Applied Industrial Technologies Reports Fiscal 2026 Second Quarter Results

Key Terms

ebitda financial

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It measures a company's profitability by focusing on the money it makes from its core operations, ignoring expenses like taxes and accounting adjustments. Investors use EBITDA to compare how well different companies are performing financially, as it provides a clearer picture of operational success without the influence of financial structure or accounting choices.

free cash flow financial

Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.

lifo financial

An accounting method that assumes the most recently acquired inventory items are sold first, so the newest costs flow into cost of goods sold while older costs stay on the balance sheet. Imagine a stack of boxes where you take from the top; when prices are rising, that top-first approach produces higher reported costs and lower reported profits, which can reduce taxes and change profit margins. Investors watch LIFO because it affects reported earnings, tax liabilities, and how comparable a company’s performance is to peers.

•  Net Sales of $1.2 Billion Up 8.4% YoY; Up 2.2% on an Organic Basis
•  Net Income of $95.3 Million, or $2.51 Per Diluted Share Up 4.6% YoY
•  Operating Income of $123.2 Million; EBITDA of $140.4 Million Up 3.9% YoY
•  Operating Cash Flow of $99.7 Million; Free Cash Flow of $93.4 Million
•  Quarterly Dividend Increased 11% to $0.51 Per Share
•  Announcing Acquisition of Thompson Industrial Supply Inc.
• Adjusting FY26 Guidance; EPS Now $10.45 to $10.75 on Sales of +5.5% to +7.0%

CLEVELAND--(BUSINESS WIRE)-- Applied Industrial Technologies (NYSE: AIT), a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies, today reported results for its fiscal 2026 second quarter ended December 31, 2025.

Net sales for the quarter of $1.2 billion increased 8.4% over the prior year. The change includes a 6.0% increase from acquisitions and a positive 0.2% impact from foreign currency translation. Excluding these factors, sales increased 2.2% on an organic basis reflecting a 2.9% increase in the Service Center segment and a 0.5% increase in the Engineered Solutions segment. The Company reported net income of $95.3 million, or $2.51 per share, and EBITDA of $140.4 million. On a pre-tax basis, results include $6.9 million ($0.14 after tax per share) of LIFO expense compared to $0.7 million ($0.01 after tax per share) of LIFO expense in the prior-year period.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “During the second quarter we continued to effectively manage through an evolving but still mixed end-market backdrop while positioning the Company for stronger growth that we see ahead. Sales and EBITDA margins were in line with our guidance, and earnings grew modestly over the prior year. This is inclusive of greater than expected LIFO expense and muted December sales activity. Our teams responded with an ongoing focus on internal initiatives and channel execution. These efforts drove solid underlying gross margin and EBITDA margin performance when excluding the LIFO impact, particularly considering difficult prior-year comparisons as previously highlighted. In addition, we continued to see encouraging signs on the sales front with order growth continuing to build across both segments. We believe this positive momentum could translate more meaningfully to sales in the second half of our fiscal year, as reflected by organic sales trending up by a mid single-digit percent year over year month to date in January. Lastly, we remain active with capital deployment including ongoing share repurchases, as well as today’s announced 11% increase in our quarterly dividend and the bolt-on Service Center acquisition of Thompson Industrial Supply Inc.”

Mr. Schrimsher added, “As we enter the second half of fiscal 2026, we remain constructive on our setup given the potential for accelerating sales and earnings growth. Our updated guidance incorporates ongoing macro and policy uncertainty that will likely continue to influence customer spending behavior and shipment activity near term. That said, we are encouraged by early fiscal third quarter sales trends including stronger sales growth across both segments. Sentiment from customers and sales teams is directionally positive, while business funnels continue to expand. Furthermore, we believe technical MRO and capital spending requirements are heightened entering a more productive environment in calendar 2026 as benefits from lower interest rates, tax policy, and deregulation provide incremental support. Combined with ongoing self-help margin opportunities and balance sheet capacity, we are well positioned to capitalize on various growth catalysts developing across the North American industrial sector.”

Fiscal 2026 Guidance

Today, the Company is adjusting fiscal 2026 EPS guidance to a range of $10.45 to $10.75 (prior $10.10 to $10.85) following fiscal 2026 first half performance. Updated guidance now assumes sales growth of 5.5% to 7.0% (prior range up 4.0% to 7.0%) including up 2.5% to 4.0% on an organic basis (prior range up 1.0% to 4.0%), while EBITDA margin guidance is now 12.2% to 12.4% (prior range 12.2% to 12.5%). Guidance now assumes annual LIFO expense in a range of $24 million to $26 million (prior range $14 million to $18 million), and incorporates ongoing macro uncertainty, broader inflationary headwinds, and growth investments. Guidance does not assume contribution from future acquisitions or share buybacks.

