CSWI - Earnings call 3 2024 | CSW Industrials, Inc.

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Operator

Greetings, and welcome to the CSW Industrials, Inc.

Third Quarter 2024 Earnings Call. [Operator Instructions] A brief question-and-answer session will follow the formal presentation. [Operation Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alexa Huerta.

Alexa Huerta

Kat. you, Thank and Third everyone, the Industrials CSW Good Earnings welcome Call. XXXX Quarter Fiscal morning, to

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

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

Joseph Armes

year-to-date our strong Alexa. and serve, and outperform despite the prior you, again in team challenging year delivered morning, Thank against everyone. the Good quarter Impressively, third conditions, to results. continues markets we record results

record through third earnings EBITDA to quarter of our third third morning, record $XX cycle quarter The $XXX announced bottom this our adjusted Earlier per $X.XX grow million. drive of of the results. we notable revenue quarter share demonstrate ability continued adjusted leverage and million, line quarter and diluted operating in results third record

on they up margin points both quarter. delivering adjusted XX% the be to tax exclude Adjusted would growth as adjusted third EPS on indicated we items EBITDA in expansion related of and in EBITDA XXX nonrecurring last grew our basis to X% call. revenue, past acquisitions, earnings EBITDA certain XX% were to

generating diluted record of or or share quarters On million, of per EBITDA consecutive adjusted $XXX heels XX.X% revenue year-to-date the X.X% an and X adjusted million growth. robust QX results, and continued growth earnings of and of $X.XX a results we growth XX.X% in of record $XXX

delivered For consecutive record of of fiscal the and facility from in year. cash quarter reduction of flow the third to million. an quarter, a aggregate fiscal revolving we our with $XX borrowing pay outstanding during of This quarter third a down operations led $XX million total under third million the $XXX credit

reduce provide our expense to interest pursue sheet arise. fortify our and balance to to future continue as We significant opportunities flexibility they

last have freight the few quarters, levels. return to ocean seen Over we normal

efficiencies in reduced Sea. operational We costs our Red have the been prior we the domestic have Recently, and year. monitoring versus freight issues additional driven

We forwarders have and freight closely transit impact the in assess all transit on to been potential with shipments. working and for pricing our time future

be most assessing are We delivery could shipping the on and rates. options, temporary there some upward but routes pressure efficient

caliber highest our expense, also We growth members. as team see staff retain we up the to and for continue compensation increased continued

our through further expand By leverage maintaining already successfully able savings, margins and margins. freight our and initiatives implementing healthy new operating and achieve to increasing pricing prior meaningful expense has been CSWI gross

opportunities. We prioritize for that to of goal and risk-adjusted our We opportunities long-term inorganic potential growth organic acquisition ultimate capital on increasing have we always maintain and will a returns evaluate estimated pipeline the generous continue support margins, value. with based the of and continuously investments shareholder

provide segment. around each the execution Then of the I financial like X so of within James details quarter. of about business would additional will performance the segments, proud to the speak each I'm briefly

increase growth Solutions over Contractor delivering another an of The our HVAC/R delivered year Contractor million, also our QX did net segment, market but not an Solutions the of for excellent a team the quarter of quarter year-over-year revenue but only outperformance third prior volumes. $XXX.X seasonally industry experiencing residential is quarter job in X% our slowest of the decline by period. despite year

more in channel, introducing centers distribution growth segment allows to innovative, serving acquisition focusing leverage, model around and our CSWI products. distribute acquire, in customers power This designed and our credit Our well. competitive our network, support, our logistics and results of strong high-value us relationships because back The advantage master newly to and our integrate, sales distribution this focus faster on products on on integration. profitable wholesalers, with accelerate office sales allowing

softening $X.X the end decreased shipment to being segment primarily initiatives. rail gas by in innovative Despite temporary which improvements team to shipment and this remains markets. a industrial oil revenue end but quarter, the efficiency continues we quarter, markets driven make by quarter, in Our growth, to during passenger recover operational a delay and Reliability full temporary and Specialized The the down third in partially quality. of the pricing drilling offset million in was outlook new we saw introduce Strong and products. good, fiscal the mining of SRS team continues showed bit at The in Solutions the year. delay expect end

