Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates is challenging due to inherent risks and volatility [1] Group 1: Company Overview - CSW Industrials (CSWI) is highlighted as a recommended growth stock with a favorable Growth Score and a top Zacks Rank [2] - The company has a historical EPS growth rate of 25.2% and is projected to achieve an EPS growth of 22.5% this year, significantly surpassing the industry average of 11.9% [5] Group 2: Financial Metrics - CSW Industrials exhibits a year-over-year cash flow growth of 11.2%, outperforming the industry average of -1.7% [6] - The company's annualized cash flow growth rate over the past 3-5 years stands at 20.9%, compared to the industry average of 2.4% [7] Group 3: Earnings Estimates - The current-year earnings estimates for CSW Industrials have been revised upward, with the Zacks Consensus Estimate increasing by 4.5% over the past month [9] - CSW Industrials holds a Zacks Rank of 2 and a Growth Score of B, indicating its potential as a solid choice for growth investors [11]

Core Viewpoint - CSW Industrials (CSWI) is experiencing significant selling pressure, with a 10.5% decline over the past four weeks, but is now positioned for a potential trend reversal as it enters oversold territory, supported by analysts predicting better earnings than previously estimated [1] Group 1: Technical Indicators - The Relative Strength Index (RSI) is utilized to identify oversold stocks, with a reading below 30 indicating oversold conditions [2] - CSWI's current RSI reading is 26.89, suggesting that heavy selling may be exhausting, indicating a potential bounce back towards equilibrium in supply and demand [5] Group 2: Fundamental Analysis - There is strong consensus among sell-side analysts to raise earnings estimates for CSWI, with a 4.5% increase in the consensus EPS estimate over the last 30 days, typically leading to price appreciation [6] - CSWI holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further indicating a potential turnaround [7]

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]

Investor Presentation January 2025 Fiscal 2025 Third Quarter Results This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to, among other things, the business, financial condition and results of operations of CSW Industrials, Inc. ("CSWI" or the "Company"). Any statements preceded or followed by or that include the words "believe," "expect," "intend," "plan," "should" or words, phrases or similar expressions or the negative ...

Financial Data and Key Metrics Changes - The company reported record fiscal Q3 revenue of $194 million, an increase of $19 million or 11% compared to the prior year [4][8] - Adjusted EBITDA for the quarter reached $42 million, reflecting a 14% growth year-over-year, with an adjusted EBITDA margin of 21.7%, up 70 basis points from the previous year [4][9] - Adjusted net income was $25 million, with adjusted earnings per diluted share of $1.48, representing a 49% increase from $17 million or $1.07 in the prior year [9][15] Business Segment Data and Key Metrics Changes - The Contractor Solutions segment generated $132 million in revenue, accounting for 67% of consolidated revenue, with total growth of 14.5% year-over-year [10] - The Specialized Reliability segment saw a 3% increase in revenue to $34.6 million, with EBITDA growing 26% to $6.6 million and an EBITDA margin improvement of 360 basis points to 19.1% [11][12] - The Engineered Building Solutions segment's revenue increased by 3% to $28.8 million, with a stable book-to-bill ratio of 1:1 [12] Market Data and Key Metrics Changes - The HVACR, electrical, and plumbing end markets reported growth, while the architecturally specified building products market experienced a slight decline [10] - The company noted that existing home sales and new home sales have been down, but housing permit numbers have recently increased [58] Company Strategy and Development Direction - The company continues to focus on sustainable growth and is actively pursuing accretive acquisitions to enhance its product offerings and market share [5][17] - The acquisition of Waterworks is expected to expand the company's distribution network and product offerings in eco-friendly drain management solutions [5][18] Management's Comments on Operating Environment and Future Outlook - Management expressed a favorable outlook for the macro environment, despite challenges such as higher interest rates and geopolitical uncertainties [58][62] - The company anticipates continued organic growth in the mid to high single digits, supported by recent acquisitions and market share gains [32][46] Other Important Information - The company ended fiscal Q3 with $214 million in cash and reported cash flow from operations of $12 million, a decrease from $47 million in the same quarter last year due to a tax payment deferral [13][14] - Inventory levels increased strategically to mitigate risks from potential supply chain disruptions [14][30] Q&A Session Summary Question: Impact of freight on margins and gross profit - Management acknowledged freight as a significant headwind, with a 4 to 6 month lag affecting costs, but expects pricing adjustments to help offset these increases [21][24] Question: Organic growth components - Organic growth was reported at 1.8%, with management expecting mid to high single-digit growth moving forward, driven by volume and pricing [32][36] Question: Acquisition pipeline and opportunities - Management indicated optimism regarding the acquisition pipeline, noting both small and larger acquisition opportunities are being evaluated [37][38] Question: Overall macro environment and its impact - Management remains favorably inclined towards the macro environment, expecting normal growth despite challenges, and highlighted the importance of acquisitions in driving growth [58][62]

