AIT - Earnings call 1 2024 | Applied Industrial Technologies, Inc.

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Operator

Greetings, and welcome to the Fiscal 2024 First Quarter Earnings Call for Applied Industrial Technologies. [Operator Instructions] As a reminder, this conference is being recorded Thursday, October 26, 2023. I would now like to turn the call over to Ryan Cieslak, Director of Investor Relations and Treasury. Please go ahead.

Ryan Cieslak

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

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

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

that, President speakers Chief our and Executive I'll include over Officer; Officer. With Wells, turn Neil. to Schrimsher, Our it today Applied's and Dave Financial Neil Chief

Neil Schrimsher

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

respective with overall, stabilize. did driving expense XXXX. also We starts an largely management. We're performance execution growth that levels. in margin as quarter job see to freight channel team internal a during our we modest start EPS inventory moderate to and LIFO against outstanding the more EBITDA reflecting and Applied with beginning year, XX% and ongoing was the fiscal strong sales and levels to inflation initiatives, line backdrop The new had expectations. growing earnings strong expansion So gross record normalize first quarter, over cost delivered a at prior XX% hitting nice and This was

a to years. As notable past and over the was several expense highlighted margins past earnings headwind calls, LIFO in

more going LIFO forward, levels the of as normalized as a moving to forward, to inflation degree view a initiatives, expect our make of along clearer the cadence and continue we expense industry mix uncertainty position. our to of on provide we evolution business While the we and there's LIFO ongoing anticipate persist progress of well expense

also of We control. quarter solid demonstrating cost had another

growth lower greater benefit to variable efficiencies following expenses shared and leverage addition continue as an across as talent investments and sales services to ongoing normalizes, our cost we In model. from well as focus technology, in

and for our and Our commitment environment across remain as guiding navigate invest continue operational execution key future posts business we an evolving to growth. discipline demand

it expectations largely As backdrop, during our broader quarter. relates in were to the line trends the with demand

consistent our highlighted normalization we with production in we years. in cadence recent following across As quarters and macro business. Customer areas activity see customer utilization into settled of a recent steady have indicators, continue a heavy facilities industrial ramp in to

technology headwind year face impacted which over basis negatively from we the at a we continue has In year-over-year activity vertical points across growth for to by our growth impacted estimate point. addition, quarter. sector, XXX the slower sales slower technology A year-over-year almost this our a in organic

across with strong as both these, in growth the considering and note, year-over-year, end our quarter. relatively and electronics includes data were Growth growth sales this semiconductor favorable national to exposure refining manufacturing, markets the vertical, we year-over-year within larger top to held last solutions quarter. will coming many utilities pulp well Our this of essential were the in positive lumber during organic energy, and and food verticals wood, structural and and and integral across well industry which against account and beverage, operations. On verticals during and improve our secular a in chains has starts vertical. Outside years, vertical center of strongest top comparisons. orders across increased supply base. many side the technology trends as our rebound and begin demand quarters difficult stabilized, in tailwinds growth within to quarter, stable acquisition. most has was sales believe mining, to of technology first and vertical infrastructure is recent as to This production underlying Trends the comparison XX with XX paper,

our over percent current in the across year during which of in prior customer activity industrial increased we from addition, more ongoing nearly These trends cross-selling energy with activity on and local over a projects industry growth areas during transition. market well and tied reshoring industrial continue In also in the of the secular capabilities Service of to months. basis and production organically from at our supports fluid Center our infrastructure, these includes aligns industrial prior directly activity U.S., business. up capture incremental seeing quarter on our these that to recent generally opportunities top a This as been the industrial in indirectly both and a core U.S. first broader capacity cooling mobile We're as Related these economy investments were service utilization rather growing suggest and products as for benefits position, from the on last while across well reflective flow highs levels quarter. than backdrop growth cycle U.S. seeing providing service have This high readings operations, spending XX% firm as prior easing including single-digit control or is contraction, and demand more the investments. We're X% year. incremental relatively as sales segment, of initiatives. benefits many combined the incremental our a is retrenchment technical solutions businesses power our year center support. Within sales

