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 Free
- Net income attributable to CSWI increased 26.1% to
$38.6 million, compared to $30.6 million
- Earnings per diluted share (EPS) increased 25.4% to $2.47,
compared to $1.97
- EBITDA 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 million
- Paid 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 HuertaVice President, Investor Relations and
Treasurer214-489-7113alexa.huerta@cswindustrials.com
|
CSW INDUSTRIALS, INC. |
CONSOLIDATED STATEMENTS OF INCOME |
(unaudited) |
|
|
|
Three Months EndedJune 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, 2024 |
ASSETS |
|
|
|
|
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 Solutions |
Specialized Reliability Solutions |
Engineered Building Solutions |
Corporate and Other |
Consolidated |
Revenue, 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 Solutions |
Specialized Reliability Solutions |
Engineered Building Solutions |
Corporate and Other |
Consolidated |
Revenue, 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 |
% |
CSW Industrials (NASDAQ:CSWI)
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From Aug 2024 to Sep 2024
CSW Industrials (NASDAQ:CSWI)
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From Sep 2023 to Sep 2024