Donaldson at Oppenheimer Conference: Strategic Growth and Challenges

On Monday, 05 May 2025, Donaldson Company (NYSE:DCI) presented at the Oppenheimer 20th Annual Industrial Growth Conference, offering insights into its strategic direction amidst both opportunities and challenges. Led by CFO Brad Bogal, the company emphasized its leadership in filtration technology, its robust global presence, and a balanced approach to capital allocation.

Key Takeaways

• Donaldson is focusing on alternative power solutions, including hydrogen fuel cells and hybrid equipment.
• The company plans to grow through organic investments and strategic acquisitions.
• Donaldson is managing tariff impacts with regional production and consumption strategies.
• Financial projections show steady revenue growth with a strong dividend history.
• The company is expanding its life sciences division, focusing on disruptive technologies.

Financial Results

• Fiscal year 2024 revenue reached $3.6 billion.
• Projected revenue growth for the current fiscal year is between 0% and 4%.
• Fiscal year 2024 EPS was $3.42 per share, with projections for the current year exceeding $3.60 per share.
• Sales and adjusted EPS have grown at compound annual growth rates of 4% and 13%, respectively.
• Donaldson is part of the S&P high yield dividend aristocrat fund, with nearly 30 consecutive years of dividend increases.

Operational Updates

• Mobile Solutions: Focus on developing solutions for hydrogen fuel cells and hybrid equipment, with 70% of mobile aftermarket parts being replacements.
• Industrial Solutions: Expansion of connected services technology to enhance customer insights and service opportunities.
• Life Sciences: Targeting disruptive technologies in bioprocessing, emphasizing strategic technology offerings.
• Global Operations: Approximately 75% of products are produced and consumed within the same region, mitigating tariff risks.

Future Outlook

• Strategic priorities include organic investment and mergers and acquisitions, with continued emphasis on dividends and share repurchases.
• Growth opportunities lie in alternative power solutions, connected services expansion, and commercialization of life sciences technologies.
• The company is poised to adapt to potential tariff impacts through pricing and supply chain strategies.

Q&A Highlights

• Alternative Power: The spectrum of options, such as hydrogen and hybrid equipment, presents more opportunities than risks.
• Industrial Solutions Connectivity: Aims to enhance customer understanding and service revenue.
• Life Sciences Strategy: Includes partnerships with academic institutions to build market awareness.
• Tariffs and Trade: Donaldson plans to offset tariffs through pricing adjustments and regional production strategies.

For more detailed insights, readers are encouraged to refer to the full transcript.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

Donald Montgomery, Conference Host, Oppenheimer: Morning, everyone. Welcome to the twentieth Annual Oppenheimer Industrial Growth Conference. Next up, we have Donald Montgomery. Very happy to have CFO Brad Bogal is with us. That still has a nice ring to it, Brad, as well as director of our honor, Sergeant Donald.

Thank you. Thank you both for taking the time this morning. Always get to chat.

Sarika, Director, Donaldson: Great. Thank you. And just we before we get started, just wanted to mention to everybody on the call that, we did just close our fiscal third quarter twenty twenty five at the April, April thirtieth. So anything we talk about today in terms of presentation material or Q and A will be backdated as of our second quarter earnings conference call. With that, we’ll pick it up, Brad.

Brad Bogal, CFO, Donaldson: Great. Well, thanks everyone for the time today. Brad Pogals, as Brian mentioned, I’ve been with Donaldson for about ten years, but CFO for the last six months. So looking forward to reconnecting with some of you or connecting for the first time as we go through this. A quick update today then for us is first, exciting part of forward looking statements.

As Sarek mentioned, I think that’s the most important one. We have an off cycle fiscal year, but of course, are all forward looking statements. So a few investment points for Donaldson that are very consistent with how we’ve talked about our business for a while. I think most importantly, we’re a leader in filtration. We’re a filtration company, technology led filtration, and that goes to the second point.

