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 [17][18] Business Line Data and Key Metrics Changes - Engineered Solutions segment sales grew organically year-over-year for the first time in seven quarters, with a 2% organic daily sales increase [9][11] - Service Center segment trends improved, returning to positive organic growth in June, with average daily sales increasing 1.5% sequentially [11][37] - The Engineered Solutions segment saw a 20.7% increase in sales year-over-year, with acquisitions contributing 19.7 points to this increase [39] Market Data and Key Metrics Changes - Year-over-year trends across the top 30 end markets remained mixed, with 15 markets generating positive sales growth [11] - Declines were noted in machinery, primary metals, utility and energy, aggregates, and chemicals, while technology verticals showed solid demand [12][13] - Orders in the Engineered Solutions segment increased by a high single-digit percentage year-over-year, indicating a positive inflection [13] Company Strategy and Development Direction - The company is focused on accelerating growth while being mindful of ongoing trade and interest rate policy uncertainties [21][24] - There is an emphasis on increasing growth with local customers through greater sales of ancillary products and comprehensive service solutions [25][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 [19][20] - The outlook for fiscal 2026 includes expectations for organic sales growth of 1% to 4% and EBITDA margins of 12.2% to 12.5% [44][45] - Management noted that recent U.S. trade agreements and tax reforms could positively impact business sentiment and capital investment [22][24] Other Important Information - The company closed four acquisitions in fiscal 2025, including Hydrodyne, which contributed over 400 basis points of inorganic growth [18][39] - The company repurchased 656,000 shares for $153 million and increased its quarterly dividend by 24% [18] Q&A Session Summary Question: Hydrodyne's sequential sales growth and EBITDA performance - Management indicated that the improvement in Hydrodyne's performance was due to stronger margin performance and quicker realization of synergy benefits [52][53] Question: Break fix MRO market trends - Management noted positive trends in local accounts and national accounts, indicating potential firming in the market [54][55] Question: Pricing contributions to guidance - Management expects pricing contributions to remain similar in the first quarter, with potential increases as the year progresses [61][62] Question: Market softness in international operations - Management identified Canada as experiencing more softness due to tariff impacts, but noted improvements as the quarter progressed [97] Question: Hydrodyne's contribution to EBITDA - Hydrodyne contributed just over $7 million to EBITDA in Q4, aligning with initial expectations for the first twelve months [87][88]

Financial Performance - Q4 2025 sales increased by 5.5% year-over-year, reaching $1.225 billion compared to $1.161 billion in Q4 2024[8] - Organic daily sales saw a positive year-over-year growth of 0.2% for the first time in over a year[8] - Earnings per share (EPS) increased by 5.9% year-over-year, from $2.64 in Q4 2024 to $2.80 in Q4 2025[8] - EBITDA decreased slightly by 0.3% year-over-year, from $153.5 million in Q4 2024 to $153.0 million in Q4 2025[8] - Free cash flow for fiscal year 2025 was $465.2 million, up 34% year-over-year[33] Segment Performance - Engineered Solutions (ES) segment sales increased by 20.7% year-over-year in Q4 2025, with organic growth of 1.8%[31] - Service Center segment sales decreased by 1.5% year-over-year in Q4 2025[23] Fiscal Year 2026 Guidance - Total sales are projected to increase by 4% to 7% year-over-year[46] - Organic sales are expected to grow by 1% to 4% year-over-year[46] - EBITDA margin is guided to be between 12.2% and 12.5%[46] - Diluted EPS is projected to be in the range of $10.00 to $10.75[46]

