CSW Industrials, Inc.

Greetings, and welcome to the CSW Industrials Fiscal First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief 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 of Investor Relations and Treasurer. Thank you, Ms. Griffin. You may begin.

Thank you, Devin, and good morning, everyone. 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-Q 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. 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 first quarter conference call. In our fiscal first quarter, our team performed remarkably, delivering record revenue, record EBITDA, and record EPS. Today we are proud to report record revenue of $200 million, or 24% growth, over the prior year period. Of the $39 million in total revenue growth, 78% was organic, with the remainder coming from the Shoemaker acquisition that we closed in December 2021. EBITDA reached a quarterly record of $50.5 million, a 21 percent growth compared to the prior year period. Finally, record EPS was $1.88, a 26 percent growth rate over $1.49 as adjusted in the prior year period. We are particularly pleased with these comparative results in light of the extraordinary performance in the fiscal first quarter of last year. As you will recall, in last year's fiscal first quarter, We delivered growth in excess of 75% in revenue and over 100% in EBITDA. While demand remains solid in the end markets we serve, I cannot overstate the importance of operational excellence in driving this performance. Drivers that led to our strong first quarter performance include, first, we protected our profitability with disciplined price actions offsetting ongoing inflation, primarily in raw materials and logistics. We will continue benefiting from our pricing initiatives consistent with the high value nature of our products and our commitment to outstanding customer service. Second, our strategic investment in raw materials and inventory continued to allow us to meet the strong customer demand underlying our record revenue. While supply chain constraints moderated or even improved sequentially, Inflation persists in specific materials and uncertainty remains in the logistics sector. Our supply chain team will continue to diligently monitor and react to evolving market dynamics to ensure that we are the single most reliable supplier to our customers. Third, acquisitions continue to contribute to our success. as we add complementary product categories in our existing end markets served. Shoemaker contributed $9 million of inorganic revenue growth in the second full quarter of our ownership. As we have discussed previously, our acquisition economics typically do not include cost synergies due to the strength of our existing margin profile and our compensation strategies. So we depend on operational excellence as an essential part of our success. In fact, in this fiscal first quarter, our operating expenses as a percent of revenue were down over 200 basis points as compared to the same prior year period. In addition to consolidating TrueAir's operations and director seals just this April, our TrueAir and Shoemaker leadership teams continue to actively assess manufacturing and commercial synergies. Consistent with our growth strategy, we continue to evaluate our portfolio of opportunities and seek attractive bolt-on acquisitions in our existing end markets. Finally, I would like to acknowledge that our team members are directly responsible for these results. At CSWI, having the best team members is a strategic advantage. And our partnership with employees results in high productivity, creativity, excellence in customer service, and collaboration. I would like to extend my thanks to each member of the CSWI team for their hard work and dedication to serving our customers and each other well. Transitioning to a discussion of our segments, each of our three segments achieved record quarterly revenue. Our contractor solution segment achieved record sales of $138 million, a 27 million or 25% increase, including organic growth of $19 million. The strength of this segment lies in leveraging our distribution network and selling high-value products. Our TruAir manufacturing facility in Vietnam returned to full production during the fiscal first quarter in line with our expectations. The steady production of shipping of grills, registers, and diffusers, coupled with recently stabilizing material and freight costs, provides confidence in our ability to meet customer needs. Our engineered building solutions segment continued to expand, reporting record revenue of $29 million, an increase of 11%. During the past two years, this team has intentionally focused on high-growth geographies and new product development, supplemented by an enhanced go-to-market strategy. For a second consecutive quarter, this segment's backlog reached an all-time high, as we were awarded jobs in multifamily residential, institutional, and commercial categories. The increased quantity and quality of products within our backlog reflect our intentional curation of opportunities, while the macro construction indices suggest solid growth potential. For calendar 2022, the American Institute of Architects is now predicting 9.1% growth in total non-residential spending, which compares to their January prediction of 5.4% growth. Together, these provide a tailwind through our fiscal 2023 and into early fiscal 2024. Our specialized reliability solutions segment gained momentum and achieved record revenue of $36 million, growth of $10 million, or 40%, as demand continued in all in-market SERPs. Evidence by incremental unit volumes and supported by the cumulative benefit of the pricing strategy we deployed last year. In fact, in the current period, specialized reliability solutions revenue exceeded its revenue in the same period two years ago, which was our fiscal 2020, by 88%, or nearly $17 million. We expect continued strength in this segment, albeit at a moderating growth rate as compared to these exceptional results. We are well positioned to win in our end markets, and the demand for our products continues to be solid. Our team continues to demonstrate the ability to effectively manage despite a challenging operating environment. Our business model remains resilient with ample opportunity to drive profitable growth, and most importantly, to deliver long-term shareholder value. At this time, I'll turn the call over to James for a closer look at our results, and I will then conclude the prepared remarks with a strategic outlook and a sustainability update.