Applied Industrial Technologies Inc (AIT) 2023 Q2 法說會逐字稿

Greetings, and welcome to the Fiscal 2023 Second Quarter Earnings Call for Applied Industrial Technologies. My name is Malika, and I'll be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded.

您好，歡迎來到應用工業技術 2023 財年第二季度財報電話會議。我的名字是 Malika，我將是您今天電話的接線員。 （操作員說明）請注意，正在錄製此會議。

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

我現在將把電話轉給投資者關係和財務總監 Ryan Cieslak。瑞安，你可以開始了。

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

好的。謝謝，Malika，大家早上好。今天早上，我們發布了收益發布和補充投資者資料，詳細介紹了我們第二季度的業績。這兩份文件均可在 applied.com 的投資者關係部分獲得。

Before we begin, just a reminder, we'll 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 statement.

在我們開始之前，提醒一下，我們將討論我們的業務前景並做出前瞻性陳述。所有前瞻性陳述均基於當前預期，受某些風險和不確定因素影響，包括我們向美國證券交易委員會提交的文件中詳述的風險和不確定因素。實際結果可能與前瞻性陳述中表達的結果存在重大差異。公司不承擔公開更新或修改任何前瞻性聲明的義務。

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

此外，電話會議將使用非 GAAP 財務措施，這些措施受這些文件中引用的資格限制。

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

我們今天的演講者包括 Applied 總裁兼首席執行官 Neil Schrimsher；和我們的首席財務官 Dave Wells。有了這個，我會把它交給尼爾。

Thanks, Ryan, and good morning, everyone. We appreciate you joining us. As usual, I will begin with some perspective and highlights on the key drivers of our results, including an update on industry conditions, as well as expectations going forward. Dave will follow with more detail on the quarter's financials and provide additional color on our outlook and guidance, which we've raised this morning, and then I'll close with some final thoughts.

謝謝，瑞安，大家早上好。感謝您加入我們。像往常一樣，我將從一些觀點和重點介紹我們業績的主要驅動因素，包括行業狀況的最新情況以及未來的預期。戴夫將詳細介紹本季度的財務狀況，並為我們今天早上提出的前景和指導提供更多色彩，然後我將以一些最後的想法結束。

So overall, we had another solid quarter with favorable performance across really all our businesses. Year-over-year organic sales growth strengthened, exceeding 21% in both segments. Our teams are doing an exceptional job at managing cost and driving continuous improvement initiatives. We expanded EBITDA margins to a new quarterly record of slightly under 12%. Looking at it over an extended period, our EBITDA margins have expanded nearly 300 basis points over the past 3 years. At the same time, we continue to invest in talent, safety, technology and our service solutions, further enhancing our capabilities and operational strength for the future. Taken together, our respective sales, EBITDA and EPS was 21%, 36% and 41% over prior year levels. As a reminder, we're facing more difficult comparisons these days, so to see this level of sustained sales and earnings growth is noteworthy and a strong indication of our enhanced growth profile and earnings power.

因此，總的來說，我們又迎來了一個穩定的季度，我們所有業務的表現都非常出色。有機銷售額同比增長加強，兩個細分市場均超過 21%。我們的團隊在管理成本和推動持續改進計劃方面做得非常出色。我們將 EBITDA 利潤率擴大到略低於 12% 的新季度記錄。從長期來看，我們的 EBITDA 利潤率在過去 3 年中擴大了近 300 個基點。同時，我們繼續在人才、安全、技術和我們的服務解決方案方面進行投資，進一步提升我們未來的能力和運營實力。總而言之，我們各自的銷售額、EBITDA 和 EPS 分別比去年同期水平增長 21%、36% 和 41%。提醒一下，這些天我們面臨著更困難的比較，因此看到這種持續的銷售和盈利增長水平是值得注意的，並且強烈表明我們的增長狀況和盈利能力增強。

I want to thank our entire team for their ongoing effort and focus on optimizing and positioning Applied to achieve these results. This progress is particularly exciting as we reflect on our company's history, including celebrating our 100-year anniversary a couple of weeks ago with more than 6,000 associates. A very proud and gratifying moment for Applied and our talented teams around the world. Our rich history and culture will remain a guiding framework to our strategy and evolution going forward, along with our valued supplier and business partners who work every day to help us serve our customers and advance our leading technical capabilities throughout our industry.

我要感謝我們整個團隊的不懈努力，並專注於優化和定位 Applied 以取得這些成果。當我們回顧公司的歷史時，這一進步特別令人興奮，包括幾週前與 6,000 多名員工一起慶祝我們成立 100 週年。對於 Applied 和我們在世界各地的才華橫溢的團隊來說，這是一個非常自豪和欣慰的時刻。我們豐富的歷史和文化將仍然是我們未來戰略和發展的指導框架，我們重要的供應商和業務合作夥伴每天都在努力幫助我們服務客戶並提升我們在整個行業的領先技術能力。

So a few key points and areas I want to emphasize to provide more detail on what's underpinning our performance and opportunity moving forward. As it relates to underlying demand, we saw positive momentum sustaining across many areas of our business during the quarter. Sales growth held strong throughout the quarter and exceeded our expectations. Sequential sales rates were above normal seasonal patterns, including solid trends through -- or during December. While order rates are slowing to more normalized level in some areas and markets, as expected, customer commentary remains fairly positive, and we've yet to see any meaningful slowdown to date. We are mindful of the ongoing cross currents facing the broader economy, which likely will continue to impact industry-wide activity in the near term.

因此，我想強調幾個關鍵點和領域，以提供更多關於支持我們的表現和機會向前發展的細節。由於與潛在需求相關，我們在本季度看到我們業務的許多領域都保持著積極的勢頭。整個季度的銷售增長保持強勁，超出了我們的預期。環比銷售率高於正常的季節性模式，包括整個 12 月或 12 月的穩定趨勢。正如預期的那樣，雖然某些地區和市場的訂單率正在放緩至更正常的水平，但客戶評論仍然相當積極，迄今為止我們還沒有看到任何有意義的放緩。我們注意到更廣泛的經濟面臨的持續交叉趨勢，這可能會在短期內繼續影響整個行業的活動。

That said, we remain constructive on our position and growth prospects long term, with our first half performance reinforcing this view. Of note, we believe we're benefiting from a more diverse mix of end markets and growth tailwinds. This is partially tied to our multichannel strategy and business evolution in recent years. As we've highlighted before, we are favorably positioned to capitalize on key secular growth trends, gaining momentum across the North American industrial sector, including greater infrastructure spending, reshoring and aging and scarce technical labor force and incremental growth opportunities resulting from government stimulus spending.

儘管如此，我們仍然對我們的長期地位和增長前景持建設性態度，我們上半年的表現強化了這一觀點。值得注意的是，我們相信我們正在受益於終端市場和增長順風的更多樣化組合。這部分與我們近年來的多渠道戰略和業務發展有關。正如我們之前強調的那樣，我們處於有利地位，可以利用關鍵的長期增長趨勢，在整個北美工業部門獲得動力，包括增加基礎設施支出、回流和老齡化以及稀缺的技術勞動力和政府刺激支出帶來的增量增長機會.

Similar to last quarter, customers continue to work through elevated backlogs. They're also embracing a higher level of technical maintenance requirements and capital spending focused on reinforcing supply chains and equipment within their production facilities. This is particularly meaningful considering an aged U.S. production infrastructure.

