Applied Industrial Technologies Inc.: Q3 FY2026 earnings call

What management said about Q3 FY2026, from the documents filed with the SEC on 28 April 2026: press release. Guidance figures: 4 raised, 5 new, 1 kept. The quarter’s numbers.

Read the filing

Key takeaways

• Organic sales rose 6.0%: Net sales rose 7.3% to $1.3 billion. Acquisitions added 0.5 points and foreign currency added 0.8 points, leaving organic growth at 6.0%. Source
• Diluted EPS up 3.1%: Diluted EPS was $2.65 against $2.57, up 3.1%. Net income was $99.8 million, against $99.8 million a year earlier. Source
• Quarterly EBITDA reached record level: EBITDA rose 6.2% to $153.9 million from $144.9 million. Operating income was $137.9 million, up from $129.4 million. Source
• Engineered Solutions grew 9.3%: Engineered Solutions organic sales rose 9.3%. Management attributed the growth to positive order trends and demand improving across legacy and emerging industry verticals. Source
• April sales trending high single digits: Organic sales for April to date are trending up by a high single-digit percent year over year. Management said orders and business funnel activity remain favorable. Source
• Free cash flow below prior year: Operating cash flow was $100.1 million and free cash flow $95.4 million, against $122.5 million and $114.9 million a year earlier. Nine-month free cash flow was $300.8 million. Source
• Full-year EPS range raised: Fiscal 2026 EPS guidance is $10.64 to $10.75, up from $10.45 to $10.75; the high end is unchanged. Source
• Fourth-quarter guidance given: Fourth-quarter guidance assumes EPS of $2.85 to $2.96, total sales growth of 4.5% to 6.0%, organic growth of 4.0% to 5.5%, and EBITDA margin of 12.6% to 12.8%. Source

“We delivered a solid third quarter underscored by strengthening organic sales growth across both segments.”

Neil A. Schrimsher, Applied’s President & Chief Executive Officer

Guidance

What changed from last quarter

• Guidance raised: Fiscal 2026 EPS guidance low end raised to $10.64 from $10.45; high end kept at $10.75. Source
• Guidance raised: Fiscal 2026 total sales growth guidance raised to 7.2% to 7.7% from 5.5% to 7.0%. Source
• Guidance raised: Fiscal 2026 organic sales growth guidance raised to 3.8% to 4.2% from 2.5% to 4.0%. Source
• Guidance raised: Fiscal 2026 EBITDA margin guidance low end raised to 12.3% from 12.2%. Source
• New guidance: Fourth-quarter guidance introduced with EPS, total sales growth, organic sales growth and EBITDA margin ranges. Source
• New: New share repurchase authorization of up to 3.0 million shares replaces the prior plan. Source

Quarter results and growth drivers

• Organic sales rose 6.0%: Net sales rose 7.3% to $1.3 billion. Acquisitions added 0.5 points and foreign currency added 0.8 points, leaving organic growth at 6.0%. Source
• Diluted EPS up 3.1%: Diluted EPS was $2.65 against $2.57, up 3.1%. Net income was $99.8 million, against $99.8 million a year earlier. Source
• Quarterly EBITDA reached record level: EBITDA rose 6.2% to $153.9 million from $144.9 million. Operating income was $137.9 million, up from $129.4 million. Source
• Nine-month EPS and sales higher: For nine months, net sales were $3.61 billion against $3.34 billion, and diluted EPS was $7.79 against $7.33. Source

Segments and regions

• Engineered Solutions grew 9.3%: Engineered Solutions organic sales rose 9.3%. Management attributed the growth to positive order trends and demand improving across legacy and emerging industry verticals. Source
• Service Center demand building: Service Center organic sales rose 4.2%. Management said Service Center demand is building, citing sales initiatives and the One Applied value proposition. Source
• North American backdrop showing favorable signs: Management said demand across its North American centric operations shows favorable signs, with U.S. macro indicators in more positive territory. Source

“Combined with our balance sheet capacity, we are in a solid position moving forward.”

