Q4 2025 CSW Industrials Inc Earnings Call

Greetings and welcome to CSW Industrials incorporated fourth quarter and full year earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this call.

Operator: This is a fourth-quarter and full-year earnings call.

Operator: At this time, all participants are in a listen-only mode. Thank you, Sherry.

Alexa: France is being recorded it is now my pleasure to introduce Alexa here attach Vice President of Investor Relations and Treasurer. Thank you you may begin.

Speaker Change: Thank you Sherry good morning, everyone and welcome to the CSW Industrials' fiscal 'twenty 25 fourth quarter and full year earnings call.

Operator: Good morning, everyone, and welcome to the CSW Industrials Fiscal 2025 Fourth Quarter and Full Year Earnings Call.

Joseph Armes: Joining me today on the call is Joseph Armes, Chairman, Chief Executive Officer, and President of CSW Industrials, and James Perry, Executive Vice President and Chief Financial Officer.

Speaker Change: Joining me today on the call is Joseph Armes, Chairman, Chief Executive Officer, and President CSW, Industrials, and James Perry Executive Vice President and Chief Financial Officer.

Operator: We issued our earnings release, updated investor relations presentation, and Form 10-K prior to the market's opening today, all of which are available on the Investors portion of our website at www.cswindustrials.com.

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

Operator: This call is being webcast and information on accessing the replay is included in the earnings release.

Speaker Change: This call is being webcast and information on accessing the replay is included in the earnings release.

Joseph Armes: During this call, we will make forward-looking statements.

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 and the comments made during this call as well.

Joseph Armes: These statements are based on current expectations and assumptions that are subject to various risks and uncertainties.

Joseph Armes: 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 in our annual report on Form 10-K and other filings with the SEC.

Speaker Change: The risk factors identified in our annual report on Form 10-K, and other filings with the SEC we.

Joseph Armes: We do not undertake any duty to update any forward-looking state.

Speaker Change: We do not undertake any duty to update any forward looking statements.

Joseph Armes: I will now turn the call over to Joe. Thank you, Alexa. Good morning, everyone.

Jeff: I will now turn the call over to Jeff.

Jeff: Thank you Alexia.

Jeff: Everyone.

Joseph Armes: It is my pleasure to report that once again, our team has delivered record results for revenue, adjusted EBITDA, adjusted earnings per diluted share, and adjusted net income for the fourth quarter of fiscal year 2025. This morning, we reported fiscal fourth quarter revenue of $231 million, as well as fiscal fourth quarter adjusted EBITDA of $60 million, adjusted earnings per diluted share of $2.24, and adjusted net income of $38 million.

Jeff: It is my pleasure to report that once again, our team has delivered record results for revenue.

Jeff: Adjusted EBITDA.

Jeff: Adjusted earnings per diluted share.

Jeff: And adjusted net income for the fourth quarter of fiscal year 2025.

Speaker Change: This morning, we reported fiscal fourth quarter revenue of $231 million as well as fiscal fourth quarter adjusted EBITDA of $60 million.

Speaker Change: Adjusted earnings per diluted share of $2 24 says and.

Speaker Change: And adjusted net income of $38 million.

Joseph Armes: I'm also proud to note that the team delivered record results for the full fiscal year 2025 for revenue, adjusted EBITDA, Adjusted Earnings for Diluted Share, Adjusted Net Income, and Cash Flow from Operations. We reported full-year revenue of $878 million, adjusted EBITDA of $228 million, including margin expansion of 70 basis points to 25.9%. Adjusted earnings per diluted share of $8.41. adjusted net income of $137 million. with cash flow from operations of $168 million.

Speaker Change: I'm also proud to note that the team delivered record results for the full fiscal year 2025 for revenue.

Speaker Change: Adjusted EBITDA.

Speaker Change: Adjusted earnings per diluted share adjusted net income and cash flow from operations.

Speaker Change: We reported full year revenue of $878 million, adjusted EBITDA of $228 million, including margin expansion of 70 basis points to 25, 9%.

Speaker Change: Adjusted earnings per diluted share of $8 41.

Speaker Change: Adjusted net income of $137 million in.

Speaker Change: In cash flow from operations of $168 million.

Joseph Armes: Our resilient business segments have focused on our customers and on operational excellence. And as a result, we have outperformed the end markets we serve.

Speaker Change: Our resilient business segments have focused on our customers and on operational excellence and as a result, we have outperformed the market the end markets we serve.

James Perry: James will provide further details of the performance of each of the three business segments for the last quarter of fiscal 2025.

Speaker Change: James will provide further details of the performance of each of the three business segments for the last quarter of fiscal 2025.

Joseph Armes: During the fiscal fourth quarter, we announced a definitive agreement to acquire Aspen Manufacturing for $313.5 million, and we were pleased to consummate this accretive and synergistic acquisition on May 1, 2025. The Aspen acquisition is the second-largest acquisition our company has made, and Aspen will expand our HVAC-R product offering with the addition of market-leading evaporator coils and air handling.

Speaker Change: During the fiscal fourth quarter, we announced a definitive agreement to acquire Aspen manufacturing for $313 $5 million and we were pleased to consummate this accretive and synergistic acquisition on May one 2025.

Speaker Change: The Aspen acquisition is the second largest acquisition our company has made in Aspen, we will expand our HVA see our product offering with the addition of market, leading evaporator coil and air handlers.

Joseph Armes: Before I turn the call over, I'd like to thank our team for delivering solid growth for the fiscal full year 2025. Our impressive results, strong balance sheet, and capital allocation discipline have continued to fuel our success.

Speaker Change: Before I turn the call over I'd like to thank our team for delivering solid growth for the fiscal full year 2025 or.

Speaker Change: Our impressive results strong balance sheet and capital allocation discipline have continued to fuel our success.

Joseph Armes: We will be celebrating our 10-year anniversary as a public company later this year and in anticipation of this milestone, we announced in late April that the company will be moving to the New York Stock Exchange on June 9. We believe this strategic move to the world's largest stock exchange will be beneficial to all shareholders and provide additional liquidity. and our team looks forward to joining the other outstanding industrial companies on the NYSE.

Speaker Change: We will be celebrating our 10 year anniversary as a public company later this year.

Speaker Change: And in anticipation of this milestone we announced in late April that the company will be moving to the New York stock Exchange on June nine.

Speaker Change: We believe this strategic move to the world's largest stock exchange will be beneficial to all shareholders and provide additional liquidity.

Speaker Change: And our team looks forward to joining the other outstanding industrial companies on the NYSE.

Joseph Armes: I also wanted to share a few longer term metrics that demonstrate the execution and commitment of our dedicated team. Our Revenue Compound Annual Growth Rate, or CAGR, since the spinoff in October of 2015 is 14.1%. This average annual growth rate for the last nine and a half years has outpaced the markets we serve by a wide margin. Our adjusted EBITDA cater over the same period is 16.5% which denotes that the team has delivered operating leverage on the revenue growth despite our already having industry leading margins when we went public in 2015.

Speaker Change: I also wanted to share a few longer term metrics that demonstrate the execution and commitment of our dedicated team.

Speaker Change: Our revenue compound annual growth rate or CAGR since the spin off in October of 2015 is 14, 1%.

Speaker Change: This average annual growth rate for the last nine and a half years has outpaced the markets we serve by a wide margin.

Speaker Change: Our adjusted EBITDA CAGR over the same period is 16, 5% percent, which to note that the team has delivered operating leverage on the revenue growth. Despite our already having industry leading margins when we went public in 2015.

Joseph Armes: In less than 10 years, we have grown our market cap over 1,000%, and total shareholder return is also over 1,000%.

Speaker Change: And less than 10 years, we have grown our market cap over 1000%.

Speaker Change: And total shareholder return is also over 1000%.

Joseph Armes: While I am pleased with the results that we have delivered and the value we have created for our shareholders over this past decade, I am equally optimistic as I look forward to what the company can accomplish over the next 10 years.

Speaker Change: While I am pleased with the results that we've delivered and the value we have created for our shareholders over this past decade.

Speaker Change: Equally optimistic as I look forward to what the company can accomplish over the next 10 years.

James Perry: At this time, I'll turn the call over to James for a closer look at our results, and following those comments, I'll return and conclude our prepared remarks. Thank you, Joe, and good morning, everyone. As Joe mentioned, during fiscal 2025, we delivered record revenue of $878 million, representing growth of 11%. $38 million of the growth was organic, with the remaining $48 million of growth coming from the acquisitions of Dustfree, PSP products, and PF Waterworks that we completed since February 2024. Operating leverage on this revenue drove 14% growth in adjusted EBITDA along with 70 basis points of margin expansion and over 20% growth in adjusted earnings per diluted share.

