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Applied Industrial Technologies Reports Fiscal 2024 Third Quarter Results and Announces Strategic Automation Acquisition

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Applied Industrial Technologies reported a 1.3% increase in net sales to $1.1 billion in fiscal 2024 third quarter, with net income of $97.2 million and EBITDA of $135.7 million. The company signed an agreement to acquire Grupo Kopar to expand its automation platform. The updated fiscal 2024 guidance projects adjusted EPS of $9.55 to $9.70, sales growth of 1.5% to 2.5%, and EBITDA margins of 12.0% to 12.1%.
Applied Industrial Technologies ha registrato un aumento delle vendite nette dell'1,3% raggiungendo 1,1 miliardi di dollari nel terzo trimestre del 2024, con un utile netto di 97,2 milioni di dollari e un EBITDA di 135,7 milioni di dollari. La compagnia ha firmato un accordo per l'acquisizione di Grupo Kopar, al fine di ampliare la sua piattaforma di automazione. Le previsioni aggiornate per il 2024 prevedono un EPS rettificato tra 9,55 e 9,70 dollari, una crescita delle vendite tra l'1,5% e il 2,5%, e margini EBITDA tra il 12,0% e il 12,1%.
Applied Industrial Technologies reportó un incremento del 1.3% en ventas netas alcanzando $1.1 mil millones en el tercer trimestre del año fiscal 2024, con un ingreso neto de $97.2 millones y EBITDA de $135.7 millones. La empresa firmó un acuerdo para adquirir Grupo Kopar y expandir su plataforma de automatización. La guía fiscal actualizada para 2024 proyecta un EPS ajustado de $9.55 a $9.70, un crecimiento en ventas del 1.5% al 2.5%, y márgenes de EBITDA del 12.0% al 12.1%.
Applied Industrial Technologies가 2024년 회계년도 3분기에 순매출이 1.3% 증가하여 11억 달러를 기록했으며, 순이익은 9,720만 달러, EBITDA는 1억 3,570만 달러에 달했습니다. 회사는 자동화 플랫폼을 확장하기 위해 Grupo Kopar를 인수하기로 합의했습니다. 2024년도 수정된 전망은 조정된 EPS가 9.55달러에서 9.70달러 사이, 매출 증가율은 1.5%에서 2.5% 사이, EBITDA 마진은 12.0%에서 12.1% 사이로 예상됩니다.
Applied Industrial Technologies a enregistré une augmentation de 1,3% de ses ventes nettes atteignant 1,1 milliard de dollars au troisième trimestre de l'exercice 2024, avec un bénéfice net de 97,2 millions de dollars et un EBITDA de 135,7 millions de dollars. La société a signé un accord pour acquérir Grupo Kopar afin d'élargir sa plateforme d'automatisation. Les prévisions révisées pour l'exercice 2024 projettent un BPA ajusté de 9,55 à 9,70 dollars, une croissance des ventes de 1,5% à 2,5%, et des marges d'EBITDA de 12,0% à 12,1%.
Applied Industrial Technologies verzeichnete im dritten Quartal des Geschäftsjahres 2024 einen Anstieg der Nettoumsätze um 1,3% auf 1,1 Milliarden Dollar, mit einem Nettoeinkommen von 97,2 Millionen Dollar und einem EBITDA von 135,7 Millionen Dollar. Das Unternehmen unterzeichnete eine Vereinbarung zur Übernahme von Grupo Kopar, um seine Automatisierungsplattform zu erweitern. Die aktualisierte Prognose für das Geschäftsjahr 2024 sieht ein bereinigtes EPS von 9,55 bis 9,70 Dollar, ein Umsatzwachstum von 1,5% bis 2,5% sowie EBITDA-Margen von 12,0% bis 12,1% vor.
Positive
  • Net sales increased by 1.3% year-over-year to $1.1 billion.
  • Net income was reported at $97.2 million, with EBITDA reaching $135.7 million.
  • The company signed a definitive agreement to acquire Grupo Kopar, enhancing its automation platform.
  • Updated fiscal 2024 guidance projects adjusted EPS of $9.55 to $9.70, sales growth of 1.5% to 2.5%, and EBITDA margins of 12.0% to 12.1%.
Negative
  • None.

