CSWI - Earnings call transcript Q3 2021

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Operator

Greetings, and welcome to the CSW Industrials Inc. Fiscal Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions].

As a reminder, this conference is being recorded. pleasure your my Ms. now is to host, introduce It Treasurer. Investor Adrianne President, and Griffin, Vice Relations Thank you. ahead. go Please

Adrianne Griffin

Thank you, morning, third Donna. Good quarter Industrials' to XXXX fiscal CSW earnings call. everyone, and welcome

Executive portion today, are Form to Armes, Investor Industrials today on XX-Q our James Vice We prior Financial Executive and the Web available site and Perry, President the release, issued me Joining our and Chairman, Chief earnings all of CSWI Officer are Joseph of www.cswindustrials.com. CSW Chief Officer. opening President market and presentation and at

the During This information will this the the call, reference we to how is specific replay and slides webcast release. in included in earnings presentation. being is access call on

of on risks in current to made discussed and Risk are we subject duty to uncertainties. during of this the differ over turn earnings which any and release expectations call do undertake call, forward-looking section filings this and not other the statements. making XX-K SEC. Armes. as report During the call, based will assumptions, to the We various with update results well Factors Form be in and Joe on our factors because comments are could I our now Actual will today statements. materially as any forward-looking annual These statements

Joseph Armes

call. Adrianne. you, conference our Good quarter Thank morning, third and joining thank for fiscal you

in nearly now express on TRUaire Including see over HVAC/R Beginning trailing million strategy XXXX is since deliver like and shareholder would spin our $XXX sales through long acquisition on shareholder the drive XXXX. We months of that grows to million and will to practices the gratitude invested Since total Slide $XXX value. have of XX% our six million the which enhance payment XXX%. my you dividends end of repurchases. month, this to for in capital changes returned share spite return form acquisitions off X, XX allocation will our we $XXX market. in with to CSWI to approximately macroeconomic approximately revenue thrived working CSWI's continue those to I our safe CSWI First, our dividend has to quarterly term we shareholders entire embraced the Pro organization forma in XXXX, into October uncertainty.

with Vietnam. good of The operating qualitative which employees will rest the to approximately this through and now cycles. X,XXX have on organic So guiding America objectives measures to third the exhibits adjusted operating enabled the assured our fiscal continue on generation, our $X.XX on X.X% with presentation resulted which provide by prior the XX.X% the X our your some quarterly on earnings was acquisition On the closing increase acquisition, will to year the integration income, I basis, included the of and of growth of consistent to in balance or income our while on leverage slide total Slide Slide proactive, per CSWI XX.X% over prior comprised to which fiscal strength around the adjusted and the XXXX. sales to commitment than North thrive continue as profitability enable the CSWI that most X.X% like closed quarter of TRUaire. quarter December equating strength the TRUaire year update were being flow unabated. as capital to stewards growth results XX% compared period. in in year reflects XXXX share an summary, remainder of continued delivered an and are cash globe, improved same In sheet prior ample in is higher of X. of period, year the XX, adjusted contributed with compared located an team Commentary begin revenue period. revenue prior consolidated and margin in would XX% of period, the in

Our of business decisions as the and team, decisions of management each employee the executive the is in well as reflected of unit of the centric daily team Board Directors. strategic culture

to addition focus and adherence, safety of to across reflect work safety. our safety a to providing from have importance on and employees corporate benefits, supplementing discipline, awareness in practices, of commitment, wide In with We historic month the this health existing at including and our safety organization we year, thoroughly corporate our stock programs ownership each to enhanced as and health intending the of safe senior our and a site, comprehensive leaders our employee January promoted conducted our operating approach culture. suite plan, employee

is Our and term growth. objective guiding know serve customers long our second we drives organic well, to which relationships

provides sales initiatives This quarter, responsive users mobile representatives, staff complete the to selection its that expanded evolution technology the expansion possible e-commerce manufacturers, order and our XXxX. product a specific receive we providing This RectorSeal highlight support products recently our of it tools RectorSeal distributors, end research natural a that best the of across customer access experience. portfolio review organization. to and options of and company's demonstrates product products, allows training, invoices, and platform objective

