CSW Industrials, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Record results for Q4 2025: Revenue $231 million, adjusted EBITDA $60 million, adjusted earnings per diluted share $2.24, adjusted net income $38 million. Full-year 2025: Revenue $878 million, adjusted EBITDA $228 million (25.9% margin), adjusted earnings per diluted share $8.41, adjusted net income $137 million.
• Acquired Aspen Manufacturing for $313.5 million, completed on May 1, 2025.
• Moving to the New York Stock Exchange on June 9, 2025.
• Since spin-off in 2015, revenue CAGR is 14.1% and adjusted EBITDA CAGR is 16.5%.
• Certified as a great place to work for the third year, with profit sharing ESOP contributions for fiscal 2025.

Segment Performance

• Contractor Solutions: Fourth quarter revenue was $166 million, accounting for 71% of consolidated revenue. It saw $24.7 million (17.5%) growth compared to the prior year quarter.
• Specialized Reliability Solutions: Revenue decreased 9% to $38 million, driven by softer market demand and lower unit volumes.
• Engineered Building Solutions: Revenue decreased 4% to $28.7 million, due to timing of project conversions from backlog.

Guidance

• Anticipate full-year growth in revenue, adjusted EBITDA, consolidated EPS, and operating cash flow in fiscal 2026.
• Aspen's 2026 revenue expected to grow in high single to low-double digits off trailing 12-month revenue of $125 million.
• Aspen's EBITDA margin expected to be approximately 24% for full-year 2026, varying by quarter.
• Expect COGS impact from tariffs, with pricing actions to offset, and strategic supply chain moves.
• EPS growth in 2026, but lower percentage growth due to additional shares, interest expense, and intangible amortization.

Risks

• Tariffs: Dynamic and potential impact on COGS, with 10% tariffs still in place, and strategic supply chain adjustments needed.
• Disruptions: Potential disruptions in international manufacturing, particularly with China and Vietnam.

Question and Answer

• Q: Impact of tariffs on COGS and segment assumptions. A: Tariffs are dynamic with little trailing impact, expect ~10% COGS impact in 2026, with Aspen's US-based operations helping.
• Q: M&A pipeline and revolver. A: Revolver renewed and upsized to $700 million, focus on accretive acquisitions.
• Q: Aspen margin accretion. A: Aspen is accretive to consolidated margin near to mid-term, EBITDA accretive day one.
• Q: Tariffs and pricing by segment. A: Pricing action on impacted products, margin impact managed through pricing, tariff costs matched with pricing.
• Q: Inventory and seasonality. A: Normal seasonality, Contractor Solutions had 8% organic growth, with a wait-and-see approach on demand.
• Q: EBS book-to-bill and EBITDA margin. A: Strong book-to-bill, targeting 20% EBITDA margin mid-term, working on cost and pricing.
• Q: SRS margin compression and strategies. A: Volume and mix issues, relocating facility to improve margins, focusing on volume and product introductions.