CSW Industrials(CSWI) - 2026 Q1 - Quarterly Results

Financial Highlights CSW Industrials reported record Q1 FY2026 revenue, net income, and EBITDA, driven by acquisitions and debt reduction Q1 FY2026 Key Financial Metrics (vs. Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Revenue | $263.6M | $226.2M | +16.6% | | Net Income | $40.9M | $38.6M | +6.0% | | Diluted EPS | $2.43 | $2.47 | -1.9% | | Adjusted EPS | $2.85 | $2.78 | +2.5% | | EBITDA | $68.7M | $65.3M | +5.3% | - Growth was driven by the recent acquisitions of Aspen Manufacturing, PSP Products, and PF WaterWorks[4] - The company paid down $40 million of debt during the quarter, resulting in a net leverage ratio of 0.2x[4] Management Commentary Management credits acquisitions for record results, notes organic volume decline, but anticipates full-year organic growth - Record revenue, net income, EBITDA, and adjusted EPS were driven by the performance of strategic acquisitions: PSP Products, PF WaterWorks, and Aspen Manufacturing[3] - Organic volumes declined in the quarter, primarily due to softer demand linked to weak housing activity[3] - The company anticipates delivering full-year organic growth in revenue and adjusted EBITDA for each segment, despite potential quarterly fluctuations[3] Consolidated Financial Performance Consolidated revenue increased 16.6% to $263.6 million, driven by acquisitions, while gross margin contracted due to mix and inflation Q1 FY2026 Consolidated Income Statement Highlights (vs. Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Revenue | $263.6M | $226.2M | +16.6% | | Inorganic Growth | $43.7M | - | - | | Organic Decline | ($6.2M) | - | - | | Gross Profit | $115.4M | $107.4M | +7.5% | | Gross Margin | 43.8% | 47.5% | -370 bps | | Operating Income | $54.9M | $55.1M | -0.3% | | Operating Margin | 20.8% | 24.3% | -350 bps | | Net Income | $40.9M | $38.6M | +6.0% | - The decrease in gross margin was primarily due to the inclusion of recent acquisitions, unfavorable sales mix, volume leverage, and material cost inflation, including tariffs[6] - Interest expense decreased by $1.5 million to $1.0 million due to reduced average borrowing and interest income earned before the Aspen acquisition[9] - Free cash flow was $57.7 million for the quarter, compared to $59.6 million in the prior year period[12] Segment Performance Segment performance was mixed, with Contractor Solutions growing due to acquisitions, while other segments saw flat revenue or profitability declines from cost pressures Contractor Solutions Contractor Solutions revenue grew 22.6% to $196.7 million from acquisitions, despite a 4.6% organic decline due to soft housing and margin contraction Contractor Solutions Q1 FY2026 Performance (vs. Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Revenue | $196.7M | $160.4M | +22.6% | | Operating Income | $52.8M | $49.9M | +5.8% | | Operating Margin | 26.8% | 31.1% | -430 bps | | EBITDA | $65.0M | $58.3M | +11.6% | | EBITDA Margin | 33.0% | 36.3% | -330 bps | - Organic revenue decline was attributed to soft housing activity, a prior-year inventory stock-up by a customer, higher preseason sales in the previous quarter, and a consumer shift to repair HVAC units instead of replacing them[13] Specialized Reliability Solutions Specialized Reliability Solutions revenue was flat at $36.8 million, but operating income fell 26.7% due to commodity prices and unfavorable sales mix Specialized Reliability Solutions Q1 FY2026 Performance (vs. Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Revenue | $36.8M | $36.8M | 0.0% | | Operating Income | $5.2M | $7.2M | -26.7% | | Operating Margin | 14.2% | 19.4% | -520 bps | | EBITDA | $6.5M | $8.5M | -23.5% | | EBITDA Margin | 17.7% | 23.1% | -540 bps | - Profitability was negatively impacted by an escalation in commodity pricing, one-time expenses for consolidating a manufacturing facility, and an unfavorable sales mix[14] Engineered Building Solutions Engineered Building Solutions revenue grew 3.2% to $31.9 million, but operating income dropped due to cost inflation from tariffs and strategic investments Engineered Building Solutions Q1 FY2026 Performance (vs. Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | Revenue | $31.9M | $30.9M | +3.2% | | Operating Income | $4.0M | $5.7M | -29.8% | | Operating Margin | 12.5% | 18.5% | -600 bps | | EBITDA | $4.4M | $6.2M | -28.7% | | EBITDA Margin | 13.9% | 20.1% | -620 bps | - The decrease in operating income was driven by inflation of project costs due to tariffs and investments in the sales team and R&D for future growth[15] Shareholder Information CSW Industrials declared its 26th consecutive quarterly cash dividend and provided details for its upcoming earnings conference call - The company announced its 26th consecutive regular quarterly cash dividend of $0.27 per share[12] - An earnings conference call was scheduled for 10:00 a.m. ET on July 31, 2025, to discuss the results[17] Financial Statements This section presents unaudited consolidated financial statements, including income, balance sheets, and cash flows, for Q1 FY2026 Consolidated Statements of Income Net revenues for Q1 FY2026 increased to $263.6 million, with net income growing to $40.9 million despite a slight diluted EPS decrease Consolidated Statement of Income (in thousands) | Account | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenues, net | $263,646 | $226,177 | | Gross profit | $115,442 | $107,421 | | Operating income | $54,876 | $55,060 | | Net income | $41,171 | $38,850 | | Net income attributable to CSW | $40,925 | $38,591 | | Diluted EPS | $2.43 | $2.47 | Consolidated Balance Sheets Total assets increased to $1.54 billion, driven by acquisitions, while cash decreased to $38.0 million and total liabilities rose to $405.7 million Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $37,990 | $225,845 | | Total current assets | $451,032 | $592,861 | | Goodwill | $365,412 | $264,092 | | Intangible assets, net | $536,418 | $357,910 | | Total assets | $1,535,919 | $1,379,065 | | Total current liabilities | $157,896 | $147,202 | | Long-term debt | $95,000 | $— | | Total liabilities | $405,658 | $286,632 | | Total equity | $1,109,828 | $1,072,246 | Consolidated Statements of Cash Flows Net cash from operating activities was $60.6 million, while investing activities used $326.7 million for acquisitions, leading to a net cash decrease of $187.9 million Key Cash Flow Items (in thousands) | Account | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $60,641 | $62,655 | | Net cash used in investing activities | ($326,718) | ($3,168) | | Cash paid for acquisitions, net | ($323,814) | ($50) | | Net cash provided by (used in) financing activities | $78,424 | ($62,266) | | Borrowings on line of credit | $135,000 | $7,723 | | Repayments of line of credit | ($40,000) | ($58,723) | | Net change in cash and cash equivalents | ($187,855) | ($3,304) | Reconciliation of Non-GAAP Measures This section reconciles non-GAAP measures like adjusted EPS, adjusted net income, EBITDA, and free cash flow to GAAP, aiding assessment of core operating performance - The company uses non-GAAP measures such as adjusted EPS, adjusted net income, adjusted operating income, and EBITDA to assess historical and prospective core operating performance[34] Reconciliation of Net Income to Adjusted Net Income Adjusted Net Income for Q1 FY2026 was $48.0 million, or $2.85 per diluted share, after accounting for acquisition-related amortization and tax effects Adjusted Net Income and EPS Reconciliation (in thousands, except per share) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net income attributable to CSW (GAAP) | $40,925 | $38,592 | | Amortization of acquisition-related intangibles | $9,412 | $6,311 | | Amortization tax effect | ($2,325) | ($1,559) | | Adjusted net income attributable to CSW (Non-GAAP) | $48,012 | $43,344 | | Diluted EPS (GAAP) | $2.43 | $2.47 | | Adjusted Diluted EPS (Non-GAAP) | $2.85 | $2.78 | Reconciliation of Net Income to EBITDA Consolidated EBITDA for Q1 FY2026 increased 5.3% to $68.7 million, calculated by adding back interest, taxes, depreciation, and amortization to GAAP Net Income EBITDA Reconciliation (in thousands) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net Income | $41,171 | $38,850 | | Interest expense, net | $1,022 | $2,520 | | Income tax expense | $13,212 | $13,950 | | Depreciation & amortization | $13,338 | $9,932 | | EBITDA (Non-GAAP) | $68,742 | $65,252 | Reconciliation of Segment Operating Income to Segment EBITDA This section details segment EBITDA for Q1 FY2026, with Contractor Solutions generating $65.0 million, Specialized Reliability Solutions $6.5 million, and Engineered Building Solutions $4.4 million Segment EBITDA Q1 FY2026 (in thousands) | Segment | Revenue | Operating Income | EBITDA | EBITDA Margin | | :--- | :--- | :--- | :--- | :--- | | Contractor Solutions | $196,740 | $52,759 | $64,996 | 33.0% | | Specialized Reliability Solutions | $36,806 | $5,241 | $6,503 | 17.7% | | Engineered Building Solutions | $31,896 | $3,999 | $4,423 | 13.9% | | Consolidated | $263,646 | $54,876 | $68,742 | 26.1% | Reconciliation of Operating Cash Flow to Free Cash Flow Free cash flow for Q1 FY2026 was $57.7 million, calculated from operating cash flow less capital expenditures, with an 84.0% conversion from EBITDA Free Cash Flow Reconciliation (in thousands) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net cash provided by operating activities | $60,641 | $62,655 | | Less: Capital expenditures | ($2,904) | ($3,101) | | Free cash flow (Non-GAAP) | $57,737 | $59,554 | | Free cash flow % EBITDA | 84.0% | 91.3% |