Earnings call transcript Q4 2023

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Operator

Welcome to the fiscal 2023 Fourth Quarter Earnings Call for Applied Industrial Technologies. My name is Frank and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded.

the and to Treasury. turn of Cieslak, now Relations Investor will call Ryan over Director I Ryan, may you begin.

Ryan Cieslak

earnings investor Okay. Thanks, results. the This our Investor call. everyone Both on and Frank, and are of good morning morning of these Relations we available fourth section detailing our deck to documents the release quarter supplemental in issued applied.com.

statement. certain reminder, forward-looking risks The to update outlook obligation and expectations statements. All publicly statements Before detailed based SEC business subject forward-looking uncertainties, in we from forward-looking no make filings. may and our expressed to begin, including revise those Actual statements. or we'll discuss in the undertakes just differ current are a those on our company forward-looking materially results any

use In measures, referenced call financial qualifications to the which those subject conference documents. in will non-GAAP are addition,

President Our Chief Financial Schrimsher, and our Executive Officer; speakers Neil Chief today Dave Wells, Officer. include Applied's and

over I'll that turn it to Neil. With

Neil Schrimsher

joining morning, some industry I'll Thanks, thoughts. including conditions good current detail outlook Dave Ryan, expectations perspective today and results, guidance. performance with XXXX will then us. start I'll our and quarter's more our going and everyone. our quarter on specific with with some fiscal forward forward. appreciate on fourth follow close We the you final

acknowledging I'd year. for by first, in So like Applied record to and pivotal and team delivering our thanking start their a hard work

industry leading engineered from best exemplify expanding to expertise execution and customers commitment technical continue with serving core We to consistently legacy to our solutions. our operations our

to quarter and flow EPS when continues nicely considering exceeding cash execution fiscal as finish Applied evolution is evident the growing our apparent are unfold. Our and strong fourth and to expectations. sales, with XXXX operational customer focus EBITDA, at the This

against growth. top that so sales during X% and core is tier fiscal driving achieved This end on solid markets. on on sales XX% XXXX performance market is EBITDA really XX% our last the year of year top quarter, growth normalizing growth demand to XX% significant grew full within EBITDA growth,

both growth record headwinds. gross in continuing XXXX this with fiscal reaching new to EBITDA margins LIFO achieving expand highs meaningful We're while margin and despite

inclusive Another fourth quarter, year nearly our working progress cash level Very million. and enhanced and over cash indication various This a the flow the point in as free as to fiscal to cash approximately investment generation drive of as of full record power we prior two-fold a margins Applied is is strong highlight the $XXX of the capital optimize bringing higher increase and encouraging CapEx. XXXX internal of scale operations initiatives. and year and well our strong

from headwinds a to meaningful for and supply demand driving this suppliers macro and thanks our entire position competitive for constraints again our the Furthermore, backdrop, capital mixed been never in year our highest improvement in and which our on in are throughout evident to ongoing faced that persistent we and performance. operational rigor exceeded years. and the significant created stronger. value inflation stakeholders. year, a the return chain had team Once over XX all Applied the is This Overall, by customers, metrics commitments

So highlight more key several detail. points in to

mining strength stack saw verticals on demand, quarter. prior of lumber beverage, compares strongest industry normal sales daily relative line basis we the was favorably account base. trends and increased in pulp in including organic and terms strong and across X% our during during energy, our to largely wood, We and saw Growth particular in across which quarters. XX% paper, and two-year underlying food firm larger national top a utilities, respectively, a verticals XX%, June. many and trends, and solid First, at the of with finish Average through was growth while sequentially, quarter generally seasonal three-year

segment solutions engineered Ongoing our backlog conversion across further provided support.

opportunities growth our incremental as In from initiatives. addition, as cross-selling position momentum we're and industry our well from capabilities, service believe building capturing we

continue Of growth growth accelerating related XXXX fiscal compared during at sales contribution a prior with actions to to build from the cross-selling year. note, notable level

we with effectiveness the gaining from business base. While cross-selling solid early and see center our sales forward alignment going innings, unit potential traction service legacy still in customer across

consumable From great sustained a and when considering momentum driving new entering across their growth customers power our automation expertise business to solutions normalize and macro process strong is as It's proposition to the advanced operations, within fluid we broader systems areas market our opportunities business, fiscal that application provides value the our of compelling funnel solutions particularly expected. continued to breadth of XXXX. see of a activity, indirect coverage support, and all

