CSWI - Earnings call transcript Q3 2025

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Operator

Greetings, and welcome to the CSW Industrials Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Alexa Huerta. Please go ahead.

Alexa Huerta

Thank you, Stacy. Good morning, everyone, and welcome to the CSW Industrials Fiscal 2025 Third Quarter Earnings Call.

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

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

Joseph Armes

$X.XX diluted of third as morning, EBITDA we share Thank delivered earnings year. This million. that third results reported team adjusted of earnings fiscal and our once of revenue, of to $XXX has this for of you, quarter quarter pleased $XX adjusted fiscal per and announce again, million, good third morning, everyone. adjusted as adjusted share well per Alexa, fiscal diluted for net EBITDA revenue record million I'm quarter $XX the income adjusted and

X the and each quarter. I'm each segment basis top XX expanded that to of fiscal during quarter. business details the performance proud our quarter. the impressive the will profitability segments third note to growth James provide delivered on margin in during XX.X% line of EBITDA adjusted further Our points

our strategy. capital We execute have allocation continued on to

acquisition drain follow-on be the current These historical eco-friendly offering expanding the During retail innovative, the with to market will PF management proceeds we offering our of to synergistic strategic deployed our product Contractor the to products of the Through Solutions in new solutions. this through path third our million channel. acquisition, PF we from equity wholesale distribution WaterWorks the quarter, expanded network fiscal added WaterWorks. fund $XX segment,

and expect opportunities, a remain shareholder enhance demonstrated has active an will value. focusing XXXX opportunities track year We and calendar evaluating value. CSWI from when respecting standpoint returns risk-adjusted to acquisition with innovative M&A growth synergistic, CSWI long and capital be record delivering on and disciplined diligent will attractive investment that shareholder of

allocation we sheet strong together the driving our aligning Our capital By of with for are and capital balance cornerstone labor, results. discipline success impressive has been CSWI.

I leveraging Our James profitability. At our remarks. on to following results. turn our time, commitment conclude prepared his And comments, customer network and a for growth distribution satisfaction will focus our and this over will long-term and conclude our for prepared with us -- to return look and call the closer positions our our I at

James Perry

Thank everyone. Joe, you, morning, good and

to quarter record gross when growth prior $XXX organic, from year our fiscal X% the over representing a fiscal during the acquisitions came months. million Free, the $X primarily profit third PF was of that mentioned, million the million of additional period. was and growth to increase million, completed the XX% Joe in million, due revenue $XX was a revenue WaterWorks we last Dust As XX quarter volumes. Consolidated the the The Products consolidated year $XX $XX increased third of compared growth during PSP or XXXX period. prior

in expenses. the due prior Our compared to gross points profit XX.X% margin freight period increased declined by to basis XX.X% XX year to

prior year XX% the a third was growth $XX fiscal to to million, Our million quarter $X third record period. consolidated the increased which adjusted for quarter EBITDA when by compared

revolver acquisition a income margin performance adjusted balance has adjustments quarter, year the delivering EBITDA, and due now CSWI to in fiscal EPS tax share, $X.XX $X.XX third demonstrating Contractor leverage. Adjusted of XX by related commitment record compared Solutions tax second was prior our become points and net the a of due income earnings the of million, record million quarter. The quarter a improved as to to in per of or repayment we diluted Both included WaterWorks. year Our lower to operating segment full representing expense, positions of $XX indemnification interest these in per paid interest quarter compared EBITDA the to for net growth are prior in our and to fee X results. adjusted to PF $XX the quarter aforementioned adjusted attributable XX.X% basis acquisitions share the diluted release period, to of of which broker income in and in uncertain asset XX%, XX% to items: the items quarter with the the the earnings are our during

During and million prior consolidated was the of recent compared $XX.X organic the of to acquisitions, our growth. year Of in quarter. or Contractor the X.X% with the million XX.X% or came $X.X from revenue delivered for our our total million third XX.X% Solutions segment, XX% or remaining the million volume while quarter, accounted $XX.X quarter, revenue $XXX when growth revenue growth

