Applied Industrial (AIT) 24 Oct 242025 Q1 Earnings call transcript

Welcome to the fiscal 2025 First Quarter Earnings Call for Applied Industrial Technologies. My name is Angela, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded.

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

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

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

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

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

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

trends. margin as expectations high-level quarter quarter September but exceeded in we make Applied the team position prior significant X% year So company comments continued expansion on over first, the sales results. declined the a above-market on to initiatives future. strategic progress few first Overall, our and growth during the our Organic on daily for encouraging our

the cash of generation a had that prior nearly quarter also We from doubled first year. free record

well the sales comparisons were trends quarter in by growth investments. dynamics impact and As mix the adverse expected, and declines as early of margin impacted as

EPS during these from benefited and large while expectations unchanged, recent trends buybacks. with line guidance rate, tax interest the Netting our improve from income year. balance expect and and remains margin margin for fiscal count the EBITDA to share factors, came for other XXXX the we quarter, of Our lower in reduced

year to we look So good on start forward. to the a going and that build

in points Digging end months with data recent in remained the in and quarter, sales early consistent generally more customer industrial resulted into This quarter. mixed. demand in macro is the activity the market trends broader subdued

As during I said, September quarter several strong daily encouraging note, and average the relatively sales finished seasonally Of to compared with were strong unchanged prior organic year. the trends.

September U.S. stronger machinery in in was on OEM customers. stronger Sales it and improvement segment. While markets, September led by Engineered order break-fix activity Solutions areas, in was process service sustained This the our several sales and came our end operations weakness shipment center by also offset in fluid in our our from power ongoing across improved benefits including from trends mobile partially initiatives.

and gas, markets, XX was paper, primary When This and during XX looking the Growth machinery, positive were below lumber beverage, XX transportation, slightly technology year, and declines utilities. over was end pulp oil top reported in wood, the quarter. by metals, across at food the is strongest and offset and quarter. prior plastics our aggregates fabricated metals, and and which last rubber

some September's remains outperformance. of reflected following While trends backdrop early is recovery, demand initial sales somewhat easing quarter showing uneven. bifurcated there and second This an are the fiscal in signs and

the timing October highlight system Organic hurricanes down We in the We are from percent sales a year. modest disruption XX estimate also this through and first ongoing election the center, much October remain but now shipments of week extrapolate of from the prior front would solution uncertainty month in of to includes in over segment and by the vary mid-single-digit recent hesitate Engineered Southeast. some business initial a our with Solutions mindful And we in too trends in nearly U.S. month-to-month. crosscurrents. days left

into year with was manage That relatively core ongoing Service our across years. of over and capital with We on national tightly improved accounts Center to more brake our more said, seasonally maintenance sales. declined fix segment continue operational on and spending stack MRO of muted top segments. billings projects fluid general September X.X% last saw customers prior trends network Digging Center quarter, and larger across MRO organically X in expenses. the health our levels Consistent prior general sales daily held growth Service Average each sales of XX% on aftermarket U.S. in activity. our well strong as

local continues team inventory capabilities, benefit investments to our as sales service greater service ongoing well Our and also initiatives from center opportunities. cross-selling

analytics predictive business productivity. continuing enhance and and technology in force to intelligence our Investments are sales

center service strong U.S. underpenetrated center in which the cycle made of compounded service as local demand on per markets, have year X and a past a within supplementing position our area years, new augmenting particularly in X% over through margin forward, moving break team mix. reaccelerates the our also are short vertical increased business. annual position our enhanced acquisitions and associates Overall, over past basis. end-market Sales focused market We've is our fix the while growth bolt-on Over

continue deferred hard measure, believe past year. rates and election release markets capital could to following maintenance subdued end technical While MRO U.S. following moderate. to across activity we demand pent-up This over some there's interest various if the and the

In equipment across as for distribution shortages customers technical addition, reshoring, proposition around expertise suppliers labor our value production infrastructure, capital focused and locally processes, combined with a gain momentum. trends efficiency secular is and critical and energy technical powerful our network our further

and fluid be over consistent ongoing segment sales segment, headwinds destocking power end market Within our demand sales quarter to -- expectations year, softer impacted our prior continue across the customers. OEM Engineered by organically last with and Solutions mobile X% declined

over trends the of sales power sales a trend over Of strengthened with during combined prior and sales segment over quarter. year the percent early system month. and Flow the note, represent strengthening control note, automation segment the softer including and by in orders in This sales. prior were our progressed, automation segment also which each strength the growth order seasonal double-digit in September. led orders lower XX% component customers, On quarter year, by positive first and reflecting as quarter mid-single-digit was technology-focused organically increased across fluid the