Of saw percent. well as up end early base. chemical of across softening spending quarter, markets XXXX, during our metals, within incremental as the single-digit organic some customer note, Into were pockets we low technology by capital fiscal certain sales a delayed and

some mindful end in remain we and While more our trends the macro that normalization backdrop. early a and difficult gauge close, market the given always of production in year-end quarter summer to typical near-term easing modest headwinds customer following seasonality presenting activity are is ongoing

have to a date any material feedback customer said, to broad see we and slowing remains generally That yet meaningful of optimistic. signs

layers we're current is these investments customer contraction Additionally, modest close and that Engineered eye and environment to US more directly considerations incremental a both reshoring rather emerging the market core will All suggest for indirectly. us and we and industrial but cooling our technical infrastructure believe adjust markets, retrenchment on our in in are Solutions activity in activity demand than a keeping required. reflective of a creating end if or easing MRO

see each Digging early growth Center fourth organically fiscal levels the segment in our quarter a fourth In last remained Center national trends across this Service we over prior year our on during US Service outgrowth sales. and is year. growth demand of with fluid seeing during encouraging of core sales top up network XXXX, Into within which Applied. our power remains as growth more X% over relatively encouraging solid accounts sales Center quarter XX% area the for segments. Sales network we're into little larger general of firm across the Service ongoing and an aftermarket well as particular sign

digital channels including also fiscal during with our XX% growing sales nicely are XXXX. over up through EDI applied.com and Transactions related

digital recent channels helping from years which benefiting Our process growth. investments and tool new are are in customer drive systems

initiatives legacy emerging In coverage. new to service addition, geographic we end see prescriptive greater force our sales capabilities, with as deploy robust to utilize more penetration we ongoing markets. gains, we and are product wallet effectiveness and growth both across local drive share continue and analytics opportunities talent capturing and Combined benchmarking,

system year. offerings, flow over albeit slightly build prior assembly percent from of moderate the our up Engineered hurdles quarters. underlying business within and remain automation and bottlenecks high control a segment supply this growth focused prior single-digit at our lesser degree area Component compared Those Solutions we quarters. Within delays saw fluid which includes were to prior still sales power, a and by

strong technology-related our demand Fluid grow we orders mobile end in core softer conversion, offset Power, sales markets. were where the see quarter industrial across the off-highway Within the continue low as solid and saw This helped up to we to growth continued quarter. teens and verticals, backlog during within progressed and year-over-year

well underpinning orders this the still channel Our above out Fluid in fiscal vertical and position. across XXXX technology-related fiscal expect a growth market our backlog as exited plays given reacceleration and normalized tailwinds Power we XXXX levels structural

and demand engineering customers COX navigate in design integrate our addition, power consumption on focus more as a labor coding reducing emissions, software expertise their market greater autonomous features are tight into and and In equipment.

process positive our flow and Demand control higher-margin also solutions. products for remains

beverage, on process spending capital and and activity such MRO energy, utilities, markets paper. end core infrastructure food quarter, and the chemicals, During solid pulp in and remains as

process As as efforts other energy end our flow meaningful to markets requirements. momentum noted building infrastructure into in investments includes We systems. further we assembly, testing see technical solutions and for quarters, in are XXXX tied the increasingly transition around prior execute applications customer our This required providing control configuration, as fiscal opportunity. decarbonization support on and this used new of

automation backdrop. to quarter and verticals. to we it growth the slightly X% next-generation vision ongoing digital on organic positive longer machine sales improved across platform robotics As constraints expanding our and against cycles chain certain to in Year-over-year demand sales solutions, focused supply continue see relates

by consumer offset semiconductor data Demand and markets. life across remains and partially centers, electronic sciences, strong across biotech, trends slower packaging,

remain interest sales our customer and record at in highs. activity business engineering elevated with presales funnel Importantly, new opportunities