Group 1 - CSW Industrials reported quarterly earnings of $1.48 per share, exceeding the Zacks Consensus Estimate of $1.29 per share, and up from $1.07 per share a year ago, representing an earnings surprise of 14.73% [1] - The company achieved revenues of $193.65 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 3.01%, and an increase from $174.97 million year-over-year [2] - CSW Industrials has consistently surpassed consensus EPS estimates over the last four quarters [2] Group 2 - The stock has underperformed the market, losing about 2.1% since the beginning of the year compared to the S&P 500's gain of 2.7% [3] - The current consensus EPS estimate for the upcoming quarter is $2.23 on revenues of $228 million, and for the current fiscal year, it is $8.22 on revenues of $870 million [7] - The Zacks Industry Rank for Chemical - Specialty is currently in the bottom 14% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Revenue Growth - Total revenue for fiscal Q3 2025 reached $193.6 million, a 10.7% increase from the prior year, with inorganic growth contributing 8.7% and organic growth 1.9%[4]. - Year-to-date revenue for fiscal 2025 was $647.8 million, representing an 11.3% growth over the prior year, with organic growth contributing 5.5% and inorganic growth 5.9%[19]. - Revenue for the three months ended December 31, 2024, was $193,649,000, compared to $174,967,000 in 2023, representing an increase of 10.6%[64]. - Revenue for the nine months ended December 31, 2024, was $647,754,000, an increase from $581,980,000 for the same period in 2023, representing a growth of 11.3%[67]. - Revenue from the Specialized Contractor Solutions segment for the nine months ended December 31, 2024, was $451,403,000, up from $395,268,000 in 2023, representing a growth of 14.2%[67]. Profitability - Net income attributable to CSWI was $26.9 million, a 48.9% increase compared to $16.7 million in the prior year, with adjusted earnings per diluted share rising to $1.48, up 38.2% from $1.07[4][11]. - Adjusted EBITDA for fiscal Q3 2025 grew 14.2% to $42.0 million, with an adjusted EBITDA margin expansion of 70 basis points to 21.7%[12]. - Segment operating income for Contractor Solutions was $122.9 million, compared to $104.4 million in the prior year, reflecting increased unit volumes and favorable product mix[30]. - Operating income for the nine months ended December 31, 2024, was $136,204,000, up from $114,780,000 in 2023, showing an increase of 18.6%[67]. - Adjusted EBITDA for the nine months ended December 31, 2024, reached $168,102,000, a 16.6% increase from $144,205,000 in 2023[60]. Segment Performance - The Contractor Solutions segment revenue increased 14.5% to $132.2 million, driven primarily by recent acquisitions, with segment operating income improving to $26.8 million[16]. - Contractor Solutions segment revenue reached $451.4 million, a $56.1 million or 14.2% increase year-over-year, driven by $34.1 million from acquisitions and $22.1 million from organic growth[30]. - Specialized Reliability Solutions segment revenue grew to $109.9 million, a $1.9 million or 1.7% increase, with operating income improving by 17.2% to $18.2 million[32]. - Engineered Building Solutions segment revenue increased by $7.7 million or 9.1% to $92.4 million, primarily due to backlog conversion and market expansion[33]. - Adjusted EBITDA for Contractor Solutions was $149.4 million, or 33.1% of revenue, compared to $126.4 million, or 32.0% of revenue in the prior year[31]. Cash Flow and Investments - Net cash provided by operating activities for the fiscal year-to-date period was $141.1 million, a slight decrease of 0.6% compared to the prior year[28]. - The company reported a net cash used in investing activities of $98,573,000 for the nine months ended December 31, 2024, compared to $15,130,000 in 2023[52]. - Free cash flow for the nine months ended December 31, 2024, was $129,334,000, slightly down from $130,246,000 in 2023, indicating a decrease of 0.7%[69]. - The free cash flow as a percentage of adjusted EBITDA for the nine months ended December 31, 2024, was 76.9%, down from 90.3% in 2023, indicating a decline of 13.4 percentage points[69]. - The Company invested $84.5 million in acquisitions and $11.7 million in organic capital expenditures during the fiscal year-to-date period[4]. Tax and Equity - The effective tax rate for fiscal Q3 2025 was 13.8%, significantly lower than the prior year period's 43.2%[15]. - The adjusted effective tax rate for the nine months ended December 31, 2024, was 25.8%, compared to 27.1% in 2023[58]. - Total assets increased to $1.35 billion as of December 31, 2024, from $1.04 billion in the prior year[48]. - Total equity rose to $1.04 billion as of December 31, 2024, compared to $615.7 million in the prior year[48].

