Q1 2025 CSW Industrials Inc Earnings Call

Operator: Greetings and welcome to the CSW Industrials Inc. Fiscal 2025 First Quarter 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, Alexa Huerta, CSWI's Vice President of Investor Relations and Treasurer. Thank you. You may begin.

Unknown Executive: Greetings and welcome to the CSW Industrials Inc. Fiscal 2025 first quarter earnings call. At this time, all participants aren't 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.

Greetings and welcome to D. C. S. W. Industrials, Inc. Fiscal 2025 first quarter 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.

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This conference is being recorded it is now my pleasure to introduce your host Alexa Huerta C. S. W is vice president of Investor Relations and Treasurer. Thank you you may begin.

Alexa Huerta: It is now my pleasure to introduce your host, Alexa Huerta, CSWI's Vice President of Investor Relations and Treasurer.

Unknown Executive: Thank you. You may begin.

Unknown Executive: Thank you, Michelle.

Alexa D. Huerta: Thank you, Michelle. Good morning, everyone, and welcome to the CSW Industrials Fiscal 2025 First Quarter Earnings Call. Joining me today is 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, updated investor relations presentation, and Form 10-Q prior to the market's opening today, all of which are available on the Investors portion of our website, at www.cswindustrials.com.

Alexa D. Huerta: Thank you Michele good morning, everyone and welcome to the CSW Industrials' fiscal 2025 first quarter earnings call.

Alexa Huerta: Good morning, everyone, and welcome to the CSW Industrials Fiscal 2025 first quarter earnings call. Joining me today is 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, updated investor relations presentation, and formed 10-Q prior to the market's opening today, all of which are available on the investor's 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.

Speaker Change: Joining me today is Joseph Armes, Chairman, Chief Executive Officer, and President of CSW, Industrials, and James Terry Executive Vice President and Chief Financial Officer.

Speaker Change: We issued our earnings release updated Investor Relations presentation and Form 10-Q prior to the market's opening today all of which are available on the investors portion of our website.

Alexa D. Huerta: This call will be webcast, and information on accessing the replay is included in the earnings release. During this call, we will make four forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainty. 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 Jeff.

At Www Dot CSW industrials Dot com. This call is being webcast and information on accessing the replay is included in the earnings release.

Speaker Change: 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.

Alexa Huerta: 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.

Jeff: 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 we do not undertake any duty to update any forward looking statements I will now turn the call over to Jeff.

Joseph Armes: I will now turn the call over to Joe. Thank you, Alexa. Good morning, everyone. I'm proud to report that once again, our team has delivered record results in the first fiscal quarter of 2025 and has outperformed the markets we serve. This morning, we reported all time highs for each of our quarterly revenue of 226 million, EBITDA of 65 million, earnings per deleted share of $2.47, net income of 39 million, and cash flow from operations of 63 million. Our lowest profit margin expanded an additional 220 basis points to 47.5%, as a result of pricing, favorable product mix, cost containment, and operational efficiency.

Joseph Brooks Armes: Thank you, Alexa. Good morning, everyone. I'm proud to report that once again, our team has delivered record results in the first fiscal quarter of 2025 and has outperformed the markets we serve. This morning, we reported all-time highs for each of our quarterly revenue of $226 million, EBITDA of $65 million, earnings per diluted share of $2.47, income of $39 million, and cash flow from operations of $63 million. Gross profit margin expanded an additional 220 basis points to 47.5% as a result of pricing, favorable product mix, Cost Containment, and Operational Efficiency. Our EBITDA margin also expanded by 210 basis points. 28.9% in the quarter.

Jeff: Good morning, everyone.

Jeff: I'm proud to report that once again, our team has delivered record results in the first fiscal quarter of 2025, and it's outperformed the markets we serve.

Jeff: This morning, we reported all time highs for each of our quarterly revenue of $226 million.

Jeff: EBITDA of 65 million earnings per diluted share of $2.47 that income of 39 million and cash flow from operations of 63.

Jeff: Gross profit margin expanded an additional 220 basis points to 47, 5% as a result of pricing.

Jeff: Favorable product mix cost containment and operational efficiency.

Joseph Armes: Our EBITDA margin also expanded by 210 basis points to 28.9% in the quarter. Our sharp focus on cash flow from operations drove a fiscal first quarter record of $63 million, or 24.7% growth over the prior year. Our strong cash flow will continue to fund our capital allocation strategy, and we remain focused on building our pipeline of inorganic investment opportunities with returns that will grow shareholder value. During the fiscal first quarter, we utilized our strong cash flow to pay down the outstanding debt on our revolving credit facility by $51 million. We ended the quarter with a balance of $115 million outstanding on our $500 million facility, allowing us to further reduce our interest expense and to maximize the capital available to us, which will fund future opportunities as they arise.

Jeff: Our EBITDA margin also expanded by 210 basis points to 28, 9% in the quarter.

Joseph Brooks Armes: Our sharp focus on cash flow from operations drove a fiscal first quarter record of $63 million, or 24.7% growth over the prior year. Our strong cash flow will continue to fund our capital allocation strategy, and we remain focused on building our pipeline of inorganic investment opportunities with returns that will grow shareholder value. During the fiscal first quarter, we utilized our strong cash flow to pay down the outstanding debt on our revolving credit facility by $51 million. We ended the quarter with a balance of $115 million outstanding on our $500 million facility.

Jeff: Our sharp focus on cash flow from operations drove our fiscal first quarter record of $63 million or 24, 7% growth over the prior year.

Jeff: Our strong cash flow will continue to fund our capital allocation strategy and we remain focused on building our pipeline of inorganic investment opportunities with returns that will grow shareholder value.

Jeff: Yeah.

Jeff: During the fiscal first quarter, we utilized our strong cash flow pay down the outstanding debt on our revolving credit facility by $51 million.

Jeff: We ended the quarter with a balance of $115 million outstanding on our $500 million facility.

Joseph Brooks Armes: Allowing us to further reduce our interest expense and to maximize the capital available to us, which will fund future opportunities as they arise. Our balance sheet strength. Equity and increasing cash flows give us the luxury of being able to quickly act on business opportunities such as these. Once again, each of the three business segments impressed during the quarter with their execution, resilience, and ability to deliver results. I will let James provide more details on the performance of each segment during the quarter.

Allowing us to further reduce our interest expense and to maximize the capital available to us, which will fund future opportunities as they arise.

Joseph Armes: Our balance sheet strength, liquidity, and increasing cash flows give us the luxury of being able to quickly act on business opportunities of size. Once again, each of the three business segments impressed during the quarter with their execution, resilience, and ability to deliver results.

Jeff: Our balance sheet strength liquidity and increasing cash flows give us the luxury of being able to quickly add on business opportunities of size.

Jeff: Once again each of the three business segments impressed during the quarter with their execution resilience and ability to deliver results.

Joseph Armes: I will let James provide more details on the performance of each segment during the quarter. CSWI has a demonstrated nine-year track record of increasing long-term shareholder value. We continue to maintain a strong balance sheet, grow revenue meaningfully, and efficiently allocate capital using a rigorous, risk-adjusted returns analysis to Gaia's. The power of our product distribution model is one key to our success, allowing us to grow faster than our market served, and our acquisitions benefit greatly from this model. At CSWI, we also care about how we succeed, so we prioritize investing in our team members, well-being, and focusing on our customers, which positions us for sustainable, long-term growth and profitability.

Jeff: I'll, let James provide more details on the performance of each segment during the quarter.

Joseph Brooks Armes: CSWI has a demonstrated nine-year track record of increasing long-term shareholder value, growing revenue meaningfully, and Efficiently Allocate Capital Using a Rigorous Risk-Adjusted Returns Analysis to Guide Us. The power of our product distribution model is one key to our success, allowing us to grow faster than our market served, and our acquisitions benefit greatly from this model. At CSWI, we also care about how we serve.

Jeff: C. S. W. O I has a demonstrated nine year track record of increasing long term shareholder value.

Jeff: We continue to maintain a strong balance sheet grew.

Jeff: Grow revenue meaningfully.

James: And efficiently allocate capital using a rigorous risk adjusted returns analysis to guide us.

James: Power of our product distribution model is one key barca, one key to our success, allowing us to grow faster than our markets served and our acquisitions benefit greatly from this model.

Jeff: At CSW are we also care about how we succeed so we prioritize investing in our team members wellbeing and focusing on our customers, which positions us for sustainable long term growth and profitability.

Joseph Brooks Armes: So we prioritize investing in our team members' well-being and focusing on our customers, which positions us for sustainable, long-term growth and profitability. At this time, I will turn the call over to James for a closer look at our results, and following that, I will return and conclude our prepared remarks. Thank you, Joe. Good morning, everyone.