So when we think about our opportunities, it’s about leveraging our filtration technology in different markets, where some companies perhaps chase a specific market. For us, it’s about developing technology at one of our facilities around the world and then thinking about ways to apply it to customer problems that might open doors to find our way into different markets that we hadn’t thought about, a niche opportunity, but we use the portfolio of technology that we have to do that. And this is what’s helped us grow very profitably for a very long time now. Helping customers meet evolving environmental and operational goals. So as we think about the markets and the opportunity for filtration, as technology gets tighter, as people, customers, or geographies move up a technology curve that tends to lend itself to better opportunities for us.

So things like on road transportation, sometimes we get the questions about how do we think about environmental regulations. And of course, that creates a moment where everybody has to be on the same page at the same time with regulations. But our business isn’t predicated on growth through regulation. As customers, our customers want to improve the quality of their equipment for their customers, it tends to result in something that’s a better performing engine or a cleaner facility, and that requires better filtration. So that’s where we step in.

Strategic and balanced growth strand strategy. So our position in legacy markets like mobile solutions, we’ve been in for over one hundred years, but then also leveraging technology to get into newer markets. So as we think about the industrial growth opportunities, it’s about things like having connected services that get us closer to our customers, where we can dig in and expand our aftermarket business in industrial facilities or in life sciences, food and beverage filtration or even new technologies in disk drive, where we’ve had this business for a long time. And then our newest set of businesses is acquisitions in bioprocessing. So things like this are all at the core of how we expand, but we’re smart about it, and we’re very balanced in how we do it.

And then finally, this progress towards life sciences. So we’ve made a few acquisitions over the last several years and all about the biospaces. Again, these are akin to filtration in certain ways, thinking about where we can grow our consumables with some of these technologies. For the most part, we’re looking at companies that offer a disruptive technology. So it’s not necessarily playing as a me too character in this world, but looking for disruptive technologies in how we support life sciences trends.

Now, of course, this is something that’s newer to our portfolio, so it’s it’s building over time. But it’s a place where, again, we see an opportunity based on our core know hows and then also leveraging technologies in a space where we’re a bit new. Overview of the company. As I mentioned, over a hundred years old, 10 this year. We’ve got about 14,000 employees.

About two thirds of those are in the production space, a 50 locations were around the world. And I think one of the most important statistics for Donaldson is our active patents. Again, we think about filtration technology, and we’ve got an amazing group of engineers and scientists that help us build capabilities that give us room to pursue a lot of different opportunities around the world. About $8,700,000,000 in market cap and then important one is long term dividend CAGR. So we are a company that’s within the S and P high yield dividend aristocrat fund, which means to be in this, we’ve increased the dividend for at least twenty years.

And at this point, we’re coming up on thirty years of annual increases. So really nice trajectory. On the bottom left of the screen is a breakdown of our revenue base in a couple of different categories. First is our operating segments, mobile solutions, which is largely related to engines industrial solutions, which is about industrial air filtration, power generation, and then aerospace and defense. And then finally, life sciences, the smaller part of our business.

Most of that 8% is coming from more legacy businesses, nonacquired. So it’s food and beverage, thinking about filtration for wine, beer, bottled water. Disc drive filtration is in there because it’s a very unique technology. Some venting solutions, think about things like, battery venting, for electric vehicles. And then our new bio businesses, which again are a very small part of this.

And then breaking it down a different way, I think the 66% is one of the statistics we get asked about a lot that is a core part of the strength of Donaldson, sixty six percent recurring revenue. We’ve done a lot of work over a long time to set up essentially a razor razor blade model where we work with our customers to come up with an innovative solution, and that’s on that first fit housing or piece of new equipment. And then our filter is the one that goes back in there. That’s the razor blade. We’re very successful with it because we offer a good value proposition again to the customers.

It’s not just make something that’s a razor blade, but we do it with a lot of science and a lot of technical know how on filtration that our customers value pretty highly. Quick stats on the revenue. I’ll go to the far right of both charts. Last fiscal year, fiscal twenty twenty four, we’re in fiscal twenty twenty five right now. And as Sarika mentioned, we just closed our third quarter.