Speaker Change: At this time I'll turn the call over to James for a closer look at our result, and following those comments I will return and conclude our prepared remarks. Thank you Joe and good morning, everyone.

Speaker Change: As Joe mentioned during fiscal 2025, we delivered record revenue of $878 million.

Speaker Change: Representing growth of 11%.

Speaker Change: $38 million of the growth was organic with the remaining $48 million of growth coming from the acquisitions of dust free PSP products and Pf waterworks, but we completed since February 2024.

Speaker Change: Operating leverage on this revenue drove 14% growth in adjusted EBITDA.

Speaker Change: Along with 70 basis points of margin expansion and over 20% growth in adjusted earnings per diluted share.

James Perry: Our consolidated revenue during fiscal fourth quarter of 2025 was a record $231 million. $20 million or 9% increase when compared to the prior year period. $13.5 million of the revenue growth came from the aforementioned acquisitions. The remaining growth was organic, primarily due to higher volumes and pricing actions in contractor solutions, offset somewhat by declines in the other two sectors. Consolidated gross profit in the fiscal fourth quarter was $102 million, representing 9% growth over the prior year period. Our gross profit margin remained relatively flat at 44.2% compared to 44.4% in the prior year period. The slight decrease from the prior year was primarily driven by decreased gross profit margins in both specialized reliability solutions and engineer building solutions, mostly offset by growth in contractors.

Speaker Change: Our consolidated revenue during fiscal fourth quarter of 2025 was a record $231 million or $20 million or 9% increase when compared to the prior year period.

Speaker Change: $13 $5 million of the revenue growth came from the aforementioned acquisitions.

Speaker Change: The remaining growth was organic primarily due to higher volumes and pricing actions in contractor solutions.

Speaker Change: Somewhat by declines in the other two segments.

Speaker Change: Consolidated gross profit in the fiscal fourth quarter was $102 million, representing 9% growth over the prior year period.

Speaker Change: Our gross profit margin remained relatively flat at 44, 2% compared to 44, 4% in the prior year period.

Speaker Change: A slight decrease from the prior year was primarily driven by decreased gross profit margins in both specialized raw ability solutions and engineered building solutions, mostly offset by growth in contractor solutions.

James Perry: Our consolidated adjusted EBITDA during the fiscal fourth quarter increased by $4 million to a fiscal fourth quarter record of $60 million, which was 7% growth when compared to the prior year period. Our adjusted EBITDA margin declined by 60 basis points to 25.9%, compared to 26.5% in the prior year quarter. as we add additional expenses related to our recently acquired companies including investments to support their successful integration as well as inbound increased freighting. Adjusted net income attributable to CSW in the quarter was a fiscal fourth quarter record of $38 million with a record $2.24 of adjusted earnings per diluted share compared to $32 million or $2.04 respectively in the prior year period, representing 19% growth in adjusted net income and 10% growth in adjusted EPS.

Speaker Change: Our consolidated adjusted EBITDA during the fiscal fourth quarter increased by $4 million to our fiscal fourth quarter record of $60 million, which was 7% growth when compared to the prior year period.

Speaker Change: Our adjusted EBITDA margin declined by 60 basis points to 25, 9% compared to 26, 5% in the prior year quarter.

Speaker Change: As we had additional expenses related to our recently acquired companies, including investment to support their successful integration as well as inbound increased freight expense.

Speaker Change: Adjusted net income attributable to CSW in the quarter was our fiscal fourth quarter record of $38 million with a record $2.24 of adjusted earnings per diluted share compared to $32 million or $2.04, respectively. In the prior year period, representing 19% growth in adjusted.

Speaker Change: And income and 10% growth in adjusted EPS.

James Perry: The lower EPS growth as compared to net income was due to the higher share count from the successful follow-on equity offering in September, in which we issued an additional 1.265 million shares for $347 million in proceeds net of fees. This growth came as a result of the aforementioned performance and adjusted EBITDA and lower interest expense, which turned to interest income in the fiscal second quarter after the full repayment of our revolver balance with the proceeds from our follow-on equity offering.

Speaker Change: The lower EPS growth as compared to net income it was due to the higher share count from the successful follow on equity offering in September and which we issued an additional 1.265 million shares for $347 million in proceeds net of fees.

Speaker Change: This growth came as a result of the aforementioned performance in adjusted EBITDA and lower interest expense, which turned to interest income in the fiscal second quarter. After the full repayment of our revolver balance with proceeds from our follow on equity offering.

James Perry: There were two non-recurring adjusting items to EBITDA, net income and EPS in the fiscal fourth quarter. The $2.1 million increase in the expected earn-out consideration for the PSP products acquisition due to revenue outperformance since the acquisition and $1.4 million of transaction expenses incurred during the quarter for the Aspen Manufacturing Acquisition. Both of these adjusted items occurred in our contractor solutions.

Speaker Change: There were two nonrecurring adjusting items to EBITDA net income and EPS in the fiscal fourth quarter.

Speaker Change: The $2 $1 million, increasing the expected earn out consideration for the PSP products acquisition due to revenue outperformance since the acquisition.

Speaker Change: And $1.4 million of transaction expenses incurred during the quarter for the Aspen manufacturing acquisition.

Speaker Change: Both of these adjusted items occurred in our contractor solutions segments.

James Perry: During the fourth quarter, our Contractor Solutions segment, with $166 million in revenue, accounted for 71% of our consolidated revenue and delivered $24.7 million, or 17.5% growth when compared to the prior year quarter. Of the revenue growth in the quarter, $13.5 million, or 9.5%, came from our recent acquisitions. while the remaining $11.2 million or 8% was driven by organic volume growth and pricing action. This solid organic growth is in line with our stated mid to high single digit growth target in the contractor solutions. During the quarter, we had growth in the HVACR and electrical in markets.

Speaker Change: During the fourth quarter, our contractor solutions segment was $166 million in revenue accounted for 71% of our consolidated revenue and delivered $24 7 million or 17, 5% growth when compared to the prior year quarter.

Speaker Change: Of the revenue growth in the quarter $13 5 million or nine 5% came from our recent acquisitions.

Speaker Change: While the remaining $11 2 million or 8% was driven by organic volume growth and pricing actions.

Speaker Change: This solid organic growth is in line with our stated mid to high single digit growth target in the contractor solutions segments.

Speaker Change: Yeah.

Speaker Change: During the quarter, we had growth in the HVAC and electrical end markets.

James Perry: Adjusted EBITDA for this segment was $56 million, or 33.7% of revenue, compared to $47 million, or 33.5% of revenue in the prior year period. The slight increase in adjusted EBITDA margin came from higher gross margins due to pricing actions, which offset increased freight expense, combined with a decrease in operating expenses as a percent of revenue.

Speaker Change: Adjusted EBITDA for the segment was $56 million or 33, 7% of revenue compared to $47 million or 33, 5% of revenue in the prior year period.

Speaker Change: The slight increase in adjusted EBITDA margin came from higher gross margins due to pricing actions, which offset increased freight expense combined with the decrease in operating expenses as a percent of revenue.

James Perry: Our Specialized Reliability Solutions segment revenue decreased by 9% to $38 million as compared to the prior period. Revenue increased in the general industrial end market, but declined in the energy, rail transportation, and mining end markets. The lower revenue was driven primarily by softer market demand, most pronounced early in the fourth quarter, which drove a decline in unit volumes versus the prior period. and also due to a stronger prior year fourth quarter due to a catch up from shipping issues at the end of the third quarter of the prior fiscal year. The segment EBITDA of $5.8 million in the fourth quarter represented a decrease of 30% from $8.2 million in the prior year period.

Speaker Change: Our specialized reliability solutions segment revenue decreased by 9% to $38 million as compared to the prior period.

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

Speaker Change: The lower revenue was driven primarily by softer market demand most pronounced early in the fourth quarter, which drove a decline in unit volumes versus the prior period.

Speaker Change: And also due to a stronger prior year fourth quarter due to a catch up from shipping issues at the end of the third quarter of the prior fiscal year.

Speaker Change: The segment EBITDA of $5 $8 million in the fourth quarter represented a decrease of 30% from $8 $2 million in the prior year period.

James Perry: The EBITDA margin contracted 450 basis points to 15.3% in the current period. driven primarily by a decrease in gross margins due to the lower volume, more growth coming from lower margin products. and Higher Freight Expenses Related to the Strategic Management of International Inventory Ahead of Time.

Speaker Change: The EBITDA margin contracted 450 basis points to 15, 3% in the current period.

