Core Insights - CSW Industrials, Inc. reported record results for the fiscal 2026 first quarter, ending June 30, 2025, with significant contributions from strategic acquisitions [1][3]. Financial Performance - Fiscal 2026 first quarter revenue reached $263.6 million, marking a $37.5 million or 16.6% increase compared to the prior year [4]. - The revenue growth included $43.7 million or 19.3% from inorganic sources due to acquisitions, while organic revenue decreased by $6.2 million or 2.8% [4]. - Gross profit was $115.4 million, a 7.5% increase from $107.4 million in the previous year, but gross margin contracted by 370 basis points to 43.8% [5]. - Operating income was $54.9 million, slightly down from $55.1 million in the prior year, with an operating margin of 20.8% compared to 24.3% [7]. - Net income attributable to CSW was $40.9 million, a 6.0% increase from $38.6 million, while diluted EPS was $2.43, down 1.9% from $2.47 [9][10]. - Adjusted EPS increased by 2.5% to $2.85, excluding amortization of acquisition-related intangible assets [9][10]. - EBITDA grew by 5.3% to a record $68.7 million, with an EBITDA margin of 26.1%, down from 28.9% [11]. Segment Performance - Contractor Solutions segment revenue was $196.7 million, a 22.6% increase, driven by acquisitions, but organic revenue decreased by 4.6% [13]. - Specialized Reliability Solutions segment revenue remained flat at $36.8 million, with operating income decreasing by 26.7% to $5.2 million [14]. - Engineered Building Solutions segment revenue increased by 3.2% to $31.9 million, but operating income decreased to $4.0 million [15]. Cash Flow and Debt Management - Cash flows from operations were $60.6 million, comparable to $62.7 million in the prior year, with free cash flow at $57.7 million [12][44]. - The company paid down $40 million of debt, resulting in a net leverage ratio of 0.2x after borrowing $135 million for the Aspen acquisition [9].

Financial Data and Key Metrics Changes - The company reported record results for revenue, adjusted EBITDA, adjusted earnings per diluted share, and adjusted net income for the fourth quarter of fiscal year 2025, with revenue of $231 million, adjusted EBITDA of $60 million, adjusted earnings per diluted share of $2.24, and adjusted net income of $38 million [4][10] - For the full fiscal year 2025, revenue reached $878 million, representing an 11% growth, with adjusted EBITDA of $228 million and adjusted earnings per diluted share of $8.41 [5][10] - Cash flow from operations for the full year was $168 million, a 2% increase compared to the prior fiscal year [18][19] Business Segment Data and Key Metrics Changes - The Contractor Solutions segment generated $166 million in revenue, accounting for 71% of consolidated revenue, with a 17.5% growth compared to the prior year [13] - The Specialized Reliability Solutions segment saw a revenue decrease of 9% to $38 million, primarily due to softer market demand [14][15] - The Engineered Building Solutions segment's revenue decreased by 4% to $28.7 million, attributed to the timing of project completions [16] Market Data and Key Metrics Changes - The company experienced organic growth in Contractor Solutions driven by higher volumes and pricing actions, while the other two segments faced declines [10][11] - The HVACR and electrical end markets showed growth during the quarter, contributing to the Contractor Solutions segment's performance [14] Company Strategy and Development Direction - The company announced the acquisition of Aspen Manufacturing for $313.5 million, aimed at expanding its HVACR product offerings [5][20] - The company plans to continue pursuing accretive acquisitions and expects to deliver sustainable growth that exceeds the markets served [28][29] - The strategic move to the New York Stock Exchange is anticipated to enhance liquidity for shareholders [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, expecting revenue and adjusted EBITDA growth for each segment in fiscal year 2026 [21][27] - The company is focused on managing the impact of tariffs and has implemented pricing actions to offset costs [26] - Management noted that while there may be some margin compression, the overall strategy remains focused on protecting margin dollars [26] Other Important Information - The company reported a strong balance sheet with $226 million in cash at the end of the fiscal fourth quarter [18] - The effective tax rate for the fiscal fourth quarter was 24.6% on a GAAP basis [21] Q&A Session Summary Question: Impact of tariffs on COGS - Management indicated that there has not been much trailing impact from tariffs yet, as they had brought in extra inventory to mitigate potential costs [34][35] Question: M&A pipeline and debt repayment - Management confirmed that they remain acquisitive and will utilize the revolving credit facility for larger acquisitions while smaller acquisitions can be funded through free cash flow [39] Question: Pricing actions and margin implications - Management stated that pricing actions are ongoing and are expected to match tariff costs, with a focus on maintaining margins [49][50] Question: Demand changes entering spring and summer - Management noted that demand has been relatively normal, with a strong performance in Contractor Solutions despite a slow start to the hot season [52][76] Question: Timeline for achieving 20% EBITDA margin in Engineered Building Solutions - Management reiterated that the 20% EBITDA margin target remains, but achieving it will depend on overcoming cost and pricing challenges [87] Question: Strategies to address poor performance in Specialized Reliability Solutions - Management highlighted that volume was the main issue, and they are focusing on product development and operational improvements to enhance margins [90][92]