Acquisition of Thompson Industrial Supply Inc.

The Company today also announced the acquisition of Thompson Industrial Supply Inc. (Thompson). Based in Los Angeles, CA, Thompson is a provider of industrial bearings, power transmission, hydraulics, pneumatics, linear motion, and lightweight belting products and related service solutions. Thompson operates with a team of more than 40 associates from two locations in Southern California and serves customers across many core verticals including food and beverage, consumer products, pharmaceutical, life sciences, and other various industrial industries. The Company will be integrated into Applied’s U.S. Service Center operations and is expected to generate annual sales of approximately $20 million in the first year of ownership.

Mr. Schrimsher commented, “We welcome Thompson to Applied as we continue to bolster our local service center position and provide our customers with leading aftermarket support of motion control solutions. Thompson is a nice bolt-on acquisition that will enhance our footprint in an important industrial market. They bring strong technical knowledge and aligned supplier relationships, as well as in-house belting and fabrication capabilities that will strengthen our value-added services and competitive position in the region. We look forward to seeing their capabilities support our collective efforts and value proposition moving forward.”

Dividend

Today the Company also announced that its Board of Directors approved an 11% increase in the quarterly cash dividend to $0.51 per common share, payable on February 27, 2026, to shareholders of record on February 13, 2026. This represents the 17^th dividend increase since 2010.

Conference Call Information

The Company will host a conference call at 10 a.m. ET today to discuss the quarter’s results and outlook. A live audio webcast and supplemental presentation can be accessed on our Investor Relations site at https://ir.applied.com. To join by telephone, dial 800-715-9871 (toll free) or 646-307-1963 using conference ID 7388794. Replays of the call will be available via webcast, as well as by telephone for one week by dialing 800-770-2030 (toll free) using conference ID 7388794.

About Applied^®

Applied Industrial Technologies is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO (maintenance, repair, and operations) and OEM (original equipment manufacturing), and new system install applications in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. For more information, visit www.applied.com.

This press release contains statements that are forward-looking, as that term is defined by the Securities and Exchange Commission in its rules, regulations and releases. Applied intends that such forward-looking statements be subject to the safe harbors created thereby. Forward-looking statements are often identified by qualifiers such as “assume,” “expect,” “see,” “guidance,” and derivative or similar expressions. All forward-looking statements are based on current expectations regarding important risk factors including trends and events in the industrial sector of the economy (such as the inflationary environment and supply chain strains), results of operations, and financial condition, and other risk factors identified in Applied's most recent periodic report and other filings made with the Securities and Exchange Commission. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by Applied or any other person that the results expressed therein will be achieved. Applied assumes no obligation to update publicly or revise any forward-looking statements, whether due to new information, or events, or otherwise.

APPLIED INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
(In thousands, except per share data)
	Three Months Ended December 31,							Six Months Ended December 31,
		2025			2024				2025			2024
Net Sales	$	1,163,023		$	1,073,001			$	2,362,546		$	2,171,945
Cost of Sales		809,689			744,951				1,647,783			1,518,813
Gross Profit		353,334			328,050				714,763			653,132
Selling, distribution and administrative expense,
including depreciation		230,125			207,180				462,524			419,090
Operating Income		123,209			120,870				252,239			234,042
Interest expense (income), net		942			(936	)			1,935			(1,563	)
Other income, net		(505	)		(755	)			(1,053	)		(3,036	)
Income Before Income Taxes		122,772			122,561				251,357			238,641
Income tax expense		27,423			29,271				55,201			53,288
Net Income	$	95,349		$	93,290			$	196,156		$	185,353
Net Income Per Share - Basic	$	2.54		$	2.43			$	5.21		$	4.83
Net Income Per Share - Diluted	$	2.51		$	2.39			$	5.14		$	4.76
Average Shares Outstanding - Basic		37,595			38,427				37,676			38,413
Average Shares Outstanding - Diluted		38,055			38,963				38,161			38,956
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) Inventories are valued at average cost, using the last-in, first-out (LIFO) method for U.S. inventories. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory determination.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
				December 31, 2025			June 30, 2025
Assets
Cash and cash equivalents				$	405,986		$	388,417
Accounts receivable, net					706,902			769,699
Inventories					529,003			505,337
Other current assets					106,568			84,020
Total current assets					1,748,459			1,747,473
Property, net					129,531			128,154
Operating lease assets, net					181,831			188,654
Identifiable intangibles, net					328,787			348,600
Goodwill					701,422			699,374
Other assets					69,292			63,289
Total Assets				$	3,159,322		$	3,175,544
Liabilities
Accounts payable				$	258,235		$	280,124
Other accrued liabilities					217,247			246,027
Total current liabilities					475,482			526,151
Long-term debt					572,300			572,300
Other liabilities					237,132			232,573
Total Liabilities					1,284,914			1,331,024
Shareholders' Equity					1,874,408			1,844,520
Total Liabilities and Shareholders' Equity				$	3,159,322		$	3,175,544

