18 slides from Applied Industrial Technologies's earnings presentation, Jan 25, 2024
Slide 1: Fiscal Q2 2024 Recap
Fiscal Q2 2024 Recap January 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 • Sustaining earnings growth and generating record cash against a moderating near-term industrial backdrop; highlights the Company’s differentiated position, evolution, and inherent execution. • Sales exceeded our expectations and held steady YoY against the most dif
Slide 4: Fiscal Q2 2024 Key Financial Highlights
Fiscal Q2 2024 Key Financial Highlights • Sales up 1.6% YoY Sales, $ in millions o Down 0.1% on an organic basis +1.6% o Acquisitions +1.4%, currency +0.3% (0.1%) Organic $1,077 $1,060 • Net Income of $91.2M and EPS of $2.32 • Adjusted Net Income of $88.2M and Adjusted EPS of $2.24 Q2 2023 Q2 2024 o
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 F2Q24 Sales Growth Detail • Relatively unchanged YoY on an organic basis; above expectations and against a difficult prior-year comparison 21.1% • Average daily sales up 1% sequentially on an o
Slide 6: Other Investor Discussion Points
Other Investor Discussion Points Discussion Point Update Detail Customer activity more mixed as production and supply U.S. industrial production contracting YoY, U.S. PMI sub-50 chain dynamics continue to normalize industrywide; impact for 14 months; core U.S. Service Center, Fluid Power, and Underl
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 Q2 2024 Margin and Expense Highlights
Fiscal Q2 2024 Margin and Expense Highlights Gross Profit, SD&A, and EBITDA Metrics • Gross margin up 34 bps YoY LIFO o Includes a favorable 51 bps YoY impact due to LIFO $ in millions Q2 24 Q2 23 Chg YoY Impact YoY o Includes a 20-30 bps YoY mix headwind from reduced Engineered Solutions segment sa
Slide 10: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet Free Cash Flow (in Millions) - Fiscal 1H Period $158.1 • F2Q24 cash from operations of $101.8M; free cash of $96.2M $150.9 o Free cash at 109% of adjusted net income in the quarter, and up 73% YoY o YTD free cash of $158.1M, up 108% YoY and at record levels $92.9 o YoY ca
Slide 11: Fiscal 2024 Guidance and Outlook Assumptions
Fiscal 2024 Guidance and Outlook Assumptions Fiscal 2024 Guidance Updated Considerations: Prior Current • Organic daily sales growth of 0% to 2% excluding ~100 bps contribution from acquisitions and foreign currency translation (10/26/23) (1/25/24) • Assumes sales are relatively unchanged YoY on an
Slide 12: 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 12
Slide 13: Net Sales and Operating Income by Segment
Appendix: Net Sales and Operating Income by Segment Three Months Ended Dec 31 (dollar amount in thousands) Q2 FY23 Q2 FY24 Service Center Based Distribution Segment: Net sales $ 705,392 $ 729,273 Operating income $ 86,484 $ 91,440 Egineered Solutions Segment: Net sales $ 354,888 $ 347,880 Operating
Slide 14: Reconciliation of Adjusted Net Income and EPS
Appendix: Reconciliation of Adjusted Net Income and EPS Three Months Ended December 31, 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 $ 115,601 $ 24,373 $ 91,228 $ 2.32 21.1% Tax valuation allowance adjustment -
Slide 15: Reconciliation of EBITDA
Appendix: Reconciliation of EBITDA Three Months Ended Dec 31 (dollar amount in thousands) Q2 FY23 Q2 FY24 Net Income $ 80,457 $ 91,228 Interest expense, net 6,185 1,917 Income tax expense 25,493 24,373 Depreciation and amortization of property 5,552 6,048 Amortization of intangibles 7,814 7,257 EBIT
Slide 16: Reconciliation of EBITDA Margin
Appendix: Reconciliation of EBITDA Margin Three Months Ended Dec 31 (dollar amount in thousands) Q2 FY23 Q2 FY24 Net Sales $ 1,060,280 $ 1,077,153 EBITDA 125,501 130,823 EBITDA Margin 11.8% 12.1% 16
Slide 17: 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: Reconciliation of Net Leverage Ratio
Appendix: Reconciliation of Net Leverage Ratio (dollar amount in thousands) Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Net Income $ 57,026 $ 68,306 $ 79,113 $ 76,880 $ 80,457 $ 97,187 $ 92,215 $ 93,826 $ 91,228 Interest expense, net 7,007 5,852 6,014 6,480 6,185 4,773 4,