Applied Industrial Technologies Reports Fiscal 2025 Second Quarter Results

• Net Sales of $1.1 Billion Down 0.4% YoY; Down 3.4% on an Organic Daily Basis
• Net Income of $93.3 Million, or $2.39 Per Share Up 6.7% vs. Prior-Year Adjusted EPS
• EBITDA of $135.1 Million Up 3.3% YoY
• Operating Cash Flow of $95.1 Million; Free Cash Flow of $89.9 Million
• Quarterly Dividend Increased 24% to $0.46 Per Share
• Raising FY25 Guidance to Reflect F2Q25 Performance and the Recent Hydradyne Acquisition

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 2025 second quarter ended December 31, 2024.

Net sales for the quarter of $1.1 billion decreased 0.4% over the prior year. The change includes a 1.9% increase from acquisitions and a 1.6% benefit from one extra selling day, partially offset by a negative 0.5% impact from foreign currency translation. Excluding these factors, sales decreased 3.4% on an organic daily basis reflecting a 1.9% decrease in the Service Center segment and a 6.3% decrease in the Engineered Solutions segment. The Company reported net income of $­­­93.3 million, or $2.39 per share, and EBITDA of $135.1 million. On a pre-tax basis, results include $0.7 million ($0.01 after tax per share) of LIFO expense compared to $3.4 million ($0.07 after tax per share) of LIFO expense in the prior-year period.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “Fiscal second quarter EBITDA and EPS exceeded our expectations, increasing a respective 3% and 7% year over year on relatively unchanged sales. Demand remained mixed during the quarter with seasonal factors and holiday timing limiting customer activity in December. That said, our team continued to execute well with organic sales trends inline with our guidance, while strong gross margin performance and cost controls drove solid EBITDA margin expansion during the quarter. Additionally, the closing of our Hydradyne acquisition at the end of December represents another notable milestone in our story and provides solid growth and operational momentum moving forward. Overall, we had a productive second quarter that highlights our business resilience, self-help opportunities, and favorable industry position.”

Mr. Schrimsher added, “We are raising fiscal 2025 guidance to reflect second quarter performance and initial estimated contribution from our recent Hydradyne acquisition. Our updated outlook assumes industrial activity remains muted near term given current economic policy uncertainty and a more gradual pace to interest rate cuts. This is reflected in January sales trending down by a mid single-digit percent on an organic basis over prior-year levels. That said, we believe a growth inflection in end-market demand is near considering improving industrial macro indicators in recent months, pent-up technical MRO activity, and easing comparisons. In addition, order momentum and business funnels are building across our technology vertical, while a more favorable regulatory backdrop, stabilizing machinery markets, and reenergized secular demand post the election should provide additional support. Combined with ongoing self-help margin opportunities and balance sheet capacity, we remain constructive on our set-up and ability to accelerate sales and earnings growth in coming quarters. Lastly, I am pleased to announce our Board has approved a 24% increase in our quarterly dividend, which highlights the conviction we have in our outlook and financial position moving forward, as well as our ongoing capital allocation opportunities.”

Updated Fiscal 2025 Guidance

For fiscal 2025, the Company now projects EPS of $9.65 to $10.05 (prior $9.25 to $10.00) on sales growth of up 1% to 3% (prior down 2.5% to up 2.5%) including down 3% to 1% on an organic daily basis (prior down 4% to up 1%), and EBITDA margins of 12.2% to 12.4% (prior 12.1% to 12.3%). Updated guidance assumes initial estimated contribution from the Company’s recent Hydradyne acquisition, which closed on December 31, 2024. In addition, updated guidance incorporates ongoing economic uncertainty and potential margin pressures on muted sales trends near term, ongoing inflationary headwinds, and growth investments. Guidance does not assume contribution from future acquisitions or share buybacks.

