CSW Industrials, Inc.

Greetings and welcome to CSW Industrials Inc. Fiscal Fourth Quarter 2022 Earnings Call. At this time, all participants are on a 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. It is now my pleasure to introduce your host, Adrienne Griffin, Vice President, Investor Relations, and Treasurer. Thank you. You may begin.

Thank you, Doug. Good morning, everyone, and welcome to the CSW Industrials Fiscal 2022 Fourth Quarter Earnings Call. Joining me today are Joseph 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 10-K prior to the market's opening today, which are available on the investor portion of our website at www.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 and 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 fourth quarter conference call. I'm pleased to announce that in fiscal 2022, we continued our successful track record of delivering exceptional performance. Treating our employees well, serving our customers well, and managing our supply chains effectively drove record results in growth and profitability. Fiscal 2022 represents our second consecutive year of record revenue, EBITDA, and earnings per share. Today, we reported record revenue of $626 million, nearly a 50% growth over the prior year. Of the $207 million in total revenue growth, half resulted from organic growth, with the remaining half coming from our TrueAir and Shoemaker acquisitions. EBITDA reached a record $133 million, or 46% growth over the prior fiscal year. Finally, record adjusted EPS was $4.39 compared to $3.36 in the prior fiscal year. These outstanding accomplishments are attributable to our diversified business model, our disciplined capital allocation, and our commitment to operational excellence, which drove impressive operating leverage despite unprecedented global disruption and turmoil. As compared to the prior year, sales increased in all segments driven by volume growth and price increases. Our contractor solution segment achieved record sales of 416 million, including record HVACR end market sales of 335 million, a 159 million or 91% total increase, including organic growth of $56 million. Our contractor solutions team, led by Don Sullivan, deserves recognition for exceeding our expectations again this year while successfully integrating acquisitions and managing significant challenges presented by inflation and supply chain constraints. I want to thank Don and his team for their extraordinarily good work. Our engineered building solutions segment grew by $1.6 million, or 1.7%. Scott Stratton and his team effectively marketed existing and newly developed products and maintained market share gains due to competitive lead times, successfully overcoming the commercial construction in-market decline during our fiscal 2021 and 22. As a result of this team's efforts, this segment's backlog reached an all-time high by the end of April, signaling a strong tailwind into fiscal 2023. Our specialized reliability solution segment achieved $38 million of organic revenue growth as demand returned in all end markets served. And operational execution improved. In fact, segment revenue in fiscal 2022 exceeded fiscal 2020 by 10.9% or nearly $11 million. Mark Bass joined our team in June of 2021. He and his team have improved relationships with our largest customers and have grown demand for our market-leading products. On the heels of solid execution in fiscal 2022, we remain confident in our impressive growth trajectory for that segment. During the last fiscal year, we executed on all aspects of our capital allocation strategy, investing $44 million with the Shoemaker acquisition, and $16 million in capital expenditures. We returned $23.5 million of cash to our shareholders through our share repurchase program and dividends. Subsequent to fiscal year end, we increased our quarterly cash dividend by 13 percent, or to 17 cents per share, indicating confidence in our fiscal 2023 outlook. And we have continued to repurchase shares. This was our second consecutive annual dividend increase, which followed a 17% per share increase in April of 2021. Turning now to our acquisition integration update. The Shoemaker integration is progressing well, and we look forward to having the first full year of Shoemaker results included in our contractor solution segment in fiscal year 2023. We also completed the formal integration of TruAir into RectorSeal, including the full ERP implementation at TruAir. This critical step improves our ability to stock RectorSeal products in all seven distribution centers across the United States, providing geographic proximity to better serve our customers. This is a significant enhancement for our customer service model, as we now provide one point of contact, one invoice, and enhanced visibility on inventory and pricing through our digital ordering platform. We are now positioned better than ever to be the reliable partner for our customers. Our M&A strategy remains active, with many of our best ideas generated organically from within our organization. Our capital allocation decisions remain focused on maximizing shareholder value on a risk-adjusted returns basis. This disciplined approach favors our current platforms, serving the same customers and in markets through our extensive distribution channels. The strength of our balance sheet provides ample capacity to act decisively and quickly on acquisitions as opportunities arise. Each quarter, we provide an update on our commitment to treat our employees well and our distinctively employee-centric culture. This quarter, I would like to expand upon our pay for performance culture. For fiscal year 2022, our board of directors recently approved annual performance bonus and profit sharing incentive payments for all of our domestic employees. As we've shared previously, all domestic employees are also eligible participants in our employee stock ownership plan, which provides direct alignment of interest with our shareholders. Our profit-sharing programs include a 6% ESOP contribution and a 3% discretionary 401 match, which is in addition to our standard 6% 401 participant match. Providing for a safe, secure, and dignified retirement along with our competitive profit-sharing programs are two of the ways we strive to remain an employer of choice, to retain quality talent, to maintain turnover rates that are lower than industry averages. In fact, recently we completed our annual retention review, and our company-wide retention rate exceeds manufacturing industry averages. I would be remiss if I did not acknowledge the dedication of our TrueAir Vietnam team members. Immediately prior to the pandemic lockdown last fall, our facility in Vietnam regularly employed 1,300 team members. In a very short period of time, this was reduced to only a few hundred employees who for three months lived at our facility manufacturing and shipping product to continue supplying our customers. During this period, we paid a premium to those at the facility and a stipend to those employees who remained on standby status. Our approach to compensation was both the right thing to do and it helped us quickly restore production. Once the restrictions were lifted, we had over 800 employees on site within a week. And today, we are at full strength with 1,400 employees. And I'm especially proud of all that our team accomplished in the face of this unprecedented adversity. Our products remain in high demand, and our team is working hard to meet that demand. Our collective efforts have positioned our company for long-term sustainable growth and profitability. And now at this time, I'd like to turn the call over to James for a closer look at our results, and then I'll conclude our prepared remarks with some longer strategic outlook.