[Financial Highlights & Performance Summary](index=1&type=section&id=Financial%20Highlights%20%26%20Performance%20Summary) This section summarizes Applied Industrial Technologies' financial performance for Q4 and full-year fiscal 2025, detailing key sales, income, and EPS metrics [Q4 Fiscal 2025 Performance](index=1&type=section&id=Q4%20Fiscal%202025%20Performance) Q4 fiscal 2025 saw net sales increase by 5.5% to $1.2 billion, driven by acquisitions, with net income rising to $107.8 million and diluted EPS to $2.80 Q4 Fiscal 2025 Key Financial Metrics (vs. Q4 FY2024) | Metric | Q4 FY2025 | Q4 FY2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1.2 Billion | $1.16 Billion | +5.5% | | Net Income | $107.8 Million | $103.5 Million | +4.2% | | Diluted EPS | $2.80 | $2.64 | +6.1% | | EBITDA | $153.0 Million | $153.5 Million | -0.3% | - The **5.5% sales growth** was primarily driven by a **6.5% increase from acquisitions**, while organic daily sales grew by **0.2%**, partially offset by negative selling day and foreign currency impacts[4](index=4&type=chunk) - Pre-tax results included a LIFO expense of **$2.9 million**, significantly higher than the **$0.3 million** LIFO expense in the prior-year period[4](index=4&type=chunk) [Full-Year Fiscal 2025 Performance](index=1&type=section&id=Full-Year%20Fiscal%202025%20Performance) For fiscal year 2025, sales increased by 1.9% to $4.6 billion, with net income reaching $393.0 million and diluted EPS at $10.12, while organic daily sales declined Full-Year Fiscal 2025 Key Financial Metrics (vs. FY2024) | Metric | FY 2025 | FY 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $4.6 Billion | $4.48 Billion | +1.9% | | Net Income | $393.0 Million | $385.8 Million | +1.9% | | Diluted EPS | $10.12 | $9.83 | +2.9% | | EBITDA | $562.1 Million | $553.3 Million | +1.6% | - On an organic daily basis, full-year sales declined by **2.3%**[5](index=5&type=chunk) - Full-year pre-tax results included a LIFO expense of **$7.7 million**, compared to **$13.0 million** in the prior year[5](index=5&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management provides insights into fiscal 2025 performance, highlighting Q4's positive organic growth and record free cash flow, alongside the strategic outlook for fiscal 2026 [Performance Review and Business Environment](index=1&type=section&id=Performance%20Review%20and%20Business%20Environment) Management expressed satisfaction with fiscal 2025 results, noting Q4 sales and EPS exceeded expectations with a return to positive organic growth and record free cash flow generation - Q4 sales and EPS exceeded expectations, with a return to positive organic growth as underlying trends improved throughout the quarter[6](index=6&type=chunk) - The Engineered Solutions segment performed exceptionally well, capitalizing on recent order strength and firming demand[6](index=6&type=chunk) - The company generated record free cash flow in fiscal 2025, enabling meaningful capital deployment throughout the year[6](index=6&type=chunk) [Outlook and Strategic Focus](index=1&type=section&id=Outlook%20and%20Strategic%20Focus) Management is focused on accelerating growth in fiscal 2026, with positive sales momentum continuing into Q1, while maintaining a prudent outlook due to economic uncertainties - Positive momentum has sustained into the first quarter of fiscal 2026, with organic sales up an estimated **4%** year-over-year to date[6](index=6&type=chunk) - Ongoing trade and interest rate uncertainty continue to impact broader demand visibility and customer capital expenditure decisions, leading to a prudent initial outlook for FY2026[6](index=6&type=chunk)[9](index=9&type=chunk) - The company highlighted its strong five-year track record, including compounded annual growth for EBITDA and EPS of **14%** and **22%**, respectively, and significant margin expansion[9](index=9&type=chunk) [Fiscal 2026 Guidance](index=1&type=section&id=Fiscal%202026%20Guidance) This section outlines Applied Industrial Technologies' fiscal 2026 guidance, including projected sales growth, EPS, and EBITDA margins, along with key underlying assumptions [Guidance Overview](index=1&type=section&id=Guidance%20Overview) Applied Industrial Technologies projects fiscal 2026 total sales growth of 4% to 7%, with EPS between $10.00 and $10.75, and EBITDA margins of 12.2% to 12.5% Fiscal 2026 Guidance | Metric | Guidance Range | | :--- | :--- | | Total Sales Growth | +4% to +7% | | Organic Sales Growth | +1% to +4% | | EPS | $10.00 to $10.75 | | EBITDA Margins | 12.2% to 12.5% | [Key Assumptions](index=2&type=section&id=Key%20Assumptions) The fiscal 2026 guidance assumes continued economic, interest rate, and tariff-related uncertainties impacting demand through the first half, incorporating pricing and inflationary pressures but excluding future acquisitions or buybacks - Guidance assumes that ongoing economic