DALLAS, July 31, 2024 (GLOBE NEWSWIRE) — CSW Industrials, Inc. (Nasdaq: CSWI or the “Company”) today reported record results for the fiscal 2025 first quarter period ended June 30, 2024.
Fiscal 2025 First Quarter Highlights (comparisons to fiscal 2024 first quarter)
Total revenue increased 11.2% to $226.2 million, driven by organic growth of 7.7% and inorganic growth of 3.5% from the recent acquisition of Dust FreeNet income attributable to CSWI increased 26.1% to $38.6 million, compared to $30.6 millionEarnings per diluted share (EPS) increased 25.4% to $2.47, compared to $1.97EBITDA grew 19.9% to $65.3 million, including margin expansion of 210 bps to 28.9%Cash flow from operations increased 24.7% to $62.7 million, compared to $50.3 millionPaid down $51.0 million of debt, further improving the strength of the balance sheet, resulting in a leverage ratio (Debt to EBITDA), in accordance with our credit facility, of 0.49x
Comments from the Chairman, President, and Chief Executive Officer
Joseph B. Armes, CSW Industrials’ Chairman, President, and Chief Executive Officer, commented, “Once again, superior execution by our team has resulted in record financial results for the fiscal first quarter of 2025. CSWI’s record revenue for the quarter was fueled by organic unit volume growth, pricing initiatives, and enhanced by our strategic acquisition of Dust Free. We further enhanced our healthy gross margin and drove record profitability while delivering record cash flow for the quarter. We continue to deliver on our commitment to build long-term shareholder value through disciplined capital allocation and by consistently outperforming the markets we serve.”
Fiscal 2025 First Quarter Consolidated Results
Fiscal first quarter revenue was $226.2 million, a $22.8 million or 11.2% increase over the prior year period. Total revenue growth included $15.7 million of organic growth contributed from Contractor Solutions and Engineered Building Solutions (7.7% of the total 11.2% growth), with the remainder contributed by the Dust Free acquisition, which is reported in the Contractor Solutions segment. In the current quarter, volume growth drove most of the revenue growth, while pricing initiatives and acquisition revenue also contributed.
Gross profit in the fiscal first quarter was $107.4 million, representing 16.6% growth over $92.2 million in the prior year period. Gross profit margin expanded 220 bps to 47.5%, compared to 45.3% in the prior year period. The gross profit margin increase was primarily a result of favorable product mix, volume leverage, and pricing initiatives.
Operating expenses as a percentage of revenue were 23.2% in the current period, which was slightly above the prior year period of 23.1%. Operating expenses were $52.4 million in the current year period, compared to $47.0 million in the prior year period and was in line with our revenue growth as we made investments related to employees, integration, and the Dust Free acquisition.
Operating income in the current period was $55.1 million, compared to $45.2 million in the prior year period. Operating income as a percent of revenue was 24.3% in fiscal 2025 first quarter, compared to 22.2% in the prior year period. The 210 bps improvement in operating income margin was a result of the previously mentioned improvement in the gross profit margin while holding operating expenses relatively flat as a percentage of revenue.
Net income attributable to CSWI (net of non-controlling interest in the joint venture) increased 26.1% to $38.6 million, compared to the prior year period of $30.6 million, and EPS increased 25.4% to $2.47, compared to $1.97 in the prior year period.
Fiscal 2025 first quarter EBITDA increased 19.9% to $65.3 million, up from $54.4 million in the prior year period. EBITDA margin expanded 210 bps to 28.9%, compared to 26.8% in the prior year period.
During the fiscal first quarter, the Company paid down $51.0 million of debt, utilizing the record quarterly cash flows from operations of $62.7 million. The resulting leverage ratio (Debt to EBITDA) for the Company, in accordance with our credit facility, was 0.49x.
Following quarter-end, the Company announced its twenty-second consecutive regular quarterly cash dividend. This dividend of $0.21 per share will be paid on August 9, 2024, to shareholders of record on July 26, 2024.
The Company’s effective tax rate for the fiscal first quarter was 26.4%.
