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- **Revenue Growth**: 9.2% YoY driven by 3% organic growth, with Service Center up 4.4% organically.
- **Profitability**: EBITDA +13.4% to $419M (12.2% margin), EPS +11.4% to $2.63.
- **Strategic Wins**: Hydradyne contributing $30M EBITDA, M&A pipeline active with $53M buybacks.
- **Key Trends**: 16/30 end markets growing, Service Center MRO demand strong, Q2 organic sales +low single digits.
- **Risks**: LIFO expense rising, but FY26 pricing guidance maintained at 150-200 bps.

**【CEO Summary Section】**
- **Revenue Growth**: Fiscal 2026 Q1 revenue increased 9.2% YoY, driven by 3% organic growth and 6.3% contribution from acquisitions. Service Center segment grew 4.4% organically, while Engineered Solutions segment sales were flat YoY but showed 5% order growth.
- **Profitability**: EBITDA rose 13.4% YoY to $419 million, with margins expanding 46 bps to 12.2%. EPS increased 11.4% to $2.63, benefiting from a 10% lower share count.
- **Market Trends**: 16 of 30 end markets showed YoY growth, with strength in machinery, food/beverage, and oil/gas. Service Center sales growth accelerated due to MRO demand and cross-selling initiatives.
- **Strategic Initiatives**: Hydradyne acquisition contributed $260 million in sales and $30 million in EBITDA, with synergies progressing well. M&A pipeline remains active, with $53 million in Q1 share buybacks.

**【CFO Financial Commentary】**
- **Top Line**: Consolidated sales of $1.1 billion reflected 9.2% YoY growth, with 200 bps pricing contribution. Service Center segment gross margin improved 70 bps to 13.9%, while Engineered Solutions margin expanded 40 bps to 13.8%.
- **Cost Control**: SG&A expenses grew 0.7% YoY, benefiting from AR provisioning and cost management. LIFO expense was $2.6 million, slightly higher than prior year.
- **Cash Flow**: Operating cash flow of $119 million supported $419 million in cash, with net leverage at 0.3x EBITDA.
- **Guidance**: Full-year EPS raised to $10.10-$10.85, reflecting Q1 performance. Q2 organic sales expected to grow low single digits, with Service Center outpacing Engineered Solutions.

**【Q&A Highlights】**
- **Pricing Dynamics**: 200 bps YoY pricing contribution in Q1, with 150-200 bps expected for FY26. Teams effectively passed through supplier price increases.
- **Hydradyne Synergies**: EBITDA up 20% sequentially, with cross-selling opportunities in MRO and field service.
- **M&A Pipeline**: Active pipeline for midsized targets, balancing share buybacks and acquisitions.
- **End Market Sentiment**: 70% of end markets showing stabilization, with positive order trends in robotics, data centers, and life sciences.
- **LIFO Impact**: Q2 LIFO expense expected to rise, but FY26 guidance assumes manageable inflationary pressures.

Applied Industrial Technologies, Inc. (AIT) Q1 2026 Earnings Call Transcript

- **Record 2025 Performance**: Achieved all-time highs in sales, EBITDA, and EPS, with 4% EPS growth vs. high-end guidance.
- **Strategic Acquisitions**: Hydradyne contributed $7M EBITDA in Q4, 30% sequential growth, ahead of 12-month $0.15 EPS target.
- **Segment Growth**: Engineered Solutions returned to 2% organic growth, driven by tech/automation. Service Center exceeded seasonal trends with June organic growth.
- **2026 Outlook**: 4-7% sales growth, 12.2-12.5% EBITDA margin, cautious on macro but optimistic on secular tailwinds.
- **Cash Generation**: $465M free cash flow in 2025, enabling $560M capital deployment (M&A, buybacks, dividend +24%).

**【CEO Summary Section】**
- **Record Fiscal 2025 Performance**: Achieved new highs in sales ($3.1B), EBITDA ($465M), and EPS ($10.25), with full-year EPS growth of 4% exceeding guidance. Gross margins expanded 50bps to 30.6%, surpassing 30% for the first time.
- **Strategic Acquisitions**: Completed four deals, including Hydradyne (largest in 6 years), contributing 400bps of inorganic growth. Q4 sales from M&A exceeded expectations, with Hydradyne EBITDA up 30% sequentially.
- **Segment Growth**: Engineered Solutions (ES) returned to 2% organic growth, driven by double-digit growth in technology and mid-single-digit in automation. Service Center sales exceeded seasonal patterns, with June organic growth.
- **2026 Outlook**: Guided for 4-7% total sales growth (1-4% organic), 12.2-12.5% EBITDA margin. Optimistic on secular tailwinds (reshoring, data centers) and Hydradyne synergies, but cautious on macro uncertainty.

