Applied Industrial Technologies, Inc. · NYSE:AIT
Applied Industrial Technologies — Q3 2023 Earnings Presentation
17 slides from Applied Industrial Technologies's earnings presentation, Apr 27, 2023
Slide 1: Fiscal Q3 2023 Recap
Fiscal Q3 2023 Recap April 27, 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 record quarterly results on solid +15% sales growth and ongoing margin expansion; executing well within an evolving macro backdrop reflecting our industry position and internal growth opportunities. • Underlying demand backdrop remains healthy; rate of sal
Slide 4: Fiscal Q3 2023 Key Financial Highlights
Fiscal Q3 2023 Key Financial Highlights • Sales up 15.4% YoY o Up 15.0% on an organic basis o Acquisitions +0.7%, currency -0.3% • Net Income of $97.2M and EPS of $2.47 • Non-GAAP Adjusted Net Income of $93.5M and Adjusted EPS of $2.38 o Excludes a net $3.7M tax benefit from the release of a deferre
Slide 5: Current Investor Discussion Points
Current Investor Discussion Points Discussion Point Update Detail Customer feedback remains generally healthy and supported by F3Q23 YoY organic sales growth of 15% vs. 21% in F2Q23; average 1. Underlying Demand traction with our growth initiatives and industry position; industry daily sales up ~1%
Slide 6: Segment Results – Service Center Based Distribution
Segment Results – Service Center Based Distribution Segment Overview: Representing 67% of fiscal 2022 sales - the segment Service Center Distribution Segment Sales, in Millions 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 Segment Overview: Representing 33% of fiscal 2022 sales - the segment Engineered Solutions Segment Sales, in Millions consists of 1) our Fluid Power network specializing in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic
Slide 8: Fiscal Q3 2023 Margin and Expense Highlights
Fiscal Q3 2023 Margin and Expense Highlights Gross Profit, SD&A, and EBITDA Metrics • Gross margin up 13 bps YoY LIFO $ in millions Q3 23 Q3 22 Chg YoY Impact YoY o Includes an unfavorable 7 bps YoY impact due to LIFO o Up 33 bps sequentially compared to F2Q23 o Price actions, channel execution, eff
Slide 9: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet Free Cash Flow (in Millions) - Fiscal YTD Period • F3Q23 cash from operations of $75.2M; free cash of $67.2M $191.2 o Free cash at 71.9% of adjusted net income in the quarter, and up 38.9% YoY $153.4 o YTD free cash of $143.2M, 57.1% of adjusted net income $143.2 o Inclus
Slide 10: Fiscal 2023 Guidance
Fiscal 2023 Guidance Fiscal 2023 Guidance Updated Considerations: • Tightening FY2023 sales guidance to high-end of prior range, and Prior Current raising FY2023 EBITDA margin and EPS guidance to reflect (1/26/23) (4/27/23) F3Q23 performance Total Sales - YoY % change 13% - 15% 14% - 15% • Implied F
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 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: Appendix: Net Sales and Operating Income by Segment
Appendix: Net Sales and Operating Income by Segment Three Months Ended March 31 (dollar amount in thousands) Q3 FY22 Q3 FY23 Service Center Based Distribution Segment: Net sales $ 658,998 $ 761,599 Operating income $ 81,640 $ 103,083 Egineered Solutions Segment: Net sales $ 321,664 $ 370,436 Operati
Slide 13: Appendix: Reconciliation of Adjusted Net Income and EPS
Appendix: Reconciliation of Adjusted Net Income and EPS Three Months Ended March 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 $ 122,280 $ 25,093 $ 97,187 $ 2.47 20.5% Tax valuation allowance adjustment, net
Slide 14: Appendix: Reconciliation of EBITDA
Appendix: Reconciliation of EBITDA Three Months Ended March 31 (dollar amount in thousands) Q3 FY22 Q3 FY23 Net Income $ 68,306 $ 97,187 Interest expense, net 5,852 4,773 Income tax expense 21,216 25,093 Depreciation and amortization of property 5,352 5,565 Amortization of intangibles 7,891 7,670 EB
Slide 15: Appendix: Reconciliation of EBITDA Margin
Appendix: Reconciliation of EBITDA Margin Three Months Ended March 31 (dollar amount in thousands) Q3 FY22 Q3 FY23 Net Sales $ 980,662 $ 1,132,035 EBITDA 108,617 140,288 EBITDA Margin 11.1% 12.4% 15
Slide 16: Appendix: 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 17: Appendix: Reconciliation of Net Leverage Ratio
Appendix: Reconciliation of Net Leverage Ratio (dollar amount in thousands) Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Net Income $ 56,063 $ 59,244 $ 52,969 $ 57,026 $ 68,306 $ 79,113 $ 76,880 $ 80,457 $ 97,187 Interest expense, net 7,608 7,673 7,390 7,007 5,852 6,014 6,
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