Last year, 3,600,000,000.0 in revenue. We forecasted some growth this year, 0% to four percent in total top line sales. EPS on the far right, excluding certain onetime items, 3.42 per share. And this year, we’re just over $3.6 per share at our midpoint of the guidance for fiscal twenty twenty five. Few of the historical highlights, I touched on the guidance here.

So if we look at the CAGR, 4% over the last few years. And I think, again, it really comes down to the strength of both the products, replacement parts, and then this process filtration, which is about food and beverage. Adjusted operating margin. And so this is a pretty remarkable set of improvements over the last few years. If you go back to fiscal twenty twenty two, this is when the world was feeling a lot of pressure on that period of hyperinflation post COVID.

Our teams did an excellent job looking at both cost in our business, but then also, I would say, our pricing muscle is very strong right now. And we look to have fair pricing with our customers, and we benefited from that as we saw some leverage in fiscal twenty twenty three, continued growth in 2024 and then again forecasting another year of growth this year. Finally, adjusted EPS, the CAGR of 13%. So sales CAGR of 4%, earnings growth of 13%, and we expect continued improvement in fiscal twenty twenty five, which I mentioned already. And another side is in terms of our forecast, we continue to view return to shareholders with dividend and share repurchase as a big part of that.

I’ll talk about capital allocation in a different slide. So the competitive advantages that we think we bring, and this is the top left is really the core, the filtration technology leadership. So a a highlight for us, we invented the first engine air filter. Our founder, Frank Donaldson, was working on a tractor, and that’s where that came from. And then we’ve expanding ever since, but it all starts with filtration and and how we can work our technology to solving a customer problem.

And then I’m gonna go to the top right, deep customer relationships. So the the thing for us that’s really important to keep in mind is we have relationships with some of the the world’s largest manufacturers, of mobile equipment, some large industrial companies, and these relationships are built with trust and development of solutions that matter to them. It’s a very high barrier to entry if you want to support some of these large customers because you have to be able to deliver, but you have to offer some technology that really matters to them. And we’ve done this over a very long period of time. The third bullet in this section, I want to just quickly touch on connected services solutions.

This is what I said earlier about really managing the customer relationship at a deeper level. So we’re expanding our connected services technology in the industrial space, but then also growing in our service business. So we’ve done a few small acquisitions to to essentially build out territories with service companies, and that gives us access to a customer that’s at a lower level than we’ve had in the past. Now moving down, again, I’m going to zigzag here, industry leader in advanced filtration operational excellence. I think the opportunity here is all about optimizing resources with efficiency.

So when we think about where we’re going over the next ten years, we’re looking at ways that help our customers meet some of their targets. And it’s not just about environmental, it’s about cost targets. But you think about the second bullet, alternative power solutions. We have a real opportunity here as we work with our internal combustion engine customers on what alternative powers would look like. But we also have opportunity with our power generation business, natural gas power plants.

All of these things are are places where we have expertise that we can build on and kind of meet this this new demand in the current environment. Diversified business, I already talked. We have a lot of locations around the world. Do wanna do a quick, sidebar here on on tariffs with our global scale. Tariffs is one of the most popular questions right now, and and, of course, that makes sense to all of us that this is the topic.

So for Donaldson, we have this natural hedge built into our business. About 75% of what we produce in a certain region is consumed in that region. So we don’t have a lot of our supply chain where it’s building a lot of things in China to bring it to The U. S. Or vice versa.

This creates a natural hedge. And then on top of it, as we look across our business, this is a way for us to think about how we can explore, let’s say, defensive opportunities in the tariff world. So if there’s things where we make it in The U. S, we want to promote that. Our biggest trading partner in The U.

S. Is with Mexico. A lot of our products are covered with the USMCA agreement, so that helps create create some hedge again right now. So as far as tariffs, we’re certainly paying attention to it like all of you, but it’s something that we we believe we’re we’re managing smartly right now. And, of course, you know, we we pay attention to the news, and and we’ll continue to monitor that.

High aftermarket retention. This is what I mentioned earlier. About two thirds of the business is consumable. And with our proprietary products, this gives us a great opportunity to replenish that. So if you have one of our systems with a proprietary product, you tend to need that filter.

