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Core Insights - Applied Industrial Technologies, Inc. (AIT) is positioned for growth due to strong demand in technology, food & beverage, pulp & paper, and oil & gas markets [1] - The Engineered Solutions segment is benefiting from increased investments in datacenter infrastructure and semiconductor manufacturing [1] Segment Performance - The Engineered Solutions segment's organic revenues increased by 1.8% year over year in Q4 FY25 [2] - Acquisitions of IRIS Factory Automation and Hydradyne contributed positively, adding 6.5% to sales [3][8] - Service Center revenues declined by 1.5% due to reduced maintenance, repair, and operations spending, particularly in international markets [9] Financial Performance - AIT paid out dividends totaling $63.7 million in fiscal 2025, a 14% increase year over year, and raised its quarterly dividend rate by 24% in January 2025 [4] - The company's cost of sales rose by 1.2% year over year, while SG&A expenses increased by 5.2%, reaching 19.4% of total revenues [10] Market Position - AIT's stock has gained 15.9% over the past year, outperforming the industry growth of 3.6% [7]

Core Viewpoint - Applied Industrial Technologies will release its fiscal 2026 first quarter results on October 28, 2025, before market opens [1] Company Announcement - The fiscal 2026 first quarter ended on September 30, 2025 [1] - A conference call will be held at 10 a.m. ET on the same day to discuss the results and outlook [1] - A live audio webcast and supplemental presentation will be available on the Investor Relations site [1]

Core Insights - Applied Industrial Technologies, Inc. (AIT) is positioned for growth due to strong performance in technology, food & beverage, pulp & paper, and oil & gas markets [1] - The Engineered Solutions segment is benefiting from solid demand for technical offerings, particularly in motion control, specialty flow control, and automation solutions, driven by increased investments in data center infrastructure and semiconductor manufacturing [1][2] Segment Performance - The Engineered Solutions segment's organic revenues increased by 1.8% year over year in Q4 fiscal 2025, despite a decline in fluid power component sales due to weak demand from off-highway mobile OEM customers [2][7] - Favorable order trends in automation, technology, and industrial verticals are expected to support revenue growth in the upcoming quarters [2] Acquisitions and Growth Strategy - AIT plans to enhance its business through acquisitions, such as the purchase of IRIS Factory Automation in May 2025, which is anticipated to strengthen its automation offerings [3] - The acquisition contributed to a 19.7% increase in sales for the Engineered Solutions segment in Q4 fiscal 2025 [3][7] Peer Comparison - EnerSys (ENS) reported an 8.4% revenue increase in its Energy Systems segment for Q1 fiscal 2026, driven by the expansion of U.S. communications networks and AI-driven data demand [4] - Roper Technologies, Inc. (ROP) is experiencing growth in its Technology enabled Products segment, with expectations of high-single-digit organic revenue growth in the second half of 2025 [5] Financial Performance - AIT's shares have increased by 14.7% over the past three months, outperforming the industry growth of 8% [6] - The company is currently trading at a forward price-to-earnings ratio of 24.23X, above the industry average of 21.14X [9] Earnings Estimates - The Zacks Consensus Estimate for AIT's fiscal 2026 earnings has decreased by 0.4% over the past 60 days [11]

Core Insights - The performance of Applied Industrial Technologies (AIT) in international markets is critical for understanding its financial resilience and growth potential [1][2] - AIT's total revenue for the quarter was $1.22 billion, reflecting a 5.5% increase [4] International Revenue Breakdown - Canada contributed $75.85 million, accounting for 6.2% of total revenue, which was a -5.27% surprise compared to the consensus estimate of $80.07 million [5] - Other International revenue was $66.99 million, representing 5.5% of total revenue, also a -3.46% surprise against the expected $69.39 million [6] Future Revenue Expectations - Analysts project AIT will report revenues of $1.16 billion for the current fiscal quarter, a 5.2% increase year-over-year, with expected contributions of 6.6% from Canada ($76.64 million) and 5.9% from Other International ($68.35 million) [7] - For the full year, total annual revenue is anticipated to be $4.82 billion, marking a 5.6% increase compared to the previous year, with Canada and Other International expected to contribute 6.6% ($317.07 million) and 5.8% ($278.56 million) respectively [8] Market Dependency and Trends - AIT's reliance on global markets for revenue presents both opportunities and risks, making the monitoring of international revenue trends essential for predicting future performance [9] - The increasing international interdependencies and geopolitical conflicts necessitate close monitoring of these trends by analysts to adjust earnings forecasts [10]