of of conversion as in as to our from Revenue due Engineered into Solutions in up the well benefiting Building increase initiatives. the with segment was pricing our bookings revenue, backlog, XX% positive record an quarter

of this railings backlog consecutive aluminum the continuing reached most drive segment's business For an high all-time quarter, the our growth. to eighth with

years to mix from multifamily backlog Project to or which record in to jobs, housing strong market. see into continue We skew more take the turn larger toward Canadian continues and revenue. our growth may X

Our booking EBS And with of ensure our likelihood greatest highest quality projects sales the on bidding the focus I'm of continue developers multifamily estimation and the of closing. and to team. performance to institutional proud teams and the

our vigor of replacement business James, used team in includes markets of portfolio, and our the markets to the sell maintenance, we Before of homeowners, moment and products our through our our assets. sector. delivering either end repair and some the a provide contract utility I and businesses of turn declining. reliability on the call to necessities mission-critical during diversification the period serve when The end lifespan that performance the of I'd The products are repeatable like and even are product applications reliability, and they growth resilience take pricing value consumption to model to over brag both specialized for solutions we the for solutions, nondiscretionary are many a or are initiatives volumes of enhance and of the and often fundamental

strengthening while CSWI portfolio. We opportunities to have outperformed the to market margins, expanding our sheet and reducing headwinds and growth positioned markets arise all across year overcome leverage our long, ratio. that pursue balance serve is we our entire

our call At turn results, time, a this the our and I'll to then conclude remarks. closer will I look James at prepared for over

James Perry

Thank you, and good Joe, everyone. morning,

has representing diluted AC During $XXX Most earnings the Guard on growth the revenue adjusted fiscal year-to-date in of of Operating XXXX. revenue year-to-date this we in EBITDA growth the million, growth adjusted fiscal organically. XX% $X.X drove period, XX% growth X.X%. Cover from million and of delivered over and came The Falcon per leverage come record Guard, share. in of acquisitions nearly

X.X% fiscal increase quarter volumes. This organically million, pricing driven and third of $XXX Our initiatives through consolidated XXXX the growth period. revenue a year the as was prior increased during compared to was unit

margin growth third period. costs. growth and more and period, ocean than increased compared freight to to profit the was domestic revenue in over the prior year unit by representing the $XX in fiscal Consolidated quarter driven pricing lower year actions, prior Gross gross XX% XX%, improved XX.X% profit from volumes million,

an tax earnings assets last our This on figures amount the on Solutions accrual for related reminder, are segment call, is third $X.X and TRUaire indemnification mentioned As fiscal presenting to as consolidated expense. acquisitions to tax and we in as $X.XX the million related share, basis, Falcon. or adjusted the due and the quarter's of results Falcon other position per profitability a uncertain Contractor release

adjusted the EBITDA million quarter third prior increased year for by to or consolidated period. when to $XX $X growth million the compared XX% Our

expansion, EBITDA employee XX% margin partially compared revenue revenue adjusted as in and growth year prior incremental growth. margin by offset quarter, to to driven expenses drive travel to improved and by XX% increased Our gross the

leverage grow We continue as prudently expenses. EBITDA strive manage for to additional and we revenue

to adjusted X%. of compared to or in million third per share per or diluted attributable representing $X.XX fiscal income Net diluted the $XX share million growth $X.XX in period, as $XX quarter was the year CSWI prior

growth and in segment million of Solutions with result our prior continues. of revenue, $XX revenue $XXX markets. the Contractor million while X% or was $XX million compared all growth or end XX% It year quarter came accounted some company's to Our even a adjusted organic, as revenue $X.X as increasing actions the for our pricing period XX% to year increased lower margin and Segment freight or delivered pricing maintain All was was of in resulted revenue quarter. growth and volumes. the million margins prior from total compared increase the year-over-year ability in XX% from unit EBITDA The to leveraging the costs. of consolidated