Service relatively with core activity. firm sales U.S. an the and our U.S. is related of network trends Service the with sign nature underlying Center correlation way the which cycle shorter led quarter, through industrial Our the considering encouraging Center production

as aftermarket see well to as power benefits larger continue across effectiveness national force sales. sales fluid We from accounts strong our initiatives. growth and

of include prescriptive As ongoing talent a reminder, investments and initiatives. system use analytics, these greater

solutions providing our strategic will reach power, benefit in Service We the our Center potential direct acquisitions progress and local them strategy bolt-on and to critical is growth to serve continuing infrastructure. We're within a identify are increasingly further fix forward. provider flow This has X to reflected viewed as market network. our a continue our level, advanced deepened and Service service accelerate customer industrial the solutions control, but greater for enhance bearing we enriched also scope customers' to customer access break early opportunities points our consistently is technical business and automation consumables Center position their strategic moving on grow from fluid for relationships we while and September, can relationships, a as technical business presenting company at This across announced as we've localized needs. The Each needs in and our to potential of at growth industries. the talent cycle, and our distributors our that brings scaled strong as supplier all ability U.S. made of footprint strengthen deep well opportunities

bolster an fluid upper and solutions. year-over-year Northeast. and reflecting We slightly quarter, welcome primarily growth Segment engineered as up proposition growth products and activity were more as and industrial though both comparisons distributors prior our positive as highlighted the expected, look and delays the supply reflecting organic ongoing capabilities by reduced component our of well during power and verticals, higher-margin moving on chain basis technology our solutions close Applied earlier. Automation X% timing were moderated control more as to year. to forward. Within sales sales sales segment, complex also constraints. seeing shipments, the prior across from lower as market, This difficult has off-highway the Southeast over across organically process was quarters bearing more end their Engineered Solutions mobile than as team to grow well value offset flow and partially forward our can the

are leverage Our Engineered OEM mobile expanded from healthy the software fluid hydraulic the of as these systems. includes electrification to into growth years. that advanced integration in penetration pneumatic backlog of backlog sales reflects capabilities couple and and Part engineering power the market of our over IoT, controls, leading and and continue and past a features benefiting coding, and electronic autonomous systems. industrial the Solutions This design, we

strengthening infrastructure our and next-generation of long-term capital process in is spending core these in end markets also on opportunities efforts. positive business a backlog pipeline as remains fluid control power tied these activity our support incremental conversion and is from evolves, the platforms. MRO lead robust proposition growth customers' as decarbonization Our flow providing power our fluid the and with we new to distribution value towards space areas expertise space

scale the engineering potential we remain In our activity excited customer strategic and forward. standpoint, an new record expect our well automation including opportunities position that as quarter, elevated sales of the automation as funnel allocation going very about accelerate highs. We're in more remaining we opportunities and with our further operations optimize addition, platform, at muted industry growth interest our forward. From well presales across remain going M&A ongoing and active pipeline drive despite business M&A sales a to to organic of capital overall investment, positioned very

to our progress the our avenues if outlook toward our capital more return objectives. This flexibility we and positive necessary. our active have We through long-term across buybacks includes financial other company underlying share see value in we considering intrinsic to strategy approach along a potentially as

to into important organization time our learning moving on over you fostering report, future. expanded Lastly, this recent reviewing. I'll the by responsible supporting on published our I implementing practices being report time, which ESG area, the in year additional citizen more Dave our across outlook. detail, sustainability into the to want stakeholder ESG continuous opportunity and results legacy operations, This building and and diversity, a commitment focused include turn energy and call insight initiatives advancing this promoting forward. We consumption around our communities. At remain now corporate spend on on to to solutions highlight our detail our information financial of broader our both our greener and for encourage this We've and I includes our actions

David Wells

Thanks, Neil.

begin. I before reminder another Just

reference have to quarterly your supplemental investor As in Investor quarters, the prior posted call. a our for site presentation we additional during

