Applied Industrial Technologies(AIT) - 2025 Q4 - Annual Results

Financial Highlights & Performance Summary 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 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] - 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] Full-Year Fiscal 2025 Performance 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] - Full-year pre-tax results included a LIFO expense of $7.7 million, compared to $13.0 million in the prior year[5] Management Commentary 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 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] - The Engineered Solutions segment performed exceptionally well, capitalizing on recent order strength and firming demand[6] - The company generated record free cash flow in fiscal 2025, enabling meaningful capital deployment throughout the year[6] Outlook and Strategic Focus 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] - 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][9] - 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] Fiscal 2026 Guidance This section outlines Applied Industrial Technologies' fiscal 2026 guidance, including projected sales growth, EPS, and EBITDA margins, along with key underlying assumptions Guidance Overview 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 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] - The outlook incorporates expected incremental sales from pricing, as well as ongoing inflationary headwinds and investments in growth[8] - The guidance explicitly excludes any potential contribution from future acquisitions or share repurchases[8] Consolidated Financial Statements 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 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 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 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] - The company more than doubled its spending on treasury share purchases, from $73.4 million in FY2024 to $152.8 million in FY2025[20] Reconciliation of GAAP to Non-GAAP Financial Measures 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 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 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) 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]