Applied Industrial Technologies, Inc. · NYSE:AIT
Applied Industrial Technologies — Q2 2022 Earnings Presentation
19 slides from Applied Industrial Technologies's earnings presentation, Jan 27, 2022
Slide 1: We Keep Industry Running: Fiscal Q2 2022 Recap
We Keep Industry Running Fiscal Q2 2022 Recap January 27, 2022
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements that are forward-looking, as that term is defined by the Securities and Exchange Commission in its rules, regulations and releases. Applied intends that such forward-looking statements be subject to the safe harbors created thereby. Forward
Slide 3: Primary Messages from Management
Primary Messages from Management • Reported record 2Q results reflecting solid execution, expanding industrial activity, traction with company- specific growth opportunities, and strong operating leverage. • Sales growth strengthened as the quarter progressed with F2Q22 daily sales rates up 3% seque
Slide 4: Fiscal Q2 2022 Key Financial Highlights
Fiscal Q2 2022 Key Financial Highlights • Sales up 16.7% YoY o Up 16.4% on an organic daily basis o Acquisitions +1.6%, currency +0.3%, selling days -1.6% • Net Income of $57.0M and EPS of $1.46 o EPS up 49.1% from prior-year adjusted EPS of $0.98 o Includes $4.7M pre-tax ($0.09/sh) of LIFO expense
Slide 5: Current Investor Discussion Points
Current Investor Discussion Points Discussion Point Update Detail Industry-wide bottlenecks continue but not getting worse; Sales exceeded expectations across Applied during F2Q22; 1. Supply Chain direct impact to Applied remains manageable reflecting cross-functional inventory planning and procurem
Slide 6: Segment Results – Service Center Based Distribution
Segment Results – Service Center Based Distribution Segment Overview: Representing 68% of fiscal 2021 sales - the segment Service Center Distribution Sales, in Millions includes our legacy distribution operations including ~400 local service centers across North America, Australia, and New Zealand,
Slide 7: Segment Results – Fluid Power & Flow Control
Segment Results – Fluid Power & Flow Control Segment Overview: Representing 32% of fiscal 2021 sales - the segment Fluid Power & Flow Control Sales, in Millions consists of 1) our Fluid Power network specializing in distributing, engineering, designing, integrating, and repairing hydraulic and pneum
Slide 8: Fiscal Q2 2022 Margin and Expense Highlights
Fiscal Q2 2022 Margin and Expense Highlights Adjusted Gross Profit, Adjusted SD&A, and Adjusted EBITDA Metrics • Gross margin up 51 bps YoY LIFO o Includes an unfavorable 42 bps YoY impact due to LIFO (1) $ in millions Q2 22 Q2 21 Chg YoY Impact YoY o Up 75 bps sequentially including a unfavorable 1
Slide 9: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet Free Cash Flow (in Millions) - Fiscal 1H Period $200 Free cash flow 120% • F2Q22 cash from operations of $32.6M; free cash of $28.7M Free cash flow as % of net income $180 As % of net income - F1H22 100% o 1H FY22 cash from operations of $81M; free cash of $74M (67% of ne
Slide 10: Updated Fiscal 2022 Guidance
Updated Fiscal 2022 Guidance Fiscal 2022 Guidance Updated Considerations: Prior Current • Raising FY2022 sales, EBITDA margin, and EPS guidance to reflect (10/27/21) (1/27/22) strong YTD performance and a favorable near-term outlook Total Sales - YoY % change 8% - 10% 11.5% - 12.5% Organic - YoY % c
Slide 11: Appendix: Number of Selling Days by Fiscal Quarter and Full Year
Appendix: Number of Selling Days by Fiscal Quarter and Full Year Fiscal Period Q1 Q2 Q3 Q4 Year 2019 63.0 62.0 63.0 63.5 251.5 2020 64.0 62.0 64.0 63.5 253.5 2021 64.0 62.0 63.0 63.5 252.5 2022 64.0 61.0 64.0 63.5 252.5 2023 64.0 61.0 64.0 63.5 252.5 11
Slide 12: Appendix: Net Sales and Operating Income by Segment
Appendix: Net Sales and Operating Income by Segment Three Months Ended December 31 (dollar amount in thousands) Q2 FY21 Q2 FY22 Service Center Based Distribution Segment: Net sales $ 515,690 $ 587,218 Operating income $ 42,654 $ 67,450 Non-routine costs 7,772 - Adjusted segment operating income $ 50
Slide 13: Appendix: Reconciliation of Adjusted Net Income and EPS
Appendix: Reconciliation of Adjusted Net Income and EPS Three Months Ended December 31, 2020 Per Share Diluted (dollar amount in thousands) Pre-tax Tax Effect Net of Tax Impact Tax Rate Net loss and net loss per share $ (10,168) $ (4,834) $ (5,334) $ (0.14) 47.5% Impairment expense 49,528 11,769 37,
Slide 14: Appendix: Reconciliation of Adjusted Gross Margin
Appendix: Reconciliation of Adjusted Gross Margin Three Months Ended (dollar amount in thousands) Q2 FY21 Q2 FY22 Net Sales $ 751,287 $ 876,874 Gross Profit 209,534 257,625 Non-routine costs in cost of sales 7,368 - Adjusted Gross Profit $ 216,902 $ 257,625 Adjusted Gross Margin 28.9% 29.4% 14
Slide 15: Appendix: Reconciliation of Adjusted SD&A Expense
Appendix: Reconciliation of Adjusted SD&A Expense Three Months Ended (dollar amount in thousands) Q2 FY21 Q2 FY22 SD&A (Operating Expense) $ 162,428 $ 179,448 Non-routine costs 403 - Adjusted SD&A (Adjusted Operating Expense) $ 162,025 $ 179,448 15
Slide 16: Appendix: Reconciliation of EBITDA and Adjusted EBITDA
Appendix: Reconciliation of EBITDA and Adjusted EBITDA Three Months Ended December 31 (dollar amount in thousands) Q2 FY21 Q2 FY22 Net Income $ (5,334) $ 57,026 Interest expense, net 7,658 7,007 Income tax expense (4,834) 15,013 Depreciation and amortization of property 5,209 5,436 Amortization of i
Slide 17: Appendix: Reconciliation of Adjusted EBITDA Margin
Appendix: Reconciliation of Adjusted EBITDA Margin Three Months Ended December 31 (dollar amount in thousands) Q2 FY21 Q2 FY22 Net Sales $ 751,287 $ 876,874 Adjusted EBITDA 68,275 92,566 Adjusted EBITDA Margin 9.1% 10.6% 17
Slide 18: Appendix: Reconciliation of Free Cash Flow
Appendix: Reconciliation of Free Cash Flow Three Months Ended September 30 (dollar amount in thousands) Q1 FY13 Q1 FY14 Q1 FY15 Q1 FY16 Q1 FY17 Q1 FY18 Q1 FY19 Q1 FY20 Q1 FY21 Q1 FY22 Cash provided by Operating Activities $ 23,947 $ 16,956 $ (18,101) $ 15,090 $ 41,864 $ 9,440 $ 11,797 $ 50,018 $ 81,
Slide 19: Appendix: Reconciliation of Net Leverage Ratio
Appendix: Reconciliation of Net Leverage Ratio (dollar amount in thousands) Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Net Income $ 38,031 $ (82,777) $ 29,989 $ 34,784 $ (5,334) $ 56,063 $ 59,244 $ 52,969 $ 57,026 Interest expense, net 9,583 8,805 8,088 7,653 7,658 7,608
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