與上一季度類似，客戶繼續處理積壓的訂單。他們還接受更高水平的技術維護要求和資本支出，重點是加強其生產設施內的供應鍊和設備。考慮到美國生產基礎設施老化，這一點尤其有意義。

Service reliability and efficient access to leading suppliers, premium brands and technologies are more critical than ever. Overall, this is supporting demand for our comprehensive maintenance and engineering solutions.

服務可靠性和對領先供應商、優質品牌和技術的高效訪問比以往任何時候都更加重要。總體而言，這是對我們綜合維護和工程解決方案的支持需求。

We're also executing on a number of internal initiatives aimed at driving greater sales force effectiveness. We're using more analytics and various sales process tools to identify and capture new business opportunities. Ongoing talent investments continue to supplement our sales momentum as well. In addition, we're seeing solid traction with our cross-selling initiatives from flow control products supporting process maintenance to emerging robotic technologies addressing labor and safety initiatives at our customers' facilities. The full suite of our technical solutions we offer today is meaningful to our value proposition. Our teams across our multichannels are increasingly collaborating and solving problems for our customers as they face labor constraints, reassess supply chain strategies and embrace required technology investments. More and more, our customers recognize us as a leading solutions provider, integral to their most valuable production assets and supply chain reliability.

我們還在執行一些旨在提高銷售人員效率的內部計劃。我們正在使用更多的分析和各種銷售流程工具來識別和捕捉新的商機。持續的人才投資也繼續補充我們的銷售勢頭。此外，從支持流程維護的流量控制產品到解決客戶設施中的勞工和安全舉措的新興機器人技術，我們的交叉銷售舉措帶來了強勁的吸引力。我們今天提供的全套技術解決方案對我們的價值主張意義重大。我們跨多渠道的團隊越來越多地協作並為我們的客戶解決問題，因為他們面臨勞動力限制、重新評估供應鏈戰略並接受所需的技術投資。我們的客戶越來越多地將我們視為領先的解決方案提供商，是他們最有價值的生產資產和供應鏈可靠性不可或缺的一部分。

Many of these internal sales growth initiatives have been instrumental to our Service Center segment results, where organic sales growth exceeded 20% for the third straight quarter. In addition, our local service centers continue to benefit from a productive U.S. manufacturing backdrop and related demand for brake-fix MRO support. They also remain focused on managing ongoing inflationary pressures and working effectively through supplier price increases.

許多這些內部銷售增長舉措對我們服務中心部門的業績起到了重要作用，該部門的有機銷售增長連續第三個季度超過 20%。此外，我們當地的服務中心繼續受益於富有成效的美國製造業背景和對製動修復 MRO 支持的相關需求。他們還繼續專注於管理持續的通貨膨脹壓力，並通過提高供應商價格來有效運作。

Gradual increases in infrastructure spending are driving greater demand from our aggregate mining and machinery customers. We also believe growth opportunities are rising as customers continue to consolidate their spend with more capable distributors, offering leading technical support and solutions. This is particularly relevant given our market focus around critical motion and powertrain products in demanding applications, including notable requirements around supplier brands and local service reliability. We did see some slowing in select end markets during the quarter, such as metals, milling and lumber and wood, however, booking levels remain relatively firm month-to-date in January as customers reset budgets and remain generally productive.

基礎設施支出的逐步增加正在推動我們的採礦和機械客戶的需求增加。我們還相信，隨著客戶繼續鞏固他們與更有能力的分銷商的支出，提供領先的技術支持和解決方案，增長機會正在增加。鑑於我們的市場重點是要求苛刻的應用中的關鍵運動和動力總成產品，包括對供應商品牌和本地服務可靠性的顯著要求，這一點尤為重要。我們確實看到本季度特定終端市場有所放緩，例如金屬、銑削和木材，但是，由於客戶重新調整預算並保持普遍的生產力，1 月份的預訂水平仍然相對堅挺。

While our Service Center segment is not immune to cycles and potential slower industrial production activity in coming quarters, we believe this segment is exposed to more secular and company-specific tailwinds today than in prior cycles, potentially providing a greater level of sales support if a slower environment does manifest.

雖然我們的服務中心部門在未來幾個季度不能倖免於週期和潛在的工業生產活動放緩，但我們認為，與之前的周期相比，該部門今天面臨更多長期和公司特定的順風，如果較慢的環境確實表現出來。

Within our Engineered Solutions segment, which includes our fluid power, flow control and automation offerings, organic sales growth accelerated 300 basis points from last quarter, increasing over 21% year-over-year despite a meaningful prior year comp of 19% growth. Backlog strength is providing solid revenue coverage with no material signs of cancellations at this point. Modest improvement in some areas of the supply chain is helping release shipments of various system assemblies previously pent up by component shortages. In addition, underlying growth prospects remain favorable within our core fluid power, industrial and off-highway mobile verticals. Our technical and engineering capabilities are in greater demand from smaller-tier OEMs as they face rapid innovation and accelerate integration of advanced features into their equipment.

在我們的工程解決方案部門（包括我們的流體動力、流量控制和自動化產品）中，有機銷售增長比上一季度加快了 300 個基點，同比增長超過 21%，儘管去年同期增長了 19%。積壓實力正在提供穩固的收入覆蓋，目前沒有取消的實質跡象。供應鏈某些領域的適度改善正在幫助釋放以前因組件短缺而被抑制的各種系統組件的出貨量。此外，我們的核心流體動力、工業和非公路移動垂直領域的潛在增長前景仍然看好。較小級別的 OEM 對我們的技術和工程能力有更大的需求，因為他們面臨快速創新並加速將高級功能集成到他們的設備中。

We are also integral to our customers' sustainability initiatives, from enhancing the overall efficiency and life cycle of hydraulic systems and power units to helping design and integrate new electrification features within fluid power systems. While we're in the early innings of the development of these opportunities, they are positively influencing our business funnel and represent an emerging area of potential growth for Applied longer term.

我們也是客戶可持續發展計劃不可或缺的一部分，從提高液壓系統和動力裝置的整體效率和生命週期到幫助設計和集成流體動力系統中的新電氣化功能。雖然我們處於開發這些機會的早期階段，但它們對我們的業務漏斗產生了積極影響，並代表了 Applied 長期潛在增長的新興領域。

In addition, demand and booking levels remain solid for our higher-margin process flow control products and solutions. MRO activity and maintenance project spending on process infrastructure remains positive in core end markets, such as chemicals, refining, petrochemical, utilities and metals. We also continue to benefit from our customers' decarbonization efforts and other required infrastructure investments as end markets transition around new energy requirements. Additionally, we are seeing sustained progress in cross-selling our flow control solutions through our service center network as we connect customers to these leading process capabilities.

此外，我們利潤率較高的過程流量控制產品和解決方案的需求和預訂水平依然穩健。 MRO 活動和過程基礎設施的維護項目支出在核心終端市場仍然是積極的，例如化學品、煉油、石化、公用事業和金屬。隨著終端市場圍繞新能源需求的轉變，我們還繼續受益於客戶的脫碳努力和其他所需的基礎設施投資。此外，隨著我們將客戶與這些領先的流程能力聯繫起來，我們在通過服務中心網絡交叉銷售我們的流量控制解決方案方面取得了持續進展。

Our strategic expansion into flow control back in 2018 is a great example of the evolution of our channel capabilities and end market mix that we believe is providing more resiliency to our growth and margin profile today.

