Applied Industrial Technologies, Inc. · NYSE:AIT
Applied Industrial Technologies — Q2 2023 Earnings Presentation
16 slides from Applied Industrial Technologies's earnings presentation, Jan 26, 2023
Slide 1: Fiscal Q2 2023 Recap
Fiscal Q2 2023 Recap January 26, 2023 - The Premier Provider of Advanced Motion, Power, Control, & Automation Solutions to Critical Industrial Infrastructure -
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 • Sustaining notable growth with organic sales up 21% and EPS up 41% in F2Q23; industry position, internal initiatives, strategic evolution, and execution supporting continued outgrowth and margin expansion. • Underlying demand resilient across both segments through
Slide 4: Fiscal Q2 2023 Key Financial Highlights
Fiscal Q2 2023 Key Financial Highlights • Sales up 20.9% YoY o Up 21.1% on an organic basis o Acquisitions +0.5%, currency -0.7% • Net Income of $80.5M and EPS of $2.05 o EPS up 40.8% from prior year of $1.46 o Includes $8.9M pre-tax ($0.17/sh) of LIFO expense in F2Q23 vs. $4.7M ($0.09/sh) in F2Q22
Slide 5: Current Investor Discussion Points
Current Investor Discussion Points Discussion Point Update Detail Strong sales growth trends through F2Q23 reflecting a productive F2Q23 YoY organic sales growth over 21% vs. 19% in F1Q23; average 1. Underlying Demand U.S. manufacturing backdrop, as well as ongoing traction with growth daily sales u
Slide 6: Segment Results – Service Center Based Distribution
Segment Results – Service Center Based Distribution Service Center Distribution Segment Sales, in Millions Segment Overview: Representing 67% of fiscal 2022 sales - the segment includes our legacy distribution operations including ~400 local service centers across North America, Australia, and New Z
Slide 7: Segment Results – Engineered Solutions
Segment Results – Engineered Solutions Engineered Solutions Segment Sales, in Millions Segment Overview: Representing 33% of fiscal 2022 sales - the segment consists of 1) our Fluid Power network specializing in distributing, engineering, $344.4 $354.9 $342.9 designing, integrating, and repairing hy
Slide 8: Fiscal Q2 2023 Margin and Expense Highlights
Fiscal Q2 2023 Margin and Expense Highlights Gross Profit, SD&A, and EBITDA Metrics • Gross margin down 28 bps YoY LIFO $ in millions Q2 23 Q2 22 Chg YoY Impact YoY o Includes an unfavorable 39 bps YoY impact due to LIFO o Up 22 bps sequentially compared to F1Q23 o Price actions, channel execution,
Slide 9: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet Free Cash Flow (in Millions) - Fiscal 1H Period • F2Q23 cash from operations of $62.9M; free cash of $55.6M $150.9 o Free cash at 69.1% of net income in the quarter, and up 93.6% YoY o F1H23 free cash of $76.0M, 48.3% of net income o Inclusive of ongoing working capital g
Slide 10: Fiscal 2023 Guidance
Fiscal 2023 Guidance Fiscal 2023 Guidance Updated Considerations: • Raising FY2023 guidance to reflect strong F2Q23 performance and Prior Current an increase to F2H23 assumptions (10/27/22) (1/26/23) • Sales growth now expected at 13% to 15% Total Sales - YoY % change 5% - 9% 13% - 15% • Similar ran
Slide 11: 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 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 2024 63.0 61.0 63.5 64.0 251.5 11
Slide 12: 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 FY22 Q2 FY23 Service Center Based Distribution Segment: Net sales $ 587,218 $ 705,392 Operating income $ 67,450 $ 86,484 Egineered Solutions Segment: Net sales $ 289,656 $ 354,888 Opera
Slide 13: Reconciliation of EBITDA
Appendix: Reconciliation of EBITDA Three Months Ended December 31 (dollar amount in thousands) Q2 FY22 Q2 FY23 Net Income $ 57,026 $ 80,457 Interest expense, net 7,007 6,185 Income tax expense 15,013 25,493 Depreciation and amortization of property 5,436 5,552 Amortization of intangibles 8,084 7,814
Slide 14: Reconciliation of EBITDA Margin
Appendix: Reconciliation of EBITDA Margin Three Months Ended December 31 (dollar amount in thousands) Q2 FY22 Q2 FY23 Net Sales $ 876,874 $ 1,060,280 EBITDA 92,566 125,501 EBITDA Margin 10.6% 11.8% 14
Slide 15: Reconciliation of Free Cash Flow
Appendix: Reconciliation of Free Cash Flow Three Months Ended September 30 (dollar amount in thousands) Q1 FY17 Q1 FY18 Q1 FY19 Q1 FY20 Q1 FY21 Q1 FY22 Q1 FY23 Cash provided by Operating Activities $ 41,864 $ 9,440 $ 11,797 $ 50,018 $ 81,842 $ 48,642 $ 25,943 Capital Expenditures (2,999) (6,336) (3,
Slide 16: Reconciliation of Net Leverage Ratio
Appendix: Reconciliation of Net Leverage Ratio (dollar amount in thousands) Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Net Income $ (5,334) $ 56,063 $ 59,244 $ 52,969 $ 57,026 $ 68,306 $ 79,113 $ 76,880 $ 80,457 Interest expense, net 7,658 7,608 7,673 7,390 7,007 5,852 6
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