Speaker Change: Driven primarily by a decrease in gross margins due to the lower volume.

Speaker Change: More growth coming from lower margin products.

Speaker Change: And higher freight expenses related to the strategic management of international inventory ahead of tariffs.

James Perry: Our engineering building solutions segment revenue decreased by 4% to $28.7 million compared to $30.1 million in the prior year period, driven simply by the timing of projects converting to revenue from back-to-back. I'll note that the prior year period had a large project completed that will not recur this year. Bidding and booking trends remained solid during the fiscal fourth quarter, which was one of the segment's highest booking quarters in our history. And our book to bill ratio for the trailing eight quarters remained at one to one. The backlog increased sequentially during the quarter with projects that will deliver favorable margin mix in future quarters as they convert to revenue.

Speaker Change: Our engineered building solutions segment revenue decreased by 4% to $28 7 million compared to $30 1 million in the prior year period.

Speaker Change: Driven simply by the timing of projects converting to revenue from backlog.

Speaker Change: Note that the prior year period had a large project completed that will not recur this year.

Speaker Change: Bidding and booking trends remained solid during the fiscal fourth quarter, which was one of the segments highest booking quarters in our history and.

Speaker Change: And our book to Bill ratio for the trailing eight quarters remained at one to one.

Speaker Change: The backlog increased sequentially during the quarter with projects that will deliver favorable margin mix in future quarters as they convert to revenue.

James Perry: Segment EBITDA was 33% lower than the prior year period at $4.2 million, or a 14.5% EBITDA margin, compared to $6.2 million and 20.5% in the prior year period. The contraction in EBITDA margin in the current period was primarily due to a $1.2 million gain in the prior year period on the sale of an operating property that did not recur, which reduced gross margin during the current reporting period as well as operating expenses as a higher percentage of revenue.

Speaker Change: Segment, EBITDA was 33% lower than the prior year period, and $4 $2 million or a 14, 5% EBITDA margin compared to $6 $2 million and 25% in the prior year period.

Speaker Change: The contraction in EBITDA margin in the current period was primarily due to a $1 $2 million gain in the prior year period on the sale of an operating property that did not recur, which reduced gross margin during the current reporting period as well as operating expenses as a higher percentage of revenue.

James Perry: Transitioning to our strong balance sheeting cash flow We ended our fiscal fourth quarter 2025 with $226 million of cash and reported cash flow from operations of $27 million in the quarter, up 22% compared to $22 million in the same quarter last year driven by increased net income. For the full fiscal year 2025, the company had a record cash flow from operations of $168 million, or 2% growth, compared to $164 million in the prior fiscal year. Our free cash flow, defined as cash flow from operations minus capital expenditures, was $22.8 million in the fiscal fourth quarter, as compared to $17.5 million in the same period a year ago.

Speaker Change: Transitioning to our strong balance sheet and cash flow.

Speaker Change: We ended our fiscal fourth quarter of 2025 with $226 million of cash and reported cash flow from operations of $27 million in the quarter up.

Speaker Change: Up 22% compared to $22 million in the same quarter last year driven by increased net income.

Speaker Change: For the full fiscal year 2025, the company had a record cash flow from operations of $168 million or 2% growth compared to $164 million in the prior fiscal year.

Speaker Change: Our free cash flow defined as cash flow from operations minus capital expenditures was $22 $8 million in the fiscal fourth quarter as compared to $17 5 million in the same period a year ago.

James Perry: This resulted in free cash flow per share of $1.35 in the fiscal fourth quarter as compared to $1.12 in the same period a year ago, which was even more impressive when considering the additional shares included in this year's quarter from the follow-on equity office. Our free cash flow for the full fiscal year was $152.1 million. That's compared to $147.8 million in the prior fiscal year. That resulted in free cash flow per share of $9.32 for fiscal 2025 as compared to $9.48 in the prior fiscal year. The reduction of free cash flow per share on the higher free cash flow was due to the additional shares from the follow-on equity office.

Speaker Change: This resulted in free cash flow per share $1 35 in the fiscal fourth quarter as compared to $1 12 in the same period a year ago.

Speaker Change: Which was even more impressive when considering the additional shares included in this year's quarter from the follow on equity offering.

Speaker Change: Our free cash flow for the full fiscal year was $152 1 million as compared to $147 $8 million in the prior fiscal year.

Speaker Change: This resulted in free cash flow per share of $9 32 for fiscal 2025 as compared to $9 48 in the prior fiscal year.

Speaker Change: The reduction of free cash flow per share on the higher free cash flow.

Speaker Change: Was due to the additional shares from our follow on equity offering.

Speaker Change: Yeah.

James Perry: As discussed last quarter, we repaid all of our borrowings under the revolver in September of 2024, utilizing the cash received from our follow-on equity office. As a result, the company was able to eliminate most of our interest expense and invest in net proceeds from the following equity offering in money market accounts to generate interest income.

Speaker Change: As discussed last quarter, we repaid all of our borrowings under the revolver in September of 2024, utilizing the cash received from our follow on equity offering.

Speaker Change: As a result, the company was able to eliminate most of our interest expense and invest the net proceeds from our follow on equity offering and money market accounts to generate interest income.

James Perry: As Joe mentioned, in the fiscal fourth quarter, we announced a definitive agreement to acquire Aspen Manufacturing for $313.5 million. We completed the acquisition subsequent to year end on May 1st, 2025. We used most of our cash on hand at that time and borrowed $135 million from our revolving credit facility to fund the transaction.

Speaker Change: As Joe mentioned in the fiscal fourth quarter, we announced the definitive agreement to acquire Aspen manufacturing for $313 $5 million. We completed the acquisition subsequent to year end on May one 2025.

Speaker Change: We used most of our cash on hand at that time and borrowed $135 million from our revolving credit facility to fund the transaction.

James Perry: I would also like to highlight that, subsequent to the end of fiscal 2025, the company renewed, extended, and upsized our revolving credit facility to $700 million earlier this month. The renewal of our revolver provides us with access to additional capital, allowing us to be nimble and opportunistic on growth opportunities. We are grateful to our banking partners for their support.

Speaker Change: I would also like to highlight that subsequent to the end of fiscal 2025, the company renewed extended and Upsized, our revolving credit facility to $700 million earlier this month.

Speaker Change: The renewal of our revolver provides us with access to additional capital, allowing us to be nimble and opportunistic on growth opportunities where.

Speaker Change: We are grateful to our banking partners for their support.

James Perry: Our effective tax rate for the fiscal fourth quarter was 24.6% on a gap basis and 24.7% when adjusted.

Speaker Change: Our effective tax rate for the fiscal fourth quarter was 24, 6% on a GAAP basis and 24, 7% when adjusted.

James Perry: As mentioned in this morning's earnings release, as we look into fiscal 2026, We anticipate delivering full-year growth in revenue and adjusted EBITDA for each segment, as well as consolidated EPS growth and even stronger growth in operating cash flow than in fiscal year 2025. We expect Aspen's fiscal 2026 revenue to grow in the high single to low double digits off their trailing 12-month revenue of $125 million through our fiscal 2025 year-end Note that Aspen's quarterly revenue sequencing is weighted more heavily to our first and second fiscal quarters due to the nature of their product. As such, we expect that Contractor Solutions' go-forward quarterly revenue seasonality will be more pronounced than we've experienced in the past.

Speaker Change: As mentioned in this morning's earnings release as we look into fiscal 2026, we anticipate delivering full year growth in revenue and adjusted EBITDA for each segment as well as consolidated EPS growth and even stronger growth in operating cash flow than in fiscal year 2025.

Speaker Change: We expect aspen's fiscal 2026 revenue to grow in the high single to low double digits off their trailing 12 month revenue of $125 million to our fiscal 2025 year end.

Speaker Change: Note that essence quarterly revenue sequencing is weighted more heavily to our first and second fiscal quarters due to the nature of their products.

Speaker Change: As such we expect the contractor solutions go forward quarterly revenue seasonality will be more pronounced than we've experienced in the past.

James Perry: We expect Aspen's EBITDA margin to be approximately 24 percent for the full fiscal year 2026 as we begin our work to improve the Aspen margins over time. The Aspen margin will vary from this full year level from quarter to quarter due to the seasonality of the business.

Speaker Change: We expect <unk> EBITDA margin to be approximately 24% for the full fiscal year 2026, as we begin our work to improve the aspen margins over time.

Speaker Change: The <unk> margin will vary from this full year level from quarter to quarter due to the seasonality of the business.

