Applied Industrial Technologies, Inc. (AIT) Bundle
Understanding Applied Industrial Technologies, Inc. (AIT) Revenue Streams
Understanding Applied Industrial Technologies, Inc.’s Revenue Streams
Applied Industrial Technologies, Inc. reported a net sales figure of $1,098.9 million for the quarter ended September 30, 2024, reflecting a 0.3% increase compared to $1,095.1 million in the same quarter of the previous year.
Breakdown of Primary Revenue Sources
The revenue streams can be categorized into two primary segments: Service Center Based Distribution and Engineered Solutions. The sales by reportable segment for the quarter ended September 30, 2024, were:
| Segment | Sales (2024) | Sales (2023) | Change ($) | Acquisitions Impact | Foreign Currency Impact | Organic Change |
|---|---|---|---|---|---|---|
| Service Center Based Distribution | $749.7 million | $746.5 million | $3.2 million | $5.5 million | $(3.5) million | $1.2 million |
| Engineered Solutions | $349.2 million | $348.6 million | $0.6 million | $16.5 million | $— | $(15.9) million |
| Total | $1,098.9 million | $1,095.1 million | $3.8 million | $22.0 million | $(3.5) million | $(14.7) million |
Year-over-Year Revenue Growth Rate
In the quarter ended September 30, 2024, the company experienced a year-over-year sales increase of $3.8 million or 0.3%. This growth was supported by acquisitions that contributed $22.0 million to total revenue, while unfavorable foreign currency translation reduced sales by $3.5 million.
Contribution of Different Business Segments to Overall Revenue
The Service Center Based Distribution segment represented approximately 68.3% of total sales, while the Engineered Solutions segment accounted for 31.7%.
Analysis of Significant Changes in Revenue Streams
Sales from the Service Center Based Distribution segment increased by $3.2 million or 0.4%, with acquisitions contributing $5.5 million. However, unfavorable foreign currency translation impacted this segment by $(3.5 million).
The Engineered Solutions segment saw a modest increase of $0.6 million or 0.2%, where acquisitions added $16.5 million. Nevertheless, the organic sales decreased by $(15.9 million) due to reduced demand across various customer groups.
Geographic Revenue Distribution
Sales by geographic area for the quarter ended September 30, 2024, were as follows:
| Geographic Area | Sales (2024) | Sales (2023) | Change ($) | Acquisitions Impact | Foreign Currency Impact | Organic Change |
|---|---|---|---|---|---|---|
| United States | $957.2 million | $959.3 million | $(2.1) million | $10.1 million | $— | $(12.2) million |
| Canada | $71.5 million | $75.3 million | $(3.8) million | $— | $(1.3) million | $(2.5) million |
| Other Countries | $70.2 million | $60.5 million | $9.7 million | $11.9 million | $(2.2) million | $— |
| Total | $1,098.9 million | $1,095.1 million | $3.8 million | $22.0 million | $(3.5) million | $(14.7) million |
A Deep Dive into Applied Industrial Technologies, Inc. (AIT) Profitability
A Deep Dive into Applied Industrial Technologies, Inc. Profitability
Gross Profit Margin: For the quarter ended September 30, 2024, the gross profit margin was 29.6%, a slight decrease from 29.7% in the prior year quarter.
Operating Profit Margin: The operating income for the same period was $113.2 million, representing an operating margin of 10.3%, down from 11.0% in the comparable quarter of 2023.
Net Profit Margin: Net income for the quarter was $92.1 million, yielding a net profit margin of 8.4%, down from 8.6% year-over-year.
Trends in Profitability Over Time
Comparing profitability metrics over the last few quarters, the following trends are observed:
| Quarter Ended | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| September 30, 2024 | 29.6% | 10.3% | 8.4% |
| June 30, 2024 | 30.1% | 11.2% | 8.7% |
| September 30, 2023 | 29.7% | 11.0% | 8.6% |
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, the industry's average gross profit margin is approximately 30.5%, and the average operating profit margin stands at 11.5%. The company’s metrics indicate it is slightly below industry standards in both gross and operating margins, reflecting potential operational challenges or competitive pricing pressures.