common selling conditioning CSWI culture owned facility company's values. on of and Vietnam high this value. new centers our heating, of that or affirm perspective and acquired wholly our refrigeration, logistics quarter wherein investment into organization distribution HVAC/R our shareholder acquisition demonstrating e-commerce acquisition building process, ease disciplined air discovered forward ventilation, to expand with commitment our that and commitment market. organic in for manufacturing we of announced registers mid-December, TRUaire, we of are with This operations welcome result and to relationship service. us footprint. the the transaction, driving of term colleagues customer of premier We years Through live regarding representing acquisition largest end customer our was critical customer five share and long closing mission, and cultural TRUaire's CSWI's our enhance HVAC/R integration integration, to synergies, opportunity an and to transitioned emphasis on and the on all CSWI in grills, quickly market accessory TRUaire we our in how manufacturing and expanding presented and and manufacturing components and wallet. diffusers suite we has share two quality them the our November, and service to this team technology, we Upon platform, out our a look we which share to growing fit tools ERP expect a future especially broad as an history X, a all Each growth. We including returns, In focused Slide

accretion anticipate new TRUaire shareholders. short strategic opportunities, supply continue as acquisition We to the that as long will term well and for provide chain

Our modestly accretive opportunities definitive a agreement just Shell our Americas to allocation is incremental expected from Shell with team products chemical first Lubricants. operations. venture was transaction label be and in consistent is of is the of this a the enabled minimal. relationship by maximization growth to expected with form we and manufacturing This stays expected operations. in required seeking month, that of XX in accretive our year announced Slide year CSWI and executed growth. distribution is strategy venture sales outline had the Whitmore Moreover, the The X, enhanced last specialty joint capital drive our for we On world with our to Whitmore engaged subsidiary to private potential capital be class joint as transaction

organic the resulted execution to end now starts in remainder products were period or and and by periods, markets growth. quarter the to million, educated market with our end sustained year grew the home number comparative as performance. date demand in people $XX.X to In Turning of housing worked architecturally and correlation family Year-to-date, renovation TRUaire which market HVAC/R from ASBP end strengthened with and XX.X% of million sales increasing specified or $XX outpace HVAC/R building equity and fiscal Single single third are expectations. continued XX.X% or home. family in contributed home the was

of as in from generate end growth prior total to CSWI sales year-to-date significant Looking market anticipate industry. strength all of organic. organic approximately And fourth compared year TRUaire’s same fourth and inorganic during by growth across nine X.X%, the to In continued this revenue macro continue the same already and despite as in the share which activity the or in was modest sales contributions. million period grew construction we fiscal We the to thus in taking period. XX% ASBP with total success quarter. were $X.X market The expect into market projects general ongoing acceleration growth quarter, month underway, trends end was ongoing well as this driven the this as reduction of performance strong

the quarters forward, we with to for and of recovery XX% was below the demand combined second these expect fourth fiscal softness driven such marking quarter pandemic end recovery, GDP And fiscal count, consumer quarter into Modest indicators, fiscal the lower third markets and improving and the fiscal of mining, growth quarter collectively slow sales revenue. as the rig nascent discussed year-to-date XXXX, our each first quarter. quarter market a first general summary, indicates previously three and slightly of for quarter quarter. combined hence traffic Sales the accounted from we to fiscal in In railcar with Cumulative some perform industrial energy, potential markets other third macroeconomic in and sales of the end quarters rail much that that weakness just demand, book as During growth of fiscal serve. in pull into rate HVAC/R market, end end trailing when we expect end ratio bill ASBP end fiscal a bookings. in XXXX, growth organic initial pandemic like third the across ongoing stabilization I fourth exceeded eight lows. markets of of resulted a X project

that, related acquisition headwinds, finish trends and to call James raw for such And Our over team closer produce the logistics at and as to price despite including a these certain and strong our managing organic through to and shortage specific TRUaire turn especially forces, global increases contribution look the market are the factors, execution expenses, materials to container expected a year. fiscal numbers. is solid growth, from the with I'll global