at Specialized X% primarily due to decreased million, to a segment $XX in end. delay Our Solutions quarter Reliability revenue temporary shipments

in of operating segment of to $X.X EBITDA expect missed quarter. XXXX in and and quarter the revenue period and to leverage We million EBITDA efficiencies. this prior We fully current in recover our able $X.X driving expenses XX% fiscal and margin the million year to the third were respectively, XX%, fiscal compared fourth managing

line bottom as mix team around well world. SRS growth, Our and products as of top the offering our high-value right focused remains to customer base the on

prior Engineered remain a compared trends to the in to increased and Solutions year segment $XX as increase revenue million Bidding period. Our XX% booking Building solid. million, $XX

trailing year December XX% million or margin of for segment. quarter third in third in we consecutive grew ended end At an EBITDA our $X record to quarter, quarters million and In EBITDA the Segment in our margin fact, fiscal the the compared period. $X.X ratio quarter, X.X:X. X about prior was book-to-bill XX% the backlog to with XX% eighth EBITDA this the of

$XX sheet $XX reported flow continuous fiscal to in the last fiscal cash cash cash with to balance of and XXXX year. the our million Transitioning compared of We third quarter third quarter and our million same of $XX operations flow. quarter strengthening record from million ended

For fiscal fiscal quarters in growth company a or the XXXX, record first million prior compared had $XX X the from $XXX current million year-to-date to XX% the period the in year. of flow operations of cash

operations the of ultimately expenditures, strategy a ago. minus enhances as impressive flow $X.XX a shareholder share period period cash fuels quarter million This per in resulted defined year quarter third same $XX $XX year our flow capital allocation million Our in in to capital the as flow, level in XX% cash free from and flow fiscal the fiscal $X.XX ago. compared free grew as to free value. That of compared the to third cash same cash in

strategy, allocation We quarter down the capital As broad million revolver. of ended our fiscal our quarter, the we million during outstanding outstanding paid on Joe million part $XXX debt. mentioned, as of our $XX $XXX third with

quarter at that time Our was EBITDA of bank improvement end an in growth of our end covenant million strong the fiscal to X.XXx, from $XXX ratio revolver our X.Xx XXXX at the due paydown and frame. leverage

at revolver creating pricing fiscal since reminder, savings. second a company interest was been XXXX As reducing coverage of spread leverage the quarter, tier bank has quarter, reporting our as our the rate and first the our the ratio lowest interest XXXX end our X.XXx expense fiscal of

borrowings a We interest of once everyone XXXX, into rate in strong entered under we the our financial an tough remind hedge more, in continue To for of to $XXX revolver. liquidity February maintain million first environment.

the and quarter third expense. $X.X the hedge quarters approximately rate interest the interest $XXX,XXX fiscal and respectively, the us X in million, year, first saved of During

effect Our of driven quarter adjusted the XXXX XX.X% XX.X% deduction rate and tax effective U.S. fiscal basis GAAP the our adjusted. tax and on was on for was credits international third seasonality fiscal by and fiscal tax the revenue return effective as for The the of the quarter. finalization higher-than-normal federal third rate XX.X% a tax of

for We and be adjusted expect fiscal to XX% our tax XXXX. between effective rate XX%

we with As delivering operating continued of rest growth year leverage. look out full record meaningful anticipate revenue fiscal XXXX, we to the

EBITDA adjusted I'll the now expect to call year well With for record that, remarks. back with also turn full as We adjusted closing flow. close as EPS, and the record to cash Joe fiscal current a

Joseph Armes

we highlighted organic growth, XXXX, posting Thank James. on of our flow. commitments margins board, results to by To the quarter the expanded deliver and you, summarize, during revenue fiscal robust cash by third record across continued

end in uncertainty all year still markets been key has markets to there end we versus While the long, expect serve. certain we outperform

focus relationships on our delivering will and leveraging through earnings growth We optimization. strong expense distributor

We will cash capital continue drive deliver to in and flow demonstrate sustainable discipline, conversion shareholder growth value.

