Applied Industrial Technologies (AIT) Q3 2025 earnings summary

Executive summary

• Q3 2025 performance exceeded expectations for gross margin, EBITDA, EPS, and cash generation, despite a 3.1% organic sales decline and muted demand trends.

• Net sales increased 1.8% year-over-year to $1.17 billion, driven by acquisitions, while organic sales declined and currency translation was unfavorable.

• Margin expansion was supported by internal initiatives, cost controls, and the Hydradyne acquisition.

• Free cash flow reached record levels, up 50% year-over-year in Q3 and 39% year-to-date, supporting over $440 million in capital deployment, including M&A and share buybacks.

• Announced acquisition of IRIS Factory Automation and a new 1.5 million share repurchase authorization.

Financial highlights

• Consolidated sales rose 1.8% year-over-year to $1.17 billion, with acquisitions contributing 6.6% growth; organic daily sales decreased 3.1%.

• Gross margin expanded 95 bps to 30.5%; EBITDA margin increased 59 bps to 12.4%.

• Reported EBITDA rose 6.8% year-over-year to $144.9 million; EPS was $2.57, up 3.7% from prior year.

• Free cash flow for Q3 was $114.9 million (115% of net income), up 50% year-over-year; year-to-date free cash flow was $327 million, up 39%.

• Net leverage ended at 0.4x EBITDA, with $353 million cash on hand.

Outlook and guidance

• Fiscal 2025 EPS guidance updated to $9.85–$10.00, with sales growth flat to up 1% and organic sales down 4% to down 3%.

• Q4 guidance: EPS $2.52–$2.67, sales down 1%–3% year-over-year, EBITDA margin 12.6%–12.8%.

• April organic daily sales declined ~3% year-over-year; Q4 assumes mid to low single-digit organic sales decline.

• Guidance reflects economic uncertainty, evolving tariffs, inflation, and cautious customer spending.

• No contribution from future acquisitions or share buybacks included in guidance.