Applied Industrial Technologies, Inc. · NYSE:AIT
Applied Industrial Technologies — Q4 2023 Earnings Presentation
19 slides from Applied Industrial Technologies's earnings presentation, Aug 10, 2023
Slide 1: Fiscal Q4 2023 Recap and FY24 Outlook
Fiscal Q4 2023 Recap and FY24 Outlook Investor Presentation August 10, 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 • Reported another quarter of outperformance with YoY sales and EBITDA growth of 9% and 17%, respectively, exceeding expectations and against difficult prior-year comparisons. • Underlying sales momentum steady despite more mixed end-market demand; F4Q23 average dail
Slide 4: Applied Value Creation Model At Work in FY23!
Applied® Value Creation Model At Work in FY23! 4
Slide 5: Fiscal Q4 2023 Key Financial Highlights
Fiscal Q4 2023 Key Financial Highlights • Sales up 9.1% YoY o Up 8.6% on an organic basis o Acquisitions +0.7%, currency -0.2% • Net Income of $92.2M and EPS of $2.35 o EPS up 16.1% from the prior year o Includes $8.1M pre-tax ($0.15/sh) of LIFO expense in F4Q23 vs. $10.8M ($0.22/sh) in F4Q22 • Gros
Slide 6: Current Investor Discussion Points
Current Investor Discussion Points Discussion Point Update Detail Industry activity continues to normalize and customer feedback is F4Q23 YoY organic sales growth of 9% vs. 15% in F3Q23; 2-Yr STACK slightly more mixed, though sales trends in F4Q23 were encouraging 1. Underlying Demand and highlight
Slide 7: 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 2023 sales - the segment includes our core distribution operations including ~400 local service centers $781.9 across North America, Australia, and
Slide 8: Segment Results – Engineered Solutions
Segment Results – Engineered Solutions Engineered Solutions Segment Sales, in Millions Segment Overview: Representing 33% of fiscal 2023 sales - the segment consists of 1) our Fluid Power network specializing in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic
Slide 9: Fiscal Q4 2023 Margin and Expense Highlights
Fiscal Q4 2023 Margin and Expense Highlights Gross Profit, SD&A, and EBITDA Metrics • Gross margin up 35 bps YoY LIFO $ in millions Q4 23 Q4 22 Chg YoY Impact YoY o Includes a favorable 24 bps YoY impact due to LIFO o Price actions, channel execution, effective freight management, and ongoing margin
Slide 10: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet Free Cash Flow (in Millions) - Fiscal Year Period • F4Q23 cash from operations of $179.9M; free cash of $174.3M $317.5 o Free cash at 189.0% of net income in the quarter, and up 268.5% YoY $276.6 o Full-year FY23 cash from operations of $344M; free cash of $317M $225.8 o
Slide 11: Fiscal 2024 Guidance and Outlook Assumptions
Fiscal 2024 Guidance and Outlook Assumptions Guidance Assumptions: Fiscal 2024 • Moderating industrial activity near term reflecting lingering macro Guidance uncertainty and normalizing customer production levels Total Sales - YoY % change 0% - 4% • Easing price contribution on sales growth as the y
Slide 12: Updated Intermediate Financial Objectives
Updated Intermediate Financial Objectives Net Sales – Grow to Over $5.5 Billion Strategic Drivers & Considerations $5.5 • Mid Single-Digit Plus Organic Growth on Average Over an Upcycle $4.4 • Greater Cross-Selling Across Legacy Customer Network $3.5 • Secular Tailwinds From Leading Technical Indust
Slide 13: 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 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 13
Slide 14: Net Sales and Operating Income by Segment
Appendix: Net Sales and Operating Income by Segment Three Months Ended June 30 (dollar amount in thousands) Q4 FY22 Q4 FY23 Service Center Based Distribution Segment: Net sales $ 718,517 $ 781,863 Operating income $ 88,138 $ 95,063 Egineered Solutions Segment: Net sales $ 342,942 $ 376,211 Operating
Slide 15: Reconciliation of Adjusted Net Income and EPS
Appendix: Reconciliation of Adjusted Net Income and EPS Year Ended June 30 2023 Per Share Diluted (dollar amount in thousands) Pre-tax Tax Effect Net of Tax Impact Tax Rate Net income and net income per share $ 449,811 $ 103,072 $ 346,739 $ 8.84 22.9% Tax valuation allowance adjustment, net - 3,657
Slide 16: Reconciliation of EBITDA
Appendix: Reconciliation of EBITDA Three Months Ended Year Ended June 30 June 30 (dollar amount in thousands) Q4 FY22 Q4 FY23 FY22 FY23 Net Income $ 79,113 $ 92,215 $ 257,414 $ 346,739 Interest expense, net 6,014 4,201 26,263 21,639 Income tax expense 21,580 30,322 72,376 103,072 Depreciation and am
Slide 17: Reconciliation of EBITDA Margin
Appendix: Reconciliation of EBITDA Margin Three Months Ended Year Ended June 30 June 30 (dollar amount in thousands) Q4 FY22 Q4 FY23 FY22 FY23 Net Sales $ 1,061,459 $ 1,158,074 $ 3,810,676 $ 4,412,794 EBITDA 119,951 140,022 409,608 524,521 EBITDA Margin 11.3% 12.1% 10.7% 11.9% 17
Slide 18: Reconciliation of Free Cash Flow
Appendix: Reconciliation of Free Cash Flow Three Months Ended June 30 (dollar amount in thousands) Q4 FY17 Q4 FY18 Q4 FY19 Q4 FY20 Q4 FY21 Q4 FY22 Q4 FY23 Cash provided by Operating Activities $ 86,113 $ 99,426 $ 103,435 $ 127,090 $ 38,288 $ 53,747 $ 179,939 Capital Expenditures (5,258) (5,332) (7,2
Slide 19: Reconciliation of Net Leverage Ratio
Appendix: Reconciliation of Net Leverage Ratio (dollar amount in thousands) Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Net Income $ 59,244 $ 52,969 $ 57,026 $ 68,306 $ 79,113 $ 76,880 $ 80,457 $ 97,187 $ 92,215 Interest expense, net 7,673 7,390 7,007 5,852 6,014 6,480 6,
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