Parker-Hannifin Corporation ($PH)

Welcome to, I guess, which is still a morning session. And our next presenter is Jennifer Parmentier. She's the Chairman and CEO of Parker Hannifin. We've known Parker for decades. We think it's been one of the great compounder stories in our coverage. And under Jen's leadership continues to be so. Welcome to London. Thanks so much for attending the conference. I think there are going to be some slides, and then we're going to go into Q&A. Thank you.

Thank you, Andrew, and thank you, everyone, for being here today and for your interest in Parker Hannifin. So as Andrew said, I wanted to go over a few slides today. Obviously, if you can all read this really quickly, I'll move to the next slide. This is Parker Hannifin at a glance. And for any of you that have followed us for some time, you're familiar with our story. We have 3 businesses: Aerospace Systems coming in at 31%, Diversified Industrial International at approximately 30% and Diversified Industrial North America at approximately 40%. When you look to the right side of this page, a little more color on those businesses are our 4 technology platforms that make up the company. Motion Systems coming in at 17%, again, Aerospace at 31%; Flow and Process Control at 23% and Filtration and Engineered Materials at approximately 30%. On the bottom of this slide is what makes all the performance and the success of our company possible and will do so well into the future. The first thing is our Win Strategy. Win Strategy is our guide to operational excellence. It's our business system. And as I like to tell people, it works. It's something that I use as a general manager in one of our businesses, as a Group President and obviously, in the role that I'm in today. We have a very much technology powerhouse of Interconnected Solutions across these 4 technology platforms. And as many examples that we talk about, this is something that I do believe gives us a significant competitive advantage and is the reason that we continue to win. We have a global distribution network, and I've said this many times publicly, that it is the envy of the competition. Our distribution partners are an extension of our engineering application expertise, and they do a great job with all the small to midsized OEMs, helping those customers in the field and providing those Parker solutions that help them be successful. And finally, our decentralized operating structure. We have 85 general managers. They're P&L owners. They make decisions every day. They stay close to the customers. They know what's best for their business, and they know what's best for the future. We believe in this decentralized structure. And again, it's the foundation of our success. We do have the #1 position in the Motion and Control industry. We're over 100 years old now, and our guide this year is approximately $21 billion in sales, something that we're very proud of. We talk about the company for the last couple of years in these 6 market verticals that you see to the left of this slide. So again, going around the circle, Aerospace and Defense at 35%. So the earlier slide said 31%. But in total, 35% of our business is Aerospace and Defense as some of that business sits inside the industrial side of Parker as those technologies belong in those specific groups. In-plant and Industrial is our next largest market vertical at 20%, followed by transportation at 15%, Off Highway coming in close at 13%, Energy at 7% and then HVAC and Refrigeration at 4%. So 2/3 of our sales comes from customers who buy 4 or more technologies. Again, a big part of our story and our competitive advantage and our organic growth is about the interconnectivity across those technology platforms with all of the Parker products. And our growth is focused on faster-growing, longer-cycle businesses and higher aftermarket. This is one of our favorite slides to show, and it shows the performance of the company over the last 10 years. As you can see, we've had a 6% revenue CAGR, over 1,000 basis points, 1,150 basis points of adjusted operating margin expansion, 16% EPS CAGR over that time period and free cash flow of over 10%. So again, very proud of this performance. And as we look to the history of our EPS, 60% of this performance comes from the legacy Parker businesses and the remaining 40% comes from those significant and very important acquisitions that you see at the top of this slide. LORD, CLARCOR, Exotic, Meggitt, and most recently, last quarter, we closed on the acquisition of Curtis. And in November, we announced our intent to acquire the Filtration Group business. So again, very proud of this performance, and we've been able to do -- the team has been able to do a great job of compounding EPS over time. This is a slide that I like to end with because it really truly is what drives Parker. And first and foremost, it's the safety, engagement and ownership of our people that help us live up to our purpose, deliver top quartile performance and be great generators and deployers of cash. That is my final slide.

Okay. Maybe we can start with the big picture. So generally, and we'll talk about the macro, but directionally, markets are looking up. You're executing well. You've sort of have teed up your next big deal, the Filtration Group. When you go and when you talk to your Board, what are the couple of things that they really care about 2, 3 years out?

