Executive Summary
Donaldson Company delivered a solid start to fiscal 2025 with total sales of $900.1 million, up 6% year over year, driven by volume growth across all three segments and modest pricing and currency benefits. The quarter showcased continued margin discipline, with gross margin of 35.6% and operating margin of 14.9%, supported by product mix and volume leverage. Management highlighted ongoing efficiency actions, including footprint optimization in Life Sciences, and a broader investment stance aimed at sustainable long-term profitability through capacity additions, new products, and strategic acquisitions.
Mobile Solutions led top-line growth via aftermarket share gains and expanded distribution capacity, Industrial Solutions benefited from strong Aerospace & Defense performance and rising connected solutions, while Life Sciences posted double-digit sales growth on Disk Drive and Food & Beverage strengths, albeit with a pre-tax loss driven by ramp costs in acquisitions. The balance sheet remains robust (net debt/EBITDA ≈ 0.6x), and the company reaffirmed a diligent capital deployment plan: capex of $85–$105 million, 85–95% cash conversion, and return of 2–3% of outstanding shares alongside a long-standing dividend track record. The guidance implies execution of a mid-single-digit top-line trajectory for the year with improving profitability as backlogs normalize, though Life Sciences profitability remains a key swing factor in the outlook.
Key Performance Indicators
Key Insights
Revenue: $900.1 million in Q1 FY2025, up 6% YoY and down 3.8% QoQ.
Gross Profit: $319.6 million; Gross Margin: 35.6% (flat YoY).
Operating Income: $130.8 million; Operating Margin: 14.9% (vs 14.7% in 2024).
EBITDA: $161.5 million; EBITDA Margin: 17.94%.
Net Income: $99.0 million; Net Margin: 11.0%; EPS (GAAP): $0.83, EPS (diluted): $0.81.
Balance Sheet: Total assets $3.0436B; Total liabilities $1.5006B; Total stockholders’ equity $1.543B; Current ratio 1.85; Net debt/EBITDA 0.6x.
Cash Flow: Ne...
Financial Highlights
Revenue: $900.1 million in Q1 FY2025, up 6% YoY and down 3.8% QoQ.
Gross Profit: $319.6 million; Gross Margin: 35.6% (flat YoY).
Operating Income: $130.8 million; Operating Margin: 14.9% (vs 14.7% in 2024).
EBITDA: $161.5 million; EBITDA Margin: 17.94%.
Net Income: $99.0 million; Net Margin: 11.0%; EPS (GAAP): $0.83, EPS (diluted): $0.81.
Balance Sheet: Total assets $3.0436B; Total liabilities $1.5006B; Total stockholders’ equity $1.543B; Current ratio 1.85; Net debt/EBITDA 0.6x.
Cash Flow: Net cash from operating activities $72.9 million; Capex $25.0 million; Free cash flow $47.9 million; Cash at end of period $221.2 million.
Capital Allocation: Dividends paid ~$32.0 million; Share repurchases ~$75.0 million; Medica stake acquired for $71.0 million (49% stake).
Segment highlights: Mobile Solutions sales $572M (+6% YoY); Aftermarket $451M (+11% YoY); Off-Road $89M (-6% YoY); On-Road $32M (-15% YoY); Industrial Solutions $258M (+5% YoY; A&D +27%); Life Sciences $70M (+17% YoY).
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
900.10M |
6.36% |
-3.77% |
| Gross Profit |
319.60M |
6.21% |
-4.54% |
| Operating Income |
130.80M |
4.98% |
-10.53% |
| Net Income |
99.00M |
7.49% |
-9.75% |
| EPS |
0.83 |
9.21% |
-8.79% |
Key Financial Ratios
operatingProfitMargin
14.5%
operatingCashFlowPerShare
$0.61
freeCashFlowPerShare
$0.4
dividendPayoutRatio
32.7%
Management Commentary
Theme: Strategy and growth priorities
- Quote: Tod Carpenter, CEO: “Our record first quarter earnings mark a strong start to fiscal 2025. We increased sales in all three segments, gained share in key business units through our technology-led solutions, and maintained strong gross margins.” This underscores a balanced mix shift toward higher-value filtration solutions and ongoing market-share gains across segments.
- Quote: Tod Carpenter, CEO: “We expanded our presence in food and beverage markets with the launch of filtration services in France, Germany, and Austria … sets the stage for further expansion and share gains across Europe.” This signals a geographic and vertical expansion push in Life Sciences-related markets.
Theme: Operational execution and demand environment
- Quote: Brad Pogalz, CFO: “Cash conversion is expected to be in the range of 85% to 95%, in line with historical averages.” Highlights disciplined cash management and a clear path to higher annual cash conversion with expected revenue growth.
- Quote: Tod Carpenter, CEO: “Backlogs remain high; as we work down our backlogs through the balance of this year, we expect profitability to improve as we get leverage on higher sales.” Indicates management’s view that near-term profitability will benefit from backlog-driven leverage.
Our record first quarter earnings mark a strong start to fiscal 2025. We increased sales in all three segments, gained share in key business units through our technology-led solutions, and maintained strong gross margins.
— Tod Carpenter
Cash conversion is expected to be in the range of 85% to 95%, in line with historical averages.
— Brad Pogalz
Forward Guidance
Guidance and assessment:
- Revenue: Expect total sales to grow 2%–6% for fiscal 2025, factoring in approximately 1% pricing benefit and currency. This implies organic growth in the low-to-mid single digits, with Mobile Solutions flat to up 4%, Industrial Solutions up 4%–8%, and Life Sciences in the low double digits.
- Margin: Operating margin guidance unchanged at 15.3%–15.9%, with the midpoint up ~20 bps vs. prior year, reflecting ongoing leverage from higher volumes and targeted cost actions. This implies a still-strong profitability trajectory even as Life Sciences remains a near-term drag on pre-tax profitability.
- EPS: Adjusted EPS guidance reaffirmed at $3.56–$3.72 for FY2025; GAAP EPS will be influenced by Life Sciences’ restructuring actions and acquisitions ramp.
- Capital allocation: Capex guidance $85–$105 million; cash conversion 85%–95%; dividend policy continued (dividends with 69th year of quarterly payments) and 2%–3% share repurchase.
- Assessment: The outlook is achievable if Life Sciences normalization progresses, backlogs unwind in Industrial Solutions, and supply chain constraints ease in Aerospace & Defense. Risks include macro weakness in agricultural and global trucking markets (On-Rroad) and potential tariff or raw material cost volatility. Management’s emphasis on in-region manufacturing and strategic investments supports optionality for upside if project timing improves and backlogs normalize further.