Examining the results, there's a modest growth in net sales attributed to strategic acquisitions and positive foreign currency translation. The organic growth rate represents resilience in the Service Center operations but raises a flag on the Engineered Solutions segment, suggesting a deeper dive into segment performance may be warranted. However, the net income and earnings per share do reflect a healthy bottom line. The inclusion of Last In, First Out (LIFO) expense indicates conservative inventory accounting, which in times of inflation can depress reported earnings, so the reduced LIFO expense year-over-year does have a positive impact on net income. The updated fiscal guidance shows cautious optimism, factoring in current economic uncertainties and potential easing of demand. It's worth considering how the projected EBITDA margins and adjusted EPS range align with industry standards.

The strategic acquisition of Grupo Kopar is a notable move, poised to strengthen Applied Industrial Technologies' position in the automation space, particularly in Mexico. The integration of high-value robotics and IIoT capabilities from Kopar could offer long-term revenue streams and margin improvements. Investors should gauge the synergy potential against integration costs. It's critical to monitor how the acquisition will be financed, the impact on leverage ratios and whether the transaction will be accretive to earnings within the expected timeframe. Moreover, the company's guidance notably excludes contributions from Kopar, indicating conservatism in forecasts and possible upside if the acquisition performs well.

The positive dividend announcement serves as a signal of confidence in the company's cash-generating ability, which is to be expected with the reported strong operating cash flow and healthy free cash flow figures. Yet, dividends also reflect the company's approach to capital allocation and it remains to be seen whether this is the most efficient use of capital given the current investment in growth via acquisitions. For stakeholders, balancing dividends with growth investments is a perennial question and the right balance could spell the difference in long-term value creation.
  • Net Sales of $1.1 Billion Up 1.3% YoY; Up 0.7% on an Organic Daily Basis
  • Net Income of $97.2 Million, or $2.48 Per Share; EBITDA of $135.7 Million
  • Operating Cash Flow of $84.2 Million; Free Cash Flow of $76.7 Million
  • Signed Definitive Agreement to Acquire Grupo Kopar, Expanding Automation Platform
  • Updating Fiscal 2024 Guidance

CLEVELAND--(BUSINESS WIRE)-- Applied Industrial Technologies (NYSE: AIT), a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies, today reported results for its fiscal 2024 third quarter ended March 31, 2024.

Net sales for the quarter of $1.1 billion increased 1.3% over the prior year. The change includes a 1.2% increase from acquisitions and a 0.2% increase from foreign currency translation, partially offset by a negative 0.8% selling day impact. Excluding these factors, sales increased 0.7% on an organic daily basis reflecting a 2.6% increase in the Service Center segment and a 3.2% decrease in the Engineered Solutions segment. The Company reported net income of $­­­97.2 million, or $2.48 per share, and EBITDA of $135.7 million. On a pre-tax basis, results include $4.8 million ($0.10 after tax per share) of LIFO expense compared to $8.2 million ($0.16 after tax per share) of LIFO expense in the prior-year period.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “Third quarter sales exceeded our expectations with the year-over-year trend gradually improving as the quarter progressed. Growth was led by our core Service Center operations where our technical industry position and internal initiatives are augmenting steady break-fix demand. This encouraging trend is a favorable indicator for our broader business and growth potential moving forward. In addition, we remain positive on our Engineered Solutions segment ahead of fiscal 2025 considering a constructive outlook across technology, automation, and process markets. Lastly, EBITDA margins were impacted by unfavorable expense absorption and mix against modest sales growth during the quarter. We expect these headwinds to alleviate near-term, and we remain on track to achieve record cash generation for the year.”

Mr. Schrimsher added, “I’m also excited to announce a key strategic step in the expansion of our automation platform with an agreement to acquire Grupo Kopar (Kopar), a provider of emerging automation technologies and engineered solutions primarily across Mexico. In addition to expanding our automation footprint with a market leader in this key growth geography, Kopar has strong alignment with our strategy focused on high-value robotics, machine vision, and IIoT applications. The acquisition will add approximately 200 new associates to our growing automation team and is expected to close in the coming weeks. Overall, we see significant potential and synergies building across our automation platform that stand to enhance our growth and earnings potential into fiscal 2025 and beyond. We look forward to welcoming Kopar to Applied and leveraging their capabilities going forward.”