我們在 2018 年向流量控制的戰略擴張是我們渠道能力和終端市場組合演變的一個很好的例子，我們認為這為我們今天的增長和利潤率狀況提供了更大的彈性。

We continue to make further progress expanding our advanced automation platform as well. We saw solid organic sales growth in the quarter and underlying order momentum remains healthy. Customer interest and new business opportunities are being driven by labor constraints and evolving production considerations. These trends are expanding the need for our leading engineering capabilities across functions such as machine tending, palletizing and quality control. We are making traction with our greenfield expansion initiatives and developing new approaches to best serve our embedded customer base and further enhance our market position, including through proprietary turnkey solutions and leading application expertise.

我們繼續在擴展我們先進的自動化平台方面取得進一步進展。本季度我們看到穩健的有機銷售增長，基本訂單勢頭保持健康。勞動力限制和不斷發展的生產考慮因素正在推動客戶興趣和新商機。這些趨勢擴大了對我們領先的工程能力的需求，涵蓋機器管理、碼垛和質量控制等職能。我們正在通過我們的綠地擴張計劃和開發新方法來為我們的嵌入式客戶群提供最好的服務，並進一步提升我們的市場地位，包括通過專有的交鑰匙解決方案和領先的應用專業知識。

In addition, we announced the acquisition of Automation, Inc. in November, which represents the fifth automation acquisition over the past 4 years. With annual sales around $25 million, the transaction further optimizes our automation footprint in the Midwest, as well as our strategy of providing leading next-generation solutions around machine vision, robotics and motion control. We welcome Automation, Inc. and look forward to leveraging their capabilities going forward.

此外，我們於 11 月宣布收購 Automation, Inc.，這是過去 4 年中的第五次自動化收購。該交易的年銷售額約為 2500 萬美元，進一步優化了我們在中西部的自動化足跡，以及我們圍繞機器視覺、機器人和運動控制提供領先的下一代解決方案的戰略。我們歡迎 Automation, Inc.，並期待在未來利用他們的能力。

Overall, the momentum sustaining across our core operations and emerging solutions is encouraging. At the same time, our teams remain focused on driving strong returns as this growth continues to manifest through both consistent execution and continuous improvement actions.

總體而言，我們核心業務和新興解決方案的持續發展勢頭令人鼓舞。與此同時，我們的團隊仍然專注於推動強勁的回報，因為這種增長通過一致的執行和持續的改進行動繼續體現出來。

For those that have been around Applied for a while, you know we have a deeply ingrained culture of operational execution and cost accountability. This remains apparent as we continue to manage inflationary pressures and drive high-teen incremental margins despite ongoing LIFO headwinds. At the same time, we've significantly improved our return on capital profile over the past several years, hitting strong double-digit levels in recent quarters, highlighting the value creation potential embedded across our business and strategy. And lastly, we ended the quarter with a healthy balance sheet and net leverage at 1x and over $1 billion in balance sheet capacity. Our M&A pipeline is active across our priority areas of fluid power, flow control and automation. We remain disciplined as always and continue to evaluate a number of attractive M&A opportunities that could enhance our growth and competitive position going forward.

對於那些在 Applied 工作了一段時間的人，您知道我們擁有根深蒂固的運營執行和成本問責文化。這一點仍然很明顯，因為我們繼續管理通貨膨脹壓力並推動高青少年增量利潤率，儘管持續存在 LIFO 逆風。與此同時，我們在過去幾年顯著改善了資本回報率，在最近幾個季度達到了強勁的兩位數水平，突顯了我們業務和戰略中蘊含的價值創造潛力。最後，我們以健康的資產負債表和 1 倍的淨槓桿率以及超過 10 億美元的資產負債表容量結束了本季度。我們的併購渠道活躍於流體動力、流量控制和自動化等優先領域。我們一如既往地保持紀律，並繼續評估一些有吸引力的併購機會，這些機會可以促進我們的增長和未來的競爭地位。

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

此時，我會將電話轉給戴夫，了解有關我們財務業績和前景的更多詳細信息。

Thanks, Neil, and good morning, everyone. First, another reminder that our supplemental quarterly recap is available on our investor site for your additional reference.

謝謝，尼爾，大家早上好。首先，再次提醒您，我們的補充季度回顧可在我們的投資者網站上獲得，供您額外參考。

Turning now to details of our financial performance in the quarter. Consolidated sales increased 20.9% over the prior year quarter. Acquisitions contributed 50 basis points of growth, which was more than offset by a 70-basis-point headwind from foreign currency translation. The number of selling days in the quarter was consistent year-over-year. [Due] to these factors, sales increased 21.1% on an organic basis.

現在轉向我們本季度財務業績的細節。綜合銷售額比上年同期增長 20.9%。收購貢獻了 50 個基點的增長，這被外幣換算帶來的 70 個基點的逆風所抵消。本季度的銷售天數與去年同期持平。 [由於]這些因素，銷售額有機增長 21.1%。

As it relates to pricing, we estimate product pricing was a mid-single-digit percentage contributor to the year-over-year sales growth in the quarter. As a reminder, this assumption only reflects measurable top line contribution from price increases on SKUs sold in both year-over-year periods.

由於與定價相關，我們估計產品定價對本季度銷售額同比增長的貢獻率是中等個位數。提醒一下，這一假設僅反映了兩個同比期間銷售的 SKU 價格上漲帶來的可衡量的收入貢獻。

Turning now to sales performance by segment. As highlighted on Slide 6 and 7 of the presentation, sales in our Service Center segment increased 21.1% year-over-year on an organic basis when excluding the impact of foreign currency. Year-over-year sales growth strengthened across our large national accounts during the quarter. We also continued to see favorable growth from smaller local accounts. When looking at the sequential increase in segment growth, the biggest end market contributors were chemicals, pulp and paper, aggregates, rubber and plastics and mining. We also saw solid fluid power aftermarket sales growth in the quarter, reflecting strong execution and service support from our leading fluid power MRO specialist network.

現在轉向按部門劃分的銷售業績。正如演示文稿的幻燈片 6 和 7 所強調的那樣，在排除外匯影響的情況下，我們服務中心部門的銷售額同比有機增長 21.1%。本季度，我們大型國民賬戶的銷售額同比增長有所增強。我們還繼續看到較小本地賬戶的有利增長。在查看細分市場增長的環比增長時，最大的終端市場貢獻者是化學品、紙漿和造紙、骨料、橡膠和塑料以及採礦。我們還看到本季度流體動力售後市場銷售額穩步增長，反映出我們領先的流體動力 MRO 專家網絡的強大執行力和服務支持。

Within our Engineered Solutions segment, sales increased 22.5% over the prior year quarter, with acquisitions contributing 140 basis points of growth. This reflects 2 months of contribution from our Automation Inc. acquisition, which closed in early November. On an organic basis, segment sales increased 21.1% year-over-year and over 41% on a 2-year stack basis. Segment sales growth continues to be supported by strong backlog levels across our Fluid Power division, sustained customer MRO and CapEx spending into process flow infrastructure and ongoing healthy demand for our next-generation automation solutions. Extended supplier lead times and inbound component delays continued to weigh on segment sales growth during the quarter, though we did see some modest improvement in lead times and supplier deliveries benefiting system completions and shipment activity during the quarter.