James Perry: As a reminder, Aspen will only be included in our results for 11 months during fiscal year 2026 and two months in our fiscal first quarter due to the May 1st acquisition date. As I previously mentioned, the company borrowed $135 million from our revolving line of credit and used the remainder of our cash on hand from the follow-on equity offering to fund the aspirin acquisition on May 1st, so we are no longer forecasting quarterly net interest income. Beginning in May, the company will begin incurring interest expense on our revolver borrowings. We anticipate paying off our current borrowings outstanding by the end of fiscal year 2026 if the company does not have further acquisitions throughout fiscal year 2026.

Speaker Change: As a reminder, Aspen will only be included in our results for 11 months during fiscal year 2026, and two months in our fiscal first quarter due to the May 1st acquisition date.

Speaker Change: As I previously mentioned the company borrowed $135 million from our revolving line of credit and use the remainder of our cash on hand from the follow on equity offering to fund the Aspen acquisition on May one so.

Speaker Change: So we are no longer forecasting quarterly net interest income.

Speaker Change: Beginning in May the company will begin incurring interest expense on our revolver borrowings.

Speaker Change: We anticipate paying off our current borrowings outstanding by the end of fiscal year 2026, if the company does not have further acquisitions throughout fiscal year 2026.

James Perry: Note that we continue to actively seek acquisitions, but do not include that in our forecast. With that context, we currently anticipate approximately $5.3 million in net interest expense for the full year, with the second fiscal quarter being the highest level. Our amortization of intangible assets will increase significantly over the prior year due to our acquisitions, most prominently from the Aspen Acquisition. We currently expect that the Aspen acquisition will add approximately $9.5 million of amortization expense in fiscal year 2026. This is a preliminary internal estimate and will be finalized during the fiscal year. In our first quarter 10-Q, we will provide the initial results of our purchase price allocation.

Speaker Change: Note that we continue to actively seek acquisitions, but do not include that in our forecast.

Speaker Change: With that context, we currently anticipate approximately $5 $3 million and net interest expense for the full year with the second fiscal quarter being the highest level.

Speaker Change: Our amortization of intangible assets will increase significantly over the prior year due to our acquisitions most prominently from the Aspen acquisition.

Speaker Change: We currently expect that the Aspen acquisition will add approximately $9 5 million of amortization expense in fiscal year 2026.

Speaker Change: This is our preliminary internal estimates and will be finalized during the fiscal year.

Speaker Change: And our first quarter 10-Q, we will provide the initial results of our purchase price allocation.

James Perry: Note that this forward looking outlook was included in the quarterly investor presentation that we posted to our website this We expect contractor solutions overall adjusted EBITDA margin for the full fiscal year 2026 to be in the low 30s. versus the recent margins closer to the mid-30s as we layer in our acquisitions and the expected impact of tariffs. We are anticipating an overall cost-of-goods sold impact from increased tariffs and we will update you each quarter as warranted on this highly fluid situation. We have taken broad-based action on pricing for our Contractor Solutions products to offset the new tariff.

Speaker Change: Note that this forward looking outlook was included in the quarterly Investor presentation that we posted to our website. This morning.

Speaker Change: We expect contractor solutions overall, adjusted EBITDA margin for the full fiscal year 2020 to be in the low thirties.

Speaker Change: Versus the recent margins closer to the mid Thirty's as we layer in our acquisitions and the expected impact of tariffs.

Speaker Change: We are anticipating an overall cost of goods sold impact from increased tariffs and we will update you each quarter as warranted on this highly fluid situation.

Speaker Change: We are taking broad based action on pricing for our contractor solutions products to offset the new tariffs.

James Perry: Our approach, as always, is to prioritize protecting margin dollars, and we know that this approach can result in some margin compression. and we continue to make strategic changes to our global supply chain to minimize the impact of tariffs and other potential disruptions. We also remain highly focused on cost discipline across the company, especially in the current economic environment.

Speaker Change: Our approach is always is to prioritize protecting margin dollars and we note that this approach can result in some margin compression.

Speaker Change: And we continue to make strategic changes to our global supply chain to minimize the impact of tariffs and other potential disruptions.

Speaker Change: We also remain highly focused on cost discipline across the company, especially in the current economic environment.

James Perry: During fiscal year 2026, specialized reliability solutions and engineer building solutions are each expected to have higher full year EBITDA margin on higher revenue than the prior year.

Speaker Change: During fiscal year 2026 specialized reliability solutions and engineered building solutions are each expected to have higher full year EBITDA margin on higher revenues in the prior year.

James Perry: We expect to see EPS growth in fiscal 2026, although the company does not anticipate EPS to grow as a percentage as much as revenue and EBITDA due to the additional shares outstanding from the follow-on equity offering. increased interest expense, and the increased intangible amortization from recent acquisitions. Thus, we continue to focus on EBITDA as the best comparable measure of our profitability growth over time.

Speaker Change: We expect to see EPS growth in fiscal 2026, although the company does not anticipate EPS to grow as a percentage as much as revenue and EBITDA due to the additional shares outstanding from the follow on equity offering incur.

Speaker Change: Increased interest expense and the increased intangible amortization from recent acquisitions.

Speaker Change: Thus, we continue to focus on EBITDA is the best comparable measure of our profitability growth over time.

James Perry: We currently forecast our fiscal 2026 tax rate to be 26%, which may vary from quarter to quarter due to specific items. With that, I'll now turn the call back to Joe for his closing remarks. Thank you, James.

Speaker Change: We currently forecast our fiscal 2026 tax rate to be 26%, which may vary from quarter to quarter due to specific items.

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

Joe: Thank you James to.

Joseph Armes: To summarize, during the fiscal fourth quarter of 2025, we posted record quarterly results for revenue, adjusted EBITDA, adjusted earnings per share, and adjusted net income. Our impressive 9% plus revenue growth included both inorganic growth from our recent acquisitions and strong organic volume growth in contractor solutions.

Speaker Change: To summarize during the fiscal fourth quarter of 2025, we posted record quarterly results for revenue.

Joe: Adjusted EBITDA.

Joe: Adjusted earnings per share.

Joe: And adjusted net income are impressive 9% plus revenue growth included both inorganic growth from our recent acquisitions.

Joe: And strong organic volume growth in contractor solutions.

Joseph Armes: Looking ahead to the full fiscal year of 2026, we will continue to focus on delivering sustainable growth that exceeds the markets we serve. We will continue to identify and pursue creative acquisitions of innovative companies and products that are synergistic to our existing portfolio.

Joe: Looking ahead to the full fiscal year of 2026, we will continue to focus on delivering sustainable growth that exceeds the markets we serve.

Joe: We will continue to identify and pursue accretive acquisitions of innovative companies and products that are synergistic to our existing portfolio.

Joseph Armes: I would like to take a moment to welcome the most recent group of employees to join the CSW family in connection with our acquisition of Aspen Manufacturing. Aspen Manufacturing is one of the largest independent evaporator coil and air handler manufacturers. for the HVAC R industry and is a recognized leader in product quality and indoor comfort. All of Aspen's products are designed, engineered, and assembled in the U.S. Bringing this line of HVAC-R equipment and the Aspen team under the CSW umbrella will expand our current product offering and allow us to distribute these products through our existing distribution centers across the US.

Joe: I would like to take a moment to welcome. The most recent group of employees to join the CSW family in connection with our acquisition of Aspen manufacturing.

Joe: Aspen manufacturing is one of the largest independent evaporator coil and air handler manufacturers for the HVA see our industry and is a recognized leader in product quality and indoor comfort.

Joe: All of <unk> products.

Joe: Our designed engineered and assembled in the U S.

Joe: Bringing this line of HVA see our equipment and the Aspen team under the CSW umbrella will expand our current product offering and allow us to distribute these products through our existing distribution centers across the U S.

Joseph Armes: At CSW, we are committed to an employee-centric culture where we focus on recruiting and retaining great talent, offering rewarding careers, and recognizing team members who excel while providing them the opportunity to earn a safe, secure, and dignified retirement. I could not be more proud to announce that CSW Industrials has recently been certified as a great place to work for the third year in a row. This recognition is a testament to our focus on core values such as accountability, citizenship, teamwork, respect, integrity, stewardship, and excellence. How we succeed matters, and our success is shaped by the collaborative efforts of our team members.

Joe: At CSW, we are committed to employee centric culture, where we focus on recruiting and retaining great talent.

Joe: Offering rewarding careers and recognizing team members, who excel, while providing them the opportunity to earn a safe secure and dignified retirement.

Joe: I could not be more proud to announce that CSW industrials has recently been certified as a great place to work for the third year in a row.

Joe: This recognition is a testament to our focus on core values, such as accountability citizenship teamwork respect integrity stewardship and excellence, how we succeed matters and our success are shaped by the collaborative efforts of our team members.

