CSW Industrials(CSWI) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record fiscal third quarter revenue of $194 million, an increase of$ 19 million or 11% compared to the prior year [6][12] - Adjusted EBITDA for the quarter was $42 million, representing a 14% increase year-over-year [13] - Adjusted earnings per diluted share reached$ 1.48, a 49% increase from $1.07 in the prior year [14] Business Segment Performance - The Contractor Solutions segment generated$ 132 million in revenue, accounting for 67% of total revenue, with a total growth of 14.5% year-over-year [15] - The Specialized Reliability segment saw a 3% increase in revenue to $34.6 million, with EBITDA growing 26% to$ 6.6 million [17][18] - The Engineered Building Solutions segment's revenue increased by 3% to $28.8 million, with a stable EBITDA margin of 14.2% [19][21] Market Data and Key Metrics Changes - Growth was reported in HVACR, electrical, and plumbing end markets, while a decline was noted in architecturally specified building products [16] - The company maintained a book-to-bill ratio of 1:1 over the trailing eight quarters, indicating stable demand [20] Company Strategy and Development Direction - The company is focused on sustainable growth and plans to pursue accretive acquisitions to enhance its product offerings and market share [28][57] - The acquisition of PF WaterWorks is expected to expand the company's distribution network and product offerings in the professional trade [29][72] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macro environment, expecting normal growth despite higher interest rates and geopolitical uncertainties [88] - The company anticipates mid-to-high single-digit organic growth over the cycle, supported by recent acquisitions [50][86] Other Important Information - The company ended the quarter with$ 214 million in cash and reported cash flow from operations of $12 million, down from$ 47 million in the same quarter last year [22][23] - The effective tax rate for the quarter was 13.8% on a GAAP basis [25] Q&A Session Summary Question: Impact of freight on margins and gross profit - Management acknowledged freight as a headwind, with a significant impact on margins due to peak freight rates from previous months [34][36] Question: Organic growth components - Organic growth was reported at 1.8%, with management indicating that both volume and pricing contributed to this figure [49][50] Question: Acquisition pipeline and opportunities - Management expressed optimism about the acquisition pipeline, indicating opportunities for both small and larger acquisitions [56][58] Question: Market share gains and opportunities - Management highlighted market share gains as a key part of their organic growth strategy, particularly in over-indexed markets [67][68] Question: Overall macro environment and its impact - Management remains favorably inclined towards the macro environment, expecting normal growth despite challenges [81][88]