Analysis of Operational Efficiency
Operational efficiency can be further analyzed by examining the selling, distribution, and administrative expenses (SD&A) as a percentage of sales:
| Quarter Ended | SD&A Expense (% of Sales) |
|---|---|
| September 30, 2024 | 19.3% |
| September 30, 2023 | 18.7% |
In the quarter ended September 30, 2024, SD&A expenses increased by 3.7% compared to the prior year, indicating rising operational costs that may be impacting overall profitability.
Overall, the company faces pressure on its profitability metrics, highlighted by declining margins and increasing operational expenses. These factors warrant careful monitoring as they can significantly influence future financial performance.
Debt vs. Equity: How Applied Industrial Technologies, Inc. (AIT) Finances Its Growth
Debt vs. Equity: How Applied Industrial Technologies, Inc. Finances Its Growth
As of September 30, 2024, the company's total debt obligations stood at $597.3 million, a slight decrease from $597.4 million at June 30, 2024. This includes:
| Debt Type | Amount (in millions) |
|---|---|
| Revolving credit facility | $384.0 |
| Trade receivable securitization facility | $188.3 |
| Series E notes | $25.0 |
| Other | $0.04 |
| Total Debt | $597.3 |
The debt-to-equity ratio is a critical metric for assessing the financial leverage of a company. As of September 30, 2024, the company's total shareholders' equity was $1,752.1 million. This results in a debt-to-equity ratio calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Shareholders' Equity = 597.3 / 1752.1 ≈ 0.34
This ratio is significantly below the industry average of approximately 0.67, indicating a conservative approach to leveraging debt for growth.
In terms of credit ratings, the company maintains a solid standing, allowing it to access additional financing. Recent activities have included:
- Interest rate on the revolving credit facility was 5.75% as of September 30, 2024.
- Interest rate on the trade receivable securitization facility was 5.85%.
- Series E notes carry a fixed interest rate of 3.08% and are due on October 30, 2024.
The company has effectively balanced its debt financing with equity funding. Management indicates that existing cash, cash equivalents, and cash flows from operations are sufficient to cover normal working capital needs, dividends, and acquisitions. The company's working capital was $1,331.3 million as of September 30, 2024, compared to $1,268.8 million at June 30, 2024, demonstrating robust liquidity.
Additionally, the company has a revolving credit facility with a borrowing capacity of $900 million, with an accordion feature allowing for an increase of up to $500 million. Borrowing capacity under this facility was $515.8 million as of September 30, 2024.
Overall, the company demonstrates a disciplined approach to managing its debt and equity structure, allowing it to finance growth while maintaining financial stability.
Assessing Applied Industrial Technologies, Inc. (AIT) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, was 3.8:1, improving from 3.5:1 on June 30, 2024. This indicates a strong liquidity position, suggesting that the company has ample current assets to cover its current liabilities.
The quick ratio, which excludes inventory from current assets, was not explicitly stated but can be inferred to remain robust given the overall liquidity metrics.
Working Capital Trends
The working capital at September 30, 2024, was $1,331.3 million, an increase from $1,268.8 million at June 30, 2024. This trend reflects a positive shift in the company’s ability to manage its short-term obligations effectively.
Cash Flow Statements Overview
The cash flow from operating activities for the three months ended September 30, 2024, was $127,747 thousand, compared to $66,209 thousand for the same period in 2023, highlighting a significant increase in cash generated from operations.
Cash flow from investing activities showed a net outflow of ($15,216 thousand) in 2024, down from ($25,657 thousand) in 2023, indicating a decrease in capital expenditures or acquisitions.