James Perry: At this time, I will turn the call over to James for a closer look at our results, and following that, our return will include our prepared remarks. Thank you, Joe. Good morning, everyone. As Joe mentioned, our consolidated record revenue during the fiscal first quarter of 2025 was $226 million. The $23 million or 11 percent increase would compare to the prior year period and a record all-time quarterly high for CSWI. $16 million of the growth was organic, mainly through increased volumes and surprising initiatives. The remaining $7 million of growth came from the acquisition of Dust-Free in February of this year.

Jeff: At this time I will turn the call over to James for a closer look at our results and following that our return.

James: Our prepared remarks.

James E. Perry: As Joe mentioned, our consolidated record revenue during the fiscal first quarter of 2025 was $226 million, a $23 million or 11% increase when compared to the prior year period, and a record all-time quarterly high for CSWI. Sixteen million dollars of the growth was organic, mainly through increased volumes and some pricing initiatives. The remaining $7 million of growth came from the acquisition of Dustfree in February of this year.

James: Thank you Joe and good morning, everyone.

James: As Joe mentioned, our consolidated record revenue during the fiscal first quarter of 2025 was $226 million or $23 million or 11% increase when compared to the prior year period and a record all time quarterly high for CSW on.

James: $16 million of the growth was organic mainly through increased volumes and some pricing initiatives.

Speaker Change: The remaining $7 million of growth came from the acquisition of dust free in February of this year.

James Perry: Consolidated growth profit in the fiscal first quarter was $107 million, representing nearly 17 percent growth over the prior year period. As Joe mentioned, our growth profit margin improved by 220 basis points to 47.5 percent compared to 45.3 percent in the prior year period. Our record consolidated EBITDA for the first quarter increased by $11 million to $65 million, which was a 20 percent growth when compared to the prior year period. Our EBITDA margin improved by 210 basis points to 28.9 percent. That's compared to 26.8 percent in the prior year quarter, driven by the growth margin expansion.

James E. Perry: Consolidated gross profit in the fiscal first quarter was $107 million, representing nearly 17% growth over the prior year period. As Joe mentioned, our gross profit margin improved by 220 basis points to 47.5% compared to 45.3% in the prior year period. Our record consolidated EBITDA for the first quarter increased by $11 million to $65 million, which was 20% growth when compared to the prior year period. Our EBITDA margin improved by 210 basis points to 28.9% as compared to 26.8% in the prior year quarter, driven by the gross margin expansion.

Speaker Change: Consolidated gross profit in the fiscal first quarter was $107 million, representing nearly 17% growth over the prior year period.

Speaker Change: As Joe mentioned, our gross profit margin improved by 220 basis points to 47, 5% compared to 45, 3% in the prior year period.

Joe: Our record consolidated EBITDA for the first quarter increased by $11 million to $65 million, which was 20% growth when compared to the prior year period.

Joe: Our EBITDA margin improved by 210 basis points to 28, 9% as compared to 26, 8% in the prior year quarter driven by the gross margin expansion.

James Perry: As we mentioned on our fiscal year-end call in May, we will continue to strive for additional EBITDA leverage as we grow revenue and manage expense. However, we are very proud of our recent EBITDA margins, and our team works hard to maintain these levels. Our focus will remain on increasing EBITDA dollars as our revenues grow. Our contractor solution segment, with $160 million in revenue, accounted for 71% of our consolidated revenue and delivered $20.5 million or $14.6% total growth when compared to the prior year of quarter. Above the revenue growth in the quarter, $13.3 million or 9.5% was organic, while the remaining $7.2 million or 5.1% came from the dust free acquisition.

James E. Perry: As we mentioned on our fiscal year-end call in May, we will continue to strive for additional EBITDA leverage as we grow revenue and manage expenses. However, we are very proud of our recent EBITDA margins, and our team works hard to maintain these levels. Our focus will remain on increasing EBITDA dollars as our revenues grow.

Joe: As we mentioned on our fiscal year end call in May we will continue to strive for additional EBITDA leverage as we grow revenue and manage expenses. However, we are very proud of our recent EBITDA margins and our team works hard to maintain these levels.

Joe: Our focus will remain on increasing EBITDA dollars as our revenues grow.

James E. Perry: Net income attributable to CSWI in the fiscal first quarter was a record $39 million, or a record $2.47 per diluted share, compared to $31 million or $1.97 per diluted share in the prior year period, representing growth of 26%. Our Contractor Solutions segment, with $160 million in revenue, accounted for 71% of our consolidated revenue and delivered $20.5 million, or 14.6% total growth, when compared to the prior year quarter. Of the revenue growth in the quarter, $13.3 million, or 9.5%, was organic, while the remaining 7.2 million, or 5.1%, came from the dust-free acquisition.

Joe: Net income attributable to CSW eye in the fiscal first quarter was a record $39 million or a record $2 47 per diluted share compared to $31 million or $1 97 per diluted share in the prior year period, representing growth of 26%.

Speaker Change: Ah.

Speaker Change: Our contractor solutions segment with $160 million in revenue accounted for 71% of our consolidated revenue and deliver $25 million or 14, 6% total growth when compared to the prior year quarter.

Speaker Change: Of the revenue growth in the quarter $13 $3 million or nine 5% was organic while the remaining $7 2 million or five 1% came from the dust free acquisition.

James Perry: Growth for the quarter was reported on all of this segment in markets and was a result of increased unit volumes and surprising initiatives. Additionally, we benefited in the first quarter from a customer adding a new distribution center network that required a one-time stock-up of inventory. Segment EBITDA was $58.3 million or 36% of revenue compared to $46.7 million or 33% of revenue in the prior year period, as our already market-leading margins continue to expand, mostly from volume leverage.

James E. Perry: Growth for the quarter was reported in all of these segments in markets and was a result of increased unit volumes and some pricing initiatives. Additionally, we benefited in the first quarter from a customer adding a new distribution center network that required a one-time stock up of inventory. Segment EBITDA was $58.3 million, or 36% of revenue, compared to $46.7 million, or 33% of revenue in the prior year period, as our already market-leading margins continued to expand, mostly from volume leverage.

Speaker Change: Growth for the quarter was reported in all of this segments end markets and was a result of increased unit volumes and some pricing initiatives.

Speaker Change: Additionally, we benefited in the first quarter from a customer, adding a new distribution center network that required a onetime stock up of inventory.

Speaker Change: Segment, EBITDA was $58 $3 million or 36% of revenue compared to $46 $7 million or 33% of revenue in the prior year period as our already market, leading margins continue to expand mostly from volume leverage.

James Perry: Our specialized raw-ability solution segment revenue decreased 2% to $36.8 million due to a slight volume decrease. During the quarter, a weather event in May at our manufacturing plant in Rockwall, Texas, caused a five-day power outage, leading to a delay in certain revenues as well as higher-than-normal maintenance and IT expenses. Revenue increased in the general industrial and rail transportation in markets, but declined in the mining and energy in markets. Pricing initiatives had a positive impact on revenue in the quarter, but were offset by the slight decrease in volume. The segment EBITDA of $8.5 million in the fiscal 2025-first quarter was in line with the prior year period results.

James E. Perry: Our Specialized Reliability Solutions segment revenue decreased 2% to $36.8 million due to a slight volume decrease. Additionally, during the quarter, a weather event in May at our manufacturing plant in Rockwall, Texas caused a five-day power outage, leading to a delay in certain revenue as well as higher than normal maintenance and IT expenses.

Speaker Change: Our specialized reliability solutions segment revenue decreased 2% to $36 $8 million due to a slight volume decrease.

Speaker Change: During the quarter a weather event in may at our manufacturing plant in Rockwall, Texas caused a five day power outage, leading to a delay in certain revenues as well as higher than normal maintenance and it expenses.

James E. Perry: Revenue increased in the general industrial and rail transportation end markets, but declined in the mining and energy end markets. Pricing initiatives had a positive impact on revenue in the quarter, but were offset by a slight decrease in volume. The segment EBITDA of $8.5 million in the fiscal 2025 first quarter was in line with the prior year period results. However, the EBITDA margin improved 70 basis points to 23% in the current period. Above our EBITDA margin target for this business of 20%.

Speaker Change: Revenue increased in the general industrial and rail transportation end markets, but declined in the mining and energy end markets.

Speaker Change: Pricing initiatives had a positive impact on revenue in the quarter, but were offset by the slight decrease in volume.

Speaker Change: The segment EBITDA of $8 $5 million in the fiscal 2025 first quarter was in line with the prior year period results. However, EBITDA margin improved 70 basis points to 23% and in the current period.

