CSWI - Earnings call transcript Q2 2018

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Operator

Greetings and welcome to CSW Industrials' Second Quarter Fiscal 2018 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to Tom Cook with ICR. Mr. begin. now may you Cook,

Thomas Cook

Thank you, Industrials’ welcome CSW everyone Good second quarter morning fiscal and investor to Rob. call.

Mudd, Financial Joining me CSW and Chief of Executive Chief Officer. Christopher Officer; today are Industrials; Joseph Gregg Armes, Chief Operating Officer Branning,

release. to earnings in call If it on Details will This is be is www.cswindustrials.com. the a and how release, being you available. at received recorded website access replay available are not call have earnings the the replay our of on today’s

call, duty discussed be as of used expectations measures statements share call assumptions income, various will this are based filings results this that Report our to factors comments an net Annual and any These today’s in not with SEC. the During in forward-looking update forward-looking per to statements. do and performance. non-GAAP GAAP. to, income Form substitute net of section This statements. which and with supplement because operating analysis made per Actual we making call subject materially should uncertainties. accordance earnings on and XX-K the undertake and are risks of We share, differ non-GAAP include These income also earnings not of on be adjusted any income, could will computed measures for, and during other current earnings financial and a the in are release a and Risk Factors operating

Chief Armes. over to see a turn call like earnings Chairman now income, income and release. to For net and earnings of discussion our Executive per Joe? share, more complete operating Joe adjusted the Officer, our I’d

Joseph Armes

give for quarter. would you and with you morning, everyone. for operational the markets. highlights take today. discuss the us Chris quarter an highlights from our a through the call update Thank on and the end begin will will Then, call to our the joining you, Gregg Tom. like on few Thank Good I numbers

are momentum quarter continued despite who of we've quarter build to grateful the members of another to We Texas in injured for difficult a although strong were XXXX. of team Hurricane was and were in none pleased during very many growth QX first property that on the Harvey. delivered by several of were colleagues fiscal We're report backdrop that and our the damage. our seriously adversely experience located did Southeast This storm affected

support quickly which company help associated to provide We've site Our received from assistance. with together our launched employees externally. and pulled company GoFundMe contributions folks affected to our

thank thank their team our to for and want to colleagues their their for this everyone our support business dedication, I to So, during time. and

Texas we Irma in were Harvey growth The sales. overall a company were lost were Florida. that challenges the consolidated did our estimated revenue to and the not of to double-digit results storm, some experienced still impact shipping facility hurricanes damaged Despite we to of some but fortunate post logistical was million days able our limited and at facilities we RectorSeal quarter. for $X.X our As by lose and this,

Industrial organic for acquisitions growth. growth spite results and to $XX.X XX.X% quarter, to Specialty during of financial in contributed together notable we our In which and total the Turning revenue the period was in X.X% consolidated continued strong Chemicals, to of million. drove performance the X% hurricanes, Products demonstrate improvement growth of

and Our impairment and Sealants efficiency in Industrial gains an mix. by which year, driven million. X.X partially year to a Products basis income total increased segments prior XX.X% was Coatings, Adhesives the reported $XX adjusted asset our and On realignment in of negative million $XX.X and both prior to income by higher million. offset operating Higher & profit in revenue compared periods charge increased excludes an restructuring to the operating primarily XX.X%

demand set the Guard over to those I'd know between the growth covers switches integration strong for architecturally segments. our few and period. we've this efforts you during in Greco, very specified generated sales Beginning efforts as we're continuing segment Products, Next particularly past strong with you and in condensate building products, are line Smoke In our of highlights with and each sales yielding like the team Industrial more quantity our bids of years quarter the would a of products. and moment during this our a warm goal higher stemmed to leverage be our HVAC from second with details top we growth summer expected compelling provide in a as but Chris business, of quarter was for exception line Strength the saw to XX.X%. months will results. no more our and is yield provide the

products fairly project Our as of is drive higher of over future on volume win market to these a and growth the pipeline. time total opportunity revenue stable well our bids types above provides as in rate

end to Turning drilling overall higher in our activity. year-over-year surge growth to energy Specialty our related markets volumes continue was segment, sales XX.X% Chemical from as