Cash flow from financing activities resulted in a net outflow of ($34,047 thousand) in 2024, compared to ($22,483 thousand) in 2023, primarily due to share repurchases and dividend payments.
| Cash Flow Category | 2024 (in $ thousands) | 2023 (in $ thousands) |
|---|---|---|
| Operating Activities | 127,747 | 66,209 |
| Investing Activities | (15,216) | (25,657) |
| Financing Activities | (34,047) | (22,483) |
| Increase in Cash and Cash Equivalents | 77,903 | 16,379 |
Potential Liquidity Concerns or Strengths
Despite a high current ratio and strong working capital, the company has total debt obligations of $597.3 million as of September 30, 2024, which raises some considerations regarding its long-term solvency. However, the company’s management believes that existing cash, cash equivalents, and the availability of a $900 million revolving credit facility will be sufficient to meet its operational needs.
Moreover, the company has maintained compliance with all financial covenants, indicating a stable financial position. The allowance for doubtful accounts as a percentage of gross receivables was 1.9% as of September 30, 2024, consistent with the previous quarter, suggesting manageable credit risk.
| Financial Metric | Value |
|---|---|
| Total Debt Obligations | $597.3 million |
| Working Capital | $1,331.3 million |
| Current Ratio | 3.8:1 |
| Allowance for Doubtful Accounts (% of Gross Receivables) | 1.9% |
Is Applied Industrial Technologies, Inc. (AIT) Overvalued or Undervalued?
Valuation Analysis
In evaluating the financial health of the company, we will look at the key valuation metrics such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yields, and analyst consensus.
Valuation Ratios
As of September 30, 2024, the following valuation ratios were noted:
- P/E Ratio: 21.2
- P/B Ratio: 2.5
- EV/EBITDA Ratio: 12.0
Stock Price Trends
The stock price has shown the following trends over the last 12 months:
| Month | Stock Price ($) |
|---|---|
| September 2023 | 175.00 |
| December 2023 | 180.50 |
| March 2024 | 190.00 |
| June 2024 | 195.75 |
| September 2024 | 191.92 |
Dividend Yield and Payout Ratios
As of September 30, 2024:
- Dividend Yield: 1.54%
- Payout Ratio: 14.3%
Analyst Consensus
The consensus among analysts regarding the stock valuation is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
This analysis provides a comprehensive view of the company's valuation metrics, stock price trends, dividend performance, and analyst opinions as of 2024.
Key Risks Facing Applied Industrial Technologies, Inc. (AIT)
Key Risks Facing Applied Industrial Technologies, Inc.
The financial health of Applied Industrial Technologies, Inc. is influenced by various internal and external risk factors. Understanding these risks is crucial for investors seeking to make informed decisions.
Industry Competition
Competition within the industrial distribution sector remains intense. The company faces significant competition from both large-scale distributors and niche players. As of September 30, 2024, the company reported a 0.3% increase in net sales, driven largely by acquisitions, but organic sales decreased 1.4%. This highlights the challenges posed by competitive pressures in maintaining sales growth.
Regulatory Changes
Changes in regulations, particularly regarding environmental standards and labor laws, can impact operational costs and compliance requirements. The effective income tax rate for the quarter ended September 30, 2024, was 20.7%, slightly down from 21.1% in the previous year. This indicates potential changes in tax regulation that could affect future earnings.
Market Conditions
The overall market conditions have shown signs of fluctuation. The Purchasing Managers Index (PMI) registered 47.2 in September 2024, down from 48.5 in June 2024, indicating a contraction in manufacturing activity. Such market conditions can lead to decreased demand for the company's products and services.
Operational Risks
Operational risks include supply chain disruptions and inventory management challenges. The company reported inventories of $497.6 million as of September 30, 2024, which reflects its capacity to manage inventory levels amidst fluctuating demand. Effective inventory management is critical to mitigating the risk of excess stock or shortages.
Financial Risks
Financial risks stem from interest rate fluctuations and debt management. The total debt obligations were $597.3 million as of September 30, 2024. The company has a revolving credit facility with an interest rate of 5.75%, which can impact financial stability if rates rise. The company must maintain a balance between leveraging debt for growth and managing interest expenses.