EBITDA markets, was came XX.X% the Contractor segment previously to within reported the increased and freight of acquisition plumbing integration $XX to and expenses million gross slight slightly lower EBITDA decline revenue Solutions. Adjusted or growth building due XX.X% offset margins or in revenue mentioned in year costs. prior in million decline compared from the specified the architecturally quarter, adjusted end market The $XX.X was HVAC/R, for of a electrical period. by products margin the in During

year margins our is lower reminder, the and which for As line our point leverage the fixed seasonally to this a our fiscal segment, costs. of impacts on third top due quarter operating low

in rail as prior in compared the an period. The third to transportation mining year XX% efficiencies and by markets to prior unit period. the the segment increase increased expenses. from driven $XX.X segment points increase in Revenues the operating And end energy end was revenue the represented in current the margin increased period, volumes to and quarter, of but XXX declined $X.X and $X.X basis of the million Our general over the an Specialized revenue X% markets. primarily primarily improved prudent operational The Reliability industrial XX.X% million increased period. prior million EBITDA by by the of in management in by driven EBITDA

revenue. increased trends the remained trailing to year conversion ratio prior the quarter for fiscal Building revenue with and solid Engineered compared to Our our $XX.X million Solutions period, Bidding in third booking a quarters during at $XX.X X:X. the by increase backlog to as segment X% X million, book-to-bill driven

favorable $X.X a in compared on EBITDA prior with XX.X% bookings see to X% million, million quality We in XX.X% a project estimations. Segment period. and at mix and backlog margin, to continue our or year modestly the contractors to EBITDA similar the margin and focus $X margin grew EBITDA

the In the storms third a first mix the the the our relief in from XX% to offset term. the $XX for potential strong fluctuate severe potential of risk Texas project fiscal seasonality this increased calendar that half and port last third cash of of year operations balance EBITDA continue cash disruptive the decreased to compared XXXX But from to cash fiscal million will construction our fiscal compared deferral that quarter-to-quarter Cash anticipated first mentioned intermediate target and the fiscal keep flooding occur margin order strategically XXXX $XX in third quarter, also We to the last in million of and on strike to flow in from due in tax temporary in market. Transitioning million segment and operations a from quarter year. third the tax same due a to our mind quarter reported $XX calendar flow XXXX. Inventory XXXX ended XXXX. in to million of to We events payment the we and with sheet from year to early quarter quarter prior the federal in margin could earnings flow. quarter period. call $XXX of other the under related

$X.XX free compared third million the Our period minus in period the a same flow same in resulted flow, capital per fiscal the in cash expenditures, as items cash to year million to ago. operations the free fiscal flow of as third I share in ago, the $XX.X mentioned. quarter This cash in year from defined to due quarter a was as $X.XX compared $X.X previously

September, our under our borrowings discussed we in our revolver from the flows. the offering repaid and follow-on As cash utilizing equity strong received all cash quarter, of last

since income equity of equity As generate net a our able money proceeds market to interest accounts the expense eliminate to company interest the offering. invest and the most result, and offering from was the

investment of third Joe a During $XX WaterWorks, PF made the million acquisition fiscal quarter, capital the as we mentioned. for

was and indemnification and a on tax and rate well a broker Falcon effective GAAP disclosed to uncertain I adjusted fiscal tax Our the for as third mentioned. as quarter XX.X% position XX.X% acquisition of tax basis fee the for assets TRUaire release exclude previously accruals when the

As for still full the fiscal will a than reminder, that, seasonality. quarter remarks. believe turn along third Joe other our tax with we and strong back rate now EPS, the can in continued closing year due flow. With EBITDA in deliver to We revenue, call I'll growth to cash quarters fluctuate more his

Joseph Armes

record summarize, earnings quarterly the adjusted quarter for third during To Thank share posted results you, revenue, adjusted adjusted fiscal per and we of and XXXX, net income. EBITDA James.