Dividend

Today the Company also announced that its Board of Directors approved a 24% increase in the quarterly cash dividend to $0.46 per common share, payable on February 28, 2025, to shareholders of record on February 14, 2025. This represents the 16th dividend increase since 2010.

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 800-715-9871 (toll free) or 646-307-1963 using conference ID 2139950. Replays of the call will be available via webcast, as well as by telephone for one week by dialing 800-770-2030 (toll free) using conference ID 2139950.

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 (maintenance, repair, and operations) and OEM (original equipment manufacturing), and new system install applications 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,” “will,” “guidance,” “assume,” “outlook,” “believe,” 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 EndedDecember 31,

Six Months EndedDecember 31,

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net Sales

$

1,073,001

 

$

1,077,153

 

$

2,171,945

 

$

2,172,341

 

Cost of sales

 

744,951

 

 

760,063

 

 

1,518,813

 

 

1,530,169

 

Gross Profit

 

328,050

 

 

317,090

 

 

653,132

 

 

642,172

 

Selling, distribution and administrative expense,








including depreciation

 

207,180

 

 

202,496

 

 

419,090

 

 

406,898

 

Operating Income

 

120,870

 

 

114,594

 

 

234,042

 

 

235,274

 

Interest (income) expense, net

 

(936

)

 

1,917

 

 

(1,563

)

 

3,237

 

Other (income) expense, net

 

(755

)

 

(2,924

)

 

(3,036

)

 

(2,493

)

Income Before Income Taxes

 

122,561

 

 

115,601

 

 

238,641

 

 

234,530

 

Income tax expense

 

29,271

 

 

24,373

 

 

53,288

 

 

49,476

 

Net Income

$

93,290

 

$

91,228

 

$

185,353

 

$

185,054

 

Net Income Per Share - Basic

$

2.43

 

$

2.35

 

$

4.83

 

$

4.78

 

Net Income Per Share - Diluted

$

2.39

 

$

2.32

 

$

4.76

 

$

4.71

 

Average Shares Outstanding - Basic

 

38,427

 

 

38,744

 

 

38,413

 

 

38,722

 

Average Shares Outstanding - Diluted

 

38,963

 

 

39,302

 

 

38,956

 

 

39,307

 

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)






 

December 31, 2024

June 30, 2024

Assets

Cash and cash equivalents

$

303,441

$

460,617

Accounts receivable, net

 

696,239

 

724,878

Inventories

 

518,044

 

488,258

Other current assets

 

96,972

 

96,148

Total current assets

 

1,614,696

 

1,769,901

Property, net

 

125,336

 

118,527

Operating lease assets, net

 

195,318

 

133,289

Intangibles, net

 

360,748

 

245,870

Goodwill

 

686,148

 

619,395

Other assets

 

62,395

 

64,928

Total Assets

$

3,044,641

$

2,951,910

Liabilities

Accounts payable

$

240,889

$

266,949

Current portion of long-term debt

 

-

 

25,055

Other accrued liabilities

 

188,551

 

209,096

Total current liabilities

 

429,440

 

501,100

Long-term debt

 

572,300

 

572,279

Other liabilities

 

249,389

 

189,750

Total Liabilities

 

1,251,129

 

1,263,129

Shareholders' Equity

 

1,793,512

 

1,688,781

Total Liabilities and Shareholders' Equity

$

3,044,641

$

2,951,910

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


(In thousands)





 

Six Months EndedDecember 31,

 

2024

 

 

2023

 

Cash Flows from Operating Activities

Net income

$

185,353

 

$

185,054

 

Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization of property

 

11,850

 

 

11,765

 

Amortization of intangibles

 

15,167

 

 

14,650

 

Provision for losses on accounts receivable

 

3,605

 

 

1,026

 

Amortization of stock appreciation rights and options

 

2,453

 

 

1,710

 

Other share-based compensation expense

 

3,101

 

 

4,237

 

Changes in assets and liabilities, net of acquisitions

 

1,451

 