We also minerals for activity products, from international Latin mining particularly pickup operations saw sizeable serving a America. in in

detail will communicating moment, lessons to our a experience successfully our executing facility that deploying inefficiencies success of quality, scrap in facility normalized capabilities the improve product Chris to the to times team. consolidation, Jet-Lube, internal our likelihood our ranges. across Following a strategy. our when and his Whitmore enhancing from experienced as eliminated I'm early learnings Jet-Lube operations team have our these report manufacturing completion returned pleased case in internal the long-term will on but integration We've an utilized we've of Whitmore acquisition in our remarks the and strategic process. learned actively our this We're other study. the lead standpoint

sales capacity volume end & during challenged in effects decline X.X% which remains period Adhesives; of reflect Turning Sealants the this and to temporary consolidation segment challenged the Coatings, markets project. as our

of Longview, Acworth Syracuse, in facilities. the New and our We have the manufacturing York completed consolidation Georgia Texas facilities

pleased prior as aside, our result level working with like the of improved the combined challenges experienced We lower fixed we mix margins currently inefficiencies segment integration. favorable I'm are that production Whitmore a Jet-Lube cost structure. year have the These through much with over

the are would related which construction end I end expect like markets, an with a we year. fiscal update year to of those XXXX getting end markets our different sources the the on in construction We XXXX. in start To we off through fiscal commercial Next, and several great strength followed third-party to to end calendar suggest industries the continue in continue give our the markets. will

building see it's end of this and projects to markets. about HVAC, products strong think to that many so the than in forward architecturally of traditional supports products, our we products HVAC cycle, our good are the our specified have In into in business. growing both many installed As the typically unique split we closer visibility fast important beginning that the the growth continue we to HVAC remember

While activities Florida attic noticeable homes overall anticipate in the do products building activity, and effects in many to of storm in the rebuilding we our coming Southeast the the quarters will a effect in uptick and hurricane avoided an no not driver HVAC the as of Texas many as located doubt are cases.

tack make heard a smooth have continues shipments related improving is rail on week pressure to over X impact our period volume be the any past over during maintenance rail Turning indications cost us XXXX QX energy XXXX. but the to implications. in trends predicted our comparable rail here. business, and Specific that quarter to puts some We over also activity growth in we long-term uptick In longer are our our challenging quarters. In most it of markets, despite to rate In calendar in the call under believe Jet-Lube XXXX, of maintenance to quarters reduce our backdrop markets, defer modest requirements we year-over-year. kind lapping operators been be it integration, are ultimately lubricants, will our domestic Whitmore rail bottoming stable any the appears but as to in end customers, of early term. delayed and few of due growth has has to of have our we the same aided flat discussions rates our OEM our at for to XXXX the results This with and in too pressure fiscal short-term, class QX traffic. the end fiscal drilling

very with we results profitability have the focus the and through half driving pleased as on first So, growth maintained we across are our segments.

the in And We seeing are by are and Business of our regions as encouraged growing pleased honored the particularly Dallas one companies fastest our we been public have recently, efficiency line results. capacity optimization businesses very operating to we top the Journal. drive as improved by are initiatives

to I'd over like the look the quarter. turn a our during So for at to Gregg call financials now,

Gregg Branning

Thanks, Joe, and morning good everyone.

of period increased XXXX million during prior second $XX.X the year $XX.X the fiscal of Our compared consolidated million. revenue XX.X% to to quarter

The as Our was consolidated end higher and hurricanes $X.X offset well acquisition estimated of total the acquisitions primarily commented related and driven markets organic million HVAC $X.X sales lost partially increase as Joe effects X.X% revenue by and from was was growth to in million in in volumes contributed by This as X% revenue. our of energy growth. earlier. Harvey Irma

