CSW Industrials, Inc.

Greetings, and welcome to CSW Industrials, Inc. Fiscal Third Quarter 2022 Earnings Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Adrian Griffin, Vice President of Investor Relations and Treasurer.

Thank you, Joe. Good morning, everyone, and welcome to the CSW Industrials Fiscal 2022 Third Quarter Earnings Call. Joining me today are Joe Arms, Chairman, Chief Executive Officer, and President of CSW Industrials, and James Perry, Executive Vice President and Chief Financial Officer. We issued our earnings release, presentation, and form 10Q prior to the market's opening today. which are available on the investor portion of our website at cswindustrials.com. This call is being webcast and information on accessing the replay is included in the earnings release. During this call, we will make forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Actual results could materially differ because of factors discussed today in our earnings release. In the comments made during this call, as well as the risk factors identified in our annual report on Form 10-K and other filings with the SEC. We do not undertake any duty to update any forward-looking statements. I will now turn the call over to Joe Arms.

Thank you, Adrienne. Good morning, and thank you for joining our fiscal third quarter conference call. In our fiscal third quarter, we saw the benefit of our diversified business model and our strong results. as all three segments contributed to our growth. We achieved Q3 year-over-year revenue and adjusted EBITDA growth of 52% and 25%, respectively. In comparing the year-to-date results with the prior year period, revenue and adjusted EBITDA grew 59% and 55%, respectively. On December 15, we celebrated the one-year anniversary of our TruAir acquisition and simultaneously closed on the Shoemaker acquisition. Shoemaker represents another accretive acquisition in the highly attractive HVAC-R end market served by our contractor solution segment. I'm also very pleased to report that our TrueAir manufacturing facility in Vietnam returned to full production in the fiscal third quarter as in-country COVID restrictions eased. Taking a moment to expand upon our strong year-to-date performance as compared to the prior year period, sales increased in all segments due to volume growth and price increases. In addition to the inorganic growth from the TruAir and Shoemaker acquisitions, the contractor solutions segment drove $42.8 million of organic revenue growth primarily into the HVACR and plumbing end markets. Our engineer building solution segment grew by 1.8 million, or 2.6%, from dedicated efforts to promote existing and newly developed products and to maintain market share gains due to competitive lead times despite a downturn in the largest construction categories that we serve. Our specialized reliability solution segment achieved $28.4 million of organic revenue growth as demand returned in the energy, mining, rail, and general industrial end markets. In fact, in the year-to-date period, specialized reliability solutions revenue exceeded its revenue in the same period in fiscal 2020 of two years ago by 7.3% or nearly $6 million. Diversity in the end markets we serve supported our performance during the past nine months, and it provides an even stronger platform for growth as we start the new year. In the past 13 months, we closed two acquisitions in our contractor solutions segment, adding products to our HVACR offerings, which is our stated highest priority for capital investment. Through the acquisitions of TruAir and Shoemaker, we invested approximately $430 million of capital. These complimentary acquisitions give us a strong position in the grills, registers, and diffusers, or GRD, product category. with Shoemaker enhancing our commercial GRD offerings. We now have significant GRD manufacturing capacity in both Vietnam and the United States with the recent addition of Shoemaker's manufacturing facility in Cle Elum, Washington. Shoemaker also brings with it a Pacific Northwest distribution and logistics operation from which we can expand sales of other contractor solution products. At this point, we'd like to extend a warm welcome to our new Shoemaker team members, to CSWI. As international logistics remain a highly discussed topic in boardrooms and in the media, I want to provide an update on our operations and international supply chain. Our TruAir manufacturing facility in Vietnam shipped an average of 32 containers per week in December and January. achieving a peak weekly shipping rate of 41 containers. Our goal is to consistently ship a volume of containers in this range in the intermediate term to ensure product availability. However, there are significant port delays in California, with the unloading process becoming most impactful to our operations. Simply stated, everything is taking a bit longer than usual as ships and cargo await unloading. We expect that the Lunar New Year will bring a respite in the inbound ship traffic, allowing this congestion to ease naturally. We know that inventory availability supported our strong revenue growth in calendar 2021, and managing our supply chains effectively remains a key component of our growth strategy. Each quarter, we provide an update on our commitment to treating our employees well. I'm very pleased to report significant improvement in our safety measures. In calendar year 2021, our total recordable incident rate was 1.3, which is a meaningful reduction from 3.2 in calendar year 2020. While we are pleased with this progress, we are certainly not satisfied. Our leadership team is focused on a zero incident workplace, And in January of this year, we completed our second annual company-wide safety awareness month, demonstrating our core values of excellence and accountability as we make safety a priority each day. As we've discussed on prior calls, we implemented multiple price increases in calendar 2021 across each of our businesses for a cumulative increase well into double digits for most of our products. Last month, we executed an additional round of price actions in specific end markets. Each of these actions is intended to offset ongoing inflation, primarily in raw materials and logistics costs, with most increases now absorbed into the base product price. Because the majority of our products are low cost with high value to the customer, we can effectively use pricing as a tool to maintain our profitability. At this time, I'll turn the call over to James for a closer look at our results, and then I'll conclude our prepared remarks with some longer-term strategic outlook.