Applied Industrial Technologies AIT Form 10-Q filing Q3 FY2026

Page No.

Part I: FINANCIAL INFORMATION

Item 1: Financial Statements

Condensed Statements of Consolidated Income - Three andNineMonths EndedMarch31, 2026and 2025 2

Condensed Statements of Consolidated Comprehensive Income - Three andNineMonths EndedMarch31, 2026and 2025 3

Condensed Consolidated Balance Sheets -March31, 2026and June 30, 2025 4

Condensed Statements of Consolidated Cash Flows -NineMonths EndedMarch31, 2026and 2025 5

Condensed Statements of Shareholders' Equity - Three andNineMonths EndedMarch31, 2026and 2025 6

Notes to Condensed Consolidated Financial Statements 8

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 23

Item 3: Quantitative and Qualitative Disclosures About Market Risk 34

Item 4: Controls and Procedures 35

Part II: OTHER INFORMATION

Item 1: Legal Proceedings 36

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 36

Item 5: Other Information 36

Item 6: Exhibits 37

Signatures 39

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

ITEM I: FINANCIAL STATEMENTS

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position of Applied Industrial Technologies, Inc. (the “Company”, or “Applied”) as of March 31, 2026, and the results of its operations and its cash flows for the nine months ended March 31, 2026 and 2025, have been included. The condensed consolidated balance sheet as of June 30, 2025 has been derived from the audited consolidated financial statements at that date. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2025.

Operating results for the nine months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the remainder of the fiscal year ending June 30, 2026.

Inventory

Inventories are valued at average cost, using the last-in, first-out ("LIFO") method for U.S. inventories. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory determination. LIFO expense of $5,565 and $2,198 in the three months ended March 31, 2026 and 2025, respectively, and $15,119 and $4,841 in the nine months ended March 31, 2026 and 2025, respectively, is recorded in cost of sales in the condensed statements of consolidated income.

Reportable Segments

The Company's reportable segments are: Service Center and Engineered Solutions. These reportable segments contain the Company's various operating segments which are aggregated based upon similar economic and operating characteristics. The Service Center segment operates through local service centers and distribution centers with a focus on providing products and services addressing the maintenance and repair of motion control infrastructure and production equipment. Products primarily include industrial bearings, motors, belting, drives, couplings, pumps, linear motion products, hydraulic and pneumatic components, filtration supplies, and hoses, as well as other related supplies for general operational needs of customers’ machinery and equipment. The Engineered Solutions segment includes our operations that specialize in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic fluid power technologies; engineered flow control products and services; and advanced automation solutions including machine vision, robotics, motion control, and smart technologies. See Note 9 for further details.

Recently Issued Accounting Guidance

In December 2025, the Financial Accounting Standards Board ("FASB") issued its final Accounting Standard Update ("ASU") which makes improvements to the Accounting Standards Codification ("ASC") in response to feedback from stakeholders. This standard, issued as ASU 2025-12, specifically updates the Codification for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. This update is effective for annual reporting periods beginning after December 15, 2026, including interim reporting periods within those annual reporting periods. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures.

In December 2025, the FASB issued its final ASU which amends and clarifies the interim disclosure requirements associated with ASC Topic 270 - Interim Reporting. This standard, issued as ASU 2025-11, provides clarity about current requirements to help entities determine whether disclosures not specified in ASC 270 should be provided in interim reporting periods. This update is effective for interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures.

In September 2025, the FASB issued its final ASU which amends certain aspects of existing guidance on the accounting for and disclosure of software costs. This standard, issued as ASU 2025-06, removes all references to project stages throughout existing accounting literature and clarifies the threshold entities apply to begin capitalizing costs. This update is effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual periods. Early adoption is permitted as of the beginning of an annual period. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

In July 2025, the FASB issued its final standard which amends the guidance on the measurement of credit losses for accounts receivable and contract assets. This standard, issued as ASU 2025-05, provides a practical expedient to assume that current conditions as of the balance sheet date will persist through the reasonable and supportable forecast period for eligible assets. Entities will still be required to adjust historical data used in the estimation of expected credit losses to reflect current conditions. The amendments will be effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures.

In November 2024, the FASB issued its final standard on the Disaggregation of Income Statement Expenses ("DISE"). This standard, issued as ASU 2024-03, requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. This update is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. The requirements can be applied prospectively with the option for retrospective application. The Company is currently evaluating the effect of this guidance on its financial statements and related disclosures.

In December 2023, the FASB issued its final standard to improve income tax disclosures. This standard, issued as ASU 2023-09, requires public business entities to annually disclose specific categories in the income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. This update is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this guidance on its financial statements and related disclosures and expects the standard will only impact its income taxes disclosures with no material effect to the consolidated financial statements.

2. REVENUE RECOGNITION

Disaggregation of Revenues

The following tables present the Company's net sales by reportable segment and by geographic areas based on the location of the facility shipping the product for the three and nine months ended March 31, 2026 and 2025. Other countries consist of Mexico, Australia, New Zealand, Singapore, and Costa Rica.

The following tables present the Company’s percentage of revenue by reportable segment and major customer industry for the three and nine months ended March 31, 2026 and 2025:

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

The following tables present the Company’s percentage of revenue by reportable segment and product line for the three and nine months ended March 31, 2026 and 2025:

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

Contract Assets and Liabilities

Depending on the terms of the contracts with certain customers, the Company may receive payments from customers before the goods or services are delivered, typically as down payments for products to be delivered in the future. These amounts are recorded as contract liabilities (deferred revenue), as the performance obligations have not yet been satisfied. The Company’s contract assets consist of unbilled amounts resulting from contracts for which revenue is recognized over time using the cost-to-cost method, and for which revenue recognized exceeds the amount billed to the customer.

Activity related to contract assets and contract liabilities, which are included in other current assets and other current liabilities on the condensed consolidated balance sheet, is as follows:

The change in balances noted above of the Company's contract assets primarily results from the timing difference between the Company's performance and when the customer is billed.

3. BUSINESS COMBINATIONS

The operating results of all acquired entities are included within the consolidated operating results of the Company from the date of each respective acquisition.

Fiscal 2026 Acquisitions

On January 17, 2026, the Company acquired substantially all the net assets of Thompson Industrial Supply ("Thompson"), a Los Angeles, California based provider of industrial bearings, power transmission, hydraulics, pneumatics, linear motion products, and service solutions. Thompson is included in the Service Center segment. The purchase price for Thompson was $9,000, net tangible assets acquired were $1,400, identifiable intangible assets were $3,800, and goodwill was $3,800; the values are based upon preliminary estimated fair values at the acquisition date, which are subject to adjustment. The purchase price includes $1,350 of acquisition holdback payments, which is included in other current liabilities and other liabilities on the condensed consolidated balance sheet as of March 31, 2026, and will be paid on the first and second anniversary of the acquisition date with interest at a fixed rate of 1.0% per annum.

Fiscal 2025 Acquisitions

On December 31, 2024, the Company acquired all the membership interests of Hydradyne, LLC ("Hydradyne"), a Dallas, Texas based provider of fluid power solutions and value-added services including product offerings in hydraulics, pneumatics, electromechanical, instrumentation, filtration and fluid conveyance. The purchase price was $282,136, which was funded using available cash. Hydradyne is included in the Engineered Solutions segment.