在我們的工程解決方案部門，銷售額比去年同期增長 22.5%，收購貢獻了 140 個基點的增長。這反映了我們 Automation Inc. 收購的 2 個月貢獻，該收購於 11 月初完成。在有機基礎上，分部銷售額同比增長 21.1%，按 2 年疊加計算增長超過 41%。流體動力部門大量積壓、持續的客戶 MRO 和流程基礎設施資本支出支出以及對我們下一代自動化解決方案的持續健康需求繼續支持部門銷售增長。延長的供應商交貨時間和入庫組件延遲繼續對本季度的部門銷售增長構成壓力，儘管我們確實看到交貨時間和供應商交付的一些適度改善有利於本季度的系統完成和裝運活動。

Moving now to gross margin performance. As highlighted on Page 8 of the deck, gross margin of 29.1% decreased 28 basis points compared to the prior year level of 29.4%. During the quarter, we recognized LIFO expense of $8.9 million compared to $4.7 million in the prior year quarter. This net LIFO headwind had an unfavorable 39-basis-point year-over-year impact on gross margins during the quarter and reflects supplier product inflation and ongoing inventory expansion year-to-date.

現在轉向毛利率表現。正如幻燈片第 8 頁所強調的那樣，與去年同期的 29.4% 相比，29.1% 的毛利率下降了 28 個基點。本季度，我們確認 LIFO 費用為 890 萬美元，而去年同期為 470 萬美元。這一淨後進先出逆風對本季度的毛利率產生了 39 個基點的不利影響，反映了供應商產品通脹和年初至今的持續庫存擴張。

We also faced a difficult comparison for favorable mix and performance, which boosted gross margins in the prior year quarter. On a sequential basis, gross margin performance increased over 20 basis points during the quarter, and was slightly ahead of our expectations. Overall, we continue to manage broader inflationary dynamics well, reflecting broad-based channel execution, pricing actions and ongoing margin countermeasures.

我們還面臨著有利的組合和業績的艱難比較，這提高了去年同期的毛利率。按順序計算，本季度毛利率表現增長超過 20 個基點，略高於我們的預期。總體而言，我們繼續很好地管理更廣泛的通脹動態，反映出基礎廣泛的渠道執行、定價行動和持續的利潤率對策。

As it relates to our operating costs, selling, distribution and administrative expenses increased 9% on an organic constant currency basis compared to prior year levels. SG&A expense was 18.4% of sales during the quarter, down from 20.5% during the prior year quarter, which is a new record low. Despite ongoing inflationary headwinds, including higher employee-related expenses, our teams are doing a great job of controlling costs in the current environment as we leverage our operational excellence initiatives, shared services model and technology investments.

由於與我們的運營成本、銷售、分銷和管理費用相關，與上一年的水平相比，在有機固定貨幣基礎上增加了 9%。本季度 SG&A 費用佔銷售額的 18.4%，低於去年同期的 20.5%，創歷史新低。儘管通脹逆風持續存在，包括與員工相關的費用增加，但我們的團隊在利用我們的卓越運營計劃、共享服務模型和技術投資時，在當前環境下控製成本方面做得很好。

Combined with the robust sales growth we saw in the quarter, EBITDA increased 36% over prior levels, while EBITDA margins expanded 128 basis points over the prior year to 11.8%. This includes an unfavorable 39-basis-point year-over-year impact due to LIFO. We continue to see strong operating leverage, resulting in incremental margins in the high-teens despite the ongoing LIFO headwind year-over-year. Combined with the reduced interest expense, reported earnings of $2.05 per share increased 41% from prior year earnings per share levels. I am pleased to highlight that this represents the second consecutive quarter of greater than 40% growth in EPS and the eighth consecutive quarter of adjusted EPS growth exceeding at least 25%.

結合我們在本季度看到的強勁銷售增長，EBITDA 比之前水平增長了 36%，而 EBITDA 利潤率比上一年擴大了 128 個基點，達到 11.8%。這包括後進先出法導致的 39 個基點的同比不利影響。我們繼續看到強勁的運營槓桿，儘管後進先出法同比持續逆風，但仍導致高青少年的利潤率增加。加上利息支出減少，報告的每股收益為 2.05 美元，比上年每股收益水平增長 41%。我很高興地強調，這是連續第二個季度 EPS 增長超過 40%，並且連續第八個季度調整後 EPS 增長至少超過 25%。

Moving to our cash flow performance. Cash generated from operating activities during the second quarter was $62.9 million, while free cash flow totaled $55.6 million. Compared to the prior year, free cash flow nearly doubled, reflecting higher earnings and stabilizing working capital investment. Looking ahead, we expect easing working capital trends into the second half of our fiscal year, including some benefit from the conversion of work in process inventories tied to our Engineered Solutions segment as well as continued benefits from our working capital initiatives.

轉向我們的現金流量表現。第二季度經營活動產生的現金為 6290 萬美元，自由現金流總計 5560 萬美元。與上一年相比，自由現金流幾乎翻了一番，反映出更高的收益和穩定的營運資本投資。展望未來，我們預計在本財年下半年，營運資金趨勢將有所緩和，包括從與我們的工程解決方案部門相關的在製品庫存轉換中獲益，以及從我們的營運資金計劃中持續獲益。

From a balance sheet perspective, we ended December with approximately $166 million of cash on hand and net leverage at 1.0x EBITDA, which is below the prior year level of 1.6x adjusted EBITDA. Our leverage remains below our normalized range of 2.0 to 2.5x, partially reflecting the significant EBITDA growth we have experienced in recent years as well as ongoing debt reduction. We also remain disciplined with our M&A approach, focused on targets and valuation supporting our return requirements and strategic priorities.

從資產負債表的角度來看，截至 12 月末，我們的手頭現金和淨槓桿約為 1.66 億美元，為 1.0 倍 EBITDA，低於去年 1.6 倍的調整後 EBITDA 水平。我們的槓桿率仍低於 2.0 至 2.5 倍的正常範圍，部分反映了我們近年來經歷的顯著 EBITDA 增長以及持續的債務削減。我們還嚴格遵守我們的併購方法，專注於支持我們的回報要求和戰略重點的目標和估值。

As it relates to recent areas of capital deployment, we announced in our press release today that we increased our quarterly dividend for the 14th time in 12 years. In addition, as Neil highlighted, we're excited by the acquisition of Automation Inc. in early November, which further enhances our automation portfolio. Our strong balance sheet, industry position and historical M&A focus are valuable attributes for our strategic acquisitions as they look to align their business and associates with the most capable and supportive organizations to best drive future growth and success.

由於涉及最近的資本部署領域，我們在今天的新聞稿中宣布，我們在 12 年內第 14 次增加了季度股息。此外，正如 Neil 強調的那樣，我們對 11 月初收購 Automation Inc. 感到興奮，這進一步增強了我們的自動化產品組合。我們強大的資產負債表、行業地位和歷史併購重點是我們戰略收購的寶貴屬性，因為他們希望將他們的業務和合作夥伴與最有能力和支持性的組織聯繫起來，以最好地推動未來的增長和成功。

Overall, we're in a great position to continue to drive our strategic priorities going forward, including remaining proactive across our organic expansion initiatives as well as executing ongoing accretive M&A.

