Adjustments for Non-Cash Items (USD, millions)

Stock-Based Compensation (USD, millions)

Changes in Working Capital (USD, millions)

Capital Expenditures (CapEx) (USD, millions)

Proceeds from Debt (USD, millions)

Repayments of Debt (USD, millions)

Share Repurchases (USD, millions)

Dividend Payments (USD, millions)

Net Change in Cash (USD, millions)

834387e450f119640527c0e280719c7b6e37896b357953441c4a007493295c45

1. **Life Sciences Restructuring**  
   **Q:** When will Life Sciences restructuring be complete?  
   **A:** The Life Sciences segment faced headwinds due to slowed large CapEx projects and elongated downstream projects. The company has made the planned adjustments to right-size the business and is focusing on current opportunities to return to basic profitability within the fiscal year. They believe they can grow from a smaller footprint even if macro conditions remain unchanged for the next **3 to 5 years**.  **[DCI_3410475_12]** **[DCI_3410475_13]** 

2. **Aftermarket Share Gains**  
   **Q:** Is aftermarket growth driven by share gains?  
   **A:** Yes, aftermarket growth is largely due to share gains, including with major customer **NAPA**, and across the independent channel. Vehicle utilization is steady with no significant expansion, but they continue to win share, evidenced by nearly **double-digit growth** across all regions. Q2 is typically the toughest quarter seasonally.  **[DCI_3410475_8]** **[DCI_3410475_15]** 

3. **Free Cash Flow Conversion**  
   **Q:** Why was free cash flow conversion **47%** and how will it improve?  
   **A:** The **47% conversion** was due to working capital investments, especially in inventory, to ensure on-time deliveries for customers. They expect to return to the **85% to 95%** conversion range for the year as sales increase and working capital normalizes throughout the year.  **[DCI_3410475_6]** 

4. **Aerospace & Defense Upside**  
   **Q:** Is there potential upside in Aerospace & Defense guidance?  
   **A:** Despite a strong start, the flat guidance accounts for supply chain challenges, with a few critical parts delaying **seven-figure projects**. If resolved, there is potential upside. The fourth quarter last year saw a **40%** increase, and timing of parts delivery can significantly impact results.  **[DCI_3410475_17]** 

5. **Price-Cost Impact**  
   **Q:** How is price-cost impacting margins and outlook?  
   **A:** Price realization was about **1%** in the quarter, aligning with normal low single-digit levels, and is expected to remain similar for the rest of the year. Costs are mixed, with labor and some inputs up and others down. The company believes price and cost are currently balanced.  **[DCI_3410475_9]** 

6. **IFS Growth Confidence**  
   **Q:** What supports confidence in IFS high single-digit growth?  
   **A:** Industrial Filtration Solutions experienced timing delays in project deliveries, but backlogs are strong and support the forecasted **high single-digit growth** for the year. They are already filling in backlog for the next fiscal year, indicating a solid business cycle in power generation.  **[DCI_3410475_11]** 

7. **Post-Election Impact**  
   **Q:** How might the election affect business and tariffs?  
   **A:** The post-election environment could normalize macro conditions, with potential positives in power generation depending on the administration's policies. There are tariff risks, particularly on steel, which is their number one commodity. However, **75%** of products are manufactured within the region, mitigating some tariff impacts.  **[DCI_3410475_10]** 

8. **Off-Road Business Outlook**  
   **Q:** Have we reached an inflection point in Off-Road?  
   **A:** It's tough to say. Despite some acceleration after five quarters of decline, the outlook remains uncertain. Agricultural markets are getting tougher, construction is muted, and improvement in China doesn't yet signal a sustained inflection point.  **[DCI_3410475_14]** 

9. **Medica's Impact on Life Sciences**  
   **Q:** How did Medica affect Life Sciences profitability?  
   **A:** Medica was essentially immaterial in the quarter, neither a contributor nor a detractor to Life Sciences operating profit. The significant event was a cash outflow of **$71 million** for acquiring the remaining **49%** stake.  **[DCI_3410475_18]** 