The following table summarizes the assets acquired and liabilities assumed in connection with this acquisition based on their estimated fair values at the acquisition date.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

During the nine months ended March 31, 2026, the Company recorded purchase accounting working capital adjustments related to the Hydradyne acquisition, which decreased the fair value of net tangible assets acquired by $872, and increased goodwill by $872.

The acquired goodwill is expected to be deductible for income tax purposes.

Net sales and net income from the Hydradyne acquisition included in the Company's results are $65,683 and $4,072 for the three months ended March 31, 2026, and $195,406 and $12,006 for the nine months ended March 31, 2026.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

The following unaudited pro forma consolidated results of operations are prepared as if the Hydradyne acquisition (including the related acquisition costs) occurred at the beginning of fiscal 2024:

The pro forma amounts are calculated after applying the Company's accounting policies and adjusting the results to reflect additional amortization that would have been recorded assuming the fair value adjustments to identified intangible assets were applied as of July 1, 2023. Additional amortization of $5,473 is included in the pro forma results for the nine months March 31, 2025. In addition, pro forma adjustments of $2,761 for the three months ended March 31, 2025 and of $8,283 for the nine months March 31, 2025 were made for interest income that would not have been earned as a result of the cash used for the acquisition. The pro forma net income amounts also incorporate an adjustment to the recorded income tax expense for the income tax effect of the pro forma adjustments described above. These pro forma results of operations do not include any anticipated synergies or other effects of the planned integration of Hydradyne; accordingly, such pro forma adjustments do not purport to be indicative of the results of operations that would have resulted had the acquisition occurred as of the date indicated or that may result in the future.

On May 1, 2025, the Company acquired substantially all the net assets of IRIS Factory Automation ("IRIS"), an Aurora, Illinois provider of automation products, services, and turn-key productized solutions focused on optimizing material handling and traceability workflows across production environments. IRIS is included in the Engineered Solutions segment. During the nine months ended March 31, 2026, the Company recorded purchase accounting working capital adjustments related to the IRIS acquisition, which decreased the fair value of net tangible assets acquired by $252, and increased goodwill by $252. The purchase price for IRIS was $14,696, net liabilities assumed were $107, identifiable intangible assets were $7,810, and goodwill was $6,993; the values are based upon preliminary estimated fair values at the acquisition date, which are subject to adjustment.

On August 1, 2024, the Company acquired substantially all the net assets of Total Machine Solutions ("TMS"), a Fairfield, New Jersey based provider of electrical and mechanical power transmission products and solutions including bearings, drives, motors, conveyor components, and related repair services. TMS is included in the Service Center segment. The purchase price for TMS was $6,025, net tangible assets acquired were $1,115, identifiable intangible assets were $2,738, and goodwill was $2,172 based upon estimated fair values at the acquisition date.

On August 1, 2024, the Company acquired 100% of the outstanding shares of Stanley Proctor, a Twinsburg, Ohio based provider of hydraulic, pneumatic, measurement, control, and instrumentation components, as well as fluid power engineered systems. Stanley Proctor is included in the Engineered Solutions segment. The purchase price for Stanley Proctor was $3,924, net tangible assets acquired were $362, identifiable intangible assets were $1,725, and goodwill was $1,837 based upon estimated fair values at the acquisition date.

For all other fiscal 2025 acquisitions, the Company funded the acquisitions using available cash and the results of operations for the acquired entities are not material in relation to the Company's consolidated financial statements.

4. GOODWILL AND INTANGIBLES

The changes in the carrying amount of goodwill for both the Service Center segment and the Engineered Solutions segment for the fiscal year ended June 30, 2025 and the nine months ended March 31, 2026 are as follows:

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

The Company has eight (8) reporting units for which an annual goodwill impairment assessment was performed as of January 1, 2026. Based on the assessment performed, the Company concluded that the fair value of all of the reporting units exceeded their carrying amount as of January 1, 2026, therefore no impairment exists.

At March 31, 2026 and June 30, 2025, accumulated goodwill impairment losses subsequent to fiscal 2002 totaled $64,794 related to the Service Center segment and $167,605 related to the Engineered Solutions segment.

The Company’s identifiable intangible assets resulting from business combinations are amortized over their estimated period of benefit and consist of the following:

Amounts include the impact of foreign currency translation. Fully amortized finite-lived identifiable intangible assets are written off in the period when they become fully amortized.

During the nine months ended March 31, 2026, the Company acquired identifiable intangible assets with a preliminary acquisition cost allocation and weighted-average life as follows:

Identifiable intangible assets with finite lives are reviewed for impairment when changes in conditions indicate carrying value may not be recoverable.

Estimated future amortization expense by fiscal year (based on the Company’s identifiable intangible assets as of March 31, 2026) for the next five years is as follows: $9,600 for the remainder of 2026, $37,400 for 2027, $34,900 for 2028, $32,800 for 2029, $30,800 for 2030 and $28,700 for 2031.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

5. DEBT

A summary of both current and long-term debt is as follows (amounts in thousands):

Revolving Credit Facility

In October 2025, the Company entered into a new five-year revolving credit facility with a group of banks to refinance the existing credit facility as well as provide funds for future acquisitions, ongoing working capital and other general corporate purposes. The revolving credit facility provides a $900,000 unsecured revolving credit facility and an uncommitted accordion feature which allows the Company to request an increase in the borrowing commitments, or incremental term loans, under the credit facility in aggregate principal amounts of up to $800,000. The new revolving credit facility also provides for a $25,000 sublimit for swing line loans and a $50,000 sublimit for letters of credit. Borrowings under this agreement bear interest, at the Company's election, at either the base rate plus a margin that ranges from 0 to 55 basis points based on the Company's net leverage ratio or Secured Overnight Financing Rate (SOFR) plus a margin that ranges from 80 to 155 basis points based on the Company's net leverage ratio. Borrowing capacity under this facility, without exercising the accordion feature, totaled $722,757 at March 31, 2026 and is available to fund future acquisitions or other capital and operating requirements. This amount is net of outstanding letters of credit of $243 at March 31, 2026 to secure certain insurance obligations. The interest rate on the long-term portion of the revolving credit facility was 4.47% as of March 31, 2026.

At March 31, 2026, the Company had $177,000 outstanding under its revolving credit facility, of which $18,000 is classified as current based on the Company's intent to repay such amount within the next twelve months. The interest rate on the short term portion of the revolving credit facility was 4.42% as of March 31, 2026.

The new credit facility replaced the Company's previous credit facility agreement. Unused lines under the previous facility, net of outstanding letters of credit of $209 to secure certain insurance obligations, totaled $515,791 at June 30, 2025, and were available to fund future acquisitions or other capital and operating requirements. The interest rate on the revolving credit facility was 5.23% as of June 30, 2025.

