CSW Industrials Q3 2026 CSW Industrials Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q3 2026 CSW Industrials Inc Earnings Call
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I would now like to turn the conference over to your host. Alexa Warda, thank you. You may begin.
Thank you, Rob.
Good morning, everyone.
Joining me today on the call is Joseph arms, chairman chief executive officer and president of csw Industrials and James Perry, Executive, Vice President and Chief Financial Officer.
We issued our earnings release.
updated investor relations, presentation, and quarterly report on form 10q prior to the markets opening today, all of which are available on the Investor's portion of our website at www.cws.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 #1: welcome to Greetings and CSW INDUSTRIALS, INC. fiscal third Quarter 2026 Earnings Call . time , all participants At this are on a listen mode .
Speaker #1: A only question and answer session follow the will formal If to enter the you'd like queue , presentation . please press star time during this one at any enter the to conference .
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, 10K and other filings with the SEC.
Do not undertake any duty to update any forward-looking statements.
I will now turn the call over to Joe.
Speaker #1: question require anyone should operator assistance during the conference , please If press telephone star Zero on your keypad . reminder , As a this being conference is recorded .
Thank you, Alexa and good morning, everyone.
Speaker #1: I would now like to conference over to turn the your host , Thank you . You Alexa Huerta . may begin .
It is my pleasure to begin by reporting that our team delivered record. Fiscal third quarter results in both revenue and adjusted ebitda
Alexa Huerta: Thank you, Rob. Good morning, everyone, and welcome to the CSW Industrials' Fiscal 2026 Q3 earnings call. Joining me today on the call is Joseph Arm, 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 quarterly report on 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. 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.
Alexa Huerta: Thank you, Rob. Good morning, everyone, and welcome to the CSW Industrials' Fiscal 2026 Q3 earnings call. Joining me today on the call is Joseph Arm, 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 quarterly report on 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. 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 #2: you . Rob . Good morning , everyone , and welcome to Thank the CSW INDUSTRIALS, INC. Fiscal 2026 third quarter Earnings call . Joining me the today on call is Joseph Armes chairman , Chief Executive Officer President of and CSW INDUSTRIALS, INC. .
despite market, headwinds, and economic uncertainty that has been present for most of this fiscal year, and which has been most pronounced in the residential, HVAC R and Market
Speaker #2: And James Perry Executive Vice President and Financial Chief . We issued our earnings Officer , updated release Investor relations presentation report and quarterly form Prior 10-q .
Before commencing our regular quarterly commentary, I want to provide additional context for our strategic initiatives and financial results in the quarter.
Csw is a larger and more Diversified company today than it was just 3 months ago when we last spoke to you.
Capitalizing on our strong balance sheet.
Speaker #2: opening to the today . markets are All of which investors portion of our available on the website at . This call is being and webcast information on accessing the replay is included in the earnings release During .
Guided by our disciplined approach to Capital allocation. We continued to invest in growth opportunities and a meaningful way.
Speaker #2: this will make call , we statements . forward These statements are looking current based on and expectations that are assumptions subject to risks and various uncertainties .
In this most recent quarter, we completed 3 Acquisitions, including the acquisition of Mars Parts within our contractor Solutions segment, our largest acquisition to date at 650 million.
Alexa Huerta: 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. We do not undertake any duty to update any forward-looking statements. I will now turn the call over to Joe.
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. We do not undertake any duty to update any forward-looking statements. I will now turn the call over to Joe.
We also acquired Hydrox Holdings and proaction fluids within our specialized reliability solution segment, which amounted to 26.5 million in aggregate investment.
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, 10K and other filings with the SEC.
Do not undertake any duty to update any forward-looking statements.
Considering the past 12 months, to include the Aspen manufacturing acquisition. We successfully executed 4, highly revenue, ibida, and cash flow accretive
Joseph Armes: Thank you, Alexa, and good morning, everyone. It is my pleasure to begin by reporting that our team delivered record fiscal third quarter results in both revenue and Adjusted EBITDA, despite market headwinds and economic uncertainty that has been present for most of this fiscal year, and which has been most pronounced in the residential HVAC R end market. Before commencing our regular quarterly commentary, I want to provide additional context for our strategic initiatives and financial results in the quarter. CSW is a larger and more diversified company today than it was just 3 months ago when we last spoke to you. Capitalizing on our strong balance sheet and guided by our disciplined approach to capital allocation, we continued to invest in growth opportunities in a meaningful way.
Joseph Armes: Thank you, Alexa, and good morning, everyone. It is my pleasure to begin by reporting that our team delivered record fiscal third quarter results in both revenue and Adjusted EBITDA, despite market headwinds and economic uncertainty that has been present for most of this fiscal year, and which has been most pronounced in the residential HVAC R end market. Before commencing our regular quarterly commentary, I want to provide additional context for our strategic initiatives and financial results in the quarter. CSW is a larger and more diversified company today than it was just 3 months ago when we last spoke to you. Capitalizing on our strong balance sheet and guided by our disciplined approach to capital allocation, we continued to invest in growth opportunities in a meaningful way.
I will now turn the call over to Joe.
Thank you, Alexa and good morning, everyone.
synergistic transactions with a total investment of approximately 1 billion dollars.
It is my pleasure to begin by reporting that our team delivered record fiscal third quarter results in both revenue and adjusted EBITDA.
In addition we've invested 70 million in open market, share repurchases during the quarter. Emphasizing our dedication to maximizing shareholder returns.
Despite market headwinds and economic uncertainty that have been present for most of this fiscal year, and which have been most pronounced in the residential HVAC/R end market,
our financial us to maintain a long-term perspective and to invest opportunistically with great discipline, even amid short-term volatility
Our capital structure now. Reflects these Investments.
Before commencing our regular quarterly commentary, I want to provide additional context for our strategic initiatives and financial results in the quarter.
Csw is a larger and more Diversified company today than it was just 3 months ago when we last spoke to you.
capitalizing on our
Our strong balance sheet.
In November we strategically funded these Acquisitions with cash on hand and low-cost debt Capital while always maintaining a net debt. Toe ratio. Well within our target range of 1 to 3 times.
Joseph Armes: In this most recent quarter, we completed 3 acquisitions, including the acquisition of MARS Parts within our Contractor Solutions segment, our largest acquisition to date, at $650 million. We also acquired Hydrotex Holdings and ProAction Fluids within our Specialized Reliability Solutions segment, which amounted to $26.5 million in aggregate investment. Considering the past 12 months to include the Aspen Manufacturing acquisition, we successfully executed 4 highly revenue, EBITDA, and cash flow accretive, synergistic transactions with a total investment of approximately $1 billion. In addition, we've invested $70 million in open market share repurchases during the quarter, emphasizing our dedication to maximizing shareholder returns. Our financial strength allows us to maintain a long-term perspective and to invest opportunistically with great discipline, even amid short-term volatility. Our capital structure now reflects these investments.
In this most recent quarter, we completed 3 acquisitions, including the acquisition of MARS Parts within our Contractor Solutions segment, our largest acquisition to date, at $650 million. We also acquired Hydrotex Holdings and ProAction Fluids within our Specialized Reliability Solutions segment, which amounted to $26.5 million in aggregate investment. Considering the past 12 months to include the Aspen Manufacturing acquisition, we successfully executed 4 highly revenue, EBITDA, and cash flow accretive, synergistic transactions with a total investment of approximately $1 billion. In addition, we've invested $70 million in open market share repurchases during the quarter, emphasizing our dedication to maximizing shareholder returns. Our financial strength allows us to maintain a long-term perspective and to invest opportunistically with great discipline, even amid short-term volatility. Our capital structure now reflects these investments.
Guided by our disciplined approach to Capital allocation. We continue to invest in growth opportunities in a meaningful way.
This ensures that we maintain a resilient balance sheet with ample liquidity for future investment. As we have committed to do in writing to you our shareholders,
In this most recent quarter, we completed 3 Acquisitions, including the acquisition of Mars Parts within our contractor Solutions segment, our largest acquisition to date at 650 million.
These Dynamics along with the magnified seasonality effects from the addition of the Aspen manufacturing and Mars Parts. Businesses make year-over-year comparisons of certain performance metrics less relevant.
We also acquired Hydrox Holdings and proaction fluids within our specialized reliability solution segment, which amounted to 26.5 million in aggregate investment.
Adjusted EPS comparisons particularly When comparing to Prior year periods when we were in a net cash position.
Considering the past 12 months, to include the Aspen manufacturing acquisition. We successfully executed 4, highly revenue, ibida, and cash flow accretive
Additionally having deployed almost 1 billion in acquisition capital in the last year, our amortization of intangible assets will increase significantly, which also challenges comparisons
synergistic transactions with a total investment of approximately 1 billion dollars.
These items are excluded when providing ebitda and adjusted debit de results, which is why we continue to point you towards these metrics as the best multi-period comparison.
In addition we've invested 70 million in open market, share repurchases during the quarter. Emphasizing our dedication to maximizing shareholder returns.
Our financials allow us to maintain a long-term perspective and to invest opportunistically with great discipline, even amid short-term volatility.
Joseph Armes: In November, we strategically funded these acquisitions with cash on hand and low-cost debt capital, while always maintaining a Net Debt to EBITDA ratio well within our target range of 1 to 3 times. This ensures that we maintain a resilient balance sheet with ample liquidity for future investment, as we have committed to do in writing to you, our shareholders. These dynamics, along with the magnified seasonality effects from the addition of the Aspen Manufacturing and MARS Parts businesses, make year-over-year comparisons of certain performance metrics less relevant. The interest expense generated by our new capital structure certainly impacts reported and Adjusted EPS comparisons, particularly when comparing to prior year periods when we were in a net cash position. Additionally, having deployed almost $1 billion in acquisition capital in the last year, our amortization of intangible assets will increase significantly, which also challenges comparisons.
In November, we strategically funded these acquisitions with cash on hand and low-cost debt capital, while always maintaining a Net Debt to EBITDA ratio well within our target range of 1 to 3 times. This ensures that we maintain a resilient balance sheet with ample liquidity for future investment, as we have committed to do in writing to you, our shareholders. These dynamics, along with the magnified seasonality effects from the addition of the Aspen Manufacturing and MARS Parts businesses, make year-over-year comparisons of certain performance metrics less relevant. The interest expense generated by our new capital structure certainly impacts reported and Adjusted EPS comparisons, particularly when comparing to prior year periods when we were in a net cash position. Additionally, having deployed almost $1 billion in acquisition capital in the last year, our amortization of intangible assets will increase significantly, which also challenges comparisons.
Providing an update on the Mars Parts, acquisition. We will. We will remind you that. At the time of acquisition, we reported that we expected to achieve 10 million dollars of run rate synergies. And to reach a 30%, ebit Dom margin for this business within 12 months.
Our capital structure now. Reflects these Investments.
We have already actioned a majority of the identified synergies. And we now expect to exceed this initial objective.
In November we strategically funded these Acquisitions with cash on hand and low-cost debt Capital while always maintaining a net debt. Toe ratio. Well within our target range of 1 to 3 times.
I am pleased to share that the team has done an outstanding job and accelerating the integration of Mars Parts into our contractor solution segment.
The conversion of this business into the contractor Solutions Erp system was completed earlier this month.
This ensures that we maintain a resilient balance sheet with ample liquidity for future investment. As we have committed to do in writing to you, our shareholders,
And other commercial integration initiatives including product harmonization are well underway.
In short, we confidently, maintain our expectations, to achieve our operational and financial goals for this acquisition.
These dynamics, along with the magnified seasonality effects from the addition of the Aspen Manufacturing and Mars Parts businesses, make year-over-year comparisons of certain performance metrics less relevant.
We have experienced encouraging order, volume as we exited December and moved into January as compared to the overall. Fiscal, third quarter.
The interest expense generated by our new capital structure certainly impacts reported and adjusted EPS comparisons, particularly when comparing to prior year periods when we were in a net cash position.
Based on very, recent detailed customer discussions, we have positive feedback that our customers inventory levels are getting more in balance as their de stocking, plans have been or are being completed.
Joseph Armes: These items are excluded when providing EBITDA and adjusted EBITDA results, which is why we continue to point you toward these metrics as the best multi-period comparison. Providing an update on the MARS Parts acquisition, we will remind you that at the time of acquisition, we reported that we expected to achieve $10 million of run rate synergies and to reach a 30% EBITDA margin for this business within 12 months. We have already actioned a majority of the identified synergies, and we now expect to exceed this initial objective. I am pleased to share that the team has done an outstanding job in accelerating the integration of MARS Parts into our Contractor Solutions segment. The conversion of this business into the Contractor Solutions ERP system was completed earlier this month, and other commercial integration initiatives, including product harmonization, are well underway.
These items are excluded when providing EBITDA and adjusted EBITDA results, which is why we continue to point you toward these metrics as the best multi-period comparison. Providing an update on the MARS Parts acquisition, we will remind you that at the time of acquisition, we reported that we expected to achieve $10 million of run rate synergies and to reach a 30% EBITDA margin for this business within 12 months. We have already actioned a majority of the identified synergies, and we now expect to exceed this initial objective. I am pleased to share that the team has done an outstanding job in accelerating the integration of MARS Parts into our Contractor Solutions segment. The conversion of this business into the Contractor Solutions ERP system was completed earlier this month, and other commercial integration initiatives, including product harmonization, are well underway.
additionally having deployed almost 1 billion in acquisition capital in the last year, our amortization of intangible assets will increase significantly, which also challenges comparisons
Since going public in 2015, we have maintained that we generally expect mid to high single-digit or organic growth, through the cycle, and our contractor Solutions segment.
Though, quarterly volatility is common.
These items are excluded when providing ebitda and adjusted ebit da results, which is why we continue to point you toward these metrics as the best multi-period comparison.
While not Recession Proof. This segment has shown impressive resilience due to the essential nature of our Innovative products.
Providing an update on the Mars Parts, acquisition. We will. We will remind you that. At the time of acquisition, we reported that we expected to achieve 10 million dollars of run rate synergies. And to reach a 30% ebit da margin for this business within 12 months.
While it is too early in the season to forecast. What we expect in calendar 2026 and for our fiscal 2027,
We are cautiously optimistic and encouraged by order patterns, starting to emerge.
We have already actioned a majority of the identified synergies. And we now expect to exceed this initial objective.
We expect to have a better view of this outlook. On our fiscal, fourth quarter earnings, call in May,
I am pleased to share that the team is done an outstanding job and accelerating the integration of Mars Parts into our contractor solution segment.
at this time, I will turn the call over to James for a closer. Look at our results and following his comments. I will return include our prepared remarks
The conversion of this business into the contractor's Solutions Erp system was completed earlier this month.
Thank you Joe. Good morning, everyone.
Joseph Armes: In short, we confidently maintain our expectations to achieve our operational and financial goals for this acquisition. We have experienced encouraging order volume as we exited December and moved into January, as compared to the overall fiscal Q3. Based on very recent, detailed customer discussions, we have positive feedback that our customers' inventory levels are getting more in balance as their destocking plans have been or are being completed. Since going public in 2015, we have maintained that we generally expect mid- to high-single-digit organic growth through the cycle in our Contractor Solutions segment, though quarterly volatility is common. While not recession-proof, this segment has shown impressive resilience due to the essential nature of our innovative products....
In short, we confidently maintain our expectations to achieve our operational and financial goals for this acquisition. We have experienced encouraging order volume as we exited December and moved into January, as compared to the overall fiscal Q3. Based on very recent, detailed customer discussions, we have positive feedback that our customers' inventory levels are getting more in balance as their destocking plans have been or are being completed. Since going public in 2015, we have maintained that we generally expect mid- to high-single-digit organic growth through the cycle in our Contractor Solutions segment, though quarterly volatility is common. While not recession-proof, this segment has shown impressive resilience due to the essential nature of our innovative products....
Including product harmonization, are well underway.
The Joe mentioned this quarter had a lot of moving parts and I will address many of them in my remarks today.
In short, we confidently, maintain our expectations, to achieve our operational and financial goals for this acquisition.
During the third fiscal quarter of 2026, we delivered record revenue of 233 million up 20% as compared to the prior year.
Driven primarily by our Acquisitions over the last year.
We have experienced encouraging order, volume as we exited December and moved into January as compared to the overall. Fiscal, third quarter.
This was partially offset by a 2.9% reduction in Consolidated organic Revenue concentrated in our contractor solution segment.
I will discuss the revenue Trends by segment later in my remarks.
Adjusted Consolidated. EBA grew 7%.
Based on very recent, detailed customer discussions, we have positive feedback that our customers' inventory levels are getting more in balance as their de-stocking plans have been or are being completed.
adjusted EPS for the fiscal third quarter was $142 demonstrating resilience amid, challenging market conditions
Since going public in 2015, we have maintained that we generally expect mid- to high-single-digit organic growth, through the cycle, in our Contractor Solutions segment.
Recognizing that this reflects a 21% reduction compared to the same period last year.
Though, quarterly volatility is common.
Joseph Armes: While it is too early in the season to forecast what we expect in calendar 2026 and for our fiscal 2027, we are cautiously optimistic and encouraged by order patterns starting to emerge. We expect to have a better view of this outlook on our fiscal Q4 earnings call in May. At this time, I will turn the call over to James for a closer look at our results, and following his comments, I will return and conclude our prepared remarks.
While it is too early in the season to forecast what we expect in calendar 2026 and for our fiscal 2027, we are cautiously optimistic and encouraged by order patterns starting to emerge. We expect to have a better view of this outlook on our fiscal Q4 earnings call in May. At this time, I will turn the call over to James for a closer look at our results, and following his comments, I will return and conclude our prepared remarks.
While not recession-proof, this segment has shown impressive resilience due to the essential nature of our innovative products.
The reduction in adjusted EPS was primarily driven by $10 million of higher interest expense. As we move from a net cash position last year, to a net debt position this year after strategically, funding Acquisitions and share repurchases with cash on hand and low cost debt capital.
While it is too early in the season to forecast, what we expect in calendar 2026 and for our fiscal 2027,
We are cautiously optimistic and encouraged by order patterns, starting to emerge.
Adjusted EPS was impacted to a lesser extent by increased operating expenses from the acquired businesses before realizing the full effect of planned and actioned synergies.