Consolidated an details Acquisitions performance year positive Netting by of headwind XXX selling had sales in the daily contributed point increased and X.X% This quarter. to X percentage currency foreign a day X.X the increased XX impact. sales on X.X% partially was point offset now a organic basis quarter. factors, quarter. from basis prior in basis. our Turning over financial the points these less

to sales the levels. quarter growth low was the product year-over-year of As quarter pricing fiscal contribution pricing, the slightly fourth for in below single digits it XXXX on estimate relates we and

sales Moving segment. by now performance to

increased negative segment, Segment of XX income XX% of prior X% of up impact the an operating our foreign on As the highlighted Solutions segment X.X% contributing increased on impact. Slide the day X our the XXX in when to selling organic currency, and the partially presentation, basis Service quarter, excluding basis, sales was while year-over-year X.X% X On Center acquisitions daily year-over-year. initial increased basis our sales across basis, partially contribution from over acquisitions points. Within sales prior an over with Service year, the X less Engineered more September the Center of our offset operations. by XXX-point sales and day strongest network year X.X% segment in early operating across headwind modest increased from segment growth, margin the daily points trends which international was U.S. selling by organic our was quarter. Growth offset

operations shipment flow impact within declined and chain see process well delayed basis constraints. well infrastructure. partially install sustained as our fluid Solutions, solutions, automation sales organic customer however, the reflecting X% growth our MRO over within as We as off-highway continue power solid ongoing industrial Sales, of year, customer and as adverse Engineered activity spending of supply CapEx on prior and mobile into an the to daily

basis Page points trends gross in was gross performance, In up XX.X%. XX.X% points the margin segment mentioned XXX income segment the prior X impacted of year activity the Segment points over approximately as impacted continue earlier, deck, slower which addition, negatively end detailed basis operating year, compared XXX growth technology on level segment operating of quarter. increased market while be to levels. Highlighting by increased of as X% by sales year within to prior the margin the our margin of XX.X% from XX now prior basis

of $X.X prior During $X.X the basis tailwind a margins in favorable year-over-year million LIFO quarter. had XX during net This the point impact recognized LIFO expense to on gross quarter, quarter. compared million the year we

the magnitude normalization margin of in directionally LIFO business. That and across underlying as transparent XX our expense, over ongoing our greater basis line with nearly expense of than XX anticipated, When points overall gross near continues of LIFO stable expansion year easing sequentially. and becoming excluding expectation and expense is gross execution more inflation was basis inventory While This were the solid reflect trends points to potential. margin term, begins more performance said, margins reflecting decline our prior to LIFO up moderate. our

manage We and inflationary focus expense gross and management through initiatives. our broader enhanced execution. includes continue on This well ongoing channel various margin to credit dynamics analytics, countermeasures

margin during We segment also within the gross quarter, Engineered dynamics performance helping saw during a segment Solutions solid both mix profitability and the quarter. our

costs, expenses from prior As expense was X.X% it and quarter, over operating SG&A year relatively an currency administrative organic to expense the our sales during XX.X% prior distribution On Selling, unchanged was quarter. the of year basis, XX.X% the to relates constant compared during year period. SG&A increased down prior levels.

reflect services also reflecting deployment the inherent as operational adjustments normalizes, focus. and of labor ongoing operational leverage as costs, as our our including from initiatives. model, as sales well to operating talent flexibility excellence as systems investments Results continue and shared well We growth benefits

ability to potential. Overall, LIFO light basis cost over expense relatively hold lower XX of investments another sales quarter, the ongoing costs in management, growth, in expense. XXX point increase our due during sustained margin performance inflationary leverage prior levels to and operating of and points impact LIFO gross nice Our in while and of growth year-over-year XX.X% execution EBITDA quarter highlight flat a the year a lower variability includes XX.X% is solid margin basis year-over-year. EBITDA This drove increased headwinds

and from Combined primarily We a share levels. investment levels, XX% with of cash year during rate relative also quarter lower income slightly from lower interest from tax yields. up reported expense greater balances net to prior higher was benefited earnings interest prior the per year reflecting over $X.XX