James Perry: However, EBITDA margin improved 70 basis points to 23% in the current period, above our EBITDA margin target for this business of 20%.

Speaker Change: Above our EBITDA margin target for this business of 20%.

James Perry: Our engineer building solution segment revenue increased to $30.9 million, a 12% increase, as compared to $27.6 million in the prior year period. Bidding and booking trends are made solid, and at the end of the fiscal first quarter, our booked bill ratio for the trailing 8 quarters remained unchanged from year-end at 1.1 to 1. Segment EBITDA grew 32% to $6.2 million, or 20% EBITDA margin, compared to $4.7 million and a 17% EBITDA margin in the prior year period. We are pleased to see our EBS segment reach the 20% EBITDA margin target for the quarter, but keep in mind that this will fluctuate on a quarterly basis due to project mix.

James E. Perry: Our engineer building solution segment revenue increased to $30.9 million, a 12% increase as compared to $27.6 million in the prior year period. Bidding and booking trends remained solid, and at the end of the fiscal first quarter, our book-to-bill ratio for the trailing eight quarters remained unchanged from year-end at 1.1 to 1.

Speaker Change: Our engineered building solutions segment revenue increased to $39 million, a 12% increase as compared to $27 $6 million in the prior year period.

Speaker Change: Bidding and booking trends remain solid and at the end of the fiscal first quarter, our book to Bill ratio for the trailing eight quarters remained unchanged from year end at one one to one.

James E. Perry: Segment EBITDA grew 32% to $6.2 million, or a 20% EBITDA margin, compared to $4.7 million and a 17% EBITDA margin in the prior year period. We are pleased to see our EBS segment reach the 20% EBITDA margin target for the quarter, but keep in mind that this will fluctuate on a quarterly basis due to project mix. Transitioning to our strong balance sheet in cash flow, we ended our fiscal 2025 first quarter with $19 million of cash and reported record fiscal first quarter cash flow from operations of $63 million compared to $50 million in the same quarter last year, representing 25% growth over the prior year period.

Speaker Change: Segment, EBITDA grew 32% to $6 $2 million or 20% EBITDA margin compared to $4 $7 million and a 17% EBITDA margin in the prior year period.

Speaker Change: We are pleased to see our EES segment reached the 20% EBITDA margin target for the quarter, but keep in mind that this will fluctuate on a quarterly basis due to project mix.

James Perry: Transitioning to our strong balance sheeting cash flow, we ended our fiscal 2025-first quarter with $19 million of cash and reported record fiscal first quarter cash flow from operations of $63 million compared to $50 million in the same quarter last year, representing 25% growth over the prior year period. The cash flow from operations in the quarter was an all-time record for CSWI. Our free cash flow, defined as cash flow from operations minus capital expenditures, was $59.6 million in the fiscal first quarter compared to $45.3 million in the same period a year ago. That resulted in a free cash flow per share of $3.82 in the fiscal first quarter as compared to $2.91 in the same period a year ago, growth of 31%.

Speaker Change: Transitioning to our strong balance sheet and cash flow. We ended our fiscal 2025 first quarter with $19 million of cash and reported record fiscal first quarter cash flow from operations of $63 million compared to $50 million in the same quarter last year, representing 25% growth over there.

Speaker Change: Higher year period.

James E. Perry: The cash flow from operations in the quarter was an all-time record for CSWI. Our free cash flow, defined as cash flow from operations minus capital expenditures, was $59.6 million in the fiscal first quarter, compared to $45.3 million in the same period a year ago. That resulted in free cash flow per share of $3.82 in the fiscal first quarter as compared to $2.91 in the same period a year ago.

Speaker Change: The cash flow from operations in the quarter was an all time record for CSW off.

James E. Perry: Growth of 31%. As Joe mentioned, this impressive level of free cash flow allows us to invest in growth with the goal of increasing long-term shareholder value. Joe mentioned that we paid down $51 million of our revolver due to our strong cash flows. As a result, our bank covenant leverage ratio at quarter end declined 0.49 times from 0.73 times at the end of fiscal 2024. As a reminder, the company has been in the lowest tier of our revolver pricing grid for a solid year now, reducing our interest rate spread and saving on interest expenses. Our effective tax rate for the fiscal first quarter was 26.4% on a gap basis.

Speaker Change: Our free cash flow defined as cash flow from operations minus capital expenditures was $59 $6 million in the fiscal first quarter compared to $45 3 million in the same period a year ago.

Speaker Change: That resulted in a free cash flow per share of $3 82.

Speaker Change: In the fiscal first quarter as compared to $2 91 in the same period, a year ago growth of 31%.

James Perry: As Joe mentioned, this impressive level of free cash flow allows us to invest in growth with the goal of increasing long-term shareholder value. Joe mentioned that we paid down $51 million of our revolver due to our strong cash flows. As a result, our bank covenant leverage ratio at quarter-in declined to 0.49 times from 0.73 times at the end of the fiscal 2024. As a reminder, the company has been in the lowest tier of our revolver pricing grid for a solid year now, reducing our interest rate spread and saving on interest expense.

James E. Perry: As Joe mentioned this impressive level of free cash flow allows us to invest in growth with the goal of increasing long term shareholder value.

Joe: Joe mentioned that we paid down $51 million of our revolver due to our strong cash flows as a result, our bank covenant leverage ratio at quarter end declined to four nine times from <unk> 73 times at the end of the fiscal 2024.

Speaker Change: As a reminder, the company has been in the lowest tier of our revolver pricing grid for a solid year now, reducing our interest rate spread and saving on interest expense.

James Perry: Our effective tax rate for the fiscal first quarter was 26.4% on a GAAP basis. We still anticipate delivering full-year growth in revenue, EBITDA, and EPS growth, along with strong cash flow.

Speaker Change: Our effective tax rate for the fiscal first quarter was 26, 4% on a GAAP basis.

Joseph Brooks Armes: We still anticipate delivering full-year growth in revenue, EBITDA, and EPS growth, along with strong cash flow. With that, I'll now turn the call back to Joe for his closing remarks. Thank you, James.

Speaker Change: We still anticipate delivering full year growth in revenue EBITDA and EPS growth along with strong cash flow.

Joseph Armes: With that, I'll turn the call back to Joe for his closing remarks. Thank you, James. To summarize, during the first fiscal quarter of 2025, we posted all-time record results for revenue, for EBITDA, for earnings per share, for net income, and for our operating cash flow. Our 11% revenue growth included both organic and inorganic growth and resulted in higher margins due to strong operating leverage. Looking further in the fiscal 2025, CSWI will continue to deliver growth that outpaces our markets served. We will continue to cultivate relationships in our strategic acquisition pipeline to complement our organic growth while maintaining our superior margins.

Speaker Change: With that I'll now turn the call back to Joe for his closing remarks.

Joe: Thank you James.

Joseph Brooks Armes: Summarize, during the first fiscal quarter of 2025, we posted all-time record results for revenue, for EBITDA, for earnings per share, for net income, and for operating cash. Our 11% revenue growth included both organic and inorganic growth and resulted in higher margins due to strong operating leverage. Looking further into fiscal 2025, CSWI will continue to deliver growth that outpaces our markets served. We will continue to cultivate relationships in our strategic acquisition pipeline to complement our organic growth while maintaining our superior margin.

Joe: To summarize during the first fiscal quarter of 2025, we posted all time record results for revenue for EBITDA for earnings per share for net income and for our operating cash flow.

Speaker Change: Our 11% revenue growth included both organic and inorganic growth and resulted in higher margins due to strong operating leverage.

Speaker Change: Looking further into fiscal 2025, CSW I will continue to deliver growth that outpaces. Our markets served we will continue to cultivate relationships and our strategic acquisition pipeline to complement our organic growth, while maintaining our superior margins.

Joseph Armes: At CSWI, we are focused on recruiting and retaining great talent, offering rewarding careers and recognizing team members who excel, while providing them with the opportunity for a safe, secure, and dignified retirement. Hardening with our employees to drive success is a very important part of our strategy. One way that we affect this is through our Employee Stock Ownership Plan. I'm proud to announce that last month, CSWI contributed $4.2 million to our ESOP. This marks the ninth consecutive year of contributions, and CSWI has now contributed an aggregate of 26.5 million to the plan since 2016 at zero cost to our team members.

Joseph Brooks Armes: At CSWI, we are focused on recruiting and retaining great talent, offering rewarding careers and recognizing team members who excel while providing them with the opportunity for a safe, secure, and dignified retirement. Partnering with our employees to drive success is a very important part of our strategy, and one way that we do this is through our employee stock ownership plan. I'm proud to announce that last month, CSWI contributed $4.2 million to our ESOP.