We expect to have a better view of this outlook on our fiscal fourth quarter earnings call in May.
James Perry: Thank you, Joe. Good morning, everyone. As Joe mentioned, this quarter had a lot of moving parts, and I will address many of them in my remarks today. During Q3 of 2026, we delivered a record revenue of $233 million, up 20% as compared to the prior year, driven primarily by our acquisitions over the last year. This was partially offset by a 2.9% reduction in consolidated organic revenue, concentrated in our Contractor Solutions segment. I will discuss the revenue trends by segment later in my remarks. Adjusted consolidated EBITDA grew 7%. Adjusted EPS for fiscal Q3 was $1.42, demonstrating resilience amid challenging market conditions.
James Perry: Thank you, Joe. Good morning, everyone. As Joe mentioned, this quarter had a lot of moving parts, and I will address many of them in my remarks today. During Q3 of 2026, we delivered a record revenue of $233 million, up 20% as compared to the prior year, driven primarily by our acquisitions over the last year. This was partially offset by a 2.9% reduction in consolidated organic revenue, concentrated in our Contractor Solutions segment. I will discuss the revenue trends by segment later in my remarks. Adjusted consolidated EBITDA grew 7%. Adjusted EPS for fiscal Q3 was $1.42, demonstrating resilience amid challenging market conditions.
As well as gross margin compression. We have signaled, all fiscal year driven primarily by the margin dilution from the Aspen manufacturing and Mars Parts. Acquisitions in contractor Solutions.
At this time, I will turn the call over to James for a closer look at our results. Following his comments, I will return and conclude our prepared remarks.
Thank you, Joe. Good morning, everyone. As Joe mentioned, this quarter had a lot of moving parts, and I will address many of them in my remarks today.
During the third fiscal quarter of 2026, we delivered record revenue of 233 million up 20% as compared to the prior year, driven primarily by our Acquisitions over the last year.
1.3 million or 68 cents per share of amortization of acquired intangible assets. Consistent with the other updated adjusted EPS methodology, we introduced in our fiscal first quarter,
This was partially offset by a 2.9% reduction in Consolidated organic Revenue concentrated in our contractor solution segment.
I will discuss the revenue trends by segment later in my remarks.
Adjusted Consolidated, ibida. Grew 7%.
Consolidated revenue for the fiscal third quarter of 2026 increased by 39, million, or 20%. When compared to the prior year, period driven mainly by the aforementioned acquisitions.
James Perry: Recognizing that this reflects a 21% reduction compared to the same period last year, the reduction in Adjusted EPS was primarily driven by $10 million of higher interest expense as we moved from a net cash position last year to a net debt position this year, after strategically funding acquisitions and share repurchases with cash on hand and low-cost debt capital. Adjusted EPS was impacted to a lesser extent by increased operating expenses from the acquired businesses before realizing the full effect of planned and actioned synergies, as well as gross margin compression we have signaled all fiscal year, driven primarily by the margin dilution from the Aspen Manufacturing and Mars Parts acquisitions and Contractor Solutions.
Recognizing that this reflects a 21% reduction compared to the same period last year, the reduction in Adjusted EPS was primarily driven by $10 million of higher interest expense as we moved from a net cash position last year to a net debt position this year, after strategically funding acquisitions and share repurchases with cash on hand and low-cost debt capital. Adjusted EPS was impacted to a lesser extent by increased operating expenses from the acquired businesses before realizing the full effect of planned and actioned synergies, as well as gross margin compression we have signaled all fiscal year, driven primarily by the margin dilution from the Aspen Manufacturing and Mars Parts acquisitions and Contractor Solutions.
Adjusted EPS for the fiscal third quarter was $1.42, demonstrating resilience amid challenging market conditions.
Inorganic growth was, partially offset by lower organic volumes in contractor Solutions, due to continued destocking by our customers in the residential hvacr Market.
Recognizing that this reflects a 21% reduction compared to the same period last year.
Consolidated gross profit in the fiscal third quarter. It was 92 million up 15% with the gross profit margin of 39.7%
down 170 basis points from 41.4% in the prior year period, with all segments, experiencing some margin contraction
The reduction in adjusted EPS was primarily driven by $10 million of higher interest expense, as we move from a net cash position last year to a net debt position this year after strategically funding acquisitions and share repurchases with cash on hand and low-cost debt capital.
Our Consolidated adjusted ebit D for the fiscal, third quarter reached a record 45 million representing a million dollar increase in 7% growth compared to the prior year period.
Adjusted EPS was impacted to a lesser extent by increased operating expenses from the acquired businesses before realizing the full effect of planned and actioned synergies.
Our adjusted ebal margin declined by 250 basis points to 19.2% from 21.7% in the prior year quarter.
James Perry: More granularly, on the EPS adjustments, our fiscal third quarter included $6.6 million, or $0.40 per share, in acquisition-related transaction and integration cost, net of tax, as well as $11.3 million, or $0.68 per share, of amortization of acquired intangible assets, consistent with the updated adjusted EPS methodology we introduced in our fiscal first quarter. Consolidated revenue for the fiscal third quarter of 2026 increased by $39 million, or 20%, when compared to the prior year period, driven mainly by the aforementioned acquisitions. Inorganic growth was partially offset by lower organic volumes in Contractor Solutions due to continued destocking by our customers in the residential HVACR market.
More granularly, on the EPS adjustments, our fiscal third quarter included $6.6 million, or $0.40 per share, in acquisition-related transaction and integration cost, net of tax, as well as $11.3 million, or $0.68 per share, of amortization of acquired intangible assets, consistent with the updated adjusted EPS methodology we introduced in our fiscal first quarter. Consolidated revenue for the fiscal third quarter of 2026 increased by $39 million, or 20%, when compared to the prior year period, driven mainly by the aforementioned acquisitions. Inorganic growth was partially offset by lower organic volumes in Contractor Solutions due to continued destocking by our customers in the residential HVACR market.
As well as gross margin compression. We have signaled, all fiscal year, driven primarily by the margin dilution from the Aspen Manufacturing and Mars Parts acquisitions in Contractor Solutions.
It was primarily driven by the Martian margin dilution from acquired businesses prior to realizing anticipated synergies. And higher input costs resulting from direct and indirect tariff impacts.
We successfully mitigated a portion of these cost pressures through strategic pricing actions and reduced domestic Freight expenses.
During the third quarter contractor Solutions generated a 168 million in Revenue.
More granularly on the EPS adjustments. Our fiscal third quarter included, 6.6 million or 400 cents per share in acquisition related transaction and integration cost net of tax. It will as well as 11.3 million or 68 cents per share of amortization of acquired intangible assets, consistent with the updated adjusted EPS methodology. We introduced in our fiscal first quarter,
Representing 71% of Consolidated revenue and 27% growth over the prior year quarter.
Growth in the quarter was driven by 42.7 million or 32.3% from acquisitions.
Consolidated revenue for the fiscal third quarter of 2026 increased by $39 million, or 20%, when compared to the prior-year period, driven mainly by the aforementioned acquisitions.
Partially offset by a 6.8 million or 5.1% organic decline, due to lower volumes in a challenging Market.
James Perry: Consolidated gross profit in fiscal Q3 was $92 million, up 15%, with a gross profit margin of 39.7%, down 170 basis points from 41.4% in the prior-year period, with all segments experiencing some margin contraction. Our consolidated Adjusted EBITDA for fiscal Q3 reached a record $45 million, representing a $3 million increase and 7% growth compared to the prior-year period. Our Adjusted EBITDA margin declined by 250 basis points to 19.2% from 21.7% in the prior-year quarter. It was primarily driven by margin dilution from acquired businesses prior to realizing anticipated synergies and higher input costs resulting from direct and indirect tariff impacts.
Consolidated gross profit in fiscal Q3 was $92 million, up 15%, with a gross profit margin of 39.7%, down 170 basis points from 41.4% in the prior-year period, with all segments experiencing some margin contraction. Our consolidated Adjusted EBITDA for fiscal Q3 reached a record $45 million, representing a $3 million increase and 7% growth compared to the prior-year period. Our Adjusted EBITDA margin declined by 250 basis points to 19.2% from 21.7% in the prior-year quarter. It was primarily driven by margin dilution from acquired businesses prior to realizing anticipated synergies and higher input costs resulting from direct and indirect tariff impacts.
Inorganic growth was partially offset by lower organic volumes and contractor Solutions due to continued destocking by our customers in the residential hvacr Market.
Consolidated gross profit in the fiscal third quarter was 92. Million up to 15% with the gross profit margin of 39.7%
As a reminder, our fiscal third quarter has always been our weakest seasonally due to lower repair and replacement activity in the hvacr End Market in that seasonality effect on revenues and the associated absorption has been magnified with the additions of Aspen manufacturing and Mars parts.
down 170 basis points from 41.4% in the prior year period, with all segments, experiencing some margin contraction
The third quarter, organic Revenue, decline reflects ongoing weakness and housing activity, and the reduction of distributor inventory levels heading into calendar year end.
Our consolidated adjusted EBIT for the fiscal third quarter reached a record $45 million, representing a $3 million increase and 7% growth compared to the prior year period.
After a strong summer, Mars Parts experienced modest year-over-year, Revenue growth of approximately 1% during the quarter since the time of our acquisition.
While Aspen experienced a reduction of 23.7% for the quarter.
Order.
James Perry: We successfully mitigated a portion of these cost pressures through strategic pricing actions and reduced domestic freight expenses. During Q3, Contractor Solutions generated $168 million in revenue, representing 71% of consolidated revenue and 27% growth over the prior-year quarter. Growth in the quarter was driven by $42.7 million or 32.3% from acquisitions, partially offset by a $6.8 million-dollar or 5.1% organic decline due to lower volumes in a challenging market. As a reminder, our fiscal Q3 has always been our weakest seasonally due to lower repair and replacement activity in the HVACR end market, and that seasonality effect on revenues and the associated absorption has been magnified with the additions of Aspen Manufacturing and MARS Parts.
We successfully mitigated a portion of these cost pressures through strategic pricing actions and reduced domestic freight expenses. During Q3, Contractor Solutions generated $168 million in revenue, representing 71% of consolidated revenue and 27% growth over the prior-year quarter. Growth in the quarter was driven by $42.7 million or 32.3% from acquisitions, partially offset by a $6.8 million-dollar or 5.1% organic decline due to lower volumes in a challenging market. As a reminder, our fiscal Q3 has always been our weakest seasonally due to lower repair and replacement activity in the HVACR end market, and that seasonality effect on revenues and the associated absorption has been magnified with the additions of Aspen Manufacturing and MARS Parts.
Aspen's decline was expected and driven by the prior years. Unusually high third quarter sales as Distributors, ramped up their inventories, prior to the manufacturing deadline for products, using the r410a refrigerant.
It was primarily driven by the margin dilution from acquired businesses prior to realizing anticipated synergies, and higher input costs resulting from direct and indirect tariff impacts.
Aspen's third quarter sales. This year were more in line with normal yearly seasonal patterns.
We successfully mitigated a portion of these cost pressures through strategic pricing actions in reduced domestic Freight expenses.
Since the May 1st acquisition date Aspen's year-over-year growth has been 14% demonstrating overall sales growing well above the market.
As a result of the Mars Aspen and PF Water Works, fiscal third quarter results.
During the third quarter contractor Solutions, generated 168 million in Revenue, representing 71% of Consolidated revenue and 27% growth over the prior year quarter.
We had a total reduction of 7.3% in organic Revenue. If we had owned these businesses last year, a metrical recently started reporting due to our large Investments and acquisitions.
Growth in the quarter was driven by 42.7 million or 32.3% from Acquisitions, partially offset, by a 6.8 million or 5.1% organic decline, due to lower volumes in a challenging Market.
Adjusted ibaa for the contractor Solutions. Segment was 41 million or 24.4% of Revenue compared to 37 million or 28.4% of Revenue in the prior year period.
James Perry: The Q3 organic revenue decline reflects ongoing weakness in housing activity and the reduction of distributor inventory levels heading into calendar year-end. After a strong summer, Mars Parts experienced modest year-over-year revenue growth of approximately 1% during the quarter since the time of our acquisition, while Aspen experienced a reduction of 23.7% for the quarter. Aspen's decline was expected and driven by the prior year's unusually high Q3 sales as distributors ramped up their inventories prior to the manufacturing deadline for products using the R-410A refrigerant. Aspen's Q3 sales this year were more in line with normal yearly seasonal patterns. Since the 1 May acquisition date, Aspen's year-over-year growth has been 14%, demonstrating overall sales growing well above the market.... As a result of the Mars, Aspen, and P.F.
The Q3 organic revenue decline reflects ongoing weakness in housing activity and the reduction of distributor inventory levels heading into calendar year-end. After a strong summer, Mars Parts experienced modest year-over-year revenue growth of approximately 1% during the quarter since the time of our acquisition, while Aspen experienced a reduction of 23.7% for the quarter. Aspen's decline was expected and driven by the prior year's unusually high Q3 sales as distributors ramped up their inventories prior to the manufacturing deadline for products using the R-410A refrigerant. Aspen's Q3 sales this year were more in line with normal yearly seasonal patterns. Since the 1 May acquisition date, Aspen's year-over-year growth has been 14%, demonstrating overall sales growing well above the market.... As a result of the Mars, Aspen, and P.F.
As a reminder, our fiscal third quarter has always been our weakest seasonally due to lower repair and replacement activity. And the HVACR end market and that seasonality effect on revenues and the associated absorption has been magnified with the additions of Aspen Manufacturing and Mars Parts.
Even though margin declined to lower gross margins from acquired business related, dilution prior to realizing anticipated synergies. Partially offset by pricing actions and the lower domestic freight costs.
The third quarter organic revenue decline reflects ongoing weakness in housing activity and the reduction of distributor inventory levels heading into calendar year-end.
On November 4th, we closed the March Parts, acquisition and contractor solutions for 650 million, in cash, utilizing a 600 million 5-year Term Loan, a and borrowing from our renewed and extended 700 million revolving line of credit.
After a strong summer, Mars Parts experienced modest year-over-year, Revenue growth of approximately 1% during the quarter since the time of our acquisition.
While Aspen experienced a reduction of 23.7% for the quarter.
This acquisition as previously mentioned expands our existing portfolio in the hvacr into market with the addition of Motors capacitors.
Other hvaccr, electrical components, equipment, installation, parts, and other components used by the protrade for repairs and replacements.
Aspen decline was expected and driven by the prior years. Unusually high third quarter sales as distributors ramped up their inventories prior to the manufacturing deadline for products using the R410A refrigerant.
Also, enhanced csw's diversification into repair parts versus replacement parts.
Aspen's third quarter sales. This year were more in line with normal yearly seasonal patterns.
Our specialized liability solution segment. Revenue increased 10.8% to 38 million from 35 million in the prior period.
Since the May 1st acquisition date Aspen's year-over-year growth has been 14% demonstrating overall sales growing well above the market.
James Perry: WaterWorks fiscal third quarter results, we had a total reduction of 7.3% in organic revenue if we had owned these businesses last year, a metric we recently started reporting due to our large investments in acquisitions. Adjusted EBITDA for the Contractor Solutions segment was $41 million, or 24.4% of revenue, compared to $37 million, or 28.4% of revenue in the prior year period. EBITDA margin declined to lower gross margins from acquired business-related dilution prior to realizing anticipated synergies, partially offset by pricing actions and the lower domestic freight costs. On 4 November, we closed the MARS Parts acquisition and Contractor Solutions for $650 million in cash, utilizing a $600 million 5-year Term Loan A, and borrowings from our renewed and extended $700 million revolving line of credit.
WaterWorks fiscal third quarter results, we had a total reduction of 7.3% in organic revenue if we had owned these businesses last year, a metric we recently started reporting due to our large investments in acquisitions. Adjusted EBITDA for the Contractor Solutions segment was $41 million, or 24.4% of revenue, compared to $37 million, or 28.4% of revenue in the prior year period. EBITDA margin declined to lower gross margins from acquired business-related dilution prior to realizing anticipated synergies, partially offset by pricing actions and the lower domestic freight costs. On 4 November, we closed the MARS Parts acquisition and Contractor Solutions for $650 million in cash, utilizing a $600 million 5-year Term Loan A, and borrowings from our renewed and extended $700 million revolving line of credit.
As a result of the Mars Aspen and PF Water Works, fiscal third quarter results.
Growth in the quarter included, 2.3 million or 6.8% from recent acquisitions and 1.4 million or 4% from organic growth driven by the general industrial and Mining end markets.
Partially offset by declines in the energy and rail Transportation into markets.
We had a total reduction of 7.3% in organic revenue. If we had owned these businesses last year, a metrical who recently started reporting due to our large investments and acquisitions.
Organic Revenue includes the realization of the price increase in this segment announced during the second fiscal quarter, partially offset by in favorable Revenue mix.
Adjusted ibaa for the contractor Solutions. Segment was 41 million or 24.4% of Revenue compared to 37 million or 28.4% of Revenue in the prior year period.
The adjusted segment. EBA of 6.5 million in the third quarter, fell 1.6% from 6.6 million in the prior year period.
Eva margin declined to lower gross margins from acquired business related. Dilution prior to realizing anticipated synergies.
Partially offset by pricing actions in the lower domestic freight costs.
the adjusted EBA margin contracted 210 basis points to 16.9% in the current period driven by Revenue mix
James Perry: This acquisition, as previously mentioned, expands our existing portfolio in the HVACR end market with the addition of motors, capacitors, other HVACR electrical components, equipment installation parts, and other components used by the pro trade for repairs and replacements. This acquisition also enhanced CSW's diversification into repair parts versus replacement parts. Our Specialized Reliability Solutions segment revenue increased 10.8% to $38 million, from $35 million in the prior period. Growth in the quarter included $2.3 million, or 6.8% from recent acquisitions, and $1.4 million or 4% from organic growth, driven by the general industrial and mining end markets, partially offset by declines in the energy and rail transportation end markets. Organic revenue includes the realization of the price increase in this segment announced during the second fiscal quarter, partially offset by unfavorable revenue mix.