Core Insights - CSW Industrials, Inc. reported record results for the fiscal 2025 third quarter, driven by strategic acquisitions and organic growth [1][3]. Fiscal 2025 Third Quarter Highlights - Revenue for the fiscal third quarter was $193.6 million, a 10.7% increase from the prior year, with $15.3 million (8.7%) from inorganic growth and $3.4 million (1.9%) from organic growth [4][7]. - Gross profit increased to $80.1 million, an 8.3% growth, while gross margin contracted to 41.4% due to increased freight expenses [5]. - Operating income was $29.6 million, with a margin of 15.3%, slightly down from 15.8% in the prior year [7][8]. - Net income attributable to CSWI reached $26.9 million, a 48.9% increase compared to $16.7 million in the prior year [7][11]. - Adjusted EBITDA grew 14.2% to $42.0 million, with a margin expansion to 21.7% [12]. Fiscal 2025 Year-to-Date Highlights - Year-to-date revenue was $647.8 million, an 11.3% increase, with $34.1 million (5.9%) from inorganic growth and $31.7 million (5.5%) from organic growth [20]. - Gross profit for the year-to-date period was $291.4 million, a 13.3% increase, with a gross margin of 45.0% [21]. - Operating income improved to $136.2 million, with an operating margin of 21.0% [23]. - Net income attributable to CSWI for the year-to-date period was $101.6 million, a 28.6% increase from $77.4 million [26]. Segment Results - Contractor Solutions segment revenue was $132.2 million, a 14.5% increase, primarily from recent acquisitions [16]. - Specialized Reliability Solutions segment revenue grew to $34.6 million, a 2.5% increase, with operating income improving to $5.2 million [17]. - Engineered Building Solutions segment revenue was $28.8 million, a 3.4% increase, with operating income slightly improving to $3.6 million [19]. Cash Flow and Shareholder Returns - The company invested $84.5 million in acquisitions and returned $24.3 million to shareholders through dividends and share repurchases [7][28]. - Cash flows from operations for the year-to-date period were $141.1 million, slightly down from $141.9 million in the prior year [27]. Tax and Interest - The effective tax rate for the fiscal third quarter was 13.8%, down from 43.2% in the prior year [15]. - Interest income was $2.0 million, compared to interest expense of $2.8 million in the prior year, due to no outstanding debt during the quarter [9].

