Applied Industrial Technologies, Inc. · NYSE:AIT
Applied Industrial Technologies — Investor Presentation (October 2023)
36 slides from Applied Industrial Technologies's investor presentation, October 2023
Slide 1: Investor Presentation
We Keep Industry Running Investor Presentation
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements that are forward-looking, as that term is defined 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
Slide 3: Company Profile
Company Profile We Are One of the Largest Distributors and Solution Providers of Industrial Motion, Power, Control, & Automation Technologies Strategic Focus on Technical Products & Solutions ~80% of Sales Generated From #1 or #2 Market Positions $4.4B $525M $6B Revenue EBITDA Market Cap Bearings &
Slide 4: Multi-Channel Capabilities
Multi-Channel Capabilities Service Centers • Local MRO / Aftermarket Support • Leading Motion / Power Control Expertise • Technical Shop, Repair, Consult Services • Over 400+ Locations Concentrated in North America Fluid Power • Fluid Power System Design, Build, Integration • Industrial, Off-Highway
Slide 5: Product Portfolio
Product Portfolio Power Bearings, Advanced General MRO; Fluid Power Flow Control Transmission Linear, Seals Automation Hose Products ~85% of Sales Focused in Critical Motion Control, Fluid Power, Flow Control, & Automation Products & Solutions 5
Slide 6: Customer Application / Cross-Sell Potential of Applied Products & Solutions
Customer Application / Cross-Sell Potential of Applied® Products & Solutions Service Centers Service Centers Specialty Flow Control Service Centers Automation Solutions Mounted bearings, gearing, & Fluid power MRO supplies, including Pumps, valves, instrumentation, hoses, & filtration to Maintenance
Slide 7: Primary Supplier Partners
Primary Supplier Partners Leading Manufacturers with World Class Brands Focused on Premier Industrial Solutions 7
Slide 8: Customer & Geographic Exposure
Customer & Geographic Exposure Industrial Metals Machinery 10% 15% Food & Beverage United States 10% 87% Sales By Forest Sales By Products General Customer Type 9% Geography Industry * 36% Canada 7% Chemical & Petrochemical 6% Mexico Cement & 3% Aggregate Other Transportation 6% 3% Oil & Gas 4% 4% *
Slide 9: Applied Value Creation Model
Applied® Value Creation Model Supports Growth Into Higher Margin Operational Focus CORE Engineered Solutions & Emerging • History of Cost Discipline • World-Class Brands • Operational Excellence Initiatives • Critical Support to Industrial Infrastructure Areas of the Industrial Sector • Shared Servi
Slide 10: Key Growth & Operational Considerations
Key Growth & Operational Considerations Our products & solutions are increasingly critical across the industrial supply chain… • Break / Fix Demand: Structurally higher given greater production and capacity utilization on aged manufacturing infrastructure across North America. • Customer Outsourcing
Slide 11: Organic Sales Growth Trend & Discussion Points – Q1 FY24
Organic Sales Growth Trend & Discussion Points – Q1 FY24 Year-over-Year Organic % Change in Sales Per Day F1Q24 Sales Growth Detail • Up 3.4% YoY on an organic daily basis; in line with expectations and against difficult comparisons • Up 23% on a 2-year stack basis, 39% on a 3-year stack basis 21.1%
Slide 12: Other Investor Discussion Points – Q1 FY24
Other Investor Discussion Points – Q1 FY24 Discussion Point Update Detail Normalizing end-market demand balanced by secular Influenced by our technical industry position, more diversified growth including indirect exposure to infrastructure end-market mix, ongoing automation buildout, and sales forc
Slide 13: Fiscal 2024 Guidance
Fiscal 2024 Guidance Fiscal 2024 Guidance Updated Considerations: Prior Current • Organic daily sales growth of 0% to 3% excluding ~100 bps contribution from acquisitions and foreign currency translation (8/10/23) (10/26/23) • Moderating industrial activity through the year reflecting macro Total Sa