Speaker Change: At <unk>, we are focused on recruiting and retaining great talent.

Speaker Change: Offering rewarding careers and recognizing team members, who excel, while providing them with the opportunity for a safe secure and dignified retirement.

Speaker Change: Partnering with our employees to drive success as a very important part of our strategy.

Speaker Change: And one way that we affect this is through our employee stock ownership plan.

Speaker Change: I am proud to announce that last month, CSW I contributed $4 $2 million to our aesop.

Joseph Brooks Armes: This marks the ninth consecutive year of contributions. CSWI has now contributed an aggregate of $26.5 million to the plan since 2016 at zero cost to our team members. With the growth of our stock price, these ESOP contributions since 2016 have grown to well over $100 million in value today, and together with our 401k match, have helped facilitate retirements for many of our long-tenured team members. Lastly, I just want to close my prepared remarks by thanking the dedicated team here at CSWI, who collectively own 4% of the company through our Employee Stock Ownership Plan, as well as all of our loyal shareholders The show, we're now ready for questions. The interview will now be conducted.

Speaker Change: This marks the ninth consecutive year of contributions and CSW I has now contributed an aggregate of $26 5 million to the plan since 2016 at zero cost to our team members.

Joseph Armes: With the growth of our stock price, these ESOP contributions since 2016 have grown to well over $100 million of value today. Together with our 401(k) match, have helped facilitate retirements for many of our long, tenured team members.

Speaker Change: With the growth of our stock price. These aesop contribution six since 2016 have grown to well over $100 million of value today.

Speaker Change: And together with our 401K match have helped facilitate retirements for many of our long tenured team members.

Joseph Armes: Lastly, I just want to close my prepared remarks by thanking the dedicated team here at CSWI who collectively owned 4% of the company through our employee stock ownership plan, as well as all of our loyal shareholders for their continued investment in, commitment to, and support of CSWI and us.

Speaker Change: So lastly, I just want to close my prepared remarks by thanking the dedicated team here at CSW are who collectively own 4% of the company through our employee stock ownership plan as well as all of our loyal shareholders for their continued investment and commitment to and support of CSW industrials.

Unknown Executive: Michelle, we're now ready for questions. Thank you.

Speaker Change: Michelle we're now ready for questions.

Operator: Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Unknown Executive: We'll now be conducting a question in the answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

Speaker Change: Thank you well now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to have your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys one moment.

Unknown Executive: For participants using speaker equipment, maybe necessary to pick up your handset before pressing the star keys. One moment, please, will we pull for your questions.

Operator: One moment, please, while we poll for your questions. Our first question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your question.

Speaker Change: When we poll for your questions.

John Tanwanteng: Our first question comes from the line of John Tanwanteng with C.J.S. Securities. Please proceed with your question.

Speaker Change: Our first question comes from the line of John Penguin Tang with CJS Securities. Please proceed with your question.

Jonathan E. Tanwanteng: Hi, it's Charlie Strauss of Substituting for John. Good morning. [inaudible] Hey, Joe. Joe, James, can you talk a little bit more about the sustainability of sales and margin? Going into Q2 and looking at Q1, were there any pull forwards or unusual items that we should take into account?

Charlie Stroud: Hi, it's Charlie Stroud of Something for John. Good morning. Hi, Charlie. Hey, Joe.

Charlie's draws: Hi, its Charlie's draws if somebody for John good morning.

Speaker Change: All right Charlie.

Charlie: Hey, Joe Joe James could you talk a little bit more about the sustainability of sales and margin about wisdom.

Charlie Stroud: Joe James, can you talk a little bit more about the sustainability of sales and margin and momentum going into Q2?

Speaker Change: Going into Q2 and.

Charlie Stroud: Looking at queue one, were there any pull forwards or unusual items that we should take into account?

Speaker Change: Looking at Q1 were there any pull forwards or unusual items that we should take into account.

James E. Perry: Yeah, good morning, Charlie. It's James.

James Perry: Good morning, Charlie.

Joe: Yeah. Good morning, Charlie as James Let me just first of all say this was an exceptional quarter really proud of the work the team did.

James Perry: It's James. Let me just first of all say this was an exceptional quarter. Really proud of the work the team did. Prepared well for the demand that was there. I think if you look at our EBS and SRS segment, you know, queue one and queue two, you should see continued type growth opportunities that we saw year-to-year. Margins fluctuate as always given product mix and timing. We talked about the little bit of revenue delay in May and specialized reliability solutions. They pretty much made that up, but obviously that affects you a little bit. But overall, those two segments, would you feel good about that?

James E. Perry: Let me just, first of all, say this was an exceptional quarter. Really proud of the work the team did, and prepared well for the demand that was there. I think if you look at our EBS and SRS segments, you know, Q1 and Q2, you should see continued growth opportunities that we saw year over year. However, margins will fluctuate, as always, given product mix and timing. We talked about the little bit of revenue delay in May and specialized reliability solutions. They pretty much made that up, but obviously, that affects you a little bit.

James: Prepared well for the demand that was there I think if you look at our E. B S and Srs segment, you know Q1 and Q2, you should you should see continued type growth.

James: Growth opportunities that we saw year over year margins will fluctuate as always given product mix and timing, we we talked about a little bit of revenue delay in may and in specialized raw ability solutions. They pretty much made that up but obviously that affects you a little bit but overall those two segments, where do you feel good about that contractor solutions just truly exceptional.

James E. Perry: But overall, those two segments, we do feel good about that. Contractor solutions are just truly exceptional. You asked specifically about pull forward. As I mentioned in my comments, we have one customer that's a large customer of ours that opened a new distribution network, and they had to stock up those distribution centers, and our team did a great job of doing that. Some of that could have been a little bit of a pull-forward. Demand may have come a little sooner than we expected. Q1 versus Q2, another customer placed some large orders near the back part of Q1. So you could say there's a little pull forward from Q1 to Q2.

James Perry: Contractor solutions, just truly exceptional. You asked specifically about pull forward. I mentioned in my comments we have one customer that's a large customer of ours that opened a new distribution network, and they had to stock up those distribution centers, and our team did a great job of doing that. Some of that could have been a little bit of pull forward. The demand may come a little sooner than we expected. Queue one versus queue two. Another customer placed some large orders near the back part of queue one. So you could say there's a little pull forward from queue one to queue two.

Speaker Change: You asked specifically about pull forward I mentioned in my comments, we have one customer that's a large customer of ours that opened a new distribution network and they had to stock up those distribution centers and our team did a great job of doing that some of that could have been a little bit of pull forward. The demand may come a little sooner than we expected Q1 versus Q2, another customer play.

Speaker Change: Some large orders.

Speaker Change: Part of Q1, so you could say theres a little pull forward from Q1 to Q2. So I don't know if I'd say I would expect a repeat performance from a revenue perspective, but we have had.

James E. Perry: So I don't know if I'd say I would expect a repeat performance from a revenue perspective, but, you know, we have had a hot summer in most places around the country, so demand has been solid. From a margin perspective, you know, we said on our Q4 year-end call that maintaining the type of margins we had last year would be our expectation. We obviously exceeded that this quarter. I think looking at the margins we've had over the last several quarters is more realistic, and on a generally go-forward basis, they'll move around some.

James Perry: So I don't know if I'd say I would expect to repeat performance from a revenue perspective, but we have had a hot summer. Most places around the country said demand has been solid from a margin perspective. We said on our queue four year end call that to maintain the type of margins we had last year would be our expectation. We obviously exceeded that this quarter. I think looking at the margins we've had it over the last several quarters as more realistic and generally go forward basis. They'll move around some. But when you had a queue one at contract or solutions with the type of volume pull through that the team was able to accomplish, especially this couple of larger orders that again may have been a little bit of pull forward.

Speaker Change: Summer most places around the country said demand has been solid from a margin perspective, we said on our Q4 year end call that to maintain the type of margins. We had last year would be our expectation, where obviously exceeded that this quarter I think looking at the margins. We've had over the last several quarters is more realistic on a generally go forward basis they'll move.

James E. Perry: But, you know, when you had a Q1 at Contractor Solutions with the type of volume pull through that the team was able to accomplish, especially those couple of larger orders that, again, may have been a little bit of pull forward, that's going to help margins. So to see that business beat its margin number kind of year over year by several hundred basis points, a lot of that's volume-driven. There's some good mix in there, but you've just got a set of kind of fixed overhead costs that don't need to move a lot to push more volume through the system.

Speaker Change: Around some but you know when you had a Q1 at contract our solutions with the type of volume pull through that the team was able to accomplish especially those couple of.