Revenue Growth - Net revenues for the three months ended December 31, 2024 increased by $18.7 million, or 10.7%, compared to the same period in 2023, primarily due to acquisitions[109]. - Net revenues for the nine months ended December 31, 2024 increased by $65.8 million, or 11.3%, with $34.1 million attributed to acquisitions[110]. - For the three months ended December 31, 2024, the company reported net revenues of $132.2 million, an increase of $16.7 million or 14.5% compared to the same period in 2023[130]. - The Contractor Solutions segment reported net revenues of $451.4 million for the nine months ended December 31, 2024, an increase of $56.1 million or 14.2% compared to the same period in 2023[132]. - The Engineered Building Solutions segment achieved a 9.1% increase in net revenues for the nine months ended December 31, 2024, totaling $92.4 million[143]. Profitability - Gross profit for the three months ended December 31, 2024 increased by $6.1 million, or 8.3%, while the gross profit margin decreased to 41.4% from 42.3%[111]. - Gross profit for the nine months ended December 31, 2024 increased by $34.3 million, or 13.3%, with the gross profit margin improving to 45.0% from 44.2%[113]. - Operating income for the three months ended December 31, 2024 increased by $2.0 million, or 7.3%, with an operating margin of 15.3%[116]. - Operating income for the nine months ended December 31, 2024 increased by $21.4 million, or 18.7%, with an operating margin of 21.0%[117]. - The Specialized Reliability Solutions segment's operating income for the three months ended December 31, 2024 increased by 40.1% to $5.2 million compared to the same period in 2023[138]. Cash Flow and Capital Management - Cash provided by operating activities for the nine months ended December 31, 2024 was $141.1 million, slightly down from $141.9 million in the same period of 2023[148]. - The company’s cash balance at December 31, 2024 was $213.8 million, significantly up from $22.2 million at March 31, 2024[147]. - Capital expenditures during the nine months ended December 31, 2024, were $11.7 million, focused on capacity expansion and new product introductions[150]. - Cash flows provided by financing activities during the nine months ended December 31, 2024, were $149.9 million, compared to $(119.5) million in 2023[151]. - Net repayments on the Revolving Credit Facility were $166.0 million during the nine months ended December 31, 2024[156]. Tax and Interest - The effective tax rate for the three months ended December 31, 2024 was 13.8%, with a provision for income taxes of $4.3 million on earnings of $31.3 million[121]. - The effective tax rate for the three months ended December 31, 2023 was 43.2%, while for the nine months ended December 31, 2023, it was 28.4%[125]. - The company expects $6.2 million of reserves for unrecognized tax positions (UTPs) to either be settled or expire within the next 12 months[126]. - Net interest income for the three months ended December 31, 2024 improved by $4.7 million compared to the same period in 2023, resulting in net interest income of $2.0 million[118]. Acquisitions - The company remains focused on identifying additional acquisition opportunities in core end markets to drive organic and inorganic growth[104]. - Acquired PF WaterWorks for an estimated purchase price of $43.2 million, including $40.0 million in cash consideration[150]. - Acquired PSP for an estimated purchase price of $47.1 million, including $32.5 million in cash consideration at closing[150]. Shareholder Returns - The capital allocation strategy prioritizes investments in organic growth, strategic acquisitions, and returning cash to shareholders through share repurchase and dividend programs[106]. - Share repurchases amounted to $13.7 million during the nine months ended December 31, 2024, compared to $5.8 million in 2023[156]. - Received proceeds of $347.4 million from a follow-on equity offering in September 2024[156]. Working Capital - Working capital used cash for the nine months ended December 31, 2024, due to higher inventories of $42.5 million and higher prepaid expenses of $17.2 million[150]. Foreign Currency Impact - Foreign currency transaction net gain (loss) was $0.1 million for the nine months ended December 31, 2024[163]. - A 10% change in foreign currency exchange rates would have impacted net earnings by approximately 3%[164].

Core Points - CSW Industrials, Inc. will release its earnings results for the fiscal third quarter ended December 31, 2024 on January 30, 2025, before market opens [1] - A conference call to discuss the results will be held on the same day at 10:00 am Eastern Time [1] - The company operates in three segments: Contractor Solutions, Specialized Reliability Solutions, and Engineered Building Solutions [4] Earnings Call Details - Participants can access the call at 1-877-407-0784, with international callers using 1-201-689-8560 [2] - A live webcast will be available at the company's website [2] - A telephone replay will be available until February 13, 2025, with access codes provided for participants [3] Company Overview - CSW Industrials is a diversified industrial growth company providing niche, value-added products known for performance and reliability [4] - The primary end markets served include HVAC/R, plumbing, electrical, general industrial, architecturally-specified building products, energy, mining, and rail transportation [4]