This acquisition, as previously mentioned, expands our existing portfolio in the HVACR end market with the addition of motors, capacitors, other HVACR electrical components, equipment installation parts, and other components used by the pro trade for repairs and replacements. This acquisition also enhanced CSW's diversification into repair parts versus replacement parts. Our Specialized Reliability Solutions segment revenue increased 10.8% to $38 million, from $35 million in the prior period. Growth in the quarter included $2.3 million, or 6.8% from recent acquisitions, and $1.4 million or 4% from organic growth, driven by the general industrial and mining end markets, partially offset by declines in the energy and rail transportation end markets. Organic revenue includes the realization of the price increase in this segment announced during the second fiscal quarter, partially offset by unfavorable revenue mix.
On November 4th, we closed the March Parts, acquisition in contractor solutions for 650 million, in cash, utilizing a $600 million, 5-year Term Loan, a and borrowing from our renewed and extended 700 million revolving line of credit.
As Joe mentioned in the third fiscal quarter, csw acquired Hydrox and proaction fluids for approximately 26.5 million in aggregate diversifying, our specialized reliability Solutions, segments, products and end markets.
The Hydrox acquisition expands our specialty oils and lubricants portfolio.
This acquisition as previously mentioned expands our existing portfolio in the hvacr into market with the addition of Motors capacitors.
And proaction fluids as products for horizontal directional, drilling that support infrastructure buildout.
Other hvacr electrical components equipment, installation parts, and other components used by the protrade for repairs and replacements.
In conjunction with these Acquisitions. And in response to the challenges in the SRS segments in markets, in our recent margin performance,
we have undertaken certain restructuring actions, earlier this month.
This acquisition also enhanced csw's diversification into repair parts versus a replacement parts.
Our specialized reliability solution, segment, Revenue increased 10.8% to 38 million from 35 million in the prior period.
Some of these were related to winding down the headquarters facility for 1 of the Acquisitions. In the remainder of the Acquisitions were at our main Legacy facility, as proactive initiatives to streamline the combined operations,
We do not take these actions lightly, but we expect them to do, enhance, our margins going forward, as we strive for a sustained at 20% ibida margin in this segment.
Growth in the quarter included, 2.3 million or 6.8% from recent acquisitions and 1.4 million or 4% from organic growth driven by the general industrial and Mining end markets.
Partially offset by declines in the energy and rail Transportation into markets.
the benefits from these changes will take effect April 1st and we will report further on the 1- time charges associated with these restructuring activities, with our fourth quarter results in May
James Perry: The Adjusted Segment EBITDA of $6.5 million in Q3 fell 1.6% from $6.6 million in the prior year period. The adjusted EBITDA margin contracted 210 basis points to 16.9% in the current period, driven by revenue mix. As Joe mentioned, in Q3, CSW acquired Hydrotex and ProAction Fluids for approximately $26.5 million in aggregate, diversifying our Specialized Reliability Solutions segment's products and end markets. The Hydrotex acquisition expands our specialty oils and lubricants portfolio, and ProAction Fluids as products for horizontal directional drilling that support infrastructure build-out. In conjunction with these acquisitions, and in response to the challenges in the SRS segment's end markets and our recent margin performance, we have undertaken certain restructuring actions earlier this month.
The Adjusted Segment EBITDA of $6.5 million in Q3 fell 1.6% from $6.6 million in the prior year period. The adjusted EBITDA margin contracted 210 basis points to 16.9% in the current period, driven by revenue mix. As Joe mentioned, in Q3, CSW acquired Hydrotex and ProAction Fluids for approximately $26.5 million in aggregate, diversifying our Specialized Reliability Solutions segment's products and end markets. The Hydrotex acquisition expands our specialty oils and lubricants portfolio, and ProAction Fluids as products for horizontal directional drilling that support infrastructure build-out. In conjunction with these acquisitions, and in response to the challenges in the SRS segment's end markets and our recent margin performance, we have undertaken certain restructuring actions earlier this month.
Organic Revenue includes the realization of the price increase in this segment announced during the second fiscal quarter, partially offset by in favorable Revenue mix.
Our engineer Building Solutions segment, Revenue decreased 1% to 28.5 million from 28.8 million in the prior year period.
The adjusted segment EBA was $6.5 million in the third quarter, down to 1.6% from $6.6 million in the prior year period.
the adjusted EBA margin contracted 210 basis points to 16.9% in the current period driven by Revenue mix
Segment ibaad decreased 5% to 3.9. Million representing a 13.7%. EBA margin compared to 4.1 million in 14.2% in the prior year period respectively.
the slight contraction in ibida margin, primarily reflects higher material cost, linked indirectly to tariffs
As Joe mentioned in the third fiscal quarter, csw acquired Hydrox and proaction fluids for approximately 26.5 million in aggregate diversifying, our specialized reliability Solutions, segments, products and end markets.
The backlog remained flat during the quarter with a trailing 8 quarter book to Bill ratio remaining steady at 0.9 to 1.
Hydrox acquisition expands our specialty oils and lubricants portfolio.
And proaction fluids as products for horizontal directional, drilling that support infrastructure buildout.
We're encouraged by the improved mix in the EBS backlog which includes more higher margin products and we expect this to benefit future results.
Pricing actions to offset. Increased costs are ongoing with additional increases planned on a project by project basis.
In conjunction with these Acquisitions. And in response to the challenges in the SRS segments in markets, in our recent margin performance,
James Perry: Some of these were related to winding down the headquarters facility for one of the acquisitions, and the remainder of the acquisitions were at our main legacy facility as proactive initiatives to streamline the combined operations. We do not take these actions lightly, but we expect them to enhance our margins going forward as we strive for a sustained 20% EBITDA margin in this segment. The benefits from these changes will take effect 1 April, and we will report further on the one-time charges associated with these restructuring activities with our Q4 results in May. Our Engineered Building Solutions segment revenue decreased 1% to $28.5 million from $28.8 million in the prior year period.
Some of these were related to winding down the headquarters facility for one of the acquisitions, and the remainder of the acquisitions were at our main legacy facility as proactive initiatives to streamline the combined operations. We do not take these actions lightly, but we expect them to enhance our margins going forward as we strive for a sustained 20% EBITDA margin in this segment. The benefits from these changes will take effect 1 April, and we will report further on the one-time charges associated with these restructuring activities with our Q4 results in May. Our Engineered Building Solutions segment revenue decreased 1% to $28.5 million from $28.8 million in the prior year period.
We have undertaken certain restructuring actions earlier this month.
Transitioning to our cash flow. We reported third quarter cash flow from operations of 28.9 million. Growing 165% compared to 10.9 million in the same quarter last year.
Some of these were related to winding down the headquarters facility for 1 of the Acquisitions, in the remainder of the Acquisitions. Read our main Legacy facility, as proactive initiatives to streamline the combined operations,
The Year of your growth was primarily attributable to a 16.8 million tax payment made in the prior year. Fiscal third quarter, which was deferred from the first 2, quarters of the, prior year, due to a temporary federal tax relief.
We do not take these actions lightly, but we expect them to enhance our margins going forward, as we strive for a sustained EBA margin at 20% in this segment.
Our free cash flow defined as cash flow from operations. Minus Capital expenditures was 22.7 million in the fiscal third quarter compared to 7.8 million in the same period a year ago.
the benefits from these changes will take effect April 1st and we will report further on the 1-time charges associated with these restructuring activities, with our fourth quarter results in May,
James Perry: Segment EBITDA decreased 5% to $3.9 million, representing a 13.7% EBITDA margin, compared to $4.1 million and 14.2% in the prior year period, respectively. The slight contraction in EBITDA margin primarily reflects higher material costs linked indirectly to tariffs. The backlog remained flat during the quarter, with a trailing 8-quarter book-to-bill ratio remaining steady at 0.9 to 1. We're encouraged by the improved mix in the EBS backlog, which includes more higher-margin products, and we expect this to benefit future results. Pricing actions to offset increased costs are ongoing, with additional increases planned on a project-by-project basis. Transitioning to our cash flow. We reported third quarter cash flow from operations of $28.9 million, growing 165% compared to $10.9 million in the same quarter last year.
Segment EBITDA decreased 5% to $3.9 million, representing a 13.7% EBITDA margin, compared to $4.1 million and 14.2% in the prior year period, respectively. The slight contraction in EBITDA margin primarily reflects higher material costs linked indirectly to tariffs. The backlog remained flat during the quarter, with a trailing 8-quarter book-to-bill ratio remaining steady at 0.9 to 1. We're encouraged by the improved mix in the EBS backlog, which includes more higher-margin products, and we expect this to benefit future results. Pricing actions to offset increased costs are ongoing, with additional increases planned on a project-by-project basis. Transitioning to our cash flow. We reported third quarter cash flow from operations of $28.9 million, growing 165% compared to $10.9 million in the same quarter last year.
Our Engineer Building Solutions segment revenue decreased 1% to $28.5 million from $28.8 million in the prior year period.
The third quarter, free cash flow increased at, $15 million, or 193.1% was primarily driven by the aforementioned tax payment deferral, partially offset by higher Capital expenditures in the current quarter and was otherwise, relatively flat year-over-year.
In the fiscal third quarter compared to 46 cents in the same period a year ago.
Segment ibaad decreased 5% to 3.9. Million representing a 13.7%. EBA margin compared to 4.1 million in 14.2% in the prior year period respectively.
The slight contraction in EBA margin primarily reflects higher material cost, linked indirectly to tariffs.
Excluding the tax payment deferral, our free cash flow per share, and this year's third quarter decreased by 9 cents or 6.2% from a $1.46.
The backlog remained flat during the quarter, with a trailing quarter book-to-bill ratio remaining steady at 0.9 to 1.
Our effective tax rate for the fiscal. Third quarter was a - 34.2% on a gap basis.
We're encouraged by the improved mix in the EBS backlog which includes more higher margin products and we expect this to benefit future results.
Our adjusted tax rate was 28.3%.
Pricing actions to offset increased costs or ongoing with additional increases planned on a project by project basis.
Slightly higher than our normal range due to several items that vary quarter to quarter and due to the lower seasonal profitability in this quarter.
James Perry: The year-over-year growth was primarily attributable to a $16.8 million tax payment made in the prior year fiscal third quarter, which was deferred from the first two quarters of the prior year due to a temporary federal tax relief. Our Free Cash Flow, defined as cash flow from operations minus capital expenditures, was $22.7 million in the fiscal third quarter, compared to $7.8 million in the same period a year ago. The third quarter Free Cash Flow increase of $15 million, or 193.1%, was primarily driven by the aforementioned tax payment deferral, partially offset by higher capital expenditures in the current quarter, and was otherwise relatively flat year-over-year.
The year-over-year growth was primarily attributable to a $16.8 million tax payment made in the prior year fiscal third quarter, which was deferred from the first two quarters of the prior year due to a temporary federal tax relief. Our Free Cash Flow, defined as cash flow from operations minus capital expenditures, was $22.7 million in the fiscal third quarter, compared to $7.8 million in the same period a year ago. The third quarter Free Cash Flow increase of $15 million, or 193.1%, was primarily driven by the aforementioned tax payment deferral, partially offset by higher capital expenditures in the current quarter, and was otherwise relatively flat year-over-year.
Transitioning to our cash flow. We reported third quarter cash flow from operations of 28.9 million. Growing 165% compared to 10.9 million in the same quarter last year.
We currently forecast, our fiscal year 2026 Gap tax rate to be approximately 23% or 26% adjusted.
Which varies quarter to quarter due to a specific items.
Year to date. These rates have been 21.4% and 25.8% respectively.
The Year of your growth was primarily attributable to a 16.8 million tax payment made in their prior year. Fiscal, third quarter, which was deferred from the first 2, quarters of the, prior year, due to a temporary federal tax relief.
As Joe mentioned, our amortization of intangible assets will increase significantly due to the recent acquisitions particularly Mars parts.
Based on preliminary purchase price allocation accounting.
Our free cash flow defined as cash flow from operations. Minus Capital expenditures was 22.7 million in the fiscal third quarter compared to 7.8 million in the same period a year ago.
We expect that annualized amortization of intangible assets will be approximately 63 million moving forward.
James Perry: Our free cash flow per share was $1.37 in the fiscal third quarter, compared to $0.46 in the same period a year ago. Excluding the tax payment deferral, our free cash flow per share in this year's third quarter decreased by $0.09, or 6.2%, from $1.46. Our effective tax rate for the fiscal third quarter was -34.2% on a GAAP basis, due to a benefit from the $6.4 million release of uncertain tax position reserves upon statute expiration from the acquisitions of TRUaire and Falcon several years ago. Our adjusted tax rate was 28.3%, slightly higher than our normal range, due to several items that vary quarter to quarter and due to the lower seasonal profitability in this quarter.
Our free cash flow per share was $1.37 in the fiscal third quarter, compared to $0.46 in the same period a year ago. Excluding the tax payment deferral, our free cash flow per share in this year's third quarter decreased by $0.09, or 6.2%, from $1.46. Our effective tax rate for the fiscal third quarter was -34.2% on a GAAP basis, due to a benefit from the $6.4 million release of uncertain tax position reserves upon statute expiration from the acquisitions of TRUaire and Falcon several years ago. Our adjusted tax rate was 28.3%, slightly higher than our normal range, due to several items that vary quarter to quarter and due to the lower seasonal profitability in this quarter.
In the third quarter, free cash flow increased by $15 million, or 193.1%. This was primarily driven by the aforementioned tax payment deferral, partially offset by higher capital expenditures in the current quarter, and was otherwise relatively flat year-over-year.
As I mentioned, we funded this year's Acquisitions using cash on hand. From the September 2024 follow-on Equity offering revolver borrowing and a new Term Loan, a
a quarter end, we had 200 million dollars outstanding on our revolver borrowing.
In the fiscal third quarter compared to 46 cents in the same period a year ago.
in the million dollar Term Loan, a
Excluding the tax payment deferral. Our free cash flow per share in this year's third quarter decreased by 9 cents, or 6.2% from a $1.46.
As a result of this debt, our third quarter fiscal 2026, had interest expense of dollars as compared to interest income of dollars in the same quarter last year.
Our effective tax rate for the fiscal third quarter was -34.2% on a GAAP basis.
Including cash on hand. Our net debt for Covenant, calculation purposes was 764 million resulting in a net debt to ibida leverage ratio of 2.3 times.
due to a benefit from the 6.4 million release of Uncertain tax positions, reserves upon statute, expiration from the Acquisitions of true are and Falcon several years ago,
This results in an interest rate of so far plus 200 basis points.
Our adjusted tax rate was 28.3%.
As a reminder, we execute an interest rate swap of so far at a rate of 3.416% for 3 years to hedge, a portion of our Term Loan, a debts
James Perry: We currently forecast our fiscal year 2026 GAAP tax rate to be approximately 23% or 26% adjusted, which varies quarter to quarter due to specific items. Year to date, these rates have been 21.4% and 25.8% respectively. As Joe mentioned, our amortization of intangible assets will increase significantly due to the recent acquisitions, particularly MARS Parts. Based on preliminary purchase price allocation accounting, we expect that annualized amortization of intangible assets will be approximately $63 million moving forward. As I mentioned, we funded this year's acquisitions using cash on hand from the September 2024 follow-on equity offering, revolver borrowings, and our new Term Loan A. At quarter end, we had $200 million outstanding on our revolver borrowings and the $600 million Term Loan A.
We currently forecast our fiscal year 2026 GAAP tax rate to be approximately 23% or 26% adjusted, which varies quarter to quarter due to specific items. Year to date, these rates have been 21.4% and 25.8% respectively. As Joe mentioned, our amortization of intangible assets will increase significantly due to the recent acquisitions, particularly MARS Parts. Based on preliminary purchase price allocation accounting, we expect that annualized amortization of intangible assets will be approximately $63 million moving forward. As I mentioned, we funded this year's acquisitions using cash on hand from the September 2024 follow-on equity offering, revolver borrowings, and our new Term Loan A. At quarter end, we had $200 million outstanding on our revolver borrowings and the $600 million Term Loan A.
Slightly higher than our normal range, due to several items that vary quarter to quarter and due to the lower seasonal profitability in this quarter.
We currently forecast, our fiscal year 2026 Gap tax rate to be approximately 23% or 26% adjusted.
Which varies quarter to quarter due to a specific items.
We maintain a strong balance sheet with the net debt to ibida ratio. Well, within our target range of 1, to 3 times, ensuring ample liquidity to continue support growth initiatives and all other elements of our Capital allocation strategy.
Year to date. These rates have been 21.4% and 25.8% respectively.
Underscoring this point and with the support of our robust free cash flow and healthy balance sheet.
During the quarter, we opportunistically repurchased, approximately 70 million of our stock in the open market.
As Joe mentioned, our Amber is of intangible assets will increase significantly due to the recent acquisitions particularly Mars parts.
Based on preliminary purchase price allocation accounting.
Representing 283,000 shares at an average price of 246 per share.
Reiterating, our confidence in our ability to create long-term shareholder value.
We expect that annualized amortization of intangible assets will be approximately $63 million moving forward.
We continue to monitor tariff developments and their impact on our businesses.
Here's acquisition.
Conditions using cash on hand from the September 2024. Follow on Equity offering revolver borrowings and a new Term Loan. A
While our specialized reliability Solutions and Engineering Building Solutions, segments, face minimal, direct exposure, both have experienced indirect effects from broader, Economic Consequences of tariff policies.
At quarter end, we had million dollars outstanding on our revolver borrowing.
James Perry: As a result of this debt, our Q3 fiscal 2026 had interest expense of $8 million, as compared to interest income of $2 million in the same quarter last year. Including cash on hand, our net debt for covenant calculation purposes was $764 million, resulting in a net debt to EBITDA leverage ratio of 2.3 times. This results in an interest rate of SOFR plus 200 basis points. As a reminder, we executed an interest rate swap of SOFR at a rate of 3.416% for three years to hedge a portion of our Term Loan A debt.
As a result of this debt, our Q3 fiscal 2026 had interest expense of $8 million, as compared to interest income of $2 million in the same quarter last year. Including cash on hand, our net debt for covenant calculation purposes was $764 million, resulting in a net debt to EBITDA leverage ratio of 2.3 times. This results in an interest rate of SOFR plus 200 basis points. As a reminder, we executed an interest rate swap of SOFR at a rate of 3.416% for three years to hedge a portion of our Term Loan A debt.
and the 600 million Term Loan, a
Each of these segments sources, a limited number of inputs International, but even certain us Source materials have seen significant cost increases.
