Applied Industrial Technologies, Inc. Q3 FY2026 earnings call

1. Solid Q3 results with 6% organic sales growth, strongest in over 2 years. 2. Orders backlog and business funnel activity building. 3. Steady underlying margin performance with record quarterly EBITDA. 4. Strong sales growth broad - based across segments, with engineered solutions segment delivering over 9% organic growth, service center segment with 4% organic growth. 5. Positive trends in industry verticals, cross - selling contributing to growth. 6. Ongoing investment in internal initiatives and M&A as part of growth strategy.

Service Center segment: Organic sales growth 4% in Q3, average daily sales up ~5% sequentially organically. Engineered Solutions segment: Sales increased 10.2% y/y, organic sales up 9.3% y/y, driven by strong volume growth in fluid power and automation, and improved growth in flow control.

Tightening full year fiscal 2026 guidance toward high end of prior range. Now projects EPS 10.60 - 10.75 on sales growth 7.2 - 7.7% (3.8 - 4.2% organic), EBITDA margins 12.3 - 12.4%. Fourth quarter EPS range 2.85 - 2.96 on organic sales growth 4 - 5.5% y/y, EBITDA margins 12.6 - 12.8%. Inorganic M&A sales contribution slightly lower in Q4.

Customers' purchasing decisions sensitive to broader macro uncertainty including ongoing dynamic trade policy and tariff backdrop. Inflationary environment and suppliers' pricing approach highly fluid. Geopolitical developments and trade policy uncertainty may influence customer spending behavior.

Q: Curious about trend with locals versus nationals, local accounts y/y up 5% vs 3.5% in Q2, national accounts y/y up 7% vs 4% in Q2.

A: Saw good growth with both, local accounts up 5% y/y vs 3.5% in Q2, national accounts up 7% y/y vs 4% in Q2.

Q: Digging into flow control process arena, flow control benefited from tech vertical, 300 basis points to flow control in quarter, had 6% growth, chemicals trend improving.

A: Flow control benefited from tech vertical, 300 basis points to flow control in quarter, had 6% growth, chemicals trend improving.

Q: Automation sales lead times and conversions shortening on process side.

A: Reference was around customers moving projects faster, good speed in larger projects, more customers interested in accelerating automation projects.

Q: On engineered solutions operating leverage, incrementals in quarter for ES were 16%, ex - LIFO more than 19%, margins strengthened as top line strengthened.

A: Incrementals in quarter for ES were 16%, ex - LIFO more than 19%, margins strengthened as top line strengthened.

Q: Timing of engineered orders flowing through P&L into fiscal 27 and conservatism in Q4 guide.

A: Want to be prudent, orders conversion can vary due to order complexity and customer projects, some projects in 60 - 90 day period, others extend.

Q: M&A environment, what encourages for M&A.

A: Clear priorities in engineered solutions, adjacency work, active and engaged in M&A process, expect M&A to be stronger contributor in next 12 - 18 months.

Q: Refining chemicals and transportation impact.

A: Refining and chemicals likely to improve in second half of calendar 26, transportation an improving environment would be good for them.

Q: 6% organic growth split between price and volume, pricing in quarter about 250 basis points, volume 350 basis points benefit.

A: Pricing in quarter about 250 basis points, volume 350 basis points benefit, pricing expected to moderate in Q4.

Q: Early April read on volume and one applied definition.

A: Saw high single digits up month to date, one applied means supporting customers' MRO requirements with engineered solutions expertise, contributing over 100 basis points to service center this quarter.