CSW Industrials, Inc.

Good day and welcome to the CSW Industrial's second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Alexa Huerta, Vice President, Investor Relations. Please go ahead, ma'am.

Thank you, Rocco. Good morning, everyone, and welcome to the CSW Industrials Fiscal 2024 Second 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, updated investor relations presentation, and formed 10Q prior to the market's opening today, all of which are available on the investors 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, everyone. Our team continues to outperform the markets we serve and deliver impressive results against strong prior year period results. Our second quarter results demonstrate our ability to leverage our robust distributor relationships, drive operational execution, and prudently manage expenses. This morning, we announced record second-quarter revenue of $204 million, record second-quarter earnings per diluted share of $1.93, and record second-quarter EBITDA of $53 million. We also continue to deliver outstanding operating leverage as EBITDA grew 21 percent on 7 percent growth in revenue, with equally impressive EBITDA margin expansion of 300 basis points to 26 percent. We also announced record first half results and revenue of $407 million in earnings per diluted share of $3.90 and an EBITDA of $107 million. For the second quarter in a row, we delivered outstanding cash flow from operations with a record fiscal second quarter total of $45 million. This led to a pay down of $37 million of borrowings under our revolving credit facility in the second quarter and an $80 million pay down for the first half of this fiscal year, reducing our interest expense and providing us significant flexibility to pursue future opportunities as they arise. As we mentioned on our recent earnings calls, the cost of ocean freight has returned to more normal levels in the last few quarters. Since the beginning of fiscal 2024, we have also reduced our domestic freight expense and driven additional operational efficiencies versus the prior year. As we continue to staff for growth and retain our exceptional employees, we are experiencing increased compensation expenses. The amortization of intangible assets has also increased as a result of recent acquisitions. By successfully implementing a solid pricing strategy across all three segments and with our gross margin savings from freight expenses, we have been able to achieve operating leverage and further expand our margins. We continue to prioritize capital allocation decisions on a risk-adjusted returns basis with the ultimate goal of enhancing long-term shareholder value. We are often asked about our approach to M&A and our strategy has not shifted. We will continue to pursue both internal and external opportunities for growth that support our healthy margins, and we will continue to maintain a pipeline of acquisition opportunities. I want to touch briefly on our segments, and then James will provide the additional details on our performance. Overall, I'm pleased with the execution of all three business segments. We are now approaching the slower season for our contractor solutions segment, but our team is highly focused on delivering another year of market outperformance despite the HVACR industry currently experiencing a decline in residential volumes. The strength of this segment centers around leveraging our robust distributor relationships, optimizing acquisition integration, and delivering high-value products to our customers. we are able to quickly acquire or master distribute products, resulting in sales at a faster and more cost-effective rate due to our strong relationships with our suppliers, our network of sales representatives, logistics leverage, and back office support. This allows us to do what we have always done with excellence, which is to focus on serving our customers well and being a great partner as we add new products to our portfolio. Our specialized reliability solution segment revenue was relatively flat in the quarter. The capacity utilization in our primary facility continued to improve over the prior year, and our team there remains focused on top and bottom line growth. The SRS team has made notable improvements in operational efficiencies and quality, which give us confidence and our ability to reach our EBITDA margin goals for the full fiscal year. Industrial and markets are relatively stable, but we have seen some softening in energy, mining, and rail. As an update on the Shell joint venture, we have elected to defer a portion of the planned capital expenditures as we assess the timing of production needs. We continue to work with Shell on forecasting their production requirements. On engineered building solutions, our engineered building solutions segment was up with an increase in revenue of 13 percent in the quarter due to timing of project completions benefiting from our record backlog as well as positive pricing initiatives. For the seventh consecutive quarter, this segment's backlog reached an all-time high with Greco, our aluminum railing business, continuing to drive most of the growth. We continue to especially see strength in our Canadian market. The project mix in our record backlog skews more toward larger jobs, which can take more than two years to turn into revenue. But the vast majority of the backlog has, at a minimum, broken ground. We are still highly focused on pursuing institutional and multifamily projects undertaken by the highest quality developers with the highest likelihood of completion. Our EBS team continues to perform well. Before I turn the call over to James, I would like to remind everyone of the demonstrated resiliency of our business model. Strengths of our business model include diversification of our product portfolio and of the end markets we serve, as well as the consumable nature of many of our products that are used either in maintenance, repair and replacement applications, or to extend the reliability, performance, and lifespan of mission-critical assets. Specific to our largest end markets, HVACR and plumbing, the products we sell and the value they provide are often non-discretionary, fundamental necessities for both homeowners and businesses. We continue to outperform in the categories we compete. We maintain a strong balance sheet that allows us to withstand market headwinds. with ample liquidity that affords us the ability to pursue growth opportunities that arise across our entire portfolio of businesses. At this time, I'll turn the call over to James for a closer look at our results, and then I will conclude our prepared remarks.