CSWI - Earnings call transcript Q2 2022

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Operator

Greetings and welcome to CSW Industrials Fiscal Second Quarter 2022 Earnings 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. I would now like to turn the conference over to your host, Adrianne Griffin, Vice President of Investor Relations and Treasurer. ahead. go Please

Adrianne Griffin

Good Industrials Maria. and to welcome Thank XXXX morning, second CSW fiscal quarter the you, everyone earnings call.

are CSW Perry, Form XX-Q the Joining and issued is the replay our Chief how today Joseph to presentation Chief We Chairman, me and website at our release, Executive market's portion Financial President Officer. of Vice Investor of Industrials; Executive James on prior earnings the and President and in today Armes, opening included information This is which being call earnings the to and are access available on webcast www.cswindustrials.com. release. Officer

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

Joseph Armes

we inflation, with chain XX for our and professionalism, quarter globe, ourselves. provide actions integration, Thank TRUaire metrics. that second team for fiscal along you, joining from with with the challenging results, and extraordinary demand months, key our customer consistent second high challenges macro and quarter members In To general leadership our including collaboration a morning growth for dynamics headwinds CSWI end-markets and few standards you dislocations, posted the economic the second in the last with ongoing our managed year's resilient I'll diligence, are focus set thank performance, resolve organic context quarter by for Adrianne. Good and fiscal impressive call. recovering operational highlight momentum price downturn. disciplined conference team past supply building around accelerating the has from aided on

As strongest in growth we period EBITDA to was year was XX% earnings which prior our rose our and then XX% inorganic was the TRUaire $X.XX year record, of period. the to revenue on XX% acquisition. per compared growth, attributable same prior growth XX% achieved from to organic and to $X.XX was which share quarterly compared growth quarter CSWI

ago of growth perspective, and fiscal additional years was compare this XX%. results was quarter EBITDA For per XXXX, line quarter's nearly share we XX%; compelling which adjusted to a XX%, our growth increased organic if including this top earnings growth X-X was two XX%, adjusted

outages. illustrate customers We product for not achieved their these distribution success short, have to minimizing they as customers with them. high-quality, have service and to customer and dependable our rely partners are network disappointed innovative our and while on us limiting providing results products to disruptions we pleased in our be excellent In partners

update I like an Next, to on manufacturing provide TRUaire operations Vietnam. in our would

the production. our and to of safe. employees earnings all were strict lived number process team kept we members restrictions extraordinary members relaxed XXX full team site. and products on-site, to in team recent on and in have facility COVID local August to Vietnam's are our protocols, on at working manufacturing reduce continued COVID our members returning have approximately key we reported As worked of Through required by we of X,XXX call, weeks accomplishments the and approximately now response in who

approximately XXXX. customer per the production full this Strategic shipped TRUaire of United expected and August demands; our a in September, and XX year. with as is made the during fiscal operations, the reestablishing TRUaire loss We revenue to position ended week, for product week containers which inventory meet For in per we perspective, or average, nine XX with of conjunction week XX, November. compares on containers containers in no October by result, sufficient decisions we of States end proved anticipate

TRUaire Coast, delivery. the Jacksonville, we Florida distribution to allows RectorSeal's and centers Southeast products fulfill and placement quarter, two TRUaire and the order the from five Fe co-location our from RectorSeal reducing California time now the and During both a orders us between portion and ship Springs, This integrated of Santa the customer warehouses. of West significantly

TRUaire Turning priorities. funded repaid in that stated facility the million $XX of we our December to XXXX, allocation closing Since of borrowings that of capital acquisition credit acquisition.

and and evaluating key analysis, we and inorganic a we we we automation, very that to dividends The have is network our pipeline healthy the of serve. resource During add we we our the efficiency paid safety end-markets will for company have year, first distribution fiscal most channels our to investments this million capital will rigorous profitable our $X.X in initiatives. returns and our seeking continue products risk-adjusted months invested differentiator in opportunities. enterprise and continue exploit implement systems six of planning distribution Through

compelling organization a I'll our this to look ready the Our closer to call the turn At at on the on remainder of results fiscal then remarks and year. the thoughts our capitalize will over opportunity. stands conclude with next I time, prepared for James

