Applied Industrial Technologies : Third Quarter 2025 Applied Industrial Technologies Reports Fiscal 2025 Third Quarter Results
AIT
Published on 05/01/2025 at 06:38
NEWS RELEASE
Applied Industrial Technologies Reports Fiscal 2025 Third Quarter Results; Announces Bolt-on Automation Acquisition & New Repurchase Authorization
2025-05-01
CLEVELAND--(BUSINESS WIRE)-- Applied Industrial Technologies (NYSE: AIT), a leading value-added distributor and technical solutions provider of industrial motion, uid power, ow control, automation technologies, and related maintenance supplies, today reported results for its scal 2025 third quarter ended March 31, 2025.
Net sales for the quarter of $1.2 billion increased 1.8% over the prior year. The change includes a 6.6% increase from acquisitions, partially o set by a negative 0.8% selling day impact and a negative 0.9% impact from foreign currency translation. Excluding these factors, sales decreased 3.1% on an organic daily basis re ecting a 1.6% decrease in the Service Center segment and a 6.5% decrease in the Engineered Solutions segment. The Company reported net income of $99.8 million, or $2.57 per share, and EBITDA of $144.9 million. On a pre-tax basis, results include $2.2 million ($0.04 after tax per share) of LIFO expense compared to $4.8 million ($0.10 after tax per share) of LIFO expense in the prior-year period.
Neil A. Schrimsher, Applied's President & Chief Executive O cer, commented, "We delivered another quarter of
strong operational performance. EBITDA and EPS exceeded our expectations, increasing 7% and 4%, respectively, over the prior year on 2% sales growth. Our Applied team did an outstanding job managing through ongoing demand weakness and macro uncertainty with the average daily sales organic decline of 3% holding relatively steady with last quarter and within our guidance. In addition, gross margins and EBITDA margins expanded nicely, further re ecting internal initiatives, channel execution, mix tailwinds, and solid cost management. We also achieved record third quarter cash generation and increased our share repurchase activity. Lastly, I am pleased with the early progress of our recent acquisition of Hydradyne with integration ongoing and nancial contribution expected to increase in coming quarters."
Mr. Schrimsher added, "Our results year to date highlight the bene ts of our strategy and proven ability to navigate various market conditions. Moving forward, we are mindful of greater macro uncertainty and in ation following recent tari actions, including potential demand implications near term as the landscape evolves. We have incorporated this uncertainty into our fourth quarter outlook, which assumes end-market weakness and organic sale declines persist near term as customers potentially continue to idle production and defer capital spending pending a more certain operating backdrop. That said, we remain focused on internal growth and margin initiatives, while our U.S. centric position provides resilience with over 70% of sales from MRO and aftermarket support including break- x applications. Further, order and backlog trends remain positive across higher-margin engineered solutions, and we are favorably positioned to manage potential greater in ation given our technical industry position, minimal cross-border sourcing, structural mix tailwinds, and various self-help counter measures inherent to our strategy. Combined with our strong balance sheet, exposure to long-term secular tailwinds including reshoring, and easier comparisons moving forward, we remain constructive on our set-up into scal 2026 and beyond."
Updated Fiscal 2025 Guidance
For scal 2025, the Company now projects EPS of $9.85 to $10.00 (prior $9.65 to $10.05) on sales growth of at to up 1% (prior up 1% to 3%) including down 4% to 3% on an organic average daily basis (prior down 3% to 1%), and EBITDA margins of 12.3% to 12.4% (prior 12.2% to 12.4%). Updated guidance assumes fourth quarter EPS between
$2.52 and $2.67 on total sales of down 1% to up 3% year over year and EBITDA margins of 12.3% to 12.4%. Fourth quarter sales guidance assumes average daily sales decline organically by a mid to low single-digit percent over the prior year. The updated outlook considers average daily sales in April declining by an estimated 3% organically year over year and greater economic uncertainty following recent tari actions, in ationary headwinds, and ongoing growth investments. The updated outlook assumes limited direct impact from tari s on pricing and cost in ation in the fourth quarter given the timing of announced supplier price increases, our product procurement exposure, and an evolving tari and trade policy backdrop. Guidance does not assume contribution from future acquisitions or share buybacks.