organic inorganic XX% included recent both revenue growth. strong our growth from growth Our volume acquisitions and

final to Looking exceeds we will our opportunities to we markets that quarter delivering we will on continue ahead XXXX, leverage. growth operating drive sustainable to for look of serve fiscal the focus and

accretive take PF enhance companies to in most join our CSWI family that recent continue of employees would to pursue WaterWorks will November growth. I products of through like to of our moment acquisition group innovative XXXX. We acquisitions to and of the the and a welcome identify

company through our management from plumbing service, at industry-leading grown CSWI team of awarded mentioned the This is for our recognizing products Conference. WaterWorks unique of customers. And and metrics. which a Supplier their allow are nominations performance lastly, provides I and has teams builders. easier the distributor PF the earlier, umbrella of to to to the the for ownership as close my XXXX thanking the of all our PF being team here award their solutions as I well to will dependable This Distributor self-sufficiency is for ethos. Bringing by is homeowners, number dedicated employee channel. shareholders these of investment now and in Voice congratulate as both a I group, promote to the that award interest distribution CSWI, drain property of stock product HVAC who WaterWorks remarks our new expand also award trade Year we questions. as performance are and products work CSWI and collectively want of totally under team RectorSeal our and for X% Distributor testament CSWI important innovation the would these the life single us HARDI, and hard recent managers commitment through significantly at ready on with their the prepared contractors, well the the make consistent in our own Industrials. Stacy, like based plan the pro-trade As to

Operator

first Instructions] [Operator Securities. Jon CJS comes Tanwanteng Your from question with

Jonathan Tanwanteng

to And mechanisms? address on was I of where see gross are in And year-over-year? exact that the on that first other trending expecting or What terms could guess? you and headwind? you the the pricing was wondering I then your you freight impact any margins impact, point do of if of offset the profit

James Perry

a of thanks lot sold. Jon, a ocean crosses and as Yes, a is X-month always. as and of our from a to was container This lag Asia for leaves the well there's the on through freight its cost way X- you on shareholders Yes, the headwind freight ocean James. works know, know, being certainly time goods

down was it saw quarter spring significant had degree, volatile. the of we freight in can headwind quarter. we back the remain kind in then but those have this It and started rates peak to obviously summer. Rates since the So saw come some to

there the in that we the We mentioned quarter, a from had pushed third There the of the you basis of perspective, alignment margin, at an XXX had an expense amount through expense. accrued alignment. was to points we if way would about QX, shift look all that of it didn't in up things quarter freight bit freight from that as true shifted. Q, a was also, And have get QX second in we

X. remind So kind you price that went gap. I'll quarter, the have put earlier of than effect that January that mentioned we explains into forth we normal. last It increase our

job better that as those that would to do fourth is covering now we place. saw our expect quarter in So we a freight fiscal expense increases pricing

Jonathan Tanwanteng

Got it.

the one would coming that it So down offset be have to seems rates freight peaked? as to on pricing to on expect side and you other

James Perry

down. spike lag, a That's the looks strike Red positive. come resolved. right. conflict Rates were open come came rates at weeks, to starting rates a ahead Yes, seen started That few the like Rates given have certainly Again, port of started Sea the deadline. the has ease avoidance we've was down. Also last of to down. the of least East, to Middle current the that's that mid-January been with back up. certainly in

which put on. potential there's ocean can all a seeing at of lot second kind point. place know the are covers is those we're But in all we of of to course, freight So factors, our impact goods but decline that temporary the forecasters pricing first But and -- in cost and quarter freight start a fiscal see sold. somewhat the those rates we this of exogenous down, would our already in we going in see come be of

Jonathan Tanwanteng

Got it.

Okay. And think I potential I heard other ahead of build strikes the inventory you and disruptions. then

be start to is expect and the to that run on down? that maybe passed risk how do to holding long Just you you before

James Perry

in Yes. for up it's February, Jon, have busy really stock the what just season. brought It's we would more probably January, the March,

in you saw, heavy Year, always a bring bit reliance Lunar on we before the obviously, As our given little New Vietnam.

the scare I bring got disrupt always that want our in. that we in little that. a more the to extra saw a year, strike, we this obviously, didn't stock-up But fall, of through we with little obviously So season. that port But

the So ahead of in we brought some port strike.