James Perry

morning, Thank everyone. you, good Joe and

prior TRUaire prior all to million, ongoing shift second to $XX.X decline the basis-point of XX.X% by million, the margin incremental resulting to from in was impacted a resulting from increased and $XX.X as to to in due a the equating increased and to mid-markets freight the sales projects the the in outpaced in of prior volumes is inclusion across Our representing XX.X% margin, the prior $XX.X and was gross of by as with period sold part also prior levels margin. expense organic in XX.X% revenue million periods, $X.X manufacturing of to million was and facility million, operating material offset three consolidated that the some quarter production and price in to inflation the Consolidated Consolidated partially the engineered compared Consolidated Consolidated period. improved building EBITDA Vietnam. pricing profit profitability year higher served a year in business fiscal The an cost of profit income TRUaire respectively. revenue operating compared revenue XXXX EBITDA This $XXX.X decrease was at quarter XXX initiatives. gross period. was XX.X% year predominantly compared as XX.X% growth, the the year cost fiscal and the period. Gross goods in incremental profit operating in reduced increases by a to reduction TRUaire segments margin XX.X% decline over current lower-margin year margin the percent solutions segment. and in XX.X% increased increased XX.X% instituted profit acquisition second XX.X% with during

the adjustments were to to of And a current sellers weighted fiscal primarily to the either prior As outstanding resulting million, attributable second $X.XX discussion more due period. Transitioning or the the December. diluted year intangible reminder, or there due XXX,XXX, $X.XX segments. in from period. There shares, average utilizing million, $XX in are EBITDA per X.X% of XXXX TRUaire last period, $XX.X we very in issued the a were on was shares of the to no acquisition to year. share profitability amount in income Reported amortization focused quarter net last of or TRUaire comparisons the CSWI to compared our

end-market or was prior million, As million, solutions revenue restrictions XXXX or initiatives due revenue due to of and our of results. of which or and for acquisition take our pricing volumes first compared for our pricing and were marked April growth then resulted total pricing of the XXXX in traditional initiatives of $XX.X contractor relaxed X.X% segment demand a XXXX million. half is from to implemented inorganic by largest fiscal quarter of effect comparison, from rate four demand growth actions, prior additional the XX.X% XX.X% TRUaire part and of exceeds as the calendar year-to-date our January. In organic sales delivered XX.X% outperforming $XX.X this Segment this XXXX shifted context $XXX.X fiscal This growth comparison. million, to year compelling is XXXX. year XX.X% total latest in EBITDA XXXX growth $X.X earlier million, of the or half to early served the comprised increased growth, first will from of COVID our our compared this of week fiscal initial growth growth of in delivered early rebounded accounted quarter, our in the fiscal period. or to quarter. in revenue first occurred solutions and quarter the our contractor which inorganic fiscal summer quickly of and Due With dynamic, year, to restrictions comprised shift these fiscal believe for out TRUaire segment revenue HVAC/R organic Providing same-period year acquisition. $XX.X beginning $XX revenue category consolidated XX.X% driven XXXX first This significantly million, organic and growth second we XX.X%

solutions air strong X.X% XX.X% XX.X% costs During XXXX as calls was has which Segment current and XX% first production fiscal performance, well materialized. In segment million, projects Vietnam headcount, fiscal revenue EBITDA million, accelerated $X.X the optimization improved by of as evaluating fiscal as is impacting half first of negatively period, revenue to related system. the period $XX.X our million first the to associated $X.X year freight revenue. our at million, revenue reduced period. TRUaire in while revenue. ERP consolidated and lower-margin, shorter-cycle was and increased expenses depreciation the roughly achieved growth this the approximately has XXXX of year or $X with has adding of prior fiscal or inclusion half revenue by or the of current XX.X% second the mentioned metrics. this compared EBITDA significantly to above to revenue accounted offset of period discussed the expenses prior engineered inflation of XXXX, profitability facility XXXX to material to partially of growth. Continuing costs, in in And our mix for the segment; TRUaire increased revenue the $XX.X year flat we've million, the Segment prior quarter building half as previous segment is adjusted half or compared on was first fiscal been And quarter pocket outpaced the