Compared to interest income of $1 million in the same quarter last year.
The SRS segment has negligible sales in high tariff markets, though. Those could be at risk, due to geopolitical volatility.
With an EBS, we factor a higher cost in the bids for new projects.
Including cash on hand. Our, net debt for Covenant, calculation purposes was 764 million resulting in a net debt to EBA leverage ratio of 2.3 times.
Within contractor solutions for continuing to reduce third-party Manufacturing. In China, a strategy that's been underway for several years.
This results in an interest rate of SOFR plus 200 basis points.
by the end of fiscal 2026, we expect China to represent 10% of the segments cost of goods sold
As a reminder, we execute an interest rates swap of sofa at a rate of 3.416% for 3 years to hedge a portion of our Term Loan, a debts
James Perry: We maintain a strong balance sheet, with a net debt to EBITDA ratio well within our target range of 1 to 3 times, ensuring ample liquidity to continue to support growth initiatives and all other elements of our capital allocation strategy. Underscoring this point, and with the support of our robust free cash flow and healthy balance sheet, during the quarter, we opportunistically repurchased approximately $70 million of our stock in the open market, representing 283,000 shares at an average price of $246 per share, reiterating our confidence in our ability to create long-term shareholder value. We continue to monitor tariff developments and their impact on our businesses. While our Specialized Reliability Solutions and Engineered Building Solutions segments face minimal direct exposure, both have experienced indirect effects from broader economic consequences of tariff policies.
We maintain a strong balance sheet, with a net debt to EBITDA ratio well within our target range of 1 to 3 times, ensuring ample liquidity to continue to support growth initiatives and all other elements of our capital allocation strategy. Underscoring this point, and with the support of our robust free cash flow and healthy balance sheet, during the quarter, we opportunistically repurchased approximately $70 million of our stock in the open market, representing 283,000 shares at an average price of $246 per share, reiterating our confidence in our ability to create long-term shareholder value. We continue to monitor tariff developments and their impact on our businesses. While our Specialized Reliability Solutions and Engineered Building Solutions segments face minimal direct exposure, both have experienced indirect effects from broader economic consequences of tariff policies.
Vietnam primarily through our own facility will be in the low 30s as a percentage of contractor Solutions cost of goods sold.
We maintain a strong balance sheet with the net debt to EBITDA ratio well within our target range of 1 to 3 times.
Other Asian markets will contribute about 15% within the segment. While the remaining cost of goods sold is primarily in the United States.
Ensuring ample liquidity to continue to support growth initiatives and all other elements of our capital allocation strategy.
After product, harmonization is complete. The Mars Parts. Acquisition is not expected to significantly alter this Geographic mix.
Underscoring this point, and with the support of our robust free cash flow and healthy balance sheet.
With that, I'll now turn the call back to Joe for his closing remarks.
Thank you, James.
During the quarter, we opportunistically repurchased approximately $70 million of our stock in the open market.
Representing 283,000 shares at an average price of $246 per share.
Reiterating, our confidence in our ability to create long-term shareholder value.
in the fiscal third quarter of 2026, we delivered record third quarter, revenue and adjusted ibida propelled by 20% Revenue growth, from recent acquisitions that have significantly outperformed our acquisition models,
We continue to monitor tariff developments and their impact on our businesses.
James Perry: Each of these segments sources a limited number of inputs internationally, but even certain US-sourced materials have seen significant cost increases. The SRS segment has negligible sales in high-tariff markets, though those could be at risk due to geopolitical volatility. Within EBS, we factor higher costs into bids for new projects. Within Contractor Solutions, we're continuing to reduce third-party manufacturing in China, a strategy that's been underway for several years. By the end of fiscal 2026, we expect China to represent 10% of the segment's cost of goods sold. Vietnam, primarily through our owned facility, will be in the low 30s as a percentage of Contractor Solutions' cost of goods sold. Other Asian markets will contribute about 15% within the segment, while the remaining cost of goods sold is primarily in the United States.
Each of these segments sources a limited number of inputs internationally, but even certain US-sourced materials have seen significant cost increases. The SRS segment has negligible sales in high-tariff markets, though those could be at risk due to geopolitical volatility. Within EBS, we factor higher costs into bids for new projects. Within Contractor Solutions, we're continuing to reduce third-party manufacturing in China, a strategy that's been underway for several years. By the end of fiscal 2026, we expect China to represent 10% of the segment's cost of goods sold. Vietnam, primarily through our owned facility, will be in the low 30s as a percentage of Contractor Solutions' cost of goods sold. Other Asian markets will contribute about 15% within the segment, while the remaining cost of goods sold is primarily in the United States.
We make, we remain highly confident in our business, and our ability to deliver above Market profitable growth. Thereby enhancing long-term shareholder value,
While our Specialized Reliability Solutions and Engineering Building Solutions segments face minimal direct exposure, both have experienced indirect effects from the broader economic consequences of tariff policies.
Each of these segments sources a limited number of inputs internationally, but even certain U.S. source materials have seen significant cost increases.
We invested approximately 1 billion in Acquisitions over the last year. Demonstrating our confidence in the long term strength of the residential, HVAC are plumbing and electrical and markets.
The SRS segment has negligible sales and high tariff markets, though. Those could be at risk, due to geopolitical volatility.
With an EBS, we factor a higher cost in the bids for new projects.
Risk, adjusted returns analysis.
Within Contractor Solutions, we're continuing to reduce third-party manufacturing in China, a strategy that's been underway for several years.
By the end of fiscal 2026, we expect China to represent 10% of the segment's cost of goods sold.
We are proud of our demonstrated 10-year track record of creating sustainable shareholder value through prudent, Capital Management and operational excellence.
Vietnam primarily through our own facility will be in the low 30s as a percentage of contractor Solutions cost of goods sold.
1 of our guiding principles is to treat our team members well and we remain committed to prioritizing the safety and health of our employees.
James Perry: After product harmonization is complete, the MARS Parts acquisition is not expected to significantly alter this geographic mix. With that, I'll now turn the call back to Joe for his closing remarks.
After product harmonization is complete, the MARS Parts acquisition is not expected to significantly alter this geographic mix. With that, I'll now turn the call back to Joe for his closing remarks.
Other Asian markets will contribute about 15% within the segment. While the remaining cost of goods sold is primarily in the United States.
After product harmonization is complete, the Mars Parts acquisition is not expected to significantly alter this geographic mix.
Joseph Armes: Thank you, James. In the fiscal Q3 of 2026, we delivered record third quarter revenue and adjusted EBITDA, propelled by 20% revenue growth from recent acquisitions that have significantly outperformed our acquisition models. We remain highly confident in our business and our ability to deliver above-market profitable growth, thereby enhancing long-term shareholder value. We invested approximately $1 billion in acquisitions over the last year, demonstrating our confidence in the long-term strength of the residential HVACR, plumbing, and electrical end markets. Our strong balance sheet will allow our outstanding team to continue to execute on all elements of our capital allocation strategy across market cycles, guided by our disciplined, risk-adjusted returns analysis. We are proud of our demonstrated 10-year track record of creating sustainable shareholder value through prudent capital management and operational excellence.
Joseph Armes: Thank you, James. In the fiscal Q3 of 2026, we delivered record third quarter revenue and adjusted EBITDA, propelled by 20% revenue growth from recent acquisitions that have significantly outperformed our acquisition models. We remain highly confident in our business and our ability to deliver above-market profitable growth, thereby enhancing long-term shareholder value. We invested approximately $1 billion in acquisitions over the last year, demonstrating our confidence in the long-term strength of the residential HVACR, plumbing, and electrical end markets. Our strong balance sheet will allow our outstanding team to continue to execute on all elements of our capital allocation strategy across market cycles, guided by our disciplined, risk-adjusted returns analysis. We are proud of our demonstrated 10-year track record of creating sustainable shareholder value through prudent capital management and operational excellence.
With that, I'll now turn the call back to Joe for his closing remarks.
Thank you, James.
I'm very pleased to report that in calendar year 2025, we achieved a total reportable incident rate or t r. I r of 1.1 an improvement from 1.2 in 2024 even as we acquired new businesses and integrated them into our environmental health and safety programs,
in the fiscal third quarter of 2026, we delivered record third quarter, revenue and adjusted ibida propelled by 20% Revenue growth, from recent acquisitions that have significantly outperformed our acquisition models,
This accomplishment, reflects our ongoing dedication to maintaining a consistently safe, work environment, and our Legacy businesses, and enhancing the work environments of the companies. We acquire
And I want to thank all of the csw team members for their role in achieving this important milestone.
We may, we remain highly confident in our business and our ability to deliver above Market profitable growth. Thereby enhancing long-term shareholder value,
We invested approximately $1 billion in acquisitions over the last year, demonstrating our confidence in the long-term strength of the residential HVAC, plumbing, and electrical end markets.
We recently completed our bi-annual for Barry Employee Engagement survey. This is a very broad-based survey that we believe provides instructive data and we are pleased to report that we had an impressive participation rate of 90% compared to 85% 2 years ago.
We invest significant time analyzing these results and applying our learnings, to enhance our employee value proposition.
Our strong balance sheet will allow our outstanding team to continue to execute on all elements of our Capital, allocation strategy across Market Cycles, Guided by our disciplined risk, adjusted returns analysis.
Having such a high level of employee participation is encouraging and it speaks to the strong employee Centric culture that we have at scw.
Joseph Armes: One of our guiding principles is to treat our team members well, and we remain committed to prioritizing the safety and health of our employees. I'm very pleased to report that in calendar year 2025, we achieved a Total Recordable Incident Rate, or TRIR, of 1.1, an improvement from 1.2 in 2024, even as we acquired new businesses and integrated them into our environmental, health, and safety programs.
One of our guiding principles is to treat our team members well, and we remain committed to prioritizing the safety and health of our employees. I'm very pleased to report that in calendar year 2025, we achieved a Total Recordable Incident Rate, or TRIR, of 1.1, an improvement from 1.2 in 2024, even as we acquired new businesses and integrated them into our environmental, health, and safety programs.
We are proud of our demonstrated 10-year track record of creating sustainable shareholder value through prudent, Capital Management and operational excellence.
As always to close my prepared remarks, I want to thank the csw Industrials team who collectively owned approximately 4% of the company through our Employee Stock ownership plan.
One of our guiding principles is to treat our team members well, and we remain committed to prioritizing the safety and health of our employees.
As well as all of our shareholders for your continued interest in and support of csw Industrials.
With that. Robert ready to take questions?
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad,
James Perry: ... This accomplishment reflects our ongoing dedication to maintaining a consistently safe work environment in our legacy businesses and enhancing the work environments of the companies we acquire. I want to thank all of the CSW team members for their role in achieving this important milestone. We recently completed our biannual Korn Ferry Employee Engagement Survey. This is a very broad-based survey that we believe provides instructive data, and we are pleased to report that we had an impressive participation rate of 90%, compared to 85% two years ago. We invest significant time analyzing these results and applying our learnings to enhance our employee value proposition. Having such a high level of employee participation is encouraging, and it speaks to the strong employee-centric culture that we have at CSW.
... This accomplishment reflects our ongoing dedication to maintaining a consistently safe work environment in our legacy businesses and enhancing the work environments of the companies we acquire. I want to thank all of the CSW team members for their role in achieving this important milestone. We recently completed our biannual Korn Ferry Employee Engagement Survey. This is a very broad-based survey that we believe provides instructive data, and we are pleased to report that we had an impressive participation rate of 90%, compared to 85% two years ago. We invest significant time analyzing these results and applying our learnings to enhance our employee value proposition. Having such a high level of employee participation is encouraging, and it speaks to the strong employee-centric culture that we have at CSW.
I'm very pleased to report that in calendar year 2025, we achieved a total reportable incident rate or t r. I r of 1.1 an improvement from 1.2 in 2024 even as we acquired new businesses and integrated them into our environmental health and safety programs,
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 1 moment. Please while we pull up for questions,
This accomplishment, reflects our ongoing dedication to maintaining a consistently safe, work environment, and our Legacy businesses, and enhancing the work environments of the companies. We acquire
And I want to thank all of the csw team members for their role in achieving this important milestone.
Our first question comes from John canine with CJs Securities, please proceed with your question.
Hey, good morning, thank you for taking my questions. Um, my first 1 is
Provides instructive data and we are pleased to report that we had an impressive participation rate of 90% compared to 85% 2 years ago.
Uh, I think you mentioned, you saw encouraging orders in January, um, you know, especially relative to Q3. I was wondering if you could maybe quantify uh in terms of orders and organic growth so far. And I know it's early and not not your biggest month but um, maybe a little more College just on the the Improvement degree from of the last quarter will be helpful. Thank you.
We invest significant time analyzing these results and applying our learnings, to enhance our employee value proposition.
James Perry: As always, to close my prepared remarks, I want to thank the CSW Industrials team, who collectively own approximately 4% of the company through our employee stock ownership plan, as well as all of our shareholders, for your continued interest in and support of CSW Industrials. With that, Rob, we're ready to take questions.
As always, to close my prepared remarks, I want to thank the CSW Industrials team, who collectively own approximately 4% of the company through our employee stock ownership plan, as well as all of our shareholders, for your continued interest in and support of CSW Industrials. With that, Rob, we're ready to take questions.
Having such a high level of employee participation is encouraging and it speaks to the strong employee Centric culture that we have at scw.
As always, to close my prepared remarks, I want to thank the CSW Industrials team, who collectively owned approximately 4% of the company through our Employee Stock Ownership Plan.
As well as all of our shareholders for your continued interest in and support of csw Industrials.
Yeah, John thanks for being on as always, this is James, appreciate that. Yeah, we exited December with a good order rate, October and November stayed relatively soft as we expected and kind of, you know, previewed as we as we, as we saw decking continue with our customers, we were encouraged by December. The exit rate was good hard to quantify January yet, but, but Jeff certainly tells us that orders have been have been very good. We're pleased with that. Uh, we also reference Joe, didn't his prepared remarks, very detailed conversations with all of our top customers. Very, very thorough report. Um, real time even this week on their
Operator: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Jonathan Tanwanteng with CJS Securities. Please proceed with your question.
Operator: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Jonathan Tanwanteng with CJS Securities. Please proceed with your question.
With that. Robert ready to take questions?
Thank you. At this time, we’ll be conducting a question and answer session. If you’d like to ask a question, please press star 1 on your telephone keypad.
A confirmation call 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.
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Jon Tanwanteng: Hey, good morning. Thank you for taking my questions. My first one is, I think you mentioned you saw encouraging orders in January, you know, especially relative to Q3. I was wondering if you could maybe quantify in terms of orders and organic growth so far, and I know it's early and not your biggest month, but maybe a little more color just on the improvement degree from the last quarter would be helpful. Thank you.
Jon Tanwanteng: Hey, good morning. Thank you for taking my questions. My first one is, I think you mentioned you saw encouraging orders in January, you know, especially relative to Q3. I was wondering if you could maybe quantify in terms of orders and organic growth so far, and I know it's early and not your biggest month, but maybe a little more color just on the improvement degree from the last quarter would be helpful. Thank you.
Our first question comes from John Kanavai with CJS Securities. Please proceed with your question.
Stocking, plans. We're encouraged by that. And obviously, that shows up in order. Some are still working through it, this quarter. I think a couple of the oems that have already reported said that they see this quarter, people still working through it so hard to quantify that for an organic growth rate. I don't think we'd get ahead of ourselves yet, but Jeff was certainly tell you that we're very encouraged by the order race in January. We mentioned it very intentionally. Um, I'll say we saw the same in the special asra, building solution. Segment. Mark has seen similar order Pace, um, as we as we enter the beginning of the calendar year, so you know, we'll report fully on the quarter things are really, really get going in February and March, of course, but very pleased with what we're seeing so far and it gives us encouragement. And as Joe said, cautious optimism leading into the busy season.
Hey, good morning, thank you for taking my questions. Um, my first 1 is
James Perry: Yeah, John, thanks for being on as always. It's James. Appreciate that. Yeah, we exited December with a good order rate. October and November stayed relatively soft, as we expected and kind of, you know, previewed as we saw destocking continue with our customers. We were encouraged by December. The exit rate was good. Hard to quantify January yet, but Jeff certainly tells us that orders have been very good. We're pleased with that. We also referenced, Joe did in his prepared remarks, very detailed conversations with all of our top customers, very thorough report, real time, even this week, on their destocking plans. We're encouraged by that, and obviously, that shows up in orders. Some are still working through it this quarter.
James Perry: Yeah, John, thanks for being on as always. It's James. Appreciate that. Yeah, we exited December with a good order rate. October and November stayed relatively soft, as we expected and kind of, you know, previewed as we saw destocking continue with our customers. We were encouraged by December. The exit rate was good. Hard to quantify January yet, but Jeff certainly tells us that orders have been very good. We're pleased with that. We also referenced, Joe did in his prepared remarks, very detailed conversations with all of our top customers, very thorough report, real time, even this week, on their destocking plans. We're encouraged by that, and obviously, that shows up in orders. Some are still working through it this quarter.
Uh, I think you mentioned, you saw encouraging orders in January, um, you know, especially relative to Q3. I was wondering if you could maybe quantify uh in terms of orders and organic growth so far. And I know it's early and not not your biggest month but um, maybe a little more college is on the the Improvement degree from the last quarter, will be helpful. Thank you.
Yeah, John. Thank
Difficulty 4 from Acquisitions. You mentioned, 47 or 45 million in Q3? What is that turn into just based on historical parameters?
James Perry: I think a couple of the OEMs that have already reported said that they see this quarter, people still working through it. So hard to quantify that from an organic growth rate. I don't think we'd get ahead of ourselves yet, but Jeff would certainly tell you that we're very encouraged by the order rates in January. We mentioned it very intentionally. I'll say we saw the same in the Specialized Reliability Solutions segment. Mark has seen similar order pace, as we, as we enter the beginning of the calendar year. So, you know, we'll report fully on the quarter. Things will really, really get going in February and March, of course, but very pleased with what we're seeing so far, and it gives us encouragement, as Joe said, cautious optimism leading into the busy season.