**【CFO Financial Commentary】**
- **Q4 2025 Results**: Consolidated sales +5.5% YoY, EBITDA $153M (+13.2%), EPS $2.80 (+5.9%). Organic daily sales up 20bps YoY, reversing 3.1% Q3 decline. Gross margin 30.6% (flat YoY, +15bps QoQ).
- **Key Drivers**: Pricing contributed 100bps YoY, offsetting mix headwinds. AR provisioning ($4M) and LIFO ($2.9M) weighed on EBITDA margin (12.5% vs. 13.2% prior year). Free cash flow $465M (+34%), enabling $560M capital deployment (M&A, buybacks, dividend +24%).
- **2026 Guidance**: Sales $3.2-3.4B, EBITDA $480-500M. LIFO $14-18M, pricing 150-200bps. Free cash flow expected to remain strong but may trend lower with demand.

**【Q&A Highlights】**
- **Hydradyne Performance**: Q4 EBITDA $7M, ahead of $0.03 EPS accretion target. Synergies realized faster than expected, with cross-selling in data centers and automation.
- **Pricing Strategy**: 100bps Q4 contribution, expected to rise to 150-200bps in 2026. Proactive management of supplier inflation, with limited near-term impact.
- **Market Trends**: Encouraging Q1 organic sales +4% YoY, but cautious on macro uncertainty. Service Center benefiting from MRO recovery, ES from tech/automation growth.
- **Tariff Impact**: Limited direct exposure, but ongoing supplier price increases. Teams managing through inflation with mix tailwinds and self-help initiatives.

Applied Industrial Technologies, Inc. (AIT) Q4 2025 Earnings Call Transcript

- **Revenue Resilience**: Organic sales decline stabilized at 3.1% YoY, with Service Center sequential improvement and automation orders surging 30% YoY.
- **Margin Strength**: Gross margin +95bps to 30.5%, EBITDA margin +59bps to 12.4%, driven by cost control and Hydradyne mix.
- **Strategic Momentum**: Hydradyne integration on track for FY26 contributions; $10M IRIS acquisition expands automation solutions.
- **Cash Machine**: Free cash flow up 50% YoY in Q3, total $327M YTD (+39%). Share buybacks of $80M and new $1.5M authorization.
- **Macro Caution**: Q4 guidance reflects -3% YoY April sales, but automation and fluid power orders suggest FY26 recovery.


**【CEO Summary Section】**
- **Revenue Performance**: Organic sales declined 3.1% year-over-year, but Service Center segment showed sequential improvement (4% increase in daily sales). Engineered Solutions orders grew 3% YoY and 8% sequentially, with automation orders up 30% YoY.
- **Margin Expansion**: Gross margin increased 95bps YoY to 30.5%, driven by cost management, Hydradyne mix, and pricing. EBITDA margin expanded 59bps to 12.4%.
- **Strategic Initiatives**: Hydradyne integration progressing well, with Q4 and FY26 synergy contributions expected. Acquired IRIS Factory Automation for $10M annual sales, targeting automation cross-selling.
- **Cash Generation**: Free cash flow up 50% YoY in Q3, total $327M YTD (39% growth). Share buybacks of $80M YTD and new $1.5M repurchase authorization.
- **Macro Outlook**: Muted demand due to tariffs and interest rates, but signs of stabilization in fluid power and automation markets.

**【CFO Financial Commentary】**
- **Topline**: Consolidated sales +1.8% YoY, with Hydradyne contributing 660bps growth. Organic daily sales down 3.1% YoY, driven by fluid power weakness.
- **Segment Performance**: Service Center EBITDA +6.4% YoY (14.7% margin). Engineered Solutions EBITDA +10.2% YoY, despite 6.5% organic sales decline.
- **Cash Flow**: Operating cash flow $122.5M, free cash flow $114.9M (115% of net income). YTD free cash flow $327M (+39% YoY).
- **Guidance Update**: FY25 EPS $9.85-$10 (vs. prior $9.65-$10.05). Q4 sales -1% to +3%, EBITDA margin 12.6%-12.8%.
- **LIFO Impact**: Q3 LIFO expense $2.2M (vs. $4.8M YoY), providing 22bps margin tailwind. Q4 LIFO neutral vs. prior year benefit.

