Applied Industrial (AIT) Q4 2026 Earnings Call Transcript

Automation sales surged over 20%, driving record organic growth in four years.

Automation sales surged over 20%, driving record organic growth in four years. Need a quote from a Motley Fool analyst? Email [email protected] Management reported a strategic shift in the company's financial framework, raising five-year sales and margin targets to reflect a greater contribution from high-margin technical solutions. The company stated that growth is increasingly influenced by secular trends in automation, robotics, and industrial system upgrades across North American manufacturing plants. Operations are focused on expanding engineered solutions and technical maintenance services while utilizing technology investments to drive back-office efficiency. Management maintained a disciplined capital allocation strategy that prioritized acquisitions, share repurchases, and dividend growth to support its evolving market position. Operator: Welcome to the Fiscal 26 Fourth Quarter Earnings Call for Applied Industrial Technologies. My name is Trevor, and I will be your moderator for today's call. At this time, all participants are in a listen-only mode. Peter, we will conduct a Q&A session. If you wish to ask a question at that time, please press star followed by the number 1 on your telephone keypad. Prior to asking a question, lift your handset to ensure the best audio quality. If at any time during the conference call, you need to reach an operator, please press star 0. Please note that this conference is being recorded. I will now turn the call over to Ryan Dale Cieslak, Vice President of Investor Relations and Treasury. Ryan, you may begin. Ryan Dale Cieslak: Okay. Thanks, Trevor, and good morning to everyone on the call. This morning, we issued our earnings release and supplemental investor deck detailing our fourth quarter results.

Both of these documents are available in the Investor Relations section of applied.com. Before we begin, just a reminder, we will discuss our business outlook and make forward looking statements. All forward looking statements are based on current expectations subject to certain risks and uncertainties, including those detailed in our SEC filings. Actual results may differ materially from those expressed in the forward looking statements. The company undertakes no obligation to update publicly or revise any forward-looking. In addition, we will use non GAAP financial measures during the conference call. Which are subject to the qualifications referenced in our SEC filings. Our speakers today include Neil A. Schrimsher, Applied President and Chief Executive Officer and David K. Wells, our Chief Financial Officer. With that, I will turn it over to Neil. Neil A. Schrimsher: Thanks, Ryan, and good morning, everyone. We appreciate you joining us. I will begin today with perspective and highlights on our results, including an update on industry conditions, and expectations going forward, as well as provide an overview of our new intermediate financial target. David will follow with more financial detail on the quarter's performance and provide additional color on our fiscal 2027 guidance. I will then close with some final thoughts. Overall, we reported a solid finish to fiscal 2026. With record fourth quarter sales and earnings that exceeded our expectations.

The quarter was underscored by organic sales growth of 10%, was the strongest in more than 3 years, and a notable improvement from the 6% growth we reported last quarter. We levered the stronger growth very well, expanding EBITDA margins by more than 60 basis points to over 13% growing EBITDA by 16%, and EPS by 13% compared to the prior year. Which is inclusive of ongoing LIFO expense headwinds. In total, these are strong results to end a year that was both defining and pivotal on many fronts. Including showing strong evidence of our operating durability, as well as early signs of the significant growth potential taking shape across our business's ongoing execution. Strengthening underlying demand was apparent in year over year trends across our top 30 end markets. where 20 generated positive sales growth compared to 17 last quarter, and 15 in the prior year quarter. Growth was strongest across metals, technology, utilities and energy, machinery, rubber and plastics, and pulp and paper. This was partially offset by declines primarily in chemicals, lumber and wood, and transportation. Sales growth during the quarter was led by our Engineered Solutions segment, which delivered 13% organic sales growth year over year. Up from 9% last quarter. During the quarter, we saw stronger demand across legacy, and emerging customer verticals. As well as solid backlog conversion. Segment order trends also remained positive during the quarter increasing by double digit percent year over year for the 3rd straight quarter. Sales growth in the quarter was strongest in automation where organic sales increased over 20% year-over-year. This was the strongest organic growth in over 4 years. Underscoring the solid demand developing for our automation solutions as the adoption of robotics, machine vision, and digital technologies ramps higher. with a more productive capital spending environment.

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