I think a couple of the OEMs that have already reported said that they see this quarter, people still working through it. So hard to quantify that from an organic growth rate. I don't think we'd get ahead of ourselves yet, but Jeff would certainly tell you that we're very encouraged by the order rates in January. We mentioned it very intentionally. I'll say we saw the same in the Specialized Reliability Solutions segment. Mark has seen similar order pace, as we, as we enter the beginning of the calendar year. So, you know, we'll report fully on the quarter. Things will really, really get going in February and March, of course, but very pleased with what we're seeing so far, and it gives us encouragement, as Joe said, cautious optimism leading into the busy season.
Over in November stayed relatively soft as we expected and kind of you know, previewed as we as we, as we saw ding continue with our customers, we were encouraged by December. The exit rate was good hard to quantify January yet, but, but Jeff certainly tells us that orders have been have been very good. We're pleased with that. Uh, we also reference Joe, didn't his prepared remarks, very detailed conversations with all of our top customers. Very, very thorough report. Um, real time even this week on Thursday stocking plans, we're encouraged by that and obviously, that shows up in order. Some are still working through it, this quarter. I think a couple of the oems that have already reported said
Yeah, John great question. You know, we've had Morris for just a couple of months now. So we're getting our arms around that fully. Um, Aspen now will, you know, have it since May 1st. So we're, this will be our first January February, March quarter. You know, we talked about Aspen was down a bit year over year just because last year was such a build-up. Like, the OEM saw with the equipment change, you know, we've said, generally that our Legacy contractor Solutions business is kind of a 50 to 55% in our, you know, stronger to fiscal quarters. You know, 40 uh 45, 50% in the others. Aspen and Mars are probably more like 6040 breaking down quarter by quarter is still a little early for us to get to and especially going through the the first year with them going through the disruption we've had in the market, the last few quarters of course with the D stocking. So, you know, I think as we get through this quarter, we'll have a better sense but they do, they do exaggerate the seasonality magnify that a little bit more because they're more repair focused, and obviously, folks are not turning their air conditioners on, you know, certainly not with the, the cold snap we've had lately, but
Jon Tanwanteng: Got it. That's helpful. And then, if you could give us a little more color on your recent acquisitions and what their expected seasonality is, I think that would be helpful just because I think it's been a little bit increased, just in terms of seasonality basis with all the new businesses you've put in there. Maybe more specific, what are you expecting from the contribution in fiscal Q4 from acquisitions? You mentioned $47 or 45 million in Q3. What does that turn into, just based on historical parameters?
Jon Tanwanteng: Got it. That's helpful. And then, if you could give us a little more color on your recent acquisitions and what their expected seasonality is, I think that would be helpful just because I think it's been a little bit increased, just in terms of seasonality basis with all the new businesses you've put in there. Maybe more specific, what are you expecting from the contribution in fiscal Q4 from acquisitions? You mentioned $47 or 45 million in Q3. What does that turn into, just based on historical parameters?
That they see this quarter people still working through it so hard to quantify that for an organic growth rate. I don't think we'd get ahead of ourselves yet, but Jeff was certainly tell you that we're very encouraged by the order race in January. We mentioned it very intentionally. Um, I'll say we saw the same in the specialized reliability solution segment. Mark has seen, similar order Pace, um, as we as we enter the beginning of the calendar year, so you know, we'll report fully on the quarter things are really, really get going in February and March, of course, but very pleased with what we're seeing so far and it gives us encouragement. As Joe said, cautious optimism leading into the busy season.
The folks aren't turning their air conditioners on and you know, December January, February, most places so you don't know that you have a repair you know if someone buys a new house they may go ahead and replace the system. So that's why that business tends to hold up a little bit better through the, through the seasonality, but they're going to exaggerate things somewhat. But I would ask that you kind of give us this quarter to get a better sense of what that looks like under.
our ownership and as we go along throughout the fiscal year we'll get a better and better look each quarter and how how each of those perform
Anything else, John?
James Perry: Yeah, John, great question. You know, we've had MARS for just a couple of months now, so we're getting our arms around that fully. Aspen now, we'll, you know, have it since 1 May, so we're - this will be our first January, February, March quarter. You know, we talked about Aspen was down a bit year-over-year, just because last year was such a buildup, like the OEM saw with the equipment change. You know, we've said generally that our legacy contractor solutions business is kind of a 50 to 55% in our, you know, stronger two fiscal quarters, you know, 40, 45, 50 percent in the others. Aspen and MARS are probably more like 60/40.
James Perry: Yeah, John, great question. You know, we've had MARS for just a couple of months now, so we're getting our arms around that fully. Aspen now, we'll, you know, have it since 1 May, so we're - this will be our first January, February, March quarter. You know, we talked about Aspen was down a bit year-over-year, just because last year was such a buildup, like the OEM saw with the equipment change. You know, we've said generally that our legacy contractor solutions business is kind of a 50 to 55% in our, you know, stronger two fiscal quarters, you know, 40, 45, 50 percent in the others. Aspen and MARS are probably more like 60/40.
Got it. That's helpful. And then if you could give us a little more color on your recent acquisitions and what they're expected seasonality is I think that would be helpful just because I think it's been a little bit increased um just in terms of seasonality basis with with all the new um businesses you've put in there. Um maybe more specific. What what are you expecting from the contribution in physical to 4 from Acquisitions. You mentioned, 47 or 45 million in Q3? What is that turn into just based on historical parameters?
Everybody.
I'll take the next question.
Our next question comes from, Susan mclary, with Goldman Sachs, please receive with your question.
Rob, we cannot hear the questions.
Can you hear me now?
Yeah, John great question. You know, we've had Mars for just a couple of months now, so we're getting our arms around that fully. Um, Aspen now will, you know, have it since May 1st. So we're, this will be our first January February March quarter. You know, we talked about Aspen was down a bit year-over-year. Just because last year was such a build-up. Like, the OEM saw with the equipment change, you know, we've said, generally that our Legacy contractor Solutions business is kind of a 50 to 55% in our you know, stronger to
We can hear you Rob. If Sue is talking, we don't hear. Sue our Q is called.
James Perry: Breaking down quarter by quarter is still a little early for us to get to, and especially going through the first year with them, going through the disruption we've had in the market the last few quarters, of course, with the destocking. So, you know, I think as we get through this quarter, we'll have a better sense. But they do, they do exaggerate the seasonality, magnify that a little bit more because they're more repair focused. And obviously, folks are not turning their air conditioners on, you know, certainly not with the cold snap we've had lately. But folks aren't turning their air conditioners on in, you know, December, January, February, most places, so you don't know that you have a repair.
Breaking down quarter by quarter is still a little early for us to get to, and especially going through the first year with them, going through the disruption we've had in the market the last few quarters, of course, with the destocking. So, you know, I think as we get through this quarter, we'll have a better sense. But they do, they do exaggerate the seasonality, magnify that a little bit more because they're more repair focused. And obviously, folks are not turning their air conditioners on, you know, certainly not with the cold snap we've had lately. But folks aren't turning their air conditioners on in, you know, December, January, February, most places, so you don't know that you have a repair.
Hello. This is are are you there Susan? Yes. Can you hear Charles Brown for Susan? Can you guys hear me? Hi Charles. Yeah. Yeah we can now. Thank you. Hey wonderful, sorry for the technical difficulties but uh uh good morning. Um,
James Perry: You know, if someone buys a new house, they may go ahead and replace the system, so that's why that business tends to hold up a little better through the, through the seasonality. But they're gonna exaggerate things somewhat, but I, I would ask that you kind of give us this quarter to get a better sense of what that looks like under our ownership. And as we go along throughout the fiscal year, we'll get a better and better look each quarter at how, how each of those perform. Anything else, John? Almost everybody.
You know, if someone buys a new house, they may go ahead and replace the system, so that's why that business tends to hold up a little better through the, through the seasonality. But they're gonna exaggerate things somewhat, but I, I would ask that you kind of give us this quarter to get a better sense of what that looks like under our ownership. And as we go along throughout the fiscal year, we'll get a better and better look each quarter at how, how each of those perform. Anything else, John? Almost everybody.
I guess, first, I'd love to ask about, you know, understanding your optimism for more normalized order rates coming through in HVAC. Can you maybe help us understand what the organic growth uh for for this business could look like in uh, you know, calendar to 26 over the next few quarters. If the housing market remains weak, you know, what is the confidence in your ability to return to
You know, your target admit to high school digit growth over time?
Business tends to hold up a little better through the, through the seasonality, but they're going to exaggerate things somewhat. But I, I would ask that you kind of give us this quarter to get a better sense of what that looks like under our ownership and as we go along, throughout the fiscal year, we'll get a better and better look each quarter and how how each of those perform
Anything else, John?
Almost everybody.
Operator: Yeah, Keven, I'll take the next question.
Operator: Yeah, Keven, I'll take the next question.
I'll take the next question.
Joseph Armes: ... Our next question comes from Susan Maklari with Goldman Sachs. Please proceed with your question.
... Our next question comes from Susan Maklari with Goldman Sachs. Please proceed with your question.
Our next question comes from Susan McLary with Goldman Sachs. Please proceed with your question.
James Perry: Rob, we cannot hear the questions.
James Perry: Rob, we cannot hear the questions.
[Analyst] (Goldman Sachs): Okay. Can you hear me now?
[Analyst] (Goldman Sachs): Okay. Can you hear me now?
Rob, we cannot hear the questions.
James Perry: We can hear you, Rob, but if Sue's talking, we don't hear Sue.
James Perry: We can hear you, Rob, but if Sue's talking, we don't hear Sue.
Can you hear me now?
Operator: Our queue is gone.
Operator: Our queue is gone.
We can hear you Rob. If Sue is talking, we don't hear. Sue our Q is on.
[Analyst] (Goldman Sachs): Hello?
[Analyst] (Goldman Sachs): Hello?
Joseph Armes: Susan, are you there, Susan?
Joseph Armes: Susan, are you there, Susan?
[Analyst] (Goldman Sachs): Yes. Can you hear... It's Charles Brown for Susan. Can you guys hear me?
[Analyst] (Goldman Sachs): Yes. Can you hear... It's Charles Brown for Susan. Can you guys hear me?
Yeah, Charles this is James. Um you know, I wish we had a real precise answer as we said it's a little early. I I'll say a couple of things you know. We we historically had a mid to high single digit, organic growth rate within contractor Solutions and that's through the cycles. Obviously this last year we did not have that. We've certainly had years when that, you know, exceeds 10% and you, you you you get back to that average. So I think as we go through the next couple of years, we expect that type of average to return what quarter we start seeing that. Um, we're not sure yet. We're certainly, as we said encouraged by the order volume, we've seen in December and January. We're most encouraged by the anecdotal evidence. We have in talking directly to our customers and where their inventory levels are in terms of parts and accessories which could be different from OEM, um, inventories. So we're encouraged by that. I would also say as we go through the year, we're going to have easier comps. You know, last year's fiscal, fourth quarter was up about 8%. You know, you kind of had a makeup over the fiscal third quarter, so the quarter that we just started, January February, March,
James Perry: Hi, Charles.
James Perry: Hi, Charles.
Joseph Armes: Yeah, we can now. Thank you.
Joseph Armes: Yeah, we can now. Thank you.
James Perry: Hey, Charles.
James Perry: Hey, Charles.
[Analyst] (Goldman Sachs): Wonderful. Hey, wonderful. Sorry for the technical difficulties, but good morning. I guess first, I would love to ask about, you know, understanding your optimism for more normalized order rates coming through in HVAC. Can you maybe help us understand what the organic growth for this business could look like in, you know, calendar 2026 over the next few quarters if the housing market remains weak? You know, what is the confidence in your ability to return to, you know, your target mid to high single digit growth over time?
[Analyst] (Goldman Sachs): Wonderful. Hey, wonderful. Sorry for the technical difficulties, but good morning. I guess first, I would love to ask about, you know, understanding your optimism for more normalized order rates coming through in HVAC. Can you maybe help us understand what the organic growth for this business could look like in, you know, calendar 2026 over the next few quarters if the housing market remains weak? You know, what is the confidence in your ability to return to, you know, your target mid to high single digit growth over time?
Was pretty good last year because people waited to stock up because they were buying the OEM equipment in the November December months, and then they stocked up on parts and accessories down in March last year. So, this quarter's comps a little harder, but as we go through the year, obviously, the comps get a little bit easier. So I think, when we talk to you in May we'll have a much better sense than with a couple of months behind us of order order volume, you'll obviously hear a lot more from our customers, those public. And the ones that we
Hello. This is are, are you there Susan? Yes. Can you hear is, Charles Brown for Susan? Can you guys hear me? Hi Charles, yeah, we can now. Thank you. Hey, Charles, hey wonderful. Sorry for the technical difficulties but, uh, uh, good morning. Um, I guess, first, I'd love to ask about, you know, understanding your optimism for more normalized order rates coming through, in HVAC, can you maybe help us understand what the organic growth uh, for for this business could look like
James Perry: Yeah, Charles, this is James. You know, I wish we had a real precise answer. As we said, it's a little early. I'll say a couple of things. You know, we've historically had a mid to high single digit organic growth rate within Contractor Solutions, and that's through the cycles. Obviously, this last year, we did not have that. We've certainly had years when that, you know, exceeds 10%, and you get back to that average. So I think as we go through the next couple of years, we expect that type of average to return. What quarter we start seeing that? We're not sure yet. We're certainly, as we said, encouraged by the order volume we've seen in December and January.
James Perry: Yeah, Charles, this is James. You know, I wish we had a real precise answer. As we said, it's a little early. I'll say a couple of things. You know, we've historically had a mid to high single digit organic growth rate within Contractor Solutions, and that's through the cycles. Obviously, this last year, we did not have that. We've certainly had years when that, you know, exceeds 10%, and you get back to that average. So I think as we go through the next couple of years, we expect that type of average to return. What quarter we start seeing that? We're not sure yet. We're certainly, as we said, encouraged by the order volume we've seen in December and January.
Like in, uh, you know, calendar '26 over the next few quarters. If the housing market remains weak, you know, what is the confidence in your ability to return to, you know, your target mid to high-single-digit growth over time?
Talk to that. We're happy to to talk about in terms of what the inventory levels look like. So when we return to that, we'll see but you know, we've got a long history in this into market and in this business that tells us that, you know, amid the high single digit organic growth rate is what we expect in the long term.
No, that's very helpful color second. I I just
Pricing. Can you provide the latest on what you're seeing on the?
Ing, the moving pieces in terms of tariffs and other input costs. How do you approach decisions? Maybe get more pricing over time. In this business this year,
you know, you know we we've been
James Perry: We're most encouraged by the anecdotal evidence we have in talking directly to our customers on where their inventory levels are in terms of parts and accessories, which could be different from OEM inventory. So we're encouraged by that. I would also say, as we go through the year, we're gonna have easier comps. You know, last year's fiscal fourth quarter was up about 8%. You know, you kind of had to make up over the fiscal third quarter. So the quarter we just started, January, February, March, was pretty good last year because people waited to stock up because they were buying the OEM equipment in the November, December months, and then they stocked up on parts and accessories down in March last year. So this quarter's comp's a little harder, but as we go through the year, obviously, the comps get a little bit easier.
We're most encouraged by the anecdotal evidence we have in talking directly to our customers on where their inventory levels are in terms of parts and accessories, which could be different from OEM inventory. So we're encouraged by that. I would also say, as we go through the year, we're gonna have easier comps. You know, last year's fiscal fourth quarter was up about 8%. You know, you kind of had to make up over the fiscal third quarter. So the quarter we just started, January, February, March, was pretty good last year because people waited to stock up because they were buying the OEM equipment in the November, December months, and then they stocked up on parts and accessories down in March last year. So this quarter's comp's a little harder, but as we go through the year, obviously, the comps get a little bit easier.
Yeah, Charles this is James. Um you know, I wish we had a real precise answer as we said it's a little early. I I'll say a couple of things you know. We we historically had a mid to high single digit, organic growth rate within contractor Solutions and that's through the cycles. Obviously this last year we did not have that. We've certainly had years when that, you know, exceeds 10% and you, you you you get back to that average. So I think as we go through the next couple of years, we expect that type of average to return what quarter we start seeing that. Um, we're not sure yet. We're certainly, as we said encouraged by the order volume, we've seen in December and January. We're most encouraged by the anecdotal evidence. We have in talking directly to our customers and where their inventory levels are in terms of parts and accessories, which could be different from OEM, um, inventory. So we're encouraged by that. I would also say as we go through the year, we're going to have easier comps. You know, last year's fiscal, fourth quarter was up about 8%. You know, you kind of had a makeup over the fiscal third quarter, so the quarter that we just started, January February, March,
James Perry: So I think when we talk to you in May, we'll have a much better sense than with a couple of months behind us of order volume. You'll obviously hear a lot more from our customers, those public, and the ones that we talk to, that we're happy to talk about in terms of what their inventory levels look like. So when we return to that, we'll see, but, you know, we've got a long history in this end market and in this business that tells us that, you know, a mid to high single digit organic growth rate is what we expect in the long term.
So I think when we talk to you in May, we'll have a much better sense than with a couple of months behind us of order volume. You'll obviously hear a lot more from our customers, those public, and the ones that we talk to, that we're happy to talk about in terms of what their inventory levels look like. So when we return to that, we'll see, but, you know, we've got a long history in this end market and in this business that tells us that, you know, a mid to high single digit organic growth rate is what we expect in the long term.
Reactionary, in terms of tariffs, obviously, um, the last couple of years, we've taken our annual price increase in January and and that's worked its way through the system and been well, received, I think, as we always say that gets passed all the way through the system, where we are in the value chain is very important. People pass that through as well. As you know, we took a bit of a midyear price increase to to cover our tariffs. And that's really starting to get fully impacted. Now, the quarter, we just started, it takes a little while to get through the system. Um, so as long as tariffs remain steady for the most part, we think we've covered that now. Um, you've seen some, obviously, some price increases on the metal side, some of that starts to impact. This aluminum affects us in EBS, even something like silver can have a bit of an impact for us. We're watching that closely. It's not a big impact yet but we're watching things like that as commodity prices continue to go up, but we think what we've done in terms of pricing is what we need. But we have never been shy about, um, taking price increases and pushing this through. If we see, uh, the cost moving
[Analyst] (Goldman Sachs): Okay. No, that's very helpful color. Second, I, I'd just like to touch on pricing. Can you provide the latest on what you're seeing on the Contractor Solutions side? You know, considering the moving pieces in terms of tariffs and other input costs, how do you approach decisions to maybe get more pricing over time in this business this year?