10. **Fiscal Year Outlook**  
    **Q:** Is the fiscal year still expected to be **49% H1** and **51% H2**?  
    **A:** Yes, the outlook remains close to **49%-51%**, with possible slight variations. Q2 is typically the toughest quarter due to seasonal factors like holidays and lower activity in planting and harvesting.  **[DCI_3410475_16]** 

e7ad5121c07214fedf4e302591e95f253d384a3fb3534012b43bebf99688a267

43075f30e75734f40ec6d475dbbcd78e2ff3a5bed6da3910953e80f1943423f6

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

| Program Details         | Program 1              |
|-------------------------|------------------------|
| **Approval Date**       | November 2023  **[0000029644-24-000181_dci-20241031.htm:7]**      |
| **End Date/Duration**   | Until terminated  **[0000029644-24-000181_dci-20241031.htm:7]**   |
| **Total Additional Amount** | 12.0 million shares  **[0000029644-24-000181_dci-20241031.htm:7]**  |
| **Remaining Authorization** | 9.7 million shares (as of 2024-10-31)  **[0000029644-24-000181_dci-20241031.htm:7]** **[0000029644-24-000181_dci-20241031.htm:35]**  |
| **Details**             | Part of the company's capital deployment strategy to return value to shareholders, supported by strong cash flow generation.  **[DCI_3368370_3]** **[0000029644-23-000136_dci-20231031.htm:33]** **[0000029644-24-000027_dci-20240131.htm:9]** **[DCI_3400044_11]**  |

550fe8268497fd78b4e6b1fb610df84d1f4c2304ac081ea7c3b400ad3a4a893c

1. Given the **pretax loss of approximately $5 million** in the Life Sciences segment due to continued investments and market challenges, can you elaborate on the specific actions you're taking to focus your expense structure, and how confident are you in achieving breakeven for the segment this fiscal year?  **[DCI_3410475_3]** 

2. With **Off-Road sales down 6%** due to sustained weak conditions in agriculture, and considering that the agriculture market continues to get tougher, what strategic initiatives are you implementing to mitigate this weakness, and when do you anticipate a potential inflection point?  **[DCI_3410475_14]** **[DCI_3410475_2]** 

3. You mentioned that **supply chain constraints in Aerospace and Defense are holding back seven-figure projects**; can you provide more detail on these bottlenecks, the expected timeline for resolution, and how they might impact your full-year guidance for this segment?  **[DCI_3410475_17]** 

4. While Mobile Solutions aftermarket sales grew due to market share gains, you've indicated that **Q2 is typically the toughest quarter** and that vehicle utilization is steady; how do you plan to sustain growth in the aftermarket business during this seasonal slowdown, and are there risks to your full-year outlook if utilization rates decline?  **[DCI_3410475_8]** **[DCI_3410475_16]** **[DCI_3410475_15]** 

5. Free cash flow conversion was **47% in the quarter**, below your full-year guidance of 85% to 95%; given ongoing investments in working capital and inventory, what measures are you taking to improve cash conversion in the coming quarters, and do you still expect to meet your full-year cash flow targets?  **[DCI_3410475_6]** 

e5a731bf1bd49c6ce21d7235ecf8d7c4e5d14ebac9f163bd9d0c05920e6a23b4

Here is the exhaustive guidance provided by Donaldson Company (DCI) in the last four earnings calls, including the issued period, guided period, and the full list of metrics:

---

### **1. Q1 2025 Earnings Call**
- **Issued Period**: Q1 2025  
- **Guided Period**: FY 2025  

#### **Guidance**:
1. **Sales Growth**: Total sales expected to increase **2% to 6%**, including a pricing benefit of approximately **1%**.  **[DCI_3410475_3]**   
   - **Mobile Solutions Sales**: Flat to up **4%**.  
     - Off-Road: Up low single digits.  
     - On-Road: Down low double digits.  
     - Aftermarket: Up low single digits.  **[DCI_3410475_3]**   
   - **Industrial Solutions Sales**: Up **4% to 8%**.  
     - IFS: High single-digit growth.  **[DCI_3410475_3]**   
   - **Aerospace and Defense Sales**: Flat.  **[DCI_3410475_3]**   
   - **Life Sciences Sales**: Low double-digit growth.  **[DCI_3410475_4]**   

