downturns [65][66] 9. **Life Sciences Segment**: The Life Sciences segment is small but has a large addressable market of $21 billion. Donaldson is focused on differentiated products and has made acquisitions to enhance its capabilities in this area [28][31] 10. **Acquisition Strategy**: The company has a strong pipeline for acquisitions, with a focus on investing in technology and organic growth [34][40] 11. **Dividend Policy**: Donaldson raised its dividend by 11%, marking the 30th consecutive year of dividend increases, highlighting its commitment to returning value to shareholders [34][35] 12. **Capital Allocation**: The company prioritizes organic investment, acquisitions, dividends, and share buybacks, with a recent buyback rate of 3.3% [36][38] Additional Important Insights - **Technological Innovation**: Donaldson is committed to innovation, with a patent granted on average every day, showcasing its focus on developing advanced filtration technologies [10][40] - **Alternative Fuels**: The company is actively working on filtration solutions for alternative fuels, including hydrogen, which presents growth opportunities in the Mobile Solutions segment [20][24] - **Operational Efficiency**: Donaldson is optimizing its manufacturing footprint and has centralized its business processes to enhance efficiency and reduce costs [51][52] - **Market Resilience**: The diversity of Donaldson's business portfolio helps mitigate risks associated with cyclical downturns in specific markets [66][67]

Core Insights - Donaldson Company, Inc. (DCI) reported adjusted earnings of 99 cents per share for Q3 fiscal 2025, surpassing the Zacks Consensus Estimate of 95 cents, marking a year-over-year increase of 7.6% [1][8] - Total revenues reached $940.1 million, exceeding the Zacks Consensus Estimate of $939 million, with a year-over-year growth of 1.3% [2][8] Revenue Results - DCI's net sales in the United States/Canada rose by 0.9% year over year, while Europe, the Middle East, and Africa saw a decline of 0.6%. Latin America experienced a 2.3% increase, and the Asia Pacific region improved by 5.2% [2] - The Mobile Solutions segment, which accounts for 62% of net sales, reported sales of $582.6 million, down 0.4% year over year, with Off-Road and On-Road businesses declining by 8.3% and 24.5%, respectively. Aftermarket sales increased by 3.3% [3] - The Industrial Solutions segment generated revenues of $283.3 million, up 5.3% year over year, driven by a 27.1% increase in Aerospace and Defense sales [4] - The Life Sciences segment reported revenues of $74.2 million, a 0.7% increase year over year, benefiting from volume growth in the Disk Drive business [4] Margin Profile - DCI's cost of sales increased by 3.4% year over year to $618.2 million, leading to a gross profit decline of 2.5% to $321.9 million. The gross margin decreased by 140 basis points to 34.2% due to higher manufacturing costs [5] - Operating expenses rose by 25.7% year over year to $234.5 million, resulting in a 39.1% decrease in operating profit to $87.4 million, with an operating margin of 9.3%, down 620 basis points year over year [5] Balance Sheet & Cash Flow - As of the end of Q3 fiscal 2025, DCI's cash and cash equivalents were $178.5 million, down from $232.7 million in Q4 fiscal 2024. Long-term debt increased to $638.8 million from $483.4 million [7] - In the first nine months of fiscal 2025, DCI generated net cash of $251.0 million from operating activities, a decrease of 31.5% year over year. Free cash flow decreased by 36% to $192.4 million [8][9] FY25 Outlook - For fiscal 2025, DCI expects adjusted earnings per share to be in the range of $3.64-$3.70, compared to $3.42 in fiscal 2024, with sales anticipated to grow by 1-3% [10] - Segment-wise, Mobile Solutions sales are expected to be flat to increase by 2%, while Industrial Solutions sales are projected to rise by 2-4%. Life Sciences sales are expected to grow in the high single-digit range [11] - Capital expenditure is anticipated to be between $75 million and $90 million, with free cash flow conversion expected to be in the range of 80-90% [12]