Speaker Change: Larger orders that again may have been a little bit of pull forward, that's going to help margins. So to see that business beat its margin number kind of year over year by several hundred basis points a lot of that's volume driven theres. Some good mix in there, but you've just got a set of kind of fixed overhead cost that they don't need to move a lot.

James Perry: That's going to help margins. So to see that business beat its margin number kind of year over year by several hundred basis points, a lot of that's volume driven. There's some good mix in there, but you've just got a set of kind of fixed overhead costs that they don't need to move a lot to push more volume through the system. So long way of saying really proud of the first quarter. Looking forward to a solid rest of the year. We talked about growing it roughly last year's growth rates plus the acquisitions. We obviously exceeded that queue one that's a seasonally strong quarter, but we're so optimistic for the year in total.

James E. Perry: So, the long way of saying really proud of the first quarter and looking forward to a solid rest of the year. We talked about growing at roughly last year's growth rates plus the acquisitions. We obviously exceeded that in Q1. That's a seasonally strong quarter, but we're still optimistic for the year in total.

James E. Perry: Push more volume through the system, so long way of saying really proud of the first quarter looking forward to a solid rest of the year, we talked about growing at roughly last year's growth rates plus the acquisitions. We obviously exceeded that Q1, that's a seasonally strong quarter, but we're still optimistic for the year in total.

Unknown Executive: Great thanks.

James E. Perry: Great, thanks. Thoughts on the OEM HVAC companies kind of increasing their forecasts and, you know, if that flows through to you guys versus the base kind of MRO demand?

Speaker Change: Great, Thanks, and thoughts on the OEM HVAC companies kind of increasing their forecast in.

Charlie Stroud: It's a lot of time the OEM HVAC companies increasing their forecast and if that flows through to you guys. Yeah, we're encouraged by that clearly to see, you know, all the OEMs, one even this morning, talk about nice year-over-year order volume pickups. You know, the residential OEM market has been soft for the last couple of years. There were some pull-forward from COVID. Obviously, higher interest rates and inflation caused a bit of a headwind for residential HVAC, but you know, I think they've a couple of things I'd mentioned. They've all talked about kind of the destocking is behind them.

Speaker Change: If that flows through to you guys versus the base kind of MRO demand.

James E. Perry: Yeah, we're encouraged by that. Clearly, to see all the OEMs, one even this morning, talk about nice year-over-year order volume pickups. The residential OEM market has been soft for the last couple of years. There was some pull forward from COVID, obviously higher interest rates and inflation caused a bit of a headwind for residential HVAC.

Speaker Change: Yeah, we're encouraged by that clearly to see all the Oems won't even this morning talk about nice year over year order volume pickup in the residential OEM market has been soft for the last couple of years. There were some pull forward from Covid, obviously higher interest rates and inflation caused a bit of a headwind for residential HVAC, but you know I think they've.

James E. Perry: But I think a couple of things I'd mention. They've all talked about how the destocking is behind them. We've said that for a while. They've said that pretty emphatically here recently.

Speaker Change: Things I've mentioned, they've all talked about kind of the destocking is behind them. We've said that for a while they've said that pretty emphatically here recently, but clearly residential HVAC volumes being up is a good thing for us. We're all about the installed base. So the more units that are going into new homes more replacement units to go into existing homes people moving putting in new units.

Joseph Armes: We've said that for a while. They've said that pretty emphatically here recently, but clearly residential HVAC volumes being up is a good thing for us.

James E. Perry: But clearly, residential HVAC volumes being up is a good thing for us. We're all about the installed base. So the more units that are going into new homes, more replacement units that go into existing homes, people moving, putting in new units, the installed base is what's most important to us because we touch a new unit, we touch a replacement unit, we touch repair, we touch maintenance. The other thing I'll mention is their year-over-year numbers are coming off some pretty soft comps.

Joseph Armes: We're all about the installed base. So the more units, they're going into new homes, more replacement units that go into existing homes, people moving, putting in new units to install bases. What's most important to us because we touch a new unit, we touch a replacement unit, we touch repair, we touch maintenance. The other thing I'll mention is, you know, their year-over-year numbers are coming off from pretty soft comps. They had, you know, this time last year, they were talking about things being down high single to low teens from a volume perspective. We've never said that.

Speaker Change: The installed basis, what's most important to us because we touch a new unit, we touch a replacement unit, we touch or payroll, we touch maintenance. The other thing I'll mention is you know their year over year numbers, we're coming off some pretty soft comps. They had this time last year. They were talking about things being down high single to low teens from a volume perspective, we've never saw.

James E. Perry: They had, this time last year, they were talking about things being down high singles to low teens from a volume perspective. We've never said that. So we've held up pretty well throughout this because of our mix across the gamut. It's not just about new OEM installations. So our comps are a little bit tougher. So while we continue to see unit volume growth from market share gains, certainly there's a tailwind from the OEM seeing more demand.

Joseph Armes: So we've held up pretty well throughout this because of our mix across the gamut. It's not just about new OEM installations.

Speaker Change: That so we've held up pretty well throughout this because of our mix across the gambit, it's not just about new OEM installations. So our comps are a little bit tougher. So while we continue to see unit volume growth from market share gains certainly there's a tailwind from the Oems seem more demand.

Joseph Armes: So our cons are a little bit tougher. So while we continue to see unit volume growth from market share gains, certainly there's a tailwind from the OEM seeing more demand.

Unknown Executive: Great.

James E. Perry: Great. One more from me before I jump back in queue. Can you provide us with an update on the input cost? is going forward, especially at Overseas Freight. Yeah, great question, Charlie.

Unknown Executive: One more from me. We're going to jump back into you.

Speaker Change: Great and one more from me before I jump back in queue can you provide us an update with it.

Charlie Stroud: Can you provide us an update within the input cost expectations going forward, especially when you look at overseas freight, which is significant, and your ability to maintain margin or margin dollars via pricing? Yeah, great question, Charlie. I'm glad you brought that up. So we've clearly seen ocean freight accelerate throughout the year, not much impacting Q1 as we've talked about before. And you know, but for the benefit of the others on the phone, you know, that takes three, four, or five months to get through the system. So Q1, you were really seeing containers that were priced back in kind of November, December, January, February timeframe.

Speaker Change: Put cost expectations going forward, especially when you look at it overseas free which is significantly and your ability to maintain margin or margin dollars via pricing.

James E. Perry: Yeah, great question, Charlie. I'm glad you brought that up. So we've clearly seen ocean freight accelerate throughout the year. Not much impact in Q1, as we've talked about before, and you know, but for the benefit of the others on the phone, you know, that takes three, four, five months to get through the system. So in Q1, you were really seeing containers that were priced back in kind of November, December, January, you know, February timeframe. Now you're seeing those prices have accelerated a lot over the last few months. So Q2 is going to start seeing some of that impact, which is a headwind to margins. Q3 and Q4 certainly will.

Speaker Change: Yeah, Great question, Charlie I'm glad you brought that up so we've clearly seen ocean freight accelerate throughout the year not much impact in Q1, as we've talked about before and you know, but for the benefit of the others on the phone that takes 345 months to get through the system. So Q1, you were really saying containers that were priced back in kind of November December January.

Speaker Change: February timeframe now youre seeing those prices have accelerated a lot over the last few months. So Q2 is going to start seeing some of that impact which is a headwind to margins in Q3 and Q4, certainly will rates have have gone up about every week for the last few months. The last two weeks, we've seen rates come down the last couple of weeks about 10% so hard to hard to say.

James Perry: Now you're seeing those prices have accelerated a lot over the last few months. So Q2 is going to start seeing some of that impact, which is a headwind of margins. Q3 and Q4 certainly will. Rates have gone up about every week for the last few months. The last two weeks we've seen rates come down. The last couple of weeks, about 10%. So, you know, hard to say two weeks is a trend, but that's certainly encouraging that maybe you've seen a peak. And now it's coming down, but nonetheless, the freight rates we're seeing the last couple of months are what's going to inform us on Q2, Q3, and now even into Q4.

James E. Perry: Rates have gone up about every week for the last few months. In the last two weeks, we've seen rates come down about 10%. So, you know, hard to say two weeks is a trend, but that's certainly encouraging that maybe you've seen a peak, and now it's coming down. But nonetheless, the freight rates we've seen the last couple of months are what's going to inform us about Q2, Q3, and now even into Q4.

James E. Perry: Two weeks as a trend, but that's certainly encouraging that maybe <unk> seen a peak and now it's coming down but nonetheless, the freight rates were seen in the last couple of months or what's going to inform us on Q2, Q3 and now even into Q4. So it is a bit of a margin headwind without a doubt we've not taken pricing action to counteract that beyond our normal pricing, we put through back in February.