XXX%. the from cash performance. the while was was during cash to totaled our cash free to up free prior million. operating Compared $XX.X flow year, flow generated Moving over $XX.X quarter Cash activities first million

the lowest As is generation typically quarter first a quarter from our reminder, perspective. seasonal cash a

initiatives. From as easy continued year some work expect of we working segment, capital to the in Engineered as the well level hand working benefit of trends is sheet at as our ahead, X.Xx conversion which from September X.Xx. a Looking from the perspective, net process million $XXX tied with progresses, Solutions capital leverage including and year benefits we our cash approximately balance EBITDA of ended on below prior

forward stakeholders. support as as Our our capital balance initiatives sheet for position is enhanced strong deployment in returns to a well all moving

and disciplined remain and supporting with priorities deployment capital Our growth strategic priorities. approach, focused primary M&A our focus consistent on remain areas. with and We our organic acquisitions, targets valuations requirements our return

Turning now to our outlook.

as and in interest our detailed and in expense first earnings net reflect well now service full indicated release, assumptions assumption, are modest sales sales and range of growth accretion guidance X%, to based per as X% early XX.X%. $X.XX to lower XXXX on our X% growth we to as share As to from growth well XX% quarter organic acquisitions, to LIFO press XX.X%. Previously, our $X.XX of per margins fiscal $X.XX on guidance project $X.XX of and Page presentation, EPS X% September margins a today's center XX.X% EBITDA share, assumed expense. of for X% to EBITDA raising including to We of XX EPS as performance of to X% of year the

contribution continues out. take plays sales economic to as uncertainty Our into and price easing the year outlook consideration

customers as continue to broader levels ongoing activity also near market in We assume production term. moderation normalize

basis. over in comparison sales October year quarter X-year prior second the fiscal XXXX, decline year difficult our our organic increasing on single-digit fiscal In and quarter. nearly Please percent a addition, XX% low and note, quarter a on second stacked XX% we for prior to month-to-date the represents organic currently based sales most trends quarter with sales second project by outlook, near-term over

in assuming more into months spending also network customers are winter year-end as subdued calendar slower persist the within an sales and activity year, We core late seasonally budget shipments Further, scheduled uncertain cadence potentially maintenance our the Service environment. in term, vertical this reflecting and Center fall our year-over-year manage technology to of headwind comparisons. partially operations difficult we're to remain and automation muted growth system macro assuming near the

sequentially gross quarter quarter. second expect saw to during margins first the we performance strong Lastly, the decline following we

as for mix tail the see expense encouraged While quarter flat perspective, we declines, we gross of guidance could potential and modest assume consumption pressures impact initiatives, nature balanced SKU reflecting second long organic performance, trajectory EBITDA our inflationary slightly well including expense our compared by that, back margin clarity prior mix. From first with comments. believe considering Neil price our year. With headwinds a an growth term well be year-over-year, turn call potential trends we up more our quarter internal modest as to lower considering ongoing on the expense margins given adjustments, margin LIFO of and the the assumes random to to it final remains headwinds. Further, are the traction offset greater to inflationary LIFO trajectory deleveraging to will uncertain, normalizing prudent EBITDA ongoing ongoing now LIFO sales I near the pending that on investments, remains some supplier as by over as for volume

Neil Schrimsher

Dave. Thanks,

So to sustained summarize, wrap encouraged the up fiscal into and XXXX. growth by early earnings are we

dynamics improvement take to approach realign a and activity remains customers our seasonal to to gradual mixed continues volumes patterns Combined systematic, rates outlook industrial more capital as manifest constructive of impact supply economic opportunities self-help the and term, many backdrop said, including globally, expect geopolitical near that as unrest. well remain cognizant quarters. That increased uncertain have We we on to in term spending. margin -- with in as we business of more industry-wide, production coming higher growth chain investment still near albeit assume typical interest the more

comprehensive including within American manufacturing activity, U.S. are and solutions, required Service our second service underpinned ongoing by to North is infrastructure growth end focus, Center market maintenance investments, system underlying customers. of demand. is IoT, feedback increasingly as and This part customers, we industry portfolio evident core This and up core network in and of our remains despite see the well and continues automation fundamental resilience greater the markets our activity spending our end to in from our quarter technical support industrial early local critical investments where holding into capacity positive positive. planned to the engineering activity talent expand. From modernization our booking equipment is backdrop Importantly, in normalizing