together Sales control see quarter funnel project areas the across these our higher and higher-margin measured Engineered Solutions as business with past spending, create commentary sign ease center positive We period we increasingly couple strategy. channel encouraging rates our second tied are decarbonization build to to our not trend. continue quarter customers believe fiscal Overall, a demand are capital leverage following interest the for growth and an and activity data our further, does year-over-year of activity dynamics continue remain expectations XXXX nonetheless to growth Flow tied extended reengage momentum segment. up of we the over half reduced as also of potentially to of we healthy could X years. in segment orders as were an investments investments. These taken in

signs encouraged catalysts developing and we're segments. by potential Overall, our both across positive

capabilities. ongoing our to fully the position of continuing phase are digital sales and We e-commerce and This serve invest tools unfolds. talent, be growth next and in customers engineering investments includes teams prepared as suppliers to to

also have capabilities logistics modernized our expanded tooling across conveying also and segment. equipment. across We've Solutions and Engineered centers updating in machining systems systems into our We invested and new while technology advanced facilities distribution

support prior cycle. this demand to larger today will potential our emerge of area starts much is than high-growth up it specialized footprint service entering business and was platform This automation vision aftermarket of as and automation supplement robotics technologies. for and while Our these our next-generation machine the from adoption in accelerates

system operating through build secular equipment. We're Further, growing we've AP speed demand some ongoing process, leverage of modernization and and AR invested These many and of automation around capabilities growth the AI recruiting. we've market leverage just engineering industrial our made going also sales forward. to to to power capacity, to to our in the and tied investments investments supplement beginning fluid serve mobile are and

through our both our most highly years customers' increase in become to organic growth been over ability our And The driving returns-based serving industrial billion and a in that of our This and of sheet puts further portfolio our then and our accretive includes mix moving completely. committed including processes faster-growing, acquisitions and cash intentional driver margin investments hand assets and potential remain service critical balance a technical investments in to focused evolution recent million more approach has accelerate and returns on our forward. advantage $X business our reinforce more to a on while higher-margin and moat. both greenfield of on competitive capabilities, capital enhance been extend and centers acquisitions strong meaningful business critical that capital. We disciplined. our a available It's nearly us this $XXX position lastly, capacity, in cash-generative

long primary and Our we create M&A with midsized targets both pipeline shareholder across bolt-on segments is our value on term. where active can focus significant

return through have deployment on flexibility well that our strategy. and share we're growing to targeting our Overall, ordinary avenues. company. buybacks requirements considering ongoing value includes also aligns across as positive focus outlook our moving capital as we intrinsic XXXX the and We see underlying with long-term dividend capital forward. greater return in This our other fiscal

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

Thanks, Neil.

we is quarterly reminder, recap reference our as for most a presentation as a quarter This investor performance. have posted site. prior additional supplemental we quarters, to Just as recent in our investor your

was quarter daily impact. Net point had decreased from foreign of financial performance in X X.X% details organic XX on the over a point points It sales XXX year the year-over-year leverage basis basis day while offset quarter. our increased a positive in basis X% XXX quarter. by to sales factors, the now the partially an selling currency contributed impact basis. Acquisitions negative Turning Consolidated prior extra translation.

our the As basis it pricing sales for was year-over-year relates XXX quarter points we and to in pricing, line of expectations. on approximately with estimate growth product the contribution

sales performance Turning to now by segment.

The local and softer decline Slide on a presentation, maintenance concentrated from X.X% Service difference early Center basis, MRO spending daily in segment driven projects and the in year-over-year the sales accounts. foreign highlighted the positive negative across quarter, from primarily by quarter excluding currency XX positive of impact X organic the from basis capital our X.X% point selling translation. X.X% the sales impact declined an when was acquisitions, a X which in impact deferral of days the organic was on As and in

over From offset and were Softer partially accounts standpoint, year, paper most a MRO also sales continued U.S. notable in though the weaker vertical the pulp fluid outside by national power the demand growth machinery, was Sales our beverage, across and market across XX the prior EBITDA the oil offset prior margin points prior over decreased metals, and and primary declined X% EBITDA over partially growth ongoing year, basis utilities and food year. within of by gas segment transportation. markets, Segment XX.X% U.S.

