Applied Industrial Technologies, Inc. (AIT) 2023 Q4 法說會逐字稿

Welcome to the fiscal 2023 Fourth Quarter Earnings Call for Applied Industrial Technologies. My name is Frank, and I'll 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. Ryan, you may begin.

歡迎參加 Applied Industrial Technologies 2023 會計年度第四季財報電話會議。我是 Frank，將擔任今天電話會議的接線員。（接線員指示）請注意，本次會議將被錄音。現在我將把電話交給投資人關係與財務部總監 Ryan Cieslak。Ryan，您可以開始了。

Okay. Thanks, Frank, and good morning to everyone on the call. This morning, we issued our earnings release and supplemental investor deck detailing our fourth quarter results. Both of these documents are available in the Investor Relations section of applied.com. Before we begin, just a reminder, we'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 that are 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.

好的。謝謝你，Frank，也向所有參與電話會議的各位道早安。今天早上，我們已發布財報新聞稿以及補充投資人簡報，詳細說明我們第四季的業績表現。這兩份文件皆可於 applied.com 的投資人關係（Investor Relations）專區取得。在開始之前提醒一下，我們將討論業務展望並發表前瞻性陳述。所有前瞻性陳述均基於目前的預期，並可能受到若干風險與不確定性影響，其中包括我們在向 SEC 提交的文件中所詳述者。實際結果可能與前瞻性陳述所表達者有重大差異。本公司不承擔公開更新或修訂任何前瞻性陳述之義務。

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

此外，本次電話會議將使用非 GAAP 財務衡量指標，並受上述文件中所引用之限制與說明所規範。今天的講者包括 Applied 總裁兼執行長 Neil Schrimsher，以及我們的財務長 Dave Wells。接下來我把時間交給 Neil。

Thanks, Ryan, and good morning, everyone. We appreciate you joining us. I'll start today with some perspective on our fourth quarter results, current industry conditions and our expectations going forward. Dave will follow with more specific detail on the quarter's performance and our forward outlook, including fiscal 2024 guidance. I'll then close with some final thoughts. So first, I'd like to start by acknowledging and thanking our Applied team for their hard work in delivering a record and pivotal year. We continue to exemplify best execution and commitment to consistently serving our customers with industry-leading technical expertise. From our core legacy operations to our expanding engineered solutions, our customer focus and operational execution are evident as the evolution at Applied continues to unfold.

謝謝你，Ryan，各位早安。感謝各位加入。我今天將先就第四季業績、目前產業狀況以及我們對未來的預期提供一些觀點。接著 Dave 會更具體說明本季表現與前瞻展望，包括 2024 會計年度指引。最後我會做一些總結。首先，我要先肯定並感謝 Applied 團隊的辛勤付出，讓我們交出創紀錄且具關鍵意義的一年。我們持續展現最佳的執行力與承諾，以業界領先的技術專業持續服務客戶。從我們核心的傳統業務到持續擴張的工程解決方案，我們以客戶為中心與營運執行力的成果清晰可見，Applied 的轉型演進仍在持續展開。

This is apparent when considering the strong finish to fiscal 2023 with fourth quarter sales, EBITDA, EPS and cash flow growing nicely and exceeding our expectations. EBITDA grew 17% on 9% sales growth, driving full year fiscal 2023 EBITDA growth to 28% on 16% sales growth. This is on top of significant growth achieved last year and against normalizing end market demand during the quarter, so really solid performance that is top tier within our core markets. We're achieving this growth while continuing to expand gross margin and EBITDA margins, with both reaching new record highs in fiscal 2023 despite meaningful LIFO headwinds.

從 2023 會計年度的強勁收官即可看出這一點：第四季銷售額、EBITDA、EPS 與現金流均有不錯成長，且超出我們預期。在銷售成長 9% 的帶動下，EBITDA 成長 17%，使 2023 會計年度全年 EBITDA 成長達 28%，對應全年銷售成長 16%。這是在去年已實現顯著成長、且本季終端市場需求趨於常態化的背景下取得的，因此表現非常扎實，並在我們核心市場中屬於頂尖水準。我們在實現成長的同時，持續擴大毛利率與 EBITDA 利潤率；儘管面臨顯著的 LIFO 逆風，兩者仍於 2023 會計年度雙雙創下新高。

Another point to highlight is the strong cash generation in the fourth quarter, bringing our full year fiscal 2023 free cash to a record level of approximately $320 million. This is nearly twofold increase over the prior year and inclusive of working capital investment and higher CapEx. Very encouraging progress and a strong indication of the enhanced cash flow power of Applied as we scale and optimize our operations and margins as well as drive various internal initiatives. Furthermore, our competitive position and operational rigor have never been stronger. This is evident by the significant improvement in our return on capital metrics throughout the year, which are the highest in over 10 years.

另一個值得強調的重點是第四季強勁的現金創造能力，使我們 2023 會計年度全年自由現金流創下約 3.20 億美元的紀錄。這幾乎是前一年度的兩倍，且已包含營運資金投入與較高的資本支出（CapEx）。這是非常令人振奮的進展，也強烈顯示隨著我們擴大規模、優化營運與利潤率並推動多項內部計畫，Applied 的現金流動力正在提升。此外，我們的競爭地位與營運紀律也從未如此強勁。這可從我們全年資本報酬相關指標的顯著改善看出，該等指標創下逾 10 年來最高水準。

Overall, in a year that faced ongoing headwinds, from supply chain constraints and persistent inflation to a mixed macro and demand backdrop, we exceeded our commitments and created meaningful value for our customers, suppliers and all stakeholders. Once again, thanks to the entire Applied team for driving this performance.

整體而言，在供應鏈限制與持續通膨等逆風，以及宏觀環境與需求背景分歧的情況下，我們仍超越承諾，並為客戶、供應商及所有利害關係人創造了有意義的價值。再次感謝整個 Applied 團隊推動並達成這樣的表現。

So several key points to highlight in more detail. First, in terms of underlying demand, we saw generally firm trends through the quarter, including a solid finish during June. Average daily sales increased 3% sequentially, largely in line with normal seasonal trends, while organic growth was strong on a 2-year and 3-year stack basis at 27% and 47%, respectively, which compares favorably relative to prior quarters.

接下來更詳細說明幾個關鍵重點。首先，就基本需求而言，我們在本季看到整體趨勢普遍穩健，包含 6 月的良好收尾。日均銷售額（Average daily sales）較前一季增加 3%，大致符合正常季節性趨勢；若以兩年與三年的疊加基礎（stack basis）來看，有機成長分別達 27% 與 47%，相較前幾季表現更具優勢。

Growth was strongest in many of our top industry verticals and across our larger national account base. We saw particular strength across food and beverage, pulp and paper, energy, utilities, lumber and wood and mining verticals during the quarter. Ongoing backlog conversion across our Engineered Solutions segment provided further support. In addition, we believe we're capturing incremental growth opportunities from our industry position and service capabilities as well as building momentum from our cross-selling initiatives.