James Perry: So it is a bit of a margin headwind, without a doubt. We've not taken pricing action to counteract that beyond our normal pricing we put through back in February and March. But we're certainly watching input costs closely. And if we continue to see elevated costs, then, you know, it's something that we always consider taking a look at as we go through the year.

James E. Perry: So it is a bit of a margin headwind without a doubt. We've not taken pricing action to counteract that beyond our normal pricing we put through back in February and March, but we're certainly watching input costs closely. And if we continue to see elevated costs, then, you know, it's something that we always consider taking a look at as we go through the year.

Speaker Change: In March, but we're certainly watching input costs closely and if we continue to see elevated cost then it's something that we always consider taking a look at as we go through the year.

Charlie Stroud: Great. Thank you.

Speaker Change: Great. Thank you thank.

Unknown Executive: Thank you, Charlie. Thank you.

Charlie: Thank you Charlie.

Julio Alberto Romero: Thank you. Our next question comes from the line of Julio Romero with the Sudotian Company. Please proceed with your question.

Julio Romero: Our next question comes from the line of Julio Romero with Cedodi and Company. Please proceed with your question. Thanks. Hey, good morning, Joe. James Alexa. Appreciate it.

Speaker Change: Thank you. Our next question comes from the line of Julio Romero with Sidoti <unk> Company. Please proceed with your question.

Julio Alberto Romero: Thanks. Hey, good morning, Joe, James, and Alexa. I appreciate it. Maybe we can start on contractor solutions.

Julio Alberto Romero: Thanks, Hey, good morning, Joe James Alexa.

Julio Alberto Romero: I appreciate it.

Julio Romero: Maybe to start on contractor solutions. You know, you call that very nice volumes in this quarter. Can you maybe quantify the sales contribution from that one customer that needed to load in, and then you mentioned a second customer that also placed a large. Thank you. Water. How much will that benefit the second quarter?

Julio Alberto Romero: Maybe just start on contractor solutions, you called out very nice volumes in this quarter.

Julio Alberto Romero: You know, you called out very nice volumes in this quarter. Can you maybe quantify the sales contribution from that one customer that needed to load in, and then you mentioned a second customer that also placed a large order? How much will that benefit the second customer?

Speaker Change: Can you maybe quantify the sales contribution from that one customer that needed a load in and then you mentioned a second customer that also placed a large order.

Speaker Change: How much will that benefit the second quarter.

James E. Perry: Yeah, Julio, this is James. Good morning. Thanks for being on, as always, and for your coverage.

James E. Perry: Yeah, Julio, this is

James Perry: Yeah, truly, this is James. Good morning. Thanks for being on as always from for your coverage. You know, it's not material enough that it's something we call out in the 10-Q or anything like that, but it's a few percent of revenue. I mean, it was, you know, that that customer would have ordered something Q1. So it's hard to make no exactly how much was pulled forward that they simply ordered and we were able to deliver. So the couple customers, it was a few percent revenue, nothing material that, you know, we needed to get real specific about, but enough to be sure we mentioned it because when you do see some revenues like that shift from, you know, what could have probably been Q2 into Q1, we wanted to be sure to inform people of that.

Julio Alberto Romero: Yes, Julien this is James good morning, and thanks for being known as always and for your coverage.

James E. Perry: You know, it's not material enough that it's something we call out in the 10Q or anything like that, but it's a few percent of revenue. I mean, it was, you know, that customer would have ordered some in Q1, so it's hard to know exactly how much was pulled forward that they simply ordered and we were able to deliver. So the couple of customers, it was a few percent of revenue, nothing material that, you know, we needed to get real specific about, but enough to be sure we mentioned it. Because when you do see some revenues like that shift from, you know, what could have probably been Q2 into Q1, we wanted to be sure to inform people of that so they understood the expectations are a little different as we look forward to Q2.

James E. Perry: It's not material enough that it's something we called out in the 10-Q or anything like that but it's a few percent of revenue I mean, it was you know that customer would have ordered some in Q1. So it's hard to know how exactly how much was pull forward that they simply ordered and we were able to deliver so the couple of customers. It was a few percent of revenue nothing material that we needed to get real specific about but.

Speaker Change: To be sure we mentioned it because when you do see some revenues like that shift from what could have probably been Q2 into Q1, we wanted to be sure to inform people of that so they understood. The expectations are a little different as we look forward to Q2.

James Perry: So they understood the expectations are a little different as we look forward to Q2.

Julio Romero: Okay, that's helpful there.

James E. Perry: Okay, that's helpful there. And then turning to the engineered building solutions segment, you know, this was your second straight quarter of 20% plus, even the margins, you know, very nice performance there. And I know that was the target for a long time. But is this just a function of the higher margin mix you've talked about for a while finally flowing through? And secondly, you know, what inning are we in in regards to that higher margin mix flowing through? Do we have more runway there for that to continue? Yeah, Julio, thanks.

Speaker Change: Okay. That's helpful. There and then turning to the engineered building solutions segment. This was your second straight quarter of 20% plus EBITDA margins.

Julio Romero: And then turning to the engineered building solution segment, you know, this was your second straight quarter of 20% plus. Even the margins, you know, very nice performance there. I know that was a target for a long time. You know, this is just a function of the higher higher margin mix. You've talked about for a while finally flowing through, and then secondly, you know, what ending are we in in regards to that higher margin mix flowing through?

Speaker Change: Very nice performance, there and I know that was a target for a long time.

Speaker Change: Just a function of the higher higher margin mix, you've talked about for a while finally flowing through and then secondly.

Speaker Change: What inning are we in in regards to that higher margin mix flowing through do we have more runway there for that to continue.

Julio Romero: Do we have more runway there for that to continue?

James E. Perry: Really proud of the work that EBS did this quarter. We said 20% was kind of our long-term margin goal, and hitting that this quarter was really impressive. So really proud of that team, and congratulations to them. Yeah, it was a result of some higher-margin products coming through the backlog and converting to revenue. That's obviously important.

James Perry: Yeah, Julio, thanks James again. Really proud of the work that EBS did this quarter. We said 20% is kind of our long term margin goal, and hitting that this quarter was really impressive. So really proud of that team. Congratulations to them. Yeah, it was a result of some higher margin products coming through the backlog and converting to revenue. That's obviously important. We have good visibility, you know, going out another quarter or so of that. The backlog remains solid. You know, backlog was generally flat. You see that if you do the math on the book to bill, you know, the last couple quarters.

James E. Perry: Yeah, Julio, thanks. James again.

Speaker Change: Yeah, Julio Thanks, James again really proud of the work the DBS did this quarter. We said, 20% is kind of our long term margin goal in hitting that this quarter.

Speaker Change: It was really impressive so really proud of that team and congratulations to them.

Speaker Change: Yes. It was a result of some higher margin products coming through the backlog and converting to revenue. That's obviously important we have good visibility going out another quarter or so of that the backlog remained solid backlog was generally flat youll see that if you do the math on the book to Bill you know the last couple of quarters. So we've been able to maintain the backlog despite some weakness in the <unk>.

James E. Perry: We have good visibility, you know, going out another quarter or so of that. The backlog remained solid. You know, backlog was generally flat. You see that if you do the math on the book to bill, you know, for the last couple quarters. So we've been able to maintain the backlog despite some weakness in the commercial construction markets, certainly in the multifamily market. The other thing I would point out besides some better mix is the team has really done a good job and made a concerted effort over the last year, and I think we saw the fruits of that this quarter in finding ways to take out costs from the supply chain. They've really tried to re-engineer some products and find some new sources for the inputs for their products as they assemble the different products.

James Perry: So we've been able to maintain the backlog despite some weakness in the commercial construction markets, certainly in the multi-family market. The other thing I would point out besides some better mix is the team has really done a good job and had a concerted effort the last year. And I think we saw the fruits of that this quarter, a finding ways to take out costs from the supply chain. They've really tried to reengineer some products, find some new sources for the inputs for their products as they assemble the different products. So that's come through, and that's led to some nice margin points.

Speaker Change: Marshall construction markets certainly in the multifamily market. The other thing I would point out besides some some better mix as the team has really done a good job and had a concerted effort. The last year and I think we saw the fruits of that this quarter are finding ways to take out cost from the supply chain. They have really tried to reengineer some products fund some new sources for the inputs for their products.

James E. Perry: So that's come through, and that's led to some nice margin points. The margin is going to bounce around, so I don't think we're saying that we're at 20% permanently yet. We've kind of said that's a little bit of a longer-term goal, so it's going to bounce around. As we look at the backlog for the next couple quarters, we're going to continue to have solid revenues.

Speaker Change: As they assemble the different products. So that's come through and that's led to some nice margin points. The margin is going to bounce around so.

