Earnings release
Page 1
NEWS RELEASE Applied Industrial Technologies Reports Fiscal 2027 First Quarter Results 2026-10-27 Net Sales of $1.3 Billion Up 7.6% YoY; Up 7.1% on an Organic Basis Net Income of $110.4 Million, or $2.97 Per Share Up 12.7% YoY Operating Income of $143.6 Million Up 11.3%; EBITDA of $160.3 Million Up 9.6% YoY Operating Cash Flow of $86.4 Million; Free Cash Flow of $73.4 Million Increasing FY27 EPS Guidance to $11.70 to $12.20 Reiterate FY27 Sales and EBITDA Margin Guidance CLEVELAND--(BUSINESS WIRE)-- Applied Industrial Technologies (NYSE: AIT), a leading value-added distributor and technical solutions provider of industrial motion, uid power, ow control, automation technologies, and related maintenance supplies, today reported results for its scal 2027 rst quarter ended September 30, 2026. Net sales for the quarter of $1.3 billion increased 7.6% over the prior year. The change includes a 0.3% increase from acquisitions and a 0.2% bene t from foreign currency translation. Excluding these factors, sales increased 7.1% on an organic basis re ecting a 14.1% increase in the Engineered Solutions segment and a 3.5% increase in the Service Center segment. The Company reported net income of $110.4 million, or $2.97 per share, and EBITDA of $160.3 million. On a pre-tax basis, results include $5.6 million ($0.12 after tax per share) of LIFO expense compared to $2.6 million ($0.05 after tax per share) of LIFO expense in the prior-year period. Neil A. Schrimsher, Applied’s President & Chief Executive O cer, commented, “We had an encouraging start to scal 2027. First quarter EPS grew 13% year over year re ecting a favorable demand environment and solid margin performance. Sales growth was led by our Engineered Solutions segment, where our leading engineering capabilities and market positioning drove strong mid-teens organic sales growth, as well as ongoing positive order momentum. Service Center segment sales growth strengthened through the quarter, with positive trends 1
Page 2
continuing into October. In addition, we continue to manage broader in ationary pressures very well through ongoing gross margin initiatives, cost control, and channel execution. Combined with favorable mix, EBITDA margins expanded over the prior year and achieved the high-end of our rst quarter guidance.” Mr. Schrimsher added, “Following rst quarter results, we are reiterating scal 2027 sales and EBITDA margin guidance established in mid-August. Sales trends are tracking in line with our expectations year to date and remain positive into early F2Q27, with organic sales month to date in October up approximately 10% year over year. While mindful of in ationary headwinds and macro uncertainty, we remain positively biased considering favorable market conditions and order trends, as well as various company-speci c opportunities that should provide ongoing bene ts moving forward. Combined with our leading technical industry position and balance sheet capacity, we are in a favorable position to deliver strong performance in scal 2027 and meaningful value creation long term.” Fiscal 2027 Guidance Today, the Company is modestly increasing scal 2027 EPS guidance to a range of $11.70 to $12.20 (prior $11.65 to $12.15) to re ect a slightly lower diluted share count assumption following rst quarter share repurchases. The Company is maintaining guidance for sales of up 4.0% to 6.5%, as well as EBITDA margins of 12.5% to 12.8%. Guidance continues to incorporate macro uncertainty tied to ongoing geopolitical events and trade policy dynamics, as well as broader in ationary headwinds and growth investments. Guidance does not assume contribution from future acquisitions or share buybacks. Board of Directors Transition The Company also announced today that Peter C. Wallace, Chairman, retired from the Board as of the Company’s annual meeting held on October 20th, 2026. The Board has selected Joe A. Raver to succeed Mr. Wallace as its next independent Chairman. Mr. Raver joined the Board of Directors in 2017. Mr. Schrimsher commented, “On behalf of the Board of Directors and the Company, we thank Pete for his outstanding leadership and dedication to Applied throughout his 21 years of service on the Board, including 12 years as Chairman. We are grateful for his many contributions and the steady guidance provided during his tenure, which helped shape the Company’s progress and position for continued success in the years ahead. We wish him well going forward.” “Having served on our Board for nearly a decade, Joe has a deep understanding of our business and strategy that provides a seamless transition as our next Chairman,” said Mr. Schrimsher. “His track record of strategic leadership, strong business acumen, and operational excellence throughout his executive career serving industrial markets has brought valuable direction and insight since joining our Board. I look forward to continuing to work alongside him and our fellow Board members as we further position Applied for sustainable growth and long-term value creation.” 2