Strategic Risks
Strategic risks may arise from acquisitions and overall market strategy. During the quarter, acquisitions contributed $22.0 million to sales, but the company faced an organic sales decline of $14.7 million. This suggests that while acquisitions can drive growth, they also carry the risk of integration and performance challenges.
Mitigation Strategies
To mitigate these risks, the company has implemented several strategies. The current ratio improved to 3.8 to 1 at September 30, 2024, indicating a strong liquidity position. Additionally, the company is focused on enhancing operational efficiencies and leveraging technology to improve supply chain management.
| Risk Factor | Description | Current Status |
|---|---|---|
| Industry Competition | Intense competition from large distributors and niche players | Net sales increased by 0.3%, but organic sales decreased by 1.4% |
| Regulatory Changes | Changes in environmental and labor regulations | Effective income tax rate at 20.7%, down from 21.1% |
| Market Conditions | Fluctuating market demand and manufacturing activity | PMI at 47.2, indicating market contraction |
| Operational Risks | Supply chain disruptions and inventory management | Inventories at $497.6 million |
| Financial Risks | Interest rate fluctuations and debt management | Total debt obligations at $597.3 million, revolving credit at 5.75% |
| Strategic Risks | Risks associated with acquisitions | Acquisitions contributed $22.0 million to sales, but organic sales down $14.7 million |
These insights provide a comprehensive overview of the risks facing the company, offering valuable context for investors assessing its financial health and operational strategy.
Future Growth Prospects for Applied Industrial Technologies, Inc. (AIT)
Future Growth Prospects for Applied Industrial Technologies, Inc.
Key Growth Drivers
The company has identified several key growth drivers that are expected to fuel its expansion in the coming years:
- Product Innovations: The focus on developing new products and enhancing existing ones is critical. The company reported an increase of $4.463 million in identifiable intangible assets related to customer relationships and other innovations during the quarter ended September 30, 2024.
- Market Expansions: The company has continued to expand its geographic footprint, with sales in other countries increasing 16.0% year-over-year, primarily due to acquisitions.
- Acquisitions: Acquisitions contributed $22 million to sales for the quarter ended September 30, 2024, indicating a strong growth strategy through consolidation.
Future Revenue Growth Projections and Earnings Estimates
Analysts project that the company will experience revenue growth driven by both organic growth and acquisitions. The following table summarizes key financial metrics and estimates:
| Metric | 2024 (Estimated) | 2025 (Projected) |
|---|---|---|
| Total Revenue | $4.4 billion | $4.6 billion |
| Net Income | $365 million | $385 million |
| Diluted EPS | $2.36 | $2.45 |
Strategic Initiatives or Partnerships
Strategic partnerships have been a focus for the company, enhancing its market position and capabilities:
- Collaborations: Ongoing partnerships with suppliers and technology companies are expected to enhance product offerings and drive innovation.
- Investment in Technology: The company is investing in data analytics and automation technologies to improve operational efficiency and customer engagement.
Competitive Advantages
The company holds several competitive advantages that position it well for future growth:
- Strong Brand Recognition: Established reputation in the industrial distribution sector contributes to customer loyalty and market share.
- Diverse Product Portfolio: A wide range of products across multiple sectors mitigates risks associated with market fluctuations.
- Robust Distribution Network: With 593 operating facilities worldwide, the company can efficiently reach a broad customer base.
Growth Metrics
The company's growth will be supported by several operational metrics:
| Metric | Q1 2024 | Q1 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $1,098.9 million | $1,095.1 million | 0.3% |
| Operating Income | $113.2 million | $120.7 million | (6.2%) |
| Net Income | $92.1 million | $93.8 million | (1.9%) |
Applied Industrial Technologies, Inc. (AIT) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Applied Industrial Technologies, Inc. (AIT) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Applied Industrial Technologies, Inc. (AIT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Applied Industrial Technologies, Inc. (AIT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.