總體而言，我們處於有利地位，可以繼續推動我們的戰略重點向前發展，包括在我們的有機擴張計劃中保持積極主動，以及執行正在進行的增值併購。

Turning now to our outlook. As indicated in today's press release and detailed on Page 10 of our presentation, we are raising full year fiscal 2023 guidance to reflect the strong second quarter performance and an improved outlook for the second half of the year. We now project EPS in the range of $8.10 to $8.50 per share based on sales growth of 13% to 15%, and EBITDA margins of 11.5% to 11.7%. Previously, our guidance assumes EPS of $6.90 to $7.55 per share, sales growth of 5% to 9% and EBITDA margins of 10.9% to 11.2%.

現在轉向我們的展望。正如今天的新聞稿和我們演示文稿第 10 頁所指出的那樣，我們正在上調 2023 財年全年指引，以反映強勁的第二季度業績和下半年改善的前景。基於 13% 至 15% 的銷售額增長和 11.5% 至 11.7% 的 EBITDA 利潤率，我們現在預計每股收益在 8.10 美元至 8.50 美元之間。此前，我們的指導假設每股收益為 6.90 美元至 7.55 美元，銷售額增長 5% 至 9%，EBITDA 利潤率為 10.9% 至 11.2%。

We are encouraged by our year-to-date performance and see ongoing opportunities supporting our growth and earnings potential in the back half of fiscal 2023. That said, our sales outlook continues to take into consideration prior economic uncertainty as well as ongoing inflationary and supply chain pressures. We expect ongoing moderation in order rates and more modest pricing contribution in the second half of the year. We will also face more difficult sales growth comparisons in coming months, including most notably during our fiscal fourth quarter. Our updated guidance incorporates these various factors.

我們對年初至今的業績感到鼓舞，並看到持續的機會支持我們在 2023 財年下半年的增長和盈利潛力。也就是說，我們的銷售前景繼續考慮到先前的經濟不確定性以及持續的通貨膨脹和供應鏈壓力。我們預計今年下半年訂單率將持續放緩，定價貢獻將更加溫和。我們還將在未來幾個月面臨更困難的銷售增長比較，包括最顯著的第四財季。我們更新的指南包含了這些不同的因素。

In addition, based on month-to-date sales trends in January, and our near-term outlook, we currently project fiscal third quarter organic sales to grow by a low- to mid-teen percentage over the prior year quarter. Please note that prior year sales comparisons are more difficult in February and March relative to January. We are also assuming some moderation in underlying billings following strong backlog conversion and back order shipments in recent months, combined with easing demand tied to the uncertain macro environment. We expect gross margins to be relatively unchanged from fiscal '23 second quarter levels of around 29%. In addition, we assume incremental margins in the mid-teens based on our low- to mid-teens sales growth increase assumption for the quarter, combined with considerations around our annual focus merit increase effective January 1, ongoing inflationary pressures and reduced operating leverage as sales growth eases.

此外，根據 1 月至今的銷售趨勢和我們的近期展望，我們目前預計第三財季的有機銷售額將比去年同期增長 15% 至 15%。請注意，與 1 月相比，2 月和 3 月的上一年銷售比較更加困難。我們還假設在近幾個月強勁的積壓轉換和未交貨訂單出貨量之後，基礎賬單有所放緩，再加上與不確定的宏觀環境相關的需求放緩。我們預計毛利率與 23 財年第二季度 29% 左右的水平相比相對不變。此外，我們根據我們本季度中低至中等的銷售增長假設，結合我們從 1 月 1 日起生效的年度重點價值增長、持續的通脹壓力和運營槓桿的降低，假設中等的利潤率增加銷售增長放緩。

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

有了這個，我現在將把電話轉回給 Neil 以徵求一些最終意見。

Thanks, Dave. So to wrap up, I am extremely proud of the Applied team and our performance through the first half of fiscal 2023. The underlying industrial backdrop remains promising long term across North America, and we are benefiting from our industry position, the ongoing build-out of our advanced solutions and operational focus. We believe various secular and structural tailwinds are providing support to the broader demand environment. This includes an incremental focus on refreshing and expanding industrial production infrastructure and capacity across North America and greater demand for advanced engineered solutions, particularly as customers manage through labor constraints and accelerate actions to reduce energy consumption.

謝謝，戴夫。因此，總而言之，我為 Applied 團隊和我們在 2023 財年上半年的表現感到非常自豪。從長遠來看，整個北美的潛在工業背景仍然充滿希望，我們正受益於我們的行業地位，正在進行的擴建我們先進的解決方案和運營重點。我們認為，各種長期和結構性順風正在為更廣泛的需求環境提供支持。這包括逐步關注更新和擴大整個北美的工業生產基礎設施和產能，以及對先進工程解決方案的更大需求，尤其是在客戶應對勞動力限制並加快行動以減少能源消耗的情況下。

Our strategy and growth initiatives are strongly aligned with these trends, and the requirements our customers are facing.

我們的戰略和增長計劃與這些趨勢以及我們客戶面臨的要求高度一致。

Consistent with our commentary from last quarter, the uncertain economic backdrop is reducing transparency into the cadence of underlying orders and growth in the interim. As expected in our updated guidance, we continue to take a cautious approach to our outlook and anticipate a moderating growth environment in coming quarters. That said, we believe any near-term slowdown could be transitional and short in nature given positive tailwinds underpinning the industrial sector, and a greater focus on supply chain reliability in the wake of meaningful shocks faced in recent years.

與我們上一季度的評論一致，不確定的經濟背景正在降低基本訂單節奏和過渡期增長的透明度。正如我們更新後的指引所預期的那樣，我們繼續對我們的前景採取謹慎的態度，並預計未來幾個季度的增長環境將放緩。也就是說，鑑於支撐工業部門的積極順風，以及在近年來面臨重大衝擊之後更加關注供應鏈可靠性，我們認為任何近期放緩都可能是過渡性和短期性的。

In addition, we entered the second half of fiscal 2023 with our balance sheet and liquidity in a solid position and the opportunity to drive stronger cash generation, reflecting our improved margin profile and normalizing working capital requirements. This will support ongoing strategic growth opportunities and shareholder returns going forward.

此外，進入 2023 財年下半年，我們的資產負債表和流動性處於穩固狀態，並有機會推動更強勁的現金產生，這反映了我們改善的利潤率狀況和正常化的營運資金需求。這將支持持續的戰略增長機會和股東回報。

And lastly, following our first half performance, we've made meaningful initial progress toward our intermediate financial targets of $5 billion in revenue and 12% EBITDA margins. These targets provide clear milestones to achieve significant value creation for all of Applied and our key stakeholders long term. As always, we thank you for your continued support.

最後，繼我們上半年的業績之後，我們在實現 50 億美元收入和 12% EBITDA 利潤率的中期財務目標方面取得了有意義的初步進展。這些目標提供了明確的里程碑，以長期為所有 Applied 和我們的主要利益相關者創造重大價值。一如既往，我們感謝您一直以來的支持。

And with that, we'll open up the lines for your questions.

有了這個，我們將為您的問題打開線路。

(Operator Instructions) Our first phone question is from the line of Ken Newman with KeyBanc Capital Markets.