a acquisitions with for quarter, to X.X% Solutions quarter, segment, growth. days, fluid X.X Engineered daily contributing sales. X.X% over our driven the year in decline segment with percent sales, basis, year-over-year. Within lesser increased flow the organic decreased accounting extent, the last decline an softer a points sales selling year-over-year of primarily automation control prior high Consistent single-digit On and power by and sales was

fluid As as mobile well across in power impacted improving as mentioned across demand by end stable demand by customers applications balanced trends lower to earlier, OEM be technology-related solutions sales industrial off-highway in-plant partially markets. continue adversely and

September. In for control both growth full to flow during sales automation lower addition, positive while quarter, year-over-year and the organic returned

the ongoing Segment EBITDA approximately levels, and while XX.X% deleveraging expense points growth largely segment reflecting positioning was prior of year XX sales year below decreased on prior in over declines EBITDA the quarter. X% margin

to gross Moving performance. margin

highlighted As to level Page the the basis of prior decreased XX.X%. gross compared XX of points margin year XX.X% deck, of X on

early gross favorability of into our net favorability quarter During a year. near-term as favorable tailwind Center year during line million for partially XX the -- expense recognized in impact $X in XXXX. fourth LIFO LIFO to This the first on fiscal million $X.X LIFO margins. trend the quarter, year of prior quarter Overall, our largely including some for quarter in segment basis expense underlying the rebates the had year-over-year Service in comparisons, point with The was expectation prior margin last quarter. compared we gross well easing as

in year-over-year price was was primarily but national higher unfavorable, normalize forward. freight Engineered sequentially, both quarter performance. We and growth neutral the to costs relatively the to Scrapping and outpaced going addition, slightly estimate expected quarter's account were lower Solutions cost are mix sales. In reflecting also

XX.X% higher an XX.X% This unfavorable an prior costs, day selling, compensation constant the from levels. deferred SG&A expense impact extra currency relates X.X% points quarter, expenses payroll administrative compared expense to up during compared prior period. year. basis XXX operating includes On point prior basis, was over prior to from it was to during basis X costs XX the increased the distribution the organic year and year As sales and year SG&A of quarter. up

reminder, nonqualified values a expense a of As expense, plan, tied which offset market primarily investments fluctuations deferred report and by SG&A in of we interest in compensation there's fluctuations costs to compensation these deferred are driven income. corresponding other and to our below net income

had the the addition, deleveraging In we as quarter. expense given some sales in decline expected

in year and levels. gross X.X% growth-oriented firming tax sales organic relative of organic Overall, [ factors, an M&A impact, measures the interest gains. and On down to a EBITDA a declining of past currency light demand points. prudent with accounting the balanced by expense modest strategic process aforementioned was we payroll basis, cash share per was and with margin higher which We earnings extra on basis income for and was prior fluctuations lower down slightly year-over-year. while adjusting these comp the EBITDA as deferred EBITDA Many rate quarter, ] couple cost currency well year-over-year, year reported in prior foreign the remain continued of $X.XX, of investments to XX.X% impact, day fund from X% decline reported in levels and SG&A the XX resulted months. have the SG&A margin greater as balances decreased of partially combined dynamics

income. million operating our generated to Cash relative to totaled $XXX.X quarter the XXX% cash nearly doubled during was performance. free representing million, Moving first a free level. to prior cash conversion net quarter first Compared year, cash the flow hit and record of flow $XXX.X while from activities

primarily flow ongoing reflects growth and investment as cash working prior to progress the internal Our more enhanced capital well the margin modest initiatives year compared with our as profile.

our to now Turning outlook.

maintaining margins guidance in we $XX year release up quarter to reflect as are of for in now on of on updated our and to EPS fiscal of prior to including Page of of full presentation, following we $X.XX today's As first our EPS daily interest down well $X.XX. modestly and results. compared press up range the detailed We raising XX are income to assumptions EBITDA to an indicated XXXX project as sales XX.X%. X% XX.X% basis $X.XX X% to organic X.X% guidance guidance X.X% That said, down to other

ongoing uncertainty. of potentially the around near-term takes activity We're malaise October-to-date sales months. into and U.S. through consideration reflecting winter customer outlook trends Our sales and the year, upcoming general balance calendar seasonally and assuming election economic the subdued the into slower fall

daily the some a together, second over Taken into modest organic to mid-single-digit for in half year decline market to of fiscal later with we prior currently end We assume year. year by demand low potential the quarter quarter. stabilizes project the percent back improvement sales the

initial underlying average Overall, including this the fiscal sales comparisons, quarterly the are trend expectations, guidance believe fourth sales easing initial year, August. this to assumes in quarter. while growth in we daily our assumption And quarter our is relatively year. year-over-year remains our midpoint with Combined at exceeded in provided directionally to unchanged in fiscal point our the maintain of outlook prudent consistent modest our first half it a organic of sales early with assumptions our return second

organic our sales Lastly, deleveraging of XX.X%. well second declines increase growth gross a margins impact offset assumptions of expense potential to slightly we sequential includes as prior basis on by the lower expect to year. to the and This quarter XX.X% expense EBITDA on as compared LIFO of margins investments