uncertainty related to interest rates and tariffs will continue to impact demand through the first half of fiscal 2026[8](index=8&type=chunk) - The outlook incorporates expected incremental sales from pricing, as well as ongoing inflationary headwinds and investments in growth[8](index=8&type=chunk) - The guidance explicitly excludes any potential contribution from future acquisitions or share repurchases[8](index=8&type=chunk) [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's condensed consolidated income statements, balance sheets, and cash flow statements for the reported fiscal periods [Condensed Statements of Consolidated Income](index=3&type=section&id=Condensed%20Statements%20of%20Consolidated%20Income) For fiscal year 2025, net sales grew to $4.56 billion, gross profit increased to $1.38 billion, and net income rose to $393.0 million, resulting in a diluted EPS of $10.12 Full-Year Income Statement Highlights (in thousands) | Account | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :--- | :--- | :--- | | Net Sales | $4,563,424 | $4,479,406 | | Gross Profit | $1,383,159 | $1,336,653 | | Operating Income | $498,529 | $495,823 | | Net Income | $392,988 | $385,762 | | Diluted EPS | $10.12 | $9.83 | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $3.18 billion, driven by acquisitions, while total liabilities rose to $1.33 billion and shareholders' equity expanded to $1.84 billion Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $388,417 | $460,617 | | Total current assets | $1,747,473 | $1,769,901 | | Total Assets | $3,175,544 | $2,951,910 | | Total Liabilities | $1,331,024 | $1,263,129 | | Shareholders' Equity | $1,844,520 | $1,688,781 | [Condensed Statements of Consolidated Cash Flows](index=5&type=section&id=Condensed%20Statements%20of%20Consolidated%20Cash%20Flows) Net cash from operating activities significantly increased to $492.4 million in fiscal 2025, while cash used in investing activities rose to $318.8 million, primarily due to acquisitions, resulting in an overall cash decrease Cash Flow Highlights (in thousands) | Account | Year Ended June 30, 2025 | Year Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash provided by Operating Activities | $492,385 | $371,393 | | Net Cash used in Investing Activities | ($318,752) | ($95,407) | | Net Cash used in Financing Activities | ($245,607) | ($156,468) | | (Decrease) Increase in cash | ($72,200) | $116,581 | - Cash used for acquisitions increased significantly to **$293.4 million** in FY2025 from **$72.1 million** in FY2024[20](index=20&type=chunk) - The company more than doubled its spending on treasury share purchases, from **$73.4 million** in FY2024 to **$152.8 million** in FY2025[20](index=20&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=6&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section reconciles key non-GAAP metrics like EBITDA and Free Cash Flow to their GAAP equivalents, providing a clearer view of underlying business performance [EBITDA Reconciliation](index=6&type=section&id=EBITDA%20Reconciliation) The company reconciles Net Income to EBITDA, showing full-year fiscal 2025 EBITDA increased to $562.1 million, while Q4 fiscal 2025 EBITDA slightly decreased to $153.0 million EBITDA Reconciliation (in thousands) | Period | Net Income | EBITDA | | :--- | :--- | :--- | | Q4 FY2025 | $107,836 | $153,028 | | Q4 FY2024 | $103,491 | $153,450 | | Full-Year FY2025 | $392,988 | $562,059 | | Full-Year FY2024 | $385,762 | $553,315 | [Free Cash Flow Reconciliation](index=6&type=section&id=Free%20Cash%20Flow%20Reconciliation) Free Cash Flow, calculated as net cash from operating activities less capital expenditures, reached a record **$465.2 million** for full fiscal year 2025, a substantial increase from the prior year Free Cash Flow Reconciliation (in thousands) | Period | Net Cash from Operating Activities | Free Cash Flow | | :--- | :--- | :--- | | Q4 FY2025 | $147,048 | $138,156 | | Q4 FY2024 | $119,234 | $111,724 | | Full-Year FY2025 | $492,385 | $465,198 | | Full-Year FY2024 | $371,393 | $346,529 | [Adjusted Net Income Reconciliation (FY2024)](index=6&type=section&id=Adjusted%20Net%20Income%20Reconciliation%20(FY2024)) For fiscal year 2024, GAAP Net Income of $385.8 million was adjusted for a tax valuation allowance, resulting in a non-GAAP Adjusted Net Income of $382.7 million, or $9.75 per share - For fiscal year 2024, GAAP Net Income of **$385.8 million** was adjusted for a tax valuation allowance, resulting in a non-GAAP Adjusted Net Income of **$382.7 million**, or **$9.75 per share**[22](index=22&type=chunk)