our projects backlog most diversification market over projects, fiscal institutional, decline the to our segment over trend. the education our in sought half, XXXX period first half XX% XXXX exposure multifamily improving and expand fiscal fiscal quarter, up Fiscal first bookings increased with XXXX an XX% bookings second second to recent geographically. share XXXX quarter revenue, grow demonstrating line top actively commercial this of stabilize allowed minimize construction a During and starts, that team in

fiscal the As of the trailing book-to-bill quarters our was eight just the end ratio of for second XXXX one-to-one. quarter, below

as We decrease Our XX%, cash successfully sales quarter week. solid $XX.X COVID-driven margin the which of XXXX, initiatives, first quarter. solutions first sheet. revenue levels. reported of resulted of or segment last compared we strength fiscal year the investment EBITDA fiscal of incremental price Considering lows increased of inventory Transitioning reported of the cash to fiscal XXX end-markets increased some a the higher from primarily the we second XXXX organic. such, volumes our another second posted basis-point $XX.X to working and million implemented serve and to was actions growth, million, operations to to ended of in segment of due quarter pressures; continue segment the last year and XX.X%, sales capital slight of was fourth $XX.X specialized over fiscal which quarter X.X% balance the recovering of reliability with and higher from as sales addressed improvement of fiscal organic growth support the all inflationary which half Price have million, $XX.X in million, due prior flow receivable growing accounts in a or

end the During second by $XXX resulting million under of $XX the approximately as quarter. revolving credit we our million facility million, reduced in quarter, outstanding the of availability amount fiscal the of $XXX

continues for capital, well range stated our to As as was effective of leverage the metrics third rapidly material volatility combined Joe $X.XX. some the basis quarter, for company's current as for XXXX year fiscal rate fiscal fiscal expect the fourth follows: is light of million GAAP XX% freight These approximately Xx costs, in we us extremely and quarter-end, well-positioned to of and X.Xx, EPS and our company XXXX. the Xx. the second consolidated an to pricing the of rate a In The economic guidance of due an with to rising was leave for $X.XX within expect providing quarters allocation XX.X% effectiveness a lag initiatives, the continued our discussed. ratio persistent, tax range million and range CSWI third $XX of of tax of For EBITDA disciplined on to $XX.X quarter

For and an of the range an million $X.XX. EPS $X.XX to range $XX $XX of expect EBITDA quarter, we fourth million to

to we future discussed Joe address closing today external back quarters. the are providing the provide have due turn to to on unusual necessarily We for do and now this circumstances guidance that, I'll the year. We fiscal With not in guidance this to our call for estimates of remarks. remainder that the current expect call

Joseph Armes

Thank you, James.

achieved served. organic, Nearly by by through driven combination $X.XX. XX% of The top-line all Adjusted growth, EPS of segments growth end-markets and and price reporting a this first XXXX half was was all volume. XX% to grew XX% across of fiscal marked

can why is of proud our understand this you team performance. So

in are real-time improvements We chain. our seeing supply

strong end-markets rising via These before EBS to robust. the people contractor activity by and segment, Our renovations work interest rates. pandemic. We equity higher their at home fiscal to about continue rate bidding low home as remain underlying in Specific a remains have financed XXXX solutions our home, segment comfort our investing fundamentals. are than optimistic as they are from

is double-digit strong the for growth bidding Dodge markets September, new by our in provided territory activity the improvement XX.X% by the future are the construction These the end of pre-pandemic is quarter. well indicated the expansionary and XX.X%. Our and momentum. second was into similar data than Billing of to August Index recent At at are this starts is strong And Architectural reading bookings in indicators EBS served regaining construction segment. in the higher which