and activity across tools with We're workflows. funnel for the our to sales premier for cross-selling supplement and we organic addition, and solutions, engineering robots, as including we of with long value labor customers application our platform systems. team is to developing that production continue mobile our optimize we years pipeline, along growth addressable to to accretive automation expect technologies In fluid new shortages excited growth potential also automation by growth years capacity optimize to see to M&A structural and unlocking core in a modernizing profile industry-leading expect suppliers. and over evolution. be customers opportunities several significant proposition automation to expertise, investing our increasing growing adoption solutions active the we scale grow around scale significantly continues term. Combined our demand our next and address our power talent, and our our potential supplier We're company of business an the from and come. Further and development autonomous market highlight automation accelerated our feedback from collaborative and automation potential This growth

electronic and of critical systems around energy addressing and develop and electrification advanced is OEM providing new autonomous be to efficiency, customers' strategy integration equipment. needs and capabilities and strong our mobile solutions. This foundation hydraulic will industrial a control Our pneumatic and to

and centralized research position engineering industry U.S. across strong our development the a investments scale in area, have this broad and and given capabilities, in We advanced

energy see control reflecting favorable and rebound growing recent with business, as we and sector a hygienic process nature steady growth sales the of half growth the of second We technology see the growth flow transition tied across the the supporting to also portfolio XXXX, across area the data operations, quarters easing potential as industrial building longer expanding of cycle and points this our well business our of setup into broader XXXX. in coming a beginning stabilization space. Combined in in fiscal comparisons opportunities macro

mindful influence and while dynamics and tailwinds need of to our flexibility past, cash the operational we're these shown timing and impact economic be, term. Further, the can potentially business of easily near the generating we've flow. if that broader simultaneously in model adjust discipline as playbook significant However, various provides

M&A Our well ongoing environment up continued balance stakeholders thank strong for sheet and lines organic that, going current questions. you for all liquidity returns support. forward. Once your that could again, we open your a as support to opportunistically provide in for the capital strategic pursue deployment the and investment other augment And with we'll as

Operator

first Instructions] question And with Manthey our David [Operator comes from Baird.

David Manthey

for a Neil, outlook expect great look Thanks the here. as path the down we what much on was very should overview. we And that

I'll on more So refocus items. company-specific

right acquisition always the being a Neil, attractive you many so little automation the about an mentioned drive do a aggressive flow, stock you there invested you there shareholder There's talk there the cash anything with would share problematic. area. internally? that more organically? can now. that returns take that the on low some and Let's strategy will Is sheet can for Is you force that repurchase, somewhat leverage balance for trust of we course, maybe cash but outlets

Neil Schrimsher

Yes.

would actions. I we are steps Dave, So say and those taking

can that the our engineering focus along acquisitions geographies, talked we allow capital in that assemble area. we've in investments space going to area solutions -- on faster. And believe another's us We'll these as in investment to increase velocity of be that remains about and rest have and touched technology we some application velocity. engineering as -- can to project really those speed systems leverage we've we opened, engineering are doing greater things think have and augment the remarks, or to facility occur. And operations engineering I go teams to it engineered allow work groups with also for organically one standards and a and allow we throughput

to continued we're growth. capital profitable think opportunities into business we the to and going numerous So deploy have

David Manthey

greenfield I'd wondering, there. Yes. lines, But you opened those a these like couple rapidly as memory I looking that space seems where lean area. just update year? in serves, something realm? augment are very along It getting And themes into if you interested it know in a secular it? at the a of and really you've an is And be can locations. Neil, you're M&A I'm open -- to forth. could lining you these well. so growing that mean, I People on is XX interested up labor outside have

So any thoughts with there share that you can us?

