Applied Industrial Technologies Reports Fiscal 2026 Third 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.

organic basis financial

"Organic basis" refers to the growth in a company's revenue or sales that comes from its existing operations, without including the effects of acquisitions, divestments, or other external changes. It shows how well a company's core business is performing on its own, much like tracking the natural growth of a plant without considering external factors. For investors, understanding organic growth helps assess the true strength and sustainability of a company's fundamental business.

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.

share buyback program financial

A share buyback program is when a company uses its cash to repurchase its own outstanding shares from the market, reducing the number of shares available to investors. That matters because it can raise the value of remaining shares and signal management's confidence in the business—similar to a bakery buying back unsold loafs to make each remaining loaf represent a larger share of its oven’s output—though buybacks can also affect cash available for other uses.

• Net Sales of $1.3 Billion Up 7.3% YoY; Up 6.0% on an Organic Basis
• Net Income of $99.8 Million; EPS of $2.65 Up 3.1% YoY
• Operating Income of $137.9 Million; EBITDA of $153.9 Million Up 6.2% YoY
• Operating Cash Flow of $100.1 Million; Free Cash Flow of $95.4 Million
• Adjusting FY26 Guidance; EPS Now $10.64 to 10.75 on Sales of +7.2% to +7.7%
• Announcing New 3.0 Million Share Repurchase Authorization

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 third quarter ended March 31, 2026.

Net sales for the quarter of $1.3 billion increased 7.3% over the prior year. The change includes a 0.5% increase from acquisitions and a positive 0.8% impact from foreign currency translation. Excluding these factors, sales increased 6.0% on an organic basis reflecting a 4.2% increase in the Service Center segment and a 9.3% increase in the Engineered Solutions segment. The Company reported net income of $­­­99.8 million, or $2.65 per share, and EBITDA of $153.9 million. Results include $1.7 million ($0.05 per share) of non-routine discrete tax expense related to prior-year tax provision adjustments. In addition, on a pre-tax basis, results include $5.6 million ($0.11 after tax per share) of LIFO expense compared to $2.2 million ($0.04 after tax per share) of LIFO expense in the prior-year period.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “We delivered a solid third quarter underscored by strengthening organic sales growth across both segments. Growth was led by our Engineered Solutions segment where ongoing positive order trends, improving demand across legacy and emerging industry verticals, and our deep application and engineering expertise is accelerating sales momentum. This is an encouraging sign that highlights our differentiated position, as well as distinct growth tailwinds emerging across the segment. In addition, Service Center segment demand is building nicely. Benefits from our sales initiatives and One Applied value proposition are reading through as we support our customers’ heightened technical MRO requirements within an increasingly positive U.S. industrial backdrop. Combined with steady underlying gross margin performance, we reported record quarterly EBITDA at the high end of our expectations. Overall, these are strong results that further demonstrate our favorable industry position and the Applied team’s consistent execution.”

Mr. Schrimsher added, “I am encouraged by our performance year to date and the company-specific opportunities that continue to develop. Organic sales month to date in April are trending up by a high single-digit percent year over year, while orders and business funnel activity remain favorable. We are mindful of recent geopolitical developments and ongoing trade policy uncertainty, which we have incorporated into our fourth quarter outlook. That said, the demand backdrop across our North American centric operations is showing favorable signs with U.S. industrial macro indicators now in more positive territory, break-fix activity firming, and customers’ capital spending gradually improving. Combined with our balance sheet capacity, we are in a solid position moving forward.”

Updated Fiscal 2026 Guidance

Guidance for our fiscal 2026 year ending June 30, 2026 is updated as follows:

• EPS: $10.64 to $10.75 (prior $10.45 to $10.75)
• Total sales growth: 7.2% to 7.7% (prior 5.5% to 7.0%)
• Organic sales growth: 3.8% to 4.2% (prior 2.5% to 4.0%)
• EBITDA margin: 12.3% to 12.4% (prior 12.2% to 12.4%)

Updated guidance assumes the following for our fiscal fourth quarter ending June 30, 2026:

• EPS: $2.85 to $2.96
• Total sales growth: 4.5% to 6.0%
• Organic sales growth: 4.0% to 5.5% year over year
• EBITDA margin: 12.6% to 12.8%

Guidance incorporates macro uncertainty tied to recent geopolitical events and ongoing trade policy dynamics, as well as broader inflationary headwinds and growth investments. Guidance does not assume contribution from future acquisitions or share buybacks.

Share Repurchase Authorization

Today, the Company announced that its Board of Directors authorized a new share buyback program to repurchase up to 3.0 million shares of the Company’s common stock. The updated plan replaces the prior share repurchase plan. Shares may be purchased in open market and negotiated transactions.

Dividend

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.51 per common share, payable on May 29, 2026, to shareholders of record on May 15, 2026.

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 833-461-5787 (toll free) or 585-542-9983 using conference ID 381460398. Replays of the call will be available via webcast, as well as by telephone for one week by dialing 833-461-5787 (toll free) using conference ID 381460398.