（操作員說明）我們的第一個電話問題來自 KeyBanc Capital Markets 的 Ken Newman。

Congrats on the excellent quarter. First question for me. I'm curious if you could just contextualize what your macro outlook assumes for the back half. I think last quarter, you mentioned that the outlook assumed to a 500-basis-point contraction in IT year-over-year in your fiscal back half. And is that still your expectation? Or just how does that evolve?

祝賀這個出色的季度。我的第一個問題。我很好奇你是否可以將你的宏觀前景對後半部分的假設背景化。我想上個季度，你提到了在你的財政後半段，前景假設 IT 同比收縮 500 個基點。這仍然是你的期望嗎？或者它是如何演變的？

So Ken, I think one way we're looking at it -- if we take it at the midpoint, we would assume low-single-digit to flattish year-over-year IP in the third quarter and then low-single-digit to perhaps a mid-single-digit contraction in the fourth quarter. And if we think about or we look at perhaps the core manufacturing or capital goods portion of those markets ex-inflation, it's probably closer to the low-single-digit to mid-single-digit growth in Q3 and then perhaps flattish to a low-single-digit year-over-year contraction in the fourth quarter. So we still believe the consumer-oriented industries are facing more of this potential contraction in some of our core industrial markets.

所以肯，我認為我們看待它的一種方式 - 如果我們把它放在中點，我們會假設第三季度的低個位數到持平 IP，然後是低個位數到第四季度可能出現中個位數收縮。如果我們考慮或看看這些市場的核心製造業或資本貨物部分（排除通貨膨脹），它可能更接近第三季度的低個位數至中個位數增長，然後可能持平至低位-第四季度同比收縮個位數。因此，我們仍然認為，在我們的一些核心工業市場中，以消費者為導向的行業面臨著更多的潛在收縮。

That's helpful. For my follow-up, I -- you talked a little bit about pricing, and obviously, it's been a positive contributor here similar to the prior quarter. Any way you can just kind of help us understand the moving buckets within the organic growth outlook? Are you still expecting pricing to mirror 2022 at this point? And then any other way to talk about the benefits of better mix versus volume?

這很有幫助。對於我的後續行動，我 - 你談到了一些關於定價的問題，顯然，與上一季度類似，它在這裡是一個積極的貢獻者。您有什麼辦法可以幫助我們了解有機增長前景中的變化？您是否仍期望此時定價能夠反映 2022 年？然後還有其他任何方式來談論更好的混合與體積的好處嗎？

Yes. So I can start and then probably Dave will come in. As I think about pricing, we would still see increases coming from suppliers. If we compare perhaps to a year ago, they're lower in count and frequency, but we still expect annual lifts or increases coming from suppliers into this time. As we also think about the backdrop of things not easing in an inflationary environment, things around the labor, the supply chain and what has been and continues to be a good demand environment that we don't think those abate. So we think there's going to be pricing contribution to the overall business and to the top line results as we work through the rest of the fiscal 2023, albeit perhaps at a lower level than we had in the last quarter.

是的。所以我可以開始，然後戴夫可能會進來。當我考慮定價時，我們仍然會看到來自供應商的增長。如果我們與一年前相比，它們的數量和頻率都較低，但我們仍然預計供應商每年都會提升或增加到這個時候。當我們還考慮到通脹環境下事情沒有緩解的背景時，圍繞勞動力、供應鏈的事情以及我們認為這些情況不會減弱的已經並將繼續是良好的需求環境。因此，我們認為，在 2023 財年剩餘時間裡，我們將對整體業務和最高業績做出定價貢獻，儘管可能低於上一季度的水平。

And early, as we talked last call, still assume we're going to see that tail off some modest incremental pricing, as Neil has indicated in response to some of those factors, but kind of more of a -- kind of lower, obviously, tail as we move off here got to be below mid-single digits as we get into Q3 and lower single digits as we get into Q4. We're talking about the comp issue.

早些時候，正如我們在上次電話會議上談到的那樣，我們仍然假設我們會看到一些適度的增量定價，正如尼爾在回應其中一些因素時所指出的那樣，但更明顯的是——有點低，當我們離開這裡時，尾巴在我們進入 Q3 時必須低於中個位數，而在我們進入 Q4 時必須低於個位數。我們正在談論補償問題。

And then you referenced the mix side of it, we're still encouraged that as we bring more advanced solutions into the business, we have the opportunity for positive mix contributions around our products and solutions, some of the end markets that we're participating in. So those should set up favorably as well. And we've said in the remarks, right, we will believe, for Q3, in the second half kind of gross margins in a similar range.

然後你提到了它的混合方面，我們仍然感到鼓舞，因為我們將更先進的解決方案引入業務，我們有機會圍繞我們的產品和解決方案做出積極的混合貢獻，我們正在參與的一些終端市場in. 所以那些也應該設置得很好。我們在評論中說過，對，我們相信，對於第三季度，下半年的毛利率會在類似的範圍內。

Understood. Maybe if I could just squeeze 1 more in here. You talked about the benefit of infrastructure spending and federal stimulus being a stronger secular tailwind versus prior cycles. Is there any way that you can help us size what the exposure is for AIT in those end markets today? And maybe what kind of benefit are you assuming, if any, in the new guide?

明白了。也許如果我能在這裡再擠 1 個。您談到了基礎設施支出和聯邦刺激措施的好處是與之前的周期相比，長期順風更為強勁。您有什麼方法可以幫助我們確定 AIT 在當今這些終端市場中的風險敞口嗎？也許您在新指南中假設了什麼樣的好處（如果有的話）？

So we would say it's inclusive into what we think about into the second half. With that said, I think some of it's just getting started into that side. So that will probably be for us more color in fiscal '24 because I think it will still take some time to ramp. But if we think about our exposure to kind of some of these mid-cycle, later-cycle industries, the heavier industries, directly and indirectly, we're probably between 30% to 50% in those industries, machinery and metals and aggregate and equipment and such that are going to benefit from this infrastructure build-out, and also the technology sector that will participate in that as well, be it 5G and data warehouse and storage and others. So we think the underpinnings of that occur more late this fiscal year and really into the back half of the calendar year.

所以我們會說它包含在我們對下半年的思考中。話雖如此，我認為其中一些才剛剛開始。因此，這可能會給我們在 24 財年帶來更多色彩，因為我認為它仍需要一些時間才能實現增長。但是，如果我們考慮直接和間接地接觸其中一些中周期、後周期行業、重工業，我們可能在這些行業、機械和金屬以及聚合和設備等將從這種基礎設施建設中受益，技術部門也將參與其中，無論是 5G 和數據倉庫和存儲等。因此，我們認為它的基礎出現在本財政年度的較晚時間，並且真正進入了日曆年的後半段。

Our next question is from the line of Chris Dankert with Loop Capital.

我們的下一個問題來自 Loop Capital 的 Chris Dankert。

I guess congrats first on the near-term impressive results and on the 100-year anniversary to the whole team there. I guess kind of jumping in here, core organic growth in both business really accelerated versus the first quarter. I mean, that wasn't in our expectation, I don't think in your either. You touched on some pieces, but can you just kind of maybe sharpen up what the real driver of the outperformance in 2Q was on the kind of the core organic basis?