Yes. So we're always talking about our performance and our performance to our fiscal year '29 targets. So we're talking a lot about the components of the Win Strategy and how we're doing quarter-to-quarter against those. But 2 regular agenda items for us are always capital deployment, the acquisition pipeline, which I've said many times, we're always working. It's robust. It never ends. Even quickly after we've announced Filtration Group, we're still working on it. So that is a topic that we are always talking about. But just as we always talk about the strength of that acquisition pipeline, we spend a lot of time talking about talent development. The strength of our pipeline of our people is very important to ensure future success. So we take a lot of pride in talent development at all levels of the organization. We obviously make sure our Board knows those people, and we talk about stretching those individuals, giving them opportunities to develop personally and really to ensure the future success. It really is all the great people at Parker that get this work done, and we want to protect that well into the future. So talent is a very strong topic.

Thank you. Look, I mean, clearly, lots of things happening in the world. Any latest thoughts on the macro environment? Any comments?

Yes. So obviously, it's a lot going on in the last couple of weeks, right, geopolitically. I would tell you that first and foremost for us is always the safety of our team members in the regions where those conflicts are happening. And I'm very happy to say that everyone is safe, and we keep very close to that. I would say that it's pretty early to make any real predictions or forecast about how that will impact, I would say, primarily our defense business. But we have been positive midterm on the defense business. We've been in that business for quite some time, a big part of our history. And we're ready to support. And obviously, that could be something that increases in the future. But I think it's too soon to tell.

Right. And just general macro other than that, I think PMIs are getting better. You sort of commented that off-highway is getting better. Any thoughts on how things develop?

So Aerospace, fourth year of double-digit growth, right? So very strong Aerospace. And we talked about a gradual recovery on the industrial side of the business. As you said, we talked about at the last earnings call that we saw construction more positive. So that's the bright spot in off-highway, along with mining. We're seeing mining be strong, not only in Europe, but in Asia as well. And the distributor sentiment remains very positive. They're positive about the quoting activity. I wouldn't yet say that it's restocking. They've done a really good job of managing their inventories and ordering to their current demand level. But there's been some bright spots in there. So we're still seeing a very gradual recovery in Industrial. But we did increase our organic growth, right, for North America. For total Parker, we started the year at 3%, then we went to 4%, and now we're at 5%. And for North America, we went 2% to 2.5%, and we increased International as well. So gradual recovery.

And maybe a price/cost environment. Once again, lots of moving pieces, tariffs, higher raw materials. What's happening with pricing? And how are you dealing -- we've been hearing that perhaps there is some sort of pushback in the channel because as tariffs are being pushed -- sort of being rescinded maybe, what's happening with the pricing? And what are you hearing from the channel?

Yes. So it's the same as it has been for some time. We have a very strong pricing muscle. We know how to respond to tariffs. We have the tools and the analytics, just as we do with any inflation driver to make sure that it doesn't impact our margins or our EPS. And we're utilizing those same tools to make sure that through this environment, we don't have any problems. The distribution channel has most recently been back to a normal pricing environment after those hyperinflationary times. So tariffs are part of something that happens, but I'm not hearing of any pushback from our channel.

Okay. Fantastic. So look, maybe we can sort of go to Aerospace, which is increasingly at the center of what investors talk about it. You do sort of model step down in incrementals for Aero in second half versus first half and sort of step down from 40% to 30%. Can you just talk about how OE spares mix impacting this outlook?

Yes. So commercial OEM is our strongest growth area right now. It's at 20% for the year. That's what our guide has in it. And in Q2 and the first half in general, we did have a strong spares and repairs mix. And it's worth noting that, that -- unlike most of Aerospace that is a long lead time, that is not a longer lead time order. Those are more difficult to forecast. So we don't have those in our forecast. So that's one of the differences. And the aerospace demand has been so strong and the team has executed so well. There is a step down that you see because we are forecasting a higher OE in the second half. But for the full year, we're still guiding to a margin of 120 basis points increase over last year at total year 40% incrementals. So there's a little bit of mix there in the second half, but still margin expansion.

And that, if there is any Defense aftermarket that sort of you see that's not in the forecast.

Correct. Anything additional that we don't see today.

And then '27 is the first year with no official Meggitt synergies. So how should we think about sort of margins incrementals in Aerospace going forward beyond '26?