2. **Operating Margin**: **15.3% to 15.9%**.  **[DCI_3410475_4]**   
3. **Adjusted EPS**: **$3.56 to $3.72**, up from **$3.42** in FY 2024.  **[DCI_3410475_4]**   
4. **Capital Expenditures**: **$85 million to $105 million**.  **[DCI_3410475_4]**   
5. **Cash Conversion**: **85% to 95%**.  **[DCI_3410475_4]**   
6. **Share Repurchase**: **2% to 3%** of outstanding shares.  **[DCI_3410475_4]**   

---

### **2. Q4 2024 Earnings Call**
- **Issued Period**: Q4 2024  
- **Guided Period**: FY 2025 and FY 2026  

#### **Guidance for FY 2025**:
1. **Sales Growth**: Total sales expected to increase **2% to 6%**, with a pricing benefit of approximately **1%**.  **[DCI_3400044_4]**   
   - **Mobile Solutions Sales**: Flat to up **4%**.  
     - Aftermarket: Low single-digit increase.  
     - Off-Road: Low single-digit increase.  
     - On-Road: Low double-digit decrease.  **[DCI_3400044_4]**   
   - **Industrial Solutions Sales**: Up **4% to 8%**.  
     - IFS: High single-digit growth.  
     - Aerospace and Defense: Flat.  **[DCI_3400044_4]**   
   - **Life Sciences Sales**: Low double-digit growth.  **[DCI_3400044_4]**   

2. **Operating Margin**: **15.3% to 15.9%**.  **[DCI_3400044_4]**   
3. **Adjusted EPS**: **$3.56 to $3.72**.  **[DCI_3400044_4]**   
4. **Interest Expense**: Approximately **$21 million**.  **[DCI_3400044_4]**   
5. **Other Income (Net)**: **$16 million to $20 million**.  **[DCI_3400044_4]**   
6. **Tax Rate**: **23% to 25%**.  **[DCI_3400044_4]**   
7. **Cash Conversion**: **85% to 95%**.  **[DCI_3400044_4]**   
8. **Capital Expenditures**: **$85 million to $105 million**.  **[DCI_3400044_4]**   
9. **Share Repurchases**: **2% to 3%** of shares outstanding.  **[DCI_3400044_4]**   
10. **R&D Investments**: Expected to **continue increasing**.  **[DCI_3400044_4]**   
11. **Dividend Policy**: Intention to **continue paying and increasing dividends**.  **[DCI_3400044_4]**   

#### **Guidance for FY 2026**:
1. **Sales Growth**: Consolidated sales expected to grow at a **3-year CAGR of 3% to 7%**.  **[DCI_3400044_2]**   
2. **Operating Margin**: **15.8% to 16.6%**.  **[DCI_3400044_2]**   
3. **Mobile Solutions Operating Margin**: **18.1% to 18.9%**.  **[DCI_3400044_2]**   

---

### **3. Q3 2024 Earnings Call**
- **Issued Period**: Q3 2024  
- **Guided Period**: FY 2024  

#### **Guidance**:
1. **Sales Growth**: Total sales expected to increase **4% to 6%**, with pricing contributing approximately **2%**.  **[DCI_3391504_4]**   
   - **Mobile Solutions Sales**: Up **2% to 4%**.  
     - Off-Road: Down low double digits.  
     - On-Road: Down low single digits.  
     - Aftermarket: Up mid-single digits.  **[DCI_3391504_4]**   
   - **Industrial Solutions Sales**: Up **6% to 8%**.  
     - IFS: Mid-single-digit growth.  
     - Aerospace and Defense: Low double-digit growth.  **[DCI_3391504_5]**   
   - **Life Sciences Sales**: Mid-teens increase (revised down from 20%).  **[DCI_3391504_5]**   

2. **Operating Margin**: **15.0% to 15.4%**.  **[DCI_3391504_5]**   
3. **Adjusted EPS**: **$3.33 to $3.39**.  **[DCI_3391504_5]**   
4. **Interest Expense**: Approximately **$22 million**.  **[DCI_3391504_5]**   
5. **Other Income (Net)**: **$15 million to $17 million**.  **[DCI_3391504_5]**   
6. **Tax Rate**: **23% to 24%**.  **[DCI_3391504_5]**   
7. **Cash Conversion**: **95% to 105%**.  **[DCI_3391504_5]**   
8. **Capital Expenditures**: **$90 million to $105 million**.  **[DCI_3391504_5]**   
9. **Dividends**: Announced an **8% increase** in the quarterly cash dividend.  **[DCI_3391504_5]**   
10. **Share Repurchases**: Approximately **2% of shares outstanding**.  **[DCI_3391504_5]**   