Core Insights - Applied Industrial Technologies (AIT) reported quarterly earnings of $2.8 per share, exceeding the Zacks Consensus Estimate of $2.6 per share, and showing an increase from $2.64 per share a year ago, resulting in an earnings surprise of +7.69% [1] - The company achieved revenues of $1.22 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.74% and up from $1.16 billion year-over-year [2] - AIT's shares have increased approximately 15.1% since the beginning of the year, outperforming the S&P 500's gain of 10% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.52 on revenues of $1.16 billion, while for the current fiscal year, the estimate is $10.52 on revenues of $4.77 billion [7] - The estimate revisions trend for AIT was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Manufacturing - General Industrial industry, to which AIT belongs, is currently ranked in the top 14% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Core Insights - Applied Industrial Technologies, Inc. (AIT) is set to release its fourth-quarter fiscal 2025 results on August 14, with a history of beating earnings estimates in the past four quarters, averaging a surprise of 6.2% [1][10] Revenue and Earnings Estimates - The consensus estimate for revenues is $1.18 billion, reflecting a 1.7% increase from the same quarter last year [2] - The adjusted earnings estimate is $2.60 per share, indicating a 1.5% decrease from the year-ago quarter [2] Segment Performance - The Engineered Solutions segment is expected to show solid momentum, with revenues projected at $382.1 million, a 3.5% increase year-over-year, driven by favorable order trends in automation and technology [3] - The Service Center Based Distribution segment is anticipated to perform weakly due to reduced maintenance, repair, and operations (MRO) spending, as well as prolonged customer plant shutdowns [6] Strategic Initiatives - The company’s focus on enhancing its product line and value-added services, along with investments in automation and digital offerings, is expected to positively impact its top line [4] - The acquisition of Grupo Kopar in May 2024 is anticipated to contribute to revenue growth by expanding AIT's automation platform into Mexico [5] Margin and Expense Outlook - Rising selling, distribution, and administrative expenses are likely to pressure AIT's margins, with a projected gross margin of 30.4%, down 30 basis points year-over-year [7] Earnings Prediction - The current Earnings ESP for AIT is 0.00%, indicating no clear prediction for an earnings beat, with both the Most Accurate Estimate and the Zacks Consensus Estimate at $2.60 [9]

Core Insights - Wall Street analysts expect Applied Industrial Technologies (AIT) to report quarterly earnings of $2.60 per share, reflecting a year-over-year decline of 1.5% [1] - Revenue is anticipated to be $1.18 billion, which indicates a 1.7% increase from the same quarter last year [1] Earnings Estimates - The consensus EPS estimate has been revised upward by 0.1% in the past 30 days, indicating a reassessment by covering analysts [2] - Changes in earnings estimates are crucial for predicting investor reactions to the stock [3] Key Metrics Projections - Analysts project 'Net Sales- Engineered Solutions' to be $399.68 million, representing an 8.2% increase year-over-year [5] - The estimate for 'Net Sales- Service Center Based Distribution' is $780.86 million, suggesting a decline of 1.3% from the previous year [5] - 'Operating income- Service Center Based Distribution' is expected to reach $108.41 million, down from $111.39 million reported in the same quarter last year [6] - 'Operating income- Engineered Solutions' is projected at $57.14 million, slightly up from $56.57 million reported in the same quarter last year [6] Stock Performance - AIT shares have increased by 3.6% over the past month, outperforming the Zacks S&P 500 composite, which rose by 2.7% [7] - AIT holds a Zacks Rank 3 (Hold), indicating it is expected to closely follow overall market performance in the near term [7]