Updated Fiscal 2024 Guidance
For fiscal 2024, the Company now projects EPS of $9.55 to $9.70 on an adjusted basis (prior $9.35 to $9.70), sales growth of 1.5% to 2.5% (prior 1% to 3%) including 0.5% to 1.5% on an organic daily basis (prior 0% to 2%), and EBITDA margins of 12.0% to 12.1% (prior 12.1% to 12.3%). Updated adjusted EPS guidance excludes the $3.0 million tax benefit recorded in the fiscal 2024 second quarter related to a deferred tax valuation allowance adjustment. Guidance incorporates current economic uncertainty and assumptions of easing end-market demand near term, as well as ongoing inflationary headwinds. Guidance does not assume contribution from Kopar (pending the transaction close) or future acquisitions.

Dividend
Today the Company announced that its Board of Directors declared a quarterly cash dividend of $0.37 per common share, payable on May 31, 2024, to shareholders of record on May 15, 2024.

Conference Call Information
The Company will host a conference call at 10 a.m. ET today to discuss the quarter’s results and outlook. A live audio webcast and supplemental presentation can be accessed on our Investor Relations site at https://ir.applied.com. To join by telephone, dial 888-660-6573 (toll free) or 929-203-0881 using conference ID 6868675. Replays of the call will be available via webcast, as well as by telephone for one week by dialing 800-770-2030 (toll free) or 647-362-9199 using conference ID 6868675.

About Applied®
Applied Industrial Technologies is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO and OEM end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. For more information, visit www.applied.com.

This press release 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-looking statements are often identified by qualifiers such as “expect,” “see,” “assume,” “will,” “guidance” and derivative or similar expressions. All forward-looking statements are based on current expectations regarding important risk factors including trends and events in the industrial sector of the economy (such as the inflationary environment and supply chain strains), results of operations, and financial condition, and other risk factors identified in Applied's most recent periodic report and other filings made with the Securities and Exchange Commission. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by Applied or any other person that the results expressed therein will be achieved. Applied assumes no obligation to update publicly or revise any forward-looking statements, whether due to new information, or events, or otherwise.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
(In thousands, except per share data)
 
Three Months Ended
March 31,
Nine Months Ended
March 31,

 

2024

 

 

2023

 

 

2024

 

 

2023

Net Sales

$

1,146,390

 

$

1,132,035

 

$

3,318,731

 

$

3,254,720

Cost of sales

 

808,144

 

 

798,917

 

 

2,338,313

 

 

2,306,314

Gross Profit

 

338,246

 

 

333,118

 

 

980,418

 

 

948,406

Selling, distribution and administrative expense,
including depreciation

 

217,040

 

 

206,207

 

 

623,938

 

 

602,070

Operating Income

 

121,206

 

 

126,911

 

 

356,480

 

 

346,336

Interest expense, net

 

265

 

 

4,773

 

 

3,502

 

 

17,438

Other (income) expense, net

 

(1,724

)

 

(142

)

 

(4,217

)

 

1,624

Income Before Income Taxes

 

122,665

 

 

122,280

 

 

357,195

 

 

327,274

Income tax expense

 

25,448

 

 

25,093

 

 

74,924

 

 

72,750

Net Income

$

97,217

 

$

97,187

 

$

282,271

 

$

254,524

Net Income Per Share - Basic

$

2.51

 

$

2.52

 

$

7.29

 

$

6.60

Net Income Per Share - Diluted

$

2.48

 

$

2.47

 

$

7.18

 

$

6.49

Average Shares Outstanding - Basic

 

38,675

 

 

38,617

 

 

38,707

 

 

38,574

Average Shares Outstanding - Diluted

 

39,252

 

 

39,268

 

 

39,291

 

 

39,203

 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) Applied uses the last-in, first-out (LIFO) method of valuing U.S. inventory. An actual valuation of inventory under the LIFO method can only be made at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management's estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory determination.
 
