Q1 2022 CSW Industrials Inc Earnings Call
Greetings and welcome for the E. S doubled your industrial fiscal first quarter 'twenty 'twenty 2 earnings call.
At this time, all participants are in English and only mall Inc.
The question and answer session will follow the formal presentation.
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As a reminder, desk conference is being recorded.
It is now my pleasure to introduce your host Adrianne Griffin, Vice President of Investor Relations and Treasurer. Please go ahead.
Thank you Carl good morning, everyone and welcome to the CSW Industrials fiscal first quarter 2022 earnings call.
Joining me today are Joseph Armes, 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 as.
As well as the supplemental form 8-K regarding a re segmentation.
And all of our available on the Investor portion of our website at Www Dot CSW industrials Dot com.
In conjunction with our re segmentation of announcements we've relaunched our web site the.
The newly designed to site includes descriptions of our new reportable segments expanded information regarding our operations and products corporate responsibility and investor materials.
This call is being webcast and information on how to access. The replay is included in the earnings release during.
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.
The fight 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 Armes.
Thank you Adrian and good morning, and thank you for joining our conference call.
We are extraordinarily pleased to share our fiscal first quarter 2022, consolidated result, reporting nearly 80% growth in both revenue and adjusted earnings per share as compared to the fiscal first quarter of last year on.
Our team delivered $73 million for 77, 3% and total revenue growth.
Of which $36.8 million for 45% was organic growth and $33.5 million for 36, 8% was inorganic growth from our true Air acquisition.
This tremendous outcome was driven by our team's intense focus on understanding our customers' needs.
Active management of our supply chain investment in inventory, bringing.
Bringing the best products to market.
And increasing our wallet share and share of market.
I would also like to highlight that we returned to organic growth in every end market that we serve specifically.
Specifically outperforming the growth of the HVAC industry.
By a significant margin.
To underscore the magnitude of the significance of our topline growth. We can compare this quarter's results to our fiscal first quarter 2 years ago, our fiscal 2020.
For that period, we reported $102.3 million on revenue.
Accordingly fiscal first quarter 2022 represents total growth of $59 million for 57, 6%, including organic growth of $25.5 million or 24, 9% over fiscal 2020.
Yes.
Our adjusted EBITDA this quarter was $45 million representing growth of nearly 108% compared to last year and.
And 67% growth as compared to 2 years ago.
Our profitability remained strong with an adjusted EBITDA margin of 25.1, 21 point for and 23, 7% in the first quarter of each of the last 3 fiscal years.
Yeah.
We are also reporting quarterly adjusted earnings per share attributable to CSW eye of $1.46.
Which is 80% growth over the 81 cents per share in the prior year period, and 44, 6% growth over the 1 dollar in 1 sense, we reported in fiscal first quarter of 2020.
While we're very pleased with our strong quarterly consolidated results, we're not satisfied.
Our diligent pursuit of operational excellence, our expectation of outperforming the end markets. We serve on our commitment to robust profitability establish the manner in which we assess performance across all areas of our organization.
And we will continue to swiftly respond to address the resolve any under performance.
Since we have now owned true air for over 2 full quarters, we wanted to provide financial and operational updates.
The demand for our true air products is strong.
And the results are exceeding the expectations, we had when we made the decision to acquire that business.
The commercial integration occurred promptly after closing and we are actively executing the next phases of our integration plan.
The region of Vietnam, where our true Air manufacturing operation is located was recently placed under enhanced COVID-19 restrictions.
We have taken appropriate actions to ensure that we can continue operations, while protecting the health safety and welfare of our employees.
Production levels at this facility are currently reduced to help satisfy COVID-19 protocols and our manufacturing is focused on products with the highest demand.
For context in the recent weeks prior to the reduced production levels. We shipped an average of 36 containers a week from Vietnam to the United States.
Last week, we shipped 14 containers.
We are continuing with our current operational plan. However, we are monitoring the situation closely and are prepared to respond to any further disruption.