cross-selling We heading opportunity also have which is projects and joint meaningfully tied efforts, up contribution more represents from prior year than XXXX. our to XXX sales open notable into a fiscal

macro So, and growth momentum continue navigate as overall uncertain environment. resilient an we underlying to promising remains

growth sheet with then leverage net organic hand one $XXX in we two including XXXX greater in XXXX and sheet investment our capital a over times $XXX $X.X billion deployed initiatives, reduction, supporting million CapEx cash fiscal actions capacity. million fiscal level over on over ongoing and dividend. ended in We a healthy And lastly, on automation below balance growth of acquisitions, debt allocation balance

favorable sustain accelerate we as following expect M&A. Looking cash organic to moderate as significant working capital drive investment heavy potentially in well firepower provides years. recent ahead to This investment requirements as generation ongoing our

fluid our On remain and top -- focused top markets. flow M&A priorities power automation on control

CapEx tailwinds requirements. reshoring, market evaluate center and develop as We continue optimizing significant business. our potential capture investments, and opportunities coverage, to to in also we technical tied to chain select and capabilities service service service talent, core the includes look supply network, leverage M&A fully growth center aimed at This our to customer our continuing across

company. In flexible buybacks return earnings if we approach given to remain including long-term our intrinsic the a active to across value necessary the we addition, more share and avenues other potentially through capital see potential

additional At this for financial time, detail results I'll to our turn outlook. over Dave on call the and

Dave Wells

Neil. Thanks

as before supplemental our recap for have to additional quarter reminder site posted we reference. Another prior I a in deck investor begin quarters,

consolidated of basis over days offset headwind Acquisitions the The year-over-year. financial translation. quarter consistent selling basis by performance which a contributed number was of X.X% sales point XX from year quarter. growth, foreign the to XX in Turning in of currency details points now quarter, increased the was prior our partially

sequentially Netting these line X.X% prior over basis. were and daily seasonal factors the in Average sales increased rates largely an X% versus normal patterns. quarter increased organic sales with on

we growth of quarters. relates in was year-over-year as the the moderating the mid-single contribution in prior digits sales estimate quarter it As product on expected low pricing in to single-digits pricing, from

by now segment. to sales performance Turning

impact As when foreign sales and presentation, our of the the of year-over-year organic currency. highlighted X.X% an on increased basis excluding Center slide eight segment seven in on Service

Service focused up vending strongest partially was across Maintenance Supplies and Center on MSS our solutions. & as indirect consumables or vendor-managed as well Solutions, network offset US was our within Growth inventory This a business more by across in operations. increased year points. margin full segment fiscal basis, our income of basis XX% segment was XX.X% operating solid XXXX, operating while international XX growth modest a On

increased continues X.X% acquisitions over Solutions X.X% prior of basis, quarter, Within year points into Growth and increased organic the off-highway sales this as flow and year-over-year. to be sales to performance growth. basis customer segment, conversion by industrial CapEx our backlog tied well an Engineered strong process power infrastructure. XXX as spending solutions, with our in segment supported fluid On segment contributing MRO and mobile sustained

the This was Organic X%. technology sales ongoing also was average partially growth fluid and timing activity offset within some automation over delays, within verticals the ahead segment power our impacting shipments. inbound operations slower at component of of system by

basis, the over levels. full On points well prior operating XXX year income XX.X% fiscal as from was from operating Solutions margin segment a while XX% a fiscal basis increased as up Engineered XXXX in strong approximately points of year, XXXX, XXX segment basis

basis margin to performance of Moving gross prior gross as deck, consolidated compared of points, nine on to XX.X%. level of XX margin our now XX.X% the increased page year the

on recognized During in basis during compared years, and quarter the tailwind normalizes the is margins million broader balanced was a the gross LIFO easing LIFO our we a the million inventory LIFO as point net lower favorable expense of This had to prior XX expense $XX.X expectation where we in quarter. with impact $X.X first quarter. This near year is in two more take LIFO year-over-year which year-over-year, approach expense to term, line of directionally growth. inflation quarter,

execution margin our and to potential. strong gross underlying expansion performance showcase margin Our continues

