Applied Industrial Technologies (AIT) Q1 2026 earnings summary

Executive summary

• Net sales for Q1 2026 increased 9.2% year-over-year to $1.2 billion, with organic growth of 3% and a 6.3% boost from acquisitions, led by strong Service Center performance and operational execution.

• Net income rose 11.4% to $100.8 million ($2.63 per diluted share), with EBITDA up 13.4% to $146.3 million and margin expanding to 12.2%.

• Gross margin improved to 30.1% (up 55 bps), and free cash flow was $112 million, representing 111% of net income.

• Service Center segment led organic growth, while Engineered Solutions benefited from acquisitions but saw a slight organic sales decline; order momentum remains positive.

• Hydradyne acquisition contributed significantly to sales, EBITDA, and synergy realization.

Financial highlights

• Consolidated sales up 9.2% year-over-year to $1.2 billion; organic sales up 3%.

• EBITDA rose 13.4% to $146.3 million, with margin expanding to 12.2% (up 46–50 bps).

• EPS increased 11.4% to $2.63, aided by share buybacks.

• Gross profit margin improved to 30.1% (up 55 bps); operating income grew 14% to $129 million.

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

Outlook and guidance

• Fiscal 2026 EPS guidance raised to $10.10–$10.85 (from $10.00–$10.75), reflecting strong Q1 and 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 rise low single digits year-over-year, with Service Center outpacing Engineered Solutions.

• Guidance assumes 150–200 bps sales contribution from pricing and $14–$18 million LIFO expense.

• Guidance reflects ongoing macro, inflation, and trade/tariff uncertainty; full-year tax rate expected at 23%–24%.