DALLAS, Aug. 04, 2021 (GLOBE NEWSWIRE) — CSW Industrials, Inc. (Nasdaq: CSWI) today reported results for the fiscal 2022 first quarter ended June 30, 2021.
Fiscal First Quarter 2022 Highlights (comparisons to prior year fiscal first quarter)
- Increase in total revenue of 77% to $161.3 million, compared to $91.0 million
- Organic revenue growth of 40%, or $36.8 million, all segments reported organic growth
- GAAP net income attributable to CSWI (after subtracting the non-controlling interest in the joint venture) of $20.0 million, or $23.0 million adjusted to exclude the final TRUaire purchase accounting effect
- EPS attributable to CSWI increased 57% to $1.27, compared to $0.81
- Growth of 80% in adjusted EPS attributable to CSWI to $1.46, compared to $0.81
- Growth of 108% in adjusted EBITDA to $40.5 million, with a 25% adjusted EBITDA margin
- Net cash provided by operating activities of $18.9 million
- Maintained balance sheet strength with leverage ratio, in accordance with our credit facility, of less than ~1.5x
- Effective April 1, 2021, CSWI strategically revised reportable segments to better align with business management, performance assessment, capital allocation, and approach to end markets served
Joseph B. Armes, CSW Industrials’ Chairman, President, and Chief Executive Officer, commented, “We are extraordinarily pleased to report our fiscal first quarter consolidated results. Specifically, adjusted earnings per share of $1.46, representing 80% growth over the prior year period, exceeded expectations. Although profitability among our three segments was inconsistent, all three segments delivered organic revenue growth, highlighted by our Contractor Solutions segment, which demonstrated robust outperformance of the end markets served, reporting 54% organic growth and 121% total growth, including significant contribution from the TRUaire acquisition we consummated in December of last year.”
Armes continued, “The decisive actions we took last year to acquire TRUaire, increase inventory levels of key products, and diversify our supply chains, while protecting employment for our team members, all directly contributed to the results that we report today. We expect the demand for our innovative, reliable products to translate into ongoing strength in top line growth. While short-term inflation, primarily in raw materials and transportation, is having a modest impact on near-term profit margins, our sustained and sharp focus on customer service, supplemented by disciplined price actions amid an accelerating economic recovery, serves to support our guiding objective of delivering sustainable long-term growth and profitability.”
Following the completion of various strategic transactions, including the acquisition of TRUaire and the formation of the Whitmore joint venture (JV) with Shell Lubricants, CSWI is now organized into three reportable segments (each of which has multiple brand names within the companies listed below):
- The Contractor Solutions segment manufactures and supplies products predominantly for residential and commercial heating, ventilation, air conditioning, and refrigeration (HVAC/R) and plumbing applications, which are designed primarily for professional tradespeople. This segment is comprised primarily of RectorSeal and TRUaire.
- The Engineered Building Solutions segment provides primarily code-driven products focused on life safety that are engineered to provide aesthetically-pleasing solutions for the construction, refurbishment and modernization of commercial, institutional, and multi-family residential buildings. This segment is comprised primarily of Balco, Greco and Smoke Guard.
- The Specialized Reliability Solutions segment provides products for increasing the reliability, performance, and lifespan of industrial assets, and solving equipment maintenance challenges. This segment is comprised primarily of Whitmore and the Whitmore JV.
The Whitmore JV has been consolidated into the operations of the Company under the variable interest entity consolidation model since formation. Income attributable to Shell Lubricants’ non-controlling interest has been excluded from select financial information provided.
The Company also provided investors with supplemental, historical segment information, recast to reflect the new segment reporting structure, beginning with the quarter ended June 30, 2019, which was filed via a Current Report on Form 8-K today and is available on the Company’s web site at https://cswindustrials.gcs-
Fiscal First Quarter 2022 Consolidated Results
Fiscal first quarter revenue was $161.3 million, representing 77.3% growth from $91.0 million in the prior year period, with growth reported in all reporting segments and all end markets served. Of the $70.3 million total growth, $36.8 million (40.5%) resulted from organic growth, including $3.5 million from the Engineered Building Solutions, and $6.4 million from the Reliability Solutions segments. The Contractor Solutions segment contributed the remaining $26.9 million in organic revenue growth, resulting in total segment growth of $60.4 million (121.0%).
Strength in the Contractor Solutions segment was driven by increased penetration in the HVAC/R, plumbing, and architecturally-specified building products (ASBP) markets, with the TRUaire acquisition contributing $33.5 million of inorganic revenue growth. Increased sales in the Engineered Building Solutions segment were associated with enhanced marketing efforts promoting existing and newly developed products, market share gains due to competitive lead times in the market place, and improved specification levels. Increased sales in the Specialized Reliability Solutions segment were driven by the Whitmore JV, and demand recovery in the general industrial and energy end markets. During the fiscal first quarter, across all segments and end markets served, appropriate price actions bolstered revenue. These price actions were implemented at various points in the quarter, and therefore the benefit is not fully reflected in this quarter’s results. Additional pricing actions have taken place since the end of the fiscal first quarter, and the cumulative impact of realized pricing and ongoing cost inflation is being closely monitored to determine if further action is needed to protect profitability.