As mentioned going been looks we it relieved it's to anyway. were earlier, I that's like now, but sell inventory

potential parts when Secondly, of to certain events. I that's with other on disruptive mentioned kind we the world, alluded what tariffs of

ahead obviously new from that. any some given seen on Asia, not comes out wanted get we've of But far, product there, that. we of that's given So action our to

again, amount decent And really so you fiscal to need what But in bought we didn't in in. flow see bring and we affecting what would the That's a was that in bring above beyond quarter. early. cash anything we third

the of because weeks whole least gets not So much lot of comes in at a the Lunar X now we weeks. not have shipped that couple next Year, in New

its way ease we'll through will a it little now inventory So very that normally. bit, and work

of sheet balance are half people from year-over-year the for at just also to a acquisitions look didn't year-over-year, December we'll The inventory acquisitions to growth add December cash alone you If flow remind balance. but accounted the was about sheet from are balance that flows. the going standpoint, inventory your through acquisitions way from

Jonathan Tanwanteng

That's Just organic address also and the pricing thoughts forward of that volume an how it. you from are X.X%? going quarter, organic helpful. component growth what much and a Could wondering growth Got perspective? in your was

James Perry

Yes. John. Sure,

organic high I think growth expect cycle, Year-to-date, single-digit a we continue is to to growth mid- X.X%, organic X%. up over

we will obviously, on growth an organic importantly. and we acquisitions year-to-date, period, made The over So start from we're year. next perspective feeding that zone of look XX-month in more kind organic a

that, key see that about to we vitality. we'll . talk that's So that always

the a offset industry-wide During of building a were HVAC, That's the architecturally little the was and a quarter. in products. quarter, things. there mentioned growth couple our plumbing softer slight bit firestopping We just That by product. in electrical specified to

in that in our a script. So We headwind my quarter. XX-Q of the that mentioned bit was in a and

calendar have that impact. also, of We of as the on pricing we rebates, year, kind end some the offset and true-ups some

quarter-to-quarter, as bit. going accruals, the relatively around So a quarter you things But have normal again, a to was pricing volume amount. true-up move favorable are year-over-year, in offset yes, little we rebates that those but did just up

as would equipment through a of the I new thing talked is XX the new for lot the getting about forward OEMs the certainly could produced last seen you've ready door pull The getting as out on December mention old that be well equipment refrigerants. the

are distributors holding both. of So a lot

the a dollars holding which minor necessarily, distributors headwind capital quarter we're the as a and lot the good look accessories, was inventory bit a quarter. holding wasn't put a the demand expecting we year. there and a fiscal and headwind we're OEM probably of but obviously lot seeing we takes while major parts a it And certainly of on normal So XXXX, headwind enter a just working fourth as of in into

Jonathan Tanwanteng

And helpful. all, did opportunities sheet balance wondering and just after seeing, last What That's was update out cash just I aperture But especially the I your of on scope WaterWorks, there it. then the an you're Got and pipeline. you entering and now? acquisition nice. seems you 'XX? seeing which the you PF on are very know the raised equity that added about

Joseph Armes

Jon, Yes, bolt-on flow. we that equity offering, cash when really said you of as smaller asking. we could recall, do that This did to we Joe. The these -- back do September, that our thanks in acquisitions is for need we the didn't out free

we acquisitions take just point, And but So swing. of also our really us, opportunities spectacular There are at position XXXX be are our there. only to entered not to M&A advantage not of that. maintaining in the what would this size opportunities acquisitions discipline. that need small in pitch we wait we're We opening an coming in disappointed an all market. And at exercise to rigor, pipeline. see right hoped larger to the for for of We it's maintaining a

So position we're what seeing. the optimistic we're very like and We in. we're we like

Operator

is next Goldman Maklari Sachs. Susan The with question

Susan Maklari

My first share question gains. is on

last business. over quarters lot of of a the that seen the several obviously the in You've course

coming year, together? to about think the And the should you next opportunities? how you most do about potentially see As as look out fiscal you even and think where we that start