Acquisition of IRIS Factory Automation
The Company today also announced that it has signed a de nitive agreement to acquire IRIS Factory Automation (IRIS). Based in Aurora, IL, IRIS is a provider of automation products, services, and turn-key productized solutions focused on optimizing material handling and traceability work ows across production environments. The Company's productized solutions utilize advanced vision and robotic automation technologies that are seamlessly deployed within a customer's facility to optimize core processes such as palletizing, case packing, quality inspection, and packaging. IRIS operates with a team of over 30 associates from one location and serves customers across various industries including food & beverage, consumer products, and pharmaceutical. The transaction is expected to close this week.
Mr. Schrimsher commented, "We welcome IRIS to Applied as we continue the expansion of our automation platform. IRIS aligns well with our solutions-centric strategy, acting as a key technical consultant to customers' emerging automation needs through proprietary and cutting-edge turn-key solutions. In addition to broadening our footprint in the U.S. Midwest region, IRIS will enhance the scalability of our automation platform by further building out our portfolio of standardized solutions solving common automation needs. We believe this acquisition can drive strong growth synergy long-term as we leverage our core suppliers' leading automation technologies and Applied's access to legacy manufacturing verticals. Overall, I am encouraged with the continued progress we are making in positioning Applied as a leading provider and channel partner of next-generation automation solutions."
Share Repurchase Authorization
The Company also announced that its Board of Directors authorized a new share buyback program to repurchase up to 1.5 million shares of the Company's common stock. The updated plan replaces the prior share repurchase plan. Shares may be purchased in open market and negotiated transactions.
Dividend
The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.46 per common share, payable on May 30, 2025, to shareholders of record on May 15, 2025.
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 7270709.
About Applied®
Applied Industrial Technologies is a leading value-added distributor and technical solutions provider of industrial motion, uid power, ow 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 https://www.applied.com.
This press release contains statements that are forward-looking, as that term is de ned 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 identi ed by quali ers 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 in ationary environment and supply chain strains), results of operations, and nancial condition, and other risk factors identi ed in Applied's most recent periodic report and other lings made with the Securities and Exchange Commission. Accordingly, actual results may di er 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,
2025
2024
2025
2024
Net Sales
$ 1,166,749 $
1,146,390
$ 3,338,694
$ 3,318,731
Cost of sales
811,459
808,144
2,330,272
2,338,313
Gross Pro t
Selling, distribution and administrative expense,
including depreciation
355,290
225,888
338,246
217,040
1,008,422
644,978
980,418
623,938
Operating Income
129,402
121,206
363,444
356,480
Interest expense (income), net
853
265
(710)
3,502
Other expense (income), net
1,267
(1,724)
(1,769)
(4,217)
Income Before Income Taxes
127,282
122,665
365,923
357,195
Income tax expense
27,483
25,448
80,771
74,924
Net Income $
99,799 $
97,217
$ 285,152
$ 282,271
Net Income Per Share - Basic $
2.60 $
2.51
$ 7.43
$ 7.29
Net Income Per Share - Diluted $
2.57 $
2.48
$ 7.33
$ 7.18
Average Shares Outstanding - Basic 38,322
38,675
38,383
38,707
Average Shares Outstanding - Diluted 38,847
39,252
38,920
39,291
1) Applied uses the last-in, rst-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 nal year-end LIFO inventory determination.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
March 31,
2025
June 30,
2024
Assets
Cash and cash equivalents
$ 352,842
$ 460,617
Accounts receivable, net
754,638
724,878
Inventories
500,562
488,258
Other current assets
83,311
96,148
Total current assets
1,691,353
1,769,901
Property, net
127,039
118,527
Operating lease assets, net
191,099
133,289
Intangibles, net
350,946
245,870
Goodwill
694,193
619,395
Other assets
61,033
64,928
Total Assets
$
3,115,663
$
2,951,910
Liabilities
Accounts payable
$
282,191
$
266,949
Current portion of long-term debt
Other accrued liabilities
-
191,999