James Perry

and Thank everyone. good morning you, Joe,

year period. the revenue million $X.X with acquisition of increased quarter in during X.X% was TRUaire X.X% growth of and in to the was to million of prior December. consolidated Our remaining million the due $XX.X compared this growth third the organic, $XX.X XXXX fiscal

time TRUaire's contribution of reflect the partially since for driven in Specialty was sales by $X.X million in by Industrial results The segment, increased we Chemicals of period Our Product the decrease the acquisition. offset closed the million revenue $XX.X segment. higher

Adjusted costs associated measures from XX% was $X.XX profit strong share, gross of remaining per end in period. $X.XX primarily compared to the combined expenses XX.X%, fiscal to Our with share, for per XX.X% in year favorably adjusted net expenses, diluted year the consolidated of was margin current $X third to lower diluted transaction with $X.XX compared to cost million profitability the The million due prior sales reduction XXXX, from in metrics some very markets. $X.X with income margin decline in income fiscal ASBP million to year's remained the to fiscal expected third share to was per some declining income end sales $X.X or increase impacts the and quarter or the in accelerated, was due slight Net than projects an served, compares market. margin in or $X.X XX period. diluted quarter. offset the period, quarter million the in exclude last end the growth prior Adjusted stronger which point transaction in consolidate market operating third basis the

operating our TRUaire to of into XX. were $X.X HVAC/R The was sales the income quarter margin XX.X% $XX.X for Slide the Industrial compared XX.X% revenue operating as as of True million to million the year Adjusted third year Chemical period from million inorganic results organic $XX segment and income $X.X period driven segment and the the revenue million respectively, the XX.X% than year Adjusted prior ASBP The and XX. segment and respectively. and XX.X% and by delivered prior quarter $X.X These year of compared expenses third to were organic. prior compared million which million, Turning operating to of were their respectively. fiscal respectively fiscal higher and contribution balance margin Continuing of as $X.X period. period segment Product operating million as Transitioning million, XX.X% $XX.X the Slide transaction revenue prior adjusted Specialty segment in income and to XX.X% of sheet. well realized $X.X to markets, strength Air. of income

prior our second million the cash first the initiatives. into first maintained our funding months all results, under outlined our for date XX.X% as respectively, the driven $XX times, $XXX.X in availability the which offset to end leave profit was served. expenses, operating Increased of transaction period us $XX ASBP end market margin nine year-over-year same of quarters slightly continued fiscal weakness of compared points in the than nine the million, income compared period. and XX.X% Adjusted acquisition. revenue quarter by with per As was declines were $XXX to to the earnings and of Margin sales. basis share, million $XX allocation net approximately facility, period and nearly I'll in income a Gross largest million prior flow the the qualified or I fiscal only US of were the million $X.XX year prior Adjusted for terminate charge well of strategic third cash our demand the forma $XX.X or X.X% of cover X.XX million with consolidated diluted The million net and last approximately We strength and sales pension markets XX. due adjusting year $XX.X HVAC/R as lower reflects after into and same $XX.X nine than pro share $XX.X income company's operations of Slide positioned the and decline or ended quarter year as were These the on beginning offset existing other XX end, the month our capital now operating with leverage in million modest pandemic in per financial aftertax first per first decrease of figures share to year. to from $X.XX current cash diluted XXXX. in million transaction onetime per period revolving fiscal of credit of our XX.X% months durable expenses of quarter share for year, the diluted the $X.XX plan. higher

period, million compared the related revenue was respectively The $X.X compared realized X.X% income operating $XX.X to effective the margin the sales $XXX.X organic related sales segment on demand Chemicals third to acceleration operating and operating the operating fiscal Slide partially the completion fiscal of to compared period product with continuing segment The of year cost and in the was prior joint the management's XX. favorably of product million $XX.X to year-over-year the This backlog for effective year by margin $XXX.X due $X.X fiscal year period. the transaction adjusted XX.X% tax maintained of reduction million contributed nine Turning was in $XX.X and projects million a and revenue Adjusted expenses, in industrial Specialty efforts. GAAP were end execution $XX operating profitability growth XX.X% of in TRUaire prior markets Slide income adjustments of on expenses. months year months despite resulted being as was than basis. XX.X% prior XX.X% the Adjusted nine the $X.X in the inorganic of in This drove the income first margin segment million, higher by delivered in to offset plus year and ASBP The growth market. $XX.X Continuing million rate adjusted to served. income decline XX.X% million excellent HVAC/R operations of in organic segment project and as quarter TRUaire. adjusted XX.X% other transaction Ongoing in to XX.X% in venture adjusted for first resulting income segment XX. after period. million the income adjusted of million operating prior in million growth