Fiscal 2025 First Quarter Segment Results
The Contractor Solutions segment revenue was $160.4 million, a $20.5 million or 14.6% increase over the prior year period, comprised of organic growth of $13.3 million (9.5% of the total 14.6% growth) driven by increased unit volumes and pricing, and inorganic growth from the recently acquired Dust Free business of $7.2 million. As compared to the prior year period, net revenue growth was driven by the HVAC/R, architecturally-specified building products, general industrial, and plumbing end markets. Segment operating income improved to $49.9 million, compared to $39.7 million in the prior year period. The incremental profit resulted from revenue growth, gross profit leverage, and the inclusion of recently acquired Dust Free and was partially offset by increased spending on business integrations, strategic development activities, and employee compensation. Segment operating income margin in the fiscal first quarter was 31.1%, compared to 28.3% in the prior year period. Segment EBITDA in the fiscal first quarter was $58.3 million, or 36.3% of revenue, compared to $46.7 million, or 33.4% of revenue in the prior year period.
The Specialized Reliability Solutions segment revenue was $36.8 million, a $0.9 million or 2.4% decrease from the prior year period. Decreased net revenue was driven by a contraction in the mining and energy end markets. Segment operating income improved to $7.2 million, as compared to $7.0 million in the prior year period, an increase of 2.7%. Segment operating income margin in the fiscal first quarter was 19.4%, compared to the prior year period of 18.5% as a result of a favorable inventory adjustment. Segment EBITDA improved by 0.6% to $8.5 million in the fiscal first quarter, with an EBITDA margin of 23.1% as compared to 22.4% in the prior year period.
The Engineered Building Solutions segment revenue was $30.9 million, a 12.0% increase compared to $27.6 million in the prior year period, driven by commercial initiatives. Segment operating income was $5.7 million, or 18.5% of revenue, compared to the prior year period of $4.3 million, or 15.4% of revenue, due to expense and volume leverage. Segment EBITDA and EBITDA margin also improved to $6.2 million and 20.1% in the fiscal first quarter, compared to $4.7 million and 17.1% in the prior year period.
Conference Call Information
The Company will host a conference call today at 10:00 a.m. ET to discuss the results, followed by a question-and-answer session for the investment community. A live webcast of the call can be accessed at https://cswindustrials.gcs-web.com/. To access the call, participants may dial 1-877-407-0784, international callers may use 1-201-689-8560, and request to join the CSW Industrials earnings call.
A telephonic replay will be available shortly after the conclusion of the call and until Wednesday, August 14, 2024. Participants may access the replay at 1-844-512-2921, international callers may use 1-412-317-6671, and enter access code 13747993. The call will also be available for replay via webcast link on the Investors portion of the CSWI website www.cswindustrials.com.
Safe Harbor Statement
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as “may,” “should,” “expects,” “could,” “intends,” “plans,” “anticipates,” “estimates,” “believes,” “forecasts,” “predicts” or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, effective tax rate, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations, and financial performance and condition.
The forward-looking statements included in this press release are based on our current expectations, projections, estimates, and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the risk factors described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K.
All forward-looking statements included in this press release are based on information currently available to us, and we assume no obligation to update any forward-looking statement except as may be required by law.
Non-GAAP Financial Measures
This press release includes an analysis of adjusted diluted earnings per share attributable to CSWI, adjusted net income attributable to CSWI, adjusted operating income and free cash flows, which are non-GAAP financial measures of performance. Attributable to CSWI is defined to exclude the income attributable to the non-controlling interest in the Whitmore JV.
CSWI utilizes adjusted EBITDA (earnings before interest, tax, depreciation and amortization) as an additional consolidated, non-GAAP financial measure, which consists of consolidated net income including income attributable to the non-controlling interest in the Whitmore JV, adjusted to remove the impact of income taxes, interest expense, depreciation, amortization and impairment, and significant nonrecurring items.
