APPLIED INDUSTRIAL TECHNOLOGIES INC (AIT)

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

AND RESULTS OF OPERATIONS

A reconciliation of supplemental segment financial information is as follows:

10.    OTHER EXPENSE (INCOME), NET

Other expense (income), net consists of the following:

11.    SUBSEQUENT EVENTS

The Company evaluated events and transactions occurring subsequent to March 31, 2026 through the date the financial statements were issued, noting no significant subsequent events require disclosure.

23

Table of Contents

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.

24

Table of Contents

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).

25

Table of Contents

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

[Excerpt truncated for page length; source filing is linked above.]

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS.

We are 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 Maintenance, Repair & Operations ("MRO") and Original Equipment Manufacturer ("OEM") 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 2026, business was conducted primarily in North America, as well as, Australia, New Zealand, and Singapore from 580 facilities.

The following is Management's Discussion and Analysis of significant factors that have affected our financial condition, results of operations, and cash flows during the periods included in the accompanying consolidated balance sheets, statements of consolidated income, consolidated comprehensive income and consolidated cash flows in Item 8 under the caption "Financial Statements and Supplementary Data." When reviewing the discussion and analysis set forth, 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 were not sold in the comparable period of the prior year, resulting in the inability to quantify certain commonly used comparative metrics analyzing sales, such as changes due to volumes, product mix and price.

OVERVIEW

Our 2026 consolidated sales were $5.0 billion, an increase of $403.3 million or 8.8% compared to the prior year, with acquisitions contributing to sales growth by $142.2 million or 3.1% and favorable foreign currency translation of $15.9 million increasing sales by 0.3%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $245.2 million or 5.4% during the year due to higher volumes of approximately $136.2 million and the remainder from positive price contribution. The Company generated operating income of $549.5 million, or operating margin of 11.1% of sales for the year ended June 30, 2026, compared to operating income of $498.5 million, or operating margin of 10.9% of sales in the prior year. The Company generated net income of $414.5 million and $393.0 million during the years ended June 30, 2026 and 2025, respectively. Our diluted earnings per share was $10.95 in 2026 compared to $10.12 in 2025.

Shareholders’ equity was $1,861.7 million at June 30, 2026 compared to $1,844.5 million at June 30, 2025. Working capital decreased $255.0 million from June 30, 2025 to $966.3 million at June 30, 2026. The current ratio was 2.6 to 1 and 3.3 to 1 at June 30, 2026 and 2025, respectively.

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.

The MCU and PMI indices increased since June 2025, while the MIP index decreased slightly over the fiscal year. The ISM PMI registered 53.3 in June 2026, an increase from the June 2025 reading of 49.0. A reading above 50 generally indicates expansion in the U.S. manufacturing sector. The indices for the months during the most recent quarter, along with the indices for the prior year end and prior quarter ends, were as follows:

19

Table of Contents

RESULTS OF OPERATIONS

This section provides comparisons of material changes in the consolidated financial statements for the years ended June 30, 2026 and 2025. For the comparison of the years ended June 30, 2025 and 2024, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2025 Annual Report on Form 10-K. We disclose segment information that is consistent with the way in which management operates and views Applied.

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

Sales in 2026 were $5.0 billion, which was $403.3 million or 8.8% above the prior year, with sales from acquisitions adding $142.2 million or 3.1% and favorable foreign currency translation increasing sales by $15.9 million or 0.3%. There were 252.5 selling days in both 2026 and 2025. Excluding the impact of businesses acquired and foreign currency translation, sales were up $245.2 million or 5.4% during the year, due to higher volumes of approximately $136.2 million and the remainder from positive price contribution.

The following table shows changes in sales by reportable segment.

Sales from our Service Center segment, which operates primarily in MRO markets, increased $169.9 million, or 5.6%, compared to the prior year. Acquisitions within this segment increased sales by $5.9 million or 0.2% and favorable foreign currency translation increased sales by $15.9 million or 0.5%. Excluding the impact of businesses acquired and foreign currency translation, sales increased $148.1 million or 4.9% during the year, due to higher volumes of approximately $80.1 million reflecting volume growth across the United States and the remainder from positive price contribution.

Sales from our Engineered Solutions segment increased $233.4 million or 15.1%. Acquisitions within this segment increased sales $136.3 million or 8.8%. Excluding the impact of businesses acquired, sales increased $97.1 million or 6.3%, due to higher volumes of approximately $56.1 million primarily reflecting stronger demand across our fluid power and automation operations, as well as positive price contribution.

20

Table of Contents

The following table shows changes in sales by geographical area. Other countries include Mexico, Australia, New Zealand, Singapore, and Costa Rica.

Sales in our U.S. operations increased $384.4 million or 9.6%, with acquisitions contributing $142.2 million or 3.6%. Excluding the impact of businesses acquired, sales in the United States were up $242.2 million or 6.0%, reflecting volume growth of $136.2 million and price contribution across both the Service Center and Engineered Solutions segments. Sales from our Canadian operations increased $4.2 million or 1.4%. Favorable foreign currency translation increased Canadian sales by $3.0 million or 1.0%. Excluding the impact of foreign currency translation, Canadian sales were up $1.2 million or 0.4%. Sales in other countries increased $14.7 million or 5.5%, primarily due to favorable foreign currency translation increasing sales by $12.9 million or 4.8%. Excluding the impact of foreign currency translation, other countries' sales were up $1.8 million or 0.7%.

Our gross profit margin was 30.3% in both 2026 and 2025. The gross profit margin for the current year was negatively impacted by 0.3% due to higher LIFO expense as compared to the prior year. This was offset by price contribution and channel execution, as well as favorable mix impacts from the growth in revenues in the Engineered Solutions segment.

Segment gross profit margin for the Service Center segment was 29.2% in both 2026 and 2025, as a 0.2% negative margin impact from higher LIFO expense was offset by price and channel execution. Segment gross profit margin for the Engineered Solutions segment decreased to 32.4% during the current year compared to 32.5% in 2025, as acquisition growth increased margins by 0.3%, which was more than offset by higher LIFO expense that negatively impacted margins by 0.3%.

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

SD&A consists of associate compensation, benefits and other expenses associated with selling, purchasing, warehousing, supply chain management, and 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 increased $72.7 million or 8.2% during 2026 compared to 2025. As a percentage of sales, SD&A was 19.3% during 2026 compared to 19.4% in 2025. SD&A from businesses acquired added $41.4 million or 4.7%, including $10.2 million of intangibles amortization related to acquisitions. Changes in foreign currency exchange rates increased SD&A by $3.2 million or 0.4% compared to 2025. Excluding the impact of businesses acquired and the impact from foreign currency translation, SD&A increased $28.1 million or 3.1% during 2026 compared to 2025 primarily due to higher compensation costs.

Segment SD&A for the Service Center segment increased $17.5 million, to $503.2 million during 2026 from $485.7 million during 2025 primarily due to higher compensation costs. As a percentage of sales, segment SD&A was 15.8% in 2026 compared to 16.1% in 2025. Segment SD&A for the Engineered Solutions segment increased $51.7 million, to $367.0 million during 2026 from $315.2 million during 2025, which reflects an increase of $43.7 million from acquisitions completed within this segment in 2025, co

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]