 

(47,855

)

Other, net

 

(96

)

 

(2,620

)

Net Cash provided by Operating Activities

 

222,884

 

 

167,967

 

Cash Flows from Investing Activities

Acquisition of businesses, net of cash acquired

 

(273,142

)

 

(21,440

)

Capital expenditures

 

(10,746

)

 

(9,863

)

Proceeds from property sales

 

922

 

 

471

 

Net Cash used in Investing Activities

 

(282,966

)

 

(30,832

)

Cash Flows from Financing Activities

Long-term debt repayments

 

(25,106

)

 

(25,125

)

Interest rate swap settlement receipts

 

6,797

 

 

7,194

 

Purchases of treasury shares

 

(30,084

)

 

(10,677

)

Dividends paid

 

(28,469

)

 

(27,155

)

Acquisition holdback payments

 

(1,210

)

 

(681

)

Taxes paid for shares withheld for equity awards

 

(13,037

)

 

(12,914

)

Exercise of stock appreciation rights and options

 

-

 

 

127

 

Net Cash used in Financing Activities

 

(91,109

)

 

(69,231

)

Effect of Exchange Rate Changes on Cash

 

(5,985

)

 

915

 

(Decrease) Increase in cash and cash equivalents

 

(157,176

)

 

68,819

 

Cash and Cash Equivalents at Beginning of Period

 

460,617

 

 

344,036

 

Cash and Cash Equivalents at End of Period

$

303,441

 

$

412,855

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATIONRECONCILIATION 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 December 31, 2023

Pre-tax

Tax Effect

Net of Tax

Per ShareDiluted Impact

Tax Rate

Net income and net income per share

$

115,601

 

$

24,373

 

$

91,228

 

$

2.32

 

21.1

%

Tax valuation allowance adjustment

 

-

 

 

3,046

 

 

(3,046

)

 

(0.08

)

2.6

%

Adjusted net income and net income per share

$

115,601

 

$

27,419

 

$

88,182

 

$

2.24

 

23.7

%

Six Months Ended December 31, 2023

Pre-tax

Tax Effect

Net of Tax

Per ShareDiluted Impact

Tax Rate

Net income and net income per share

$

234,530

 

$

49,476

 

$

185,054

 

$

4.71

 

21.1

%

Tax valuation allowance adjustment

 

-

 

 

3,046

 

 

(3,046

)

 

(0.08

)

1.3

%

Adjusted net income and net income per share

$

234,530

 

$

52,522

 

$

182,008

 

$

4.63

 

22.4

%

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

Three Months EndedDecember 31,

Six Months EndedDecember 31,

 

2024

 

 

2023

 

 

 

2024

 

 

2023

 

Net Income

$

93,290

 

$

91,228

 

$

185,353

 

$

185,054

 

Interest (income) expense, net

 

(936

)

 

1,917

 

 

(1,563

)

 

3,237

 

Income tax expense

 

29,271

 

 

24,373

 

 

53,288

 

 

49,476

 

Depreciation and amortization of property

 

5,926

 

 

6,048

 

 

11,850

 

 

11,765

 

Amortization of intangibles

 

7,567

 

 

7,257

 

 

15,167

 

 

14,650

 

EBITDA

$

135,118

 

$

130,823

 

$

264,095

 

$

264,182

 

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 EndedDecember 31,

Six Months EndedDecember 31,

 

2024

 

 

2023

 

 

 

2024

 

 

2023

 

Net Cash provided by Operating Activities

$

95,137

 

$

101,758

 

$

222,884

 

$

167,967

 

Capital expenditures

 

(5,197

)

 

(5,523

)

 

(10,746

)

 

(9,863

)

Free Cash Flow

$

89,940

 

$

96,235

 

$

212,138

 

$

158,104

 

 


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

 

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Ryan D. Cieslak Director – Investor Relations & Treasury 216-426-4887 / [e-mail]