people. I our is on our matters, management asset, which is succeed safety focus like to to we that important will one would continue how metric most Because CSWI our important to extremely share incident total the our compared XXXX. is calendar final for the rate. The X.X year entire calendar to that was year TRIR, enterprise TRIR X.X, significantly XXXX the down for for reportable team

commitment to milestone TRIR members CSWI year. a has want I for by for keeping our safe XX% thank for Our daily continued to over achieving on basis employees. the to success all contributing team of reduced meaningful our our continued at and this everyone calendar the company in our

role Continuing theme Jeff may with have General the segment. of Jeff current succeed Underwood, release the as and of that President Head of separate announced and the Contractor the Strategy Don Manager Executive appointment Sullivan our transition Vice leadership Solutions will the you of work leadership. of people, together. Vice this a an seen to CSWI team Corporate of Solutions. morning new in the of Jeff and his news smooth Senior we in Officer will that to a Don pleased to and ensure Don welcome executive at as with Very I Chief and closely especially continue remain President will role CSWI assume happy Contractor

a XXXX, start strong good expect we're businesses. have fiscal fourth with what we appears to record a approach quarter, to the end a we a our and As solid been for January off of

now revenue our to finalize XXXX. to year. much or be variables still expand to fiscal there the operating are maintain And we and do there's for margins. budget We while done work change we can We throughout recognize that the as show our expect growth are budget, preparing

expect also attractive our acquisition pursue opportunities would that organic supplement to We growth.

very bright. believe that is the future We

fundamental products our of our remain the high-value subcategories the profits. While have growing on temporary market, that products largest focused and year-over-year intact. time, the while we from and we firmly we growth that industry. end remain long-term the business HVAC/R, company to faster our than for do prefer, offer headwinds remains revenue and time In customers in investment delivering focused thesis overall growth are innovative, on the We

a we We homeowner driven our shareholders. these and growing a installed temperatures, long-term higher dynamics backdrop provide continue for experience to a can rising comfort value shortage. for deliver We base, part by believe expectations housing in where

all well interest continued Now support stock for operator, CSWI as always, here X% thanking of want company. our I approximately our we're to our now shareholders take CSWI, employee my our ownership colleagues to ready plan, that, of -- close own collectively through by of as as who questions. and at With their stock in

Operator

Thank you.

We conducting will now be a question-and-answer session.

Tanwanteng Our first CJS from question Securities. comes from Jon

Jonathan Tanwanteng

that missed in number when seen make if nice is especially what Really still the that expect comm that I tell already to in one. delayed was actual up? could And margins, out if job actually on the what was Or two, wondering impact you that ] you've quarter, given and in the the January? us [ and number ship shipment. was you

Joseph Armes

quarter. things shortages. both already through There There Yes, were that. and realized And James mentioned, It of the staffing quarter the at should a and opportunities end be wasn't fully that some shipments, in one January. are we were did shortages flow missed shipment. some It seeing as that just here. series was that the final in of I packaging

the back the the So is of intact. year half completely still full year,

Jonathan Tanwanteng

And multiple it that in SRS Or in segment? was segments? just the was

Joseph Armes

only No, SRS. in

Jonathan Tanwanteng

because that pushouts? excluding of basis, is quantify the January? on effect? Or an that organic strength the Could you're in Is also seeing you shipment that

Joseph Armes

say, would I effect. that excluding

Jonathan Tanwanteng

Red one, to And then improvements see And do that that inflation you year? year. was despite made do at shift the the you you for how you to how guys much shipping much costs much in and shipping I all? today, going if even freight expect this mentioned you all the Sea in up, last wondering, freight