成長最強勁的領域出現在我們多個主要產業垂直市場，以及較大型的全國性客戶（national account）基礎。我們在本季於食品飲料、紙漿與造紙、能源、公用事業、木材與木製品以及採礦等垂直領域看到特別強勁的表現。工程解決方案（Engineered Solutions）事業部持續進行的在手訂單（backlog）轉換也提供了進一步支撐。此外，我們相信，憑藉我們的產業地位與服務能力，以及交叉銷售（cross-selling）計畫所累積的動能，我們正在掌握額外的成長機會。

Of note, growth contribution from cross-selling actions continued to build during fiscal 2023 with related sales growth accelerating at a notable level compared to the prior year. While still in the early innings, we see solid potential from cross-selling going forward, with business unit alignment and sales effectiveness gaining traction across our legacy service center customer base. From fluid power and process systems to advanced automation solutions and indirect consumable support, the breadth of our solutions and application expertise provides our customers coverage across all areas of their operations, a compelling value proposition that is driving a strong funnel of new business opportunities entering fiscal 2024.

值得注意的是，交叉銷售行動對成長的貢獻在 2023 會計年度持續累積，相關銷售成長相較前一年度以顯著幅度加速。雖然仍處於早期階段，我們對未來交叉銷售的潛力抱持正面看法；隨著事業單位協同與銷售效能在我們傳統服務中心客戶基礎中逐步到位，成效正在顯現。從流體動力與製程系統，到先進自動化解決方案與間接耗材支援，我們解決方案的廣度與應用專業，能為客戶營運的各個面向提供覆蓋，形成具吸引力的價值主張，並推動大量新商機管道（funnel）在進入 2024 會計年度時持續湧入。

It's great to see the sustained growth momentum within our business, particularly when considering broader macro market activity continued to normalize as we expected. Of note, we saw some incremental softening within metals, technology and chemical end markets during the quarter as well as delayed capital spending across certain pockets of our customer base.

看到我們業務維持的成長動能令人振奮，尤其是在更廣泛的宏觀市場活動如我們預期持續常態化的情況下。值得一提的是，本季我們在金屬、科技與化工終端市場看到一些額外的走弱跡象，同時在部分客戶群中也出現資本支出延後的情形。

Into early fiscal 2024, organic sales are up by a low single-digit percent. While early trends in the quarter are always difficult to gauge given typical seasonality in the summer and some normalization following our year-end close, we remain mindful of ongoing macro headwinds and easing customer production activity that is presenting a more modest near-term end market backdrop. That said, we have yet to see any meaningful signs of a broad material slowing to date and customer feedback remains generally optimistic.

進入 2024 會計年度初期，有機銷售額年增為低個位數百分比。由於夏季通常的季節性，以及我們年終結帳後的部分常態化因素，本季初期趨勢一向難以判斷；我們仍留意持續的宏觀逆風與客戶生產活動放緩，這使短期終端市場背景更為溫和。不過，截至目前我們尚未看到任何廣泛且實質的明顯放緩跡象，客戶回饋整體仍偏向樂觀。

Additionally, we believe emerging reshoring activity and investments in U.S. industrial infrastructure are creating incremental demand layers for our technical MRO and Engineered Solutions, both directly and indirectly. All these considerations suggest to us that current market easing is more reflective of a modest cooling in customer activity rather than a retrenchment or contraction in our core end markets, but we're keeping a close eye on the environment and will adjust if required.

此外，我們認為新興的回流生產（reshoring）活動，以及對美國工業基礎設施的投資，正為我們的技術型 MRO 與工程解決方案帶來額外的需求層次，無論是直接或間接。綜合上述因素，我們判斷目前市場的趨緩更像是客戶活動的溫和降溫，而非我們核心終端市場的退縮或收縮；但我們會密切關注環境變化，並在必要時進行調整。

Digging a little more into each of our segments. Sales growth within our Service Center network remains encouraging with Service Center segment sales up over 9% organically over prior year levels during the fourth quarter and on top of 21% growth last year.

再更深入看我們各個事業部。服務中心（Service Center）網絡的銷售成長仍令人鼓舞：第四季服務中心事業部的銷售額有機年增超過 9%，且是在去年已成長 21% 的高基期之上達成。

Into early fiscal 2024, we're seeing relatively firm sales trends across our U.S. Service Center network, which is an encouraging sign for general demand as well as the ongoing outgrowth we see in this core area of Applied. In particular, growth remained solid during the fourth quarter across larger national accounts and fluid power aftermarket sales. Transactions through our digital channels, including EDI and applied.com, are also growing nicely with related sales up over 30% during fiscal 2023.

進入 2024 會計年度初期，我們在美國服務中心網絡看到相對穩健的銷售趨勢，這對整體需求以及我們在 Applied 這一核心領域持續超越市場的成長（outgrowth）而言，都是令人鼓舞的訊號。尤其在第四季，大型全國性客戶與流體動力售後市場（aftermarket）銷售的成長仍然穩健。透過我們數位通路（包括 EDI 與 applied.com）的交易量也持續良好成長，相關銷售在 2023 會計年度成長超過 30%。

Our digital channels are benefiting from systems and process tool investments in recent years which are helping drive new customer growth. In addition, we see greater sales force effectiveness as we continue to deploy and utilize prescriptive analytics to drive more robust benchmarking, wallet share gains, product penetration and geographic coverage. Combined with ongoing talent initiatives and our local service capabilities, we are capturing new growth opportunities across both legacy and emerging end markets.

我們的數位通路受益於近年在系統與流程工具上的投資，這些投資正協助帶動新客戶成長。此外，隨著我們持續部署並運用規範式分析（prescriptive analytics），以推動更強健的標竿比較、提升客戶錢包份額（wallet share）、產品滲透率與地理覆蓋，我們也看到銷售團隊效能提升。結合持續的人才計畫與在地服務能力，我們正在傳統與新興終端市場中掌握新的成長機會。

Within our Engineered Solutions segment, which includes fluid power, flow control and automation offerings, we saw underlying growth moderate slightly from prior quarters, though sales were still up by a high single-digit percent over the prior year. Component delays and supply bottlenecks remain hurdles within this system build and assembly-focused area of our business, albeit at a lesser degree compared to prior quarters. Within fluid power, we saw strong backlog conversion as the quarter progressed and solid growth within our core off-highway mobile and industrial verticals, where sales were up in the low teens year-over-year and orders continued to grow during the quarter. This helped offset softer demand we continue to see across technology-related end markets.

在我們的工程解決方案（Engineered Solutions）事業部（包含流體動力、流量控制與自動化產品）方面，我們看到基本成長較前幾季略為放緩，但銷售額仍較去年同期成長高個位數百分比。零組件延遲與供應瓶頸在這個以系統建置與組裝為主的業務領域仍是障礙，儘管相較前幾季程度已有所降低。在流體動力方面，隨著季度推進，我們看到強勁的在手訂單轉換，且在核心的非公路移動式（off-highway mobile）與工業垂直領域維持穩健成長，銷售年增達低十位數百分比，且本季訂單持續成長。這有助於抵銷我們在科技相關終端市場持續看到的較疲弱需求。

Our fluid power backlog exited fiscal 2023 still well above normalized levels and we expect a reacceleration in orders across the technology-related vertical as fiscal 2024 plays out given structural growth tailwinds underpinning this market and our channel position. In addition, our design, engineering and software coding expertise are in greater demand as customers focus on reducing power consumption and CO2 emissions, navigate a tight labor market and integrate more autonomous features into their equipment.