focused and simultaneously evaluating innovation, new has multifaceted introduced effort product adjacent production operational segment markets accuracy. new organic while for the we introduced increased growth SRS recently products reduced into leadership four complexity and expansion. market a Our sales Prioritizing on market

venture production Our begun month plant expand with capacity Shell current utilization run at results improved facility. Whitmore joint the our much in rate has capital to and production investing

that any team So to leadership recognize through have At CSWI, serve and last did we our families. responsibility upcoming we we response take our our customers cycle. And to and to a pandemic-related COVID resiliency it's our care layoffs an We fiscal begins who for employees outstanding as many ramifications. the seriously well-positioned reminder, their demonstrated year. are members not success and SRS strength, with have

completed the a the such our we lower-than-industry in our fairly, has survey loyalty of And year, which to highest an Our benefits. with great recognition and by was and North Australia six recently has response objective that treat achieved is third extravagantly, XX% to is We turnover. supported ever. on this survey average believe year into to this them our focus employee and employee history. compensate and America, business translated We performance that Kingdom. facilitate team our development. firsthand excellent This professional in higher people their know rate engagement community engagement to We this members directly United

we We positive are are the action currently findings. to develop results indications analyzing quite will address early but key plans and

members While in labor have widely business welcome we our Vietnam extend I thanks to to throughout to dominate avoided my shortages TRUaire them and pressures have the like wage the back would media, team experienced sincere that economy. workforce and work. been

to in we including members a work in dignified return safe employees Vietnam, our team over the environment, is facility our of reflected when to our working called. commitment and XX% to that Our fact wages and in fair chose

knowledge the workforce certainly this continuity experienced provides. will from We of benefit

CSWI, support which ownership We colleagues through to employee from here we with our for of we're shareholders at compete. collective believe ready ownership And that, company close company our always, employee and of plan take to and interests now I employees our our well X% questions. shareholders of that our as by would with driver collectively of our company. as which interest powerful their own continued aligning the success stock the thanking plan, through all As Maria, a is who my like stock differentiates all those of our in

Operator

first [Operator Tanwanteng CGS your Securities. comes question from with Instructions] John question. with Our proceed Please

Jonathan Tanwanteng

everybody. the Thanks could if help decline me you James, morning, better sequential was for my good wondering profitability. bridge the Hey, taking questions. I in

the the TRUaire whatever called in if have been you think else inflation I investments quantify between bucket. out specific making, the was but disruption the me wondering I could and help may the you rest increased you're

James Perry

the James. paid some specifically that working and sold of facility Yes. We goods that goods it's cost line. John, Yes. wages were the of of of because under-absorption we in employees million extra that the mentioned $X.X the sold at cost

get prices a fact increase minute. in allowed. solutions it's we we as I'll we've at So of the that increased the the about January. materials But example, The pressure just week that's headcount the is profit see business those can that line; we of the and that's mentioned, We profit things so. inflationary effective had, gross freight costs. those gross of mentioned, of it of mention kind from as and beyond market of this one our as be really X%, so other We ERP a in below beginning drop profit quickly X% for some we that to did quickly we or things. in a gross callout line, really little as expenses raising the conditions been maybe that would bit rest contractor price Most announced here and the type there, of there's and

that price what beginning four price get increases about had we're them a given took we that August, competition call. right that but is part. the sight looking the right things. another and the those had up. And see In couple this fiscal kind of just increase stabilize. of last example, calendar time of into costs us It's for of and line XX-day that standards good since the at, in, had usually lag months to about for our was and most earnings the We've quarter of to freight a takes in at industry now it the price year increase, last kind we gives step segment we've So while fourth started

through those goods of way costs have have taken product, it's hit material prices as that of the the of Some finally step And cost well; you that up. sell pressure. their and sold as you course, inflationary when really work then a lag so inventory