Page 3
Dividend Today the Company also announced that its Board of Directors declared a quarterly cash dividend of $0.51 per common share, payable on November 30, 2026, to shareholders of record on November 13, 2026. Conference Call Information The Company will host a conference call at 10 a.m. ET to discuss the quarter’s results and outlook. A live audio webcast and presentation can be accessed on our Investor Relations site at https://ir.applied.com. To join by telephone, dial 833-461-5787 (toll free) using conference ID 447 138 162. About Applied® Applied Industrial Technologies is a leading value-added distributor and technical solutions provider of industrial motion, uid power, ow 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 de ned 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 identi ed by quali ers such as “expect,” “will,” “guidance,” “assume,” “should,” 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 in ationary environment and supply chain strains), results of operations, and nancial condition, and other risk factors identi ed in Applied's most recent periodic report and other lings made with the Securities and Exchange Commission. Accordingly, actual results may di er 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 Ended September 30, 2026 2025 3
Page 4
2026 2025 Net sales $ 1,291,170$ 1,199,523 Cost of sales 898,957 838,094 Gross pro t 392,213361,429 Selling, distribution and administrative expense, including depreciation248,621 232,399 Operating income 143,592129,030 Interest expense, net 3,087 993 Other income, net (436) (548) Income before income taxes 140,941128,585 Income tax expense 30,538 27,778 Net Income $ 110,403$ 100,807 Net income per share - basic$ 3.01$ 2.67 Net income per share - diluted$ 2.97$ 2.63 Average Shares Outstanding - Basic36,705 37,757 Average Shares Outstanding - Diluted37,180 38,271 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1) Inventories are valued at average cost, using the last-in, rst-out (LIFO) method for U.S. inventories. An actual valuation of inventory under the LIFOmethod can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations arebased on management’s estimates of expected year-end inventory levels and costs and are subject to the nal year-end LIFO inventorydetermination. APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(In thousands) September 30, 2026 June 30, 2026 Assets Cash and cash equivalents $ 112,236$ 127,130Accounts receivable, net 822,293 831,244Inventories 533,253 508,979 Other current assets 85,829 111,376 Total current assets 1,553,6111,578,729Property, net 134,621 131,651Operating lease assets, net 217,535 213,199Identi able intangibles, net 303,147 312,814Goodwill 704,507 704,700 Other assets 70,328 68,880 Total Assets $ 2,983,749$ 3,009,973 Liabilities Accounts payable $ 293,019$ 341,094 Other accrued liabilities 245,212 271,317 Total current liabilities 538,231 612,411Long-term debt 282,300 262,300 Other liabilities 278,902 273,513 Total Liabilities 1,099,4331,148,224 Shareholders' Equity 1,884,3161,861,749 Total Liabilities and Shareholders' Equity$ 2,983,749$ 3,009,973 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIESCONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)(In thousands) ThMthEdd 4
Page 5