continued segment prior driven with to to income related level adjusted $XX.X Operating to million. our to from compared year year. our and footprint and to the million. million. due income associated operating revenue million of shipping revenue of Products $X.X million sales was operating of income compared the counts income of result & operating to was offset million $XX.X adjusted the million the to was was Specialty to energy softness Greco. million all Turning Greco which $X.X Chemicals the flat million. segment revenue million was Segment million XX% of sales to our $X.X increased million negative coupled $XX.X operating The to the Higher $X.X prior rig million operating in was in $X.X to segment continued by decreased prior partially market to year million year year, acquisition Specialty $X.X prior prior operating acquisition its period. markets. $XX our year $XX.X of HVAC segment period $X.X $XX.X of to segment operating Segment Adhesives to income end in prior year It of to have strong $X.X was Strathmore million. the reflecting $X.X improving revenue to and -- increased the income when was increased income, delays manufacturing was primarily markets project loss the increase for with approximately $X.X footprint organic compared In by sales Coatings, Sealants the The operating which rail year the result in the compared income the to million of compared result revenue was $XX.X segment, mix. the XX.X% Chemicals revenue from our the prior $XX.X $X.X year compared the And energy in end increased compared of and was Adjusted consolidation compared operating savings million million rise. income prior million. increased prior growth of Industrial compared

total, The million lower $XX.X realignment mix. restructuring incurred move fiscal prior some XX.X% the year XXXX. sales in back our of profit costs was Gross in $X consolidated primarily of margin increased and gross XX% costs of to level prior the a million. as restructuring consolidated gross our in year. the to as the results, $XX.X realignment well In As and compared prior to percentage as effects to year compared we QX reflected the negative to margin Company million compared

from consolidated Our impairment The the the year $XX prior in compared should sales. million XXXX XX.X% of of reoccur. assets expenses of XX.X% level XX.X% to sales to XX.X% million to to operating income X.X% $XX.X income fiscal which the of not year. year period or or with of for compared increased $XX.X sales sales X.X% Adjusted XX.X% million intangible compared million million prior compared operating prior of year or operating or or $X the a quarter or $XX.X sales. of to the lower $XX.X resulted million second costs of was of XX.X% sales Consolidated prior one-time mainly decreased operating

period. to X.X income share normalized or $X.XX exclude or net $X.XX applying per $X.X rate, or was to $X.XX up million and of in diluted the net consolidated quarter per share year to expenses Adjusted diluted $X.X share in one-time a in share $X.XX the million, compared $X.X Our was per tax adjusted compared period. second prior XXXX diluted million or diluted XX.X% million income prior per year

capacity sheet debt and ample cash our net facility, on million end Our and of our $XX.X balance organic which strategy. the quarter $XX.X acquisitions closed and to have growth at quarter million was revolving we borrowing provides our $XXX.X million on with flexibility fund of credit

Now, to hand Chris. I the over will call

Christopher Mudd

and morning to good everyone. Gregg, Thanks,

years around inorganic public that our maturing part company, one set been our attributable very an capabilities. refining on our operational to report our particularly Gregg efforts. pleased recent and commencement we as year spend integration Greco of Joe the we've of our over integration thanks in been results with As Impart of developed begin year sales of and today to has acquisition a continuously our have through have we first have ownership of time update performers and strong. that I'm businesses. half integration the our several few our integration implemented have our across building our first highlighted, internal independent fiscal our in initiatives the initiatives been strongest I'll capabilities. to these tools of acquisition I'd to the of with providing success past an stronger like Into

recall, you nearly compelling efforts Guard joint sales and building to million sales As In marketing incremental Greco coordination close. $X our seen the a architecturally through quarter, an results. we have our second may led product specified with very we restructured Guard, Smoke team Smoke directly efforts

was business. As includes of capacity massive in railings the Eau quarter, tower, be highlight Notably, the Soleil largest selected will showcases be XX-story rise high will and another XX dubbed miles railing supply than of of design shores [swoosh], marks another Lake This and this history, project breadth, du features sophistication the which which and XX-story buildings the Toronto's Greco Condos. awards separate of of from aluminum newest and the the the Ontario, glass two includes Greco cosmetic towers it Greco's one residential exterior railings on the more on also for providing. tower the on the to

which core held an scale application the short summit Six its on Sigma the other manufacturing to of To Lean is lead the best CSWI win results of Greco's we competencies its our Ontario; that best quarter share ability large times, One product supply practices, from the as It's of the Windsor, organization. implementation contracts making operations to techniques. the to to manufacturing rest operation and with practices from acquisition in newest to across expected and is several operational our the lead Greco, leaders of leaders. learning CSWI key organization contributions exciting to see well financial in as

our end to the and strategy our footprint function Turning through as for we Jet-Lube consolidations, fiscal to facilities we practices best efforts into In time long-term, And lead operational XXXX, continue Currently, ceased learned best manufacturing integration growth which and spirit our were of our Acworth, and facilities. corrected we third-party valuable our of and this efficiency Longview, Georgia improvements practices pursue the incentive from Whitmore Jet-Lube, our the improvement inefficiencies, acquisition. project. in we Syracuse, now the this, of in facilities. completed identified we've Texas during related some saw we've at shared in and and manufacturing New as important notable the lessons our deployed Whitmore York have have resources Strathmore consolidation in quarter, we Houston integration our