The Company paid $1,611 of debt issuance costs related to the new revolving credit facility in the nine months ended March 31, 2026, which are included in other current assets and other assets on the condensed consolidated balance sheet as of March 31, 2026 and will be amortized over the five-year term of the new credit facility. The Company analyzed the unamortized debt issuance costs related to the previous credit facility under ASC Topic 470 - Debt. As a result of this analysis, $47 of unamortized debt issuance costs were expensed and included within interest expense, net on the condensed statements of consolidated income in the nine months ended March 31, 2026, and $804 of unamortized debt issuance costs were rolled forward into the new credit facility and will be amortized over the five-year term of the new credit facility.

Additionally, the Company had letters of credit outstanding not associated with the revolving credit agreement, in the amount of $5,336 as of March 31, 2026 and June 30, 2025, to secure certain insurance obligations.

Trade Receivable Securitization Facility

In August 2018, the Company established a trade receivable securitization facility (the "AR Securitization Facility"). The AR Securitization Facility effectively increases the Company’s borrowing capacity by collateralizing a portion of the amount of the U.S. operations’ trade accounts receivable. The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt. The AR Securitization Facility's maximum borrowing capacity is $250,000 and fees on amounts borrowed are 0.90% per year. Borrowing capacity is further subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the accounts receivable portfolio and, therefore, at certain times, we may not be able to fully access the $250,000 of borrowing capacity available under the AR Securitization Facility. Borrowings under the AR Securitization Facility carry variable interest rates tied to SOFR. The interest rate on the AR Securitization Facility as of March 31, 2026 and June 30, 2025 was 4.58% and 5.32%, respectively. On July 10, 2025, the Company amended the AR Securitization Facility and extended the term to July 10, 2028, with no substantial changes in other terms.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

6. DERIVATIVES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

In January 2019, the Company entered into an interest rate swap to mitigate variability in forecasted interest payments on $463,000 of the Company’s U.S. dollar-denominated unsecured variable rate debt. The notional amount declined over time to $384,000 as principal payments were made. The interest rate swap effectively converted a portion of the floating rate interest payment into a fixed rate interest payment. The Company designated the interest rate swap as a pay-fixed, receive-floating interest rate swap instrument and accounted for this derivative as a cash flow hedge. During fiscal 2021, the Company completed a transaction to amend and extend the interest rate swap agreement which resulted in an extension of the maturity date to January 31, 2026. The pay-fixed interest rate swap was considered a hybrid instrument with a financing component and an embedded at-market derivative that was designated as a cash flow hedge. The weighted average fixed pay rate was 1.58% and the interest rate swap was indexed to SOFR. The Company made various accounting elections related to changes in critical terms of the hedging relationship due to reference rate reform to preserve the hedging relationship.

Realized gains and losses of the actual monthly settlement activity of the interest rate swap is included within interest income or expense in the condensed consolidated statements of operations. The Company historically reflected the unrealized changes in fair value of the interest rate swap at each reporting period in other comprehensive income and a derivative asset or liability was recognized at each reporting period in the Company’s consolidated balance sheets for the interest rate swap. The interest rate swap matured as scheduled in January 2026 and as such, the derivative asset was derecognized. There were no amounts remaining in accumulated other comprehensive income related to this hedge as of March 31, 2026.

The interest rate swap converted $384,000 of variable rate debt to a rate of 2.48% as of June 30, 2025. The fair value (Level 2 in the fair value hierarchy) of the interest rate cash flow hedge was $5,503 as of June 30, 2025, which was included in other current assets in the condensed consolidated balance sheet. Amounts reclassified from other comprehensive loss, before tax, to interest expense (income), net was income of $988 and $3,654 for the three months ended March 31, 2026 and 2025, respectively, and $8,141 and $12,436 for the nine months ended March 31, 2026 and 2025, respectively.

7. FAIR VALUE MEASUREMENTS

Marketable securities measured at fair value at March 31, 2026 and June 30, 2025 totaled $27,428 and $25,628, respectively. The majority of these marketable securities are held in a rabbi trust for a non-qualified deferred compensation plan. The marketable securities are included in other assets on the accompanying condensed consolidated balance sheets and their fair values were determined using quoted market prices (Level 1 in the fair value hierarchy). In addition, the Company holds Corporate-Owned Life Insurance ("COLI") policies on certain retired

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

employees, which are valued at the cash surrender value of the policies (Level 3 in the fair value hierarchy). The fair value of the COLI policies totaled $21,598 and $20,817, at March 31, 2026 and June 30, 2025, respectively, and are included in other assets on the condensed consolidated balance sheets.

As of March 31, 2026 and June 30, 2025, the Company had no fixed interest rate debt outstanding.

The revolving credit facility and the AR Securitization Facility contain variable interest rates and their carrying values approximate fair value (Level 2 in the fair value hierarchy). The carrying value of our cash and cash equivalents, trade accounts receivable, and accounts payable approximate fair value because of the short-term maturity of these financial instruments.

8. SHAREHOLDERS' EQUITY

Accumulated Other Comprehensive Loss

Changes in the accumulated other comprehensive loss are comprised of the following amounts, shown net of taxes:

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

Other Comprehensive (Loss) Income

Details of other comprehensive (loss) income are as follows:

Anti-dilutive Common Stock Equivalents

In the three months ended March 31, 2026 and 2025, stock options and stock appreciation rights related to 61 and 68 shares of common stock, respectively, were not included in the computation of diluted earnings per share for the periods then ended as they were anti-dilutive. In the nine months ended March 31, 2026 and 2025, stock options and stock appreciation rights related to 64 and 88 shares of common stock, respectively, were not included in the computation of diluted earnings per share for the periods then ended as they were anti-dilutive.

9. SEGMENT INFORMATION

The Company's reportable segments are: Service Center and Engineered Solutions. These reportable segments contain the Company's various operating segments which have been aggregated based upon similar economic and operating characteristics. The Service Center segment operates through local service centers and distribution centers with a focus on providing products and services addressing the maintenance and repair of production equipment and motion control infrastructure. Products primarily include industrial bearings, motors, belting, drives, couplings, pumps, linear motion products, hydraulic and pneumatic components, filtration supplies, and hoses, as well as other related supplies for general operational needs of customers’ machinery and equipment. The Engineered Solutions segment includes our operations that specialize in distributing, engineering, designing, integrating, and repairing hydraulic and pneumatic fluid power technologies, engineered flow control products and services, and automation technologies. The accounting policies of the Company’s reportable segments are as described in Note 1.

The Company's chief operating decision maker ("CODM") is the chief executive officer. The CODM uses Segment Operating Income as the measure of segment profit and loss in measuring segment performance, determining how to

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

allocate the Company's assets, evaluating performance in periodic reviews, and during the development of the annual budget and the regular forecasting process. The chief operating decision maker considers budget-to-actual variances on a quarterly basis, as well as segment-specific forecasting, when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses the segment's net sales in measuring segment performance.

In addition to the two reportable segments, there is a category of certain business activities and expenses, referred to as corporate & other, that does not constitute an operating segment. Corporate & other expense, net includes the cost of our corporate headquarters and corporate functions, primarily compensation and benefits, and related administrative expenses and other expenses not directly associated with any reportable segment. These corporate and other expenses reconcile segment operating income to total consolidated income before income taxes.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts) (Unaudited)

¹ The Company accounts for inter-segment sales using market rates.