---

### **4. Q2 2024 Earnings Call**
- **Issued Period**: Q2 2024  
- **Guided Period**: FY 2024  

#### **Guidance**:
1. **Sales Growth**: Total sales expected to increase **3% to 7%**, with pricing contributing approximately **2%** and a currency translation benefit of about **1%**.  **[DCI_3375416_5]**   
   - **Mobile Solutions Sales**: Up **1% to 5%**.  
     - Off-Road: Down low double digits.  
     - On-Road: Flat.  
     - Aftermarket: Up mid-single digits.  **[DCI_3375416_5]**   
   - **Industrial Solutions Sales**: Up **3% to 7%**.  
     - IFS: Mid-single-digit growth.  
     - Aerospace and Defense: Mid-single-digit growth.  **[DCI_3375416_5]**   
   - **Life Sciences Sales**: Up approximately **20%**.  **[DCI_3375416_5]**   

2. **Operating Margin**: **15.0% to 15.4%**.  **[DCI_3375416_6]**   
3. **Adjusted EPS**: **$3.24 to $3.32**.  **[DCI_3375416_6]**   
4. **Capital Expenditures**: **$95 million to $110 million**.  **[DCI_3375416_6]**   
5. **Cash Conversion**: **95% to 105%**.  **[DCI_3375416_6]**   
6. **Life Sciences Profitability**: Expected to be approximately breakeven.  **[DCI_3375416_5]**   
7. **Gross Margin**: Second-half gross margin rate expected to approximate the first half.  **[DCI_3375416_6]**   
8. **R&D Investments**: Double-digit increase planned.  **[DCI_3375416_1]**   

--- 

This summary includes all metrics guided for in the last four earnings calls, along with the issued and guided periods.

18f3ba72077763e7d458bec8604a62618487211549977eb2889f649389047875

U.S. and Canada

Europe, Middle East, and Africa (EMEA)

Asia Pacific (APAC)

Latin America (LATAM)