We anticipate that our focused production plan through this restriction period in conjunction with inventory on hand in our U S distribution centers will be sufficient to meet customer demand for the foreseeable future.
Our fiscal first quarter results reflect the sound measures established by our leadership team. The early months of last fiscal year, which were executed in an ongoing manner by CSW team members around the globe.
We remain.
Steadfast in our commitment to the guiding objectives, we previously articulated and our outcomes have demonstrated the we are focused on the right solutions to the benefit of our team members our customers communities and our shareholders addressing many aspects of our corporate sustainability efforts.
Over the past several quarters, we have shared specific metrics that provide insight into our guiding objective to treat our employees well.
And our recently filed proxy statement, we share an important metric for communicate the effectiveness of our focus on safety total recordable incident rate or T. Our IR.
At the end of calendar 2020, our T. Our IR was 3 point too which was improved over calendar 2019.
And through the first 6 months of calendar 2021, our T. Our IR.
Was 1.5 demonstrated continued meaningful improvement year over year.
Additionally, we recently announced that 2021, CSW Ais scholarship recipients, who were awarded a total of $50000 of assistance to further their education.
The scholarship fund was established for years ago and has awarded a total of $200000 to 26 students.
Recipients of the scholarships must be dependence of our CSW hi, Tim team members and attend the technical College work 2 or 4 year University.
Of the 26 recipients to date, 61% or their families first generation to pursue of post secondary education, we're very proud of those students and of our company's investment in their future.
Returning to our recent results our capacity to serve our customers well, which is another guiding objective was demonstrated through our outstanding revenue growth.
Demand for our products correlates with strong sell through channel inventory restocking and general improvement in the health of the global economy.
To address the ongoing inflation of materials freight and commodities during the first fiscal quarter across all segments and end markets served.
We took price actions to protect profitability.
These price actions were implemented at various points in the quarter and therefore this quarter's results do not reflect the full benefit of those price actions, resulting in some margin compression in certain end markets served.
Additional pricing actions have taken place since the end of the fiscal first quarter.
And we continue closely monitoring the cumulative impact of realized pricing actions and ongoing cost inflation to determine if further action is needed to protect profitability.
While we are managing the same supply chain constraints that others are discussing we of qualitative data that indicates we are performing significantly better than competitors on lead time and product availability across the end markets that we serve.
Reflective of our guiding objective to manage our supply chain effectively.
We believe that we provide a premium product concurrent with best in class availability and customer service and we will continue to appropriately address price inflation.
At this time I will turn the call over to James for a closer look at our segment results Jamie. Thank you Joe and good morning, everyone.
Earlier this morning as disclosed on our form 10-Q, and our quarterly earnings release, we announced the strategic realignment of our reportable segments and we also filed the form 8-K, providing supplemental historical segment information recast to reflect our new reportable segments.
Following the acquisition of true error and the formation of the Whitmore joint venture with shell lubricants, our leadership team in consultation with our board of directors determined it was appropriate to realign our reportable segments to more clearly reflect the manner in which our leadership team reviews business performance and allocates capital.
We feel of this re segmentation provides our investors with a clearer picture of the performance of our various businesses after the acquisition and the formation of the JV.
CSW why is now organized into 3 segments.
Our contractor solutions segment is comprised predominantly of a rectocele and true air businesses, which are well known for the value, adding products, mainly targeting residential and commercial HVAC are on plumbing applications.
Our engineered building solutions segment is comprised primarily of our Balco Greco and smoke guard businesses, which provide co driven products focus on life safety that are engineered to provide aesthetically pleasing solutions for the construction refurbishment and modernization of commercial.
<unk> and multifamily residential buildings.
Our third segment of specialized reliability solutions, primarily comprised of our Whitmore business and the Whitmore shale joint venture.
Which for ride products that enhance the reliability performance and lifespan of critical assets in the general industrial energy mining and rail into markets.