² Amortization of intangibles is recorded within selling, distribution, and administrative expense, and therefore included in segment operating income for all periods presented.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Applied Industrial Technologies (“Applied,” the “Company,” “We,” “Us” or “Our”) is a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies. Our leading brands, specialized services, and comprehensive knowledge serve MRO (Maintenance, Repair & Operations) and OEM (Original Equipment Manufacturer) end users in virtually all industrial markets through our multi-channel capabilities that provide choice, convenience, and expertise. We have a long tradition of growth dating back to 1923, the year our business was founded in Cleveland, Ohio. During the third quarter of fiscal 2026, business was conducted in the United States, Puerto Rico, Canada, Mexico, Australia, New Zealand, Singapore, and Costa Rica from 589 facilities.

The following is Management's Discussion and Analysis of significant factors which have affected our financial condition, results of operations and cash flows during the periods included in the accompanying condensed consolidated balance sheets, statements of consolidated income, consolidated comprehensive income and consolidated cash flows. When reviewing the discussion and analysis set forth below, please note that a significant number of SKUs ("Stock Keeping Units") we sell, or the products we sell in our Engineered Solutions segment, in any given period are not necessarily sold in the comparable period of the prior year, resulting in the inability to quantify with certainty commonly used comparative metrics analyzing sales, such as changes due to volumes, product mix and price.

Overview

Consolidated sales for the quarter ended March 31, 2026 increased $84.7 million or 7.3% compared to the prior year quarter, with acquisitions contributing to sales growth by $5.5 million or 0.5% and favorable foreign currency translation contributing $9.5 million or 0.8% to sales growth. Excluding the impact of businesses acquired and foreign currency translation, sales increased $69.7 million or 6.0% during the quarter primarily reflecting volume growth in both the Service Center and Engineered Solutions segment and modest price contribution. The Company generated operating income of $137.9 million, or operating margin of 11.0% of sales for the quarter ended March 31, 2026, compared to operating income of $129.4 million, or operating margin of 11.1% of sales for the same quarter in the prior year. The Company generated net income of $99.8 million both the quarters ended March 31, 2026 and March 31, 2025.

Applied monitors several economic indices that are key indicators for industrial economic activity in the United States. These include the Manufacturing Industrial Production ("MIP") and Manufacturing Capacity Utilization ("MCU") indices published by the Federal Reserve Board and the Purchasing Managers Index ("PMI") published by the Institute for Supply Management ("ISM"). Historically, our performance correlates well with the MCU, which measures productivity and calculates a ratio of actual manufacturing output versus potential full capacity output. When manufacturing plants are running at a high rate of capacity, they tend to wear out machinery more frequently and require replacement parts.

Through March 2026, all indices increased since December 2025 reflecting growing industrial activity in the United States. The indices for the months during the current quarter, along with the indices for the prior fiscal year end and prior quarter end, were as follows:

The number of Company employees was 6,859 at March 31, 2026, 6,837 at June 30, 2025, and 6,818 at March 31, 2025. The number of operating facilities totaled 589 at March 31, 2026, 596 at June 30, 2025, and 619 at March 31, 2025.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Results of Operations

Three Months Ended March 31, 2026 and 2025

The following table is included to aid in review of Applied's condensed statements of consolidated income.

During the quarter ended March 31, 2026, sales increased $84.7 million or 7.3% compared to the prior year quarter, with sales from acquisitions adding $5.5 million or 0.5%, and favorable foreign currency translation increasing sales by $9.5 million or 0.8%. There were 63 selling days in both the quarters ended March 31, 2026 and March 31, 2025. Excluding the impact of businesses acquired and foreign currency translation, sales increased $69.7 million or 6.0% during the quarter due to higher volumes of approximately $40.0 million with the remainder attributed to positive price contribution.

The following table shows changes in sales by reportable segment (amounts in millions).

Sales from our Service Center segment, which operates primarily in MRO markets, increased $43.3 million or 5.7% compared to the prior year quarter. Acquisitions within this segment increased sales by $1.8 million or 0.2% and foreign currency translation increased sales by $9.5 million or 1.3%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $32.0 million or 4.2%, due to higher volumes of approximately $13.0 million reflecting improving end-market demand and progress with internal growth initiatives across the United States, as well as positive price contribution of approximately $19.0 million.

Sales from our Engineered Solutions segment increased $41.4 million or 10.2%. Acquisitions within this segment increased sales by $3.7 million or 0.9%. Excluding the impact of businesses acquired, sales increased $37.7 million, or 9.3%, due to higher volumes of approximately $27.0 million primarily reflecting stronger demand across our fluid power and automation operations, as well as modest demand improvement across our flow control operations and the remainder is positive price contributions.

The following table shows changes in sales by geographic area. Other countries includes Mexico, Australia, New Zealand, Singapore, and Costa Rica (amounts in millions).

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Sales in our U.S. operations increased $74.9 million or 7.2%, as acquisitions added $5.5 million or 0.5%. Excluding the impact of businesses acquired, sales in the United States increased $69.4 million or 6.7% primarily reflecting stronger demand in the Engineered Solutions segment and the Service Center segment, as well as positive price contribution year over year. Sales from our Canadian operations decreased $0.8 million or 1.1%. Favorable foreign currency translation increased Canadian sales by $3.4 million or 4.8%. Excluding the impact of foreign currency translation, Canadian sales decreased $4.2 million or 5.9% due to softer end-market demand in the Service Center segment. Sales in other countries increased $10.6 million or 16.9%. Favorable foreign currency translation increased sales $6.1 million or 9.7%. Excluding the impact of foreign currency translation, sales in other countries increased $4.5 million or 7.2% due primarily to higher demand for fluid power solutions.

Our gross profit margin was 30.4% in the quarter ended March 31, 2026 compared to 30.5% in the prior year quarter. The gross profit margin for the current year quarter was negatively impacted by 0.3% due to higher LIFO expense as compared to the prior year quarter. This was partially offset from favorable mix impacts from the growth in revenues in the Engineered Solutions segment.

Segment gross profit margin for the Service Center segment decreased to 29.2% during the current year quarter compared to 29.3% in the prior year quarter due to higher LIFO expense that negatively impacted margins by 0.3%, partially offset by price contribution and channel execution. Segment gross profit margin for the Engineered Solutions segment of 32.6% remained the same during the current year quarter compared to the prior year quarter as higher LIFO expense negatively impacted margins by 0.3%, which was offset by favorable mix and price contribution.

The following table shows the changes in selling, distribution and administrative expense ("SD&A") (amounts in millions).

SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, and facility related expenses. SD&A was 19.4% of sales in both the current and prior year quarter. SD&A from businesses acquired added $1.7 million or 0.7% of SD&A expenses, including $0.1 million of intangibles amortization related to these acquisitions. Changes in foreign currency exchange rates increased SD&A during the quarter ended March 31, 2026 by $1.9 million or 0.8% compared to the prior year quarter. Excluding the impact of businesses acquired and the favorable currency translation impact, SD&A increased $13.4 million or 6.0% during the quarter ended March 31, 2026 compared to the prior year quarter primarily due to higher compensation costs of $9.7 million.

