Applied Industrial Technologies, Inc. (AIT) Q2 2026 Earnings Call

Investor webinar replay

Replay transcript excerpt

Overall, we continue to effectively manage through a mixed yet evolving in-market backdrop during the second quarter. Sales and EBITDA margins were in line with guidance despite higher than expected LIFO expense and seasonally weak sales activity in December. Our team responded well with strong underlying margin performance and cost control while continuing to expand backlogs and business funnels supporting a stronger sales trajectory into calendar 2026. We also remain active with capital deployment across many fronts, supported by our free cash generation and balance sheet capacity. As it relates to sales trends in the quarter, reported year-over-year organic growth of 2.2% was modestly below last quarter of 3%. Underlying sales growth showed signs of strengthening as the quarter progressed, with November sales up by a nearly mid single-digit percent organically over the prior year, following a low single-digit percent increase in October. However, growth moderated in December with average daily sales rates notably below normal seasonal patterns. While monthly sales trends have been choppy for most of the year, we do not view December's weakness as indicative of the underlying sales trend developing across the business. Of note, December is always a noisy month, given seasonal factors that can drive variability in how customers operate plants and phase shipments. This dynamic was further influenced this year by the midweek timing of the holidays. In addition, we're encouraged by early fiscal third quarter trends with organic sales month to date in January trending up by a mid single digit percent year over year. Booking rates also continue to show positive momentum across both segments. In particular, orders in our engineered solution segment increased over 10% year...