Given the enhanced correlation between our reportable segments in the end markets served we believe investors will have improved clarity to understand our performance. We will no longer provide quantitative update on end market sales as these will be appropriately reflected directly within the segment results.
Another item to note in our financials this quarter the.
This is the first fiscal quarter in which we are reporting the results of the Whitmore joint venture.
The joint venture financial results are fully consolidated in the CSW on.
We have reported select financial information on a basis that is attributable the CSW eye.
For clarity these attributable results exclude the net income attributable to the Noncontrolling interest.
As Adrian mentioned in the opening remarks, our new website is available and it along with our quarterly Investor presentation found on the website reflects this new segment structure and incremental joint venture reporting.
Our consolidated revenue during the fiscal first quarter of 2022 increased 77, 3% to $161.3 million.
Compared to $91 million in the prior year period.
The higher revenue was driven by each segment was $64 million from contractor solutions.
$3.5 million from engineered building solutions and $6.4 million from specialized reliability solutions.
Contractor solutions segment revenue was $110.2 million for <unk>.
121% increase from the prior year period due to increased organic sales in to the HVAC, our plumbing and architecturally specified building products end markets, plus the $33.5 million of inorganic growth from true here.
And pricing initiatives that began in the fiscal fourth quarter 2021, and that continued in increased during the fiscal first quarter 2022.
In fiscal first quarter 2022, the segment accounted for 68% of our consolidated revenue.
Adjusted segment EBITDA was $39.4 million for 35, 8% of revenue.
Compared to $17.3 million for 34, 7% of revenue in the prior year period.
Engineered building solutions segment revenue was $25.7 million of 15.8% increase from the prior year period of $22.2 million, principally due to enhanced marketing efforts to promote existing and newly developed products.
Many of these products have a shorter sales cycle, which contributed to our ability to drive growth. Despite a contracting nonresidential construction market.
Segment, EBITDA was $4.3 million or 16, 6% of revenue compared to the prior year period of $4.2 million for $19.1 per cent of revenue.
With the margin decrease due to a shift in sales of lower margin products.
Pricing increases in this segment have been implemented in the second fiscal quarter.
As of the end of the fiscal first quarter, our book to Bill ratio for the trailing 8 quarters was just below 1.
The specialized reliability solutions segment revenue was $25.4 million of 33, 9% increase from the prior year period of $19 million, mostly due to increased sales volumes into the general industrial and energy end markets.
Segment, EBITDA was $1.8 million for 7.3% of revenue approximately flat to the prior year period as growth in material and freight expenses accelerated more quickly and the effectiveness of the implemented pricing initiatives.
The JV contributed income this quarter and is expected to continue growing in future quarters, as we ramp up production, which we are accelerating due to supply of recently, leaving the market.
While we are disappointed in the results from this segment, we remain confident in the expectation of improved profitability in the back half of the year due to improving end market conditions accelerating growth of the JV.
The new segment leadership that arrived in June that has already instituted pricing increases.
Consolidated gross profit in the fiscal first quarter was $68.6 million.
Representing 65% growth from $42.8 million on the prior year period.
With the incremental profit, resulting predominantly from the true air acquisition and increased organic sales volumes.
Adjusted to exclude the final $3.9 million purchase accounting effect from the true of our inventory value step up.
Gross profit was $72.5 million for adjusting resulting in an adjusted gross profit margin of 45 per cent compared to 47% in the prior year period.
As mentioned previously the decline in gross profit margin was primarily due to incremental expenses related to inclusion of the true of our business as well as inflation of material and freight costs. It outpaced instituted price increases in some end markets served.
Adjusted consolidated operating income increased by 99, 3% to $32.4 million equating to a 21% margin and representing a 220 basis point increase over adjusted operating income margin in the prior year period.
Adjusted consolidated EBITDA increased 107, 9% to $45 million from $19.5 million on the prior year period.
Adjusted consolidated EBITDA as a percent of revenue was 25, 1% and 21.4 percentage in the current and prior periods respectively.