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

Thanks, Dave.

develop, segment. demand summarize, to to higher-margin we're positive we that see across good signals order Solutions our about rising including So Engineered trends starting and feel up wrap the

ahead self-help to slowly in quarters. margin many U.S. had to and production upcoming months. and slower coming near-term expect manifest said, opportunities fall we choppy customers also expect that seasonally investments That We and the and we reengage growth sales remain as of election winter capital

uncertainty geopolitical interest and extent around cuts also unrest term. We currents, including cross of near remain lingering some cadence and the macro rate cognizant of

at months. backdrop XXXX macro believe and margin EBITDA we pending and outlook clarity the coming our demand in such, greater maintaining on fiscal this remains As sales juncture, prudent

Importantly, industry support their to we on favorably within expanding of position reinforce fundamental to of and and remain solutions, margin in We're support level, local supply our drive focus. reconfigure expansion initiatives. a and customers and significant strategies end own an portfolio as critical From to positioned industry specialized the internal markets growth technologies emerging outlook at growth customers as capabilities demand engineering and believe and break-fix long our chains term. strategy reaccelerates, we underlying core are our our above-market reflecting constructive MRO and

have and own reshoring present believe industrial manufacturing manifest U.S. technical accelerate as as just extended infrastructure over the well X an We years. infrastructure their are to across aged. U.S. and of service and to higher and is into expanding time, America. as in period customers' Demand same break-fix could this manage increased, tailwinds production next as our refreshing And investment structurally ongoing and requirements the X around activity support the beginning infrastructure they investment MRO capacity labor constraints. backdrop North could At

require and partners leading will solutions capabilities, strategic This relationships. strong next-generation channel technical with supplier

investments requirements. opportunity positioning XXXX aligned growth into are term and and creates and trends longer with compelling growth this calendar strategy Our these accordingly. and We strongly a our believe teams initiatives and we're

capital And power, around we're our reliability. the to of industrial core in premier critical and and equipment. local access nationwide components the given includes applications. brands expertise supplier to This trained nonstandard across then economy lastly, positioned capitalize well industrial and motion knowledge scale and domain our iteration demanding on service products next facilities

advanced power linking role shops, high-tech legacy technicians we're providing machine in our network we engineers, fluid have vision a production industrial channel and with Combined service in In playing critical systems. position robotics, addition, of leading advanced new and Overall, I and to and future. and with forward potential, years excited come. showcasing about capabilities we the our in remain both technologies, applications processes and into quarters now look our and infrastructure the to

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

[Operator Instructions].

from comes question with first Your Baird. Manthey line David of the

of first budgets ES what is sales did items? question the a about, related approximation then well? are to the And orders in September. curiosity. My coming capital more have that, you orders of customer rough a sales When you you October in spending in you remain percentage strong expense orders segment, of do out bit versus talked about then via but talk being midst delivery talked of softer, that better about in were guess, October I And trends ES as

Yes.

Dave, So I'll start.

I think for are returns to and sales investments they our are would have solutions, they can a of across them, our by I very good profile. capitalized large customers engineered them. significant But and many be capital those say not

and And capitalize. productivity term I that enhance that type so obviously it, be think they that often OpEx can performance it about today activities will

So were as talked is and double-digit they're good not have side. We that coming well to which including the quarter as encouraged in the that see heavy automation side across order capital-intensive about and trends by the systems technology, side. on we in that first the

technology dealing And productivity. why position center we or constraints with to our of combined enhance month-to-month, early that service and how I'd engagement be teams, with their and either automation encouraged problems that on, are some helping they labor can still even those across around are customers some be continued by view activity. our with can automation to and Especially them access of say use -- that they're presented there and solve the

from perfectly, steady encouraged. that and to it's are here early call we the but So rise up sustained

hear, Neil. That's good to

Wondering -- expectations are to acquisition pipeline your congruent to seller not talk Next the and you your down. targets high. strategy. bit on net the there, continues you little Dave quiet front if partially a Are dwindle too about debt one for for finding with still here that