Neil Schrimsher

I collaboration, I have the proven this would Obviously, at and Yes, there's We getting we're a that. results the we say with stage don't number feel we're know we in that specific forward that taking that like like we've can. teams the to. that solutions we the

looking what best points footprint into geographies, we've other especially they're for had and customer-driven, others success our served expanded, geographies. But today, And we're entry in evaluate they're continue is even with areas. with where solutions, so us which accounts, and those to to pulling our we'll growing strategic reach those with them able into into

And so success. we're having

XX% we perhaps will more on we We higher, we time, in that's of do. do getting $XX There's if our about we the becomes And think addressable touched billion arena. and can this So sales. this it. there's in growing market more think

David Wells

of full the CapEx organic aspect and of outlook the kind to on investment year in of some that terms of [indiscernible] read CapEx, the XX% seeing Dave, higher forward you're still figure through, spend. And XX%

you the about day, terribly service that. greenfielding as investment some the of too, leveraging in our end think these just footprint capital intensive, not center at behind So and goes the sites, that of

kind and as big that. committed So continue up the not investment. this to But fits of intensive, again, business capital so nature step to organic not the dollars of just once

Operator

question next Dankert Chris comes Our Loop Capital. from with

Christopher Dankert

I been what of mean, in execution beat for. Any gross quarter kind of here? was dig you of it quarter impressive kind the Is you've color parse maybe to in driving was mean, bit Was really margin mean, that? the what cost? really here. gross were really margin little we it in what price a internal guess, just us drove here. first going I apart hoping on can give freight? looking versus through the I more can you I it on other kind

David Wells

Yes.

Beyond from we points the XX basis point still broke that you're benefit LIFO out, basis XX up year-over-year. year-over-year

thinking So QX's quarter continued as focused our aspects, across the about some of initiatives recovery, levers around rebate on But programs, hitting some softest typically kind our seasonally margin solid et margin there. gross freight, enhancement really reset. operations really there, of execution all work freight all cetera, excellence

it, gross So being still Engineered nice work we that by standpoint the nicely. mix Solutions, team, up contribution modest, there the and talked from nice is and growth the more margin very despite about segment margins obviously, EBITDA

that contribution even volume, driving So lower on nice mix a there.

business. Engineered front. cylinders all team how still solid pricing basis that's that P&L that And on factor through side levers, the just through continued the said, thinking driving really the as think points value continuing are So by work and XX we no points on for basis cost to Solutions the improvement, operational on the really sticks and XX about sequentially, focus the really, year-over-year that reading price hitting there's the one on that all just I like we're out neutral, of of kind

Neil Schrimsher

I'd Chris, with in I'm Yes, performance say the execution pleased the it. and

I similar, didn't million line I in think. think to Dave do covered of things in from expect LIFO standpoint, million quarter. we $X.X perhaps a as the a -- next quarter would the the couple we $X

in perhaps that we'll at the be XX.X% that we operate So the quarter. sequentially think it quarter, in still area. I second or if second may But the side, performance perhaps think for about in down more as so I good, strong

Christopher Dankert

Center don't comments move in here, month, of really Service guide down to Center mean, the Again, just it. of nice with date execution maybe to the Service here overall low typically I but is Got I the October on kind know comment kind to pullback by XQ? guess on for team. there. you I line any in single-digit

Neil Schrimsher

about As well. performed segment Service the has think quarter the we think performance, in I it Center

-- have think would about We flattish Center's in to October, stage. this And -- got that a little Service so than better have we overall. probably being at we

Christopher Dankert

Got just be pretty And levels it. Solutions has seen backlog your I'm it. commentary cancellations? curious, you just Just been to any we more. any kind if of backlog great. indulge Is Engineered here? normal that elevated. back one on on Got would in Have

Neil Schrimsher

I'd we're We're think levels going a to Xx standpoint. plus we still about "historical be those we say, think prepandemic from a as as overall, backlog it, to operating backlog, at back norms". pleased, still

did solutions and of We teams in anytime as expect a think convert. working encouraged, how allows further And that So of little and a we that technology, new to engineer side. especially have solutions. for the doing industrial, would are backlog, quarter, forward. In on add -- if doing that's as that there's work job. mobile conversion in expected. But nice we're teams in we But that slowing off-highway us that we're encouraging the some it a to that to what or bit to level including we're of

