Applied Industrial Technologies (AIT) Q1 2026 earnings summary

Executive summary

• Net sales reached $1.2 billion, up 9.2% year-over-year, with organic growth of 3.0% and a 6.3% boost from acquisitions, led by strong Service Center performance and operational execution.

• EBITDA grew 13.4% year-over-year to $146.3 million, with margin expanding to 12.2%, and EPS increased 11.4% to $2.63, both exceeding expectations.

• Free cash flow was $112 million, representing 111% conversion relative to net income.

• Hydradyne acquisition contributed significantly to growth and margin expansion.

• Positive order trends and backlog in key verticals, including fluid power, automation, and flow control, with improving customer sentiment.

Financial highlights

• Gross margin improved 55 basis points to 30.1%, aided by Hydradyne and margin initiatives.

• Operating income grew 14.0% to $129.0 million.

• Cash flow from operations was $119.3 million, with free cash flow at $112 million.

• SDNA expense was 19.4% of sales; organic SDNA up 0.7% vs. 3% organic sales growth.

• Share repurchases totaled $53.2 million for 204,136 shares in the quarter.

Outlook and guidance

• Fiscal 2026 EPS guidance raised to $10.10–$10.85 (from $10.00–$10.75), reflecting strong Q1 performance and a lower share count.

• Sales guidance maintained at 4%–7% growth (1%–4% organic); EBITDA margin guidance at 12.2%–12.5%.

• Second quarter organic sales expected to grow low single digits year-over-year, with service center outpacing engineered solutions.

• Full-year effective tax rate expected in the 23.0% to 24.0% range.

• Guidance reflects ongoing macro uncertainty, inflation, and evolving trade/tariff environment.