Joseph Armes: It's my pleasure to also announce that our board has recently approved a profit-sharing ESOP contribution for fiscal 2025 equal to 6% of each U.S. employee's salary, as well as an additional profit-sharing 401k contribution of 3% for fiscal 2025, which is in addition to our already healthy 6% match.

Joe: <unk> for fiscal 2025, which is in addition to our already healthy 6% match.

Joseph Armes: As always, to close my prepared remarks, I just want to thank the dedicated team here at CSW Industrials who collectively own approximately 4% of our company through the Employee Stock Ownership Plan, as well as all of our shareholders for your continued interest in and support of CSW Industrials.

Joe: As always to close my prepared remarks, I just want to thank the dedicated team here at CSW industrials, who collectively own approximately 4% of our company through the employee stock ownership plan.

Joe: As well as all of our shareholders for your continued interest in and support of CSW industrials.

Operator: So operator, we're now ready for questions. Thank you.

Joe: So operator, we're now ready for questions.

Speaker Change: Thanks, Dan.

Operator: If you would like to ask. Star 1 on your telephone keypad. A confirmation tone will indicate your line.

Joe: I'd like to ask a question. Please press star one on your telephone keypad.

Joe: Tone will indicate your line is in the question queue. You May press star two if he would 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.

Operator: Press Star 2 if you would like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary set before.

Joe: One moment, while we poll for questions.

Jonathan Tanwanteng: Our first question is from John Tanwanteng with CJS. Thank you for taking my questions and congrats on making it to the end.

Jon: Our first question is from Jon <unk> with CJS Securities. Please proceed.

Jon <unk>: Thank you for taking my questions and congrats on a nice quarter.

James Perry: I was wondering if you could go over in a little more detail the impact of tariffs on your cause, maybe you saw on a trailing basis, if any, and what your assumptions are by segment going forward. and Vietnam, especially. Sure, John.

Joe: Was wondering if you could go over in a little more detail the impact of tariffs on your Cogs, maybe you saw on a trailing basis, if any and what your assumptions are.

Joe: By segment going forward.

Joe: The anonymous specialty focus.

Joe: Sure John Good morning, it's James Thanks for being on as always I. Appreciate your coverage tariffs is obviously very dynamic there's not a lot of trailing impact yet just given the lag of that and when tariffs came into play as you may recall in our fiscal third quarter, we brought in extra inventory as well as early in the fourth quarter to get ahead of any potential tariffs. So we've.

James Perry: Good morning. It's James. Thanks for being on, as always. Appreciate your coverage. You know, tariffs is obviously very dynamic. There's not a lot of trailing impact yet, just given the lag of that. And when tariffs came into play, as you may recall, in our fiscal third quarter, we brought in extra inventory as well as early in the fourth quarter to get ahead of any potential tariffs. So we've been working through that inventory the last couple of months, so there's not much trailing impact. As we go forward, you know, as a reminder, despite the current pause on tariffs, there's still a 10% tariff everywhere and 30% plus in China.

Joe: Been working through that inventory the last couple of months, so theres not much trailing impact as we go forward.

Joe: Reminder, despite the current pause on tariffs there are still a 10% tariff everywhere and 30% plus in China and as you know we do have some of our product that comes out of China. We.

James Perry: And as you know, we do have some of our product that comes out of China. We expect for fiscal 26 for that number to be at or a little less than 10%. As I mentioned, we've been working hard to strategically move things around. The addition of Aspen, which is fully United States based, helps that percentage as well. Vietnam continues to be important to us with our facility there. We have no owned facilities internationally outside of in Vietnam. Vietnam's in the 30s now as a result. So we're watching the tariffs very closely. Obviously, the current pause is helpful in the near term.

Joe: We expect for fiscal 'twenty six for that number to be at or a little less than 10% as I mentioned, we've been working hard to strategically move things around the addition of Aspen, which is fully United States based helps that percentage as well.

Joe: <unk> continues to be important to us with our facility. There we have no owned facilities internationally outside of in Vietnam. Vietnam is in the <unk> now as a as a result, so we are watching the tariffs very closely obviously the current pause is helpful. In the near term and as I mentioned, we've had some broad based pricing action on certain products that had been impac.

James Perry: And as I mentioned, we've had some broad-braced pricing action on certain products that have been impacted. And, you know, that's a product by product type conversation. So we do expect that there's going to be an impact. We do expect that we'll weather that well, working closely with our customers on that. And again, as we continue to strategically work our way out of areas like China into other areas that have less impact there, I think we're going to come out of the other end in really good shape.

Joe: And that's a product by product type conversation. So we do expect that theres going to be an impact we do expect that we'll weather that well working closely with our customers on that and again as we continue to strategically.

Joe: Worked our way out of areas like China, and other areas that have less impact there I think we're going to we're going to come out the other end in really good shape.

James Perry: Great, thank you.

Speaker Change: Okay, great. Thank you and then.

Jonathan Tanwanteng: And then, you know, just in regards to the M&A pipe. on the next publication.

Joe: Just in regards to the M&A pipeline.

Joe: You mentioned being able to pay off your debt.

Joe: Revolver by year end.

Joe: <unk> size of your revolver is there more in the pipeline that would utilize that capacity or is that more of them, but just in case that you can move forward.

Joseph Armes: Well, John, this is Joe. As you know, I mean, we have been acquisitive since the beginning, and so we will continue to do that. We take a very disciplined approach, and so we never forecast acquisitions. We have said, you know, since the equity offering that we feel like we can fund the typical strategic product line extension type acquisitions that are smaller through our free cash flow that we generate through operations. The revolving line of credit is available for chunkier, sizable acquisitions like Aspen Manufacturing that we just closed and like TrueAir that we did several years ago.

Joe: Well John This is Joe as you know I mean, we have been acquisitive since the beginning and so we will continue to do that we take a very disciplined approach and so we never forecast acquisitions. We have said since the equity offering that we feel like we can fund.

Joe: On the.

Joe: Typical strategic.

Joe: A product line extension type acquisitions that are smaller through our free cash flow that we generate through operations.

Joe: The revolving line of credit is available for Chunkier sizeable acquisitions like Aspen manufacturing that we just closed in like true error that we did several years ago. So.

Joseph Armes: So the revolver is there so that we can be opportunistic, and we think that the target list for acquisitions is very, very robust and strong, and there's still a lot of consolidation and a lot of innovation that we can acquire over the next few years.

Joe: So the revolver is there so that we can be opportunistic and we think that the target list.

Joe: For acquisitions is very very robust and strong and there is still lot of consolidation.

Joe: Lot of innovation.

Joe: We can acquire over the next few years I would say that there seems to be a bit of a sorting out.

Jonathan Tanwanteng: I would say that there seems to be a bit of a sorting out, and as we sit here today, we would likely wait for some of the uncertainty to settle down before we did anything with international manufacturing. But domestic manufacturing, like the Aspen Manufacturing acquisition, would still be very, very actionable. Got it. Thank you.

Joe: And as we sit here today, we would likely wait for some of these some of the uncertainty to settle down before we did anything with international.

Joe: Manufacturing.

Joe: But domestic.

Joe: Manufacturing like the Aspen manufacturing acquisition would still be very very actionable in the short term.

Speaker Change: Got it. Thank you and then just one last question on Aspen do you believe that to be accretive to your margins over the longer term, what's the I guess the upside there as you're bringing into your distribution in.

Jonathan Tanwanteng: And then just one last question on Aspen. Do you believe that to be accretive to your margins over the longer term? I guess the upside there is you bring it into your distribution. Yeah, John, I think, you know, given where the margins are now, 24%, I think accretion to the consolidated margin is a goal of ours in the kind of near to midterm, you know, we're a couple points from that. Accretive to the contractor solutions margins in the 30s, you know, that's a stronger bar to a higher bar to get over. You know, given the nature of that product being more in the equipment space and the accessory space, the margins just aren't quite as opportunistic there, but we do think there's a good path to see accretion in the near term to the consolidated margin.

Joe: Try to do your product improvements on the business yes.

Joe: Yes, John I think given where the margins are now 24% I think accretion to the consolidated margin as a goal of ours in the kind of near to mid term.

Joe: There were a couple of points from that accretive to the contractor solutions margins in the Thirty's that said that's a stronger.

Joe: Stronger BARDA, a higher bar to get over given the nature of that product being more in the equipment space in the accessory space. The margins just aren't quite as opportunistic there, but we do think theres a good path to see accretion in the near term to the consolidated margin.