James Perry

have some travel Yes. We the do Vietnam been through will have Suez shipments our shipments Canal from that facility rerouted. Those normally. all

going most all around are. of as they're Africa, tip So south south the shipments

rerouted. We have directions, different have been other shipments that course. those But go of

increase an seen have pricing. You in

so. a years call down was got a $XX,XXX-plus of up to pricing a thousand. of seeing know, dollars $X,XXX We're there, thousand couple rates or to you As it back couple out ago, few

pop. You've seen things

this now. see. temporary rather that been weeks. We expect It's a few only for is We'll

think, one, also It's weeks because little couple here. a fact. lot have a -- no have last rerouted. you cargo been This is all shuts Asia, the stocking as That XX spent up production or on of manufacturers in XX being Things days for holiday number I Tet the is in the safe. But starts, being exception. when our get that time take -- of down Saturday, to we've longer us

that. ahead So of we get kind of

through. So we've shipments had some come

you weeks in So impact here -- of things see where you really couple a that respect. won't that have

lot this not somewhat temporary. the last couple seems in was demand. baked It's to fully into -- media There around and of of a days supply be

however, ship we'll boat. containers do see. that goods takes from over you, something on that several a through we sold. our you I'll dozen flow to as our And of So a months for It put we facility. remind know, cost every week few

seeing the quarter freight So off current lower rates. you're still quarter, this QX, working still last of the QX, of

So that delta the year-over-year we're experiencing in still pickup.

fourth rates year This quarter, last this down. come had time,

minimize. So is to starting that delta

importantly, where we that's we as budget, feel monitoring Joe of our in are, preserve with this we things. to closely, on our it those the first margins. routes things sure efficient partners, want and working we more year. shipping So impact through We're rates, kind you'll good that will see of temporary alternative of part most pop how but elements, go be one about, hard as the but next still talked And

expectations. the So sure stay need we'll be our to from intact do actions we to we take that

Jonathan Tanwanteng

do part you as your What to going normal be that incorporate to follow-up. I increased these like rates? expect guess, you about earlier. Is it pricing increases that the were a on a go does reflect pricing, of through it surcharge? you of retention And year? just the compensation kind also was do Is talking That to

James Perry

through We've go annual dynamic. put normal announced soon. effect increases. those already our a here pretty We and that's Yes, into those seasonal few weeks price ago

to margins, that's of adjust rates? back I higher always, for need certainly normal. that this a the then what is increases we normal appropriate. that. bear good rate, maintain prior And look If a shipping said, see. our our and normally Do at so to job we see. account team things what's hyperinflation would normal with like And to kind becomes ready achieved to We'll market will we permanently pricing that and to We do

are I we will costs already dynamic be -- how be, expectations That's those need around things. shipping it long But we assume looks labor think what into action the if going forward. rates, going baked to to lasts and that the really like will up. impact take kind our of determine

Operator

Our question Sidoti Julio & comes next from Romero Company. from

Julio Romero

volumes Maybe customers what I nice regards ground there. about the once Solutions, to the you're Contractor year calendar hearing of again to start on HVAC/R of what the shape to first what seeing? unit calendar boots will 'XX and up the has how are of wanted from growing month demand, on job kind you in ask remainder told your

James Perry

looks December. heels for close you up the Jon, in lost January that's And we month. SRS wanted as the But really felt we the today. about just mentioned X to on a give to what of QX starting of across give Joe just you the into literally a like. board, not making to earlier We're in to good January. shipments sense books Yes, peak It's little

people just months. mixed record at lot solutions. to for now, HVAC for to last beginning attendance. That was next of continue stocking early the really were We're start up the Right of but the buying will lot when of feel couple us A folks, showed industry A season market A of contractor the of it we we conversations very talk at lot week. you outperform reported the market. good.