Segment SD&A for the Service Center segment increased $8.8 million, to $125.6 million during the current year quarter from $116.8 million during the prior year quarter due primarily to higher compensation costs of $2.8 million, changes in foreign currency exchange rates of $1.9 million, and accounts receivable provisioning cost of $1.1 million. As a percentage of sales, segment SD&A was 15.6% in the current year quarter compared to 15.3% in the prior year quarter. Segment SD&A for the Engineered Solutions segment increased $6.6 million, to $94.1 million during the current year quarter from $87.6 million during the prior year quarter due to higher compensation costs of $4.6 million and accounts receivable provisioning cost of $1.1 million. As a percentage of sales, segment SD&A was 21.1% in the current year quarter compared to 21.6% in the prior year quarter primarily reflecting effective expense leveraging on higher sales levels.

Operating income increased $8.5 million or 6.6%, to $137.9 million in the current year quarter from $129.4 million during the prior year quarter, and as a percent of sales decreased to 11.0% from 11.1% during the prior year quarter.

Segment operating income for the Service Center segment increased $3.0 million to $109.4 million during the current year quarter, from $106.4 million during the prior year quarter due to higher revenues partially offset by higher SD&A expenses. As a percentage of sales, segment operating income decreased to 13.6% in the current year quarter from 14.0% in the prior year quarter primarily due to higher employee related costs and accounts receivable provisioning cost. Segment operating income for the Engineered Solutions segment increased $7.1 million to $51.6 million during the current year quarter from $44.5 million during the prior year quarter due to incremental gross profit on higher volumes, partially offset by higher SD&A expenses. As a percentage of sales, segment operating income increased to 11.6% in the current year quarter from 11.0% in the prior year quarter, primarily reflecting effective expense leveraging on higher sales levels.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The Company had net interest expense in the current year period of $2.4 million compared to $0.9 million in the prior year period primarily reflecting lower interest income on lower cash balances in the March 2026 quarter as compared to the prior year period.

Other expense, net, which represents certain non-operating items of income and expense, was expense of $0.4 million in the current year quarter compared to expense of $1.3 million in the prior year quarter. Current quarter expense primarily consists of unrealized losses on investments held by non-qualified deferred compensation trusts of $0.7 million and foreign currency transaction losses of $0.2 million, offset by life insurance income of $0.5 million. During the prior year quarter, other expense, net included $0.7 million in unrealized losses on investments held by non-qualified deferred compensation trusts and $1.0 million in foreign currency transaction losses.

The effective income tax rate was 26.2% for the quarter ended March 31, 2026 compared to 21.6% for the quarter ended March 31, 2025. The increase in the effective tax rate is primarily due to discrete tax expense from changes in estimates related to prior year tax returns of $2.5 million identified as part of the preparation of the tax return, coupled with lower benefit from the research and development tax credit due to lower qualifying activities in 2026. In the prior year period, there was a discrete tax benefit of $1.7 million from changes in estimates related to prior year tax returns.

As a result of the factors noted above, net income for the quarter ended March 31, 2026 increased less than $0.1 million compared to the prior year quarter. Diluted net income per share was $2.65 per share for the quarter ended March 31, 2026 compared to $2.57 per share in the prior year quarter, an increase of 3.1%.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Results of Operations

Nine Months Ended March 31, 2026 and 2025

The following table is included to aid in review of Applied's condensed statements of consolidated income.

During the nine months ended March 31, 2026, sales increased $275.3 million or 8.2% compared to the prior year, with sales from acquisitions adding $138.6 million or 4.2% and favorable foreign currency translation accounting for an increase of $10.9 million or 0.3%. There were 189 selling days in both the nine months ended March 31, 2026 and March 31, 2025. Excluding the impact of businesses acquired and foreign currency translation, sales increased $125.8 million or 3.7%, due to higher volumes of approximately $46.0 million and the remainder from positive price contribution.

The following table shows changes in sales by reportable segment (amounts in millions).

Sales from our Service Center segment increased $99.5 million or 4.5%. Acquisitions within this segment increased sales by $2.3 million or 0.1% and favorable foreign currency translation increased sales by $10.9 million or 0.5%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $86.3 million or 3.9%, due to higher volumes of approximately $39.0 million reflecting volume growth across the United States and the remainder from positive price contribution.

Sales from our Engineered Solutions segment increased $175.8 million or 15.9%. Acquisitions within this segment increased sales by $136.3 million or 12.3%. Excluding the impact of businesses acquired, sales increased $39.5 million or 3.6%, due to higher volumes of approximately $7.0 million primarily reflecting stronger demand across our fluid power and automation operations, as well as positive price contributions of approximately $32.0 million.

The following table shows changes in sales by geographic area. Other countries includes Mexico, Australia, New Zealand, Singapore, and Costa Rica (amounts in millions).

Sales in our U.S. operations increased $268.6 million or 9.2%, as acquisitions added $138.6 million or 4.7%. Excluding the impact of businesses acquired, sales in the United States increased $130.0 million or 4.5%, reflecting volume growth and price

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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

contribution in the Service Center segment, coupled with price contribution in the Engineered Solutions segment. Sales from our Canadian operations decreased $0.2 million or 0.1%. Favorable foreign currency translation increased Canadian sales by $3.0 million or 1.4%. Excluding the impact of foreign currency translation, Canadian sales were down $3.2 million or 1.5% primarily reflecting modest volume decline compared to the prior year. Sales in other countries increased $6.9 million or 3.5%. Favorable foreign currency translation increased sales $7.9 million or 4.0%. Excluding the impact of foreign currency translation, sales in other countries decreased $1.0 million or 0.5% due primarily to lower demand in Mexico.

Our gross profit margin was 30.3% in the nine months ended March 31, 2026 compared to 30.2% in the prior year. The gross profit margin for the current year period was positively impacted by favorable acquisition mix of 0.3%, partially offset by higher LIFO expense that negatively impacted margins by 0.3%.

Segment gross profit margin for the Service Center segment was 29.1% in both the nine months ended March 31, 2026 and the prior year period, as a 0.3% negative margin impact from higher LIFO expense was offset by price and channel execution. Segment gross profit margin for the Engineered Solutions segment increased to 32.6% during the current year compared to 32.5% in the prior year, as acquisition growth increased margins by 0.5%, partially offset by higher LIFO expense that negatively impacted margins by 0.3%.

The following table shows the changes in selling, distribution and administrative expense (SD&A) (amounts in millions).

SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management and providing marketing and distribution of the Company's products, as well as costs associated with a variety of administrative functions such as human resources, information technology, treasury, accounting, insurance, legal, and facility related expenses. SD&A was 19.5% of sales in the nine months ended March 31, 2026 compared to 19.3% in the prior year, an increase of $60.4 million or 9.4% compared to the prior year. SD&A from businesses acquired added $40.6 million or 6.3% of SD&A expenses, including $6.3 million of intangibles amortization related to acquisitions. Changes in foreign currency exchange rates increased SD&A during the nine months ended March 31, 2026 by $2.2 million or 0.3% compared to the prior year. Excluding the impact of businesses acquired and the unfavorable currency translation impact, SD&A increased $17.6 million or 2.8% during the nine months ended March 31, 2026 compared to the prior year primarily due to higher compensation costs.

