Donaldson Company, Inc. (NYSE:DCI) Q1 2023 Earnings Call Transcript

Daniel Rizzo: No. Just long term outlook. In terms of this is what we think we can achieve, given what’s going on, and this is what we hope to achieve. That type of thing. Not for this year.

Scott Robinson: Yeah. So I mean, we gave a prior target at our last Investor Day, April 9, 2019. We have another Investor Day April 2023, where we’ll be glad to host you in Bloomington here, and we’ll be providing longer-term targets at that point in time.

Daniel Rizzo: Okay. Thank you very much.

Scott Robinson: Thank you.

Operator: Your next question will come from the line of Dillon Cumming with Morgan Stanley. Please go ahead.

Dillon Cumming: Great. Good morning. Thanks for the question. I just wanted to ask kind of on the flurry (ph) sales outlook again, maybe framing this up a bit differently, but you mentioned you were starting to work down some of the late backlog in the quarter. When you look at your level of backlog coverage for the full year, kind of current levels of backlog versus implied, full year sales, would you say that coverage is maybe higher than normal or kind of in line with normal seasonality. It’s kind of like a flavor of how you’re framing the full year sales guide relative to that backlog level?

Tod Carpenter: Yeah. Thanks, Dillon. So we’d say it’s in line with the guide. We baked that in. We haven’t seen an appreciable change since we gave full year guidance. Surely, we’re really very, very proud of the quarter that we just turned in. But we also believe that we have really given a balanced approach to how we expect the year to play out.

Dillon Cumming: Okay. Got it. Thanks. And then maybe just one last one on Life Sciences. I know you mentioned you’re going to release some intra-quarter data maybe to help frame up the modeling side of it, but just wanted to see if you can give us a flavor ahead of time around what the kind of revenue margin profile that Life Sciences business might look like when those numbers do come out.

Scott Robinson: Yeah. So like we said, we’re going to — our new organizational structure was effective the 1st of November. So we’re completing our updated segment analysis as we speak, but we expect to have three segments going forward and moving into more of a focus on the Life Sciences business. We would expect that business to have higher margins in our traditional businesses, which is where we’ve been investing in good solid growth rates. But before we issue the second quarter’s results, we’ll give you an 8-K with updated historicals for the new segments going forward. So people can see how those businesses performed and that will help our great analyst group with their modeling.

Dillon Cumming: it’s very much appreciated. Thanks for the time guys.

Tod Carpenter: Thanks, Dillon.

Operator: Your next question will come from the line of Rob Mason with Baird. Please go ahead.

Robert Mason: Yes. Good morning. I had a question just around your margin guidance. It did not change for the full year, and you certainly can appreciate we’re only one quarter into the year, but you did get off to a very good start, particularly on the gross margin line. And Scott, I thought you mentioned operating margin this year would benefit from both gross margin expansion as well, operating expense leverage. So I guess, thinking literally, it kind of suggests that — yes, I’m not sure how much gross margin opportunity we still have for the balance of the year versus, again, the first quarter start. And again, understand the seasonality potentially in the second quarter is typically a seasonally lower quarter. But I’m just curious, was there anything unusual in the first quarter gross margin that benefited there or how we should think about gross margin for the year relative to the first quarter?