We haven’t really had to give up a lot of opportunities because our filter helps us retain that business. So when we think about the growth, it’s about continuing to populate the world with new solutions that have our filter as that proprietary razor blade, like I said earlier. And then operations, again, teams around the world are focused on continuous improvement and taking out costs where it makes sense. Capital allocation, I’ll speed up a little bit through here. And of course, we can take questions at the end.

But I want to start at the top and we’ll go counterclockwise. 21% is organic investment, and this over the last three years, one point four twenty five percent through dividend, 34% through share repurchase and 20% through M and A. So the top priority for us is growing the business. When we look at that M and A and organic, that is our number one priority for capital deployment. We want to grow our business.

And then next is dividend and then following that is share repurchase. On share repurchase, we typically look to at least offset dilution of about 1%. And then over over time, we’ve gone above that by about 1%. So our average is around 2% in the past many, many years. So these are the last points, and this is the points I started with.

But I I think, if you take away anything, it’s about leader in filtration and technology because it’s based on getting plugged in with our customers. So with that, Brian, happy to take questions, and we can go from there.

Donald Montgomery, Conference Host, Oppenheimer: Okay. Sounds great. Yeah. In in covering Donaldson for for quite a while, with regard to our mobile business, there there are always questions on, you know, how much risk there is with, you know, alternative power as as you you referenced, different engine adoption scenarios. You know, where are you vulnerable?

You know, how is your team managing through those potential outcomes? And maybe just walk us through that in terms of, you know, the puts and takes of the, you know, key potential engine adoption scenarios, where you are positioned now, how your team in terms of technology development is managing through each of those, you know, potential paths. And I guess what it what it means going forward. Obviously, the that secular risk, that watch item has been there for like, covered the stock for over a decade. So it’s been discussed the whole time, your mobile solutions team has, has put up some pretty good numbers.

So that certainly hasn’t hit you yet. Profitability continues to climb, but, you know, the the concern remains it’s understandable at a high level. Just curious what, you know, finer points you Sure.

Brad Bogal, CFO, Donaldson: So the the ten year that you mentioned is I I kind of think about that too. Ten years ago, the question that we would often get posed is similar. How does this affect our business? But at the time, the perspectives were binary. It was it was much more clear at the time that it was internal combustion or electrification, and that was it.

Now a fully electrified engine doesn’t have a lot of filter content on it, so I can understand the the concerns at the time. What has evolved, and I think what is really exciting for us is the spectrum of options is much, much wider than ICE or EV. So things like, hydrogen fuel cell, where we’ve got a partnership with Daimler to work on a concept truck with them. We did a press release on that. Hydrogen fuel cell require pristine air intake.

And, of course, as I mentioned earlier, we started with air, and we’re we’ve been doing that for a hundred years plus, and we’re very, very good at air intake. And the standard with hydrogen fuel cell is that the air intake goes up. You require a little bit extra because there’s now chemical filtration that has to come into it. These are solutions that we have developed, and we see really good content opportunities on that. Hybrid equipment, kind of the same.

If there’s a diesel power plant running a lot of electric drive motors or electric equipment on the on the machine, that still creates opportunity. So the air filtration, the fuel filtration, the lube filtration, hydraulics. So as we look at the landscape of things, there is probably more opportunity than risk because the likelihood that EVs just become the only solution is very, very low. Now this is debatable thing on how long will it take. So one of the things we talk about also is the the population of equipment in the world.

Our aftermarket business, as we already said, is huge. So so conversion to new equipment, if it started today, still leaves us with decades of aftermarket equipment, unless you believe that all that equipment just sort of goes away right away, which we don’t. So our growth in aftermarket and our commitment to expanding share there with the newest technologies, best availability, good options, all of that creates long, long term opportunity. So I I would say from our chair right now as as we work on these things, we have we have more optimism than concern with regard to this new set of technologies because we think we’re really well positioned to be a key player in the alternative power space.

Donald Montgomery, Conference Host, Oppenheimer: That’s very helpful color and and encouraging. The well setting question on that truck within mobile, you you had mentioned the 66% replacement consolidated. What is it? 75 plus with mobile?