Yes, this is the last year. Fiscal year '26 is the last year for those. The last year that we'll be talking about them. I think you need to think about it this way. I made the comment that 60% of our performance has come from the legacy Parker businesses that have been using the Win Strategy for almost 25 years now. The Meggitt business has only been using it for 3 years. So there's been nice margin expansion with the high growth in Aerospace, and there will continue to be. The teams have adopted the Win Strategy well, but there's still room to improve.

And commercial aero OEM and aftermarket outlook, specifically on aftermarket, can you remind us what changes you have made to your aftermarket business model over the past year on the commercial side? And then any sort of comments on obvious OEM business because that seems to be dynamic.

Yes. So the final phase of the Meggitt integration, which really started about 2 years ago, was to combine the Parker and Meggitt aftermarket businesses. So that's the change that you're talking about. We brought those 2 businesses together, all those products. It's made it incredibly stronger than what we had to begin with. And it's also given us the ability to serve in all regions. So that's something that has gained us quite a bit of strength in the past. Bringing that talent together, those customer relationships, the product portfolio has really, really helped us have that low double-digit growth that we're still forecasting for aftermarket. Meggitt also brought a lot of Defense business, too. So it's not just a commercial story when you talk about the aftermarket, it's obviously a Defense story as well.

And just -- we sort of talked a little bit about Defense aftermarket. But could you just -- because we have been questions -- getting questions on Defense aftermarket. Could you remind us what programs are you -- you have this beautiful picture and which is saved in our model, but -- as a visual. But could you just remind us what's your exposure to Defense aftermarket? What products are you -- what platforms are you on, without commenting on this.

Yes. I mean fighter jets, ground, naval, I mean, we're on all the key platforms in Defense.

Maybe we can shift to Industrial. On Curtis acquisition, could you remind us where we are in terms of hitting our plan on financial impact in '26?

Yes. So we've had Curtis for about a quarter now. So we have 1 quarter under our belt. It's very much in line with our expectations. It's been a great addition to our portfolio. Just for those who may not be as aware, Curtis brings to us low-voltage motor controller solutions, which was a gap in our portfolio. It pairs well nice with our higher voltage motors and our control solutions. We've been able to bring this into one division inside of Parker. And now we have a full suite of motors and controllers for hybrid and electric equipment. And much of that is equipment that's been electric or hybrid for quite some time, proven business case products. So really been a nice acquisition. It will be accretive to EPS this year, initially dilutive to margins, but it's on track.

Yes. No, I mean the CONEXPO stand that Jeff sort of showcase was super useful in actually understanding where the technology fits actually.

Yes, the team did a nice job. I'm glad you could stop by.

No, no, that was terrific. Maybe we can talk about macro and what set of macro conditions would it take for Industrial North America to be able to accelerate from -- and just a reminder, you guys are in June year, but we are in third quarter of fiscal '26. But what set of macro conditions would it take for Industrial North America to be able to accelerate from Q3 to Q4 because your current guidance implies no sequential acceleration.

Yes. It's -- dollar-wise, it is, it is sequential organic growth-wise. We did increase our organic growth target. And dollar-wise, it is. So it's -- we don't feel that it's overly conservative at this point.

No, no, you pushed the company. I'm keenly aware of that.

We do -- like I said before, we do see some bright spots there. I think what it's going to take probably is something we've been talking about for some time with this part of the business. And there's still the uncertainty around tariffs, right, and interest rates. I think that all plays into the decisions that our customers' customers make. So those are some things that I think would make a difference. Obviously, we've had some things happen in the last couple of weeks. We don't know what the impact of that's going to be. But we still feel really good about the increased guide that we put out there. So we'll see. We'll see what happens here.

Maybe sort of pace of recovery in off-highway market. And we were at CONEXPO, it seems like folks are feeling better. The question there is just on capacity. I think I asked this question a couple of quarters ago. But for example, do you have flexibility to toggle capacity between construction, mining and ag? And how does the ramp in off-highway impact margins?

Yes. So we don't give margins by market.

No, no, but that's impacted the...

Yes, I would just tell you that -- something I've long said since I was running plants is volume is our friend, right? So even with a higher OEM mix possibly with some of that ramping up, we'll still enjoy a nice aftermarket, but we'll be able to leverage that volume for production efficiency. So I think -- I think we will like that. And we have in the off-highway space, as you said, we've seen the same thing. Construction is stronger and mining as well. Ag is still in the same place as we've talked about the last couple of quarters, but...

People use the term dead.

I don't think I would say.

Yes, yes, I know you won't, but a number of people use that term.