Core Insights - Applied Industrial Technologies, Inc. reported better-than-expected earnings for Q4, with earnings per share (EPS) of $2.80, surpassing the analyst consensus estimate of $2.65 [1] - The company achieved quarterly sales of $1.225 billion, exceeding the analyst consensus estimate of $1.183 billion [1] Financial Outlook - For FY2026, the company projects GAAP EPS in the range of $10.00 to $10.75, compared to market estimates of $9.96 [2] - Sales expectations for FY2026 are set between $4.747 billion and $4.883 billion, exceeding projections of $4.522 billion [2] Management Commentary - The President & CEO of Applied Industrial Technologies noted that Q4 sales and EPS exceeded expectations, with positive organic growth driven by strong performance in the Engineered Solutions segment [3] - The company capitalized on recent order strength and improving demand across various verticals [3] Market Reaction - Following the earnings announcement, Applied Industrial shares fell by 5.4%, trading at $258.00 [3] Analyst Ratings and Price Targets - Baird analyst David Manthey maintained an Outperform rating and raised the price target from $265 to $300 [6] - Oppenheimer analyst Christopher Glynn also maintained an Outperform rating, increasing the price target from $290 to $300 [6] - Raymond James analyst Sam Darkatsh downgraded the stock from Outperform to Market Perform [6]

Core Insights - Applied Industrial Technologies (AIT) reported revenue of $1.22 billion for the quarter ended June 2025, marking a year-over-year increase of 5.5% and exceeding the Zacks Consensus Estimate by 3.74% [1] - The earnings per share (EPS) for the same period was $2.80, up from $2.64 a year ago, representing a surprise of 7.69% over the consensus estimate of $2.60 [1] Financial Performance Metrics - Net Sales for Engineered Solutions reached $445.55 million, surpassing the three-analyst average estimate of $399.68 million, with a year-over-year change of 20.7% [4] - Net Sales for Service Center Based Distribution were reported at $779.18 million, slightly below the average estimate of $780.86 million, reflecting a year-over-year decline of 1.5% [4] - Operating income for Service Center Based Distribution was $101.29 million, compared to the average estimate of $108.41 million [4] - Operating income for Engineered Solutions was reported at $54.09 million, below the estimated $57.14 million [4] Stock Performance - Shares of Applied Industrial Technologies have returned 4.2% over the past month, outperforming the Zacks S&P 500 composite's return of 3.3% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Financial Performance - In fiscal 2025, the Service Center segment represented 66% of total sales, while the Engineered Solutions segment accounted for 34%[37] - Approximately 88% of fiscal 2025 sales were generated in the United States, with Canada contributing 6% and other international operations making up the remaining 6%[32] - The Engineered Solutions segment contributes over 40% of consolidated EBITDA, highlighting its importance to the company's overall financial performance[29] Market and Growth Potential - The addressable market for cross-selling initiatives is approximately $80 billion, with significant growth potential in sectors like food & beverage, semiconductor, and life sciences[29] - The company is positioned to benefit from industry consolidation, with a focus on acquisitions to enhance its service capabilities and organic growth profile[29] - The company is expanding its automation solutions through acquisitions and organic growth, with a focus on machine vision, robotics, and Internet of Things technologies[29] Operations and Facilities - The company operates approximately 600 facilities, including service centers and distribution centers, with a focus on technical MRO and engineered solutions[16] - The Service Center segment focuses on MRO distribution operations across North America, Australia, and New Zealand, providing products for maintenance and repair of production equipment[38] Workforce and Training - As of June 30, 2025, the company had approximately 6,800 associates, with 5,250 in the United States and 4,050 in the Service Center segment[44] - The company completed approximately 4,600 safety training courses during the fiscal year to raise awareness of workplace risks[47] - The company emphasizes the importance of attracting and retaining qualified employees, which is critical for its success[85] - The company is committed to safety and well-being, requiring associates to complete specific online training courses annually related to workplace safety hazards[47] Regulatory and Economic Environment - The company is subject to complex laws and regulations, and any failure to comply could result in sanctions or penalties that may adversely affect its business[86] - The company’s operations are dependent on general industrial and economic conditions, and adverse events could negatively impact its business[49] Sales and Seasonality - The business exhibits minor seasonality, with sales per day in the first half of the fiscal year historically lower than in the second half due to customer plant shutdowns and holidays[48] Technology and Innovation - Investments in technology and predictive analytics have streamlined operations and enhanced sales force productivity[29] - The company emphasizes minimizing production downtime and improving machine performance for its customers, which is critical in the industrial supply chain[22] Goodwill and Intangible Assets - As of June 30, 2025, the company had remaining goodwill of $699.4 million and other intangible assets of $348.6 million[84] Industry Position - The Engineered Solutions segment is believed to be the largest distributor of fluid power and industrial flow control products in the United States[40]