[Analyst] (Goldman Sachs): Okay. No, that's very helpful color. Second, I, I'd just like to touch on pricing. Can you provide the latest on what you're seeing on the Contractor Solutions side? You know, considering the moving pieces in terms of tariffs and other input costs, how do you approach decisions to maybe get more pricing over time in this business this year?
Was pretty good last year because people waited to stock up because they were buying the OEM equipment in the November December months, and then they stocked up on parts and accessories down in March last year. So, this quarter's comps a little harder, but as we go through the year, obviously, the comps get a little bit easier. So I think, when we talk to you in May we'll have a much better sense than with a couple of months behind us of order order volume, you'll obviously hear a lot more from our customers, those public. And the ones that we talked to that were happy to to talk about in terms of what their inventory levels look like. So when we were returned to that we'll see but you know we've got a long history in this end market and in this business that tells us that you know a mid to high single digit organic growth rate is what we expect in the long term.
James Perry: You know, we've been reactionary in terms of tariffs, obviously. The last couple of years, we've taken our annual price increase in January, and that's worked its way through the system and been well received. I think, as we always say, that gets passed all the way through the system. Where we are in the value chain is very important. People pass that through as well. As you know, we took a bit of a mid-year price increase to cover our tariffs, and that's really starting to get fully impacted now, the quarter we just started. It takes a little while to get through the system. So as long as tariffs remain steady for the most part, we think we've covered that now. You've seen some, obviously, some price increases on the metals side. Some of that starts to impact us.
James Perry: You know, we've been reactionary in terms of tariffs, obviously. The last couple of years, we've taken our annual price increase in January, and that's worked its way through the system and been well received. I think, as we always say, that gets passed all the way through the system. Where we are in the value chain is very important. People pass that through as well. As you know, we took a bit of a mid-year price increase to cover our tariffs, and that's really starting to get fully impacted now, the quarter we just started. It takes a little while to get through the system. So as long as tariffs remain steady for the most part, we think we've covered that now. You've seen some, obviously, some price increases on the metals side. Some of that starts to impact us.
Contractor solution side and you know, considering the moving pieces in terms of tariffs and other input costs. How do you approach decisions? Maybe get more pricing over time. In this business this year,
Up. And we're very transparent with that. With our customers that gets passed through the system. Like I said, we don't do that early, or until we need to, you know, last year as you recall, tariffs kind of spiked came back down. We waited and I think our patience was rewarded with customer response, um, on how we handle that in, in terms of the industry. And so we will not be hesitant to take pricing as we need to last fall, we took price increases within specialized reliability Solutions and passed that through the system um within EBS, that's a project by project basis. So we are not going to let the shareholders bear the brunt of cost increases, we will continue to pass that through as as warranted.
you know, you know we we've been
No, that makes sense. Thank you for that and if I can squeeze 1 last question and maybe for James, you know, can you provide your update and update on your Capital? Allocation priorities from here. Obviously, you're sitting near the midpoint of your targeted, leverage range and and you know, are you willing to do more acquisition in the near term and and what is the pipeline for for m&a that you're seeing today?
Reactionary, in terms of tariffs, obviously, um, the last couple of years, we've taken our annual price increase in January, and that's worked its way through the system and been well received, I think. As we always say, that gets passed all the way through the system. Where we are in the value chain is very important. People pass that through as well. As you know, we took a bit of a midyear price increase to cover our tariffs, and that's really starting to get fully impacted now. The quarter we just started, it takes a little while to get through the system. Um, so
James Perry: Aluminum affects us in EBS. Even something like silver can have a bit of an impact for us. We're watching that closely. It's not a big impact yet, but we're watching things like that as commodity prices continue to go up. But we think what we've done in terms of pricing is what we need, but we have never been shy about taking price increases and pushing those through if we see the cost moving up. And we're very transparent with that with our customers. That gets passed through the system, like I said. We don't do that early or until we need to. You know, last year, as you recall, tariffs kind of spiked, came back down. We waited, and I think our patience was rewarded with customer response on how we handle that in, in terms of the industry.
Aluminum affects us in EBS. Even something like silver can have a bit of an impact for us. We're watching that closely. It's not a big impact yet, but we're watching things like that as commodity prices continue to go up. But we think what we've done in terms of pricing is what we need, but we have never been shy about taking price increases and pushing those through if we see the cost moving up. And we're very transparent with that with our customers. That gets passed through the system, like I said. We don't do that early or until we need to. You know, last year, as you recall, tariffs kind of spiked, came back down. We waited, and I think our patience was rewarded with customer response on how we handle that in, in terms of the industry.
Yeah I'll pass some of this over to Joe Charles if you don't mind but you know, we will certainly work to pay down our debt, you know, but we're sitting at a 2.3 times on the Covenant. We've been there before after the true our acquisition, we were right on that same number in fact and worked that down over time we've got strong cash flow you know as we get into the next couple of quarters these Acquisitions the power is really going to show the cash flow that they generate similar to our Legacy business. So we're going to have the opportunity to do that, you know, that leverage ratio, obviously, moved up from the Acquisitions, but we also repurchased 70 million of stock in the quarter.
James Perry: We will not be hesitant to take pricing as we need to. Last fall, we took price increases within Specialized Reliability Solutions and passed that through the system. Within EBS, that's a project-by-project basis. We're not going to let the shareholders bear the brunt of cost increases. We will continue to pass that through as warranted.
We will not be hesitant to take pricing as we need to. Last fall, we took price increases within Specialized Reliability Solutions and passed that through the system. Within EBS, that's a project-by-project basis. We're not going to let the shareholders bear the brunt of cost increases. We will continue to pass that through as warranted.
Um you know we've got certain levels at which we do that and that got triggered and we did that and we think having an average share price of 246 dollars in that repurchase program. Last quarter is going to look very attractive, long term and create a lot of value for the shareholders. So we we made a very intentional decision to to take on a little more leverage to do that. But we're very comfortable with 2.3. We see that coming down over time from the results of our cash flow and I'll let Joe talked about kind of our thoughts on m&a right now. Yeah. Thank you James. I think uh, as James said I mean our free cash flow and our cash flow is going to be very impressive as we move through the year with these Acquisitions. Um, we do have a period of digestion here. I've been asked about, you know,
[Analyst] (Goldman Sachs): No, that makes sense. Thank you for that. And if I can squeeze one last question in, maybe for James. You know, can you provide an update on your capital allocation priorities from here? Obviously, you're sitting near the midpoint of your targeted leverage range, and you know, are you willing to do more acquisition in the near term, and what is the pipeline for M&A that you're seeing today?
[Analyst] (Goldman Sachs): No, that makes sense. Thank you for that. And if I can squeeze one last question in, maybe for James. You know, can you provide an update on your capital allocation priorities from here? Obviously, you're sitting near the midpoint of your targeted leverage range, and you know, are you willing to do more acquisition in the near term, and what is the pipeline for M&A that you're seeing today?
Kind of spiked came back down. We waited and I think our patience was rewarded with customer response, um, on how we handle that in, in terms of the industry. And so we will not be hesitant to take pricing as we need to last fall, we took price increases within specialized reliability Solutions and pass that through the system. Um within ebf, that's a project by project basis so we're not going to let the shareholders bear the brunt of cost increases, we will continue to pass that through as as warranted.
James Perry: Yeah, I'll pass some of this over to Joe, Charles, if you don't mind. But, you know, we will certainly work to pay down our debt, you know, but we're sitting at our 2.3 times on the covenants. We've been there before, after the TRUaire acquisition, we were right on that same number, in fact, and worked that down over time. We've got strong cash flow. You know, as we get into the next couple of quarters, these acquisitions, the power is really gonna show the cash flow that they generate, similar to our legacy business. So we're gonna have the opportunity to do that. You know, that leverage ratio obviously moved up from the acquisitions, but we also repurchased $70 million of stock in the quarter.
James Perry: Yeah, I'll pass some of this over to Joe, Charles, if you don't mind. But, you know, we will certainly work to pay down our debt, you know, but we're sitting at our 2.3 times on the covenants. We've been there before, after the TRUaire acquisition, we were right on that same number, in fact, and worked that down over time. We've got strong cash flow. You know, as we get into the next couple of quarters, these acquisitions, the power is really gonna show the cash flow that they generate, similar to our legacy business. So we're gonna have the opportunity to do that. You know, that leverage ratio obviously moved up from the acquisitions, but we also repurchased $70 million of stock in the quarter.
No, that makes sense. Thank you for that and if I can squeeze 1 last question and maybe for James, you know, can you provide your up and update on your Capital? Allocation priorities from here? Obviously, you're sitting near the midpoint of your targeted, leverage range and and you know, are you willing to do more acquisition in the near term and and what is the pipeline for for m&a that you're seeing today?
Future Acquisitions. And how long will it take to be able to you know, be in a position to do another acquisition? And I I've said that will be quarters, not years. Uh, the integration is going exceedingly. Well we are very very pleased with the team's performance on that and therefore, we're hitting all of our targets or exceeding. And so, we're, we're very pleased with that. And so again, that would be quarters of digestion, not years and uh, uh, but they also gives us, uh, quarters to pay down debt and, uh, we will we will do that with our capital in the meantime. And, uh, we are disciplined. We are very rigorous in our analysis and our, and our thinking about Returns on those Investments and so, um, but but we, we're in, we're in a bit of an execution mode, right? This moment but again, that will last quarter is not years and
James Perry: You know, we've got certain levels at which we do that, and that got triggered, and we did that, and we think having an average share price of $246 in that repurchase program last quarter is gonna look very attractive long term, and create a lot of value for the shareholders. So we, we made a, a very intentional decision to, to take on a little more leverage to do that, but we're very comfortable with 2.3. We see that coming down over time from the results of our cash flow, and I'll let Joe talk about kind of our thoughts on M&A right now.
You know, we've got certain levels at which we do that, and that got triggered, and we did that, and we think having an average share price of $246 in that repurchase program last quarter is gonna look very attractive long term, and create a lot of value for the shareholders. So we, we made a, a very intentional decision to, to take on a little more leverage to do that, but we're very comfortable with 2.3. We see that coming down over time from the results of our cash flow, and I'll let Joe talk about kind of our thoughts on M&A right now.
Yeah I'll pass some of this over to Joe Charles if you don't mind but you know, we will certainly work to pay down our debt, you know, but we're sitting at a 2.3 times on the Covenant. We've been there before after the true our acquisition, we were right on that same number in fact and worked that down over time we've got strong cash flow you know as we get into the next couple of quarters, these Acquisitions the powers really going to show the cash flow that they generate similar to our Legacy business. So we're going to have the opportunity to do that, you know that leverage ratio, obviously moved up from the Acquisitions but we also repurchased 70 million dollars of stock in the quarter. Um, you know, we've got certain levels at which we do that and that got triggered and we did that and we think having an average share price of 246 dollars in that repurchase program. Last quarter is going to look very attractive.
And uh, I I think all levers are available to us and uh we're just going to be uh uh very mindful of of how we how we move forward. Um and uh continue our track record of carefully, allocating Capital to the highest risk adjusted return opportunity um and uh that that's paid off for us so far.
Thank you for the time guide and good luck with the quarter.
Thanks.
Joseph Armes: Yeah. Thank you, James. I think, as James said, I mean, our free cash flow and our cash flow is gonna be very impressive as we move through the year with these acquisitions. We do have a period of digestion here. I've been asked about, you know-
Joseph Armes: Yeah. Thank you, James. I think, as James said, I mean, our free cash flow and our cash flow is gonna be very impressive as we move through the year with these acquisitions. We do have a period of digestion here. I've been asked about, you know-
Our next question comes from Italian back with City, please proceed with your question.
Hi, good morning.
Morning.
James Perry: ... future acquisitions and how long will it take to be able to, you know, be in a position to do another acquisition? And I, I've said that will be quarters, not years. The integration is going exceedingly well. We are very, very pleased with the team's performance on that, and therefore, we're hitting all of our targets. We're exceeding, and so we're very pleased with that. And so again, that would be quarters of digestion, not years. And, but that also gives us quarters to pay down debt, and we will do that with our capital in the meantime. And, we are disciplined. We are very rigorous in our analysis and our, in our thinking about returns on those investments. And so... But, we're in, we're in a bit of an execution mode right this moment.
... future acquisitions and how long will it take to be able to, you know, be in a position to do another acquisition? And I, I've said that will be quarters, not years. The integration is going exceedingly well. We are very, very pleased with the team's performance on that, and therefore, we're hitting all of our targets. We're exceeding, and so we're very pleased with that. And so again, that would be quarters of digestion, not years. And, but that also gives us quarters to pay down debt, and we will do that with our capital in the meantime. And, we are disciplined. We are very rigorous in our analysis and our, in our thinking about returns on those investments. And so... But, we're in, we're in a bit of an execution mode right this moment.
Active long term um, and create a lot of value for the shareholders. So we we made a very intentional decision to to take on a little more leverage to do that. But we're very comfortable with 2.3. We see that coming down over time from the results of our cash flow and I'll let Joe talked about kind of our thoughts on m&a right now. Yeah. Thank you James. I think uh, as James said, I mean our free cash flow and our cash flow is going to be very impressive as we move through the year with these Acquisitions. Um, we do have a period of digestion here. I've been asked about, you know,
Just ask it anyway. Um, just curious about given the Colder Weather and snow we've reached. And we've seen how do you observe any like near-term? Pick up and replace an activity or pull forward within the contractor Solutions segment in this quarter.
James Perry: But again, that will last quarters, not years. And I think all levers are available to us, and we're just gonna be very mindful of how we move forward, and continue our track record of carefully allocating capital to the highest risk-adjusted return opportunity. And that's paid off for us so far.
But again, that will last quarters, not years. And I think all levers are available to us, and we're just gonna be very mindful of how we move forward, and continue our track record of carefully allocating capital to the highest risk-adjusted return opportunity. And that's paid off for us so far.
Future Acquisitions. And how long will it take to be able to you know, be in a position to do another acquisition? And I I've said that will be quarters, not years. Uh, the integration is going exceedingly. Well we are very very pleased with the team's performance on that and therefore, we're hitting all of our targets or exceeding. And so, we're, we're very pleased with that. And so again, that would be quarters of digestion, not years and uh, uh, but they also gives us, uh, quarters to pay down debt and, uh, we will we will do that with our capital in the meantime. And, uh, we are disciplined. We are very rigorous in our analysis and our, and our thinking about Returns on those Investments and so, um, but but we, we're in, we're in a bit of an execution mode, right? This moment but again, that will last quarter is not years and uh I I think all levers are available to us and uh, we're just going to be uh uh, very mindful of of how we how we move forward.
Yeah, I don't think we see much impact there necessarily. You know, we've got less exposure on the heating side. Um, so to speak, obviously there's some there, but, um, you know, it's more on the air conditioning side, you know, you tend to have something like this every year or 2. So it's not terribly unusual. In terms of changing patterns. I think that tell you all I would say so far. Obviously a look, back will be valuable, you know, a few weeks or a couple months from now. But, you know, we talked about the order volume has been, you know, at a very encouraging Pace as we exited December and January, seeing very nice orders in the contractor solution business as well, the the only direct impact we've seen so far, is we lost a couple of shipping days as some of our facilities will make that up in the quarter. So we're not concerned about that. So we don't see any negative impact in terms of Tailwind, I think time will tell. But you know, we, we see more of that in the summer when it gets exceptionally hot on the air conditioning side than in the winter, when it gets exceptionally cold.
[Analyst] (Goldman Sachs): Thank you for the time, guys, and good luck with the quarter.
[Analyst] (Goldman Sachs): Thank you for the time, guys, and good luck with the quarter.
Um and uh continue our track record of carefully, allocating Capital to the highest risk adjusted return opportunity um and uh that that's paid off for us so far.
James Perry: Thanks, Charles.
Joseph Armes: Thanks, Charles.
Thank you for the time, guys. And good luck with the quarter.
Thanks.
Operator: Our next question comes from Natalia Barkhudarova with Citi. Please proceed with your question.
Operator: Our next question comes from Natalia Barkhudarova with Citi. Please proceed with your question.
Got it. That's helpful caller. And then just on the acquisition front, I think earlier mentioned that you expect to see the initial cost synergies that you outlined. Um, so I'm just curious if what enang are you in or the margin maturity curve today. Uh, versus where you first, when you initially closed on Acquisitions and how much additional costs and energies, you expect to not realize from them.
Natalia Bak: Hi, good morning.
Natalia Bak: Hi, good morning.
Our next question comes from Natalia, back with Citi. Please proceed with your question.
James Perry: Morning.
James Perry: Morning.
[Analyst] (Goldman Sachs): Morning.
Joseph Armes: Morning.
Hi, good morning.
Natalia Bak: I lost connection for a bit, so I'm not sure if this was asked, but I'll just ask it anyway. Just curious, that given the colder weather and snow we've recently seen, have you observed any, like, near-term pickup in replacement activity or pull forward within the Contractor Solutions segment in this quarter?
Natalia Bak: I lost connection for a bit, so I'm not sure if this was asked, but I'll just ask it anyway. Just curious, that given the colder weather and snow we've recently seen, have you observed any, like, near-term pickup in replacement activity or pull forward within the Contractor Solutions segment in this quarter?
Good morning.
James Perry: Yeah, I don't think we see much impact there necessarily. You know, we've got less exposure on the heating side, so to speak. Obviously, there's some there, but, you know, it's more on the air conditioning side. You know, you tend to have something like this every year or two, so it's not terribly unusual in terms of changing patterns. I think, Natalia, all I would say so far, obviously, a look back will be valuable, you know, a few weeks or a couple of months from now. But, you know, we talked about the order volume has been, you know, at a very encouraging pace as we exited December and January, seeing very nice orders in the Contractor Solutions business as well. The only direct impact we've seen so far is we lost a couple of shipping days at some of our facilities.