我們的流體動力在手訂單在 2023 會計年度結束時仍遠高於常態水準；隨著 2024 會計年度的推進，考量支撐該市場的結構性成長順風以及我們的通路地位，我們預期科技相關垂直領域的訂單將再度加速。此外，隨著客戶聚焦降低耗電與 CO2 排放、因應緊俏的勞動市場，並將更多自主化功能整合至其設備中，我們的設計、工程與軟體程式開發（software coding）專業也更受需求青睞。

Demand also remains positive for our higher-margin process flow control products and solutions. During the quarter, MRO activity and capital spending on process infrastructure remained solid in core end markets such as chemicals, food and beverage, utilities, energy and pulp and paper.

我們高毛利的製程流量控制（process flow control）產品與解決方案需求也仍維持正向。本季在化工、食品飲料、公用事業、能源以及紙漿與造紙等核心終端市場中，MRO 活動與製程基礎設施的資本支出仍然穩健。

As noted in prior quarters, our flow control solutions are increasingly used in applications tied to our customers' decarbonization efforts and other required infrastructure investments as end markets transition around new energy requirements. This includes providing technical support for the configuration, assembly and testing of process systems. We see further momentum building into fiscal 2024 as we execute on this meaningful opportunity.

如同前幾季所提及，我們的流量控制解決方案愈來愈多被應用於與客戶減碳努力相關的應用，以及終端市場因應新型能源需求轉型所需的其他基礎設施投資。這包括為製程系統的配置、組裝與測試提供技術支援。隨著我們把握這項具重大意義的機會，我們看到動能將持續累積並延伸至 2024 會計年度。

As it relates to our expanding automation platform focused on next-generation robotics, machine vision and digital solutions, we continue to see positive demand backdrop. Year-over-year organic sales growth improved to 9% in the quarter against ongoing supply chain constraints and slightly longer sales cycles across certain verticals.

就我們持續擴展、聚焦於下一代機器人、機器視覺與數位解決方案的自動化平台而言，我們仍看到正向的需求環境。在供應鏈限制持續以及部分垂直領域銷售週期略為拉長的情況下，本季有機銷售年增率提升至 9%。

Demand remains strong across biotech, life sciences, data centers and consumer packaging, partially offset by slower trends across semiconductor and electronic markets. Importantly, customer interest in new business opportunities remain elevated with our sales funnel and presales engineering activity at record highs. We also have more than 100 open projects tied to our joint cross-selling efforts, which is up meaningfully from prior year and represents a notable sales contribution opportunity heading into fiscal 2024.

生技、生命科學、資料中心與消費品包裝等領域的需求仍然強勁，部分被半導體與電子市場較為放緩的趨勢所抵銷。重要的是，客戶對新業務機會的興趣仍維持在高檔，我們的銷售漏斗與售前工程活動皆創下歷史新高。我們也有超過 100 個與聯合交叉銷售努力相關的在手專案，較去年顯著增加，並在邁入 2024 會計年度之際代表一項可觀的銷售貢獻機會。

So overall, underlying growth momentum remains resilient and promising as we continue to navigate an uncertain macro environment. And then lastly, we ended fiscal 2023 with a healthy balance sheet and over $300 million cash on hand, net leverage below 1x and over $1.5 billion in balance sheet capacity. We deployed over $180 million in fiscal 2023 on capital allocation actions, including 2 automation acquisitions, a greater level of CapEx investment supporting organic growth initiatives, ongoing debt reduction and growth in our dividend.

因此整體而言，在我們持續因應不確定的總體環境之際，基本成長動能仍具韌性且前景可期。最後，我們以健康的資產負債表結束 2023 會計年度，手上現金超過 3 億美元，淨槓桿低於 1 倍，且資產負債表可用額度超過 15 億美元。我們在 2023 會計年度投入超過 1.8 億美元進行資本配置行動，包括 2 項自動化併購、提高資本支出以支持內生成長計畫、持續降低負債以及提高股利。

Looking ahead, we expect favorable cash generation to sustain as our working capital requirements moderate following heavy investment in recent years. This provides significant firepower to drive ongoing organic investment as well as potentially accelerate M&A. On top -- our top M&A priorities remain focused on automation, fluid power and flow control markets. We also continue to evaluate select M&A opportunities across our Service Center network aimed at optimizing our market coverage, talent and service capabilities as we look to fully leverage and capture the significant growth potential continuing to develop in our core Service Center business.

展望未來，隨著近年大量投資後營運資金需求趨於緩和，我們預期有利的現金創造能力將可持續。這將提供充足火力以推動持續的內生投資，並可能加速併購（M&A）。此外，我們的併購首要重點仍聚焦於自動化、流體動力與流量控制市場。我們也持續評估服務中心（Service Center）網路中的特定併購機會，旨在優化市場覆蓋、人才與服務能力，以便在我們核心服務中心業務持續發展的顯著成長潛力中，充分發揮並掌握機會。

This includes tailwinds tied to reshoring, customer CapEx investments and technical supply chain requirements. In addition, we remain flexible to return capital through other avenues if necessary, including a potentially more active approach to share buybacks given our long-term earnings potential and the intrinsic value we see across the company.

這包括與回流生產（reshoring）、客戶資本支出投資以及技術性供應鏈需求相關的順風因素。此外，如有需要，我們也將保持彈性，透過其他方式回饋資本，包括在考量我們長期獲利潛力以及我們所見公司內在價值的前提下，可能採取更積極的庫藏股回購作法。

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

接下來，我將把電話會議交給 Dave，請他就我們的財務結果與展望提供更多細節。

Thanks, Neil. Another reminder before I begin, as in prior quarters, we have posted a supplemental quarter recap deck to our investor site for additional reference. Turning now to details of our financial performance in the quarter, consolidated sales increased 9.1% over the prior year quarter. Acquisitions contributed 70 basis points of growth, which was partially offset by a 20 basis point headwind from foreign currency translation. The number of selling days in the quarter was consistent year-over-year.

謝謝你，Neil。在我開始之前再提醒一次，如同前幾季，我們已在投資人網站上發布補充的季度回顧簡報，供大家參考。接著說明本季財務表現細節，合併銷售額較去年同期增加 9.1%。併購貢獻 70 個基點的成長，但部分被外幣換算帶來的 20 個基點逆風所抵銷。本季銷售天數與去年同期一致。

Netting these factors, sales increased 8.6% on an organic basis. Average daily sales rates increased over 3% sequentially versus the prior quarter and were largely in line with normal seasonal patterns. As it relates to pricing, we estimate the contribution of product pricing on year-over-year sales growth was in the low single digits in the quarter, moderating as expected from mid-single digits in prior quarters.

扣除上述因素後，銷售額以有機基礎計算增加 8.6%。平均每日銷售率較上一季依序增加逾 3%，大致符合正常季節性型態。就定價而言，我們估計本季產品定價對年增銷售成長的貢獻為低個位數百分比，並如預期自前幾季的中個位數百分比趨於緩和。

Turning now to sales performance by segment. As highlighted on Slide 7 and 8 of the presentation, sales in our Service Center segment increased 9.1% year-over-year on an organic basis when excluding the impact of foreign currency. Growth was strongest across our U.S. Service Center network as well as within MSS, or Maintenance Supplies & Solutions, our indirect consumables business focused on vendor-managed inventory and vending solutions. This was partially offset by more modest growth across our international operations.