Core Insights - Applied Industrial Technologies (AIT) reported fourth-quarter fiscal 2025 earnings of $2.80 per share, exceeding the Zacks Consensus Estimate of $2.60, marking a year-over-year increase of 5.9% [1][10] - Net revenues for the quarter reached $1.22 billion, surpassing the consensus estimate of $1.18 billion, with a year-over-year growth of 5.5% [2][10] - For fiscal 2025, AIT's total net revenues were $4.6 billion, reflecting a 1.9% increase year over year, while adjusted earnings were $10.12 per share, up 3.8% [2] Revenue Breakdown - The Service Center-Based Distribution segment generated revenues of $779.2 million, contributing 66% to net revenues, but saw a year-over-year decline of 1.5% [3] - The Engineered Solutions segment, which accounted for 34% of net revenues, reported revenues of $445.5 million, a significant year-over-year increase of 20.7% [4] - Acquisitions positively impacted the top line by 19.7%, while organic sales increased by 1.8% due to strong demand in key growth areas [5] Margin and Cost Analysis - AIT's cost of sales rose by 5.7% year over year to $850 million, with gross profit increasing by 5.2% to $374.7 million, resulting in a slight decrease in gross margin to 30.6% [6] - Selling, distribution, and administrative expenses increased by 10.5% year over year to $239.7 million, while EBITDA was reported at $153 million, reflecting a decrease of 0.3% [6] Balance Sheet and Cash Flow - At the end of fiscal 2025, AIT had cash and cash equivalents of $388.4 million, down from $460.6 million at the end of fiscal 2024, with long-term debt remaining stable at $572.3 million [7] - The company generated net cash of $492.4 million from operating activities, a 32.6% increase year over year, and free cash flow rose by 34.2% to $465.2 million [8] Future Guidance - For fiscal 2026, AIT anticipates adjusted earnings in the range of $10-$10.75 per share, with sales growth projected between 4-7% year over year [10][11] - The company expects EBITDA margin to be in the range of 12.2-12.5% for fiscal 2026 [11]

Financial Data and Key Metrics Changes - The company achieved record sales, EBITDA, and EPS in fiscal 2025, with full-year EPS growth of 4% exceeding initial guidance [6][7] - Gross margins expanded nearly 50 basis points, surpassing 30% for the first time in history [6][7] - Free cash flow reached over $465 million, up 34% year-over-year, marking a new record [18][19] Business Line Data and Key Metrics Changes - The Engineered Solutions segment saw a 2% organic daily sales increase, marking the first year-over-year growth in seven quarters [10][11] - The Service Center segment experienced a 0.4% organic sales decline year-over-year, but showed improvement from a 1.6% decline in the previous quarter [37][38] - Overall, the Engineered Solutions segment's sales increased by 20.7% year-over-year, with acquisitions contributing significantly to this growth [40][41] Market Data and Key Metrics Changes - Year-over-year trends across the top 30 end markets remained mixed, with 15 markets showing positive sales growth [11][12] - Declines were noted in machinery, primary metals, utility and energy, aggregates, and chemicals, while demand was solid in technology, pulp and paper, and food and beverage sectors [12][13] - Orders in the Engineered Solutions segment increased by a high single-digit percentage year-over-year, indicating a positive trend [13] Company Strategy and Development Direction - The company is focused on accelerating growth while being mindful of ongoing trade and interest rate policy uncertainties [22][24] - There is an emphasis on increasing growth with local customers through ancillary products and comprehensive service solutions [26][28] - The company plans to remain active in M&A, with a developing pipeline for fiscal 2026 [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute amid evolving tariff backdrops and inflationary pressures [20][21] - The outlook for fiscal 2026 includes expectations for organic sales growth of 1% to 4% and EBITDA margins of 12.2% to 12.5% [45][46] - Management noted that recent U.S. trade agreements and tax reforms could positively impact business sentiment and capital investment [23][24] Other Important Information - The company repurchased 656,000 shares for $153 million and increased its quarterly dividend by 24% [19] - The Hydrodyne acquisition is expected to contribute positively to EPS and EBITDA, with synergy realization ahead of schedule [87][88] Q&A Session Summary Question: Hydrodyne's sequential sales growth and EBITDA contribution - Management indicated that the stronger margin performance was due to leverage from SG&A falling through to EBITDA and quicker realization of synergy benefits [53][54] Question: Break fix MRO market trends - Management noted positive trends in local accounts and indicated that there are signs of firming demand [56][57] Question: Pricing contributions in guidance - Management expects pricing contributions to be similar to the previous quarter, with potential increases as the year progresses [62] Question: Engineered Solutions segment growth drivers - Management highlighted growth in data centers and semiconductor manufacturing as key components of the technology vertical [63][64] Question: LIFO and AR provisioning impacts - Management clarified that the majority of AR provisioning impacts were skewed towards the Service Center segment, with expectations for normalization moving forward [75][76]