Segment SD&A for the Service Center segment increased $13.7 million, to $371.1 million during the current year from $357.3 million during the prior year primarily due to higher compensation costs. As a percentage of sales, segment SD&A was 15.9% in the current year compared to 16.0% in the prior year. Segment SD&A for the Engineered Solutions segment increased $47.1 million, to $271.4 million during the current year from $224.3 million during the prior year, which reflects an increase of $36.9 million from acquisitions completed within this segment in fiscal 2025, coupled with higher compensation costs. As a percentage of sales, segment SD&A was 21.2% in the current year compared to 20.3% in the prior year primarily reflecting effective expense leveraging on higher sales levels.

Operating income increased $26.7 million or 7.4%, to $390.2 million in the current year period from $363.4 million during the prior year, and as a percentage of sales decreased to 10.8% from 10.9% during the prior year.

Segment operating income for the Service Center segment increased $15.5 million to $307.7 million during the current year, from $292.2 million during the prior year primarily due to higher revenues partially offset by higher SD&A expenses. As a percentage of sales, segment operating income increased to 13.2% in the current year from 13.1% in the prior year. Segment operating income for the Engineered Solutions segment increased $10.7 million to $145.4 million during the current year from $134.6 million during the prior year due to incremental gross profit on higher volumes and the impact from recent acquisitions, partially offset by higher SD&A expenses. As a percentage of sales, segment operating income decreased to 11.4% in the current year from 12.2% in the prior year, reflecting the impact of acquisitions in this segment in fiscal 2026, including increased amortization expenses from these acquisitions and increased employee related costs.

The Company had net interest expense in the current year period of $4.4 million compared to net interest income of $0.7 million in the prior year primarily reflecting lower interest income on lower cash balances as compared to the prior year.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Other income, net was $0.7 million for the nine months ended March 31, 2026, which included unrealized gains on investments held by non-qualified deferred compensation trusts of $1.3 million and $0.8 million of life insurance income, offset by foreign currency transaction losses of $1.4 million. During the prior year period, other income, net was $1.8 million, which primarily consisted of unrealized gains on investments held by non-qualified deferred compensation trusts of $0.7 million, foreign currency transaction gains of $0.2 million, and life insurance income of $0.7 million.

The effective income tax rate was 23.4% for the nine months ended March 31, 2026 compared to 22.1% for the nine months ended March 31, 2025. The increase in the effective tax rate is primarily due to higher discrete tax expense from changes in estimates related to prior year tax returns of $2.5 million identified as part of the preparation of the tax return, coupled with lower benefit from the research and development tax credit due to lower qualifying activities in 2026. In the prior year period, there was a discrete tax benefit of $1.7 million from changes in estimates related to prior year tax returns. We expect our full year tax rate for fiscal 2026 to be in the 23.0% to 24.0% range.

As a result of the factors addressed above, net income for the nine months ended March 31, 2026 increased $10.8 million or 3.8% compared to the prior year. Diluted net income per share was $7.79 per share for the nine months ended March 31, 2026 compared to $7.33 per share in the prior year, an increase of 6.3%.

Recent Developments

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017, as amended, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, during the nine months ended March 31, 2026, the Company evaluated all deferred tax balances under the newly enacted tax law and identified any other changes required to its financial statements as a result of the OBBBA. The provisions of the OBBBA did not have a material impact to our income tax expense or effective tax rate. We expect the provisions of the OBBBA to result in a reduction to our cash tax payments for our fiscal year ended June 30, 2026. The Company will continue to evaluate the impact of the OBBBA as additional guidance becomes available.

Liquidity and Capital Resources

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt. We had total debt obligations outstanding of $365.3 million and $572.3 million as of March 31, 2026 and June 30, 2025, respectively. Management expects that our existing cash, cash equivalents, funds available under the revolving credit facility, and cash provided from operations will be sufficient to finance normal working capital needs in each of the countries in which we operate, payment of dividends, acquisitions, investments in properties, facilities and equipment, debt service, and the purchase of additional Company common stock. Management also believes that additional long-term debt and line of credit financing could be obtained based on the Company's credit standing and financial strength.

The Company's working capital at March 31, 2026 was $1,044.6 million, compared to $1,221.3 million at June 30, 2025. The current ratio was 2.9 to 1 at March 31, 2026 and 3.3 to 1 at June 30, 2025.

Net Cash Flows

The following table is included to aid in review of Applied's condensed statements of consolidated cash flows (amounts in thousands).

Cash provided by operating activities during the nine months ended March 31, 2026 declined $26.3 million as compared to the prior year primarily due to an increase in working capital of $60.7 million offset by higher net income of $10.8 million and higher deferred tax provision of $21.3 million reflecting the reduction of the deferred tax asset associated with capitalized R&D costs due to changes from OBBBA. The increase in working capital was due to (i) higher inventory of $36.9 million related to

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

strategically carrying incremental inventory levels to serve customer needs and (ii) lower cash inflow in accounts receivable of $31.3 million due to to timing of revenues generated in the March quarter.

Net cash used in investing activities during the nine months ended March 31, 2026 decreased from the prior primarily due to $11.4 million used for acquisitions in the nine months ended March 31, 2026 compared to $273.3 million used for acquisitions in the prior year.

Net cash used in financing activities during the nine months ended March 31, 2026 increased from the prior year due to higher share repurchase activity in 2026 coupled with higher debt repayments. The Company used $236.4 million of cash to repurchase 897,115 shares of common stock during the nine months ended March 31, 2026 as compared to $79.8 million used to repurchase 331,876 shares of common stock in the prior year. This was coupled with higher net long-term debt repayments in the current year of $207.0 million as compared to $25.1 million in the prior year.

Share Repurchases

The Board of Directors authorized the repurchase of shares of the Company's common stock. These purchases may be made in open market and negotiated transactions, from time to time, depending upon market conditions. At March 31, 2026, we had authorization to repurchase 402,885 shares. During the three months ended March 31, 2026, the Company acquired 346,479 shares of the Company's common stock on the open market for $93.0 million. During the nine months ended March 31, 2026, the Company acquired 897,115 shares of the Company's common stock on the open market for $236.4 million. During the three months ended March 31, 2025, the Company acquired 204,500 shares of treasury stock on the open market for $49.3 million. During the nine months ended March 31, 2025, the Company acquired 331,876 shares of treasury stock on the open market for $79.8 million.

On April 22, 2026, the Board of Directors authorized the repurchase of up to 3.0 million shares of the Company's common stock, replacing the prior authorization.