gave already quarter, we in But now fourth taken saw hit given You now QX. We're behind of third low some take in to that of well. The you have recovery point quarter, going here solutions the you're that kind in the place the we in biggest see effect. quarter, we we similar the gave guidance guidance the per fourth share you. quarter going and the for and thus also the earnings from third seasonality EBITDA that will return that's type sharp and can a to as pricing quarter fourth have of us in see piece contractor when see

more look line. EBITDA the we've that a we metric with a line, things. that actually and include TRUaire, up a Then of think bit. a a tailwind really have as Does to you look difference, amortization, is kind we ERP depreciation well profit up of we course, you XXXX. we're you've picked we operating gross TRUaire, at. little gross the got the why now that with line picked even profit headcount, is year-over-year, those depreciation to which little know, lot fourth fiscal in we profit big quarter help? expenses a So, we into from extra Below some bit Yes, going had But saw really starting

Jonathan Tanwanteng

understand next is, QX back jumps I up, get you're that Yes, to might year. you that and that understand more follow-up Or guess level it historical the after more profitability year? into to there's maybe what is I does. head from gets you go volume missed seeing, back as QX to obvious a to getting help that me your of your more earlier you it you through you and all when QX drivers have catch-up the levels? still little this of and do bit fiscal catch-up to margins Just is that and that the if as

James Perry

continue. appreciate Sure. is mentioned guidance. And you I Yes, this I'll James again. the

for that's help, but see really we now. it today. we temporary As We'll conditions given are thought would how mentioned, unusual

So a I note appreciate take you of that.

fourth quarter, EBITDA a at guidance quarter an perspective, second and quarter a gave you're the perspective. we with As from at we from looking EPS that lot looks you, the like look that,

still are margins to normal back think I recovering levels. somewhat

that. like to we're is our a would think have But guide path I going dollars be we've really We profit focused to what on recover our to with to continue profit the margin. price to recovering increases. able

The I seeing levels, of think, because opportunity. and the EPS little dollars. first time, achieve But just that now, we have those EBITDA margin seeing that goal more quarter I like a think that math. and of profit for second you're recovering profit in tougher dollars is our to type return us

raise you match pressured. that costs, margin still may going earnings get be is numerator profit your to the number to bit you a but little denominator As prices the

we for be we fiscal to that now somewhat rather our the costs getting sticky and have to in We're over starting see margins to I to a like. XXXX X opportunity what normalized see as look recover we return time April of deep the start into continue continue think, just I really historical levels. pricing think as to time, process

tailwind into little order 'XX. it's fiscal and moving into then too fourth to early that we much quarter visibility a conditions given think a the we've market we the the had, got we to about talk So have, given for say, nice other than us

Jonathan Tanwanteng

last then, me. one for And

Have side. on trough I in what I in you P&L You the orders color, good was that the two gave hit how squares quarters. wondering we or yet? next guess, the see there the with on the architectural one

Joseph Armes

your about see on some didn't income we've more down pressure. year, that going air it as line. we fiscal the as the you in in taking mentioned, you much pocket we an line a talked here as been we've know, The as back to and work for XX-Q at way statement all income look half, revenue while think and talked you operating appear the as orders the about but this the you're I

see You're bit. fourth a for down pressure one year. That QX in with a continue nice see profitability last and job did that that little bit. going to you is the That segment a third quarter reason really the profitability

to see know, some higher generally, those You year we're nature. fiscal pressure cycle, lower for they're are those shorter margin project-based now, this well year the 'XX. orders job projects. as done and We in helping orders return bigger as of projects because profitability a the margin of see has good The really team us we taking orders levers but the longer-term finding the that begin you

Operator

over [Operator Armes to Instructions] would call of I Ladies back and like gentlemen, remarks. closing we've turn reached the Joe to the for session end the and question-and-answer

Joseph Armes

to us you this and much. our speaking your appreciate Thank look again to company. support we interest next Great. very appreciate joining And forward We morning quarter. of really you everyone and

you. thank So,

Operator

concludes This today's conference.

lines may time. participation. for at You Thank disconnect your this your you

CSW Industrials (CSWI) 6 Nov 212022 Q2 Earnings call transcript