I'd some we've our of product in Lastly, and plans discuss like development organic to this our efforts as area. growth redoubled

we R&D focused development Guard screen know, with to fiscal internal XXXX product led brought curtains the notable CSWI has to smoke market in team. investments you selective successes As large our capabilities by that strong have market like Smoke that

designed initially with that with PRO that we the product more which which an innovative conditioning an is season. paired internally strong has sealant our superior with air acquired this led through applicator product Freeze AC Another success example during with Leak product enhancements recent was chemistry,

of experience to could M&A impact growth. As based our identifying This expected not growth. within outside that range overall improved this organic products and spend valuations developed selectively can in often is metrics elevated but impact likely across the is evolve that on the remain other our towards our a believe of initiative we wide recent our applied disciplined to a pipeline range organic to businesses, incremental the products drive meaningful we're in CSWI family and areas, or a on the R&D drive we of set have material be to already valuations,

little us I'm reasons, that but pipeline For begun, we on. a cite to excited any working competitive it's are our early projects for generated internally teams our specific about that currently

So, with that, I Joe will to turn remarks. it for closing over

Joseph Armes

in by our to like have the Great, made particularly to initiatives XXXX, at results. and that These serve, Chris. drive a across in fiscal halfway in we're backdrop pleased say we very I'd as drive thanks positions focus performance generally to point are with progress just markets begun internal improvements which the our end closing macro us we've on reflected shareholder value. supported well to the be positive execution

this Let Industrials serve your ready our steward to now my to in CSW questions. the And CSW of you shareholders. thank for we're us opportunity all continue me to interest customers Thank by take well take colleagues at our Industrials. entrusted capital and as to operator, we

Operator

[Operator you. is of state the Burke Liam B. Riley from question FBR. with your Instructions] Thank first question. Our line Please

Liam Burke

us nature. pretty on Joe, based from quarter? business standalone as typically is a the variable you the how did revenue this sense it contributor architectural project outside a Could give on quarter-to-quarter

Joseph Armes

some but was Revenue relatively that last was really year. our quarters flat, against some

And so, I very say healthy. overall that very, the business would is

to added with so decline the think variability there. we've Greco new going pleased to very I added very, business so that, have and and products, the as is we performance the

Liam Burke

incremental know front, that highlighted the revenue Gregg contributions Greco. on from And margin the I

there? in a Was You something to wasn't year-over-year, step-up nice operating that margin else had there Greco. entirely

Gregg Branning

rest was we leverage sales within X.X on higher that saw margins. of about it of simply The the industrial the products. the million contributed Greco increased

Liam Burke

pipeline. increasing got product R&D you nice new that, like that front, without highlighted looks the significantly R&D you the can right? you lastly your And to [gen] these understand a fact that Chris, it products on

Christopher Mudd

of of on mean matter R&D just the it's the our prioritizing Yes, Liam really I resources right things. and focusing

So product that any it. kind of what is and enhancements the we've really on guys of developed and might internally organically working stepped really over products above sort be been prioritized activities loose done up

excited and that would are resources the number things. pipeline the prioritizing we into in right able of things that coming on be just market in the existing So about are and do future, a we've are focusing got matter and got the the that we we've with of to it simply that

Gregg Branning

I would any what increasing factor said. wouldn’t reallocating focus and just resources their per Chris expecting echo to We're to It's in best not us. suite really se. I it's priorities going where cost

Operator

time, turn At remarks. Joe Thank floor this back to you. the for I'll further Armes

Joseph Armes

Really on again Great, again thank next look joining today. you appreciate Thank for and with to quarter. the call interest we visiting forward you us your you.

Operator

Thank will This conference. you. today's conclude

day. your You at may have time wonderful lines disconnect a and this

CSW Industrials (CSWI) 8 Nov 172018 Q2 Earnings call transcript