XX an we During points expanded of higher XX.X% basis fiscal from margins XX point to LIFO headwind basis expense. XXXX, gross inclusive

than over points two basis In expense. margins more excluding when up past addition, years, XX LIFO were gross the

initiatives, including Our continues margin to of gross application manage inflationary team dynamics recovery enhanced analytics, delivering freight broader well, channel the execution. and on our

the expense distribution X.X% from SG&A expenses sales during operating As quarter. to to during Prior year the from prior self-insurance favorability, cost, compared benefited our SG&A administrative of quarter, levels. well selling, slight and relates prior as increased was deferred as expense. year XX.X% down tied lower our to XX.X% compensation performance, it year

the over year year prior SG&A prior approximately up favorable was When these excluding expense items, period. X%

We shared continue excellence to deployment of and investments, leverage from initiatives. labor as costs as services well, and talent operational systems well a reflection benefits

sales representing realized SG&A in XXX-basis-point a of full fiscal the the expense improvement our a team's These and fiscal enhancements. over XXX-basis-point and was of ongoing as of percent are a improvement evidence year For operational have levels. recent year rigor results XXXX, we from structural years business and our evolution prior XX.X%, improvements XXXX

Our combined per a levels. while drive impact over margin LIFO to in $X.XX relative Including rate solid year share share up to prior XX% levels. higher a increase tax expense. year earnings expense reported and the EBITDA reduced to sales of levels points was year-over-year to gross year prior and lower XX-basis-point a EBITDA cost per margin favorable due XX over basis earnings year increased compared levels, from includes This interest quarter, XX.X% slightly prior growth, of leverage, management during XX.X% prior

flow operating fourth representing at activities totaled was flow while strong to quarter generated the conversion net Cash during now of $XXX.X Moving free from $XXX.X our income. million, cash cash XXX% performance. million,

a For high, we the past over full investment despite up year. capital generated greater free year the and and million, record the which of XX% CapEx was $XXX cash from prior working year,

We net prior the with X.X hand approximately ended EBITDA. cash level and below year times million $XXX of of which EBITDA, at times X.X June on is leverage

Our up the years. range leverage our X.X significant in have growth remains EBITDA we normalized experienced below times, to reflecting recent partially target

focused and valuations, our also our We priorities. on strategic disciplined and remain M&A requirements with return targets approach supporting

to detailed year-over-year outlook, of and full are XX.X%. including our guidance, EPS page fiscal establishing in our which $X.XX share, XX of of based on EBITDA the is on flat XXXX to of range margins up we per now presentation, Turning $X.XX year X% XX.X% to sales to

plays growth into price Our strategic trends August, consideration, investments, out. sales contribution economic early and as through easy uncertainty, outlook year takes ongoing the

through normalize are rate moderation levels interest market assuming near environment. and additional broader a to also production term as manage We in activity customers continue higher

on we trends midpoint growth outlook. year. have year seen the in any initial slowdown of approach to broad believe is to-date assumes year-over-year guidance the first partially comparisons meaningful company growth prudent not material take a specific our lower our relative The to constructive to second sales more the balanced remain While our of signs difficult prior reflecting of half, the the half in opportunities, we it and

through organic currently the sales at slightly addition, In partially based project fiscal albeit assume and a XXXX, fiscal by percent lower margin grow than ongoing we cost early we a on quarter offset expense trends in year-over-year. quarter-to-date August, pressures a prior to low-single-digit first perspective, level sales inflationary more over year LIFO by quarter. From modest

trajectory. near-term merit the and include operating pending annual usual, line supply relative on lingering XXXX Combined our to year will conditions pay broader top more As growth January fiscal and further guidance increase economic modest impact chain growth the of with our transparency assumes constraints, lower X. leverage

cash of process capital progress year the the free solid working investment perspective, benefit as into our some the a initiatives. we as from well of front performance, and flow given from cash capital generation on half easing working Lastly, of release another working year additional expect

range addition, for we well further In value to fiscal expenditures supply $XX capital in million growth supporting targeted organic $XX ongoing our strategy proposition with investment technology chain expect million investments in as and and XXXX. as

for final I'll the now that, some to turn call over back Neil With comments.