Three Months Ended September 30, 2026 2025 Cash Flows from Operating ActivitiesNet income $ 110,403$ 100,807 Adjustments to reconcile net income to net cash providedby operating activities:Depreciation and amortization of property6,625 6,486Amortization of intangibles 9,667 10,203Provision for (recovery of) losses on accounts receivable999 (1,671)Amortization of stock appreciation rights 1,767 1,494Other share-based compensation expense2,102 1,831Changes in operating assets and liabilities, net of acquisitions(45,492) (584) Other, net 305 751 Net Cash provided by Operating Activities86,376 119,317 Cash Flows from Investing Activities Capital expenditures (13,013) (7,301)Net cash paid for acquisitions, net of cash acquired— (2,280) Proceeds from property sales 98 35 Net Cash used in Investing Activities(12,915) (9,546) Cash Flows from Financing Activities Repayments under revolving credit facility(20,000) —Borrowings under revolving credit facility40,000 —Interest rate swap settlement receipts — 2,698Purchases of treasury shares (80,034) (53,175)Dividends paid (18,767) (17,383)Acquisition holdback payments (310) (1,210) Taxes paid for shares withheld (8,686) (9,495) Net Cash used in Financing Activities(87,797) (78,565) E ect of Exchange Rate Changes on Cash (558) (907) (Decrease) increase in Cash and Cash Equivalents(14,894) 30,299 Cash and Cash Equivalents at Beginning of Period127,130 388,417 Cash and Cash Equivalents at End of Period$ 112,236$ 418,716 APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIESSUPPLEMENTAL INFORMATIONRECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)(In thousands) The Company supplements the reporting of nancial information determined under U.S. generally accepted accounting principles (GAAP) withreporting of non-GAAP nancial measures. The Company believes that these non-GAAP measures provide meaningful information to assistshareholders in understanding nancial results, assessing prospects for future performance, and provide a better baseline for analyzing trends inour underlying businesses. Because non-GAAP nancial measures do not have a standard de nition, it may not be possible to compare these non-GAAP nancial measures with other companies' non-GAAP nancial measures having the same or similar names. These non-GAAP nancialmeasures should not be considered in isolation or as a substitute for reported results. The Company believes these non-GAAP nancial measuresre ect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of thebusiness. The Company strongly encourages investors and shareholders to review company nancial statements and publicly led reports in theirentirety and not to rely on any single nancial measure. Reconciliation of Net Income, a GAAP nancial measure, to EBITDA, a non-GAAP nancial measure: Three Months Ended September 30, 2026 2025 Net income $ 110,403$ 100,807 Interest expense, net 3,087 993Income tax expense 30,538 27,778Depreciation and amortization of property6,625 6,486 Amortization of intangibles9,667 10,203 EBITDA $ 160,320$ 146,267 The Company de nes EBITDA as Earnings from operations before Interest, Taxes, Depreciation, and Amortization. EBITDA is a non-GAAP nancialmeasure which excludes items that may not be indicative of core operating results. 5
Page 6
Reconciliation of Net Cash provided by Operating activities, a GAAP nancial measure, to Free Cash Flow, a non-GAAP nancial measure: Three Months Ended September 30, 2026 2025 Net Cash provided by Operating Activities$ 86,376$ 119,317 Capital expenditures (13,013) (7,301) Free Cash Flow $ 73,363$ 112,016 Free cash ow is a non-GAAP nancial measure and is de ned as net cash provided by operating activities less capital expenditures. APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIESSALES GROWTH BY REPORTABLE SEGMENT (Unaudited)(Percent change compared to prior-year period)For the three months ended September 30, 2026 Reported SalesSelling DaysImpact(1) AcquisitionsForeign CurrencyOrganic Change Service Center 4.2 % 0.0 % 0.4 % 0.3 % 3.5 % Engineered Solutions14.1 % 0.0 % 0.0 % 0.0 % 14.1 % Total Company7.6 % 0.0 % 0.3 % 0.2 % 7.1 % (1)Based on U.S. selling days; there were 64 selling days in both Q1 FY27 and Q1 FY26. APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIESNET SALES, OPERATING INCOME, EBITDA, & EBITDA MARGIN BY REPORTABLE SEGMENT & CORPORATE & OTHER EXPENSE, NET (Unaudited)(In thousands) Three Months Ended September 30, 2026 2025Service Center Segment: Net Sales $ 815,349$ 782,474 Operating income $ 105,317$ 104,053Depreciation and amortization of property4,667 4,235 Amortization of intangibles727 730 EBITDA $ 110,711$ 109,018 EBITDA margin - % of sales13.6% 13.9% Engineered Solutions Segment: Net Sales $ 475,821$ 417,049 Operating income $ 60,923$ 45,860Depreciation and amortization of property1,958 2,251 Amortization of intangibles8,940 9,473 EBITDA $ 71,821$ 57,584 EBITDA margin - % of sales15.1% 13.8% Corporate & other expense, net$ 22,648$ 20,883 Ryan D. Cieslak Vice President – Investor Relations & Treasury 216-426-4887 / rcieslak@applied.com 6
Page 7
Source: Applied Industrial Technologies, Inc. 7