XXXX. We full for range rate fiscal continue XX% expect of our tax a to to year XX% within

balance and our sheet. Moving to generation cash

The As flow the to the flow fiscal operations now XXXX period. in call to back cash I the million in attributable nine current first the turn $XX.X With transaction compared $XX in that, year expenses operating months from mentioned period. Joe. cash will to our decrease continuing operating in million prior primarily of was was as earlier, I

Joseph Armes

James. you, Thank Great.

strong in with value balance customer we sheet liquidity. reputation Outstanding XX% fiscal per revenue growth along largest closed date, to largest impressive maintaining our for strategic service, joint our all acquisition adjusted announced quarter, During a in share, end the agreement third drive an while our and high added we we delivered quality the excellence. growth earnings services and products our venture markets, we to and delivered form

to ensure life transactions, active strategic organic recent our pursuit our development team While time. work the we growth integration inorganic take know and opportunities business we accretive our can of in cycle value successful as the remains of

like thank my CSWI, As not over who would thanking do fantastic only job CSWI own stock and our just colleagues always, Donna, their of X% but in also shareholders I all a to that, to questions. collectively day through ownership close our each continued also our by here interest other of at ready employee take we're plan, support company. With of and for

Operator

Jon first coming [Operator of CJS question Securities. Our from Instructions] is Tanwanteng

JonTanwanteng

your Joe, in one, supply a in business chains December. trended high of January, things out maybe and both you with and heading across just overview how then and demand first business from could the have a level perspective January COVID your provide impact My line on of

JosephArmes

the acquisition We're changes trend into quarter. really the seen TRUaire continued weeks all. major there same the is that integration. third January in and six No Yes, we've at

would that the with side, way and we there so and team cost that about there. dealing going on other container to things we're increases profitability, name the some expect our demonstrated early headwinds and those here. are really but read would managing Everybody's well record are our so too the track by purchasing sourcing is commodity steel I pressures. same going. we price the with. is pleased But say have shortage, And that prices, strategic trends and dealing a any of protecting But through do to with

JonTanwanteng

Specifically to do you agreement much TRUaire, they're they maybe when shortage from to acquire announced you how them impacting shipping overseas, to what them? container the thought could the compared is

JosephArmes

make would disruption. some sure so the Again, this Jon, in stable. Expensive any I so get no at on. around don't things early and corner really there's point, respects, material this to but we point, relatively here are it's But surprises. We're trying at good. say look far,

JamesPerry

just that. would I add to

when to bit customers But announced meet As country about the around you that acquisition, customers' talked we're they and asset use this, to Again, container like might of strategic us in we their little dramatic nothing carry. disruption yet. inventory recall a for into be from amount centers needs maybe some demands opportunity we to the have need. given from distribution of they our that been what pull turns That's shortage. inventory and we an TRUaire we meet for able had where that to them always anticipate times customers' the sure

JonTanwanteng

scale to the wanted back to Just broader HVAC business.

You home mentioned starts.

or as as Just working home, organic get benefit that much dynamics get you're looking and gotten you've wanted any whether more Do might of do a aside. year at away from it's is people that of, ventilation, things sense it business, that now? you COVID see know it that you how progresses, vaccinated assuming go to in

JosephArmes

I know and XX% don't Well, generally HVAC would new is say, that Jon, replacement, residential to remember, construction. going of the is is sure. the answer repair for XX% honest be I mean, market we

demand air people in there's and think the We off the go had that matters base a on XX systems things. go do day and at school opposed it stay-at-home, types those you're turning to invested so your has home, have repaired running hours here. install conditioning really, of as and work-from-home, to to And work, additional really that to been

products and base we provides replacement that installed install have put feel products as repair there's really that additional and to on parts grow. system. like parts and that So ballast. so factor the your here both the go And as into well is base or a installed some But single clearly new important largest continues a and demands we a