For a reconciliation of these measures to the most directly comparable GAAP measures and for a discussion of why we consider these non-GAAP measures useful, see the “Reconciliation of Non-GAAP Measures” section of this release.
About CSW Industrials, Inc.
CSW Industrials is a diversified industrial growth company with industry-leading operations in three segments: Contractor Solutions, Specialized Reliability Solutions, and Engineered Building Solutions. CSWI provides niche, value-added products with two essential commonalities: performance and reliability. The primary end markets we serve with our well-known brands include: HVAC/R, plumbing, general industrial, architecturally-specified building products, energy, mining, and rail transportation. For more information, please visit www.cswindustrials.com.
Investor Relations
Alexa Huerta
Vice President, Investor Relations and Treasurer
214-489-7113
alexa.huerta@cswindustrials.com
CSW INDUSTRIALS, INC.CONSOLIDATED STATEMENTS OF INCOME(unaudited) Three Months Ended
June 30,(Amounts in thousands, except per share amounts) 2024 2023 Revenues, net $226,177 $203,360 Cost of revenues (118,756) (111,193)Gross profit 107,421 92,167 Selling, general and administrative expenses (52,361) (46,961)Operating income 55,060 45,206 Interest expense, net (2,520) (4,009)Other income, net 260 314 Income before income taxes 52,800 41,511 Provision for income taxes (13,950) (10,455)Net income 38,850 31,056 Less: Income attributable to redeemable noncontrolling interest (259) (445)Net income attributable to CSW Industrials, Inc. $38,591 $30,611 Net income per share attributable to CSW Industrials, Inc. Basic $2.48 $1.97 Diluted 2.47 1.97 Weighted average number of shares outstanding: Basic 15,534 15,520 Diluted 15,596 15,547
CSW INDUSTRIALS, INC.CONSOLIDATED BALANCE SHEETS (unaudited) (Amounts in thousands, except for per share amounts) June 30, 2024 March 31, 2024ASSETS Current assets: Cash and cash equivalents $18,852 $22,156 Accounts receivable, net of allowance for expected credit losses of $945 and $908, respectively 143,195 142,665 Inventories, net 156,791 150,749 Prepaid expenses and other current assets 12,381 15,840 Total current assets 331,219 331,410 Property, plant and equipment, net of accumulated depreciation of $106,976 and $103,515, respectively 92,371 92,811 Goodwill 246,402 247,191 Intangible assets, net 312,898 318,819 Other assets 67,636 53,095 Total assets $1,050,526 $1,043,326 LIABILITIES AND EQUITY Current liabilities: Accounts payable $55,025 $48,387 Accrued and other current liabilities 66,460 67,449 Total current liabilities 121,485 115,836 Long-term debt 115,000 166,000 Retirement benefits payable 1,103 1,114 Other long-term liabilities 143,166 125,298 Total liabilities 380,754 408,248 Commitments and contingencies Redeemable noncontrolling interest 19,614 19,355 Equity: Common shares, $0.01 par value 164 164 Additional paid-in capital 143,970 137,253 Treasury shares, at cost (968 and 952 shares, respectively) (102,406) (95,643)Retained earnings 618,381 583,075 Accumulated other comprehensive loss (9,951) (9,126)Total equity 650,158 615,723 Total liabilities, redeemable noncontrolling interest and equity $1,050,526 $1,043,326
CSW INDUSTRIALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited) Three Months Ended