Brad Bogal, CFO, Donaldson: Yeah. Sort of the mobile, the percent of the placement cards. Yeah. Yeah. 70 some percent.

Yep. That’s right. That’s a good point too. About three quarters of of that business is some sort of recurring.

Sarika, Director, Donaldson: Particularly now given where we are in the cycle. So

Donald Montgomery, Conference Host, Oppenheimer: Indeed. Alright. I’ve been intrigued by industrial solutions connectivity for a while. I do tend to admittedly, you know, overlook the the service component of that. You know, maybe talk about the, I I guess, the the decision to to go down that path more more over the years, the steps your team’s taken in terms of technology, you know, rollouts and adjustments along the way, where you stand now in terms of the, you know, connected and and service strategy, overall portfolio role, what it what it can mean for Donaldson over the medium to long term.

Brad Bogal, CFO, Donaldson: Sure. So the the impetus, I would say, is as as this business has expanded, the opportunity for us was to get closer to our customers. So we sell through every channel in industrial. Let’s talk specifically industrial air filtration, which is the largest portion of that segment. So this is dust collection across a variety of sizes, and it can be across pretty much every market you could consider.

It’s woodworking, pharmaceutical dust, weld fume, anything like that. So as we grew this business, it was about boots on the ground, people selling to maintenance people in a facility or more strategic key accounts at a parent or working with distributors and dealers around the world where maybe we needed the access. So kind of every channel. Connectivity allows us to understand more of the customer specific needs. So one of the things that we launched several years ago is this IQ connected solutions that gives us insight into what a dust collector is doing.

So you think about some specific unit in a factory, and we know about the pressure in that. We know if the fan is operating. We know about the utilization of that equipment. And why that matters to the customer, though, is they don’t have to worry about it then. So now if there’s something that looks like it could be an issue, we can help them spot it.

If it looks like if there is an issue, we can perhaps fix it even over the phone. Maybe it’s as simple as a literally, a dustbin needs to be emptied. But these all are the things that all of a sudden we have these sensors and this capability where the customer, the end user is thinking about Donaldson, not necessarily just their distributor partner that hopefully comes to us. That connection is really important because what we’re also finding is as as the world gets more complicated, and and, of course, our customers, especially in the plants, very, very busy, they they want that peace of mind. And the thing that they wanna worry about is how they make their widget and the quality of their widget.

They don’t wanna worry about these very complicated systems to make sure that the air is clean and their systems are operating properly. So this gives us a whole different set of opportunities to plug in in a meaningful way. What I expect that that gives us the opportunity to report back to all of you is we’ll watch more and more of the the growth in the sales and service or excuse me, the aftermarket and service part of this business.

Donald Montgomery, Conference Host, Oppenheimer: Which I assume over time will be increasingly mix accretive.

Brad Bogal, CFO, Donaldson: Yes. Absolutely.

Donald Montgomery, Conference Host, Oppenheimer: I know it’s not the easiest stat to provide, so any any color, would be helpful. What is the mix now of, you know, truly connected revenue and or service revenue for, for industrial? What’s the, I guess, entitlement mix over time as as you look forward?

Brad Bogal, CFO, Donaldson: Yeah. Service revenue is is small. I wanna I wanna caveat the connected revenue. It’s it’s not it’s not something that we’re lobbying as a subscription. The connected is the think of it as the access point.

So the more we know about how to support the customers, the better opportunity for growing either the aftermarket part or service, you know, to the extent of you’re the shipment shows up today because you’re gonna need a replacement part tomorrow for this type of filter. So it’s things like that, Brian. We’ll measure success more in service revenue, which is small as a part of industrial today, and aftermarket part growth.

Donald Montgomery, Conference Host, Oppenheimer: Okay. Understood. Alright. Let’s talk life sciences. You have the newest leg of at least bioprocessing, specifically the newest leg of the Donaldson store.

Maybe recap the decision to get into the space. You did touch on that a little bit earlier. But, you know, talk about the impetus for getting into to bioprocessing, you know, the quote, unquote puzzle pieces that your team has put in place thus far, And, you know, what differentiates those those assets from, you know, competing previously available technologies?