Slide 14: Historical Financial Highlights
Historical Financial Highlights Net Sales 8% Five-Year CAGR (2018-2023) EBITDA 14% Five-Year CAGR (2018-2023) (in billions) (Adjusted; in millions) $4.4 $525 $3.8 $410 $3.5 $3.2 $3.2 $3.1 $331 $318 $278 $293 $2.5 $2.6 $201 $215 2016 2017 2018 2019 2020 2021 2022 2023 2016 2017 2018 2019 2020 2021 20
Slide 15: Historical Free Cash Generation
Historical Free Cash Generation Durable & Solid Cash Generation Through All Cycles Strategic Initiatives Aligned to Drive Free Cash Flow (3-Year Rolling Average) Greater Cash Generation $250 • Average FCF Conversion of ~112% Past 5 Years Free Cash Flow, 3-Year Rolling Average • Increased Scale & Mar
Slide 16: Balance Sheet & Liquidity
Balance Sheet & Liquidity Net Leverage Ratio (Net Debt to Trailing Adjusted EBITDA) Balance Sheet & Liquidity (As of September 30, 2023) • Net leverage ratio at 0.5x 2.1x • $360M of cash on hand 1.9x 1.8x 1.7x 1.6x • Total debt down ~40% since early 2018 1.4x 1.2x • ~$800M of balance sheet capacity
Slide 17: Acquisitive Growth
Acquisitive Growth Active Acquisition Pipeline Aligned with Long-term Growth Priorities… • Acquisitions Remain an Element of Growth Formula Acquisition Priority Areas o 50 acquisitions since 2000 o 33 acquisitions since 2012 representing over $1B in annual sales Focused on Expanding Current Offering
Slide 18: Intermediate Financial Objectives
Intermediate Financial Objectives Net Sales – Grow to Over $5.5 Billion Strategic Drivers & Considerations • Mid Single-Digit Plus Organic Growth on Average Over an Upcycle $5.5+ $4.4 • Greater Cross-Selling Across Legacy Customer Network $3.5 • Secular Tailwinds From Leading Technical Industry Posi
Slide 19: Why Invest In Applied?
Why Invest In Applied®? Strong & Growing Enhanced Growth Profile Competitive Moat Cash Generation • • Significant Cross-Sell Opportunity Exposure to Secular Tailwinds • • Leading Position in Technical Product Areas Engineered Solutions & Service Capabilities • >100% Conversion (on Net Income) • Expa
Slide 20: Segment Overview
Segment Overview Service Center Based Distribution Engineered Solutions Legacy service center distribution network across Specializing in distributing, engineering, designing, & 67% North America, Australia, & New Zealand; Focused on MRO motion & power control solutions for critical break-fix 33% in
Slide 21: Service Center Network
Service Center Network • Network of service locations supporting industrial motion & power control MRO requirements • Over 400 locations across North America, Australia, & New Zealand • Local market focus with overnight inventory replenishment from 12 distribution centers • 24 / 7 emergency service
Slide 22: Fluid Power: Overview & Industry Application
Fluid Power: Overview & Industry Application The Leading Provider of an Unmatched Industrial Power & Efficiency Solution Key Applications & Market Focus Fluid Power 101: Hydraulic & pneumatic technologies using Off-Highway liquids & gases under pressure to transmit power Industrial Technology Mobile
Slide 23: Fluid Power Position & Value Proposition
Fluid Power Position & Value Proposition We Provide Innovative Fluid Power Solutions Through Unmatched Engineered Systems Design, Assembly, Integration, & Service Capabilities Engineering & Design System Build & Integration Service & Repair Largest Fluid Power Distributor in North America HFX48M (24
Slide 24: Flow Control: Overview & Industry Application
Flow Control: Overview & Industry Application The Leading Provider of Process Flow Control Solutions to the Industrial Sector Flow Control Key Applications & Market Focus OEM & Life Flow Control 101: Products used to manage & control Chemical Manufacturing Sciences the flow of liquids & gases within