June 30,(Amounts in thousands) 2024 2023 Cash flows from operating activities: Net income $38,850 $31,056 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,622 3,239 Amortization of intangible and other assets 6,503 5,868 Provision for inventory reserves 517 2,509 Provision for credit losses 378 108 Share-based compensation 3,746 2,805 Gain on disposals of property, plant and equipment (13) (12)Net pension benefit 16 17 Impairment of assets — 92 Deferred taxes 2,084 843 Changes in operating assets and liabilities: Accounts receivable (998) (4,319) Inventories (6,766) 2,141 Prepaid expenses and other current assets 3,438 2,443 Other assets 28 (788) Accounts payable and other current liabilities 10,923 3,233 Retirement benefits payable and other liabilities 327 1,022 Net cash provided by operating activities 62,655 50,257 Cash flows from investing activities: Capital expenditures (3,101) (4,971)Proceeds from sale of assets 13 12 Cash paid for investments (500) — Cash paid for acquisitions (163) (112)Proceeds from acquisitions true-up 470 — Net cash used in investing activities (3,281) (5,071)Cash flows from financing activities: Borrowings on line of credit 7,723 15,432 Repayments of line of credit (58,723) (58,432)Purchase of treasury shares (7,891) (2,864)Dividends (3,262) (2,947)Net cash used in financing activities (62,153) (48,811)Effect of exchange rate changes on cash and equivalents (525) (42)Net change in cash and cash equivalents (3,304) (3,667)Cash and cash equivalents, beginning of period 22,156 18,455 Cash and cash equivalents, end of period $18,852 $14,788
Reconciliation of Non-GAAP Measures
We use adjusted earnings per share attributable to CSWI, adjusted net income attributable to CSWI, adjusted operating income, and adjusted EBITDA, together with financial measures prepared in accordance with GAAP, such as revenue, cost of revenue, operating expense, operating income and net income attributable to CSWI, to assess our historical and prospective operating performance and to enhance our understanding of our core operating performance. Free cash flow is a non-GAAP financial measure and is defined as cash flow from operations less capital expenditures. We also believe these measures are useful for investors to assess the operating performance of our business without the effect of non-recurring items. In the following tables, there could be immaterial differences in amounts presented due to rounding.
CSW Industrials, Inc.Reconciliation of Net Income Attributable to CSWI to EBITDA(unaudited) (Amounts in thousands) Three months ended
June 30, 2024 2023 Net Income attributable to CSWI $38,591 $30,611 Plus: Income attributable to redeemable noncontrolling interest 259 445 Net Income $38,850 $31,056 Adjusting Items: Interest Expense 2,520 4,009 Income Tax Expense 13,950 10,455 Depreciation & amortization 9,932 8,915 EBITDA $65,252 $54,435 EBITDA % Revenue 28.9% 26.8%
CSW Industrials, Inc.Reconciliation of Segment Operating Income to Segment EBITDA(unaudited) (Amounts in thousands)Three months ended June 30, 2024 Contractor
SolutionsSpecialized
Reliability
SolutionsEngineered
Building
SolutionsCorporate
and OtherConsolidatedRevenue, net$160,418 $36,791 $30,893 $(1,926)$226,177 Operating Income$49,884 $7,150 $5,723 $(7,698)$55,060 % Revenue 31.1% 19.4% 18.5% 24.3% Adjusting Items: Other income (expense) 396 (63) (7) (66) 260 Depreciation & amortization 7,983 1,423 485 41 9,932 EBITDA$58,263 $8,511 $6,201 $(7,723)$65,252 % Revenue 36.3% 23.1% 20.1% 28.9% (Amounts in thousands)Three months ended June 30, 2023 Contractor
SolutionsSpecialized
Reliability
SolutionsEngineered
Building
SolutionsCorporate
and OtherConsolidatedRevenue, net$139,954 $37,711 $27,587 $(1,892)$203,360 Operating Income$39,667 $6,966 $4,260 $(5,686)$45,206 % Revenue 28.3% 18.5% 15.4% 22.2% Adjusting Items: Other income (expense) 172 (37) 8 172 314 Depreciation & amortization 6,895 1,530 441 48 8,915 EBITDA$46,734 $8,458 $4,708 $(5,466)$54,435 % Revenue 33.4% 22.4% 17.1% 26.8%
CSW INDUSTRIALS, INC.Reconciliation of Operating Cash Flow to Free Cash Flow(Unaudited) (Amounts in thousands) Three Months Ended June 30, 2024 2023 Net cash provided by operating activities $62,655 $50,257 Less: Capital Expenditures (3,101) (4,971)Free Cash Flow $59,554 $45,286 Free Cash Flow % Net Income 153.3% 145.8%