Neil Schrimsher

Thanks, Dave.

our Applied trends and to Applied result and So on is and improved industry for performance that have strategic XXXX operational growth stronger relative fiscal the partially strong our capital. team. position This the returns to evidence of initiatives our execution positioned legacy the up, potential investments wrap of provides in of favorable

results suppliers will driving value XXXX. core uncertainty how to receive a From the feedback fiscal fiscal our to we the our high financial when at from into and as resonating and other customers, stakeholders, our activity backdrop is is we marketplace. macro proposition year XXXX, ago a industrial evolution across began current track Similar level

remain with near significant which of ongoing the costs, in chain outlook growth the supply tighter current years environment. fiscal end and constraints, into the spending customer Combined conditions budgets term. incorporates initial in XXXX capital market sales credit moderating and we and the year, our recent drags will half following believe Higher comparisons is for labor difficult on growth in prudent first likely

near many That said position long-term. we sustain our both new growth remain catalyst industry constructive opportunities that above-market a continue funnel that and diverse performance can presents and self-help drive business robust and to and

In addition, trajectory next continuing cycle progress regardless the our we strategic as underlying of our strength operational enhance our dynamics, we towards to scaling on focused business in objectives. of are

alignment are secular advanced in building across embedded to centered effect our power at Engineered which as strategy and while team Center legacy automation, technologies. and the optimizing and speed Service around leveraging process operations Our expanding is flywheel Solutions gain underlying momentum, tailwinds core as our strong is industrial its higher-margin tied

Our of Service vertical within We're systems. into logistics vehicle semiconductors, new engaging wastewater. IoT supplier science, are Center tied and network, solutions growth life expanding production, and multifaceted to of for adoption our new the markets also energy, presenting we partners strategy many catalysts smart and electric developing renewable

in sales the Our emerging expertise invaluable opportunities and accelerate. technical channel as are domain knowledge business assets these

well supporting way of we're leading and developing operations, as equipment. digital solutions autonomous integrating the in and power technologies the fluid In electrified acceleration as control

fluid supporting further power engineering tailwind. position the growth Our competitive for to also come. sector regions fluid our us to end years capacity technology potential strengthening power semiconductor We're market, set adding strong including across the secure capabilities growth in this in a systems

transition. see initiatives We the expanding tied our in notable growth solutions potential energy also in sustainable to

biogas strategic production. lithium as engaging is well capture as suppliers, and and business Control opportunities Flow and carbon our around note, hydrogen Of identifying

integral and flow systems ongoing flow market emerging capabilities, combined the build-out control opportunities. with these of our are green processes product portfolio broad various utilized engineering in to Our

And next-generation excited of ongoing platform. lastly, we remain expansion automation about our the

Engineered sales, contribution greater Now our as business organic our from growth Solutions representing close expect this we cross-selling efforts. our in to XX% of area we fiscal XXXX, of accelerate segment advanced particularly

our traction greenfield including leading develop solutions and embedded making approaches We're to position, and base initiatives new enhance proprietary to expertise. turnkey through market further with serve continue and our our application best expansion customer

XXXX this see M&A significant organic to fiscal beyond initiatives. scale potential both, and into platform with We further and

objective XX%. targets financial our Given XXXX, these strong and performance EBITDA we're the over billion dynamics sales fiscal margins in and over intermediate our with $X.X increasing now

the capability significant next to can or within and is execute the objectives years believe achieved believe milestones all of are within on engaged stakeholders. framework, we next ready value these on other well and depending company's for We the macro and be for sooner cadence our creation these M&A team factors. Overall, the five provide condition, which broader

Once for And support. continued that, open we'll lines thank the again, questions. for you we with your your up

Operator

you. Thank

Our will first with David the We question-and-answer from Please comes now question Instructions] proceed. [Operator begin Manthey session. Baird.

David Manthey

guys. Good you. Thank morning,

Neil Schrimsher

Good morning.

David Manthey

to is First question related allocation. capital

you I philosophically more of leverage ratios could shares of So the believe, and broadly, state And under million your the talk repurchase pipeline? still you about economy, your acquisition maybe current the given just available have share X.X authorization. the state

Dave Wells

Sure.