James Perry: The margin is going to bounce around, so I don't think we're saying that we're 20% permanently yet. We've kind of said that's a little bit of a longer-term goal. So it's going to bounce around as we look at the backlog, and that's couple quarters. We're going to continue to have solid revenues; margin is going to bounce around. You know, what any, you know, Joe and I often say, you know, we'll kind of see it coming. Given the backlog is there we feel good about it. We would say things are maybe a little softer. The back part of the year right now.

James E. Perry: I don't think we're saying that we're 20% permanently yet we've kind of said that's a little bit of a longer term goal. So it is going to bounce around as we look at the backlog. The next couple of quarters, we're going to continue to have solid revenues margins going to bounce around what any Joe and I, often say well kind of see it coming given the backlog as they are we feel good about it we would say things are maybe a little <unk>.

James E. Perry: You know, what any Joe and I often say, you know, we'll kind of see it coming. Given the backlog is there, we feel good about it. We would say things are maybe a little softer in the back part of the year right now, so we're working to fill that in. You know, some of these projects, if we just put something in the backlog last week, it may be a year or two out.

James E. Perry: After the back part of the year right now so we're working to fill that in some of these projects. If we just put something in the backlog last week. It may be a year or two out so we see maybe a little softness in the back part of the year in the next fiscal year, we see some of that picking up again there are some projects that have sped up in fact up in the Toronto market is a very specific example, you've heard us talk about Toronto.

James Perry: So we're working to fill that in. You know, some of these projects, if we just put something in the backlog, you know, last week, it may be a year or two out. So we see maybe a little softness the back part of the year in the next fiscal year. We see some of that picking up again. There's some projects that have sped up in fact up in the Toronto market as a very specific example. You've heard us talk about Toronto quite a bit. We've got some nice backlog up there. They're having a labor crunch because there's so many projects, and some of those have gotten sped up.

James E. Perry: So we see maybe a little softness in the back part of the year. In the next fiscal year, we see some of that picking up again. There are some projects that have sped up, in fact, in the Toronto market as a very specific example. You've heard us talk about Toronto quite a bit. We've got some nice backlog up there. They're having a labor crunch because there are so many projects, and some of those have gotten sped up, so we've benefited from that.

Speaker Change: Quite a bit we've got some nice backlog up there that are having a labor crunch because theres. So many projects in some of those have gotten sped up so we've benefited from that other markets things have slowed down because the demand has slowed down a little bit so it bounces around but.

Julio Romero: So we've benefited from that. Other markets things are slowed down because the demand is slowed down a little bit. So it bounces around, but a long way to say that I'm really proud of the quarter. Really proud of the way the rest of the year looks, but it's going to pop up and down a little bit. Got it. That's very helpful color there.

James E. Perry: Other markets think they've slowed down because demand has slowed down a little bit, so it bounces around, but a long way to say that really proud of the quarter, really proud of the way the rest of the year looks, but it's going to pop up and down a little bit.

James E. Perry: Long way to say that really proud of the quarter, we're really proud of the way the rest of the year looks but it's kind of it's going to pop up and down a little bit.

Speaker Change: Okay.

James E. Perry: I got it. That's a very helpful color there. And then that kind of dovetails into my last question here, which is just, you know, overall thinking about your margins. Obviously, you had very strong margin performance in the quarter. But you guys reiterated that your focus is really on the EBITDA dollars and growing that portion, but if you could just talk to us about, you know, aside from maybe the volume leverage, why some of this margin performance isn't sustainable or maybe asked in another way, anything from this quarter that may get us more constructive on margin expansion for the remaining three quarters of the year.

Speaker Change: Got it that's very helpful color, there and then that kind of dovetails into my last question. Here is just overall thinking about your margins. Obviously, you had very strong margin performance in the quarter.

James Perry: And then that kind of dovetails into my last question here is just overall thinking about your March. You know, obviously you had very strong margin performance in the quarter. You guys reiterated that your focus is really on the EBITDA dollars and growing that portion, but if you could just talk to us about, you know, aside from maybe the volume leverage, you know, why some of this margin performance isn't sustainable or maybe asking another way, anything from this quarter that may get us more constructive on margin expansion for the remaining three quarters of the year. Yeah, it's a great question, Julio.

James E. Perry: You guys reiterated that your focus is really on the EBIT dollars and growing that portion but.

Speaker Change: If you could just talk to us about.

Speaker Change: Aside from maybe the volume leverage.

Speaker Change: Some of this margin performance isn't sustainable or or maybe asked another way.

Speaker Change: Anything from this quarter that may get us more constructive on margin expansion for the remaining three quarters of the year.

James E. Perry: Yeah, it's a great question, Julio. You know, obviously, we're always aiming for margin expansion. The team did it in the first quarter, and I'm really proud of the team's work there from top to bottom. You know, we talked about last year's margins being market-leading, and we were very proud of that. You know, yeah, mix matters, and there were some products in the quarter where the mix really was favorable to us. And that can, that can obviously move around.

James E. Perry: Yes, it's a great question Hillier, obviously, we're always aiming for margin expansion. The team did it in the first quarter really proud of.

James Perry: You know, obviously we're always aiming for margin expansion. The team did it in the first quarter; really proud of the team's work there from top to bottom. You know, we talked about last year's margins being market leading and very proud of that. You know, yeah, mixed matters, and there were some products in the quarter that mixed really was favorable to us. And that can obviously move around. The team has picked up some share, and you know, getting these couple of orders we talked about, maybe a little bit of pull forward from Q2 to Q1. That's a volume leverage.

Speaker Change: The team's work there from top to bottom.

James E. Perry: We talked about last year's margins being market, leading and very proud of that yes mix matters and there were some products in the quarter that mix really was favorable to us and that can that can obviously move around the team has picked up some share and getting these couple of.

James E. Perry: The team has picked up some share, and you're getting these couple of orders we talked about maybe a little bit of pull forward from Q2 to Q1. That's volume leverage. There were also a nice mix of orders in that perspective.

James E. Perry: Orders, we talked about maybe a little bit of a pull forward from Q2 to Q1. That's the volume leverage there were also a nice mix of orders in that perspective.

James Perry: There were also a nice mix of orders in that perspective. You know, the team, I think going into the year when we talked about protecting margins and maintaining where we are, has really taken a hard look at cost and has held off on, you know, maybe some hiring and some cost from a G&A perspective. As we continue to see the volume pick up and as we continue to see success, there's some holes we need to fill in, I think. So you'll see some of those costs maybe come in, but Q1 they weren't there. But overall, you know, we're optimistic, but we really just want to caution folks that, you know, the margin performance in Q1, which is always going to be seasonally a strong quarter.

James E. Perry: You know, the team, I think going into the year when we talked about protecting margins and maintaining where we are, has really taken a hard look at costs and has held off on, you know, maybe some hiring and some costs from a G&A perspective. As we continue to see the volume pick up and as we continue to see success, there are some holes we need to fill in, I think. So you'll see some of those costs maybe come in, but in Q1, they weren't there.

James Perry: The team I think going into the year, when we talked about protecting margins and maintaining where we are has really taken a hard look at cost and has held off on maybe some hiring and some cost from a G&A perspective.

James E. Perry: As we continue to see the volume pick up and as we continue to see success. There are some some holes we need to fill and I think so youll see some of those costs may be come in the Q1, they werent there, but overall, we're optimistic but we really just wanted to caution folks that the margin performance in Q1, which is always going to be seasonally a strong quarter, you know that as well as anybody on this call.

James E. Perry: But overall, you know, we're optimistic, but we really just want to caution folks that, you know, the margin performance in Q1, which is always going to be a seasonally strong quarter. You know that as well as anybody on this call. And when you have a little bit of pull forward, things just fired on all cylinders.

James Perry: You know that as well as anybody on this call. And when you have a little bit of pull forward, things just far down all cylinders. So we don't want to talk about margin too much. But I think looking at last year's margins and applying that, and then accounting for the pull forward, maybe a little bit from, you know, Q2 to Q1, as you asked earlier, a few percent of revenue kind of gets you back to what's probably a little more normal expectations for a Q2 and then going forward with the rest of the year. And who will show the other thing I would point you to is Q3 is always a seasonally lowest revenue for contractor solutions, which is our highest margins.

James E. Perry: And when you have a little bit of pull forward things just fired on all cylinders. So we don't want to talk about margin too much but I think looking at last year's margins and applying that and then accounting for the pull forward, maybe a little bit from Q2 to Q1 as you asked earlier a few percent of revenue kind of gets you back to what's probably a little more normal expectations for Q2, and then go.