#X it said I M&A find up then repurchase And on allocation capital that these years. where at more And seem on share list. if to something like that allocating in when think XX, repurchase based you're other the would relative I share can't would priorities, do look you and coming leapfrog Slide deals at about today, you to capital to Neil, about

could the you calendar feel those we about bit year maybe enter about So talk as items just a next them how X you and here?

active point, in traditional I deals, bet. said, and to Dave, both of terms said, both remain the to do our footprint solutions, stand, targets. some bolt-on we focused certainly more encouraged disciplined terms pipeline are those build-out power. to around to we've in the and automation fluid You of mean on organically That build more we the flow midsized I very where by there and as once deals like acquisitions very that your very and continued the through the continued engineered as including bolt-on of continuing again, the out control expand the really priorities, around so well

given share like active pipeline, we're But expect is. we just where discipline position just thinking to cash made and be we next the the quarters, to recent like about. see seeing there, We point to in continue So more leverage buyback. on would few well, that the what your continue quarters as over there

So are can't move acquisitions timing there in I that good as I on forward, I always like of pipeline. the still the things these said, encouraged some very I control expect remain just like said, we

the say, year is Last We the over think at $XXX I'd Dave, good. billion little XX. And you returned ], a we Slide to mentioned of and $X year be million X over Yes. higher. expect [ capital years this number would

committed. to profile good have to there where so for a continue that in capital M&A do vet intensive invest we'll that With and know strong doing will it. we're we so us that. remain opportunities not And priority. But return organic to said, a are we're strong

our We this differentiation we're stack to going all will customers in build opportunities to the multiple just really mean setup what differentiation, to and and our further that not environment, cash. think technical our have will in We stakeholders. out

projects several of some organic investment And that very to light is ongoing there pending what importance of I of for do see the like spend as continue with recovery the on key the and that's we protect growth. we growth much organic well in SG&A focused fact that

absorbers some growth just focused So the projects. of spend to still and bottom in we to profitability, cost that SG&A organic natural the the actions of to temporary some some the but very line in fund shock continue work protect on addition business to that's continues critical

the comes Christopher Glynn of question Oppenheimer. next Your line with from

Just wanted some into particularly to think, dive some areas inflected you a from quarters. the of saw technology commentary recent the and automation where little seems I improvement,

you further So wondering can those production? you types to if on with And think that starting of on feels? going particularly actually also how makers, comment technology. sticky seeing some layers device what's on you increase customers Are

Yes.

Engineered I over up So segment consolidates a see or it's quarters the if that overall. But you the start sales flat rate past X back good on activity order our increased it relatively technology, quarter of kind and in when if contributor to to that. to good was the think see Solutions so,

I around the top then I increased 'XX activity being are see, that. many high we activity manufacturers. indicators equipment perhaps on for the 'XX, on digit forecast chip that fab And numbers double percentage of over at think would an for still XX% think have perhaps wafer being most that

we'd Obviously, have those with involved that. exchanges we're see think early and indications. to I some into start customers

for So to and that's as we 'XX, I move the through favorable still technology be front. perhaps think But on going early. calendar us into

autonomous the labor then been collaborative side, own customers to and enhance challenges with deal and to continue their high or side be side, mobile automation AMRs, And the robotics robots, the look doing the encouraging. activity as has it on interest on

is control what that we activity, can So mean work that on also pipeline side, on product engineering process got good. amount activity we've the going on and front. have inspection, think enhancements application about and But the that side, that on quality as good for of and we vision

the And have so by even that like always other we projects we implemented. when get sequence oftentimes, to that activity. general there's but parts say, are into And not the encouraged

And so directly think there. your I stickiness there's to question,

by sounds where has on more I Great. area the on capital. to it little And tracking other press standard seeing then that That's a but been pipeline recall more long for commentary like postures really don't a release, has the the looser the you've transpired in bullish. just pipeline? is the inflected And midsized reference verbiage your in Are that you what sellers time?

be you cycles, need to is time we or work around. companies We the prospect very to available. mean fits, environment know I'd become can't know we the control hard perfectly our say in timing. state who we I them

I've clearly, our our bolt-ons and well. I in right focus, priorities think always said midsize the are areas as