But yes, we see a nice recovery going on in construction.

So just traditional manufacturing model on the industrial side.

Yes. And one of the things that our teams do really well. And the answer to your first part of that question is that we are able to flex the team members within the factory, if it's different product lines that are needed, if it's not the same products, and in many cases, it can be. And when we need to, we will add team members, right? And we really make sure that we have robust processes for onboarding and really staying ahead of our customers' demand curve to make sure we're ready.

Excellent. And just the same zip code. It seems like Class 8 orders are looking up. Transportation is actually guided to be your weakest end market in '26, down mid-single digits. What would it take for you to get more constructive on the segment? And I appreciate that your year ends when maybe things start looking up on Class 8 and maybe that's the answer.

Right. It really is. I think that -- in the U.S., the emissions, the '27 emissions clarity is going to help, has helped. We have had the forecast for mid-single-digit decline. We haven't changed that throughout the year. And we see that through June 30 that that's what the guide is going to be. Any recovery there, we think would happen in the second half of the calendar year, which is our next fiscal year.

Excellent. And maybe can we talk about sort of evolution of your view on power gen, which is sort of part of Energy in your slide deck. Can you remind us of your exposure, what it is you do and your views on the sector?

Absolutely. This is one of those great interconnected technology stories that I was speaking about with the slides. If you think about that slide that I had up there with the 4 technology platforms, Motion systems, Flow and Process control, Aerospace, Engineered Materials and Filtration. We have products in power gen under each one of those technology platforms. And we have products on all sizes of gas turbines, whether -- and types, heavy-duty, industrial, aero derivatives, diesel, gas. We actually have thermal products from Engineered Materials on battery energy storage systems that are key in data centers and different areas where power is required. So this is a really good space for us. It's 7% of our total sales, Energy and about half of that is power gen. So it's small, but it has a really nice backlog. We're working with all of the OEMs that you would -- the names that you would know. And we're working close with them to help them increase their efficiency and their power and their products. So it's a real good spot for us.

And how are you views sort of evolved over the past 12 months? And what's really interesting, I think, maybe in the past 3 months, there's a lot more focus on behind-the-meter and microgrids. Has the tone of conversation with the customers changed in the past 3 months?

I wouldn't say that it's changed in the past 3 months. I would just say that the order backlog is robust. And Parker definitely benefits in this space, right, because we have the products that they need. And we see an increase of behind-the-meter request. So I don't know that I would say it was the last 3 months, but it's definitely increased in the last year.

And are there opportunities because you have such a broad portfolio of technologies, other sort of incremental opportunities related to battery energy storage systems for Parker?

Yes. I mean thermal products, we have thermal products today on there, and there will be additional opportunities, I'm sure. Our teams are working very closely with a lot of those battery manufacturers. So it's definitely something that's in our pipeline.

Maybe shifting just Industrial International. What are you seeing there?

So orders have been positive now for, I believe, 6 quarters. Q2 was a great quarter for our international business. And as I mentioned earlier, we've increased the outlook there. EMEA had a very strong -- international had a very strong Q2, primarily due to some longer cycle project orders that we shipped. So we had 4.6% growth. And you see that come down because those project orders don't repeat in the second half. But again, increase the outlook for International. As we mentioned earlier, we see stronger construction and mining in Europe, also mining in China, electronics in China. So we increased EMEA to low single-digit positive. And we have previously had that at flat, neutral, slightly positive and positive mid-single digit for Asia Pacific.

And within Asia Pacific, maybe China versus the rest of Asia Pacific?

Yes, we see some nice growth in China with automotive and some electronics as well. So growth is nice there.

And how are you positioned in India?

Really well. We have big OEM customers in India. We've localized production there for them over the last decade and in the process of doing some more of that. So I believe we're really positioned well. All of our technologies are represented in India. So we have a nice manufacturing footprint there.

Maybe just sort of talking about growth, particularly maybe sort of looking into fiscal '27, you did talk about gradual recovery. Perhaps recovery could accelerate, maybe it doesn't accelerate. But how do you make sure that the ramp is smooth operationally and that you maintain your very strong incrementals?