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
 
March 31, 2024 June 30,
2023
 
 
Assets
Cash and cash equivalents

$

456,533

$

344,036

Accounts receivable, net

 

710,195

 

708,395

Inventories

 

503,910

 

501,184

Other current assets

 

97,044

 

93,192

Total current assets

 

1,767,682

 

1,646,807

Property, net

 

115,325

 

115,041

Operating lease assets, net

 

95,569

 

100,677

Intangibles, net

 

220,840

 

235,549

Goodwill

 

588,713

 

578,418

Other assets

 

66,814

 

66,840

Total Assets

$

2,854,943

$

2,743,332

 
Liabilities
Accounts payable

$

271,185

$

301,685

Current portion of long-term debt

 

25,107

 

25,170

Other accrued liabilities

 

172,114

 

213,489

Total current liabilities

 

468,406

 

540,344

Long-term debt

 

571,862

 

596,926

Other liabilities

 

145,651

 

147,625

Total Liabilities

 

1,185,919

 

1,284,895

Shareholders' Equity

 

1,669,024

 

1,458,437

Total Liabilities and Shareholders' Equity

$

2,854,943

$

2,743,332

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands)
 
Nine Months Ended
March 31,
 

 

2024

 

 

2023

 

 
Cash Flows from Operating Activities
Net income

$

282,271

 

$

254,524

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property

 

17,567

 

 

16,598

 

Amortization of intangibles

 

21,601

 

 

23,189

 

Provision for losses on accounts receivable

 

1,001

 

 

4,676

 

Amortization of stock appreciation rights and options

 

2,570

 

 

2,322

 

Other share-based compensation expense

 

7,508

 

 

7,419

 

Changes in assets and liabilities, net of acquisitions

 

(77,403

)

 

(142,092

)

Other, net

 

(2,956

)

 

(2,609

)

Net Cash provided by Operating Activities

 

252,159

 

 

164,027

 

Cash Flows from Investing Activities
Acquisition of businesses, net of cash acquired

 

(21,440

)

 

(35,667

)

Capital expenditures

 

(17,354

)

 

(20,809

)

Proceeds from property sales

 

514

 

 

226

 

Net Cash used in Investing Activities

 

(38,280

)

 

(56,250

)

Cash Flows from Financing Activities
Net repayments under revolving credit facility

 

-

 

 

(27,000

)

Long-term debt repayments

 

(25,188

)

 

(40,185

)

Interest rate swap settlement receipts

 

10,839

 

 

5,501

 

Purchases of treasury shares

 

(28,875

)

 

(716

)

Dividends paid

 

(41,524

)

 

(39,829

)

Acquisition holdback payments

 

(681

)

 

(1,510

)

Taxes paid for shares withheld for equity awards

 

(15,874

)

 

(7,914

)

Exercise of stock appreciation rights and options

 

127

 

 

127

 

Net Cash used in Financing Activities

 

(101,176

)

 

(111,526

)

Effect of Exchange Rate Changes on Cash

 

(206

)

 

1,402

 

Increase (decrease) in cash and cash equivalents

 

112,497

 

 

(2,347

)

Cash and Cash Equivalents at Beginning of Period

 

344,036

 

 

184,474

 

Cash and Cash Equivalents at End of Period

$

456,533

 

$

182,127

 

 
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)

(In thousands)

The Company supplemented the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with reporting of non-GAAP financial measures. The Company believes that these non-GAAP measures provide meaningful information to assist shareholders in understanding financial results, assessing prospects for future performance, and provide a better baseline for analyzing trends in our underlying businesses. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for reported results. These non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review company financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

Reconciliation of Net income and Net income per share, GAAP financial measures, with Adjusted Net income and
Adjusted Net income per share, non-GAAP financial measures:

 
Three Months Ended March 31, 2023
Pre-tax Tax Effect Net of Tax Per Share
Diluted 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

 

-

 

3,657

 

(3,657

)

 

(0.09

)

3.0

%

Adjusted net income and net income per share

$

122,280

$

28,750

$

93,530

 

$

2.38

 

