CSW Industrials, Inc. Q3 FY2025 earnings call

• Joe Armes announced record revenue, adjusted EBITDA, and earnings per share for the fiscal third quarter. - James Perry detailed segment performances, noting freight as a headwind but expecting fiscal fourth quarter to better cover it due to price increases. - CSW deployed $42 million from equity offering to acquire PF WaterWorks, expanding product offerings. - RectorSeal awarded Voice of the Distributor Award, and CSWI has a 4% employee stock ownership plan ownership.

Contractor Solutions segment had revenue of $132 million, accounting for 67% of consolidated revenue, with adjusted EBITDA of $37.5 million (28.4% of revenue). Specialized Reliability segment revenue increased 3% to $34.6 million, with segment EBITDA of $6.6 million (19.1% margin). Engineered Building Solutions segment revenue was $28.8 million (up 3%), with segment EBITDA of $4.1 million (14.2% margin).

• Expect continued growth in revenue, EBITDA, and EPS. - 2025 to be active for M&A, focusing on synergistic, innovative opportunities. - Fiscal fourth quarter expected to benefit from price increases implemented January 1st to offset freight headwinds.

• Volatility in freight rates with a lagged impact on COGS. - Potential disruptions from port strikes and tariffs. - Geopolitical and regulatory uncertainties affecting operations and margins.

Q: Impact of freight on margins and gross profit, and trending expectations?

A: James Perry said freight was a headwind due to lagged ocean freight rates, with rates starting to come down, and price increases implemented January 1st to offset.

Q: Organic growth components and future outlook?

A: James Perry stated organic growth includes mid-to-high single-digit expectations with market share gain, and ongoing focus on certain over-indexed markets.

Q: Market share gain opportunities and acquisition impact?

A: James Perry mentioned market share gain is part of organic growth, with acquisitions providing more product to distribution customers for market share opportunity.

Q: Macro environment impact and IRA effects?

A: James Perry said macro environment is favorable with normal growth expected, and IRA rollback not a major impact yet.

Q: Refrigerant pre-buy impact?

A: James Perry noted a possible Q3 headwind from refrigerant pre-buy, but price increases and new equipment upgrades provide tailwinds.