25,055
209,096
Total current liabilities
474,190
501,100
Long-term debt
572,300
572,279
Other liabilities 241,692
189,750
Total Liabilities 1,288,182
1,263,129
Shareholders' Equity 1,827,481
1,688,781
Total Liabilities and Shareholders' Equity $ 3,115,663
$ 2,951,910
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited) (In thousands)
Nine Months Ended
March 31,
2025
2024
Cash Flows from Operating Activities
Net income
$ 285,152
$ 282,271
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property
18,433
17,567
Amortization of intangibles
25,385
21,601
Provision for losses on accounts receivable
2,652
1,001
Amortization of stock appreciation rights
3,570
2,570
Other share-based compensation expense
5,824
7,508
Changes in assets and liabilities, net of acquisitions
5,371
(77,403)
Other, net
(1,050)
(2,956)
Net Cash provided by Operating Activities 345,337 252,159 Cash Flows from Investing Activities
Acquisition of businesses, net of cash acquired (273,312) (21,440)
Capital expenditures (18,295) (17,354)
Proceeds from property sales 1,022 514
Net Cash used in Investing Activities (290,585) (38,280) Cash Flows from Financing Activities
Long-term debt repayments
(25,106)
(25,188)
Interest rate swap settlement receipts
9,435
10,839
Purchases of treasury shares
(79,794)
(28,875)
Dividends paid
(46,159)
(41,524)
Acquisition holdback payments
(1,210)
(681)
Taxes paid for shares withheld for equity awards
(14,332)
(15,874)
Exercise of stock appreciation rights and options
-
127
Net Cash used in Financing Activities
(157,166)
(101,176)
E ect of Exchange Rate Changes on Cash
(5,361)
(206)
(Decrease) Increase in cash and cash equivalents
(107,775)
112,497
Cash and Cash Equivalents at Beginning of Period
460,617
344,036
Cash and Cash Equivalents at End of Period $ 352,842 $ 456,533
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 nancial information determined under U.S. generally accepted accounting principles (GAAP) with reporting of non-GAAP nancial measures. The Company believes that these non-GAAP measures provide meaningful information to assist shareholders in understanding nancial results, assessing prospects for future performance, and provide a better baseline for analyzing trends in our underlying businesses. Because non-GAAP nancial measures are not standardized, it may not be possible to compare these nancial measures with other companies' non-GAAP nancial measures having the same or similar names. These non-GAAP nancial measures should not be considered in isolation or as a substitute for reported results. These non-GAAP nancial measures re ect 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 nancial statements and publicly led reports in their entirety and not to rely on any single nancial measure.
Reconciliation of Net income and Net income per share, GAAP nancial measures, with Adjusted Net income and Adjusted Net income per share, non-GAAP nancial measures:
Nine Months Ended March 31, 2024
Per Share Diluted
Pre-tax Tax E ect Net of Tax 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%
Reconciliation of Net Income, a GAAP nancial measure, to EBITDA, a non-GAAP nancial measure:
Three Months Ended Nine Months Ended
March 31, March 31,
2025
2024
2025
2024
Net Income
$ 99,799$
97,217
$ 285,152 $
282,271
Interest expense (income), net
853
265
(710)
3,502
Income tax expense
27,483
25,448
80,771
74,924
Depreciation and amortization of property
6,583
5,802
18,433
17,567
Amortization of intangibles 10,218 6,951 25,385 21,601
EBITDA $ 144,936$ 135,683 $ 409,031 $ 399,865
The Company de nes EBITDA as Earnings from operations before Interest, Taxes, Depreciation, and Amortization, a non-GAAP nancial measure. EBITDA excludes items that may not be indicative of core operating results, a non-GAAP nancial measure.
Reconciliation of Net Cash provided by Operating activities, a GAAP nancial measure, to Free Cash Flow, a non-GAAP nancial measure:
Three Months Ended Nine Months Ended
March 31, March 31,
2025
2024
2025
2024
Net Cash provided by Operating Activities $ 122,453 $
84,192
$ 345,337 $
252,159
Capital expenditures (7,549)
(7,491)
(18,295)
(17,354)
Free Cash Flow $ 114,904 $
76,701
$ 327,042 $
234,805
Free cash ow is de ned as net cash provided by operating activities less capital expenditures, a non-GAAP nancial measure.
Ryan D. Cieslak
Director - Investor Relations & Treasury 216-426-4887 / [email protected]
Source: Applied Industrial Technologies, Inc.
Disclaimer
Applied Industrial Technologies Inc. published this content on May 01, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 01, 2025 at 10:36 UTC.