So know into too much to that remarks. read the it's I in don't -- the

operating areas think, don't amount And -- good with of more that that focus on and We and integrating attractive operating. expecting on I in know, And there's our And the verbiage of very help. we the in I cycles we've that's record had, good that clearly executing opportunities. or are we've my avenues before, acquisitions and and sellers. challenges. can it. there across, are just track And a good in clearly, side. Customers it's working there doing help and been prospective the to think got I many frequency think perhaps that. they running businesses, we're look those we there's based then And scale can

Capital comes KeyBanc next Ken from Your question Markets. Newman of the with line

Good morning.

first So here trends. on question the October

XQ color this, is frame what new just as Sorry just then the progress those relative the if through on the far a quantify we I report. missed the for the but And that's comps to I'm think trends? what so monthly the are December and to like any November, month. there October look AIT impacts hurricane way into you

Yes, start. I can

we're areas. at We that they I very period. I look impacted easily think running X/X more one in the of looking the can to likely do and bit a extended buckets well, maybe to hurricane, some in that And for look be and will say and But reduced great don't but on running few a quantification of it and in perhaps maybe associate know We are running it, a up think fall that is X/X customers of some and still most them. the ramp tragedy I'd at got all of at little great others it. some down support I've operating. areas. displaced about to We're then

we an through I in it's hey, its one, weather economic work events think just side. standpoint, total, from in like the other

natural still And October on rate, to month-to-date activity. about that type go, We side can there final think X pickup do just and of in usually X to then trends. have as the I days. days There's the be it's early the

as And that occur expect so could to well in October. we some of

say, I'd in is would November just coming I October the we easier and year. month, to have say December relative as And somewhat Ken, in prior by similar relates then it both year-over-year an November. comparison comps to to about the do October

it. That's how good you share I just if curious ended. you was for then helpful. demand very just environment. And pleasantly the think talk this in whether Got a quarter could weaker about I'm bit follow-up little incremental by surprised here, you're the gaining

I think demand largest competitors past industrial one in expectations. their weaker saw their some of your this business versus quarter

niches play if dynamic, outperformed of if from potentially a the think I'm so you curious is more winning mix depending on Or seem like And does the your you bigger this you here, markets in? just that are you but customers it just end competitors? so

a a of our focus areas space I little mean, getting as going in continue customers that's the focus cross-sell, area. job early on focus. seeing we're And clear fewer, And on a highly large, being can lot going to the the Solutions. while expand our and I But that think one that And to and sets do think fragmented that executes within clear gain consolidate to in space. look do to product can good strategy is about continue against a how our offering and to talked innings, business at of we and with what a just we've we traction, then continue them, intent valuable solutions it and hey, and it. Customers be got continue. look we do side. that's We've that. and to benefits that we'll bit will and capable we're teams that compete obviously, into there's got spend. customers They're of still more suppliers on just to are I you go to our many and we out think those a Engineered

comes line Mizuho. from Linzey of question with next Brett the Your

should were back resources First say overhead. it good retained leverage fairly satisfy you of come and weak. of return some even you question to the as engineered recovery lot as we there? fair personnel get the that the on Or the And and the of that of growth terms just is and thinking to capacity order this AIT are in volumes automation staffing a Is when integrator And the need platform. see here? the utilization

pace Brett, process consciously to to in low. in levels The projects. robotics of focus we periods. a worked We segments, there'll when busy those there's around those percentage what amount vision. more, in No, the times, an and especially But the hard and especially stay think engagement, still it. be X we the remains of consider talked of areas, what we've active, the ahead no, period on our we are believe automation were for there and slower maintained core adoption staffing in engineering now relatively have few customer through, to doing capability customer we we some step approval highly going of in We were those for earlier the see at about extra attractive for application have we times, maybe there's

and interest So demand. increasing. lot fulfill we a is help need The we there, can that think of is

on follow-up a just the dynamic. reassuring then And great. That's

doubled the addressable years. last markets several the has AIT So over

You've solutions. expanded the

these think doubling per how improved line or certainly is with increased project are think U.S., that or about Should you share thoughts AIT's As we some kind TAM? restored well? that the wallet content the into the your in of as of industries getting critical on content? about of there of Any that

-- indirectly. of mean good content us. We're we're which seeing reshoring good think I but benefiting. of when I positioned look amount Yes, and and the also we're for have there's are activity just we for on industries, support aggregates, benefit obviously, we there. construction the those and projects, involved well at metals, are amount cement directly, participation we industrial in

supply dynamic these to things more election feel is as and derisk through outcome and just of going it determined degree only heightened have tariff to the I to think perhaps the on changes perhaps how heightened a they cycle, level, at depends locally fully continue customers the look will we at chains industries it other to than, looked So participate available like continue be like or what level.