Core Insights - CSW Industrials, Inc. reported record results for the fiscal 2025 fourth quarter, driven by strategic acquisitions and strong organic growth in Contractor Solutions [1][4][5] Fiscal 2025 Fourth Quarter Highlights - Revenue for the fourth quarter reached $230.5 million, a 9.3% increase from the prior year, with $13.5 million from inorganic growth and $6.2 million from organic growth [5][6] - Adjusted net income was $37.7 million, reflecting an 18.7% increase compared to $31.8 million in the prior year [6][12] - Earnings per diluted share (EPS) increased to $2.24, a 9.8% rise from $2.04 [6][12] - Adjusted EBITDA grew 7.1% to $59.8 million, with a margin of 25.9% [6][13] Fiscal 2025 Full Year Highlights - Total revenue for the year was $878.3 million, a 10.8% increase from $792.8 million, with $47.5 million from inorganic growth and $37.9 million from organic growth [18][24] - Net income attributable to CSWI increased 25.7% to $136.7 million, with adjusted EPS improving 20.0% to $8.41 [24][25] - Adjusted EBITDA for the year rose 13.9% to $227.9 million, with an adjusted EBITDA margin of 25.9% [25] Segment Performance - Contractor Solutions segment revenue was $165.9 million, a 17.5% increase, with organic growth of 8.0% and inorganic growth contributing significantly [15] - Specialized Reliability Solutions segment revenue decreased by 9.2% to $37.7 million, primarily due to contraction in certain end markets [16] - Engineered Building Solutions segment revenue was $28.7 million, a 4.5% decrease, attributed to project timing [17] Acquisition and Future Outlook - The company completed the acquisition of Aspen Manufacturing for $313.5 million on May 1, 2025, which is expected to enhance its product offerings and customer relationships [4][34] - The company anticipates continued revenue and adjusted EBITDA growth across all segments in fiscal 2026, supported by a disciplined capital allocation strategy [4][34]

Core Viewpoint - CSW Industrials, Inc. has successfully completed the acquisition of Aspen Manufacturing for approximately $313.5 million in cash, enhancing its HVAC/R product offerings and expected to drive market share gains [1][2][4] Group 1: Acquisition Details - The acquisition price of $313.5 million represents about 11 times Aspen Manufacturing's estimated 2024 adjusted EBITDA of $28.5 million [1] - The funding for the acquisition was sourced from cash on hand and borrowings under an existing $500 million revolving credit facility, while maintaining sufficient liquidity and a strong balance sheet [1] Group 2: Strategic Implications - This acquisition is expected to expand CSW Industrials' HVAC/R product offerings by incorporating Aspen Manufacturing's leading evaporator coils and air handlers [2] - The integration of Aspen Manufacturing is anticipated to enhance CSW's service offerings and maximize market channels, leveraging its established distribution channels and manufacturing expertise [2] Group 3: Product Overview - Aspen Manufacturing's product suite includes a wide range of high-quality residential and light commercial evaporator coils, blowers, and air handling units, all designed and assembled in the United States [3]

Core Viewpoint - CSW Industrials, Inc. has entered into a definitive agreement to acquire Aspen Manufacturing for approximately $313.5 million in cash, which is expected to enhance CSWI's HVAC/R product portfolio and market position [2][5]. Group 1: Acquisition Details - The acquisition price of $313.5 million represents approximately 11 times Aspen Manufacturing's estimated 2024 adjusted EBITDA of $28.5 million [2][6]. - CSWI plans to fund the acquisition using a combination of cash on hand and debt from its existing $500 million credit facility, with the closing expected in the first quarter of CSWI's 2026 fiscal year [2][3]. Group 2: Aspen Manufacturing Overview - Aspen Manufacturing, based in Humble, Texas, is a leading independent manufacturer of evaporator coils and air handlers for the HVAC/R industry, with estimated 2024 revenues of $122.4 million [3][4]. - The company is recognized for its high-quality products, all of which are designed, engineered, and assembled in the United States [3][4]. Group 3: Strategic Fit and Market Position - Aspen Manufacturing is well-positioned to address the current refrigerant transition, manufacturing products compatible with both legacy and new refrigerants [4]. - The acquisition aligns with CSWI's strategy to expand its HVAC/R product offerings and leverage existing distribution channels to increase market share [6][11].