Jonathan Tanwanteng: I will also say, as I mentioned in my script, that we're really highly focused on the EBITDA from that acquisition. You're going to have intangible amortization, as I detailed, and it's in the investor deck online. You've got interest expense for a little while, those kind of things, but from an EBITDA accretion perspective, it's accretive day one from a dollar's perspective, but the margins aren't consolidated. We think we will get there in the kind of near to midterm.

Joe: I'll also say as I mentioned in my script that we're really highly focused on the EBITDA from that acquisition youre going to have intangible amortization as I detailed them as in the investor deck online.

Joe: You've got interest expense for a little while those kinds of things, but from an EBITDA accretion perspective, it's accretive day, one from a dollars perspective, but the margins on consolidated we think we will get there in the kind of near to midterm.

Jonathan Tanwanteng: Got it.

Jonathan Tanwanteng: Thank you.

Joe: Got it thank you.

Operator: Thanks, John.

John: Thanks, John.

Susan McElroy: Our next question is from Susan McElroy.

John: Our next question is from Susan Mcclary with Goldman Sachs. Please proceed.

James Perry: Good morning, everyone. Good morning. Morning. My first question is, I just want to follow up on the answers that you gave to the prior question with the 10% or less that will come from China in fiscal 26. Is that as a percent of the COGS or as a percent of the portfolio sales? How should we think about what that number is exactly referring? Sure, Susan, thanks for asking.

Susan Mcclary: Thank you good morning, everyone.

Speaker Change: Good morning, Susan.

Susan: Good morning. My first question is I just wanted to follow up on the the answers that you gave to the prior question with the 10% or less that'll come from China in fiscal 'twenty is that as a percent of the cogs or as a percent of the portfolio sales how should we think about what that number is exactly referring to.

Susan: Sure Susan Thanks, Thanks for asking this is James Thats on Cogs and that is specific to contractor solutions. The other two segments, which last quarter were less than 30% and it'll be even less now with Aspen coming in have virtually nothing that comes from overseas a little little bit here and there, but I am referring to contractor solutions cost of goods sold for.

James Perry: This is James. That's on COGS, and that is specific to contractor solutions. The other two segments, which, you know, last quarter were less than 30%, and it'll be even less now with Aspen coming in, have virtually nothing that comes from overseas, a little, little bit here and there. But I'm referring to contractor solutions cost of goods sold for fiscal 26. Okay. All right. That's helpful.

Susan: Fiscal 'twenty six.

Speaker Change: Okay, Alright, that's helpful. And then just following up on the pricing can you give us some sense about how we should think about the magnitude and perhaps the timing of those pricing that pricing action coming through and the implications that we could see to the margins as we move through fiscal 2026.

James Perry: And then just following up on the pricing, can you give us some sense about how we should think about the magnitude and perhaps the timing of those prices, that pricing action coming through and the implications that we could see to the margins as we move through fiscal 2026? Yeah, we're still working through some of that. You know, as you recall, in Contractor Solutions, we had a price increase January 1st with the increased freight expenses from last year. So that's been in effect, you know, all through the fiscal fourth quarter and now into the fiscal first quarter of 2026.

Speaker Change: Yes, we're still working through some of that as you recall in contract our solutions, we had a price increase January one.

Speaker Change: With the increased freight expenses from last year, So thats been in effect all through the fiscal fourth quarter and now into the fiscal first quarter of 2026.

James Perry: The price increase that I mentioned earlier, kind of broad-based, and it's targeted by specific products based on their country of origin, certain customers, those kind of things. You know, that's something that'll take place likely during this quarter. We've worked through that with our customers. Obviously, that's very dynamic with all the changes that we see. So in terms of margin impact, you know, you're starting to see the tariff costs come through, but we think we're matching that pretty well with pricing as we need to as we go through this quarter and through the fiscal year. Okay, that's helpful.

Speaker Change: The price increase that I mentioned earlier kind of broad based and it's targeted a specific products based on their country of origin certain customers those kind of things that's something that'll that'll take place likely during this quarter.

Speaker Change: We've worked through that with our customers. Obviously, that's very dynamic with all the changes that we see so in terms of margin impact you are starting to see the tariff costs come through but we think we're matching that up pretty well with pricing as.

Susan: As we need to as we get through this quarter into the fiscal year.

Susan: Okay. That's helpful and then one last question.

James Perry: And then one last question, you know, as you think about the setup into the busy spring and summer season, how are you thinking about the inventory on the ground? Are you seeing that your customers and the contractors have started to kind of focus perhaps more on some of these products as they've moved past some of the changes in the regulations on the refrigeration side? And did you see any pull forward or any actions in response to the tariffs that have been announced by your customers or in turn, you know, in the field? I don't think we've seen anything terribly unusual.

Susan: As you think about the setup into the busy spring and summer season, how are you thinking about the inventory on the ground are you seeing that your customers on the contractors have started to kind of focus perhaps more on some of these products as these move past some of the changes in the regulations on the refrigeration side did you see.

Susan: Any pull forward or any actions in response to the tariffs that have been announced by your customers who are in turn in the field.

Susan: I don't think we've seen anything terribly unusual we had a nice fiscal fourth quarter with 8% organic growth in contractor solutions, we were really happy with the performance of of that team on the ground.

James Perry: You know, we had a nice fiscal fourth quarter with 8% organic growth in contractor solutions. You know, we were really happy with the performance of that team on the ground. You know, it's been a little later hot season if you look at, you know, cooling days across the country so far. I think people have taken a bit of a wait-and-see approach at the very beginning of the quarter, but overall things feel relatively normal. I think what you saw, you know, the pull forward on the equipment from the OEMs was probably more pronounced with the refrigeration change to be sure they had the new equipment as well as the old equipment.

Susan: It's been a little later hot season, if you look at cooling days across the country. So far.

Susan: Think people have taken a bit of a wait and see approach at the very beginning of the quarter, but overall things feel relatively normal I think what you saw the pull forward on the equipment from the Oems was probably more pronounced with the refrigeration change to be sure. They have the new equipment as well as the old equipment. As we've said all along that just hasn't affected us a whole lot I think our <unk>.

James Perry: As we've said all along, that just hasn't affected us a whole lot. I think our normal seasonality and pattern of purchasing from our customers for the parts and accessories, and now with Aspen, the evaporator coils, which are more of a replacement part, has been pretty normal. Okay. All right.

Susan: Normal seasonality and pattern of purchasing from our customers for the parts and accessories and now with Aspen, the evaporator coils, which are more of a replacement part has been pretty normal.

Susan: Okay, alright, thanks for all the color and good luck. Thanks.

Susan McElroy: Thanks for all the color and good luck. Thanks, Susan.

Speaker Change: Thanks, Susan.

Sam Reed: Our next question is from Sam Reed with Wells Fargo. Awesome, thanks so much. I really appreciate all the context on Aspen, the detail you gave on the margin profile. I wanted to drill down a little bit on the swings in margin interquarter, you know, just for modeling. It sounds like overall margins running at around 24%, but maybe just give us some bands around that 24%. Just so we have some guardrails for Maklari.

Speaker Change: Our next question is from Sam Reed with Wells Fargo. Please proceed.

Sam Reed: Awesome. Thanks, so much really appreciate all the context on Asps and the detail you gave on the margin profile wanted to drill down a little bit on the swings in margin inter quarter just for modeling purposes.

Sam Reed: It sounds like overall margins running at around 24%, but maybe just give us some band around that 24%. So we have some guard rails for modeling.

James Perry: Yeah, Sam, this is James. That's hard. I think we'll be able to give you more clarity as we go through this first couple quarters of owning Aspen. Obviously, you know, we're looking to make improvements where we can. It's several hundred basis points, either side of that 24%. I can safely say that. You know, how many hundreds of basis of points it is, I think we're going to, you know, we'll learn as we go through this first year, because obviously, you know, we'll get them into our accounting system and our operations and those kind of things.

Sam Reed: Yes, Sam this is James that's hard I think we'll be able to give you more clarity as we go through this first couple of quarters of owning Aspen, obviously, we're looking to make improvements where we can it's several hundred basis points either side of that 24% I can safely say that.

Sam Reed: How many hundreds of basis points. It is I think we're going to we'll learn as we get through this first year, because obviously, we will get them into our accounting system in our operations and those kinds of things. So I think it's early to give beyond that we wanted to give you what we could at least give you a sense of that 24% give you some sense of revenue, but being able to get detailed.

James Perry: So I think it's early to give beyond that. We wanted to give you what we could, and at least give you a sense of that 24% and give you some sense of revenue. But being able to get detailed on the swings quarter to quarter is a little premature for us.