Reported net income attributable to CSW odds and fiscal first quarter of 2022 was $20 million for $1.27 per diluted share compared to $12 million or <unk> 81 from the prior year period, which had no adjustments.
The adjusted to exclude the final true up of purchase accounting effect the.
Adjusted net income attributable to CSW I was $23 million for $1.46 per diluted share.
Transitioning to the strength of our balance sheet.
We ended the fiscal first quarter with $15.7 million of cash.
And increased our cash flow from operations to $18.9 million of 33, 8% increase over the prior year period.
During the quarter, we reduced the outstanding amount under our $400 million revolving credit facility by $11 million, resulting in approximately $180 million of availability as of the end of the fiscal first quarter.
As of quarter end, our leverage ratio was less than 1.5 times well within our stated range of 1 to 3 times.
These metrics leaves us well positioned for the continued allocation of capital as outlined in our capital allocation strategy the.
The company's effective tax rate for the fiscal first quarter was 23, 9% on a GAAP basis and the company continues to expect the 25 per cent tax rate for the fiscal year 2022.
With that I'll now turn the call back to Jeff.
Thank you James.
For my colleagues here, we say this often.
<unk> at CSW I, how we succeed matters.
In achieving these outstanding consolidated first quarter results represents an outcome of our commitment to be good stewards of your capital.
Into our goal of delivering long term shareholder value.
Our outstanding revenue growth. During this first fiscal quarter was fueled by the true Air acquisition.
Organic volume growth and contributions from the price actions we've discussed today.
Consolidated EBITDA margins were protected from inflation.
As we look ahead to the remainder of this fiscal year, we continue to expect year over year quarterly growth.
And further expect that the rate of growth will necessarily decline from the 77% growth rate, we realized this quarter as our strong performance in the last 9 months of FY 2021 make future quarter over quarter comparisons more difficult.
As we consider the drivers of expected revenue growth in the remainder of the fiscal year.
We remind everyone that we acquired true error on December 15, 2020, and accordingly fiscal fourth quarter true Air contributions will be included in our organic growth consistent with how we've treated all prior acquisitions.
We expect that the fiscal third quarter will continue to be our lowest revenue quarter due primarily to the seasonally reduced spend in the HVA see our industry.
While we are proactively managing pricing to protect profitability timing differences in the short term headwinds in raw materials and freight could impact margins modestly.
As I commented in my opening remarks, we are not satisfied with the performance of all of our segments, but we are optimistic about the long term health of the end markets, we serve and the strength of our leadership team today to return to consistently improving profitability across our organization.
And before we open the line for questions I'd like to take this moment to thank Bill Quinn.
Who has served on the board of directors of CSW I since our founding nearly 6 years ago.
As part of our strong commitment to the highest of governance standards, we have of mandatory retirement age for directors and.
And after our annual meeting of shareholders later this month.
Bill service on our board will conclude.
Bill has provided thoughtful.
Wise and decisive leadership to our organization.
I would like to thank him for his indispensable contributions as chair of our audit Committee.
And as a member of our board.
On a personal note bill has been a mentor to me and is influential presence will be sorely missed.
We wish him the very best as he continues to serve on other boards.
And serving his community.
As always I'd like to close by thanking all of my colleagues here of CSW, who collectively own 6% of our company through our employee stock ownership plan.
And do such a great job as well as all of our shareholders for their continued interest in and support of our company.
With that operator, we're now ready to take questions.
Yes.
Thank you.
We will now begin the question and answer session. The joined the question queue. You May Press Star then 1 on your telephone keypad.
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The first question comes from John Chen Lei Zhang from C. J S Securities. Please go ahead.
Hey, good morning, everyone really really great quarter congratulations on that.
My first question day.
Regarding true error that the commentary from Vietnam seemed a little bit concerning I was wondering how many days of inventory do you have.
Fortunately our net current demand is high level, then I expect them to leave any revenue on the table for the.
Potentially for competitors to regain share or just not being on the meat in the near term quarters.