**【Q&A Key Themes】**
1. **Tariff & Inflation**: Minimal direct tariff exposure (<2% COGS). Indirect inflation managed via pricing, mix, and cost controls. Q4 price contribution ~100bps, similar to Q3.
2. **Engineered Solutions Recovery**: Fluid power orders +6% YoY, mobile OEM inventory normalization. Automation orders +30% YoY, with backlog conversion into FY26.
3. **Demand Trends**: April sales -3% YoY organically, but Service Center sequential improvement. Tech, food/beverage, and aggregates markets resilient.
4. **Capital Allocation**: $440M deployed YTD (M&A, buybacks). IRIS acquisition adds $10M annual sales. Balance sheet strong (0.4x net leverage).
5. **Reshoring Impact**: U.S.-centric customer base benefits from reshoring investments, with opportunities in MRO, automation, and fluid power.


Applied Industrial (AIT)-1 May 25-2025 Q3 Earnings call transcript

- **Revenue Resilience**: Despite 3.4% organic sales decline, EBITDA and EPS exceeded expectations, driven by 114 bps gross margin expansion and cost controls.
- **Hydradyne Synergy**: $260M sales and $30M EBITDA in first year, with $0.15 EPS accretion. Targeting $5M-$10M synergies over 3 years through cross-selling and operational improvements.
- **Margin Momentum**: Engineered Solutions EBITDA margin hits 16.3% (up 115 bps YoY), highlighting strategic growth in high-margin segments.
- **Cash Flow Strength**: Free cash flow up 34% YoY to $212M, supporting 24% dividend increase and $30M buybacks.
- **Q3 Outlook**: Gross margin moderates to ~30%, but EBITDA margin remains above 12% as Hydradyne integration begins.

**【CEO Summary Section】**
- **Revenue Performance**: Organic daily sales declined 3.4% year-over-year, driven by soft end market demand and holiday timing impacts. Engineered Solutions segment sales decreased 6.3% organically, while Service Center segment sales declined 1.9%.
- **Margin Expansion**: Consolidated gross margin improved 114 basis points to 30.6%, driven by strong execution in the Engineered Solutions segment (16.3% EBITDA margin, +115 bps) and cost controls. LIFO expense reduction contributed 25 bps to margin expansion.
- **Strategic Acquisitions**: Hydradyne acquisition ($276M purchase price) expected to generate $260M in sales and $30M EBITDA in first year, with $0.15 EPS accretion. Synergies targeting $5M-$10M over 3 years through cross-selling and operational efficiencies.
- **Capital Deployment**: $380M deployed year-to-date, including $30M share buybacks. Dividend increased 24% to align with normalized earnings growth.

**【CFO Financial Commentary】**
- **Earnings Growth**: GAAP EPS of $2.39 (+6.7% YoY), driven by 3.3% EBITDA growth and 12.6% EBITDA margin. Non-GAAP EPS exceeded expectations, excluding one-time tax benefits.
- **Cash Flow**: Free cash flow of $89.9M in Q2, $212M year-to-date (+34% YoY). Pro forma net leverage 0.5x post-Hydradyne, with $1.5B balance sheet capacity.
- **Guidance Update**: Full-year EPS raised to $9.65-$10.05, reflecting stronger Q2 performance and Hydradyne contribution. Sales growth 1%-3%, EBITDA margin 12.2%-12.4%.

**【Q&A Highlights】**
- **January Sales Trends**: Down mid-single digits YoY due to holiday timing, but improving in last 2 weeks of January. Encouraged by pickup in break-fix activity and automation orders.
- **Gross Margin Outlook**: Q3 gross margin expected to moderate to ~30% due to normalized LIFO expense and mix headwinds. EBITDA margin to 12.0%-12.2%.
- **M&A Pipeline**: Active pipeline for bolt-on and mid-sized deals, with focus on fluid power, automation, and flow control. Integration resources sufficient to handle multiple transactions.
- **Tariff Impact**: Minimal pre-buy activity expected, as 50% of Service Center business is break-fix and less sensitive to tariffs.

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