接著按部門說明銷售表現。如簡報第 7 與第 8 頁所示，在排除外幣影響後，我們服務中心（Service Center）部門的銷售額以有機基礎計算年增 9.1%。成長最強勁的來自我們美國服務中心網路，以及 MSS（Maintenance Supplies & Solutions，維護用品與解決方案）業務，也就是我們聚焦於供應商管理庫存與自動販賣解決方案的間接耗材業務。這部分被我們國際營運較為溫和的成長所部分抵銷。

On a full year basis, segment operating income increased a solid 24% in fiscal 2023, while segment operating margin of 12.6% was up 80 basis points. Within our Engineered Solutions segment, sales increased 9.7% over the prior year quarter with acquisitions contributing 220 basis points of growth.

以全年來看，該部門營業利益在 2023 會計年度穩健成長 24%，部門營業利益率為 12.6%，提升 80 個基點。在我們工程解決方案（Engineered Solutions）部門方面，銷售額較去年同期增加 9.7%，其中併購貢獻 220 個基點的成長。

On an organic basis, segment sales increased 7.5% year-over-year. Growth in this segment continues to be supported by strong performance and backlog conversion tied to our industrial and off-highway mobile fluid power solutions as well as sustained customer MRO and CapEx spending into process flow infrastructure. Organic sales growth within our automation operations was also ahead of the segment average at over 9%. This was partially offset by slower activity within fluid power technology verticals and ongoing inbound component delays impacting the timing of some system shipments.

以有機基礎計算，該部門銷售額年增 7.5%。此部門的成長持續受惠於我們工業與非公路移動式流體動力解決方案的強勁表現與在手訂單轉換，以及客戶在製程流體基礎設施上的 MRO 與資本支出（CapEx）支出維持。自動化營運的有機銷售成長也高於部門平均，超過 9%。上述表現部分被流體動力技術垂直領域活動較慢，以及持續的來料零組件延遲影響部分系統出貨時點所抵銷。

On a full year basis, Engineered Solutions segment operating income increased a strong 30% in fiscal 2023, while segment operating margin of 14.1% was up approximately 150 basis points from the prior year as well as over 300 basis points from fiscal 2019 levels.

以全年來看，工程解決方案部門營業利益在 2023 會計年度強勁成長 30%，部門營業利益率為 14.1%，較去年約提升 150 個基點，亦較 2019 會計年度水準提升逾 300 個基點。

Moving now to our consolidated gross margin performance and Page 9 of the deck, gross margin of 29.2% increased 35 basis points as compared to the prior year level of 28.9%. During the quarter, we recognized LIFO expense of $8.1 million compared to $10.8 million in the prior year quarter. This net LIFO tailwind had a favorable 24 basis point year-over-year impact on gross margins during the quarter.

接著看合併毛利率表現與簡報第 9 頁，毛利率為 29.2%，較去年同期的 28.9% 提升 35 個基點。本季我們認列 LIFO 費用 810 萬美元，去年同期為 1,080 萬美元。此一 LIFO 的淨順風在本季對毛利率帶來有利的 24 個基點年增影響。

This is the first quarter in 2 years where LIFO expense was lower year-over-year, which is directionally in line with our expectation of easing LIFO expense near term as broader inflation normalizes and we take a more balanced approach to inventory growth. Our underlying gross margin performance continues to showcase strong execution and our margin expansion potential. During fiscal 2023, we expanded gross margins 12 basis points to 29.2%, inclusive of an 18 basis point headwind from higher LIFO expense.

這是兩年來首次 LIFO 費用較去年同期下降，方向上符合我們的預期：隨著整體通膨趨於正常化，且我們對庫存成長採取更平衡的作法，短期內 LIFO 費用將趨於緩和。我們的基礎毛利率表現持續展現強勁執行力與毛利率擴張潛力。在 2023 會計年度，我們將毛利率提升 12 個基點至 29.2%，其中包含因 LIFO 費用較高而帶來的 18 個基點逆風。

In addition, gross margins were up more than 80 basis points over the past 2 years when excluding LIFO expense. Our team continues to manage broader inflationary dynamics well, delivering on our gross margin initiatives, including the application of enhanced analytics, freight recovery and channel execution.

此外，若排除 LIFO 費用，過去兩年毛利率提升超過 80 個基點。我們團隊持續妥善管理更廣泛的通膨動態，推動毛利率相關計畫落地，包括運用強化分析、運費回收以及通路執行。

As it relates to our operating costs, selling, distribution and administrative expenses increased 7.3% compared to prior year levels. SD&A expense was 18.3% of sales during the quarter, down from 18.6% during the prior year quarter. Prior year SD&A benefited from slight favorability tied to our self-insurance performance as well as lower deferred compensation expense. When excluding these favorable prior year items, SD&A expense was up approximately 4% over the prior year period.

就營業成本而言，銷售、配送與管理費用較去年增加 7.3%。本季 SD&A 費用占銷售額比重為 18.3%，低於去年同期的 18.6%。去年 SD&A 受惠於與自保（self-insurance）績效相關的些許有利因素，以及較低的遞延薪酬費用。若排除這些去年同期的有利項目，SD&A 費用較去年同期約增加 4%。

We continue to leverage labor costs well, a reflection of talent and systems investments as well as benefits from shared services deployment and operational excellence initiatives. For full year fiscal 2023, SD&A expense as a percent of sales was 18.4%, representing a 130 basis point improvement over the prior year and a 290 basis point improvement of fiscal 2019 levels. These results are evidence of our team's operational rigor and the structural improvements we have realized in recent years from our ongoing evolution and business enhancements.

我們持續有效槓桿化人力成本，反映出我們在人才與系統上的投資，以及共享服務部署與營運卓越計畫所帶來的效益。以 2023 會計年度全年來看，SD&A 費用占銷售額比重為 18.4%，較去年改善 130 個基點，亦較 2019 會計年度水準改善 290 個基點。這些結果證明我們團隊的營運紀律，以及近年來隨著持續演進與業務強化所實現的結構性改善。

Our solid sales growth, gross margin management and cost leverage combined to drive a 16.7% increase in EBITDA over prior year levels during the quarter, while EBITDA margin of 12.1% increased 79 basis points compared to prior year levels. This includes a favorable 24 basis point year-over-year impact due to lower LIFO expense. Including reduced interest expense and a slightly higher tax rate relative to prior year levels, reported earnings per share of $2.35 was up over 16% from prior year earnings per share levels.

我們穩健的銷售成長、毛利率管理與費用槓桿化共同推動本季 EBITDA 較去年增加 16.7%，EBITDA 利潤率為 12.1%，較去年提升 79 個基點。其中包含因 LIFO 費用降低而帶來的 24 個基點年增有利影響。再加上利息費用下降，以及相較去年略高的稅率，稀釋後每股盈餘（EPS）為 2.35 美元，較去年每股盈餘成長逾 16%。

Moving now to our cash flow performance. Cash generated from operating activities during the fourth quarter was $179.9 million, while free cash flow totaled $174.3 million representing strong conversion at 189% of net income. For the full year, we generated free cash of $317 million, which was up 87% from the prior year and a record high despite greater working capital investment and CapEx over the past year. We ended June with approximately $344 million of cash on hand and net leverage at 0.5x EBITDA, which is below the prior year level of 1.2x EBITDA.