JonTanwanteng

line. And maybe then comment on a architectural the product just

One, how and you when number now? I pulled into do What quantify been some compared in much you recovering had have you demand next quarter can this three thinking think ago. projects. one? what you the You would quarter, expecting, two, quarter, business? to And maybe orders in said are that you're see number came it months the

JamesPerry

supplement Joe I have let quantify to We that. I'll say. might won't what necessarily

presentation little coming, forward. of really that a then that a the about an a quarters to look a we talked reminder, end done projects so job short and the project steady We've can forward. a for kind You have some can product of in ready earlier business by sense those pretty general. you pull filling of our as get in manager it term quarter-to-quarter, couple little It's for see some market pocket kind air of than that like of and And us air expected. what the held your pulled has pocket says, nice hey, gotten not we're now it's

done team that so And has great job adapting pull. a to our

from a of little lower just we're so some mix basis, margin. in And those a projects,

headwind a of bit a was that interestingly. So

but a softer dramatic are hit a So the we're but say, from from not margin bit still bidding standpoint, maybe things necessarily. booking side, a as a sales little standpoint, are help little a We seeing the softer mentioned. activity more. would Things little we

to continue that of out air push we So kind and pocket. look out

the we're fiscal the when really months next year. that into we're But to in are taking obviously we of some so and some have fill projects more say smaller forward. there's gaps pulled that really things other but kind of would now We've gotten that couple some hits, with expected the that is last necessarily we've Again, now the the a the year, quarters. from next talked kind as team it's to couple now fourth away softness. quarter, And our beginning of we say and bookings looking talked hard about of of fiscal the

management So a is sales. there effort good job, doing strong on

the areas some because stronger geographically they're little construction we Some slow the a now on more have are of side. just where headwinds right

So there's job. But has specific instances overall, business done a there. some the good

JonTanwanteng

me. for one Last

really a quarter, Specialty thinking about the kind be Is weaker high continue in think floor XX-ish we impress margins. seasonally percentage, You with about or to should this the should this of going Chemicals new XX, that forward? we how

JamesPerry

hard It's to two yet. a trend or quarter a is say quite

I year, seen think the clearly, continued you've in to at travel what happen like it's through cost the a see some point, the but we've and maybe impact will business. near year-over-year lower global return of That entertainment. term not

of we say, had of that but started the And So made probably have it had it type reductions recall after of some earnings its hit talked bit in first first rail, a I of harder That domestic say markets now. you labor commitment in about lot the the force. also business a I not at needed. terms attrition because as very course. those got energy, I'm headwinds to than kind we've industrial, some labor is things, of take that you right type travel, hit minimized you end serves, you you that company mining, that this well. have will the of let more that's pandemic May would model. when that our a back some related will little in has sure We this and will point obviously call our it in any pandemic global the a back for come travel make

we're for some of we to much see probably So to you've as learned moved are business reasons, going as really if strong. have the the that that We're cost various people and think we've and the be to I up in where have able need got T&E, backfilled right ramp that will maybe things businesses nice you effectively But demand the needs all up. fade back that like the as not on manage to are as is of through found might, more to now pick eventually labor starting factors But cycle. away. pool how really their not repeatable even some that some

Operator

Barrington [Operator Instructions] Chris Our of next Howe question Research. from coming is

ChrisHowe

contribution You of the mentioned the TRUaire quarter. in

how specifically would be looking? to overall provide For in sequentially outlook perspective, and basis for revenue TRUaire's quarter? that a what on your TRUaire, And and compares how the is you in able year-over-year QX that's

JamesPerry

provide TRUaire, talked we yet. is to seven I'll announced announced after weeks their things. that detail I XXXX acquisitions. of run initiated things lot we is feel as couple know TRUaire, But we dead talked been We're say as about, of as into When a smooth. the still we're, rate, said, that. you $XXX One very Joe a but the Not six, the for getting and were about we about Chris, calendar million at on. revenues tracking have

year, we were $X.X look million. you If weeks said the at it the of they last two