我想首先要祝賀近期取得的令人印象深刻的成果，並祝賀整個團隊成立 100 週年。我想有點跳進這裡，與第一季度相比，這兩項業務的核心有機增長確實加速了。我的意思是，這不在我們的預期之內，我也不認為在您的預期之內。你談到了一些問題，但你能否在核心有機基礎上加強第二季度表現出色的真正驅動因素？

Well, I think there are a few things you take it across. And we think about on our service center side, break-fix demand activity stayed strong throughout the quarter. That was positive. We're still seeing benefit coming from the cross-sell and the collaboration of those more advanced solutions is helping in that front. We think our industry position, service liability, the inventory that we have in place for some of those critical break-fix times and -- plus our local presence, all help that service center side of the business performed very well.

好吧，我認為您可以理解一些事情。我們認為在我們的服務中心方面，整個季度的中斷修復需求活動保持強勁。這是積極的。我們仍然看到交叉銷售帶來的好處，這些更先進的解決方案的協作在這方面有所幫助。我們認為我們的行業地位、服務責任、我們為一些關鍵的故障修復時間準備的庫存，以及我們在當地的存在，所有這些都有助於服務中心方面的業務表現得非常好。

Within fluid power, we saw nice execution on projects coming in. We've talked about having a productive backlog in fluid power. So the team were able to execute on a portion of that backlog as suppliers improved some availability of products or perhaps the availability of smaller componentry that was holding up a shipment going out. The automation team benefited from that and so organic growth into the 24% in that period, which was positive. And then we're seeing continued strength around flow control. And it's typically a later cycle business. And so we think that sets up well for the process flow control business and ourselves as we think about going into the second half.

在流體動力方面，我們看到了很好的項目執行情況。我們已經討論過在流體動力方面有一個富有成效的積壓。因此，隨著供應商提高了某些產品的可用性，或者可能是阻礙發貨的較小組件的可用性，團隊能夠執行部分積壓訂單。自動化團隊從中受益，有機增長到那個時期的 24%，這是積極的。然後我們看到流量控制方面的持續優勢。而且它通常是較晚的周期業務。因此，當我們考慮進入下半年時，我們認為這對流程控制業務和我們自己都有好處。

Got you. So it really is a lot of pieces all pulling together. That's great color. And just kind of a follow-up here. Inventory was up again sequentially, but days are still kind of well below the long-term average. Maybe how should we think about inventory positioning today and maybe working capital into the back half of the year here?

明白了所以它真的是很多部分都聚集在一起。那是很棒的顏色。這裡只是一種跟進。庫存再次環比上升，但天數仍遠低於長期平均水平。也許我們應該如何考慮今天的庫存定位以及下半年的營運資金？

I'd expect working capital, as we talked about in the script, to be a bit of a tailwind as we move across Q3, but more pronounced in Q4. So we did see some stabilization, to your point, we did see further increase, once again, really driven by those project-focused businesses and that strong backlog position that we enjoy there. Did see some stabilization though, as I said, as we move through November and December in terms of inventory levels, would anticipate kind of that being flattish as we move across Q3 as we continue to work through some of that project backlog and see some of those supplier constraints start to ease further. And then we'd be targeting a reduction in inventory as we move in Q4. So a tailwind when you think about the cash generation.

正如我們在劇本中談到的那樣，我預計營運資金會在我們跨越第三季度時有點順風，但在第四季度更為明顯。所以我們確實看到了一些穩定，就你的觀點而言，我們確實看到了進一步的增長，再次真正受到那些以項目為中心的業務和我們在那裡享有的強大積壓地位的推動。不過，正如我所說，隨著我們在 11 月和 12 月的庫存水平，確實看到了一些穩定，隨著我們繼續處理一些項目積壓並看到一些，隨著我們在第三季度移動，預計這種情況會持平這些供應商限制開始進一步緩解。然後我們的目標是在第四季度移動時減少庫存。因此，當您考慮現金生成時，這是順風。

Understood. And if I could just sneak 1 last 1 in here. Given the rise in interest rates and just kind of what we're seeing in very low leverage from you guys today, I mean has the target leverage range changed from kind of that 1.5 to 3x just given what interest rates are doing, or is it still that's kind of the long-term target for debt?

明白了。如果我能在這裡偷偷最後 1 個。考慮到利率上升以及我們今天看到的非常低的槓桿率，我的意思是目標槓桿率範圍從 1.5 倍變為 3 倍只是考慮到利率的變化，或者是這仍然是債務的長期目標嗎？

We talked about longer term in a more normalized environment, 2% to 2.5% being the target, putting the balance sheet to work, working at accretive M&A that we've been so successful in driving value with. We are sensitive to the interest rate environment and the implications and leverage continue to be improved in terms of the M&A and kind of really stay focused on the priorities. So we'll be cognizant of that. But on the longer term over cycle it's still a 2 to 2.5x target in terms of that leverage ratio as we move forward. SP1.

我們談到了在一個更加規範化的環境中的長期目標，目標是 2% 到 2.5%，讓資產負債表發揮作用，進行增值併購，我們在推動價值方面非常成功。我們對利率環境很敏感，在併購方面的影響和槓桿作用不斷提高，並且真正專注於優先事項。所以我們會意識到這一點。但從長期來看，隨著我們前進，就槓桿率而言，它仍然是 2 到 2.5 倍的目標。 SP1。

(Operator Instructions) Next question is from the line of David Manthey with Baird.

（操作員說明）下一個問題來自 David Manthey 和 Baird。

To dig in a little bit more here on the guidance, just so I understand, is it a fair statement to say that your assumption for the economic backdrop has shifted a few months to the right based on your new starting point that you've seen here in the first half of the fiscal year? Or has there been, in fact, a change in your view on the depth and/or duration of the downturn?

就我的理解而言，在這裡更深入地挖掘一下指導意見，根據你所看到的新起點，你對經濟背景的假設已經向右移動了幾個月，這是否公平？財政年度上半年在這裡？或者事實上，您對經濟衰退的深度和/或持續時間的看法是否發生了變化？

I can start. David, I would say it's -- it could be a shift to the right. We know what we can see from a visibility standpoint. And so we touched on January and a solid start. We know the comps get a little more challenging in February and March in that side. And so our view is, we feel like we have very good line of sight to Q3 with that sales up to the mid-teens and expectations around margins and thus, those mid-teen incrementals. So we see that. We just can ignore what could potentially be some of these cross currents and when they develop. We know our Service Center segment in Q4 has a tougher comparable. I think last year, it was up plus 21% in the side and even around the Engineered Solutions segment, it was good last quarter as well.

我可以開始了。大衛，我想說的是——這可能是向右轉變。從可見性的角度來看，我們知道我們能看到什麼。因此，我們談到了 1 月份，這是一個堅實的開端。我們知道 comps 在 2 月和 3 月在那方面變得更具挑戰性。所以我們的觀點是，我們覺得我們對第三季度有很好的視線，銷售額達到十幾歲左右，對利潤率的期望，因此，那些十幾歲的增量。所以我們看到了。我們可以忽略其中一些潛在的交叉電流以及它們何時發展。我們知道我們在第四季度的服務中心部分具有更強的可比性。我認為去年，它在側面甚至在工程解決方案部分增加了 21%，上個季度也很好。

So we just want to be mindful as we inform or lay out the guidance.