接著看現金流表現。第四季營運活動產生的現金為 1.799 億美元，自由現金流合計 1.743 億美元，代表以淨利為基礎的強勁轉換率，達 189%。全年我們產生 3.17 億美元自由現金，較去年增加 87%，並創下歷史新高，儘管過去一年營運資金投資與資本支出（CapEx）更高。我們於 6 月底的手上現金約為 3.44 億美元，淨槓桿為 EBITDA 的 0.5 倍，低於去年 EBITDA 的 1.2 倍。

Our leverage remains below our normalized target range of 2x to 2.5x, partially reflecting the significant EBITDA growth we have experienced in recent years. We also remain disciplined with our M&A approach, focused on targets and valuations supporting our return requirements and strategic priorities.

我們的槓桿水準仍低於常態化目標區間的 2 倍至 2.5 倍，部分反映我們近年經歷的顯著 EBITDA 成長。我們在併購（M&A）策略上也持續保持紀律，聚焦於能支持我們報酬要求與策略優先事項的標的與估值。

Turning now to our outlook, which is detailed on Page 11 of our presentation, we are establishing full year fiscal 2024 guidance including EPS in the range of $8.80 to $9.55 per share, based on sales of flat to up 4% year-over-year and EBITDA margins of 11.9% to 12.1%. Our outlook takes into consideration sales trends through early August, ongoing economic uncertainty, strategic growth investments and easing price contribution as the year plays out.

接下來談到我們的展望（詳見簡報第 11 頁），我們提出 2024 會計年度全年指引，包括每股盈餘（EPS）介於每股 8.80 美元至 9.55 美元，係以銷售額年增率持平至成長 4%，以及 EBITDA 利潤率 11.9% 至 12.1% 為基礎。我們的展望已納入截至 8 月上旬的銷售趨勢、持續的經濟不確定性、策略性成長投資，以及隨著年度推進價格貢獻趨於緩和等因素。

We also are assuming additional moderation in broader market activity near term as customers continue to normalize production levels and manage through a higher interest rate environment. While we have not seen any meaningful signs of the broad material slowdown to date and remain constructive on our company-specific growth opportunities, we believe it is prudent to take a balanced approach to our initial outlook.

我們也假設短期內整體市場活動將進一步趨於溫和，因為客戶持續使生產水準正常化，並在較高利率環境下進行調整。雖然截至目前我們尚未看到任何顯著的廣泛性重大放緩跡象，且對公司自身的成長機會仍持正面看法，但我們認為在初步展望上採取較為平衡的做法是審慎之舉。

The midpoint of our guidance assumes lower year-over-year sales growth trends in the first half of the year relative to the second half, partially reflecting more difficult comparisons earlier in the year. In addition, based on quarter-to-date sales trends through early August, we currently project fiscal first quarter organic sales to grow by a low single-digit percent over the prior year quarter.

我們指引的中位數假設上半年相較下半年之年對年銷售成長趨勢較低，部分反映年初比較基期較為艱難。此外，根據截至 8 月上旬的本季迄今銷售趨勢，我們目前預估 2024 會計年度第一季有機銷售額將較去年同期成長低個位數百分比。

From a margin and cost perspective, we assume ongoing inflationary pressures, albeit at a more modest level than in fiscal 2023, partially offset by slightly lower LIFO expense year-over-year. As usual, the year will include the impact of our annual merit pay increase January 1. Combined with slower top line growth and lingering supply chain constraints, guidance assumes more modest operating leverage relative to fiscal 2023 pending further transparency on broader economic conditions and our near-term growth trajectory.

就利潤率與成本面而言，我們假設通膨壓力仍將持續，但程度較 2023 會計年度溫和，並由年對年略低的 LIFO 費用部分抵銷。如同以往，本年度將包含我們每年 1 月 1 日的績效調薪影響。再加上營收成長放緩以及供應鏈限制仍未完全消退，指引假設相較 2023 會計年度的營運槓桿較為溫和，直到對整體經濟情勢與短期成長軌跡有更清晰的能見度為止。

Lastly, from a cash generation perspective, we expect another solid year of free cash flow performance given easing working capital investment into the front half of the year as well as some benefit from the release of working process and additional progress on our working capital initiatives.

最後，就現金創造能力而言，隨著上半年營運資金投入趨緩，以及在製品釋放帶來部分助益並且我們的營運資金改善計畫持續取得進展，我們預期自由現金流表現仍將是穩健的一年。

In addition, we expect ongoing organic investment supporting our growth strategy and value proposition as well as further investments in technology and supply chain, with capital expenditures targeted in $27 million to $29 million range for fiscal 2024. With that, I'll now turn the call back over to Neil for some final comments.

此外，我們預期將持續進行支持成長策略與價值主張的有機投資，並進一步投資於科技與供應鏈；2024 會計年度資本支出目標為 2,700 萬至 2,900 萬美元。接下來我把電話交回給 Neil，請他做一些最後的補充。

Thanks, Dave. So to wrap up our performance in fiscal 2023 provides strong evidence of our favorable industry position and the operational execution potential of the Applied team. This is partially the result of strategic investments and initiatives that have positioned Applied for stronger growth relative to our legacy trends and improved returns on capital.

謝謝，Dave。總結來說，我們在 2023 會計年度的表現有力證明了我們在產業中的有利地位，以及 Applied 團隊的營運執行潛力。這部分來自於策略性投資與各項計畫，使 Applied 相較於過往趨勢具備更強的成長動能，並提升資本報酬。

From our financial results to the feedback we receive from customers, suppliers and other stakeholders, our value proposition and evolution is resonating at a high level across our core marketplace. Similar to a year ago, when we began fiscal 2023, the current macro backdrop is driving uncertainty as how industrial activity will track into fiscal 2024.

從我們的財務結果到客戶、供應商及其他利害關係人給予的回饋，我們的價值主張與演進在核心市場中正以高度共鳴的方式被接受。與一年前我們開始 2023 會計年度時類似，目前的總體環境仍帶來不確定性，影響工業活動在 2024 會計年度的走勢。

Higher capital costs, tighter credit conditions and ongoing labor and supply chain constraints will likely remain drags on end market spending and customer budgets in the near term. Combined with difficult comparisons following significant growth in recent years, our initial outlook for fiscal 2024 incorporates moderating sales growth into the first half of the year, which we believe is prudent in the current environment.

較高的資本成本、更緊縮的信貸條件，以及持續的勞動力與供應鏈限制，短期內可能仍會拖累終端市場支出與客戶預算。再加上近年顯著成長後所面臨的艱難比較基期，我們對 2024 會計年度的初步展望納入上半年銷售成長趨緩的假設；在目前環境下，我們認為這是審慎的。

That said, we remain constructive that our industry position and self-help opportunities can sustain above-market performance and continue to drive a robust business funnel that presents many new and diverse growth catalysts, both near and long term. In addition, regardless of the trajectory of cycle dynamics, we are focused on continuing to enhance our underlying operational strength and scaling our business as we progress towards our next strategic objectives.