Brad Bogal, CFO, Donaldson: Sure. The decision to go in is is kind of similar to our our legacy of this continued expansion. We we were engine air filtration company, and then we moved into industrial air filtration. And then there was disk drive, and we’ve got aerospace and defense, and we got into process filtration via an acquisition twenty five years ago now, right around February, ’2 thousand ’1. So so this is this is kind of next leg in a journey that’s not inconsistent with what we’ve been doing for a long time.

The biospace is specifically, we’re looking more for disruptive technologies. So it’s less about trying to be a me too and push ourselves in, more about smaller companies that have some sort of niche offering or niche approach or or disruptive approach to how they approach these markets. And we’ve we’ve bought four companies, I guess, technically, 4.49 companies. We also announced a a 49% share in a company called Medica. But I’ll talk about the other four companies.

Two of them pre revenue and two of them small with some existing business. The two small with some existing business are focused specifically on bioreactors. One of them is is, called Solaris, and that was a comp that was our first acquisition in the space. So that’s more about bioreactors in labs or or for very specific types of things. And when we talk about we did a press release a few years ago of looking at different proteins, making making salmon in a bioreactor, for consumption.

So some really interesting spaces like that, especially as you think about food sources and and where growth can come from in the world and how that’s supported. The other one, Universells, was in Belgium, and that’s a company that isn’t also in bioreactors, but a little bit more of the traditional biospace. Both of them have a unique approach to the bioreactors, and so the opportunity for us was to leverage that and see where we can into customers with a different value proposition, and we think a pretty strong value proposition in terms of cost or efficiency. The other two are are pre revenue companies. So this is something where we’re developing technologies.

We just did a press release, I think, a week ago for one of them called Isolere and announcing some new technologies. So this is something that very, very early innings. I think what we’ve what we’ve learned about this space over time is these things take a long time. So we bought these companies over a while, and they’re still immaterial to the total revenue for the company. Something where when we think about the space, again, to your question, Brian, it it aligns well with how we think about expansion, smart, strategic, specific technology offerings, not just jamming out a Me Too, like I said earlier, but ways to go on these.

So I I don’t wanna I don’t wanna oversell where we are today. There’s still a lot of road in front of us.

Donald Montgomery, Conference Host, Oppenheimer: No. Understood. That’s yeah. It’s it’s a helpful walk through. I guess what what can you provide with the lessons learned in knowing, or better understanding positioning these assets and, you know, the timelines and market with different technologies?

How does the path to commercialization, you know, look at this point for the platform in? Sure.

Brad Bogal, CFO, Donaldson: Well, on on the two bioreactor companies, it looks a lot like a a traditional path and that it’s about being on clinical trials and and being expecting early To just leapfrog that process and land on a commercial application, the likelihood of that is very small, which of course is something that prolongs the time frame relative to some of our other businesses. The biggest thing in terms of milestones, though, is clinical trials and then engagement with customers. We’ve also partnered with some academia. One of the things we did with Universelle, we and again, via press release, so you could all reference this. But we we set up a partnership with the labs at University of Pennsylvania, work on our products, test them, use them in your applications.

So things like that, Brian, that help us sort of build the awareness of what we offer and then also help us build our understanding where opportunities are in the space.

Donald Montgomery, Conference Host, Oppenheimer: Definitely makes sense, at least at a high level. Every time I try to drill down on some of the individual technologies, I get a bit confused.

Brad Bogal, CFO, Donaldson: There’s lot of very smart people here that that do that well, and I I can’t claim myself amongst them.

Donald Montgomery, Conference Host, Oppenheimer: Alright. So the so I mentioned the puzzle pieces, and then you Yep. You discussed what’s in place now with the four bolt on assets. What, what’s left in terms of the kind of string of hurdles on a, you know, build out or what do you need to develop organically to really round out, you know, make make this a, you know, holistic value proposition that, know, can be scaled more important going forward?