Joseph Armes: Yeah, I don't think we see much impact there necessarily. You know, we've got less exposure on the heating side, so to speak. Obviously, there's some there, but, you know, it's more on the air conditioning side. You know, you tend to have something like this every year or two, so it's not terribly unusual in terms of changing patterns. I think, Natalia, all I would say so far, obviously, a look back will be valuable, you know, a few weeks or a couple of months from now. But, you know, we talked about the order volume has been, you know, at a very encouraging pace as we exited December and January, seeing very nice orders in the Contractor Solutions business as well. The only direct impact we've seen so far is we lost a couple of shipping days at some of our facilities.
Um, I lost connection for a bit so I'm not sure if this was asked but I'll just ask it anyway. Um, just curious that given the Colder Weather and snow. We've reached the me seeing how you observed any like near-term pickup and replacement activity or pull forward within the contractor Solutions segment in this quarter.
Yeah, this is James and Talia, thanks for that. Yeah, Joe did mention that and we're we're we're really pleased that, uh, that we see in excess of 10 million dollars, you know. Just a couple months in, I don't think we're ready to quantify that quite yet, we've got some internal goals that we always had internal goals that exceeded 10 million. But now we feel comfortable saying that we're going to exceed them. In terms of innings, I'd say on the margin side, you're in the first couple Innings. You know, we said that's a 12-month Target where, you know, 2 and a half months into the Acquisitions and maybe even the second or third inning and it's the seasonally low quarter. So you can only do so much from a margin perspective. Uh, but we, we remain on track and are very comfortable with continuing to, to talk about a 30% margin. I'll say this Mars has been fully integrated. So being able to directly pick out a margin is going to get difficult for us but we're tracking it awfully. Well, in terms of the synergies I'd say we're more in the middle Innings because we've actioned these synergies. You know, a lot of it was folks that didn't come with the acquisition day 1. You know, we've wound down a facility, we have, you know, another FAQ
James Perry: We'll make that up in the quarter, so we're not concerned about that, so we don't see any negative impact. In terms of tailwind, I think time will tell, but, you know, we see more of that in the summer when it gets exceptionally hot on the air conditioning side than in the winter when it gets exceptionally cold.
We'll make that up in the quarter, so we're not concerned about that, so we don't see any negative impact. In terms of tailwind, I think time will tell, but, you know, we see more of that in the summer when it gets exceptionally hot on the air conditioning side than in the winter when it gets exceptionally cold.
Yeah, I don't think we see much impact there necessarily. You know, we've got less exposure on the heating side. Um, so to speak, obviously there's some there, but, um, you know, it's more on the air conditioning side, you know, you tend to have something like this every year or 2. So it's not terribly unusual. In terms of changing patterns, I think Natalia all I would say so far. Obviously a look, back will be valuable, you know, a few weeks or a couple months from now. But, you know, we talked about the order volume has been, you know, at a very encouraging Pace as we exited December and January seen very nice orders in the contractor solution business as well. The the only direct impact we've seen so far is we lost a couple of shipping days as some of our facilities will make that up in the quarter so we're not going to
Concerned about that. So, we don't see any negative impact in terms of Tailwind—I think Tom will tell. But, you know, we see more of that in the summer, when it gets exceptionally hot on the air conditioning side, than in the winter, when it gets exceptionally cold.
Natalia Bak: Got it. That's helpful color. And then just on the acquisition front, I think earlier you mentioned that you expect to exceed the initial cost synergies that you outlined. So I'm just curious, like, what inning are you in, or the margin maturity curve today, versus where you when - first when you initially closed on the acquisitions, and how much additional cost synergies do you expect to now realize from them?
Natalia Bak: Got it. That's helpful color. And then just on the acquisition front, I think earlier you mentioned that you expect to exceed the initial cost synergies that you outlined. So I'm just curious, like, what inning are you in, or the margin maturity curve today, versus where you when - first when you initially closed on the acquisitions, and how much additional cost synergies do you expect to now realize from them?
You know, the rent coming off of that facility as we go along. So we have actioned, the vast majority of the 10 million and now even Beyond 10 million of synergies, but it takes the 12 months to really see that roll through. Obviously that's an annualized type number. So, you know, I think we're in the middle innings in terms of actioning, but you're still, similarly, in the first couple innings in terms of a prorat and what we're seeing so far. Given that's a 12-month goal.
James Perry: Yeah, this is James, Natalia. Thanks for that. Yeah, Joe did mention that, and we're really pleased that we see in excess of $10 million. You know, just a couple of months in, I don't think we're ready to quantify that quite yet. We've got some internal goals, that we always had internal goals that exceeded $10 million, but now we feel comfortable saying that we're gonna exceed them. In terms of innings, I'd say on the margin side, you're in the first couple innings. You know, we said that's a 12-month target. We're, you know, two and a half months into the acquisitions, maybe you're in the second or third inning, and it's a seasonally low quarter, so you can only do so much from a margin perspective.
James Perry: Yeah, this is James, Natalia. Thanks for that. Yeah, Joe did mention that, and we're really pleased that we see in excess of $10 million. You know, just a couple of months in, I don't think we're ready to quantify that quite yet. We've got some internal goals, that we always had internal goals that exceeded $10 million, but now we feel comfortable saying that we're gonna exceed them. In terms of innings, I'd say on the margin side, you're in the first couple innings. You know, we said that's a 12-month target. We're, you know, two and a half months into the acquisitions, maybe you're in the second or third inning, and it's a seasonally low quarter, so you can only do so much from a margin perspective.
And maturity curve today, uh, versus Q4, Q1 versus when you initially closed on those positions, and how much additional cost introduced you expected—now realized—from them?
That's helpful. And then just 1 last quick question, just switching over to SRS. Um, just to give you the margin contracted and SRS and I believe last quarter you mentioned that you implemented a price increase. Uh, so how much of the margin pressure is due to timing lag and pricing were structurally higher material costs. And when do you expect pricing to fully offset the material inflation in the segment?
James Perry: But we, we remain on track and are very comfortable with continuing to, to talk about a 30% margin. I'll say this: Mars has been fully integrated, so being able to directly pick out a margin is gonna get difficult for us, but we're tracking it awfully well. In terms of the synergies, I'd say we're more in the middle innings because we've actioned these synergies. You know, a lot of it was folks that didn't come with the acquisition day one. You know, we've wound down a facility. We have, you know, another, you know, the rent coming off of that facility as we go along. So we have actioned the vast majority of the $10 million, and now even beyond $10 million of synergies, but it takes the 12 months to really see that roll through. Obviously, that's an annualized type number.
But we, we remain on track and are very comfortable with continuing to, to talk about a 30% margin. I'll say this: Mars has been fully integrated, so being able to directly pick out a margin is gonna get difficult for us, but we're tracking it awfully well. In terms of the synergies, I'd say we're more in the middle innings because we've actioned these synergies. You know, a lot of it was folks that didn't come with the acquisition day one. You know, we've wound down a facility. We have, you know, another, you know, the rent coming off of that facility as we go along. So we have actioned the vast majority of the $10 million, and now even beyond $10 million of synergies, but it takes the 12 months to really see that roll through. Obviously, that's an annualized type number.
Yeah, this is James and Talia, thanks for that. Yeah, Joe did mention that and we're we're we're really pleased that uh, that we see in excess of dollars, you know. Just a couple months in, I don't think we're ready to quantify that quite yet, we've got some internal goals that we always had internal goals that exceeded 10 million. But now we feel comfortable saying that we're going to exceed them in terms of innings, I'd say on the margin side, you're in the first couple of innings, you know, we said that's a 12-month Target where, you know, 2 and a half months into the Acquisitions and maybe you're in the second or third inning and it's the seasonally low quarter. So you can only do so much from a margin perspective. Uh, but we, we remain on track and are very comfortable with continuing to, to talk about a 30% margin. I'll say this Mars has been fully integrated. So being able to directly pick out a margin is going to get difficult for us but we're tracking it awfully. Well, in terms of the synergies I'd say we're more in the middle Innings because we've actioned these synergies. You know, a lot of it was folks that didn't come with the acquisition day 1. You know, we've wound down our facility. We have, you know, another FAQ
Yeah, I I think that we've seen the price increase come through now Natalia so that offset the tariffs. I think we're there, that was done prior to last quarter end, so I feel comfortable with that part. Uh, the biggest change this quarter was mixed, you know, when the energy markets or some of our more attractive products and they were down, you you obviously see less drilling activity and some of those things. So as the energy markets are softer and our product mix shifts away from that, um, then you're going to see potentially lower margins, I'll reiterate though that, you know, we mentioned in my remarks that the Acquisitions are going to be favorable to us as we kind of get through a year of having those. We've got Synergy and margin goals with the Acquisitions while small, they're going to be important to us. They also to continue to diversify our markets more in the food, and beverage market, for example, which is attractive or in the horizontal drilling Market infrastructure continues to be attractive. So we feel good about their contributions and then we mentioned, we took the opportunity and we really give Mark a lot of credit for the proactivity here. We took some restructuring
James Perry: So, you know, I think we're in the middle innings in terms of actioning, but you're still similarly in the first couple innings in terms of a pro rata and what we're seeing so far, given that's a 12-month goal.
So, you know, I think we're in the middle innings in terms of actioning, but you're still similarly in the first couple innings in terms of a pro rata and what we're seeing so far, given that's a 12-month goal.
You know, the rent coming off of that facility as we go along. So we have actioned, the vast majority of the 10 million and now even Beyond 10 million of synergies, but it takes the 12 months to really see that roll through. Obviously that's an annualized type number. So, you know, I think we're in the middle Innings of actioning, but you're still, similarly, in the first couple innings in terms of a pro rat. And what we're seeing,
Natalia Bak: Okay, that's helpful. And then just one last quick question. Just switching over to SRS, just to give you that margin contract in SRS, and I believe last quarter you mentioned that you implemented a price increase. So, how much of the margin pressure is due to timing lag in pricing versus structurally higher material costs? And when do you expect pricing to fully offset the material inflation in the segment?
Natalia Bak: Okay, that's helpful. And then just one last quick question. Just switching over to SRS, just to give you that margin contract in SRS, and I believe last quarter you mentioned that you implemented a price increase. So, how much of the margin pressure is due to timing lag in pricing versus structurally higher material costs? And when do you expect pricing to fully offset the material inflation in the segment?
So far, given that the 12-month goal,
James Perry: Yeah, I think that we've seen the price increase come through now, Natalia, so that offsets the tariffs. I think we're there. That was done prior to last quarter end, so I feel comfortable with that part. The biggest change this quarter was mix. You know, when the energy markets are some of our more attractive products and they were down, you obviously see less drilling activity and some of those things. So as the energy markets are softer and our product mix shifts away from that, then you're gonna see potentially lower margins. I'll reiterate, though, that, you know, we mentioned in my remarks that the acquisitions are gonna be favorable to us as we kind of get through a year of having those. We've got synergy and margin goals with the acquisitions. While small, they're gonna be important to us.
James Perry: Yeah, I think that we've seen the price increase come through now, Natalia, so that offsets the tariffs. I think we're there. That was done prior to last quarter end, so I feel comfortable with that part. The biggest change this quarter was mix. You know, when the energy markets are some of our more attractive products and they were down, you obviously see less drilling activity and some of those things. So as the energy markets are softer and our product mix shifts away from that, then you're gonna see potentially lower margins. I'll reiterate, though, that, you know, we mentioned in my remarks that the acquisitions are gonna be favorable to us as we kind of get through a year of having those. We've got synergy and margin goals with the acquisitions. While small, they're gonna be important to us.
Right, that's helpful. And then just one last quick question, just switching over to SRS. Just to give margin contracted and SRS, and I believe last quarter you mentioned that you implemented a price increase. So how much of the margin pressure is due to timing lag in pricing versus structurally higher material costs? And when do you expect pricing to fully offset the material inflation in the segments?
Thank you, that's it. On my end.
Thanks Natalia.
Our next question comes from Thomas ano with JP Morgan please proceed with your question.
Good morning, everyone.
Good morning.
James Perry: They also to continue to diversify our end markets, more in the food and beverage market, for example, which is attractive, more in the horizontal drilling market. Infrastructure continues to be attractive, so we feel good about their contributions. Then we mentioned we took the opportunity, and we really give Mark a lot of credit for the proactivity here. We took some restructuring activity earlier this month, both with shutting down the headquarters facility of the acquisitions, which was part of the plan, but we also saw some administrative and other roles that we could reduce and combine and give others more responsibility at our legacy facility here just outside of Dallas. We'll have some charges here in the Q4 that we'll quantify on the earnings call. Those will all then be tailwind for us as we enter the new fiscal year, 1 April.
They also to continue to diversify our end markets, more in the food and beverage market, for example, which is attractive, more in the horizontal drilling market. Infrastructure continues to be attractive, so we feel good about their contributions. Then we mentioned we took the opportunity, and we really give Mark a lot of credit for the proactivity here. We took some restructuring activity earlier this month, both with shutting down the headquarters facility of the acquisitions, which was part of the plan, but we also saw some administrative and other roles that we could reduce and combine and give others more responsibility at our legacy facility here just outside of Dallas. We'll have some charges here in the Q4 that we'll quantify on the earnings call. Those will all then be tailwind for us as we enter the new fiscal year, 1 April.
I think congrats on TR by the way. And my first question is regarding margins. How purchase how, how participant, how, sorry, how persistence do you expect the 1 of cost such as integration inventory, right Downs, recognizing this quarter to be going forward. Like when do you anticipate margin recovery? Once these cost um subside, please
Yeah, I I think that we've seen the price increase come through now Natalia. So that offsets the tariffs. I think we're there that was done prior to last quarter in. So I feel comfortable with that part. Uh, the biggest change this quarter was mixed, you know, when the energy markets or some of our more attractive products and they were down, you you obviously see less drilling activity and some of those things. So as the energy markets are softer and our product mix shifts away from that, um, then you're going to see potentially lower margins, I'll reiterate though that, you know, we mentioned in my remarks that the Acquisitions are going to be favorable to us as we kind of get through a year of having those. We've got Synergy and margin goals with the Acquisitions while small, they're going to be important to us. They also to continue to diversify our markets more in the food, and beverage market, for example, which is attractive or in the horizontal drilling Market infrastructure continues to be attractive. So we feel good about their contributions and then we mentioned, we took the opportunity and we really give Mark a lot of credit for the proactivity here. We took some restructuring
James Perry: So, you know, when we look at a margin in the mid-teens%, the last couple of quarters, with a goal of 20% sustainable, Mark, and working with the team, looked at that and said, "We've got to get to the 20%," and taking these acquisitions into effect with these restructuring activities, gives us better sight to that goal.
So, you know, when we look at a margin in the mid-teens%, the last couple of quarters, with a goal of 20% sustainable, Mark, and working with the team, looked at that and said, "We've got to get to the 20%," and taking these acquisitions into effect with these restructuring activities, gives us better sight to that goal.
Yeah, Tomah. This is James. Thanks. And I really appreciate you. You mentioned the TR, we know how important it is to you and it's the highest important to us. So seeing that come down this year, was really an exciting achievement to be able to report. Um, in terms of margins on contractor Solutions, we'll continue to have some integration expenses. Transaction expenses will be be behind us, those were kind of, you know, because of the Acquisitions of Mars Hydrox and pro action during the quarter. So, those were specific expenses related to that, not only the, the acquisition expenses themselves, the proformas that we put out a couple of weeks ago, um, we're at the corporate level. So, you know, we have those costs. I think those are for the most part behind us. We'll continue to have some integration expenses that Erp integration just went live, 2 and a half weeks ago at Mars. So we'll still have some integration expenses.
Jon Tanwanteng: That's helpful. Thank you. That's it on my end.
Natalia Bak: That's helpful. Thank you. That's it on my end.
Um, activity earlier this month, both was shutting down the headquarters facility at one of the acquisitions, which was part of the plan, but we also saw some administrative and other, uh, roles that we could reduce and combine and give others more responsibility at our legacy facility here just outside of Dallas. We'll have some charges here in the fourth quarter that we'll quantify on the earnings call. Those will all then be tailwind for us as we enter the new fiscal year April 1st. So, you know, when we look at a margin in the mid-teens the last couple quarters, with the goal of 20% sustainable margin and working with the team, looked at that and said, we've got to get to the 20%. And taking these acquisitions into effect with these restructuring activities gives us better sight to that goal.
James Perry: Thanks, Natalia.
James Perry: Thanks, Natalia.
Thank you, that's it. On my end.
Thanks Natalia.
Operator: Our next question comes from Tomohiko Sano with J.P. Morgan. Please proceed with your question.
Operator: Our next question comes from Tomohiko Sano with J.P. Morgan. Please proceed with your question.
We will quantify and adjust that out, but I think as we get through this quarter, most of that should be behind us. We still have to do the Erp implementation for Aspen. However, that'll be coming as we go throughout the year. So we'll have some integration expenses but we'll be sure to identify that for you so that's why we continue to point to an adjusted, Eva margin as being the best comparative tool, and we feel good about using that. Um,
Tomohiko Sano: Good morning, everyone.
Tomohiko Sano: Good morning, everyone.
Our next question, comes from Tom osano with JP Morgan please proceed with your question.
Was there. Another part to the question? Sorry. If I missed that.
James Perry: Good morning, Tomo.
James Perry: Good morning, Tomo.
Jon Tanwanteng: Good morning, Tomo.
Jon Tanwanteng: Good morning, Tomo.
Good morning, everyone.
Tomohiko Sano: Hi, and congrats on TRIR, by the way. My first question is regarding margins. How persistent do you expect the one-off costs, such as integration, inventory write-downs, recognized in this quarter to be going forward? Like, when do you anticipate margin recovery once these costs subside, please?
Tomohiko Sano: Hi, and congrats on TRIR, by the way. My first question is regarding margins. How persistent do you expect the one-off costs, such as integration, inventory write-downs, recognized in this quarter to be going forward? Like, when do you anticipate margin recovery once these costs subside, please?
Good morning.
Oh, the, the, the other thing you mentioned, I apologize. The inventory right off that we had that was 1 time in nature. That was related to a specific distribution relationship. That terminated we've since replaced that product and our product line. The customers have received that very well in the last few weeks and we since we were able to start marketing that, but that specific call out was 1 time in nature.