Neil A. Schrimsher, Applied’s President & Chief Executive Officer

Demand and order book

• April sales trending high single digits: Organic sales for April to date are trending up by a high single-digit percent year over year. Management said orders and business funnel activity remain favorable. Source
• U.S. macro indicators more positive: Management cited U.S. industrial macro indicators in more positive territory, break-fix activity firming, and customers' capital spending gradually improving. Source
• Benefits from One Applied reading through: Management said benefits from sales initiatives and the One Applied value proposition are reading through as it supports customers' technical MRO requirements. Source

Margins and costs

• LIFO expense rose year over year: LIFO expense was $5.6 million pre-tax, or $0.11 per share after tax, against $2.2 million, or $0.04 per share, a year earlier. Source
• Discrete tax expense of $1.7 million: Income tax expense included a non-routine discrete expense of $1.7 million, or $0.05 per share, tied to prior-year tax provision adjustments. Total income tax expense was $35.4 million. Source
• Gross margin described as steady: Gross profit was $380.8 million against $355.3 million. Management described underlying gross margin performance as steady. Source
• Selling and admin expense increased: Selling, distribution and administrative expense, including depreciation, was $242.9 million against $225.9 million. Source

“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.”

Neil A. Schrimsher, Applied’s President & Chief Executive Officer

Capital, cash and returns

• Free cash flow below prior year: Operating cash flow was $100.1 million and free cash flow $95.4 million, against $122.5 million and $114.9 million a year earlier. Nine-month free cash flow was $300.8 million. Source
• Buybacks and dividends for nine months: Nine-month share repurchases totaled $236.4 million, against $79.8 million a year earlier, and dividends paid were $53.7 million. Source
• Long-term debt lower at quarter end: Long-term debt was $347.3 million with $18.0 million current, against $572.3 million at June 30, 2025, after $207.0 million of net revolver payments in nine months. Source
• Cash balance lower at quarter end: Cash and cash equivalents were $171.6 million at March 31, 2026. Nine-month acquisition cash paid was $11.4 million, against $273.3 million a year earlier. Source
• Balance sheet capacity cited: Management cited balance sheet capacity as part of the company's position moving forward. Source

Updated fiscal 2026 guidance

• Full-year EPS range raised: Fiscal 2026 EPS guidance is $10.64 to $10.75, up from $10.45 to $10.75; the high end is unchanged. Source
• Full-year sales growth lifted: Total sales growth guidance is 7.2% to 7.7%, up from 5.5% to 7.0%. Source
• Organic growth and margin guidance raised: Organic sales growth is now 3.8% to 4.2%, up from 2.5% to 4.0%. EBITDA margin is 12.3% to 12.4%, with the low end up from 12.2%. Source
• Fourth-quarter guidance given: Fourth-quarter guidance assumes EPS of $2.85 to $2.96, total sales growth of 4.5% to 6.0%, organic growth of 4.0% to 5.5%, and EBITDA margin of 12.6% to 12.8%. Source
• Guidance excludes acquisitions and buybacks: Guidance does not include contribution from future acquisitions or share buybacks. Source

Coming up, as management said on 28 April 2026

• Dividend payable May 29, 2026: The $0.51 quarterly dividend is payable May 29, 2026, to holders of record on May 15, 2026. Source
• Fiscal year ends June 30: Fiscal 2026 closes June 30, 2026, the end of the fourth quarter covered by the updated guidance. Source
• Repurchases through open market and negotiated deals: Shares under the new authorization may be bought in open market and negotiated transactions. Source

Risks management discussed

• External: Management said it has factored recent geopolitical developments and trade policy uncertainty into fourth-quarter guidance. Source
• External: Guidance includes macro uncertainty, broader inflationary headwinds, and growth investments. Source

Earlier plans management reported on

• Met: Management said quarterly EBITDA was record and came in at the high end of its expectations. Source

Other quarters

• Q4 FY2026 earnings call
• Q2 FY2026 earnings call
• Q1 FY2026 earnings call
• Q4 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.