即便如此，我們仍正向看待：我們的產業地位與自助改善（self-help）機會可支撐優於市場的表現，並持續推動強勁的商機漏斗，帶來多元且新的成長催化劑，涵蓋短期與長期。此外，不論景氣循環動態的走向如何，我們都專注於持續強化底層營運實力，並在邁向下一階段策略目標的過程中擴大業務規模。

Our team and alignment are strong as the underlying flywheel effect embedded in our strategy is building momentum, which at its core is centered around optimizing and leveraging our legacy Service Center operations as secular tailwinds gain speed while expanding across higher-margin engineered solutions tied to advanced automation, industrial power and process technologies.

我們的團隊與組織一致性很強，策略中內嵌的飛輪效應正在累積動能；其核心在於：在長期結構性順風加速之際，優化並善用我們既有的 Service Center（服務中心）營運，同時擴張至與先進自動化、工業電力與製程技術相關、毛利率更高的工程解決方案。

Our multifaceted strategy is presenting many new growth catalysts. Within our Service Center network, we are expanding into new vertical markets tied to electric vehicle production, semiconductors, renewable energy, life science, logistics and wastewater. We're also engaging supplier partners and developing solutions for the adoption of IoT and smart systems. Our domain expertise and technical sales knowledge are invaluable assets in the channel as these emerging business opportunities accelerate.

我們多面向的策略帶來許多新的成長催化劑。在我們的 Service Center 網絡中，我們正擴展至與電動車生產、半導體、再生能源、生命科學、物流與廢水處理相關的新垂直市場。我們也與供應商夥伴合作，並開發支援 IoT 與智慧系統導入的解決方案。隨著這些新興商機加速發展，我們的領域專業與技術型銷售知識是通路中極具價值的資產。

In fluid power operations, we're leading the way in developing and integrating solutions supporting the acceleration of digital control technologies as well as autonomous and electrified equipment. Our engineering capabilities set us in a strong competitive position to secure this fluid power growth tailwind.

在流體動力（fluid power）業務方面，我們在開發與整合解決方案上居於領先地位，以支援數位控制技術的加速導入，以及自主化與電動化設備的發展。我們的工程能力使我們具備強勁的競爭地位，可掌握流體動力成長的順風。

We're also adding capacity in regions supporting the technology end market, including further strengthening our fluid power systems growth potential across the semiconductor sector for years to come. We also see notable growth potential in expanding our solutions tied to sustainable initiatives in the energy transition. Of note, our flow control business is engaging strategic suppliers and identifying opportunities around biogas and carbon capture as well as hydrogen and lithium production.

我們也在支援科技終端市場的地區增加產能，包括進一步強化我們在半導體領域的流體動力系統成長潛力，展望未來多年。我們也看到在能源轉型中、與永續倡議相關解決方案的擴張具有顯著成長潛力。值得一提的是，我們的流量控制（flow control）業務正與策略供應商合作，並在沼氣與碳捕捉，以及氫能與鋰生產等領域尋找機會。

Our broad flow control product portfolio, combined with our engineering capabilities, are integral to the ongoing build-out of various flow systems and processes utilized in these emerging green market opportunities. And lastly, we remain excited about the ongoing expansion of our next-generation automation platform. Now representing close to 15% of our Engineered Solutions segment sales, we expect greater organic growth contribution from this advanced area of our business in fiscal 2024, particularly as we accelerate our cross-selling efforts.

我們廣泛的流量控制產品組合，結合工程能力，對於這些新興綠色市場機會中各類流體系統與製程的持續建置至關重要。最後，我們也對下一代自動化平台的持續擴張感到振奮。該平台目前已接近占我們工程解決方案（Engineered Solutions）部門銷售額的 15%，我們預期在 2024 會計年度，這一先進業務領域將帶來更高的有機成長貢獻，特別是在我們加速交叉銷售之際。

We're making traction with our greenfield expansion initiatives and continue to develop new approaches to best serve our embedded customer base and further enhance our market position, including through proprietary turnkey solutions and leading application expertise.

我們在綠地（greenfield）擴張計畫上已取得進展，並持續發展新的方法，以更好地服務我們既有的客戶群並進一步提升市場地位，包括透過自有的交鑰匙（turnkey）解決方案與領先的應用專業能力。

We see significant potential to further scale this platform into fiscal 2024 and beyond with both M&A and organic initiatives. Given these dynamics and the strong performance in fiscal 2023, we're increasing our intermediate financial targets, with our sales objective now over $5.5 billion and EBITDA margins over 13%. We believe these objectives are well within the company's capability and can be achieved within the next 5 years or sooner, depending on broader macro conditions, the cadence of M&A and other factors.

我們看到在 2024 會計年度及其後，透過併購（M&A）與有機計畫進一步擴大此平台規模的巨大潛力。基於這些動態以及 2023 會計年度的強勁表現，我們上調中期財務目標：銷售額目標現為超過 55 億美元，EBITDA 利潤率超過 13%。我們相信這些目標完全在公司能力範圍內，並可在未來 5 年內或更短時間達成，取決於更廣泛的總體環境、併購節奏及其他因素。

Overall, our team is engaged and ready to execute on these next milestones, which we believe provide the framework for significant value creation for all stakeholders. Once again, we thank you for your continued support. And with that, we'll open up the lines for your questions.

整體而言，我們的團隊投入且已準備好執行下一階段里程碑；我們相信這些里程碑為所有利害關係人創造顯著價值提供了架構。我們再次感謝各位持續的支持。接下來，我們開放電話線供各位提問。

(Operator Instructions) Our first question comes from David Manthey with Baird.

（接線員指示）我們的第一個問題來自 Baird 的 David Manthey。

First question is related to capital allocation. So I believe you still have 1.5 million shares available under the current authorization. And maybe more broadly, could you talk philosophically about share repurchase, just given the state of the economy, your leverage ratios and the state of your acquisition pipeline?

第一個問題與資本配置有關。我相信在目前的授權下，你們仍有 150 萬股可供回購。更廣泛地說，考量目前經濟狀況、你們的槓桿比率，以及併購案源（pipeline）的情況，能否從理念層面談談股票回購？

In terms of rank order, we've talked about it before, certainly our first priority is going to be organic investment. You saw more significant organic investment in the business in the past year in fiscal '23. Anticipating that in '24 as well, really focused around continuing to build out capabilities on the Engineered Solutions side of the business.

就優先順序而言，我們之前談過，當然第一優先會是有機投資。你們在 2023 會計年度看到我們對業務進行了更顯著的有機投資；我們也預期 2024 會計年度同樣如此，重點在於持續建置工程解決方案業務端的能力。

Certainly still an active M&A pipeline, would like to continue to see us drive significant shareholder value with the bolt-on acquisitions still very much in line of sight for fiscal '24. But as we made reference in the earnings release and the script, I think in addition, to kind of continue to be a dividend payer, with the track record of 14 years of increases. We would expect to be a bit more active in terms of share buyback, just given cash position, low leverage levels and kind of that near-term view on the cash generation characteristics of the business.