Brad Bogal, CFO, Donaldson: Yeah. I think I think part of it right now is we’re we’re trying to be really smart about the investments we’re making in in how we grow what we have. So this, for the group, this this puzzle that that Brian is talking about, we’ve put this out in some of our investor materials, and this this gives a sense of how things filled in fill in from upstream and downstream and then systems versus consumables. Brian, to your question, I think when we’ve talked about this business, it’s well documented at this point. We’ve said that the ramp up is taking longer than we’d expected.

So some of it right now is really dig into what we have. The puzzle is still, of course, something we consider, but our motivation right now is to make sure we’re proper properly prioritizing what we have as we think about the leg of these things. It’s not walking away from the puzzle as much as you’ve you’ve heard us talk in the last couple quarters about some restructuring. Part of that included life sciences and then a reprioritization within these businesses.

Donald Montgomery, Conference Host, Oppenheimer: K. Understood. And we have a couple minutes left. As much as I hope looking forward, it’s not a real focal point, but tariffs are the, you know, kind of myopic focus for the time being. Circling back to the exposures that you’ve had, your abilities team to, you know, directly offset costs, play offense and defense as needed in, you know, the tariff and trade war kind of environment that we have.

We know that the pricing model was refined, you know, during and post pandemic, so that’s a relative good guy. If you wanna offer any finer points on that, please please feel free. We did discuss it. In addition to that, you know, what cost actions have it taken, and what are the key considerations in terms of your manufacturing footprint, supply chain adjustments that have taken place over time. I know even pre pandemic, you had you had started a number of those actions that continued beyond.

So your positioning overall, like I surmise, is quite a bit better than it would have been, to to navigate this environment. Just looking for you to walk through the key points on that.

Brad Bogal, CFO, Donaldson: Sure. Rewinding the clock a bit, Brian’s right. The the post pandemic and hyperinflation that all of us dealt with was was a moment for Donaldson where where we got much stronger in our pricing muscle. And and, you know, of course, that helped us offset and then grow the profitability of our businesses. What’s important to note is that’s not something we intend to walk away from.

I think we’ve gotten much more strategic in how we approach these things. The goal for us is always a fair relationship with our customers. So it’s not about pricing ourselves out of the market. We’re sensitive to that, and we acknowledge that. With tariffs specifically, the three dimensions that you mentioned, Brian, are the price and then supply chain and production.

That’s I kind of look at it in that order from easiest to impact or most most immediate to longest term. So, like like, pretty much everybody we’re hearing as we go through this quarterly earnings cycle, we’re we’re committed to trying to offset the cost of tariffs. Now how we do that is a bit dependent on the business and the customer relationships. In some cases, especially with our large OE customers, we have longer term commitments with them. So there’s an aspect of transparency that we go through with that.

It may be in surcharges versus pricing or tariff specific pricing, but we’re doing our best to help our customers understand that this is a product of tariff versus us getting too greedy. Again, we’re really committed to these fair relationships with our customers. In some businesses, it’s more straight pricing. In other businesses, it’s about today’s quote. So a large dust collector, we would quote today based on source of goods and the bill of materials and the supply.

So, again, we’re trying to be clear with our customers on on where tariffs fit in that, but there’s a variety of mechanisms. Supply chain, we’re looking at it, and we’re we’re taking advantage of that where there are specific opportunities. That’s a little tougher to comment on because it’s almost the micro opportunities around the world. It’s not something where we ship right from Mexico to Canada, for example. I mean, those are things that are more dramatic examples.

And then production is something where we’re being smart about how we think about where things are produced, but that’s a longer term decision. And for us, and I mentioned this during the intro slides, the way we’re structured today gives us a lot of natural hedges. We wanna be smart about our production strategy and where it goes with the long term in mind, not today’s announcement on on tariffs.

Donald Montgomery, Conference Host, Oppenheimer: That makes complete sense. I think it’s a good place to wrap it. It actually go over over time, but very, very helpful color throughout. You know, appreciate the time as always for Ed. Sorry.

Brad Bogal, CFO, Donaldson: Thanks, Brian. Thank you. Thanks, everybody, to join. Appreciate the time. See you.

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