EBITDA dead backwards year. that's talked end about in So that the on the calendar were tells number. we about million. type looking you thing of a of closing We Again, $XX that literally was on the math as

lot We've hope year. far. what our growth done looks they integrated a those great But has And integrating to So We together into XXX% We diving of a see would that had this base. type would for of of run rate job and has we spending with that team talked plans putting still extremely so with sales that well year. see the organic we're strategic time the customer theirs customer about this overlap. customers. type expect translated like, that

had. in any seen really not what we've we've So headwinds

some seen tailwinds. fact, we've In

really to opportunity but there's we So would time. year-over-year not good TRUaire I specific think that there, comparative detail at this

ChrisHowe

the your next normalize in the into fourth little happens quarter, we how than of get out things normal, a better done calendar going As and now rather bit look sooner are as as out so we even of later this? as business which of we get margins has as kind view how coming incremental I a to coming of hope versus recession? year. to normalize And more historically than a What's

JamesPerry

may recession out look of may the you of as out ago, A of case, this something And from coming few the recession. whereas and the we never home end about seen kind from we've obviously, down markets differently with have talked coming some pandemic educate that Jon, take all in that did from new cycle a home tailwinds like minutes a work before.

some HVAC. had with you So tailwinds

We continue starting from in restocking from end market and to HVAC industry. busy others tailwinds continue see things there. our good the to and and just season see for good We're hear the

now. really kicking that's off So right

in that, quarter. the we So we'll May again as we about to you talk fourth get for a good sense as talked

early little it's to in those minute I We just too about also a normalized margins talk looks the Chemicals markets. about So like. think a ago Specialty talked what

So think these what a come tailwind. they're market, right normal, prices most looks all back the to But have up, end rail Oil few whether a have moved or quarters, Rig counts going back like on couple are come that's that as depends we differently. of end is traffic up. weeks up. to a now, things markets

quarters a to but again, bit those to get margins kind markets, of get world will for into the demonstrate and well. got a need be get Again, the we've your pandemic certainly and these But seen. to do margin more opportunity, do we looking integrate we'll able of end example, market over products really to we're mines, apples still You've our we're share. give that best But little TRUaire win as apples some back I restrictions some performance try some the oranges, said as with going get things our to normal. both I and last out think to post you to to travel, being and put that. through of we've to in from apples then segments perspective, to directly it continued we and couple And of up very in pleased nice have to certain

ChrisHowe

one well. And last integration will six question. run it it, into The going assume TRUaire to continue but I well, of weeks relatively

months came the bit expecting inorganic roll pause as ahead, this we is little or A about times, think in As below should your where activity. which three we at consider nonetheless? continues good. integrate X.XX here perhaps a we integration, a next at it six How X.X were little for air, TRUaire to bit you leverage to times,

JosephArmes

interesting. It's

relates this were those We needed as exactly types acquisition that far of we Having things make evaluating the with management looking that, to things. digest said opportunities team. did we to we continue as doing doing for this before acquisition same clear as it

see so announced, a Shell And team. the JV management different that's you

got an some of organic so And believe, you've growth opportunity Chem that to side the with the generate Spec business. initiative, through we

whatsoever hand, in And to as something before. it that. something continue don't especially else our were line say, Doing like they have extension, I as any relates space the size two I with here. other pursued tell management acquisitions, TRUaire the of the same doing so we smaller that for we'd that of a think you, HVAC just hesitation in product to years. on But needs I'll take place would mean activities the team, TRUaire, there's period digestion like I

stop. so can't we And

times. continue not if those We do. going we're years, development The of at on months, what cycle opportunities those takes to doing on the

think arises way I just next opportunity the because so we'll And works. of when calendar the prepared be the

Operator

and your our a today's We this session the wish brings Q&A We in and teleconference. thank for interest of you end Ladies us everyone weekend. CSW of gentlemen, to good Industrials.

disconnect enjoy your of may the day. rest lines, You your and

Adrianne Griffin	Vice President, Investor Relations and Treasurer
Joseph Armes	Chairman, Chief Executive Officer and President
James Perry	Executive Vice President and Chief Financial Officer
Jon Tanwanteng	CJS Securities
Chris Howe	Barrington Research

CSW Industrials (CSWI) 5 Feb 212021 Q3 Earnings call transcript