Reported gross profit in the fiscal first quarter was $68.6 million, representing 60.5% growth from $42.8 million in the prior year period, with the incremental profit resulting predominantly from the TRUaire acquisition and increased sales volumes. Gross profit margin as a percentage of sales was 42.5%, compared to 47.0% in the prior year period. This decline is due in part to a $3.9 million purchase accounting effect relating to the TRUaire acquisition, which has now been fully recognized as of the end of the fiscal first quarter, as well as the incremental expenses related to inclusion of the TRUaire business, and material and freight cost inflation that outpaced instituted price increases in some end markets served. Adjusted to exclude the aforementioned purchase accounting effect, gross profit and gross profit margin for the fiscal first quarter were $72.5 million and 45.0%, respectively. There were no adjustments in the prior year period.
GAAP operating expenses increased to $40.1 million in the current year period, from $26.5 million in the prior year period, mainly due to the incremental expenses related to inclusion of the TRUaire business, as well as additional sales commissions and enterprise resource planning system pre-implementation and optimization. Operating expenses as a percent of revenue improved 420 basis-points in the current quarter to 24.9% from 29.1% in the prior year period. This improvement in operating expense margin was effectively attributable to sales growth, partially offset by increased operating expenses.
GAAP operating income in the current period was $28.5 million, representing 75.2% growth from $16.3 million in the prior year period, resulting primarily from increased gross profit, partially offset by increased operating expenses, as discussed above. Adjusted to exclude the aforementioned purchase accounting effect, fiscal first quarter 2022 operating income was $32.4 million, a 99.3% increase over the prior year period. Reported operating income margin in fiscal first quarter 2022 was 17.7%, or 20.1% on an adjusted basis, representing a 220 basis-point increase over the prior year period. There were no adjustments to operating income in fiscal first quarter 2021.
Reported net income, attributable to CSWI, in the fiscal first quarter of 2022 was $20.0 million, or $1.27 per diluted share, compared to $12.0 million, or $0.81 in the prior year period. Adjusted to exclude the TRUaire purchase accounting effect, adjusted net income was $23.0 million, or $1.46 per diluted share, or 80.5% over the prior year period, which had no adjustments.
Fiscal first quarter of 2022 adjusted EBITDA increased 107.9% to $40.5 million from $19.5 million in the prior year period. Adjusted EBITDA as percent of revenue was 25.1% and 21.4%, in the current and prior year period, respectively.
Following quarter end, the Company declared its tenth consecutive quarterly regular cash dividend in the amount of $0.15 per share, which will be paid on August 13, 2021, to shareholders of record on July 29, 2021.
The Company’s effective tax rate for the fiscal first quarter was 23.9% on a GAAP basis, and the Company continues to expect a 25% tax rate for fiscal year 2022.
Fiscal First Quarter 2022 Segment Results
Contractor Solutions segment revenue was $110.2 million, a $60.4 million increase, or 121.0%, from the prior year period, due to increased organic sales volumes into the HVAC/R, plumbing, and ASBP end markets, plus the inorganic growth from TRUaire ($33.5 million), and coupled with pricing initiatives that began in the fiscal fourth quarter 2021, continued, and increased during the fiscal first quarter 2022. GAAP segment operating income was $29.5 million, 85.5% growth over $15.9 million in the prior year period, due overall to the inorganic growth from the TRUaire acquisition and increased organic sales, partially offset by increased spend related to sales commissions and enterprise resource planning system pre-implementation and optimization. Operating income margin in the fiscal first quarter was 26.8%, compared to 31.9% in the prior year period, due to the aforementioned purchase price accounting effect. Adjusted to exclude this effect, adjusted segment operating income was $33.4 million, or 30.3% of revenue. There were no adjustments in fiscal first quarter 2021. Adjusted EBITDA in the fiscal first quarter was $39.4 million, or 35.8% of revenue, compared to $17.3 million, or 34.7% of revenue in the prior year period.
Engineered Building Solutions segment revenue was $25.7 million, a $3.5 million increase, or 15.8%, from the prior year period of $22.2 million due to enhanced marketing efforts promoting existing and newly developed products, market share gains due to competitive lead times in the market place, and improved specification levels. GAAP segment operating income was $3.9 million, a slight decrease compared to the prior year period of $4.0 million, due to a shift in sales to lower margin projects. Reported operating income margin in the fiscal first quarter was 15.0%, compared to the prior year period of 18.2%. Segment EBITDA and EBITDA margin were $4.3 million and 16.6% in the fiscal first quarter, compared to $4.2 million and 19.1% in the prior year period. There were no adjustments in either period.
Specialized Reliability Solutions segment revenue was $25.4 million, a $6.4 million increase, or 33.9%, from the prior year period of $19.0 million, mostly due to increased sales volumes into general industrial and energy end markets. GAAP segment operating income was $0.3 million, approximately flat to the prior year period as growth in material and freight expenses accelerated more quickly than the effectiveness of the implemented pricing initiatives. Reported operating income margin in the fiscal first quarter was 1.1%, compared to the prior year period of 1.6%. Segment EBITDA and EBITDA margin were $1.8 million and 7.3% in the fiscal first quarter, compared to $1.9 million and 9.8% in the prior year period. There were no adjustments in either period.
All percentages are calculated based upon the attached financial statements and reconciliations of non-GAAP financial measures.
About CSW Industrials, Inc.
CSW Industrials is a growth-oriented, diversified industrial Company with industry-leading operations in three segments: Contractor Solutions, Engineered Building Solutions, and Specialized Reliability 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, electrical, general industrial, architecturally-specified building products, energy, mining, and rail. For more information, please visit www.cswindustrials.com.