Well, it starts with the divisions, right? It starts with the general managers, staying close to the customers, our teams, our customer service teams staying close to the customers, making sure that we have a clear picture of demand and making sure that our supply chain has a clear picture of demand. One of the things that we've talked about over the last several years is the investment that we've made in the supply chain and the investment that we've made in our -- what we call our e-capacity and e-procurement tools, really wanting to make sure that we have the visibility and that we can respond quickly. And again, too, as I mentioned, making sure that when we do have to bring team members in that we have the time to onboard them properly, and we use all of our programs to onboard them properly. So it's using a lot of the tools in the Win Strategy and making sure that we stay in front of the customer demand.

And maybe just sort of pivot back up in terms of Win Strategy, I know you actually literally have...

Always...

The Win Strategy slide. Can you just expand on Win Strategy? And it has been evolving. I think sort of the new generation of Parker leaders has a lot more experience on the factory floor and you guys are younger, you sort of grew up on the factory floor. Can you just talk -- and I think it's a different group of people running the company today than it was under the previous regimes, which also have been very successful.

Very successful.

How does it inform your view of the Win Strategy? And where does it go as maybe more focused on operations and what's happening on the factory floor? Because everything we've been sort of talking about, you keep bringing into operations.

Yes. Yes. Well, I would tell you this much. The Win Strategy is our business system, as I've said, it's our guide to operational excellence. We have to be good at everything on the Win Strategy to ensure that we can grow organically. And one pillar of the Win Strategy is profitable growth. I would tell you what I think is different about the Win Strategy, even going back to the leadership before the current leadership, the single biggest change that was made to this Win Strategy under my predecessor that's had the biggest impact is having a pillar for the people and putting that pillar first, putting safety first, putting high-performance teams on there and the culture of Kaizen. It starts there. And even though that was added to the Win Strategy a decade ago, it takes time for all of that to really come to fruition and make a big difference. And it has made a big difference over the last decade, and it is what we start with, and it is why we get the success that we do. High-performance teams are how we run our business. Culture of Kaizen is how we improve it. And so when it comes to things as organic growth, we use that pillar with organic growth and all of our focus around growing this business differently than we have in the past. And I think that's one of the biggest differences.

And I don't think what people appreciate is how flat Parker organizational structure is. Can you just expand on it? And how do you manage -- yes, because it is -- Parker is getting larger and larger and larger. It's a very complex organization, yet the structure remains very flat. How do you sort of -- what I've observed sort of traveling is that how nimble the company is. So how do you maintain this as the company is getting bigger?

I attribute that to our decentralized structure and the focus that the general manager has at the division level. Over the last...

How many...

85.

85.

85 divisions across 5 operating groups. But if you think about it, and Andrew, you know some of this as long as you've known Parker, we used to be 8 operating groups and prior to acquisition, over 120 division groups. And so divisions could be rather small in nature, less than $100 million. So over time, we've consolidated those, brought technologies together, created divisions that can focus on the customer and focus on the markets and succeed. So that decentralized structure is key. It's key. And the discipline and the cadence we have on a monthly, quarterly and annual basis to not only monitor the business, but to make plans, strategy deployment, strategic positioning at the division level. So putting these tools into the hands of the general managers and then having the accountability around them is what has allowed us to keep the structure that we have and just to build upon it.

Maybe going to back to end markets. If you go on Parker World, life sciences is a pretty big area and now even bigger post Filtration Group acquisition. And I actually remember when the world sort of really slowed. I remember going, I think, to Hanover and like half the booth was life science stuff. So you have very, very -- you've historically had very strong presence in this end market. Can you talk about sort of what are your views on biopharma reshoring in the U.S., how real it is?

Yes. So Parker World, very new. I'm glad you got to experience it. The tiles on Parker...

I hope I don't get a sale -- a salesperson calling me.

The tiles on Parker World are all the same size to show the interconnectivity of the technologies and to show all the places that Parker products are in play. And as you know, it's not a market vertical, right? It's not that size as of yet. I would tell you that we're going to serve the customers at the local level, no matter what business phase they're in, if it is reshoring or it's adding capacity to existing operations. I think we still have to see what we learn after we close on the Filtration Group acquisition. But obviously, we've traditionally been more in medical devices and diagnostic imaging type products. And with Filtration Group, we get more bioprocessing and more diagnostic testing. So it's different products. So we'll see what we learn on that side of possible reshoring activity. But we're really, really excited about this acquisition because all these technologies are complementary in nature. And even though they bring some new customers, it's markets and customers we know, and that's what's always a good fit into the portfolio.