And out. they're qualifying which equipment So then into or more back running further well. their light may involvement to either them capital projects or we they some supplier, play that can facility. supply our think customers their may help their those work chain our that we've into build got work be help reshoring will capacity be continue. And for for And with bring us, looking and requirements with to as another

that's Canada really, from our positioned, about also. I been are us. think only as getting for not benefits business Mexico it, that U.S., positive and we're So well but And in

comes the Capital Chris of Loop Markets. Dankert with question from Your next line

were the any capacity organic 'XX? Northwest of half I into to on kind the anything guess, the of out start of kind ramp opportunities, that the I worth of of Pacific calling proliferation some investments? back kind of And earlier. guess in investment to fiscal circle opportunities to back technology maybe things touching update update terms on on

Yes.

would So what fluid doing power Northwest in operational Same fully there complete facility investment in it. I the the well. as technology new team operating and in in, with running say

for in could what demand us well. both an and it very of of investment inflection think greater serve will well be So we positioned, both moves, timing will capacity be, and those

where To solutions, can ASO even things areas footprint of expand amongst make ] automation well engineering organically continue together investments that and and collaborate [ as like cross-sell of as to businesses they some tying specialties well. our with have

as additional area So technology additional as focus. and driving efficiencies of back Chris. that's some business, some office, really another And the across well there investment

So many it's on fronts.

guess in for sweet customers a between are integrated play. you approach think And type I a more I of a of of It assessment. one automation like and to question. integrator in seems kind customer of is guess, I then, there's play that there. of more serve friction kind the conceptual a system any appetite And distributors to that the it. able lot maybe be some you that's there kind level just spot maybe at where Got specifically? AIT seems correct

it particularly seeing to Just market, the maybe there? you're growth thoughts some on automation pertains as that and

Sure.

So markets dictate and I'd that. and say Chris, in and channels pass when accelerated products I going multiple don't they're solutions view especially flow customers and be friction to often to that and growth, there's often

project in work flow or some And it's that, it. if more to is the of live be may happy in we're be in way those when we going is And have so If ways more capability in solutions there's they integrators a themselves. they internal our the project active either complex, that. doing involved

We productized in collaborative more and goes that solutions as customers are we have working also it in. and about and robotics vision both think turnkey as palletizing more type for are others in applications

so they are not high and they're lighter, replicated yield And that they can across. be but benefit investments, that good

in that. look we'll more at we participate So those ways how

we're agnostic. But hey, no,

problems market. with a how is part with and that to our going integrators are help we their focus Our customers solutions of

compelling more one. mature. some think I markets operation the briefly. guess, it. kind solutions CMC a of operation The And was new really productized kind into there really past, are just in could machine or and of guys Got that are I I I further on exploring being were follow palletizing opportunity, If you think up moving

the markets serving Just number update any with solutions terms in you're today? of the productized of like

they and of environment those the applications. of of doing all a quality know of applications, and our and out as whether in don't move also they can markets. control about those more packaging I in and Because We be more production have CMC, number which customers, think right? logistics, exist if and product it machine tending, end consumer Yes, I inspection. warehousing There's

So some requirements, a opportunities technically but things upfront we engineering benefits up may have adoption. make for less those, still integration challenging that accelerates just more that. more it then for little in very requirements if even It do opens us, we'll bit significant can the in to less we of easier, think around be And it customer.

the taking customer like we productized hey, more entry but all in us. as likely and all addressing they their can, or solving the is for doors opportunities not it facilities requirements an So or opening more point. solutions It's the

Please Your next of comes line Aaron ahead. from Northcoast question with go Reed the Research.

issues in you behind are more a if could there Or most was any inflation? that remaining pockets you're that be the remaining future? guys? wondering any I near that about little Or pressure seeing talk from of bit you coming is could

price at kind good. general points. price basis about neutral cost again, of quarter, see inflation, which, in still for said distributors We We steady relatively XXX once is the

think easing key again, steady from and coming fashion. and overhead other I them it now. with can impact slow, state spend it's in Once do trends, normalized that on So largely pass see we and more is what those to LIFO partner we're the our orderly inflationary and labor an seeing steady take from price you suppliers our manufacturers. increases well But

package passed drops said, fashion. I how pockets And line good this incremental I of it, as know steady, impact like to distribution because take And for during bottom areas on it, at to an some concern. process. no we is orderly the So look good, inflationary slight the

and quickly some they're out other timing about difficult I'm and as part the to if And it, sort we're of the of touched hey, is, on Okay. election. quantify of of hearing we're that if wondering that hear for the that's after are you're that, that you there legitimately is is after wondering do might pent-up thinking off that, people well, the be was an Great. saying, Or you, people be. a if the there being later but then you election kind that a little how we're seeing And And would if it's there it that. and you considerations are on of some of when you more what wait think reason? potential saying, the going I demand know you too, be taking waiting lot bit lot speak to generated just excuse pent-up demand, in? a election, is could revenue other from might briefly I