In terms we've organic our Certainly going to before. it about of talked rank priority be is order, investment. first

to bolt-on the pipeline still significant active still you us in more past in fiscal Solutions business would for saw see to as organic capabilities really acquisitions in of M&A the on with much sight investment side the to Engineered continue the anticipating significant in out XXXX, build XXXX. year very well, line continuing fiscal XXXX shareholder value that around Certainly, like You business. of drive focused in the

track given to position of bit years we in I reference the just and to low that could in with be generation cash release As record characteristics expect of of script, XX active on would share a be kind more terms leverage it increases the the payer levels view cash business. kind the dividend of of a buyback, near-term and we made of in the earnings think, addition

to significant you the of the see inventory as and some leading We're improvement elevated the in continue business. flow, through to still moving off drive levels work continued cash slightly well of think in setup profitability these, XXXX, about process

expect as to there move active more So in be bit buyback, us of a share through XXXX. we terms

David Manthey

like a seems It Yeah. big opportunity.

debt two you're repurchase X.X turns to what Your a with billion $X.X hundred it the past million everything It constrained to and of hasn't well like you levels couple years, addition are really of acquisitions. availability as shuffle towards may doing. relates else over seems in it almost as down

said But capital guidance is investments of right redeployment also any it it -- CapEx. you other outside currently, are include in I we but it right just in assuming include not assume any that of to am doesn't acquisitions, form unannounced your I does operations and think

Dave Wells

the a That's course correct. existing of business The normal for operations. guidance would be

would So in exclude terms M&A incremental the anything capital opportunity I that would be allocation. or upside of unusual

David Manthey

Yes.

examples you second, then customer discrete of that success seeing your you could with And of more receptivity give maybe us sort the today? us And some specifically, replicable automation an applications. give solutions on Okay. of you're could towards update some maybe top

Neil Schrimsher

Yes.

So Dave, I can start.

machine active, manual and interest both with would I of vision real replicated some from those teams inspection their labor. pleased. in see can and would previously think their challenges engaging control. and be which would We systems, how are see is and labor with think tending were solve a them that for The in apply collaborative we robots the versus and application, engineers specialists quality help we perhaps address where also around or And about understanding constraints quarter help sales we problems. perhaps customers using numbers can customers and applications our projects when technology. Enhancements use operations customers were focus the conversion applications or

of barcoding those and through standards packaging can accuracy environments. see go more and There's course, as retail packaging, in consumer We trends consumer right? high on on labeling

that. a requirement we vision there, applied there's systems into and get can so see so high And that

identify in application to also projects they targeted the conversion reference increase those to encouraged and as some connect we these and more that pipeline they up which prospects we as at our productized I'm continuing Center teams can well We customers grow. segments solutions, We with their how but set there, resources continue opportunities So look in grow think our then automation vertical helps made to of with Service by have. rate. and there's team current to our targets

David Manthey

Neil. All sounds Thanks, really good.

Neil Schrimsher

Thank you.

Operator

comes with KeyBanc Please Ken question next Markets. from Newman Our proceed. Capital

Ken Newman

Hey, guys. good morning,

Neil Schrimsher

Good morning.

Ken Newman

Curious a organic guide, just more the as of you confidence normalize. break/fix how your into the particularly about sales back peers. half quarter back a what the in plays distributors seen about But we've obviously, the way can a you're you for bit half. XXXX? of this I bit relative you've more talk that lot quarter more little chains know to a supply Neil, Any of a destocking expect lot perspective obviously, bit do kind from quantify customers destock across out and the industrial of this can you a heard

Neil Schrimsher

Yes.

So again, it. we've about talked

we get stocking. the at a break/fix think lift do technical – more solutions, favorable I natural not then the a some resistance customized of we nature from think I trends. times many little destocking our given of I think And random products, get demand. Oftentimes, to those therefore,

customers really on products us, requirements break/fix those and those around counting solutions. given Our are

So it's consumables in as say of other products lower won't front. goes, zero, that it's I but and much forms it than

opportunities environment. and any our in trends think currents to continue that the is environment we to our will the can guide sales cross to and also effectiveness operate those of focus publications our and perform customers the right or a strong pay we we So but be have the about as prudent focus or on some

