Parker Hannifin : Presentation Q3 2024

Parker Hannifin Corporation

Fiscal 2024 Third Quarter Earnings Presentation

May 2, 2024

Forward-Looking Statements and

Non-GAAP Financial Measures

Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. Often but not always, these statements may be identified from the use of forward-looking terminology such as "anticipates," "believes," "may," "should," "could," "expects," "targets," "is likely," "will," or the negative of these terms and similar expressions, and include all statements regarding future performance, earnings projections, events or developments. Neither Parker nor any of its respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward- looking statements will actually occur. Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from past performance or current expectations. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.

Among other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in product mix; the impact of political, social and economic instability and disruptions; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions, including the integration of Meggitt PLC; our ability to effectively manage expanded operations from acquisitions; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully capital allocation initiatives, including timing, pricing and execution of share repurchases; availability, limitations or cost increases of raw materials, component products and/or commodities that cannot be recovered in product pricing; global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates, credit availability and changes in consumer habits and preferences; ability to manage costs related to insurance and employee retirement and health care benefits; legal and regulatory developments and changes; additional liabilities relating to changes in tax rates or exposure to additional income tax liabilities; ability to enter into, own, renew, protect and maintain intellectual property and know-how; leverage and future debt service obligations; potential impairment of goodwill; compliance costs associated with environmental laws and regulations; potential labor disruptions or shortages and the ability to attract and retain key personnel; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; global competitive market conditions, including U.S. trade policies and resulting effects on sales and pricing; local and global political and economic conditions, including the Russia-Ukraine war and other armed conflicts and their residual effects; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; government actions and natural phenomena such as pandemics, floods, earthquakes, hurricanes or other natural phenomena that may be related to climate change; increased cyber security threats and sophisticated computer crime; and success of business and operating initiatives. Readers should consider these forward-looking statements in light of risk factors discussed in Parker's Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and other periodic filings made with the SEC.

This presentation contains references to non-GAAP financial information including organic sales for Parker and by segment, adjusted earnings per share, adjusted segment operating margin for Parker and by segment, adjusted net income, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, Gross Debt to Adjusted EBITDA, Net Debt to Adjusted EBITDA, free cash flow and free cash flow margin. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. For Parker, adjusted EBITDA is defined as EBITDA before business realignment, Integration costs to achieve, acquisition related expenses, and other one-time items. Free cash flow is defined as cash flow from operations less capital expenditures. Although organic sales, adjusted earnings per share, adjusted segment operating margin for Parker and by segment, adjusted net income, EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, free cash flow and free cash flow margin are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating the company performance for the period. Detailed reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures have been included in the appendix to this presentation.

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FY24 Q3: The Win StrategyTM Delivers Outstanding Results

FY24 Q3 Highlights

§	Continuous improvement culture driven by our
	global team members
§	Robust aerospace demand

17%

Reduction in

Recordable

Incidents

$5.1B

Sales

+0.3% Reported

+1.2% Organic1

§	Significant margin expansion
§	Transformed portfolio and strong performance
	drive full year guidance increase

24.7%

Adjusted Segment Margin1 +150 bps

10%

Adjusted EPS

Growth1

12.6%

YTD Free Cash Flow Margin1

1. Includes certain non-GAAP adjustments and financial measures. See Appendix for additional details and reconciliations. Note: FY24 Q3 As Reported: Segment Operating Margin of 21.5%, EPS of $5.56. YTD Cash Flow from Operations: $2,147M

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High-Performance Culture is a Competitive Advantage

Builds a better, more resilient Parker

• Increases engagement and commitment
• Strength-basedapproach to culture
• Reinforces our customer-centric mindset
• Drives continuous improvement

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Our People, Strategy & Portfolio Drive Performance

Revenue

Adjusted Operating Margin1

Adjusted EPS1

Free Cash Flow1

~$19.8B	~24.6%	~$24.75	~$3.0B

$14.3B	18.6%	$13.10
					$1.5B

FY19	Adj. EPS	15.7%Adj. EPS	FY19	Adj. EPS	FY19	Adj. EPS
FY24G	FY19	FY24G	FY24G	FY24G

+7%	+600 bps	+14%	~2x
Revenue CAGR	Adjusted Operating	Adjusted EPS1	Free Cash Flow1
	Margin1 Expansion	CAGR	Growth

1. Includes certain non-GAAP adjustments and financial measures. See Appendix for additional details and reconciliations.

Note: FY19 As reported: Operating Margin of 17.0%, EPS of $11.57, CFOA of $1.7B. FY24G As reported: Operating Margin of 21.2%, EPS of $20.90, CFOA of $3.4B

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Summary of Fiscal 2024 3rd Quarter Highlights

FY24 Q3 Financial Summary

$ Millions, except per share amounts	FY24 Q3	FY24 Q3	FY23 Q3	YoY Change
	As Reported	Adjusted¹	Adjusted¹	Adjusted
Sales	$5,074	$5,074	$5,062	+0.3%
Segment Operating Margin	21.5%	24.7%	23.2%	+150 bps
EBITDA Margin	25.1%	25.5%	24.2%	+130 bps
Net Income	$727	$851	$772	+10.2%
EPS	$5.56	$6.51	$5.93	+9.8%

1. Sales figures As Reported. Includes certain non-GAAP adjustments and financial measures. See Appendix for additional details and reconciliations. Note: FY23 Q3 As Reported: Segment Operating Margin of 18.8%, EBITDA Margin of 22.4%, Net Income of $591M, EPS of $4.54.

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FY24 Q3 Adjusted Earnings per Share Bridge

	$0.17	$0.06
	($0.07)	($0.01)
$0.45		($0.02)

$6.51

$5.93

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FY23 Q3	Segment	Interest	Income	Corp G&A	Other	Share	FY24 Q3
Adjusted	Operating	Expense	Tax		Expense	Count	Adjusted
EPS¹	Income						EPS¹

1. FY23 Q3 As Reported EPS of $4.54. FY24 Q3 As Reported EPS of $5.56. Includes certain non-GAAP adjustments and financial measures. See Appendix for additional details and reconciliations.

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FY24 Q3 Segment Performance

Diversified

Industrial

North America

Diversified

Industrial International

Aerospace

Systems

Parker

	Segment
Sales	Operating
As Reported $	Margin
Organic %1	As Reported

$2,231M	22.0%
(4.6%) Organic

$1,434M 21.6%

(3.1%) Organic

$1,409M 20.5%

+17.9% Organic

$5,074M 21.5%

+1.2% Organic

Segment

Operating

Margin

Adjusted1

24.1%

+120 bps YoY

23.5%

+10 bps YoY

26.7%

+320 bps YoY

24.7%

+150 bps YoY

Order Rates2 Commentary

• Operational excellence drives margin expansion
  (4%) • Softness in off-highway and transportation
• Destocking continued at a decelerating rate
• Margin expansion on lower volumes

(8%)	• Continued contraction in off-highway,
transportation and industrial markets

• Choppy orders in EMEA; APAC improves
• Growth across all market segments +15% • 25%+ commercial aftermarket sales growth
• Substantial segment margin expansion
• Positive growth from transformed portfolio

Flat	• Win Strategy delivers another record quarter
• 150 bps adjusted segment margin1 expansion
	• Strong orders against tough prior year comp

1. Includes certain non-GAAP adjustments and financial measures. See Appendix for additional details and reconciliations.
2. Diversified Industrial orders are on a 3-month average computation and Aerospace Systems are rolling 12-month average computations. Beginning FY23 Q3, orders include acquisitions and exclude divestitures and currency.

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