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,” “expectation,” “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 March 31,							Nine Months Ended March 31,
	2026			2025				2026			2025
Net sales	$	1,251,453		$	1,166,749			$	3,613,999		$	3,338,694
Cost of sales		870,649			811,459				2,518,432			2,330,272
Gross profit		380,804			355,290				1,095,567			1,008,422
Selling, distribution and administrative expense,
including depreciation		242,879			225,888				705,403			644,978
Operating income		137,925			129,402				390,164			363,444
Interest expense (income), net		2,447			853				4,382			(710	)
Other expense (income), net		350			1,267				(703	)		(1,769	)
Income before income taxes		135,128			127,282				386,485			365,923
Income tax expense		35,359			27,483				90,560			80,771
Net income	$	99,769		$	99,799			$	295,925		$	285,152
Net income per share - basic	$	2.68		$	2.60			$	7.89		$	7.43
Net income per share - diluted	$	2.65		$	2.57			$	7.79		$	7.33
Average shares outstanding - basic		37,223			38,322				37,527			38,383
Average shares outstanding - diluted		37,684			38,847				38,002			38,920

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
	March 31, 2026				June 30, 2025
Assets
Cash and cash equivalents	$	171,576			$	388,417
Accounts receivable, net		792,849				769,699
Inventories		526,324				505,337
Other current assets		90,457				84,020
Total current assets		1,581,206				1,747,473
Property, net		128,037				128,154
Operating lease assets, net		181,830				188,654
Identifiable intangibles, net		322,689				348,600
Goodwill		704,998				699,374
Other assets		69,951				63,289
Total Assets	$	2,988,711			$	3,175,544
Liabilities
Accounts payable	$	303,057			$	280,124
Current portion of long-term debt		18,000				—
Other accrued liabilities		215,565				246,027
Total current liabilities		536,622				526,151
Long-term debt		347,300				572,300
Other liabilities		244,746				232,573
Total Liabilities		1,128,668				1,331,024
Shareholders' Equity		1,860,043				1,844,520
Total Liabilities and Shareholders' Equity	$	2,988,711			$	3,175,544
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 STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In thousands)
		Nine Months Ended
		March 31,
		2026				2025
Cash Flows from Operating Activities
Net Income		$	295,925			$	285,152
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property			19,472				18,433
Amortization of intangibles			30,213				25,385
Provision for losses on accounts receivable			1,095				2,652
Amortization of stock appreciation rights			4,174				3,570
Other share-based compensation expense			5,414				5,824
Changes in operating assets and liabilities, net of acquisitions			(55,310	)			5,371
Other, net			18,103				(1,050	)
Net Cash provided by Operating Activities			319,086				345,337
Cash Flows from Investing Activities
Net cash paid for acquisitions, net of cash acquired			(11,425	)			(273,312	)
Capital expenditures			(18,312	)			(18,295	)
Proceeds from property sales			986				1,022
Net Cash used in Investing Activities			(28,751	)			(290,585	)
Cash Flows from Financing Activities
Net payments under revolving credit facility			(207,000	)			—
Long-term debt repayments			—				(25,106	)
Interest rate swap settlement receipts			5,765				9,435
Purchases of treasury shares			(236,379	)			(79,794	)
Dividends paid			(53,727	)			(46,159	)
Payment of debt issuance costs			(1,611	)			—
Acquisition holdback payments			(1,393	)			(1,210	)
Taxes paid for shares withheld			(12,812	)			(14,332	)
Net Cash used in Financing Activities			(507,157	)			(157,166	)
Effect of Exchange Rate Changes on Cash			(19	)			(5,361	)
Decrease in Cash and Cash Equivalents			(216,841	)			(107,775	)
Cash and Cash Equivalents at Beginning of Period			388,417				460,617
Cash and Cash Equivalents at End of Period		$	171,576			$	352,842

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 financial results of the Company. The Company strongly encourages investors and shareholders to review the Company's 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							Nine Months Ended
	March 31,							March 31,
	2026			2025				2026			2025
Net Income	$	99,769		$	99,799			$	295,925		$	285,152
Interest expense (income), net		2,447			853				4,382			(710	)
Income tax expense		35,359			27,483				90,560			80,771
Depreciation and amortization of property		6,396			6,583				19,472			18,433
Amortization of intangibles		9,884			10,218				30,213			25,385
EBITDA	$	153,855		$	144,936			$	440,552		$	409,031

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							Nine Months Ended
	March 31,							March 31,
	2026			2025				2026			2025
Net Cash provided by Operating Activities	$	100,110		$	122,453			$	319,086		$	345,337
Capital expenditures		(4,734	)		(7,549	)			(18,312	)		(18,295	)
Free Cash Flow	$	95,376		$	114,904			$	300,774		$	327,042
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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Ryan D. Cieslak
Vice President – Investor Relations & Treasury
216-426-4887 / rcieslak@applied.com

Source: Applied Industrial Technologies, Inc.