Slide 25: Flow Control Position & Value Proposition
Flow Control Position & Value Proposition We Offer the Largest, Most Comprehensive Flow Control Product & Service Portfolio Focused on Mission-Critical & Full-Cycle Solutions Flow Control Overview & Growth Strategy Covering • Leading technical MRO position Everything On • Higher margins from high-to
Slide 26: Automation Solutions
Automation Solutions A Growing Provider of Next-Generation Automation Supplies & Solutions Focused on Machine Vision, Robotics, Motion, & Digital Technologies Evolving Toward the Factory of the Future… Machine Vision: • Scanners • 1-D/2-D ID • 2-D/3-D Vision Robotics: • Neural / AI Solutions • Five
Slide 27: Increasing Focus on Next Generation Automation & Industry 4.0
Increasing Focus on Next Generation Automation & Industry 4.0 Market Opportunity Technology converging with traditional industrial supply chains as customers address skilled labor constraints & plant efficiency, while considerations around manufacturing re-shoring & U.S. industrial infrastructure ha
Slide 28: Increasing Focus on Next Generation Automation & Industry 4.0
Increasing Focus on Next Generation Automation & Industry 4.0 Products, Solutions, & Vast Network with Entrenched Customer Expansion into Experience Across Legacy Relationships Across Underpenetrated Next Generation Automation Operations Industrial End Markets & Smart Technology Solutions Locations
Slide 29: Maintenance Supplies & Solutions
Maintenance Supplies & Solutions A Leading National Distribution Platform for C-Class MRO Supplies Through Vendor Managed Inventory (VMI) & Vending Solutions Machine Shop • 200+ Sales & Service Representatives • 4 Distribution Centers “Core Business” SM VMI Solution Cutting Tool, Manufacturing • 250
Slide 30: Talent Development
Talent Development Management Development & Planning Strengthening Leadership & Organizational Capabilities • Expanding Organizational Vitality • Integrated HR Information System Enhancing the Hire-to-Retire Process • Enhancing Performance & Realizing Potential o Recruitment • Creating Succession &
Slide 31: Environmental - Social - Governance (ESG)
Environmental - Social - Governance (ESG) Our ESG Focus Takes Many Forms • 100 years of conducting business Integrity Respect Customer Commitment ethically & responsibly Focus to Excellence • Low-carbon footprint as a distributor • Advise customers on energy savings & reducing their carbon footprint
Slide 32: Safety & Sustainability Performance
Safety & Sustainability Performance • Dedicated safety focus with comprehensive training programs across company • Formalized EHS policy, analysis, monitoring, & accountability focus • Low carbon footprint as a distributor • Conduct customer energy audits on motors, belting, & gearing • Develop flui
Slide 33: Corporate Governance
Corporate Governance Key Governance Features Board Refreshment & Tenure • Independent Chairman; all directors independent except CEO Average Tenure of Board Members • Key committees composed of only independent directors • Women represent 33% of board members < 4 Year 3 • Strong “Pay for Performance
Slide 34: Appendix
6) APPLIED Industrial Technologies® Appendix
Slide 35: Appendix: Reconciliations
Appendix: Reconciliations EBITDA, Adjusted EBITDA, & Adjusted EBITDA Margin Twelve Months Ended June 30 (dollar amount in thousands) 2016 2017 2018 2019 2020 2021 2022 2023 Net Income $29,577 $133,910 $141,625 $ 143,993 $24,042 $144,757 $257,414 $346,739 Interest expense, net 8,763 8,541 23,485 40,1
Slide 36: Appendix: Reconciliations
Appendix: Reconciliations Free Cash Flow Fiscal Year, Ended June 30 (dollar amount in thousands) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Cash provided by Operating Activities $90,422 $111,397 $110,110 $157,007 $162,014 $164,619 $147,304 $180,601 $296,714 $241,697 $187,570 $343,96
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