Sam Reed: On the swings quarter to quarter is a little premature for us.

James Perry: Now that's fair. And then just another quick one on Aspen, you know, just historically, you know, has Aspen taken pricing kind of in line with the industry? Has it taken pricing ahead of the industry and just maybe any context on price gaps versus some of the competitors in the air handler evaporator coils? Yeah, I think Aspen's done a good job, obviously, as they've become part of our environment now, May 1st, and we're working with them on that. You know, couldn't really do anything before that, and working with them, of course, but Aspen's done a good job of that, and I think that you'll see, you know, them react like the competitors do, them react as they need to, but again, you know, Aspen doesn't have the tariff impact, necessarily, given that it's U.S.

Sam Reed: No that's fair and then just.

Sam Reed: Another quick one on Aspen, just historically has aspen taken pricing kind of in line with the industry has it taken pricing ahead of the industry and just maybe any context on price gaps.

Sam Reed: Versus some of the competitors in the air handler evaporator coil space.

Susan: Yes, I think Aspen has done a good job obviously as they become part of our environment now may 1st and we're working with them on that didn't really do anything before that and working with them of course, but <unk> done a good job of that and I think that youll see.

Susan: M react like the competitors do them react as they need to but again.

Susan: Aspen doesn't have the tariff impact necessarily given that its use space. So as we compete with.

James Perry: based. So as we compete with evaporator quarrels and air handlers that have either components or the full system coming in from overseas, you have an opportunity there, but in general, Aspen's doing a good job with pricing, and they'll fall into the same discipline that we do from a cost perspective and a pricing perspective with the rest of contractor solutions.

Susan: Evaporate of corals and air handlers that have either components or the full system coming in from overseas you have an opportunity there, but in general <unk> is doing a good job with pricing and they'll fall under the same discipline that we do from a cost perspective, and a pricing perspective with the rest of contractor solutions.

James Perry: Now that's helpful. And then maybe if I could just squeeze one more in here, tariff pricing, you know, you sell into multiple channels, you know, you sell into distributors, you sell into retailers, you know, talk to kind of how those pricing discussions have worked by channel. And then are you finding it easier to push pricing through on the distribution side versus say some of the home Yeah, I don't think we bifurcate quite that much. Obviously, each customer is a little bit different. You know, we've always said where we are in the supply chain is important.

Susan: No. That's helpful. And then maybe if I could just squeeze one more in here tariff pricing.

Speaker Change: You sell into multiple channels, you sell it to distributors, who sell into retailers talk through kind of how those pricing discussions have worked by channel.

Speaker Change: And then are you finding it easier to push pricing through on the distribution side.

Susan: Some of the home centers.

Susan: Yeah, I don't think we bifurcate quite that much obviously, each customer has a little bit different we've always said, where we are in the supply chain is important to our ability to to push pricing in that working its way through the system, we feel comfortable with.

James Perry: So our ability to push pricing and that working its way through the system we feel comfortable with. But, you know, I think it's early and I don't think we get so precise to bifurcate, you know, retail versus distribution. As a reminder, we are heavily weighted towards distribution. You know, retail plays a role in some of the products, of course. But, you know, our ability to look at and have good relationships and always think about the long term with distributors is very important to us. As I mentioned, we're focused on the dollars, not the margin as much.

Susan: But I think it's it's early and I don't think we get so precise to bifurcate our retail versus distribution. As a reminder, we are heavily weighted towards distribution retail plays a plays a role in some of the products of course, but our ability to to look at pricing and have good relationships and always think about the law.

Susan: Long term with distributors is very important to us as I mentioned, we're focused on the dollars not the margin as much. So you may see a little bit of compression, we saw that saying you weren't with us at the time, but we saw that during COVID-19 and we recovered that over time some of those costs came back down but again, we continue to focus on those distribution customers, where we have relationships with retailers.

James Perry: So you may see a little bit of compression. We saw that, Sam, you weren't with us at the time, but we saw that during COVID and we recovered that over time as some of those costs came back down. But again, we continue to focus on the distribution customers.

Sam Reed: Where we have relationships with retailers, we're having good discussions there as well. Awesome.

Susan: We're having good discussions there as well.

Sam Reed: Thanks so much.

Speaker Change: Awesome. Thanks, so much I'll pass it on.

Operator: I'll pass it on.

Sam: Thanks Sam.

Jamie Cook: Our next question is from Jamie Cook with Truist Security. Hi, good morning. I guess two questions. One, just on, you know, we're in May and your quarter ended in March. Just wondering if there was any change in demand as we entered into April, you know, in May, you know, across the portfolio.

Speaker Change: Our next question is from Jamie Cook with <unk> Securities. Please proceed.

Jamie Cook: Hi, Good morning, I guess two questions one just on.

Jamie Cook: We are in May and your quarter ended March just wondering if there was any change in demand as we entered into April.

Jamie Cook: You know in May across the portfolio and then my second question on contractor solutions. It sounds like organic growth is still expected to be healthy in 2026, obviously, you're putting through price increases because of tariffs do you assume volumes are still healthy or do you assume to what degree does this higher pricing sort of have a negative impact on <unk>.

Jamie Cook: And then my second question on contractor solutions, it sounds like organic growth is still expected to be healthy in 2026. Obviously, you're putting through price increases because of tariffs. Do you assume volumes are still healthy or do you assume to what degree does higher pricing sort of have a negative impact on volumes?

Jamie Cook: And then my last, actually, one of you, my last question is, sorry, just on engineered building solutions. Organic growth was obviously negative, but you posted a strong book to bill and your bookings were up 18%. So just wondering when we should see that translate into positive organic growth for EBS. Thank you.

Jamie Cook: And then my last actually why don't you.

Jamie Cook: My last question is sorry, just on engineered building solutions.

Jamie Cook: Organic growth was obviously negative, but you posted a strong book to Bill and your bookings were up 18%. So just wondering when we should see that translate into positive organic growth for eds. Thank you.

James Perry: Yeah, Jamie, thanks. And if I missed some of that, circle back, please.

Speaker Change: Yeah, Jamie Thanks, and if I Miss some of that circle back. Please I'll start at the engineered building solutions again, we wanted to highlight historically strong booking quarter for us and given things like the Abi index and those kinds of things. We're really proud of the team. We're focused on the direct sales of the smoke curtains were focus on the right projects that are still.

James Perry: I'll start at the end. Engineer building solutions, you know, again, we wanted to highlight historically strong booking quarter for us. And given, you know, things like the ABI index and those kind of things, we're really proud of the team. We're focused on, you know, the direct sales of those smoke curtains, we're focused on the right projects that are still getting built and getting permitted. You know, one thing that our leadership team has told us, they're seeing a higher number of rebiddings, which means projects are getting very close to getting done. Instead of just kind of that initial bid, they throw out but don't turn into a booking.

Speaker Change: Getting built and getting permitted one thing that our leadership team has told US they are seeing a higher number of re biddings, which means projects are getting very close to getting done.

Speaker Change: Instead of just kind of that initial bid they throw out but don't turn into a booking. So we had a really nice fourth quarter across the board there really bucking some of the industry trends based on the team's hard work there in the commercial sales efforts.

James Perry: So we had a really nice fourth quarter across the board. They're really bucking some of the industry trends based on the team's hard work there and the commercial sales efforts. And we think we're going to have a nice, you know, booking year in fiscal 26 as well. You know, in terms of when that turns into revenue, obviously, some of it's rather near term, things like smoke curtains can be, you know, near term, depending on when they're bid and booked. You know, some of those are 18 to 24 months out. But we do expect good top line growth as well as EBITDA and margin growth at EBS.

Speaker Change: We think we're going to have a nice booking year in fiscal 'twenty six as well.

Speaker Change: In terms of when that turns into revenue obviously some of it for other near term things like smoke curtains can be near term depending on when they are when they are bid and booked some of those rate 10 to 24 months out, but we do expect good top line growth as well as EBITDA and margin growth and EPS within specialized liability solutions going back to your demand question again, we have.

James Perry: Within specialized reliability solutions, going back to your demand question again, we had a soft fourth quarter. January, February were soft. As we exited March, April, and now into May, we've seen things pick up some. You still have a little bit of softness in the energy markets, for example, but the team is doing a good job finding opportunities. So I think that they're back to a nice order booking level and a nice sales level. And again, we expect revenue and EBITDA with margin growth in that segment as well.

Speaker Change: A soft fourth quarter January February were soft as we exited March April and now into May.

Speaker Change: Seen things pick up some that you still have a little bit of softness in the energy markets. For example, but the team is doing a good job finding opportunities. So I think that there that they are back to a nice order booking level.