Borrowing Arrangements

A summary of both current and long-term debt is as follows (amounts in thousands):

Revolving Credit Facility

In October 2025, the Company entered into a new five-year revolving credit facility with a group of banks to refinance the existing credit facility as well as provide funds for ongoing working capital and other general corporate purposes. The revolving credit facility provides a $900.0 million unsecured revolving credit facility and an uncommitted accordion feature which allows the Company to request an increase in the borrowing commitments, or incremental term loans, under the credit facility in aggregate principal amounts of up to $800.0 million. The new revolving credit facility also provides for a $25.0 million sublimit for swing line loans and a $50.0 million sublimit for letters of credit. Borrowings under this agreement bear interest, at the Company's election, at either the base rate plus a margin that ranges from 0 to 55 basis points based on the Company's net leverage ratio or Secured Overnight Financing Rate (SOFR) plus a margin that ranges from 80 to 155 basis points based on the Company's net leverage ratio. Borrowing capacity under this facility, without exercising the accordion feature, totaled $722.8 million at March 31, 2026 and is available to fund future acquisitions or other capital and operating requirements. This amount is net of outstanding letters of credit of $0.2 million at March 31, 2026 to secure certain insurance obligations. The interest rate on the revolving credit facility was 4.47% as of March 31, 2026.

At March 31, 2026, the Company had $177 million outstanding under its revolving credit facility, of which $18 million is classified as current based on the Company's intent to repay such amount within the next twelve months. The interest rate on the short term portion of the revolving credit facility was 4.42% as of March 31, 2026.

The new credit facility replaced the Company's previous credit facility agreement. Unused lines under the previous facility, net of outstanding letters of credit of $0.2 million to secure certain insurance obligations, totaled $515.8 million at June 30, 2025, and were available to fund future acquisitions or other capital and operating requirements. The interest rate on the revolving credit facility was 5.23% as of June 30, 2025.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The Company paid $1.6 million of debt issuance costs related to the new revolving credit facility in the nine months ended March 31, 2026, which are included in other current assets and other assets on the condensed consolidated balance sheet as of March 31, 2026 and will be amortized over the five-year term of the new credit facility. The Company analyzed the unamortized debt issuance costs related to the previous credit facility under ASC Topic 470 - Debt. As a result of this analysis, less than $0.1 million of unamortized debt issuance costs were expensed and included within interest expense, net on the condensed statements of consolidated income in the nine months ended March 31, 2026, and $0.8 million of unamortized debt issuance costs were rolled forward into the new credit facility and will be amortized over the five-year term of the new credit facility.

Additionally, the Company had letters of credit outstanding not associated with the revolving credit agreement, in the amount of $5.3 million as of March 31, 2026 and June 30, 2025, to secure certain insurance obligations.

Trade Receivable Securitization Facility

In August 2018, the Company established a trade receivable securitization facility (AR Securitization Facility). The AR Securitization Facility effectively increases the Company’s borrowing capacity by collateralizing a portion of the amount of the U.S. operations’ trade accounts receivable. The Company uses the proceeds from the AR Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs. The AR Securitization Facility's maximum borrowing capacity is $250.0 million, fees on amounts borrowed are 0.90% per year, and the facility terminates on August 4, 2026. Borrowing capacity is further subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the accounts receivable portfolio and, therefore, at certain times, we may not be able to fully access the $250.0 million of borrowing capacity available under the AR Securitization Facility. Borrowings under the AR Securitization Facility carry variable interest rates tied to SOFR. The interest rate on the AR Securitization Facility as of March 31, 2026 and June 30, 2025 was 4.58% and 5.32%, respectively. On July 10, 2025, the Company amended the AR Securitization Facility and extended the term to July 10, 2028, with no substantial changes in other terms.

The credit facility and the unsecured shelf facility contain restrictive covenants regarding liquidity, net worth, financial ratios, and other covenants. At March 31, 2026, the most restrictive of these covenants required that the Company have net indebtedness less than 3.75 times consolidated income before interest, taxes, depreciation and amortization (as defined in these agreements). At March 31, 2026, the Company's net indebtedness was 0.3 times consolidated income before interest, taxes, depreciation and amortization (as defined in these agreements). The Company was in compliance with all financial covenants at March 31, 2026.

Cash Flow Hedge Maturity

As disclosed in Footnote 6 to this Form 10-Q, the interest rate swap the Company entered into in January 2019 matured on January 31, 2026. The Company reduced outstanding borrowings under its revolving credit facility by a net $207.0 million, using available cash to mitigate the impact of higher interest costs.

Accounts Receivable Analysis

The following table is included to aid in analysis of accounts receivable and the associated provision for losses on accounts receivable (amounts in thousands):

Accounts receivable are reported at net realizable value and consist of trade receivables from customers. Management monitors accounts receivable by reviewing Days Sales Outstanding (DSO) and the aging of receivables for each of the Company's locations.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

On a consolidated basis, DSO was 57.0 at March 31, 2026 compared to 56.6 June 30, 2025. As of March 31, 2026, approximately 1.2% of our accounts receivable balances are more than 90 days past due, compared to 2.1% at June 30, 2025.

On an overall basis, we recorded modest provisions for losses on uncollected receivables representing 0.03% of sales for the nine months ended March 31, 2026 compared to provision for losses of 0.08% of sales for the nine months ended March 31, 2025. This change is primarily in the U.S. operations of the Service Center segment due to less accounts receivable balances past due. Historically, this percentage is between 0.10% to 0.15%. Management believes the overall receivables aging and provision for losses on accounts receivable are at reasonable levels.

Inventory Analysis

Inventories are valued using the last-in, first-out (LIFO) method for U.S. inventories and the average cost method for foreign inventories. Management uses an inventory turnover ratio to monitor and evaluate inventory. Management calculates this ratio on an annual as well as a quarterly basis, and believes that using average costs to determine the inventory turnover ratio instead of LIFO costs provides a more useful analysis. The annualized inventory turnover based on average costs was 4.4 and 4.3 for the periods ended March 31, 2026 and June 30, 2025, respectively.

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 4: CONTROLS AND PROCEDURES

For quantitative and qualitative disclosures about market risk, see Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended June 30, 2025.

Evaluation of Disclosure Controls and Procedures

The Company's management, under the supervision and with the participation of the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have not been any changes in internal control over financial reporting during the three months ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is a party to pending legal proceedings with respect to various product liability, commercial, personal injury, employment, and other matters. Although it is not possible to predict the outcome of these proceedings or the range of reasonably possible loss, the Company does not expect, based on circumstances currently known, that the ultimate resolution of any of these proceedings will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of common stock in the quarter ended March 31, 2026 were as follows:

(1) On April 29, 2025, the Board of Directors authorized the repurchase of up to 1.5 million shares of the Company's common stock. Purchases can be made in the open market or in privately negotiated transactions. The authorization is in effect until all shares are purchased, or the Board revokes or amends the authorization.

On April 22, 2026, the Board of Directors authorized the repurchase of up to 3.0 million shares of the Company's common stock, replacing the April 29, 2025 authorization. Purchases can be made in the open market or in privately negotiated transactions. The authorization is in effect until all shares are purchased, or the Board revokes or amends the authorization.