Yes.

election, don't the has for of that. real know clearly, think but mind many top it's driver, it I of I one, a that So conversations

frame belt general release into December point, entry front. the and I into deferral. will that's if early and time think that on we seen more then there of post-November be tightening XXXX going And in have that

some year. and can then So and for occurred, of think or as some positives calendar pickup we be through go the start our so us the be QX that has there new would we what into

from of of the comes question with next America. Abrams Your Sabrina line Bank

a little about Good want to standpoint. from morning, customer bit destock I everyone. ask end just and your both the

guess, little it maybe getting bottoming. things are own your And like constructive on I from a, about more here? a you sounds thinking So how inventories

how but So just think still not do to your And are here, customers I destocking? then, from destocking ask about inventories? of want the -- your own b, any

Yes.

any they and and start I So what's they to with We And closely side, production make going talk where we're the inventory business very but not have into types high-velocity looking may want regular but on those. on back them we're suppliers not preparation. own. we we know Obviously, want be overstock in investments. our hey, and the in We reducing appropriate restock, been know at projects their or to where of our with to make to can inventories. right working the we pulling various that

for have in. lead they longer in helps that make harder Things them. sure make, to appropriate And running. fully going is look that probably up that continue are the customers attractive times MRO and And stay ones to we're slower to to an of the our participate to aftermarket are that moving, investments suppliers what

approach. So our that's

say I'd of part, the benefit do destocking any the cycles. technical We stocking nature not get products. economic the or penalty most the our For of therefore, in of around

go see I was in extended months when driven And And be would did standpoint what a then on or and could years, on they softens in little have needs product the XX I make comes we to needs fluid and be. a still off-highway requirements. of environment some placements that the would demand power. by our think their of had X bit area the that production to it from near-term lead and would the of some on that a over side, smaller OEMs portion mobile as out those little in bets think requirements that, times bit, or business

And will part them. electronic that do mobile, work in, I into look 'XX, I improve we early at 'XX. calendar a of I think will It type controls think positive. whether time as If this which in this technology improve. some I also off-highway projects know on taking cycles pickup to in be comes as quarter, we're autonomy will the perhaps start demand the that through there's for go with automation, front be more engineering them with perhaps an of into even in

So hopefully, stocking, destocking. the inventory that's that. we'll work color But right for

super That's helpful. I quarter. And margins then just to the in EBITDA the wanted ask about

what what the want had understand to but maintained just in year little guys from obviously they and guided your differently a came guide, I below think expectations? I trended full you

Yes.

so we development of in not It's the quarter. end sales across in that the I think to would we first for talked as year go right, line. And linear the in start that us, always it, about about as largely say we year

in off We we were in we front. is there some of areas some Some investments walk, the -- maintain really was did liquidation we what of QX. were including for in then comparisons as appropriate we margin the side. the And LIFO think but conscious and that gross higher it the wanting layer the late, into to occur just timing in did on coming growth see in really coming

So some in sequential that. we expected change

were the of the there in first year. prior can year-over-year occur the that quarter some comparison favorability But

good we're contend help have with in not outlook So we We're we opportunities plans to changing that feel levers we margins. still and have good and position. the like ourselves all I around that a trajectory,

Yes.

LIFO versus last business, vendor this year with some and this look anomalies you We on higher if through performance year. softest some even bucked we're what gross we quarter. some think I trend margin reading back XX.X% QX in with typically rebates is expense our saw that

see as a lot good a move see last The you're of the said there. to the we path outpacing seeing margins, our those comparison said, on basis what really tough I I across and comp that about a expectations. do saw And we felt slightly we improve gross that like continue So tough year-over-year a is sales quarters year. development,

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

Thank the want much. this for talking No. today, thank quarter. you joining you very to to forward with we point, At I just and look everyone us throughout

for Ladies call. Thank Thank and participating. you concludes gentlemen, you. today's conference this

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