And just sort of wrapping up on the macro view. I actually have been surprised because if you look at sort of Big Beautiful Bill, which seems to be like eternity away in the past. But I think accelerated depreciation was supposed to be this big material thing. And then when we talk to companies, the large companies ended up saying, "Wow, our capital spending is not really driven by that. We're happy to benefit from it," but that's not what drives sort of the underlying math. But I would imagine for smaller and medium-sized customers, it would be more of an impact. As you talk to your distributors, as you talk to your channel, what has the feedback been on accelerated depreciation and any potential impact that we may see in calendar '26?

I would tell you that, that's not a conversation that I've heard of or that we're having, right? They're not signaling that where they see the bright spots, it's because of accelerated depreciation. They're talking more about their customers are working on automation and productivity enhancements in their businesses, rather large capital projects. So again, I'm not...

No, that has been a huge mystery because in terms of philosophically, right, it should drive it.

Yes, that's...

But it's exactly right. When we talk to people, like nobody has brought it up, like -- so maybe M&A Filtration Group any update on timing?

So when we announced it in November, we said 6 to 12 months to close. So that is still the timing that is out there. We're going through the normal process, the normal regulatory process that we go through, but that's still our estimate on timing.

And can you just step back and remind folks just the industrial logic on the Filtration Group because you're getting it from the Madison Group, which has reputation for running the assets well. You're targeting 11% synergies?

Yes.

It's a healthy number.

Yes, it is.

So how do you get 11% out of well-run business? And how does Filtration Group sort of fit into Parker and how come Parker ended up winning the process?

That's a lot of questions.

Yes.

Well, we have always admired the Filtration Group from afar. And as I've always talked about, the pipeline is active. We're always looking -- a lot of times, it's about timing. And this clearly was a story about timing. We didn't know it was going to become available, but being familiar with it and getting the call, we were able to quickly make some visits, see some of the factories, meet some of the people. And we saw what we thought we would see. We saw a business that we really liked, a very high aftermarket business. We saw a lot of talent in the business. The products are very impressive, good technology. It is a very well-run business. It's decentralized in nature, which is a lot like Parker. But why we're confident in the synergies is because we really believe in the Win Strategy, right? And while we saw a well-run business, we didn't see all of our tools at play. And we know that, that business hasn't been able to fully leverage the power of Parker, right? So there's -- just as with any acquisition, there are several different synergy buckets, and we could see line of sight in all of our traditional buckets where we could make improvement. We will bring the Filtration Group into existing Parker divisions, so...

Because then you bought Meggitt. Meggitt like disappeared like really fast.

There are some businesses of Meggitt that are stand-alone divisions, but the majority of them were integrated into existing divisions.

Right. Like you took out like multiple layers like...

Yes, I would say that, that was a -- there was more there than we knew, right, after we closed, that's one of the reasons we were able to achieve those synergies earlier than we thought. So integration team has been formed. We put an integration leader on -- in charge of every synergy bucket, and we also bring a member from Filtration Group into that team, and they work on that together. So those team members have been identified. The teams have met. We're doing everything that we can that follows all the rules, and we'll be ready to go when we close.

And maybe last question. Given the pacing of how you guys do M&A and given the development process, you are probably already looking at your next...

Always.

Right, because what does an ideal deal look like 3 years out sort of size end market, right? And as I said, it's a fair question because these things develop for 3 to 5 years or more.

Right, right. We spend a lot of time developing the relationships with the businesses in the pipeline. We're constantly, as we say, working the pipeline and keeping a close eye on it. It is, though, so many times, as I just said with Filtration Group, it's about timing, and we're not in control of the timing. And that's why we stay so close to it. So if it does become available, we're ready. A future deal looks like the deals that we've done, complementary technologies, customers we know, markets we know, a culture that fits with Parker, a culture that we can see will integrate well with the Win Strategy, accretive to margins with synergies, accretive to cash flow, EPS, following the trends that our business has grown on and really part of the transformed portfolio. So before we did Curtis, everybody thought that the next acquisition was going to be bigger than Meggitt, right? And Curtis was a great example of a business that we had followed for quite some time that filled a product gap for us, right? And so it became available again and the timing was right, right? And then obviously, quickly thereafter, Filtration Group became available. So the good news is that the business does generate a lot of cash. We've shown that we can hit the synergies and pay down debt rather quickly. So we'll just keep working that pipeline and see what happens.

Thanks a lot, Jenny.

You bet. Thank you.

Always a pleasure. Thank you.