當然，我們的併購案源仍然活躍，也希望在 2024 會計年度透過補強型（bolt-on）併購持續創造顯著的股東價值，這仍非常清楚地在我們的視野之內。不過，正如我們在財報新聞稿與講稿中提到的，此外，我們也會持續作為股利發放公司，並維持連續 14 年提高股利的紀錄。基於現金部位、低槓桿水準，以及對公司短期現金創造特性的看法，我們預期在股票回購方面會更為積極一些。

We're well set up to drive continued significant cash flow as you think about moving through '24, bleeding off some of these still slightly elevated work in process inventory levels and continue to see the improvement in the profitability of the business. So expect us to be a bit more active there in terms of share buyback as we move through '24.

展望 2024 會計年度，我們已具備良好條件持續帶來可觀的現金流：一方面逐步消化目前仍略偏高的在製品（work in process）庫存水位，另一方面也將持續看到公司獲利能力的改善。因此，隨著 2024 會計年度推進，我們預期在股票回購方面會更積極一些。

Yes. It seems like a big opportunity. Your debt levels are down, what, almost 1.5 turns over the past 2 years, and it really hasn't constrained you as it relates to acquisitions. It seems like with $1.5 billion of availability, you might as well shuffle a couple of hundred million towards repurchase in addition to everything else you're doing. But is it -- am I right in assuming that your guidance currently -- I think you said it does not include any unannounced acquisitions, but are we also right to assume it doesn't include any other form of capital redeployment outside of just investments in operations and CapEx?

是的。這看起來像是一個很大的機會。你們的負債水準在過去兩年下降了大約 1.5 倍（turn），而且在併購方面似乎也沒有因此受到限制。看起來在有 15 億美元可用額度的情況下，除了你們正在做的其他事情之外，或許也可以把幾億美元挪去做回購。但我想確認一下——我是否可以理解你們目前的指引——我記得你們說過其中不包含任何尚未公告的併購，那我們是否也可以理解它同樣不包含除營運投資與資本支出（CapEx）之外的任何其他資本再部署形式？

That's correct. The guidance would be a normal course of business for the existing operations, so would exclude the incremental M&A, that would be upside opportunity, nor anything unusual in terms of capital allocation.

沒錯。這份指引將反映既有營運的正常業務進程，因此不包含增量的併購（M&A）——那會是上行機會——也不包含任何在資本配置方面的異常事項。

Yes. Okay. And then second, maybe you could give us an update on customer receptivity towards your discrete automation applications. And more specifically, maybe you could give us some examples of some of the top sort of replicable solutions that you're seeing success with today?

是的。好的。第二個問題，或許您可以向我們更新一下客戶對你們離散自動化應用的接受度。更具體地說，能否舉一些你們目前看到成效、且最具可複製性的解決方案例子？

Yes. So Dave, I can start. I think from the numbers in the quarter, we were pleased. The teams are active, both our sales engineers and application specialists, engaging with customers, and a real focus is understanding their operations and how we help solve their problems. And think about applications that can be replicated, we would see interest in projects in conversion around collaborative robots and machine tending, which can help customers with labor.

好的。所以 Dave，我可以先開始。我認為從本季的數字來看，我們感到滿意。團隊很積極，我們的銷售工程師與應用專家都在與客戶互動，並且真正聚焦於理解他們的營運，以及我們如何協助解決他們的問題。談到可複製的應用，我們看到在協作機器人與機台上下料（machine tending）相關的轉換專案上有興趣，這些可以協助客戶因應人力問題。

We would see applications in use of vision systems where customers would apply them for quality control enhancements or perhaps also address some labor challenges or constraints, when those previously were perhaps manual inspection versus using technology. We can see trends in consumer packaging, right? There's high standards on consumer packaging, on accuracy and labeling and of course barcoding, as those go through more retail environments. And so there's a high requirement there, and so we see vision systems that can get applied into that.

我們也看到視覺系統的應用，客戶會用於提升品質管制，或在先前可能是人工檢驗的情況下，透過技術來解決一些人力挑戰或限制。我們也看到消費品包裝的趨勢，對吧？消費品包裝在精準度與標示、以及當然條碼方面有很高的標準，因為這些會進入更多零售環境。因此需求很高，我們看到視覺系統可以被導入其中。

So they continue to grow. We look at how we can set up some of these productized solutions, which we think helps our service center teams identify those opportunities and then connect with our application resources, to increase that conversion rate. We made reference to there's more projects in the pipeline there, but I'm also encouraged by our automation team continuing to grow in their targeted vertical segments and with current customers as well as prospects and targets they have.

所以這些仍在持續成長。我們在思考如何建立一些產品化的解決方案，我們認為這能幫助服務中心團隊辨識機會，並與我們的應用資源連結，以提高轉換率。我們也提到那裡有更多專案在管線中；同時，我也很受鼓舞，因為我們的自動化團隊在其鎖定的垂直領域、以及在現有客戶與潛在客戶和目標客戶上，都持續成長。

Our next question comes from Ken Newman with KeyBanc Capital Markets.

我們的下一個問題來自 KeyBanc Capital Markets 的 Ken Newman。

Curious if you could just talk a little bit more about the confidence in the organic sales guide, particularly for the back half. Neil, obviously, we've heard a bit more about customers destocking across a lot of industrial distributors this quarter as the supply chains normalize. But obviously you're a bit more break/fix relative to a lot of your peers. Any way you can kind of quantify what you've seen from a destock perspective this quarter and how do you expect that plays out into the back half of '24?

想請教你們能否再多談一點對有機銷售指引的信心，特別是下半年。Neil，很明顯我們本季聽到不少工業分銷商的客戶在供應鏈正常化之際進行去庫存。不過你們相較許多同業更偏向故障維修（break/fix）。你能否量化一下本季從去庫存角度你們看到的情況，以及你預期這會如何影響到 2024 年下半年？

Yes. So again, we've talked about it. I think at times, I think given the technical nature of our products, the random break/fix demand, oftentimes many of those -- a little more customized solutions, we do not get a favorable lift from stocking. And then therefore I think we get some natural resistance to destocking trends.

是的。所以再說一次，我們談過這點。我認為有時候，鑑於我們產品的技術性，以及隨機的故障維修需求，很多時候那些——較多是客製化的解決方案——我們不會因為客戶備貨而獲得有利的拉抬。因此我認為我們對去庫存趨勢有一些天然的抗性。

Our customers are really counting on us given those break/fix requirements around those products and solutions. So I won't say it's 0 as it goes, but it's much lower than other forms of products and consumables in that front. So as we think about the environment and the guide, right, our focus is, hey, we'll be prudent to some of the cross currents or the trends or publications, but we also have, hey, strong focus on our customers and those opportunities and our sales effectiveness that we can operate to continue to perform in any environment.

我們的客戶在這些產品與解決方案的故障維修需求上非常仰賴我們。所以我不會說它是 0，但相較於其他類型的產品與耗材，影響要小得多。當我們思考環境與指引時，我們的重點是：我們會對一些相互牽動的因素、趨勢或公開資訊保持審慎；但同時我們也會強力聚焦於客戶與那些機會，以及我們的銷售效能，讓我們能在任何環境下持續表現。

And then in the past, I think you've talked a little bit more about your macro assumptions that underlie the full year outlook. And I'm curious can you just share what you're assuming for industrial production or capacity utilization at the midpoint of the guide for this year?

