$8.3 million. That was the odd number in Applied Industrial Technologies’ latest annual report: the distributor generated less operating cash over the twelve months ended June 30, 2026, even as revenue rose 8.8% and operating income climbed 10.2%.
The business grew from $4.6 billion to $5.0 billion in sales. Operating income reached $549.5 million, while net income rose a more modest 5.5% to $414.5 million. The company’s diluted share count fell 2.5%, helping earnings per share rise 8.2% to $10.95.
Cash conversion diverged from the other growth measures. Operating cash flow fell from $492.4 million to $484.1 million, and cash conversion dropped from 1.25 times net income to 1.17 times. Gross margin held at 30.3%, so gross margin was unchanged.
Management points to working capital, particularly receivables built during the stronger second half of the year.
"The increase in working capital was primarily due to higher accounts receivable of $61.5 million due to stronger revenues generated in the second half of 2026 as compared to 2025."
Applied Industrial Technologies, 10-K, 2026-08-13
That explanation is straightforward, but it leaves the central operating question intact: sales arrived, and the cash attached to those sales arrived more slowly. Accounts receivable rose 8.0% to $831.2 million, nearly matching the pace of revenue growth. Inventory barely moved, rising 0.7% to $509.0 million.
The company also used substantially more cash outside operations. It repurchased 1,162,863 shares for $317.2 million, versus $152.8 million for 655,791 shares a year earlier, and made $310.0 million in net long-term debt repayments. Cash therefore declined by $261.3 million over the year.
Applied Industrial described the financing outflow this way:
"N et cash used in financing activities during 2026 increased compared to 2025 primarily due to $317.2 million of cash used to repurchase 1,162,863 shares of common stock in 2026 compared to $152.8 million used to repurchase 655,791 shares of common stock in 2025, coupled with higher net long-term debt repayments in the current year of $310.0 million as compared to $25.1 million in the prior year."
Applied Industrial Technologies, 10-K, 2026-08-13
The numbers describe two different uses of a growing business. Operations produced slightly less cash, while management directed more cash toward buybacks and debt reduction. Capital spending also fell to $23.6 million, and acquisition spending dropped sharply from the prior year’s $293.4 million to $11.4 million.
The revenue increase was broad enough to show up in both main segments. Service Center Based Distribution grew 5.6% to $3.2 billion, while Engineered Solutions grew 15.1% to $1.8 billion. Applied Industrial does not quantify how much of the change came from volume, product mix, or price because a significant number of products sold in one period were not sold in the comparable period.
At the latest close, the shares were $357.26, up 1.3% on the day. The company’s own annual record shows operating margin at 11.1% in both 2024 and 2026, after 6.8% in 2017, while the current valuation stands at 35.3 times earnings. That highlights the difference between the filing’s operating margin, which is holding, and cash conversion, which is moving in the opposite direction.
Applied Industrial’s next report will provide the next comparison for accounts receivable, operating cash flow, and the cash still being directed to buybacks and debt repayment.
For now, growth is arriving faster than cash.