因此，我們只想在告知或製定指南時留心。

That's very rational. You made a comment in the release that said, the business is more resilient in past -- than in past cycles due to your channel strategy. Could you elaborate on what you mean by that?

這是非常理性的。你在新聞稿中發表評論說，由於你的渠道策略，過去的業務比過去的周期更有彈性。你能詳細說明你的意思嗎？

I think it's a lot of the build-out of our capabilities, not only service centers and bearing and power transmission and the importance of those products, but what we're doing in engineered solutions around fluid power, the addition of process flow control and now the start with automation. With its run rate now at $175 million to $180 million, that's adding to our value proposition and offering that's very important to customers, plus our participation in presence, in maintenance supplies and consumables on that front. So as we build out those capabilities, very helpful because I contend the customers are looking to consolidate their spend with fewer, more capable suppliers to partner with someone that can help them deal with their labor constraints and challenges and their operational desires for much greater uptime as they continue to serve their industry demand.

我認為這很大程度上是我們能力的增強，不僅是服務中心、軸承和動力傳輸以及這些產品的重要性，還有我們在圍繞流體動力的工程解決方案中所做的工作，增加過程流量控制和現在開始自動化。現在它的運行率在 1.75 億美元到 1.8 億美元之間，這增加了我們的價值主張和對客戶非常重要的產品，加上我們在這方面的存在、維護用品和消耗品的參與。因此，當我們建立這些能力時，這非常有幫助，因為我認為客戶希望通過更少、更有能力的供應商來鞏固他們的支出，以便與能夠幫助他們應對勞動力限制和挑戰以及他們對更長正常運行時間的運營願望的人合作因為他們繼續滿足他們的行業需求。

And as we've said, kind of regardless of what depth comes at us in terms of a market slowdown, really feel like because of that more comprehensive offering, the ability to continue to drive kind of market outperformance with cross-sell, we have the ability certainly to soften that impact as we work through the next cycle as it comes. And regardless, we still know how to be operators and like I said, gauge the business accordingly as we've demonstrated through each of the downturns.

正如我們所說，無論市場放緩對我們的影響有多大，真的感覺因為提供了更全面的產品，能夠通過交叉銷售繼續推動市場表現出色，我們有隨著下一個週期的到來，我們肯定會緩和這種影響。無論如何，我們仍然知道如何成為運營商，就像我說的那樣，正如我們在每次經濟低迷時期所展示的那樣，相應地衡量業務。

Okay. I guess I'll stick with the theme of 3 questions, if it's okay with you guys. Could you talk about the average order size of an average discrete automation solution, maybe a little bit about the sales cycle there? I assume these are capital items for customers. Just anything you can share with us regarding the -- what that type of sale looks like in terms of magnitude and the sort of the length of time it takes to gear up, something like that?

好的。我想我會堅持 3 個問題的主題，如果你們不介意的話。您能否談談平均離散自動化解決方案的平均訂單量，也許可以談談那裡的銷售週期？我假設這些是客戶的資本項目。您可以與我們分享任何關於 - 這種類型的銷售在規模和準備所需的時間長度方面是什麼樣的，類似的東西？

Yes. So I don't know that I have the average order size, but let me come at it a couple of ways. I'd say; one, we are doing more to have productized solutions that can make this sales process go very quickly. And so if a customer wants to deal with labor constraints and has machine tending, and they want to have fewer operators to each fabrication equipment, they can leverage collaborative robots and perhaps have 1 operator per 4 pieces of equipment. And so that's been an area that's been helpful.

是的。所以我不知道我有平均訂單大小，但讓我用幾種方法來解決這個問題。我會說;第一，我們正在做更多的工作來提供產品化的解決方案，使這個銷售過程能夠非常快速地進行。因此，如果客戶想要處理勞動力限制並進行機器維護，並且他們希望每台製造設備的操作員更少，他們可以利用協作機器人，也許每 4 台設備配備 1 名操作員。所以這是一個很有幫助的領域。

We're doing more in palletizing and help distribution-oriented companies or to help the volume of outflows that people have dealt with challenges perhaps around warehouse labor. We're also active in [Envision] for safety-type products. And so move from manual inspection on those. So great enhancements and improvement, but also on consumer packaged goods, where you cannot have a labeling or product defect, especially if it's going to some key retailers, that packaging has to be pristine. And you just can't afford or do it effectively from a manual vision standpoint. So those systems are very helpful. So that's helping the sales process go quickly.

我們在碼垛和幫助面向分銷的公司方面做得更多，或者幫助人們處理可能圍繞倉庫勞動力的挑戰的流出量。我們還積極參與 [Envision] 安全型產品。因此，不再對這些進行手動檢查。如此巨大的增強和改進，但也適用於消費品包裝，你不能有標籤或產品缺陷，特別是如果它要賣給一些主要零售商，包裝必須是原始的。從手動視覺的角度來看，您只是負擔不起或無法有效地做到這一點。所以這些系統非常有用。所以這有助於銷售過程快速進行。

I'd say, Dave, on the other side, then we have sales engineers and application engineers that are connecting with customers, especially on our -- now our legacy service center side where we know their production equipment so well in solving a discrete automation problem or challenge. And so we'll start focused and perhaps small of how mobile or mobile and collaborative robots can help our vision or motion control type products or maybe connectivity in the plant, and we're solving small projects. And I would say not all of them are going to the level that these are extensive capital projects that they're bringing along, but they're getting approved, but they opened the door for other projects within that plant. And based on the ownership equation, of those companies into their other facilities as they look to replicate that success or impact that we could have. So we're encouraged by the business activity and the presence.

我會說，戴夫，另一方面，我們有銷售工程師和應用工程師與客戶聯繫，特別是在我們 - 現在是我們的遺留服務中心方面，我們非常了解他們的生產設備，可以解決離散自動化問題問題或挑戰。因此，我們將開始關注移動或移動和協作機器人如何幫助我們的視覺或運動控制類型的產品，或者可能是工廠中的連接，並且我們正在解決小型項目。我要說的是，並非所有人都會達到他們帶來的這些廣泛的資本項目的水平，但他們正在獲得批准，但他們為該工廠內的其他項目打開了大門。並根據所有權等式，將這些公司轉移到他們的其他設施中，因為他們希望復制我們可能擁有的成功或影響。因此，我們對商業活動和存在感到鼓舞。

It's not extremely long-cycle massive investments that customers have to undertake to positively impact their performance with automation.

客戶不必進行非常長周期的大量投資，就可以通過自動化對他們的績效產生積極影響。

Thank you. At this moment, I'm showing we have no further questions. I will now turn the call over to Mr. Schrimsher for any closing remarks. Please go ahead.

謝謝你。此刻，我表明我們沒有其他問題了。我現在將把電話轉給 Schrimsher 先生，聽取任何結束語。請繼續。

Thank you, Malika. And I just want to thank everyone for joining us today, and we look forward to talking with you throughout this quarter.

謝謝你，馬利卡。我只想感謝大家今天加入我們，我們期待在整個季度與您交談。

Thank you, ladies and gentlemen. That does conclude today's call. We thank you for your participation and disconnect your lines. Have a good day.

謝謝你們，女士們，先生們。今天的電話會議到此結束。我們感謝您的參與並斷開您的線路。祝你有美好的一天。