Other

Total Revenue

a4e8a73319d5b6bfb6a4f1f30eeb7636fb8c28b33077e89ec21da6bc8a601b86

| Name               | Position                                      | Start Date          | Short Bio                                                                                                                                                                                                 |
|--------------------|-----------------------------------------------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Tod E. Carpenter   | Chairman, President, and CEO                  | November 2017       | Tod E. Carpenter has been with Donaldson Company, Inc. since **1996**. He was appointed as the **Chairman, President, and Chief Executive Officer** in **November 2017**. Previously, he served as COO and in various other roles.  **[0000029644-24-000111_dci-20240731.htm:14]** **[0000029644-24-000132_dci-20241002.htm:15]**        |
| Scott J. Robinson  | Chief Financial Officer                       | 2015                | Scott J. Robinson served as the **Chief Financial Officer** of Donaldson Company, Inc. from **2015** until **October 31, 2024**. Before joining DCI, he was CFO at Imation Corp..  **[0000029644-24-000111_dci-20240731.htm:14]** **[0000029644-23-000085_dci-20230731.htm:14]** **[0000029644-24-000170_dci-20241025.htm:1]**                                                     |
| Amy C. Becker      | Chief Legal Officer and Corporate Secretary   | November 2022       | Amy C. Becker joined Donaldson Company, Inc. in **1998** and was appointed as **Chief Legal Officer and Corporate Secretary** in **November 2022**. She has held various legal roles within the company.  **[0000029644-24-000111_dci-20240731.htm:14]** **[0000029644-23-000085_dci-20230731.htm:14]**                                   |
| Sheila G. Kramer   | Chief Human Resources Officer                 | November 2022       | Sheila G. Kramer has been with Donaldson Company, Inc. since **2015** and was appointed as **Chief Human Resources Officer** in **November 2022**. She previously worked at Taylor Corporation and Lifetouch, Inc..  **[0000029644-24-000111_dci-20240731.htm:14]** **[0000029644-23-000085_dci-20230731.htm:14]** **[0000029644-22-000089_dci-20220731.htm:22]**                    |
| Guillermo Briseño  | President, Industrial Solutions               | November 2022       | Guillermo Briseño joined Donaldson Company, Inc. in **2003** and became **President, Industrial Solutions** in **November 2022**. He has held various positions in Latin America.  **[0000029644-24-000111_dci-20240731.htm:14]** **[0000029644-23-000085_dci-20230731.htm:14]**                                                         |
| Andrew Dahlgren    | President, Mobile Solutions                   | August 1, 2024      | Andrew Dahlgren joined Donaldson Company, Inc. in **1994** and was appointed as **President, Mobile Solutions** effective **August 1, 2024**. He has held various leadership roles within the company.  **[0000029644-24-000073_exhibit991officerapptjun20.htm:0]** **[0000029644-24-000111_dci-20240731.htm:14]** **[0000029644-24-000073_dci-20240624.htm:1]**                                  |
| Richard B. Lewis   | President, Life Sciences                      | August 1, 2024      | Richard B. Lewis joined Donaldson Company, Inc. in **2002** and was appointed as **President, Life Sciences** effective **August 1, 2024**. He previously served as President of Mobile Solutions.  **[0000029644-24-000073_exhibit991officerapptjun20.htm:0]** **[0000029644-24-000073_dci-20240624.htm:1]** **[0000029644-24-000111_dci-20240731.htm:14]**                                      |
| Thomas R. Scalf    | President, Enterprise Operations and Supply Chain | November 2022   | Thomas R. Scalf has been with Donaldson Company, Inc. since **1989** and was appointed as **President, Enterprise Operations and Supply Chain** in **November 2022**. He has held various roles in operations and management.  **[0000029644-24-000111_dci-20240731.htm:15]** **[0000029644-23-000085_dci-20230731.htm:15]** **[0000029644-23-000085_dci-20230731.htm:14]**           |
| Brad Pogalz        | Chief Financial Officer                       | November 1, 2024    | Brad Pogalz was appointed as the **Chief Financial Officer** effective **November 1, 2024**. He has been with Donaldson Company for nearly a decade and has held various finance roles.  **[0000029644-24-000170_dci-20241025.htm:1]** **[DCI_3405636_9]**                                                    |

1e950fae0f1b7813aa85ba398d469db769f8c6fe070c275d18480f9d5e61623c

Donaldson Company, Inc. is a global leader in technology-led filtration products and solutions, serving a broad range of industries and advanced markets. The company designs and manufactures filtration systems and components for various applications, including air and liquid filtration, industrial processes, and life sciences. Donaldson's products are used in diverse sectors such as construction, mining, agriculture, transportation, power generation, aerospace, and medical devices.

1. **Mobile Solutions** - Provides replacement filters for air and liquid filtration, filtration housings, and systems related to exhaust and emissions for OEMs in construction, mining, agriculture, and transportation, as well as independent distributors and OEM dealer networks.  **[0000029644-24-000111_dci-20240731.htm:4]** **[0000029644-24-000073_exhibit991officerapptjun20.htm:0]** **[0000029644-24-000093_a991pr20240731.htm:4]** **[0000029644-24-000111_dci-20240731.htm:31]** **[0000029644-23-000085_dci-20230731.htm:29]** **[0000029644-23-000136_dci-20231031.htm:18]** **[0000029644-24-000067_dci-20240430.htm:23]** **[0000029644-24-000027_dci-20240131.htm:21]** 
   
2. **Industrial Solutions** - Offers products for industrial air filtration, industrial gases, industrial hydraulics, power generation, and aerospace and defense, including dust collectors, compressed air purification systems, and filtration for industrial processes.  **[0000029644-24-000111_dci-20240731.htm:4]** **[0000029644-24-000073_exhibit991officerapptjun20.htm:0]** **[0000029644-24-000093_a991pr20240731.htm:4]** **[0000029644-24-000111_dci-20240731.htm:31]** **[0000029644-23-000085_dci-20230731.htm:29]** **[0000029644-23-000136_dci-20231031.htm:18]** **[0000029644-24-000067_dci-20240430.htm:23]** **[0000029644-24-000027_dci-20240131.htm:21]** 