James Perry

kind of mid- growth we Obviously, digits gains, to single share about. is digits. important thanks growing Market talk low rate, an Susan, the that single industry high of organic part our is

part market pick to part of our key gains gain indoor up putting putting would share strategy. bow a that. We And we're that budget next mini quality, on to, in is of type certain for our splits, competition search protection, obviously, over-indexed from market share things. year, air like also markets to that ability point be fiscal continues together, are we're Our those a the

in So goes all hand of kind that hand.

market also customers because these our have more that to want vendors. fewer bring share us in we of distribution gives As acquisitions opportunity

palette, can so from we be may market a gives that offer they can up to it share truckload, that And full us. them full product opportunity more of gain the whatever a a us get pick truckload, more

don't up we the mid- organic while good specifics, share of are So growth out Jeff his high break chunk team single-digit a clearly gain a and building to looking expectation to market includes toward. that

Susan Maklari

you that Okay. then deal closed mentioned That's PF the And you the quarter. helpful. in

and think there, to them And elaborate within should about you bit do we the be summer seasons? expand As thinking as just a into busier get you can spring about how synergies the starting the on that? channel we

Joseph Armes

for Yes. the is have This the Joe. that asking. interesting innovative, traditionally Thanks really, retail been products really market. It's through sold

opportunity And of side the so will there be in growth really butter. to really, professional which and we in distribution wholesale the is see the business, trade accelerate the the where bread our

so number plumbers those available we making all at professional professional that those products, and lots of least we if of a see through products taking And there. not to the of opportunity opportunity see the of as those trade,

that not have just for did We have. the they distribution that,

James Perry

season. the not busy HVAC product, that course, ramp we're necessarily so up a having not for of it's plumbing seasonal, Susan, mention, I'll thing One a being to

spread through to the So our that ramp year and introduce we'll up that customers.

that plumbing. same the dual HVAC with about with customers we've trade talked and are Some

good of that's on market gain plumbing other products So displace have we're part I take to potentially. real that. to share a again, your And question going think

Operator

Citi. question, Next with Natalia Bak

Natalia Bak

uncertainty. there is on in there still quarter. I you of environment, ask the ISM to U.S. of for currents or lot I that overall a be question first could on if elaborate the to want guess now seems and Congrats higher cross macro increased terms longer geopolitical rates weak out

you the are how your And transition So fiscal XXXX? about as towards you telling distributors what market? the about macro you are year thinking

James Perry

as looks be it James. you favorably as higher Yes, Chairman is Powell. it's that. interest relatively reading inclined. Inflation in the recently Obviously, what we're for Fed kind to check, think rates yesterday still like seems with Thanks are Natalia, saying say. of for I as longer,

doesn't closely, dependent as some And it so quite we're normal The factors. move around growth. of year of expecting HVAC market much but economically watching as the we're a other

down, may have have than more products and the a maintenance. and of used have again, little new at sales times. But permit little housing bit been Existing lately. replace for our some little home but a are up repair home You numbers repair sales been a

So and is have to at on point, replace equipment new there, equipment some take unit. replacement you do the your

ago saw I we past cycle from probably forward think we're X back into a COVID normal X, the years pull now.

interest is continue just could markets. So higher a acquisitions be up bit in the favorable opportunity being see so And there. we're giving a of obviously, up us bit rates we're we rates trends that, But headwind to little to customers. these a our mortgage again, our making, offer with more to being critical

segments, look clearly, for EBS, book-to-bill couple the of other challenged you trailing If continue to at you the we X:X X-quarter our high-quality of but construction in products market backlog. put tells has been commercial the

focused we XX% that have. next margin And so growth budget, well. good really right can that on market feel year's as in hit sure put goal about is we being we together team get we that that as estimation right geographies, projects, right the the we Our

in Solutions, little Reliability plus tends be it. Specialized of then maybe And bit to a a with that relatively GDP

important light market favorable energy down the but energy in some That was again, So the quarter, of we this market, is there's somewhat there. last raise think.

component an and SRS. international domestic within got You've

at So the market look more in global respect. that we

macro but se, opportunity as mentioned the Susan's the the we're So exceed macro good. great over-indexed the being that us to earlier I I growth big sectors give -- within our question, higher the to picture, it's markets environment in, not is expectations. given to per Maybe environment think