Yes, John This is James good morning, Thanks for the thanks for the nice remarks, very pleased with the quarter of the dollar 46 of adjusted earnings is a record for us and very happy with that and I. Appreciate the kind words as far as Vietnam. Yeah. We wanted to be sure. The you and our investors were aware of the situation over there is that's not necessarily in the news as much of the <unk>.
Jim over the Air Let me first of all I'll say is doing a tremendous job health and safety of our employees is priority 1 and we've done a great job with that what we've done with the reduced staff that we have and we talked about the container loads we have.
Coming over each week the last couple of weeks and you see the reduction there you all mentioned 2 things we are highly focused on those products in the highest demand as Joe mentioned, we know which products are the fastest moving products as you recall, John when we announced.
<unk> announced the acquisition and even in last couple of quarters earnings calls, we talked about true every carrying a high level of inventory. So they can meet the customer demand very quickly, we don't see that being a problem anytime soon.
We keep a high level of inventory, we talked in fact about debt may be a strategic advantage for us being able to do that when we bought the company and as a result that required some investment we've taken that same tack on some of the other parts of the company the hold a little extra inventory to be safe. These days and we've not had issues getting product to customers at true Ers.
Specifically again, we're focused on what's coming up on those containers is the highest moving products, but we did a pretty deep dive in the analysis and the the true air and rector seal team and contractor solutions did a really good job with this we've got several of them by several on me more than a few months of inventory of the highest moving products already here in the states and more coming on.
Marine containers every week, so we feel very good about being able to meet customer demand for those products for the next several months you know it's hard to look much further than that not many companies talk about several months of inventory, so having that little bit of extra already here of being able to continue to ship product over is of is an advantage to us we think in this market.
Situations, where the change in coming quarters, we'll talk about that but to date, we don't see revenue being left on the table anytime soon.
Got it the comp.
Operating the here. Thank you for the clarification there.
Second I was just wondering if you could comment on demand trends and specifically if you pulled forward anything from Q3 and sometimes the distributors.
Over order or restock of overstock sometime and I think in this environment I think people would want more safety stock of normal as you demonstrated so I'm wondering.
Are you seeing continued demand strength and if so what is what are the components of loss from a total growth of true demand basis.
Sure John Yeah. That's of Great question any key question for US you know we watch closely.
What what the distributors are doing those the publicly report with the Oems are doing all of those not a perfect comp. Obviously you have a few OEM comps out there the genial very well and we generally outperformed the market in the HVAC space and very very pleased with that and that's really a testament to our commercial sales efforts the availability of inventory like I talked about and the team.
To produce and get these products out the door.
But in terms of of the other side of things, we watch very closely the sell through rates of the distributors and those rates were very high. This last quarter. There may be a little deceleration of that and we're starting to see orders kind of I think get an equilibrium with that as Joe talked about.
The comps get harder year over year, because our first quarter last year, we kind of of half of of tough quarter in the back half ended up good last year, our second and third quarter of a very strong we're starting out this quarter very well again, we feel good about demand is still there. It's always hard to know until you get on the other side is there a pull forward demand, but again the sell through rates that we were.
Watch very closely at the couple of institutions that published at <unk>.
Tell us that the distributors are selling what they're buying so we feel right now that theres not much pull forward time will tell if there's a little bit but the demand is still strong and John. This is Joe 1 thing I would add to that is that we are building backlog of orders that we haven't had before I mean in much larger quantities and so.
The businesses that are typically tried to ship out within 24, 48.72 hours of an order of coming in we have significant backlogs. There. So again demand is not a problem at this point and we feel really good about that.
Got it that's helpful.
And I really appreciate you breaking out the debt.
The architectural business.
Into the income statement structure I was wondering on the go forward basis are you expecting continued improvements for the levels or is there more of the trough behind the model.
Construction.
Tim continues to be a little bit weaker.
Yeah.