另外，過去我想你們也談過一些支撐全年展望的總體假設。我想請問，在今年指引的中位數情境下，你們對工業生產或產能利用率的假設是什麼？

Yes. So I'd start and say, right, we're not perfect economists, as we think we'd like to say we're more focused on or hope to be better operators than economists. But if I think about guidance, I would say to your question then, around the midpoint, we'd assume kind of a low single-digit year-over-year decline in the first half, and then perhaps in the second half more muted or just a slight contraction to the market in the second half.

是的。所以我先說，我們不是完美的經濟學家；我們更希望自己是更好的經營者，而不是經濟學家。但如果我從指引來看，回到你的問題，在中位數附近，我們假設上半年年對年會是低個位數的下滑，而下半年市場的收縮會更為溫和，或只是輕微的收縮。

Understood. Maybe to just squeeze one more in, I wanted to talk about the low end of the guide. Obviously, it assumes higher margin and EPS but flat sales. Maybe just talk a little bit more about bucketing the various drivers of that margin expansion in that scenario, how much of that is going to be from a mix shift versus cost-out initiatives? Any help there would be appreciated.

了解。再擠一個問題：我想談談指引的低端。很明顯它假設毛利率與 EPS 較高，但銷售持平。能否再多談談在那種情境下，毛利率擴張的各項驅動因素如何拆分？其中有多少來自產品組合改善（mix shift），又有多少來自降本措施（cost-out initiatives）？若能提供一些說明會很有幫助。

Sure. So as we think about it, and we've touched on, we believe we continue to have gross margin opportunities and the multiple initiatives or focus areas that we have there. And so we'll continue -- appropriate actions are in focus around in execution point of sale. As we think about customer mix, that in the slowing environment could be perhaps a little bit of a headwind, right? We'll continue to work and serve local accounts, but they may be the ones that impact -- or feel that softness a little bit more than more large national accounts.

當然。就我們的看法，以及我們也提到過的，我們相信毛利率仍有機會，且我們在這方面有多項倡議與聚焦領域。因此我們會持續——在銷售端的執行上，會聚焦於採取適當行動。談到客戶組合，在放緩的環境下可能會有些逆風，對吧？我們會持續服務在地客戶，但他們可能是相較大型全國性客戶更容易受到疲弱影響的族群。

We will continue to sell technical solutions, which [help] positive on the mix side and then we will work the other levers as well on the gross margins. I think we've demonstrated ongoing cost accountability in the business. There's some natural shock absorbers that would go in if there is softness, that go into play, and so those would help or benefit.

我們會持續銷售技術型解決方案，這在組合面是正向的；同時我們也會運用其他毛利率槓桿。我認為我們已展現出持續的成本紀律。在出現疲弱時，業務中也有一些天然的緩衝機制會啟動，因此也會帶來幫助或效益。

And then as I think about the business overall and LIFO, as we think about perhaps LIFO in the first half, that potentially that could get to at or slightly below $8 million a quarter, at least for the first half. For the second half, we'll see, to be determined, but that could be a slight contributor as well.

另外，從整體業務與 LIFO 來看，若我們思考上半年的 LIFO，可能每季會落在約 800 萬美元或略低，至少在上半年是如此。下半年則還要再看、尚待確定，但也可能會是些微的貢獻因素。

(Operator Instructions)

（接線員指示）

Our next question comes from Chris Dankert with Loop Capital.

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

I guess thinking about the guide for fiscal '24 here, are we assuming kind of a return to a much more typical pricing dynamic where it's modest to maybe like a 1% contributor? Or is it something in that ballpark?

我想就 2024 財年的指引來看，我們是否可以假設定價動能回到更典型的狀態，也就是溫和、可能大約貢獻 1%？大概是這個範圍嗎？

Yes. I mean certainly we saw kind of some of that subside, that mid-single-digit go to low double -- low single digits here in the most recent quarter. So yes, I mean, especially as we work through the year against some of the comps, I'd expect that to be low single digit. Very modest inflationary assumptions continuing across the year that we'd react to in the form of price as well as other kind of margin expansion initiatives. So not a big contributor, at least as on a year-over-year basis compared to what we saw in '23.

是的。我的意思是，我們確實看到那種情況有所消退，從中個位數降到低雙位數——本季則是低個位數。是的，尤其當我們在年度中與一些比較基期（comps）對比時，我預期會是低個位數。全年我們仍假設通膨非常溫和，我們會以調價以及其他毛利率擴張措施來因應。因此它不會是很大的貢獻者，至少以年對年來看，相較於我們在 2023 年看到的情況。

Got it. Yes. No, it's good to kind of see -- or a return to something more normal, I guess. And then maybe just on the backlog side of things, how should we be thinking about the impact of backlog growth in the near term? Are we assuming Engineered Solutions benefits from that in '24 and kind of outgrows the Service Center business, kind of when we're looking at the guide overall?

了解。是的，看到——或回到比較正常的狀態，算是好事。接著在積壓訂單（backlog）方面，短期內我們應該如何看待積壓成長的影響？我們是否假設工程解決方案（Engineered Solutions）在 2024 年會因此受益，並且在整體指引下相對服務中心（Service Center）業務成長更快？

Yes, I would say that start, we would think about in the first half that the Service Center business will continue to do well. Our U.S. Service Center business having strong performance right now. I think some of the overall -- a little bit of a slower start in perhaps Canada and Mexico in that, that could blend the overall number down a little bit.

是的，我會先說，我們認為上半年服務中心業務會持續表現良好。我們美國的服務中心業務目前表現強勁。我想整體上——加拿大與墨西哥可能起步稍慢一些，這可能會讓整體數字略微被稀釋、往下拉一點。

But I would say in the 2, and we'll have expectations for performance, that service centers could be a little stronger. As I think about the backlog, that's predominantly in our fluid power segment within that Engineered Solutions, and while flow control and automation have, and we did see a little bit of growth in that in the quarter, the biggest area that we care backlog is around fluid power, a nice conversion in the quarter, and we're still operating at good levels on backlog, I would say, really at 2x normalized level.

但我會說在下半年，我們對表現會有期待，服務中心可能會更強一些。至於積壓訂單，它主要集中在我們工程解決方案中的流體動力（fluid power）部門；雖然流量控制與自動化也有，而且我們本季確實看到那裡有些成長，但我們最關注的積壓最大部分是在流體動力。本季轉換表現不錯，而我們目前的積壓水位仍在良好水準，我會說大約是正常化水準的 2 倍。

So we view that as positive and can provide us some underlying strength as we go forward in really the first half of this fiscal year.

因此我們視其為正面因素，並且在我們往前走、尤其是本財年上半年，能提供一些底層支撐力道。

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

目前我這邊顯示沒有其他問題。我現在把電話交回給 Schrimsher 先生，請他做結語。

I just want to thank everyone for joining us today, and we look forward to talking with many of you throughout the quarter. Thanks.

我只想感謝各位今天加入我們，我們也期待在本季期間與各位中的許多人持續交流。謝謝。

Ladies and gentlemen, this does conclude today's conference. You may now disconnect your lines. Have a great day, everyone.

各位女士先生，今天的電話會議到此結束。您現在可以掛斷電話線。祝各位有美好的一天。