James E. Perry: So we don't want to talk down margin too much, but I think looking at last year's margins and applying that and then accounting for the pull forward, maybe a little bit from, you know, Q2 to Q1, as you asked earlier, a few percent of revenue, kind of get you back to what's probably a little more normal expectations for Q2 and then going forward the rest of the year. And Julio, the other thing I would point you to is that Q3 is always the seasonally lowest revenue for contractor solutions, which has our highest margin. That margin is never of the same size as Q1. So, it's important to keep that in mind.

Joe: Forward the rest of the year and who we are as Joe. The other thing I would point you to is Q3 is always the seasonally lowest revenue for contractor solutions, which is has our highest margins and so that margin is never.

Julio Romero: And so that margin is never, you know, the same as Q1. So just, it's important to keep that in mind. No, absolutely. Great color, guys. Nice job. Appreciate it.

Speaker Change: The same as Q1, so just.

Speaker Change: Keep them.

Julio: No absolutely.

Julio Alberto Romero: No, absolutely. Great caller, guys. Nice job. Appreciate it.

Julio: Great color guys nice job I appreciate it.

Operator: Thanks, Julio. Thank you. Our next question is a follow-up from Jon Tanwanteng with CJS Securities. Please proceed with your question.

Unknown Executive: Thanks, Julia.

Unknown Executive: Julia.

Speaker Change: Thanks Julio familiar. Thank you. Our next question is a follow up from Jon <unk> with CJS Securities. Please proceed with your question.

Unknown Executive: Thank you.

John Tanwanteng: Our next question is a follow-up from John Tanwin-Tang with C.J.S. Securities. Please proceed with your question. I just want more for you. Actually, two more.

Jonathan E. Tanwanteng: Hi, just one more for you. Actually, two more.

Jonathan E. Tanwanteng: Hi, just one more for you actually two more when you look at your strong cash flow.

Charlie Stroud: You look at your strong cash flow. His M&A still kind of a high priority for you, and opportunities becoming more actionable there in the pipeline. Yeah, Charlie, it is. You know, we've always kind of laid out our capital allocation policy. Organic growth opportunities are almost always the most competitive from a return standpoint, but we don't have enough of those to spend $200 million of cash flow in a year. So M&A is going to be an important part of our story. It has been, and will continue to be. We're pleased with the pipeline. We're very pleased with the opportunities that we're seeing.

Jonathan E. Tanwanteng: Is M&A still kind of a high priority for you and opportunities becoming more rational there in the pipeline.

Charlie: Yes, Charlie.

Jonathan E. Tanwanteng: Yes.

Charlie: We've always kind of laid out our capital allocation policy.

Speaker Change: Organic growth opportunities are almost always the most competitive from a return standpoint, but we don't have enough of those two.

Speaker Change: <unk> $200 million of.

Jonathan E. Tanwanteng: When you look at your strong cash flow, is M&A still kind of a high priority for you, and are opportunities becoming more actionable in the pipeline?

Speaker Change: Cash flow in a in a in a year or so.

Speaker Change: M&A is going to be an important part of our story. It has been and will continue to be we're pleased with the pipeline. We're very pleased with the opportunities that we're seeing I would say a really good mix of small and large.

James E. Perry: Yeah, Charlie. You know, we've always kind of laid out our capital allocation policy: organic growth opportunities are almost always the most competitive from a return standpoint, but we don't have enough of those to spend $200 million. Cash Flow in a year. So M&A is going to be an important part of our story. It has been and will continue to be. We're pleased with the pipeline. We're very pleased with the opportunities that we're seeing.

James E. Perry: I would say a really good mix of small and large acquisition targets, and there's a little bit of price discovery still going on right now, trying to figure out exactly what the clearing price is on these targets. But it feels like we're closer today than we were three months ago, the last time we talked to you guys about these things, on folks coming together in a meaningful way on price. So we're very pleased with the pipeline, very pleased with the calls we're getting, the opportunities we're seeing, and the pricing valuation issues, I think are going to shake out.

James Perry: I would say a really good mix of small and large acquisition targets, and there's a little bit of price discovery still going on right now, trying to figure out exactly what the clearing price is on these targets. But it feels like we're closer today than we were, you know, three months ago. The last time we talked to you guys about these things on folks coming together in a meaningful, you know, kind of way on price. So yeah, we're very pleased with the pipeline, very pleased with the calls we're getting, the opportunities we're seeing, and the pricing. You know, kind of valuation issues, I think, are going to shake out here.

James E. Perry: Acquisition targets and Theres, a little bit of price discovery is still going on right now trying to figure out exactly what the clearing prices on these on these targets, but it feels like we're closer today than we were.

James E. Perry: Three months ago. The last time, we talked to you guys about these things on folks coming together on a on a on a meaningful kind of weigh on price. So yeah. We're very pleased with the pipeline very pleased with the calls we're getting the opportunities we're seeing.

James E. Perry: And the pricing kind of valuation issues, I think youre going to shakeout here.

Charlie Stroud: Great, just let's.

James E. Perry: And just lastly, just with the storms recently in Houston and the area there, any impact, you know, near term, and how should we think about weather, kind of, in general this year, impacting our driving demands?

Speaker Change: Great and just lastly, just with the storms recently in Houston in the area there any impact.

James E. Perry: Determined how should we think about whether you're kind of in general this year.

Speaker Change: Packaging are driving demand.

Joseph Armes: Yeah, we did have, you know, some minor damage in Houston to a roof, you know, insured loss, and actually, honestly, of roof, we were getting ready to replace anyway. The five days, you know, kind of out of power here in Dallas, we were laughing earlier. You know, you don't get a lot of TV coverage on a power. There's no good video for that. So, but, but it affected, you know, their business. And so hopefully those are behind us now. I think we've got a very resilient organization. Houston team certainly has been through this repeatedly, and we don't see that as a really high risk. But, but it's, it's something that we keep, you know, we keep in mind and are always prepared for.

James E. Perry: Yeah, we did have, you know, some minor damage in Houston to a roof, an insured loss and actually, honestly, a roof we were getting ready to replace anyway. The five days, you know, kind of out of power here in Dallas, we were laughing earlier, you know, you don't get a lot of TV coverage on a power outage; there's no good video for that. So but but it affected, you know, their business.

Speaker Change: Yes, we did have.

Speaker Change: Some minor damage in Houston to a roof insured loss and actually honestly a roof, we were getting ready to replace anyway.

James E. Perry: Five days kind of out of power here in Dallas, We were laughing earlier, you don't get a lot of television coverage on a power outage is no good video for that so.

James E. Perry: But it affected their business and so.

James E. Perry: And so hopefully, those are behind us now. I think we've got a very resilient organization. The Houston team certainly has been through this repeatedly. And we don't see that as a really high risk. But it's something that we keep, you know, we keep in mind, and are always prepared for. So at this point, there's nothing that we would point to. There's nothing that we would say.

James E. Perry: Hopefully those are behind US now I think we've got a very resilient organization Houston teams certainly has been through this repeatedly and.

James E. Perry: We don't see that as a as a really high risk but.

James E. Perry: But it's something that we keep.

James E. Perry: We keep in mind and.

James E. Perry: We're always prepared for so at this point.

Joseph Armes: So, at this point, there's nothing that we would point to. Nothing that we would say would affect our financial results. We appreciate the questions.

James E. Perry: There is nothing that we would point to nothing that we would say would affect our financial results.

Jonathan E. Tanwanteng: Great, I appreciate the question.

James E. Perry: Great I appreciate it.

Charlie Stroud: Thank you. Thanks, Charles.

Speaker Change: The questions. Thank you.

James E. Perry: Thanks, Charlie. Thanks, Charlie. Thanks for being on.

James E. Perry: Thanks, Charles Thanks, Charles Thanks for being on.

Unknown Executive: Thanks for being on.

Joseph Brooks Armes: Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Armes for any additional closing remarks.

Unknown Executive: Thank you. There are no further questions at this time.

Jonathan E. Tanwanteng: Thank you there are no further questions at this time I'd like to turn the call back over to Mr. Armes for any additional closing remarks.

Joseph Armes: I'd like to turn the call back over to Mr. Arms for any additional closing remarks. Yes, thank you. We just appreciate everybody's interest and taking part in this call and look forward to our next conversation next quarter. So, thank you very much.

Joseph Brooks Armes: Yes, thank you. We just appreciate everybody's interest in taking part in this call and look forward to our next conversation next quarter. So, thank you very much.

Joseph Brooks Armes: Yes. Thank you we just appreciate everybody's interest and taking part in this call and look forward to our next conversation next quarter. So thank you very much.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Unknown Executive: Thank you.

Unknown Executive: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Operator: Yeah.

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