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands)
		Six Months Ended
		December 31,
			2025				2024
Cash Flows from Operating Activities
Net income		$	196,156			$	185,353
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property			13,076				11,850
Amortization of intangibles			20,329				15,167
(Recovery of) provision for losses on accounts receivable			(240	)			3,605
Amortization of stock appreciation rights			2,887				2,453
Other share-based compensation expense			3,280				3,101
Changes in operating assets and liabilities, net of acquisitions			(26,230	)			1,451
Other, net			9,718				(96	)
Net Cash provided by Operating Activities			218,976				222,884
Cash Flows from Investing Activities
Net cash paid for acquisitions, net of cash acquired			(2,425	)			(273,142	)
Capital expenditures			(13,578	)			(10,746	)
Proceeds from property sales			642				922
Net Cash used in Investing Activities			(15,361	)			(282,966	)
Cash Flows from Financing Activities
Long-term debt repayments			—				(25,106	)
Interest rate swap settlement receipts			5,083				6,797
Purchases of treasury shares			(143,401	)			(30,084	)
Dividends paid			(34,723	)			(28,469	)
Payment of debt issuance costs			(1,611	)			—
Acquisition holdback payments			(1,210	)			(1,210	)
Taxes paid for shares withheld			(11,191	)			(13,037	)
Exercise of stock appreciation rights and options			(1	)			—
Net Cash used in Financing Activities			(187,054	)			(91,109	)
Effect of Exchange Rate Changes on Cash			1,008				(5,985	)
Increase (Decrease) in Cash and Cash Equivalents			17,569				(157,176	)
Cash and Cash Equivalents at Beginning of Period			388,417				460,617
Cash and Cash Equivalents at End of Period		$	405,986			$	303,441

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)

(In thousands)

The Company supplements the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with reporting of non-GAAP financial measures. The Company believes that these non-GAAP measures provide meaningful information to assist shareholders in understanding financial results, assessing prospects for future performance, and provide a better baseline for analyzing trends in our underlying businesses. Because non-GAAP financial measures do not have a standard definition, it may not be possible to compare these non-GAAP financial measures with other companies' non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for reported results. The Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review company financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

Reconciliation of Net Income, a GAAP financial measure, to EBITDA, a non-GAAP financial measure:
	Three Months Ended							Six Months Ended
	December 31,							December 31,
		2025			2024				2025			2024
Net income	$	95,349		$	93,290			$	196,156		$	185,353
Interest expense (income), net		942			(936	)			1,935			(1,563	)
Income tax expense		27,423			29,271				55,201			53,288
Depreciation and amortization of property		6,590			5,926				13,076			11,850
Amortization of intangibles		10,126			7,567				20,329			15,167
EBITDA	$	140,430		$	135,118			$	286,697		$	264,095

The Company defines EBITDA as Earnings from operations before Interest, Taxes, Depreciation, and Amortization. EBITDA is a non-GAAP financial measure which excludes items that may not be indicative of core operating results.
Reconciliation of Net Cash provided by Operating activities, a GAAP financial measure, to Free Cash Flow, a non-GAAP financial measure:
	Three Months Ended							Six Months Ended
	December 31,							December 31,
		2025			2024				2025			2024
Net Cash provided by Operating Activities	$	99,659		$	95,137			$	218,976		$	222,884
Capital expenditures		(6,277	)		(5,197	)			(13,578	)		(10,746	)
Free Cash Flow	$	93,382		$	89,940			$	205,398		$	212,138
Free cash flow is a non-GAAP financial measure and is defined as net cash provided by operating activities less capital expenditures.

 

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CONTACT INFORMATION

Ryan D. Cieslak

Director – Investor Relations & Treasury

216-426-4887 / rcieslak@applied.com

Source: Applied Industrial Technologies, Inc.