OEM than year, some we subcategories, the growth. to There's grow this But mentioned, indexed like are unitary Joe be some down ducted expect We we relatively market. HVAC the that expectations could faster that flat. as said,

we a as that have know grow indexed grow we ductless to you and And ductless and continue as share. shareholders grow, areas market to of more that products, market protection continues surge along. our the more to and of percent to that like go to we're as space tied The continues number --

outperform So products innovate our find introduce continues to market. the commercial to team will and that

talked I So sense it's good good -- that is that's predict entirely getting generally, to great we will never And without a precursor it, the have about of stocking behind feels we've thing certainly nice strength a can of Contractor that that how of couple deep say a in looked too last quarters May we'll season. they a start us. season, that but And are when we the to seen say in the out. that take will we've back a we to report saw year an but We January lot good hard fact into weather, the January the Solutions, a the folks what destocking. tells we January. be I think One anticipate like said us it for up

Julio Romero

That's efforts talked HVAC color about outperform to And you really on market there. helpful the the side. your

efforts runway maybe previously you how speak have nationwide. of to them and just that to much related your Some to lines increase more Can with acquired product sales you of that's some that? taking

James Perry

of introduce and when the going them highest availability to the to of highest that be competitor, makes you because sure for great still us that we TRUaire that to pricing we're they're level service, that to still a product It's really over product X now. I there's back introducing we We question. go even want runway. years inventory, going customer a ago to and new a them. We're think displace -- sense give the customers some

TRUaire still Shoemaker ago, and from from we're customers X years converting X and So respectively.

recent of organic than one is old. Falcon now Falcon. a you, is give year though, I'll because example One That's a more

did to got part, it's inventory in and selling were a limited, nationwide. more most immediately That they a that innovating the that of model but a have introduced our great hundred call we and literally product the a So out That distributors. product, great because and but for that organic. example was catalog undermarketed, was a mile slow was introduction. we somewhat move, It of of product the our over. shipping of team We couple moved job now under-commercialized the ownership Coast-centric the West

in Now warehouses. all of it's our

customers the aware product. of are Now more the

So our ability of have our is the Falcon to the package week, to the show heater full water full that and things in a connectors part at water and own speak, whole last heater attached now now product. prominent. so kind of around of the around a to heater, water We a fact, the had booth Falcon's

So it takes time.

ago, So is about for XX runway made well still for as there those acquisitions certainly TRUaire as runway we Shoemaker. and months

yes, appreciate you I recognizing that. So

don't X it get It or continued get opportunity that a quarter X, for long all cycle X. don't of all day introduction you and year is You growth.

Julio Romero

background regarding And what Can what question Very about morning of same talk the maybe you other the about you appointments. And and had release to press he about I Don a brings this helpful the strategy officer of there. role. and little the brings Jeff's role GM Contractor then he Solutions? ask just to wanted bit to

Joseph Armes

been, about Jeff. when marketing. now, of the Joe. for our I'll in -- to done large years the really start increase start and size attributable of And go-to-market scale -- professionalization the Solutions Jeff's in sales talk I we This initiatives, been there. here those initiatives for has and mean part, work growth of business and great Contractor and been segment, strategy We'll Yes. that's that's the with X in Jeff's been the is charge the that and

came here. comes with -- before. worked where Goodman us So a he Jeff record from real strong from track to Don

really had marketplace. very been integral Jeff that, lot strategy our in a to for well of acquisition a has strong and the background, known industry experience, very, that just business. been the Before Bain at And

a team from known the there, you'd to and perfect here, seamless seamless internally, of and a by so both of big Don, that transition internal, have well. our Don a expect well somebody April by really takes been completely of on our transition -- it success customers a a them lot It had just way kind just And there of like have to being part who's Jeff to as transition. X.

the been a we've senior for success. operating tremendous record track had of here has that a exec and around most while has Don just

integrate and has done We that. these have to leaned them he on acquisitions job a with to make and phenomenal him successful,

kind the that really, of segments. expanding lot really, for for of accretive scale across an I opportunity here meaningful him and having the that be think spend to acquisition integrate work time to opportunity next just So acquisition will looking to high-profile another But hopefully going a Don's shareholders. for really that our

Operator

This like floor question-and-answer to session. comments. back closing concludes Armes Joseph turn the I our for would to over

Joseph Armes

in for us QX Great. May. forward for joining Thank again you your you, We everyone, call. this appreciate interest look and to to speaking

So, thank you.

Operator

today's teleconference. This concludes

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

CSW Industrials (CSWI) 1 Feb 242024 Q3 Earnings call transcript