Yes, and thanks for thanks for recognizing the new segments. We are pleased to be able to present that we think over time, it's going to make things easier for everybody and you can you can see the historical performance of the segments in the 8-K, we published in terms of that segment, specifically with VAALCO Greco and smoke guard, it's going to be a bit of of mix we are seeing.
What looks in 2022 like a downturn in commercial construction that leads to some of what these businesses of sell of course, I'm, having a little less demand. There is a backlog on these businesses. We are seeing however, bidding activity up order activity up and we're starting to rebuild some backlogs in these some of those there were a few quarter.
As out as we always talk about so without getting real specific business by business right now some of the some of the products. In these businesses are kind of moving into the air pocket, we've talked about for a while on a little bit of a little bit of a trophy. Following the the commercial side of things, but some of the other businesses and products are still performing very well those are shorter term in nature.
<unk> and that's what's really helped this business up to have nice margins of nice revenue growth year over year. So we will continue to update that but the trends. We are seeing youre right that there seems to be a downturn in commercial construction. This year, because obviously coming out of the pandemic of lot of projects were put on hold some of those are getting ramped back up and we're seeing that in orders for projects that will but it'll be.
The completed later this year and into early next fiscal year, but we are strongly optimistic about fiscal 2023 for that business John and so we can already begin to look through the back half of the year here and see we were setting up for a nice year in fiscal 2023 there.
Okay.
Okay, great. Thank you for that and then last 1 from me.
For the pricing increases in the.
And the reliability segment.
The increase the margins on the sequential basis.
Yeah, I'll say a couple of things.
That was the business that probably was the latest in the timing of the price increases part of that was due to kind of our change of leadership and really getting the feet on the ground on working through that some of the ones you've got some contractual relationships that business has some backlog and it has to work its way through.
You had some higher price costs coming through pretty quickly and it's taken us a little bit of time to get that pricing increase to really offset that from a margin perspective. So you had some degradation, we're going to see some of that this quarter as well before we really kind of get our sea legs, there and that's really starts kicking in the contractor solutions businesses and I'll come back to the reliability for a contractor salute.
<unk> was able to do that early and often during the quarter and continues to an engineered building solutions had success, there as well, but the specialized reliability solutions segment.
A bit of a headwind there I'd say a couple of things in terms of margins number 1 as we go through not specifically in my remarks mentioned the back half of the year looking a little through this current quarter that were that were in the middle of now to the back half of the year, we see those pricing increases really having nice effect all the way through the back half of the year I will also say as.
The demand of business is picking up in the end markets served in that space The general industrial the.
The mining the rail the energy space demands picking up so volumes are picking up you saw that year over year, obviously on the numbers and then lastly, the JV as the joint venture of ramping up very quickly and we're even accelerating some of that because we mentioned some supply of leaving the market and we have an opportunity to fill that demand that all leads to better absorption of the plant you.
Very well John in most of our investors do the way of a very nice facility that had a lot of capacity and 1 reason the JV was very elegant for us and works very well is to fill that capacity. So between the organic demand in the JV demand. We think we have good opportunity back half of the year and fully expect to have back half of this year and certainly into next fiscal year margin improve.
Is going to be quite noticeable.
Yeah.
Okay. Thanks for that.
Thank you John.
Thanks, John.
The next question comes from Chris Howe from Barrington Research. Please go ahead.
Hi, good morning, everyone.
Good morning, Chris.
Good morning, young jumping right in here on them.
I apologize if this was asked earlier juggling multiple things for this morning.
But as we think about this pressured environment.
That may or may not pressure profit can you talk about.
Anything in the quarter.
Got it.
As far as the timing of orders or anything to point out there that might have might be pushing into the.
The into the following quarter end.
As far as the price increases you mentioned it.
As to how it relates to the reliability segments.
Can you talk about just how this environment is playing out versus your expectation without.
Kind of getting into a quantifiable number.
Okay.
Yeah. Good morning, Chris This is James I'll start and Joe Joe I'll add a little bit to that you know the.
First question you asked about timing of orders I think where I would point to nothing unusual other than what Joe mentioned a minute ago about backlog, we did have some backlog and some of our businesses because the demand has been so strong.
