Applied Industrial Technologies Reports Fiscal 2026 Third Quarter Results | AIT Stock News

Net Sales of $1.3 Billion Up 7.3% YoY; Up 6.0% on an Organic BasisNet Income of $99.8 Million; EPS of $2.65 Up 3.1% YoYOperating Income of $137.9 Million; EBITDA of $153.9 Million Up 6.2% YoYOperating Cash Flow of $100.1 Million; Free Cash Flow of $95.4 MillionAdjusting FY26 Guidance; EPS Now $10.64 to 10.75 on Sales of +7.2% to +7.7%Announcing New 3.0 Million Share Repurchase AuthorizationCLEVELAND--(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 GuidanceGuidance 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 $2.96Total sales growth: 4.5% to 6.0%Organic sales growth: 4.0% to 5.5% year over yearEBITDA 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 AuthorizationToday, 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.DividendThe 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 InformationThe 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 SUBSIDIARIESCONDENSED STATEMENTS OF CONSOLIDATED INCOME(Unaudited)(In thousands, except per share data) Three Months EndedMarch 31,Nine Months EndedMarch 31,2026202520262025Net sales$1,251,453$1,166,749$3,613,999$3,338,694Cost of sales870,649811,4592,518,4322,330,272Gross profit380,804355,2901,095,5671,008,422Selling, distribution and administrative expense,including depreciation242,879225,888705,403644,978Operating income137,925129,402390,164363,444Interest expense (income), net2,4478534,382(710)Other expense (income), net3501,267(703)(1,769)Income before income taxes135,128127,282386,485365,923Income tax expense35,35927,48390,56080,771Net income$99,769$99,799$295,925$285,152Net income per share - basic$2.68$2.60$7.89$7.43Net income per share - diluted$2.65$2.57$7.79$7.33Average shares outstanding - basic37,22338,32237,52738,383Average shares outstanding - diluted37,68438,84738,00238,920APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(In thousands) March 31,2026June 30,2025 AssetsCash and cash equivalents$171,576$388,417Accounts receivable, net792,849769,699Inventories526,324505,337Other current assets90,45784,020Total current assets1,581,2061,747,473Property, net128,037128,154Operating lease assets, net181,830188,654Identifiable intangibles, net322,689348,600Goodwill704,998699,374Other assets69,95163,289Total Assets$2,988,711$3,175,544 LiabilitiesAccounts payable$303,057$280,124Current portion of long-term debt18,000—Other accrued liabilities215,565246,027Total current liabilities536,622526,151Long-term debt347,300572,300Other liabilities244,746232,573Total Liabilities1,128,6681,331,024Shareholders' Equity1,860,0431,844,520Total Liabilities and Shareholders' Equity$2,988,711$3,175,544 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS1) 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 SUBSIDIARIESCONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS(Unaudited)(In thousands) Nine Months EndedMarch 31,20262025 Cash Flows from Operating ActivitiesNet Income$295,925$285,152Adjustments to reconcile net income to net cash providedby operating activities:Depreciation and amortization of property19,47218,433Amortization of intangibles30,21325,385Provision for losses on accounts receivable1,0952,652Amortization of stock appreciation rights4,1743,570Other share-based compensation expense5,4145,824Changes in operating assets and liabilities, net of acquisitions(55,310)5,371Other, net18,103(1,050)Net Cash provided by Operating Activities319,086345,337Cash Flows from Investing ActivitiesNet cash paid for acquisitions, net of cash acquired(11,425)(273,312)Capital expenditures(18,312)(18,295)Proceeds from property sales9861,022Net Cash used in Investing Activities(28,751)(290,585)Cash Flows from Financing ActivitiesNet payments under revolving credit facility(207,000)—Long-term debt repayments—(25,106)Interest rate swap settlement receipts5,7659,435Purchases 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 Period388,417460,617Cash and Cash Equivalents at End of Period$171,576$352,842APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION 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 EndedNine Months EndedMarch 31,March 31,2026202520262025Net Income$99,769$99,799$295,925$285,152Interest expense (income), net2,4478534,382(710)Income tax expense35,35927,48390,56080,771Depreciation and amortization of property6,3966,58319,47218,433Amortization of intangibles9,88410,21830,21325,385EBITDA$153,855$144,936$440,552$409,031The 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 EndedNine Months EndedMarch 31,March 31,2026202520262025Net Cash provided by Operating Activities$100,110$122,453$319,086$345,337Capital 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.View source version on businesswire.com: https://www.businesswire.com/news/home/20260428553267/en/Ryan D. CieslakVice President – Investor Relations & Treasury216-426-4887 / rcieslak@applied.comSource: Applied Industrial Technologies, Inc.