Natalia Bak

regarding from how, if IRA, example, rollback heat for business? Got new it. Helpful impacting at like all, color. impact your curious, concerns pumps? on the just And Any administration I'm impacting then the is

James Perry

itself, early. had heard We're IRA there. of what's through. come it's we've much the OEMs out say The certainly think going that of tracking some not on I

that So go they tailwind of into the have clearly going don't it's things much. change a pump I market. think And heat away, don't see that, products yet. going that that to was much We

products have that into market. We traditional go the

So respect. we're rather agnostic in that

like big been the had a or success industry had. we've that's factor seem doesn't in the has it So

So think going away I an don't impact. that of much is

we're take news tariffs. Obviously, more if tariffs, you need pricing some in push of potentially, near that respect, things term would to watch One thing then that's do, like we the to opportunity. we watching that little And those through offset we I'll closely mention or note as obviously. a

a reminder, have out As don't we Mexico. product coming any of

our out no of that product very EBS group. have We within little Canada very, comes

So Mexico have really may affect headwinds don't tariff near-term and some Canada, which us.

that of a goes bit into have little Canada. We product

there's then tariffs, we if cyclical to look what do So a at there. need we'll

mentioned we've the China Contractor Solutions businesses. exposure before, teens our As virtually is nothing other in these and low days within

and not And overall an exposure. Vietnam our on talked Vietnam good much. about has right as So now is is digits been single relations biggest company. as

those So react closely. watching we're as We'll to. need we things

on products, through we to As time. able we have were a tariffs and already pass reminder, last that Chinese

have opportunity good affect watching would do of that and that. lot to in there whole respond more to But think a So sure we will see when we year, at we'll to May things don't that talk to we're I'm carefully, And the course, directly, of end point, the to. but very we're closely. appropriately watching your react fiscal we us and again date, be things

Natalia Bak

results, one the space? HVAC then And prebuy across just final for at resi CSWI refrigerant Helpful. about more it. me. if impacting question Got it Is the What all?

James Perry

that seen mentioned that they up the people just because in our on the QX to equipment equipment, little anymore both the in their both refrigerant very stocking January X. customers was could OEMs prebuy Jon and offer refrigerant I fiscal as produce can't we briefly of have equipment response of the could headwind old old in to there a new so

equipment, So tied and of have capital seen have seen may working capital the may distributors in lot that. have because headwind a parts a in our up we accessories little

January increases The up, So change fiscal that X stock we now itself the into would expect this affect a tailwind people that. we've as quarter first to refrigerant a our which agnostic fourth we is anything all. got price us sell at that as and effect on well, quarter price helpful. in as reminder, little doesn't We're extra and

their people equipment, a be tailwind growth systems positive little a QX back little the to efficiency overall. for well a SEER seen years may up and potential potentially one bit. would new refrigerant better that get with couple offsetting environmentally future The ratings we as to new is new sound upgrade having popped if of as ago repairs have But is replacement have going it, tampered unit we in dramatic. as But to that nothing us look organic headwind on but a more our

Joseph Armes

talking job your On effects. earlier great James operational think Natalia, a is I about did Joe. the this And questions,

think with leverage as for have was powder advantage our may really M&A dry those because who that good our those at. balance Both than standpoint we competitive have, a looking the the the of that longer. look we about the out a have we have, pristine are might strategy for to of the from that regulatory rates think and already at don't around payments much assets enforcement about competitors we're that sheet crux administration, an have better interest think I question. in regulations scheme and some you position M&A for your think there of and I you the we interest of you higher But acquisition zoom new and

Operator

to over would floor I like remarks. to the turn Joe Armes closing for

Joseph Armes

you. soon. us quarter conference again call. much, We to you the Yes. Take for Thank third everyone, to joining look speaking so you for care. forward Thank

Operator

This teleconference. concludes today's

time, You you may this your disconnect and thank lines your for at participation.

CSW Industrials (CSWI) 30 Jan 252025 Q3 Earnings call transcript