And so in order that was placed may be in our fiscal first quarter. The revenue we may see here in the fiscal second quarter because of those backlogs. We have a couple of product lines, where that builds and we got some relief when we had some good some good shipment of product come in and got that out the door. So other than that nothing unusual in terms of timing of orders that I would talk about this quarter.
In terms of the reliability solutions segment as I mentioned earlier opportunity for pricing increases their opportunity to continue to focus on which products have the best margin opportunity, where we need to focus our capacity, which geographies have the best margin opportunity.
Where we need to focus our sales efforts and our capacity and I think we're heading in the right direction in that respect Jeff Yeah, I think there's a laser focus on this within the management team and a while.
As James said, the reliability business got a little bit of a late start everybody is highly focused on this and we see no reason why we won't have the pricing power available too.
The protect our profit and that's absolutely our our commitment and Chris 1 thing I'll mentioned, we've mentioned it a couple of times just to.
To clarify on Al I'll, let you ask your next question is what we're really focused on first is profit dollars. So as we increase our prices. Our first goal is to be sure. We're covering the cost increases which spanned across raw materials airborne Frey, our seaborne freight excuse me and labor all of those has cost increases some of those likely.
I'll go back down on something like freight likely will over time as we see some congestion relief, but some costs won't but our pricing increases have been 2 of least cover those costs from a dollar perspective, as we were able to in the market increased price beyond that we can protect that margin percentage. So while margin percentage may see a little bit of of headwind as you mentioned those dollars.
We feel very good about and thus the record year over year earnings.
That's great color on it led me to another question that didn't have plans.
As we think about these price increases.
If we look at true are you of a good market position and the brand names that you carry on some of the other areas of the business.
Is this an opportunity for the company to take price.
Other words.
Not give some of it back is this inflationary environment are strained environment starts to loosen.
Given your market position.
Yes, Chris I think youre right that there there'll be some stickiness on some of this pricing, but we're going to take a long term perspective with respect to our customers and treating our customers well of serving our customers well is 1 of our guiding principles and so.
Being overly optimistic in this environment is probably not the right approach either so.
We're going on we're going to we're going to work through that but take a long term perspective, but there is no question that the price increases.
Have some stickiness to them some of these commodity some of these freight costs those types of things will come down.
They're all cyclical and.
We'll see how it plays out from there.
Okay and 1 last question.
He has been asked but.
There arent many companies around with your capital structure, you got a leverage ratio of less than 1.5 turns.
Surely we have to make sure.
True heirs integrated for.
Ali.
But as you kind of navigate this environment from a competitive perspective.
I would assume your pipeline for inorganic growth is only growing and it's just about being disciplined and making sure that fits the timing of the company.
Yes, Chris I couldn't agree more I mean, I think we are setting up very very nicely with a lot of free cash flow, a really strong balance sheet of lot of dry powder.
And as you said this 1 is key we have a demonstrated track record of being disciplined and waiting for the right opportunity is true air was but then being decisive.
And of.
Of taken advantage of the opportunities so.
We're looking for another opportunity to do that and with every passing day.
We're getting closer to that because.
The integration of the JV and and the.
True are going well.
And where we're going to be an of integrate positioned to.
Ops to allocate capital.
The 2 inorganic growth opportunities, but again disciplined is the word of the day, we're not going to overpay and we're going to make sure. It's the right acquisition at the right price so that it creates shareholder value.
Alright, great and thank you to you and the team for a great quarter.
Great. Thank you very much.
This concludes the question and answer session I would like to turn the conference back over to Mr. Joe Armes for any closing remarks.
Yeah I just wanted to say thank you very much for joining us today I know, it's a busy week and appreciate your your interest in CSW eye and look forward to doing this again next quarter. So thank you take care.
Okay.
This concludes today's conference call you may disconnect your lines. Thank you.
You for participating and have a pleasant day.
Yes.
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Yes.
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Okay.