3. **Life Sciences** - Supplies products for bioprocessing, food and beverage, medical devices, vehicle electrification, microelectronics, and disk drives, including bioprocessing equipment, chromatography devices, and specialized air and gas filtration systems.  **[0000029644-24-000111_dci-20240731.htm:4]** **[0000029644-24-000073_exhibit991officerapptjun20.htm:0]** **[0000029644-24-000093_a991pr20240731.htm:4]** **[0000029644-24-000111_dci-20240731.htm:31]** **[0000029644-23-000085_dci-20230731.htm:29]** **[0000029644-23-000136_dci-20231031.htm:18]** **[0000029644-24-000067_dci-20240430.htm:23]** **[0000029644-24-000027_dci-20240131.htm:21]**

56331c79b7e0874a33b35c082b19aaadab301293995bb91f9155a3beea979cb7

- **Donaldson's acquisition of a 49% stake in Medica S.p.A.** provides access to **hollow fiber membrane technology**, a fundamental filtration technology not previously in its portfolio. This allows expansion into bioprocessing applications like lab-based applications, bioreactor productions, and cell culture processes. **Revenue contribution is expected to start late next fiscal year**, indicating future growth opportunities.  **[DCI_3391504_1]**
- **Strong operating margin performance**, with **Q3 operating margin at 15.5%**, a **130 basis point improvement** over the prior year, and expectations for continued sequential improvement in Q4, demonstrates robust financial performance and profitability trends. The company is expecting an **operating margin improvement of 60 basis points** at the midpoint for the full year.  **[DCI_3391504_7]**
- The company is **strategically investing in its Life Sciences business**, which, while increasing operating expenses in the short term, is expected to lead to **significant growth** ("hockey stick" effect). Over time, operating expenses are expected to **renormalize back into company averages** or potentially lower, enhancing long-term profitability.  **[DCI_3391504_11]**

6b8da77c7bea7e8fa7a9d22d306b805857a668ff4ce40b13363afe4932288c58

- The company **reduced its full-year sales guidance for the Life Sciences segment** from approximately **20% growth to mid-teens growth**, due to **timing uncertainties and cautiousness in bioprocessing orders**, which may indicate **challenges in achieving growth expectations** in this segment.  **[DCI_3391504_5]** **[DCI_3391504_8]**
- **Softening in On-Road markets**, particularly in **U.S. long-haul trucks** and **China**, has led the company to **reduce its On-Road sales guidance** from **flat to negative low single digits**, potentially impacting revenue in the Mobile Solutions segment.  **[DCI_3391504_4]** **[DCI_3391504_13]**
- Despite delivering a **strong operating margin of 15.5%** in the quarter, the company **did not raise its full-year operating margin guidance**, suggesting potential **caution about future profitability** or anticipated **headwinds** in the fourth quarter.  **[DCI_3391504_7]**

11561565f3a55d3af24a855ad56fbb9f96f4fcdb7ad5b0e8a0ef7b5f63ded152

- **Reduced outlook in agriculture markets negatively impacting Off-Road segment**: The company **lowered its outlook** for the Off-Road equipment segment due to **weakness in agriculture markets globally**, which may negatively impact future revenues.  **[DCI_3375416_10]**
- **Continued investments in Life Sciences increasing expenses and pressuring margins**: Increased **R&D and SG&A expenses** due to aggressive investments in **Life Sciences**, including scaling pre-revenue acquisitions, may continue to **pressure margins** in the near term, with the plateau of these investments **yet to be reached**.  **[DCI_3375416_17]** **[DCI_3375416_9]**
- **Potential future margin pressure in Mobile Solutions as agriculture market recovers**: Current **high margins** in the Mobile Solutions segment may be **unsustainable**, as the favorable mix due to **lower agriculture equipment shipments** may reverse when the agriculture market recovers, potentially leading to **margin pressure**.  **[DCI_3375416_16]**

ed69ffbe3ed0864233bbf14f9c2d22eb91be4111959db38a47d622773c530781

- **Donaldson Company is achieving significant market share gains in the Mobile Solutions aftermarket business**, driving strong sales growth despite steady vehicle utilization rates.  **[DCI_3410475_8]** **[DCI_3410475_15]**
- **Potential upside in the Aerospace and Defense segment** if supply chain constraints are resolved, as supply chain issues have held back significant projects.  **[DCI_3410475_17]**
- **Executing well on organizational redesign**, the company is gaining share in several businesses, expanding its addressable market, and is well-positioned to deliver on its financial targets.  **[DCI_3410475_5]**