23.5

%

 
Nine Months Ended March 31, 2024
Pre-tax Tax Effect Net of Tax Per Share
Diluted Impact
Tax Rate
Net income and net income per share

$

357,195

$

74,924

$

282,271

 

$

7.18

 

21.0

%

Tax valuation allowance adjustment

 

-

 

3,046

 

(3,046

)

 

(0.08

)

0.8

%

Adjusted net income and net income per share

$

357,195

$

77,970

$

279,225

 

$

7.10

 

21.8

%

 
Nine Months Ended March 31, 2023
Pre-tax Tax Effect Net of Tax Per Share
Diluted Impact
Tax Rate
Net income and net income per share

$

327,274

$

72,750

$

254,524

 

$

6.49

 

22.2

%

Tax valuation allowance adjustment, net

 

-

 

3,657

 

(3,657

)

 

(0.09

)

1.1

%

Adjusted net income and net income per share

$

327,274

$

76,407

$

250,867

 

$

6.40

 

23.3

%

Reconciliation of Net Income, a GAAP financial measure, to EBITDA, a non-GAAP financial measure:

 
Three Months Ended
March 31,
Nine Months Ended
March 31,

 

2024

 

2023

 

2024

 

2023

Net Income

$

97,217

$

97,187

$

282,271

$

254,524

Interest expense, net

 

265

 

4,773

 

3,502

 

17,438

Income tax expense

 

25,448

 

25,093

 

74,924

 

72,750

Depreciation and amortization of property

 

5,802

 

5,565

 

17,567

 

16,598

Amortization of intangibles

 

6,951

 

7,670

 

21,601

 

23,189

EBITDA

$

135,683

$

140,288

$

399,865

$

384,499

 
The Company defines EBITDA as Earnings from operations before Interest, Taxes, Depreciation, and Amortization, a non-GAAP financial measure.  EBITDA excludes items that may not be indicative of core operating results, a non-GAAP financial measure.
Reconciliation of Net Cash provided by Operating activities, a GAAP financial measure, to Free Cash Flow, a non-GAAP financial measure:
 
Three Months Ended
March 31,
Nine Months Ended
March 31,

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net Cash provided by Operating Activities

$

84,192

 

$

75,204

 

$

252,159

 

$

164,027

 

Capital expenditures

 

(7,491

)

 

(7,992

)

 

(17,354

)

 

(20,809

)

Free Cash Flow

$

76,701

 

$

67,212

 

$

234,805

 

$

143,218

 

 
Free cash flow is defined as net cash provided by operating activities less capital expenditures, a non-GAAP financial measure.

 

Ryan D. Cieslak

Director – Investor Relations & Treasury

216-426-4887 / rcieslak@applied.com

Source: Applied Industrial Technologies, Inc.

FAQ

What was Applied Industrial Technologies' net sales in the fiscal 2024 third quarter?

Applied Industrial Technologies reported net sales of $1.1 billion in the fiscal 2024 third quarter.

How much was the net income reported by Applied Industrial Technologies?

Applied Industrial Technologies reported a net income of $97.2 million.

What was the EBITDA reported by Applied Industrial Technologies?

Applied Industrial Technologies reported an EBITDA of $135.7 million.

What strategic acquisition did Applied Industrial Technologies announce in the PR?

Applied Industrial Technologies announced the acquisition of Grupo Kopar to expand its automation platform.

What is the updated EPS guidance for Applied Industrial Technologies for fiscal 2024?

The updated EPS guidance for Applied Industrial Technologies for fiscal 2024 is $9.55 to $9.70 on an adjusted basis.

Applied Industrial Technologies, Inc.

NYSE:AIT

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About AIT

with fiscal 2014 sales of $2.5 billion, applied industrial technologies (nyse: ait) is a leading industrial distributor that offers more than five million parts to serve the needs of mro and oem customers in virtually every industry. in addition, applied provides engineering, design and systems integration for industrial and fluid power applications, as well as customized mechanical, fabricated rubber and fluid power shop services. applied also offers maintenance training and inventory management solutions that provide added value to its customers. the applied network encompasses more than 560 operating facilities and nine distribution centers. to learn more, visit www.applied.com.