Applied Industrial Technologies, Inc. · NYSE:AIT
Applied Industrial Technologies — Q3 2024 Earnings Presentation
18 slides from Applied Industrial Technologies's earnings presentation, Apr 25, 2024
Slide 1: Fiscal Q3 2024 Recap
Fiscal Q3 2024 Recap April 25, 2024 - 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 • Sales exceeded our expectations and returned to modest YoY organic growth in F3Q24 with support from internal growth initiatives and secular tailwinds; YoY trends improved as the quarter progressed. • Sales growth led by shorter-cycle core U.S. Service Center opera
Slide 4: Fiscal Q3 2024 Key Financial Highlights
Fiscal Q3 2024 Key Financial Highlights • Sales up 1.3% YoY Sales, $ in millions o Up 0.7% on an organic daily basis $1,146 $1,132 +1.3% o Acquisitions +1.2%, currency +0.2%, selling days -0.8% 0.7% Org/Day • Net Income of $97.2M and EPS of $2.48 o EPS up 4.0% from prior-year adjusted EPS Q3 2023 Q3
Slide 5: Organic Sales Growth Trend and Investor Discussion Points
Organic Sales Growth Trend and Investor Discussion Points Year-over-Year Organic % Change in Sales Per Day F3Q24 Sales Growth Detail • Up ~1% YoY on an organic daily basis; above expectations with trends improving through the quarter 19.4% 21.1% • Organic growth led by Service Center segment sales 1
Slide 6: Other Investor Discussion Points
Other Investor Discussion Points Discussion Point Update Detail Customer activity remains mixed as firm technical MRO SC segment organic daily sales +2.6% YoY in F3Q24 with spending balanced by muted OEM channel and engineered YoY trends improving each month; ES segment organic daily Underlying Dema
Slide 7: Segment Results – Service Center Based Distribution
Segment Results – Service Center Based Distribution Segment Overview: Representing 67% of fiscal 2023 sales - the segment Service Center Distribution Segment Sales, in Millions includes our core distribution operations including ~400 local service centers across North America, Australia, and New Zea
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 Q3 2024 Margin and Expense Highlights
Fiscal Q3 2024 Margin and Expense Highlights Gross Profit, SD&A, and EBITDA Metrics • Gross margin up 8 bps YoY LIFO o Includes a favorable 30 bps YoY impact due to lower LIFO expense $ in millions Q3 24 Q3 23 Chg YoY Impact YoY o Includes unfavorable YoY mix from lower Engineered Solutions segment
Slide 10: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet Free Cash Flow (in Millions) - Fiscal YTD Period • F3Q24 cash from operations of $84.2M; free cash of $76.7M $234.8 o Free cash at 79% of net income in the quarter, and up 14% YoY $191.2 o YTD free cash of $234.8M, up 64% YoY and at record levels o YoY cash flow growth re
Slide 11: Capital Allocation
Capital Allocation Capital Allocation Priorities & Strategy Pursue greenfield expansion while optimizing customer service Organic Growth capabilities and operating efficiencies through technology, working Dividends capital, and system investments $252 M Debt Reduction $344 M ~$900M Scale Engineered
Slide 12: Fiscal 2024 Guidance and Outlook Assumptions
Fiscal 2024 Guidance and Outlook Assumptions Fiscal 2024 Guidance Updated Considerations: Prior Current • Tightening FY2024 sales guidance; assuming ongoing moderation (1/25/24) (4/25/24) in underlying industrial activity and muted sales growth recovery in Engineered Solutions segment near term Tota
Slide 13: 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 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 2025 64.0 62.0 63.0 63.5 252.5 13
Slide 14: Appendix: Net Sales and Operating Income by Segment
Appendix: Net Sales and Operating Income by Segment Three Months Ended Mar 31 (dollar amount in thousands) Q3 FY23 Q3 FY24 Service Center Based Distribution Segment: Net sales $ 761,599 $ 789,356 Operating income $ 103,083 $ 100,470 Egineered Solutions Segment: Net sales $ 370,436 $ 357,034 Operatin
Slide 15: Appendix: Reconciliation of EBITDA
Appendix: Reconciliation of EBITDA Three Months Ended Mar 31 (dollar amount in thousands) Q3 FY23 Q3 FY24 Net Income $ 97,187 $ 97,217 Interest expense, net 4,773 265 Income tax expense 25,093 25,448 Depreciation and amortization of property 5,565 5,802 Amortization of intangibles 7,670 6,951 EBITDA
Slide 16: Appendix: Reconciliation of EBITDA Margin
Appendix: Reconciliation of EBITDA Margin Three Months Ended Mar 31 (dollar amount in thousands) Q3 FY23 Q3 FY24 Net Sales $ 1,132,035 $ 1,146,390 EBITDA 140,288 135,683 EBITDA Margin 12.4% 11.8% 16
Slide 17: Appendix: Reconciliation of Free Cash Flow
Appendix: Reconciliation of Free Cash Flow Three Months Ended September 30 (dollar amount in thousands) Q1 FY18 Q1 FY19 Q1 FY20 Q1 FY21 Q1 FY22 Q1 FY23 Q1 FY24 Cash provided by Operating Activities $ 9,440 $ 11,797 $ 50,018 $ 81,842 $ 48,642 $ 25,943 $ 66,209 Capital Expenditures (6,336) (3,173) (4,
Slide 18: Appendix: Reconciliation of Net Leverage Ratio
Appendix: Reconciliation of Net Leverage Ratio (dollar amount in thousands) Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Net Income $ 68,306 $ 79,113 $ 76,880 $ 80,457 $ 97,187 $ 92,215 $ 93,826 $ 91,228 $ 97,217 Interest expense, net 5,852 6,014 6,480 6,185 4,773 4,201 1,
Applied Industrial Technologies — Q3 2024 Earnings Presentation on 6ix