ITEM 5. Other Information

Rule 10b5-1 Trading Plans and Non-Rule 10b5-1 Trading Arrangements

During the quarter ended March 31, 2026, none of the Company’s directors or officers (as defined in Rule 16a-1(f)) adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that (i) was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or (ii) that constituted a “non-Rule 10b5-1 trading arrangement” as defined in Regulation S-K 408(c) of the Securities Exchange Act of 1934, as amended, except as follows:

On February 26, 2026, Madhuri Andrews, one of the Company's directors, provided her irrevocable consent to contribute, at a later date, and subject to certain price thresholds established on February 26, 2026, 3,845 shares of the Company's common stock to an exchange fund in exchange for shares in that fund, subject to acceptance of such shares by the exchange fund. The irrevocable commitment letter constitutes a "non-Rule 10b5-1 trading arrangement."

ITEM 6. Exhibits

• Asterisk indicates an executive compensation plan or arrangement.

Exhibit No. Description

3.1 Amended and Restated Articles of Incorporation of Applied Industrial Technologies, Inc., as amended on October 25, 2005 (filed as Exhibit 3(a) to Applied’s Form 10-Q for the quarter ended December 31, 2005, SEC File No. 1-2299, and incorporated here by reference). 3.2 Code of Regulations of Applied Industrial Technologies, Inc., as amended on October 19, 1999 (filed as Exhibit 3(b) to Applied’s Form 10-Q for the quarter ended September 30, 1999, SEC File No. 1-2299, and incorporated here by reference). 4.1 Certificate of Merger of Bearings, Inc. (Ohio) (now named Applied Industrial Technologies, Inc.) and Bearings, Inc. (Delaware) filed with the Ohio Secretary of State on October 18, 1988, including an Agreement and Plan of Reorganization dated September 6, 1988 (filed as Exhibit 4(a) to Applied’s Registration Statement on Form S-4 filed May 23, 1997, Registration No. 333-27801, and incorporated here by reference). 4.2 Receivables Financing Agreement dated as of August 31, 2018 among AIT Receivables LLC, as borrower, PNC Bank, National Association, as administrative agent, Applied Industrial Technologies, Inc., as initial servicer, PNC Capital Markets LLC, as structuring agent and the additional persons from time to time party thereto, as lenders (filed as Exhibit 10.1 to Applied's Form 8-K filed September 6, 2018, SEC File No. 1-2299, and incorporated here by reference). 4.3 Purchase and Sale Agreement dated as of August 31, 2018 among various entities listed on Schedule I thereto (including Applied Industrial Technologies, Inc.), as originators, Applied Industrial Technologies, Inc., as servicer, and AIT Receivables LLC, as buyer (filed as Exhibit 10.2 to Applied's Form 8-K filed September 6, 2018, SEC File No. 1-2299, and incorporated here by reference). 4.4 Amendment No. 1 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty dated as of March 26, 2021 among AIT Receivables LLC, as borrower, PNC Bank, National Association, as administrative agent, Applied Industrial Technologies, Inc., as initial servicer, PNC Capital Markets LLC, as structuring agent and the additional persons from time to time party thereto, as lenders (filed as Exhibit 10.2 to Applied's Form 8-K filed March 29, 2021, SEC File No. 1-2299, and incorporated here by reference). 4.5 Amendment No. 1 to Purchase and Sale Agreement dated as of November 19, 2018 among Applied Industrial Technologies, Inc. and various of its affiliates, as originators, Applied Industrial Technologies, Inc., as servicer, and AIT Receivables LLC, as buyer, (filed as Exhibit 4.10 to Applied's Form 10-Q for the quarter ended March 31, 2021, SEC File No. 1-2299, and incorporated here by reference). 4.6 Amendment No. 2 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty, dated as of May 12, 2023, by and among AIT Receivables, LLC, Applied Industrial Technologies, Inc., PNC Bank, National Association, Regions Bank, and PNC Capital Markets LLC (filed as Exhibit 4.10 to Applied’s Form 10-K for the fiscal year ended June 30, 2023, SEC File No. 1-2299, and incorporated here by reference). 4.7 Amendment No. 2 to Purchase and Sale Agreement dated as of March 26, 2021 among various entities listed on Schedule 1 thereto (including Applied Industrial Technologies, Inc.), as originators, Applied Industrial Technologies, Inc., as servicer, and AIT Receivables LLC, as buyer (filed as Exhibit 10.2 to Applied's Form 8-K filed March 29, 2021, SEC File No. 1-2299, and incorporated here by reference). 4.8 Amendment No. 3 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty dated as of August 4, 2023 among AIT Receivables LLC, as borrower, PNC Bank, National Association, as administrative agent, Applied Industrial Technologies, Inc., as initial servicer, PNC Capital Markets LLC, as structuring agent, and the additional persons from time to time party thereto, as lenders (filed as Exhibit 10.1 to Applied’s Form 8-K filed August 9, 2023, SEC File No. 1-2299, and incorporated here by reference). 4.9 Amendment No. 3 to Purchase and Sale Agreement dated as of August 4, 2023 among various entities listed on Schedule I thereto (including Applied Industrial Technologies, Inc.), as originators, Applied Industrial Technologies, Inc., as servicer, and AIT Receivables LLC, as buyer (filed as Exhibit 10.2 to Applied’s Form 8-K filed August 9, 2023, SEC File No. 1-2299, and incorporated here by reference). 4.10 Amendment No. 4 to Receivables Financing Agreement and Reaffirmation of Performance Guaranty dated as of July 10, 2025 among AIT Receivables LLC, as Borrower, PNC Bank, National Association, as administrative agent, Applied Industrial Technologies, Inc., as initial servicer, PNC Capital Markets LLC, as structuring agent, and the additional person from time to time party thereto, as lenders (filed as Exhibit 10.1 to Applied’s Form 8-K filed July 11, 2025, SEC File No. 1-2299, and incorporated here by reference). 4.11 Amendment No. 4 to Purchase and Sale Agreement dated as of July 10, 2025 among various entities listed on Schedule I thereto (including Applied Industrial Technologies, Inc.), as originators, Applied Industrial Technologies, Inc., as servicer, and AIT Receivables LLC, as buyer (filed as Exhibit 10.2 to Applied’s Form 8-K filed July 11, 2025, SEC File No. 1-2299, and incorporated here by reference).

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4.12 Credit Agreement dated as of October 24, 2025, among Applied Industrial Technologies, Inc., Key Bank National Association as Agent, and various financial institutions (filed as Exhibit 10.1 to Applied’s Form 8-K filed October 24, 2025, SEC File No. 1-2299, and incorporated here by reference). 10.1 Restricted Stock Award Terms and Conditions (Directors) (31) Rule 13a-14(a)/15d-14(a) certifications (32) Section 1350 certifications (101) The following financial information from Applied Industrial Technologies Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Statements of Consolidated Income, (ii) the Condensed Statements of Consolidated Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Statements of Consolidated Cash Flows, (v) the Condensed Statements of Shareholders' Equity, and (vi) the Notes to Condensed Consolidated Financial Statements. (104) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

The Company will furnish a copy of any exhibit described above and not contained herein upon payment of a specified reasonable fee which shall be limited to the Company’s reasonable expenses in furnishing the exhibit.

Certain instruments with respect to long-term debt have not been filed as exhibits because the total amount of securities authorized under any one of the instruments does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each such instrument.