Ken Newman

year talked sense. assumptions what midpoint the capacity you're this share utilization macro a bit production more And in then curious, industrial And your can full assuming past, for Make think Right. the the I year? outlook. the you've guide that just for underlie or of you at about little I'm

Neil Schrimsher

Yes.

and I'd better we than So like I question would say in to in midpoint, as second think to half half the half. single-digit to not more But or a muted if perfect we'd hope or say slight economist focused I economists. contraction kind declines say the the a operators on start assume about then guidance, your market first around right the more we're low perhaps be we're just and year-over-year to of in then the think, we'd second

Ken Newman

more is flat a just in. please and to about one wanted Understood. Maybe margin of sales. I higher the little it shift the would assumes about bit various Obviously, expansion bucketing low end mix Maybe more scenario, to versus guide. EPS that be of just that talk much in Any that going be talk margin cost-out there initiatives? a the of appreciated. from how help drivers of

Neil Schrimsher

Sure.

have as and So it area about margin believe have continue that or we initiatives we think we multiple focused the opportunities to touched on, gross and we've we there.

-- continue an in we'll so And are appropriate of sale. actions focus around, execution point

As impact little or more feel more we to than environment slowing national in could continue a that large of about bit ones little softness serve the a a accounts. mix -- We'll think that bit work local that customer they and headwind. perhaps be accounts, but the may be

sell margins. positive we will the gross side on the help will We work levers other solutions, mix well on as technical which then the to continue and

in think those go that go is benefit. the I business. play, we've would that would into absorbers if softness demonstrated so and natural accountability shock or cost There's in help there ongoing some

first we I as at/or below million then first half to quarter overall think And the as at in think half. slightly and perhaps for business about that about the LIFO but least $X could the a LIFO potentially get

to For that the slight half, contributor be could a we'll be second see as well. but determined

Ken Newman

guys. Very helpful. Thanks

Operator

proceed. [Operator comes Instructions] with Loop next Dankert Chris Please Capital. from Our question

Chris Dankert

it modest ballpark? thinking where I taking it's about is pricing maybe something a guide guys. a fiscal for Thanks XXXX, guess, typical the assuming more or kind to morning, the Hey question. good like are contributor, return X% of we for dynamic to in much that a

Dave Wells

Yeah. double that the mid-single-digit that subside -- to mean, of most quarter. digits certainly recent some low I single we here in go saw low

we through other I'd comps of that to the expect inflationary as well So, form digit. that year initiatives. we'd single be to I price the work across react the low the of some as margin in mean modest yeah, especially as continuing again expansion year Very assumptions

on as least a year-over-year at in what compared saw XXXX. contributor we big to a not So basis

Chris Dankert

Got it. we're backlog more we maybe the something center then backlog impact outgrows the from in in Yeah. benefits to business things, return side service growth we the And thinking guess. that about overall? at the looking it's on be of guide engineered I just solutions normal good how XXXX should the to No near-term? Are assuming of

Neil Schrimsher

think say the to Yeah, the business that I start, well. about that at center will the we service do half would would first continue in

right US performance Our having service strong now. business center

Canada in a Mexico -- I little think overall little number the overall of some that in the of that start down could and bit perhaps a blend a bit. slower

say the two, and I stronger. that could we'll have performance But service expectations for centers a little be would in

operating As about predominantly flow the fluid in the around normalized backlog, the a quarter, we nice conversion and automation biggest that and power, level. did and levels Xx backlog is area backlog in in engineered at solutions think we segment really good still while within at a little control the that we're our bit see have in care and growth quarter would on say I of power I that's that fluid

first we underlying So that can go and positive as strength the we fiscal view really provide forward this of some year. half as in us

Chris Dankert

luck for of best in year much Got color, it. new so Thanks guys. the the and

Neil Schrimsher

Thanks Chris.

Operator

questions. this Mr. I to time, closing no the back for turn further showing remarks. I'm we now have At will any call Schrimsher

Neil Schrimsher

the today of quarter. talking with look want Thanks. just we to throughout to and you joining for thank forward everyone us many I

Operator

and gentlemen, conference. does this today's Ladies conclude

disconnect You everyone. day, great may lines. a now Have your

Applied Industrial (AIT) 10 Aug 232023 Q4 Earnings call transcript