0699fc37c9791279904d2f1b4e0b1979e5647fe9e093133e80a8eb4585de312c

- The **Life Sciences segment is experiencing delays** in growth expectations, particularly in bioprocessing, where programs are slipping by **1 to 2 years**, leading to a **reduction in sales and margin expectations** for fiscal 2026 compared to previous targets.  **[DCI_3400044_9]** **[DCI_3400044_7]**
- The company is **exiting certain non-strategic product lines** in their On-Road business, which will cause a **revenue headwind** in fiscal 2025 and contribute to a **low double-digit decrease** in On-Road sales.  **[DCI_3400044_14]**
- Benefits from the company's **footprint optimization and cost reduction initiatives** will **take time to materialize**, with returns expected in **year 2 or year 3**, meaning these initiatives will not significantly impact fiscal 2025 results.  **[DCI_3400044_21]** **[DCI_3400044_13]**

60a33273190ada40d437679845d76e7a7a9c38bb93fccf23faea7286be23670e

- The **Life Sciences** segment is experiencing significant headwinds, with both upstream CapEx projects slowing and downstream projects elongating, leading to delays of **1 to 2 years** and requiring adjustments and restructuring, which may impact profitability and growth.  **[DCI_3410475_12]**
- The company's **free cash flow conversion** in Q1 was only **47%**, significantly below the full-year target of **85% to 95%**, due to increased working capital investments, potentially indicating cash flow challenges.  **[DCI_3410475_6]**
- The **Aerospace and Defense** segment is facing "incredibly stubborn" supply chain issues, particularly with "a couple of piece parts" holding back **seven-figure projects** from being delivered, potentially impacting revenue and limiting growth in this segment.  **[DCI_3410475_17]**

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- **Record margins in the Mobile Solutions segment** are expected to be sustainable in the short term due to volume gains, market share gains, and favorable pricing, particularly in the independent channel. The company does not anticipate any short-term changes in pricing or margins.  **[DCI_3375416_16]**
- The **Life Sciences segment is expected to ramp up significantly** in the second half, supported by backlogs and contributions from large projects from recent acquisitions, particularly in Bioprocessing. This positions the company for strong future growth in this segment.  **[DCI_3375416_15]** **[DCI_3375416_11]**
- The company is **committed to improving operating margins**, with a goal to increase from the current guidance of **15.2%** to **16%** over the next two years, indicating focus on profitability and operational efficiency.  **[DCI_3375416_12]**

a1a0e6a46fb403f73775550a0e943a44cba4bbcdae0e43cbeab64fdc700c379d

- **Strong share gains in the Mobile Solutions aftermarket business are expanding operating margins**, with the independent channel (60% of the aftermarket business) up high single digits and the OE channel (40% of the aftermarket business) up high teens in the quarter.  **[DCI_3400044_8]**  This demonstrates the power of the mix and the company's ability to gain market share despite headwinds in first-fit production.
- **Healthy backlog and growth prospects in Industrial Solutions** support a positive outlook, particularly in Industrial Filtration Solutions (IFS). The company expects Power Generation sales to be up year-over-year due to a robust backlog.  **[DCI_3400044_10]**  Additionally, their **connected base products are gaining momentum**, with about 1,000 units set up in the last fiscal year, helping to drive aftermarket sales and market share gains, especially in the United States.  **[DCI_3400044_10]**
- **Improved gross margins and cost efficiency efforts are supporting profitability**. The company achieved a gross margin of **36.2% in Q4 and 35.6% for the year**  **[DCI_3400044_13]** , attributed to efficiency improvements and effective cost management. They have initiated a footprint and cost optimization program, which, while not providing immediate benefits, is expected to enhance margins in the longer term.  **[DCI_3400044_13]**  The company expects to **maintain current levels of gross margin going forward**.  **[DCI_3400044_13]**

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Donaldson Company Inc (DCI)

Financials