So it level. a healthy still remains at good

Solutions to of Yes. cancellations And Engineered question. to business. of typically nature you in the business that the given that No, piece wouldn't see answer cancellation the

that trends. that by that Xx shipments but may ongoing kind those Really see demand, You getting and projects door. impacting we seeing that's on of to pretty the order backlog constraints And some are just of adversely continues based out strong still OEM supplier be driven rephasing timing modest. of some shipment are

the impact side that Solutions see business. Engineered to continuing the -- So of

lower the reading for that quarter. through growth to the of Some

Operator

KeyBanc from Markets. And Newman question Instructions] with comes Capital [Operator next our Ken

Kenneth Newman

about the the off that automation just just in back how Maybe of thinking can coming half. and cadence back the demand we start with you're

that is a complex of in just Neil, think those then talked specifically what orders? the bit? And some being into for and mean, on shipments pushed prepared touching you comments about maybe you the of those more the I is Just what shipments that bit. Can little tight a timing think just vertical on some second comment again, cadence remarks, expand I about out your last your you still half? of in do how

Neil Schrimsher

Yes.

it up So would PLCs that small about At what's first, as area things, kind cabling small can up, of -- I'll it or interface can things. be with it -- I create. that be holding connectors the kind or in components, holding of times, start X think

that part are larger projects these working is the sometimes of on. a customer then And project

managers timing. charts impacts that something that we're that on out, or to if not extended And Gantt So will project window extends managing those work else that their it project. related

so beyond And to on I them start the perhaps of some going calendar the of those those. think some move see year, we're projects, as in into our of

that growth that I sales be the as business think that we half, similar QX for So set or up it demand But would expect if it might at automation window, our in standpoint. a in look about I to a from in back side. resume could overall

Kenneth Newman

is Got it. is high Or timing? Is the there -- out evenly the a way to, these it kind split what project big is more from parse versus between impact level, other? larger one magnitude of a small a of components than

Neil Schrimsher

cover are it's parse it that, external to it projects reviews is in with in the contributing or in But or working the We Well, with inputs or it. hard out them that. teams side. operating to our suppliers components each factor

we building the So movement. work material what collaboration application problems touched sight. And needs amount encouraging, a around have the good sales labor and opportunities. I engineers good We funnel it's line we by of and setup think sales other on like conversion and the the to engineers, that's the advanced the of are of a address by and feel doing

could impact a operations that mobile, exist plus how from collaborative also robots seeing for we're some So in labor performance customer's of it and address standpoint. opportunities and quality that can challenges vision but positively

this So on especially 'XX, continued and But we to the forward We second of we're where in Can't half in the at. we're automation we hey, side. go look into going encouraged from release outsized know like into some as again, timing contributions expect control perfectly we that. project remain space. the the outgrowth

Kenneth Newman

Right. in the just Last quarter, sorry, and think if this, gave you think funnel sized -- us I you gave -- but missed I automation. I us you opportunity

that think quarter? Did funnel willing you I XXX Or are last there this update projects to quarter. were an you to? over open provide

Neil Schrimsher

No, as it's go -- that a it would along. in I -- I similar in didn't. higher say would around

that. in some are the that. those to of there's next areas in are to add consistency teams stage funnel, So plus many to the Obviously, of projects moving looking

to draw greater. quarter, last I would be it if the So comparison

Kenneth Newman

headwind, But could sector the kind comps. information the you've if on market where Understood. you any, Maybe was any seen that biggest seems technology give more in really one it just could curious was end I if verticals I Obviously, other if you other headwind of outsized this primarily deceleration, any of outside the some serve? the like of in tough quarter in. saw squeeze only the you

Neil Schrimsher

Yes.

touched So on technology. we

other around aggregates some some see we'd one areas on only I and headwinds, presenting in that be could think that side. that materials building construction the

up, top half in XX those I doing I are aggregate the about be as the that all, in declining ones XX think -- along But that As compared all right? to would talked favorable, technology, last on industries, many top of quarter that with the we well. of stack and it on think the year-over-year. the side

Operator

further questions closing call time. this for the back remarks. I'll turn no are there And to at you

Neil Schrimsher

to we again want join talking to us look Thanks. everyone with quarter. thank today, you just and time forward I the for throughout to taking the

Operator

conclude thank participation does today. and call your for please That that We disconnect you conference you for your lines. ask the

Applied Industrial (AIT) 26 Oct 232024 Q1 Earnings call transcript