Speaker Change: And a nice sales level and again, we expect revenue and EBITDA with margin growth in that segment as well and contractor solutions as I mentioned, 8% organic growth in the fiscal fourth quarter, we do expect kind of a single.

James Perry: In contractor solutions, as I mentioned, 8% organic growth in the fiscal fourth quarter. We do expect kind of single, you know, or mid to high single digit growth, you know, as we go mid and long term in that business. That's going to quarter to quarter. We feel good about it. As I mentioned to one of the earlier questions, Jamie, you know, it's been a slow hot season so far, but the group is still doing a great job of getting our product in customers' hands so they have what they need as soon as it heats up.

Speaker Change: Mid to high single digit growth.

Speaker Change: As we goes mid and long term in that business is going to vary a little bit quarter to quarter. We feel good about it as I mentioned to one of the earlier questions Jamie.

Speaker Change: It's been a slow.

Speaker Change: Hot season, so far but the.

Speaker Change: The group is still doing a great job of getting our product in customers hands. So they have what they need as soon as it heats up we do a great job of getting things out very near term. Obviously, the fact that some of it comes from overseas. We have to plan Accordingly, we strategically place the right inventory. So we feel good about the organic growth prospects there as well.

James Perry: We do a great job of getting things out very near term. Obviously, the fact that some of it comes from overseas, we have to plan accordingly. So we strategically place the right inventory. So we feel good about the organic growth prospects there as well.

James Perry: And I'll mention, you know, on top of introducing new products to the acquisitions we have, product innovation with those acquisitions. And we will always include as part of our organic growth expectations, market share growth. The team is highly focused on continuing to offer more and more of the contractor solutions products to our customers. And the more products we can offer our distribution customers, the more they want to do business with us. We make it easy to do business with technology, with shipments, with invoicing, one point of contact. So we're picking up share as we continue to add product.

Speaker Change: And I'll mention on top of introducing new products to the acquisitions, we have product innovation with those acquisitions and we will always include as part of our organic growth expectations market share growth. The team is highly focused on continuing to offer more and more of the contractor solutions products to our customers and the more products we can offer.

Speaker Change: Offer our distribution customers the more they want to do business with us we make it easy to do business with technology with shipments within voice and one point of contact so we're picking up share as we continue to add products.

Jamie Cook: Thank you. Hopefully I covered it all, Jamie. Yeah, you did. You did.

Speaker Change: Thank you.

Jamie Cook: Hopefully I covered it all Jamie.

Speaker Change: Yes, you did thank you.

Operator: Thank As a reminder, this star one on your telephone... if you would like to ask...

Speaker Change: Thanks.

Speaker Change: As a reminder, this star one on your telephone keypad, if he would like to ask a question.

Natalia Bach: Our next question is from Andrew Kaplewicz.

Speaker Change: Our next question is from Andrew Kaplowitz with Citigroup. Please proceed.

James Perry: All right, good morning. This is Natalia Bach on behalf of Andy Capitalist. Hi Natalia. First question I want to ask, just in engineering or engineered building solutions, last quarter you reiterated a 20% EBITDA margin target in the intermediate term, so as backlog quality improves, what's the timeline to approach that goal? Are there any key hurdles like cost, scale, or pricing you need to overcome to get there? Yeah, Natalia, great question. We still target that as the midterm hurdle. Whether we're there each and every quarter, that'll bounce around as it has. The only thing I would say that's a little in the face of that is there's a minimal tariff impact there, as they do import some products.

Bob: Alright. Good morning. This is metallic Bob on behalf of Andy Kaplowitz.

Johann Italia: And that's all Johann Italia.

Speaker Change: First question I want to ask just in engineering or engineered building solutions last quarter you.

Speaker Change: Reiterated a 20% EBITDA margin target in the intermediate term so backlog quality improves what's the timeline to approach cycle like are there any key hurdles at Costco or pricing you need to overcome to get there.

Speaker Change: Yeah, and I'll tell you great question, we still target that is the midterm hurdle whether were that are each and every quarter that will bounce around as it has the only thing I would say thats a little in the face of that is there is a minimal tariff impact there as they do import some products Motors for example, those kind of things. So we've seen a little cost and it's a little harder to get pricing through that business because you bid.

James Perry: Motors, for example, those kind of things. We've seen a little cost, and it's a little harder to get pricing through that business because you bid projects. So we're working on that. Obviously, a little tariff relief is helpful. So we're going to bring in all the products we can at a little bit lower tariff than we thought we might have. But 20% is still the intermediate term hurdle. Are we there for the full year fiscal 26? Probably a little early to say that, necessarily. But we're approaching it here as we go through quarter to quarter. A couple.

Speaker Change: <unk>. So we're working on that obviously, a little tariff relief is helpful. So we're going to bring in all the products, we can add a little bit lower tariff than we thought we might have but 20% is still the intermediate term hurdle or window for the full year fiscal 'twenty six probably a little early to say that necessarily but we're approaching as yours, we go through quarter to quarter, yes.

Speaker Change: Okay, and then just in SaaS like margins compress this quarter, but what specific factors contributed to this performance, but more importantly, what strategies are in place to address these challenges like I saw in the presentation. There's a mention of new product introductions and new deals in process, maybe if you could expand on those points.

James Perry: And then just an SRS, like margins compressed this quarter, but what specific factors contributed to the performance, but more importantly, what strategies are in place to address these challenges? Like I saw in the presentation, there's a mention of new product introductions and new deals in process. So maybe if you could expand on those points. Yeah, sure, Natalia, the biggest So, one key factor for specialized reliability solutions, as we've talked about, is volume. And it was a soft January and February, certainly compared to the prior year. We had some catch-up last year from some shipments we missed, but, you know, volume matters in that business.

Speaker Change: Yes, sure and that's the biggest.

Speaker Change: Factor for special is our ability solutions as we've talked about is volume and it was a soft January and February certainly compared to the prior year, we had some catch up last year from some shipments we missed but volte.

Speaker Change: Volume matters in that business and the volume was soft in January and February and Thats, just going to hit margins. Your absorptions arent as strong winter overhead, it's a pretty high fixed cost base. There also as we went through the mix in the quarter. We had a few more products that sold that were just lower margin product thats going to vary quarter to quarter. So nothing is wrong with that business nothing intuitively tells us that that's the <unk>.

James Perry: And the volume was soft in January and February, and that's just going to hit margins. Your absorptions aren't as strong with your overhead. It's a pretty high fixed cost base there. Also, as we went through the mix in the quarter, we had a few more products that sold that were just lower margin products. That's going to vary quarter to quarter. So, nothing is wrong with that business. Nothing intuitively tells us that that's the new hurdle. We've talked about that being a 20% margin business as well. They've hit it several times. So, I think, more than anything, it's making sure we have the volume.

Speaker Change: New hurdle, we've talked about that being a 20% margin business as well. They attended several times. So I think more than anything it's making sure. We have the volume one thing Thats a little under the radar. We've mentioned just in passing to folks we relocated.

James Perry: You know, one thing that's a little under the radar, we've mentioned just in passing to folks, we relocated a facility from Pennsylvania down to our main facility here in Texas. And that's our highest margin group of products. And so, A, we eliminate a little bit of cost by moving that down here, but, secondly, we've got more eyes on those products now. We're doing better with product development there, having it right here in the same lab and the same facility. And so, we're doing things like that structurally that will continue to push top-line and bottom-line growth and help those margins.

Speaker Change: Our facility from Pennsylvania down to our main facility here in Texas, and that's our highest margin group of products and so we eliminate a little bit of cost by moving that down here. The secondly, we've got more eyes on those products now we're doing better with product development there having it right here in the same lab in the same facility and so we're doing things like.

Speaker Change: That structurally that will continue to push topline and bottomline growth and help those margins.

Speaker Change: Okay. That's helpful. That's all my questions congrats on the quarter.

Natalia Bach: That's all my questions. Congrats. Thanks, Natalia.

Speaker Change: Thanks Netanya.

Operator: If there are no further questions at this time, I would like to turn the conference back over to Thank you, and we just want to thank everyone for joining us for this fourth quarter and full year conference call. We appreciate your support and look forward to the next time we'll be in contact. Thank you.

Operator: There are no further questions at this time I would like to turn the conference back over to Joe Armes for closing remarks.

Operator: Thank you and we just want to thank everyone for joining us for this <unk>.

Operator: Fourth quarter and full year conference call I appreciate your support and look forward to the next time, we will be in contact. Thank you.

Operator: This will conclude today's conference. Thank you for your patience and thank you for your patience.

Operator: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Operator: Okay.

Operator: [music].