Core Insights - Applied Industrial Technologies, Inc. (AIT) is experiencing growth in its technology, food & beverage, pulp & paper, and transportation markets, with the Engineered Solutions segment's revenues increasing by 13.5% year over year in Q3 of fiscal 2025 [1] Group 1: Market Performance - The Engineered Solutions segment is benefiting from strong demand in technology-related fluid power, automation, and industrial verticals, contributing to revenue growth [1] - AIT's stock has gained 31.5% over the past year, outperforming the industry growth of 9.7% [8] Group 2: Acquisitions and Growth - The company made strategic acquisitions, including IRIS Factory Automation, which is expected to enhance its automation offerings and contribute positively to sales [2] - The acquisition of Hydradyne is anticipated to boost fluid power offerings and create cross-selling opportunities, adding $260 million in sales and $30 million in EBITDA [3] Group 3: Financial Returns to Shareholders - AIT has been committed to returning value to shareholders, paying out $46.2 million in dividends in the first nine months of fiscal 2025, marking an 11.2% increase year over year [4] - The company increased its quarterly dividend rate by 24% in January 2025 and authorized a new share buyback program to repurchase up to 1.5 million shares [5] Group 4: Challenges - Despite the growth in certain segments, AIT is facing challenges in its Service Center Based Distribution segment due to reduced spending on maintenance and operations, which has negatively impacted performance [9] - The company's SG&A expenses increased by 4.1% year over year, with a rise in operating costs affecting overall profitability [10]

Core Insights - The article discusses the author's background in analytics and accounting, highlighting over 10 years of experience in the investment arena, starting as an analyst and progressing to a management role [1]. Group 1 - The author holds a master's degree in Analytics from Northwestern University and a bachelor's degree in Accounting [1]. - The author has a personal interest in dividend investing and aims to share insights with the Seeking Alpha community [1].

Core Insights - Applied Industrial Technologies, Inc. (AIT) is positioned for growth with strong performance in key markets such as technology, food & beverage, pulp & paper, aggregates, and transportation [1] - The Engineered Solutions segment saw a revenue increase of 13.5% year over year in Q3 FY25, driven by technology-related fluid power demand [1][7] Acquisitions and Market Expansion - AIT is focused on enhancing its capabilities through acquisitions, which positively impacted sales by 6.6% in the fiscal third quarter [2] - Recent acquisitions include IRIS Factory Automation and Hydradyne, which have strengthened AIT's automation and fluid power offerings, respectively [2] - The acquisition of Grupo Kopar in May 2024 expanded AIT's automation platform into Mexico [2] Shareholder Returns - AIT has committed to rewarding shareholders with dividends and share buybacks, paying out $46.2 million in dividends in the first nine months of fiscal 2025, an increase of 11.2% year over year [3] - A quarterly dividend rate hike of 24% was implemented in January 2025 [3] - A new share buyback program was authorized in April 2025 to repurchase up to 1.5 million shares [4] Financial Performance - AIT's stock has gained 20.9% over the past year, outperforming the industry growth of 4.2% [5] - The Service Center revenues fell by 3.5% in Q3 FY25 due to weak MRO and local account sales [7][8] - SG&A expenses increased by 4.1% year over year in Q3 FY25, reaching 19.4% of total revenues [9]

Group 1 - The stock of Applied Industrial Technologies, Inc. (AIT) is experiencing significant attention due to high implied volatility in the options market, particularly the Aug. 15, 2025 $195 Call option [1] - Implied volatility indicates the market's expectation of future price movement, suggesting that investors anticipate a significant change in the stock's price, potentially due to an upcoming event [2] - Currently, Applied Industrial Technologies holds a Zacks Rank 3 (Hold) in the Manufacturing - General Industrial industry, which is in the bottom 45% of the Zacks Industry Rank, with no analysts increasing earnings estimates for the current quarter and a decrease in estimates leading to a consensus estimate drop from $2.74 to $2.64 per share [3] Group 2 - The high implied volatility may indicate a developing trading opportunity, as options traders often seek to sell premium on options with high implied volatility, aiming for the underlying stock to not move as much as expected at expiration [4]