CSW Industrials, Inc.

Greetings and welcome to CSW Industrial's fourth quarter and full year fiscal 2023 earnings conference 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. At this time, I'd like to turn the conference over to your host, Alexa Huerta. Thank you. You may begin.

Thank you, Rob. Good morning, everyone, and welcome to the CSW Industrials Fiscal 2023 Fourth Quarter Earnings Call. Joining me today is 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, 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.

Thank you, Alexa. Good morning, and thank you for joining our fiscal fourth quarter conference call. I'm pleased to report that in fiscal 2023, we continued our successful track record of delivering exceptional performance. Our commitment to treat our employees well, to serve our customers well, and to manage our supply chains effectively drove exactly the kind of growth and revenues and profitability that we had hoped for. Fiscal 2023 represented another record year of revenue, EBITDA, and earnings per share. Today, we reported record revenue of $758 million, 21 percent growth over the prior year. Organic growth represented 15.3 percent of the total growth, with the balance coming from our recent acquisitions, all of which are reported on our contractor solution segment. EBITDA reached a record $174 million, or 31 percent growth, over the prior fiscal year. Finally, our record EPS was $6.20, an increase of 41 percent compared to $4.39 as adjusted in the prior fiscal year. These record results are attributable to our diversified business model, discipline to capital allocation, and commitment to operational excellence, which drove impressive operating leverage despite global and financial market uncertainties. As compared to the prior year, sales increased all three segments, driven by positive pricing actions and growth from our acquisitions. Our contractor solutions segment achieved record sales of $514 million, including record HVACR in market sales of $418 million, an $83 million or 25% increase in our HVACR sales. including organic growth of 51 million, despite a slight decline in unit volume. Our contractor solutions team deserves recognition for exceeding our expectations again this year, while successfully integrating multiple acquisitions and managing significant challenges presented by inflation and supply chain constraints. I want to congratulate and thank Don Sullivan and his team, including Jeff Underwood, the segment's Senior Vice President for Sales and Marketing, for their extraordinary performance in fiscal 2023. In recognition of this team's hard work, I'm pleased to share that we were recently named Supplier of the Year by Johnstone Supply, which is their only external vendor award that is given each year. Our Engineered Building Solutions segment grew by $7 million, or 7%. Scott Stratton and his team effectively promoted 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 2022. As a result of the EBS team's productive commercial efforts, this segment's backlog as of the end of 2023 achieved an all-time high. and then reached another all-time high by the end of April, signaling a tailwind into fiscal 2024. Our specialized reliability solution segment achieved record revenue of $147 million, which represents 31 million of organic revenue growth, or 27 percent, as demand strengthened and all end markets served, and commercial and operational execution improved significantly. In fact, segment revenue in the current fiscal year exceeded fiscal 2021 by an impressive 88%, or $69 million. Since Mark Bass joined CSWI in June of 2021, he and his team have enhanced our competitive position within the marketplace and have strategically addressed the demand for our market-leading, highly specialized products. On the heels of this solid execution, in fiscal 2023, we remain confident in our ability to achieve further growth and strong margins in fiscal 2024. During the last fiscal year, we executed on all aspects of our capital allocation strategy, investing $58 million in acquisitions, including Falcon, CoverGuard, and AC Guard, as well as $14 million in capital expenditures. We returned an aggregate of $46 million of cash to our shareholders through our share repurchase program and dividends. Subsequent to fiscal year end, the board approved a 12% increase in our quarterly dividend to 19 cents per share, signaling our confidence in the business and in our ability to generate cash. On the M&A front, I'm pleased to report that all of our acquisitions during fiscal 2023 are progressing well. I'm impressed with the efficient integration of all of our acquisitions and our ability to offer these new products to our broad base of distribution customers, adding vitality to our portfolio of products. Our M&A strategy remains active, with many of the best ideas and opportunities 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. Inorganic growth remains a key strategic initiative, and we continue to maintain an active pipeline of acquisition opportunities. The strength of our balance sheet and access to capital 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. This quarter, I would like to focus on our pay for performance culture. For fiscal year 2023, our board of directors has once again approved annual performance bonus and profit sharing incentive payments. As we have reported previously, All domestic employees are eligible participants in our Employee Stock Ownership Plan, or ESOP, which results in direct alignment of interest with our shareholders. Our profit-sharing programs in fiscal 2023 included an 8% ESOP contribution plus a 3% discretionary 401 contribution, which is in addition to our standard 401 participant match of 6%. Of note, our 401 plan also boasts a 96% participation rate, which is significantly higher than the recognized industry benchmark. Providing for a safe, secure, and dignified retirement, along with aligning interests with our employees through our competitive profit-sharing programs, are some of the ways we strive to be an employer of choice, attracting and retaining quality talent In fact, as a result of maintaining a consistent focus on our employee-centric culture, we continue to exceed industry standards and retention rates. Recently, approximately 79 percent of our employees participated in our fiscal 2023 engagement survey conducted through Great Place to Work, which showed that our engagement scores remain high, and we were pleased to announce in January of this year that we received the Great Place to Work certification. Our products remain in high demand, and our team is working diligently to treat our employees well, serve our customers well, and manage our supply chains effectively. And I truly believe that our collective efforts have positioned the company for long-term, sustainable growth and profitability. At this time, I'll turn the call over to James for a closer look at our results.