James Perry: Yeah, Tomo, this is James. Thanks, and I really appreciate you mentioning the TRIR. We know how important it is to you, and it's of highest important to us. So seeing that come down this year was really an exciting achievement to be able to report. In terms of margins on Contractor Solutions, we'll continue to have some integration expenses. Transaction expenses will be behind us. Those were kind of, you know, because of the acquisitions of MARS, Hydrotex, some ProAction during the quarter. So those were specific expenses related to that. Not only the acquisition expenses themselves, the pro formas that we put out a couple of weeks ago were at the corporate level. So, you know, we had those costs. I think those are, for the most part, behind us. We'll continue to have some integration expenses.
James Perry: Yeah, Tomo, this is James. Thanks, and I really appreciate you mentioning the TRIR. We know how important it is to you, and it's of highest important to us. So seeing that come down this year was really an exciting achievement to be able to report. In terms of margins on Contractor Solutions, we'll continue to have some integration expenses. Transaction expenses will be behind us. Those were kind of, you know, because of the acquisitions of MARS, Hydrotex, some ProAction during the quarter. So those were specific expenses related to that. Not only the acquisition expenses themselves, the pro formas that we put out a couple of weeks ago were at the corporate level. So, you know, we had those costs. I think those are, for the most part, behind us. We'll continue to have some integration expenses.
All right, and congrats on. Try by the way and my first question is regarding margins. How persistent? How how, how participant, uh, how sorry, how persistence do you expect? The 1 of costs such as integration inventory, right Downs, recognized in this quarter to be going forward. Like when do you anticipate margin of recovery? Once these cost um subside. Please
Thank you, James and my, uh, follow-up is EVS business. Uh, we didn't touch uh, that much in a Q&A session. So could you update the color of, um, The Market Outlook as well as your growth strategies margin Improvement initiatives for EVS, uh, business please, cuz you got the 1 billion MMA on, basically CS business SRS business but uh, not for EBS business. So could you talk about organic and organic strategies and margins for this business? Please.
James Perry: The ERP integration just went live two and a half weeks ago at MARS, so we'll still have some integration expenses. We will quantify and adjust that out, but I think as we get through this quarter, most of that should be behind us. We still have to do the ERP implementation for Aspen, however, that'll be coming as we go throughout the year. So we'll have some integration expenses, but we'll be sure to identify that for you. So that's why we continue to point to an adjusted EBITDA margin as being the best comparative tool, and we feel good about using that. Was there another part to the question? Sorry if I missed that. Oh, the other thing you mentioned, I apologize. The inventory write-off that we had, that was one-time in nature. That was related to a specific distribution relationship that terminated.
The ERP integration just went live two and a half weeks ago at MARS, so we'll still have some integration expenses. We will quantify and adjust that out, but I think as we get through this quarter, most of that should be behind us. We still have to do the ERP implementation for Aspen, however, that'll be coming as we go throughout the year. So we'll have some integration expenses, but we'll be sure to identify that for you. So that's why we continue to point to an adjusted EBITDA margin as being the best comparative tool, and we feel good about using that. Was there another part to the question? Sorry if I missed that. Oh, the other thing you mentioned, I apologize. The inventory write-off that we had, that was one-time in nature. That was related to a specific distribution relationship that terminated.
So, you know, we had those calls. I think those are for the most part behind us. We'll continue to have some integration expenses that Erp integration just went live, 2 and a half weeks ago at Mars. So we'll still have some integration expenses. We will quantify and adjust that out, but I think as we get through this quarter, most of that should be behind us. We still have to do the Erp implementation for Aspen. However, that'll be coming as we go throughout the year. So we'll have some integration expenses but we'll be sure to identify that for you so that's why we continue to point to an adjusted, Eva margin as being the best comparative tool, and we feel good about using that. Um,
Was there. Another part to the question? Sorry. If I missed that.
James Perry: We've since replaced that product in our product line. The customers have received that very well in the last few weeks and weeks since we were able to start marketing that, but that specific call-out was one time in nature.
We've since replaced that product in our product line. The customers have received that very well in the last few weeks and weeks since we were able to start marketing that, but that specific call-out was one time in nature.
Sure. To this is Joe, I I would say. EBS has always been our most cyclical business and the commercial construction Market continues to be really uh, pretty tough out there. We've been very pleased with the performance of our team and bucking that Trend and showing some growth. Uh uh various quarters and uh continuing to serve our customers really, really well, I would say that uh the opportunity for organic growth is still out there. 1 of the great things about this business is its small and you win a project or 2 and it really makes a difference. And we are um very pleased with the reception in the marketplace of some of our new product development work is especially in uh, any EBS where we have brought some new products to Market that are being, uh, specked into projects. And we would say that that is a really good opportunity for us to see organic growth. Um, but the Market's tough.
Tomohiko Sano: Thank you, James. And my follow-up is EBS business. We didn't touch that much in the Q&A session, so could you update the color of the market outlook as well as your growth strategies, margin improvement initiatives for EBS business, please? Because you got the $1 billion M&A on basically CS business, SRS business, but not for EBS business. So could you talk about organic and inorganic strategies and margins for this business, please?
Tomohiko Sano: Thank you, James. And my follow-up is EBS business. We didn't touch that much in the Q&A session, so could you update the color of the market outlook as well as your growth strategies, margin improvement initiatives for EBS business, please? Because you got the $1 billion M&A on basically CS business, SRS business, but not for EBS business. So could you talk about organic and inorganic strategies and margins for this business, please?
Oh, the, the, the other thing you mentioned, I apologize. The inventory right off that we had that was 1 time in nature. That was related to a specific distribution relationship. That terminated we've since replaced that product and our product line. The customers have received that very well in the last few weeks and we since we were able to start marketing that, but that specific call out was 1 time in nature.
Uh, we continue to point to the Toronto Market, that really blew up over the last couple of years. Uh, added a, a significant chunk to our backlog. That is now being Reed. It's not being replaced in the backlog. Uh, the new, um, starts for high-rise residential in Canada has changed dramatically, but we're not seeing cancellations out of the backlog, we're not losing any business there. And so those projects are revenue and uh, so
James Perry: Sure, Tomo, this is Joe. I would say EBS has always been our most cyclical business, and the commercial construction market continues to be really, pretty tough out there. We've been very pleased with the performance of our team in bucking that trend and showing some growth, various quarters and, continuing to serve our customers really, really well. I would say that, the opportunity for organic growth is still out there. One of the great things about this business is it's small, and you win a project or two, and it really makes a difference.
Joseph Armes: Sure, Tomo, this is Joe. I would say EBS has always been our most cyclical business, and the commercial construction market continues to be really, pretty tough out there. We've been very pleased with the performance of our team in bucking that trend and showing some growth, various quarters and, continuing to serve our customers really, really well. I would say that, the opportunity for organic growth is still out there. One of the great things about this business is it's small, and you win a project or two, and it really makes a difference.
Thank you, James and my uh, follow-up is EVS business. Uh, we didn't touch uh, that much in a Q&A session. So could you update the color of? Um, The Market Outlook as well as your growth strategies margin Improvement initiatives for EVS uh business please, cuz you got the 1 billion and 1 day on basically CS business SRS but uh, not for EBS business. So could you talk about organic and organic strategies and margins for this business? Please.
Uh, you know, we're we're benefiting from that as well. So new product developments probably, uh, our best, uh, opportunity for um, uh, organic growth in this tough Market. But I think 1 of the things that we're we see with EBS, is we are really well positioned for when the market does come back, we are serving multiple.
Market. And so, uh, we think there is organic growth opportunity there for us.
James Perry: We are very pleased with the reception in the marketplace of some of our new product development work, especially in EBS, where we have brought some new products to market that are being specced into projects, and we would say that that is a really good opportunity for us to see organic growth. But the market's tough. We continue to point to the Toronto market that really blew up over the last couple of years, added a significant chunk to our backlog. That is now being revenued. It's not being replaced in the backlog. The new starts for high-rise residential in Canada has changed dramatically, but we're not seeing cancellations out of the backlog.
We are very pleased with the reception in the marketplace of some of our new product development work, especially in EBS, where we have brought some new products to market that are being specced into projects, and we would say that that is a really good opportunity for us to see organic growth. But the market's tough. We continue to point to the Toronto market that really blew up over the last couple of years, added a significant chunk to our backlog. That is now being revenued. It's not being replaced in the backlog. The new starts for high-rise residential in Canada has changed dramatically, but we're not seeing cancellations out of the backlog.
Back. I think you'd really see a nice a nice uptick there.
Thank you, Joe. That's all from me.
Thank you, Tom.
Our next question comes from John Tanner 1, with CJs Securities, please proceed with your question.
Sure. Tommo this is Joe I I would say. EBS has always been our most cyclical business and the commercial construction Market continues to be really uh, pretty tough out there. We've been very pleased with the performance of our team and bucking that Trend and showing some growth. Uh uh various quarters and uh continuing to serve our customers really, really well, I would say that uh the opportunity for organic growth is still out there. 1 of the great things about this business is its small and you win a project or 2 and it really makes a difference. And we are um very pleased with the reception in the marketplace of some of our new product development work, especially in uh any EBS where we have brought some new products to Market that are being uh inspected into projects and we would say that that is a really good opportunity for us to see organic growth. Um but the Market's tough.
All right, thanks for taking the follow-up. Um I was wondering if you could just give your high-level thoughts on what what you think, housing demand and Home Improvement demand looks like heading into, you know, calendar 26. Um, and beyond that, if, if there's any specific puts and takes that we should be applying on top of that, like, lapping the refrigerant change or, or, or, or others, like that,
James Perry: We're not losing any business there, and so those projects are revenuing, and so you know, we're benefiting from that as well. So new product development's probably our best opportunity for organic growth in this tough market. But I think one of the things that we see with EBS is we are really well positioned for when the market does come back. We are serving multiple property types. We have focused highly on institutional hospitals, things like that, that are high-end and kind of set the standard for other types of construction within that market. And so we think there is organic growth opportunity there for us. If the market would come back, I think you'd really see a nice uptick there.
We're not losing any business there, and so those projects are revenuing, and so you know, we're benefiting from that as well. So new product development's probably our best opportunity for organic growth in this tough market. But I think one of the things that we see with EBS is we are really well positioned for when the market does come back. We are serving multiple property types. We have focused highly on institutional hospitals, things like that, that are high-end and kind of set the standard for other types of construction within that market. And so we think there is organic growth opportunity there for us. If the market would come back, I think you'd really see a nice uptick there.
We continue to point to the Toronto market that really blew up over the last couple of years. Uh, added a significant chunk to our backlog. That is now being revenue. It's not being replaced in the backlog. Uh, the new, um, starts for high-rise residential in Canada have changed dramatically, but we're not seeing cancellations out of the backlog, we're not losing any business there, and so those projects are revenue. And, um, so—
Uh, you know, we're we're benefiting from that as well. So new product developments probably, uh, our best, uh, opportunity for um, uh, organic growth in this tough Market. But I think 1 of the things that we're we see with EBS, is we are really well positioned for when the market does come back, we are serving multiple.
Yeah, John it's James. You know we we're all hopeful of course that housing activity, picks up, you know, new housing, activity continues to stay, pretty soft. It looks like you. Look at permit numbers, it stayed soft um, existing home sales. We've seen some, some green shoots there. It looks like, you know, mortgage rates, have dipped now and then and you've seen the pick up on that. And as we talked about on the last quarterly call, you know, a good number of existing home sales come with replacement of units. So that would be a good thing. Um you know, I think we'll see in the first couple of months here. Um, if mortgage rates start to move, what consumer confidence does in terms of mortgage rates. And there's a lot of pent up inventory, it sure seems. So that people willing to give up the lower mortgage rates to move has been challenging, you know, we would say that obviously the order
Property types. Uh, we have focused highly on institutional hospitals, things like that, uh, that are high-end and, uh, kind of set the, the standard for other types of construction, uh, within that market. And so, uh, we think there is organic growth opportunity there for us. Um, if the market would come back, I think you'd really see. Uh, a nice, uh, a nice uptick there.
Tomohiko Sano: Thank you, Joe. That's all from me.
Tomohiko Sano: Thank you, Joe. That's all from me.
James Perry: Thank you, Tomo.
Joseph Armes: Thank you, Tomo.
Thank you, Joe. That's all from me.
Thank you, tommo.
Operator: Our next question comes from Jonathan Tanwanteng with CJS Securities. Please proceed with your question.
Operator: Our next question comes from Jonathan Tanwanteng with CJS Securities. Please proceed with your question.
Jon Tanwanteng: Hi, thanks for taking the follow-up. I was wondering if you could just give your high-level thoughts on what you think housing demand and home improvement demand looks like heading into, you know, calendar 2026, and beyond that, if there's any specific puts and takes that we should be applying on top of that, like lapping the refrigerant change or others like that?
Jon Tanwanteng: Hi, thanks for taking the follow-up. I was wondering if you could just give your high-level thoughts on what you think housing demand and home improvement demand looks like heading into, you know, calendar 2026, and beyond that, if there's any specific puts and takes that we should be applying on top of that, like lapping the refrigerant change or others like that?
Our next question comes from John Tan with CJS Securities. Please proceed with your question.
James Perry: ... Yeah, John, it's James. You know, we're all hopeful, of course, that housing activity picks up. You know, new housing activity continues to stay pretty soft, it looks like. You look at permit numbers; it's stayed soft. Existing home sales, we've seen some green shoots there, it looks like. You know, mortgage rates have dipped now and then, and you've seen the pickup on that. And as we talked about on the last quarterly call, you know, a good number of existing home sales come with replacement of units, so that would be a good thing.
James Perry: ... Yeah, John, it's James. You know, we're all hopeful, of course, that housing activity picks up. You know, new housing activity continues to stay pretty soft, it looks like. You look at permit numbers; it's stayed soft. Existing home sales, we've seen some green shoots there, it looks like. You know, mortgage rates have dipped now and then, and you've seen the pickup on that. And as we talked about on the last quarterly call, you know, a good number of existing home sales come with replacement of units, so that would be a good thing.
All right, thanks for taking the follow-up. Um, I was wondering if you could just give your high-level thoughts on what what you think, housing demand and Home Improvement demand looks like heading into, you know, a calendar 26. Um, and beyond that if, if there's any specific puts and takes that we should be applying on top of that, like, lapping the refrigerant change or, or, or others like that,
Rates we've seen this quarter you know, so far could could could give us a little bit of positive signs. There is probably a little bit early. Um, you know, another thing I would mention is, you know, someone else mentioned on a call earlier this week in the industry that, you know, there's been a lot of repair business last year. And we think that continues this year, we're not sure when that shifts back obviously. Um, and obviously now with the diversification of Mars and Aspen, we've got good exposure and much better balance between repair and replace, but eventually, those repair jobs turn into a replacement, you know, they may, they may buy you a couple of years or a few years, but eventually those units do need to be replaced. But there's no doubt that housing activity is key. And I think you've hit right on it. And when Charles asked earlier about organic growth rates, you know, if you can tell us what housing is going to do, we'll have a much better sense of that. And as our teams right now are going through the budget process, you know, our fiscal year being April 1st. We're going through the intense budget process right now. Obviously, housing activities will be key to that. So, we're watching the same data. You are, we watch the weekly permits, we watch the weekly inventory, numbers, the weekly mortgage.
Rates and that informs us on what we think we could expect and and we hope to see some continued optimism in the next couple months.
James Perry: You know, I think we'll see in the first couple of months here, if mortgage rates start to move, what consumer confidence does in terms of mortgage rates, and there's a lot of pent-up inventory, it sure seems, so people willing to give up the lower mortgage rates to move has been challenging. You know, we would say that, obviously, the order rates we've seen this quarter, you know, so far, could give us a little bit of positive signs there. It's probably a little bit early. You know, another thing I would mention is, you know, someone else mentioned on a call earlier this week in the industry that, you know, there's been a lot of repair business last year, and we think that continues this year. We're not sure when that shifts back, obviously.
Got it. Thank you and then 2 2. Quick timing questions you mentioned. Higher. Margin backlog flowing through an EBS. What did you expect that to hit number 1? And then number 2 you mentioned. I'm trying to achieve the 20% margin, consistently in. SRS. What what's the timeline or or your expected schedule to to arrive there?
You know, I think we'll see in the first couple of months here, if mortgage rates start to move, what consumer confidence does in terms of mortgage rates, and there's a lot of pent-up inventory, it sure seems, so people willing to give up the lower mortgage rates to move has been challenging. You know, we would say that, obviously, the order rates we've seen this quarter, you know, so far, could give us a little bit of positive signs there. It's probably a little bit early. You know, another thing I would mention is, you know, someone else mentioned on a call earlier this week in the industry that, you know, there's been a lot of repair business last year, and we think that continues this year. We're not sure when that shifts back, obviously.
Confidence does in terms of mortgage rates and there's a lot of pent up inventory. It sure seems that people willing to give up the lower mortgage rates to move has been challenging, you know, we would say that obviously
James Perry: Obviously, now with the diversification of MARS and Aspen, we've got good exposure and much better balance between repair and replace. But eventually, those repair jobs turn into a replacement. You know, they may buy you a couple of years or a few years, but eventually, those units do need to be replaced. But there's no doubt that housing activity is key, and I think you've hit right on it. And when Charles asked earlier about organic growth rates, you know, if you can tell us what housing is gonna do, we'll have a much better sense of that. And as our teams right now are going through the budget process, you know, our fiscal year being April first, we're going through the intense budget process right now. Obviously, housing activity is a big key to that. So we're watching the same data you are.
Obviously, now with the diversification of MARS and Aspen, we've got good exposure and much better balance between repair and replace. But eventually, those repair jobs turn into a replacement. You know, they may buy you a couple of years or a few years, but eventually, those units do need to be replaced. But there's no doubt that housing activity is key, and I think you've hit right on it. And when Charles asked earlier about organic growth rates, you know, if you can tell us what housing is gonna do, we'll have a much better sense of that. And as our teams right now are going through the budget process, you know, our fiscal year being April first, we're going through the intense budget process right now. Obviously, housing activity is a big key to that. So we're watching the same data you are.
Yeah, on EBS. You know the the better backlog is coming over the last couple quarters and those usually have anywhere from 6 to 18 months, you know, turn around. So I think we'll start seeing that. We still have some of the lower margin, you know, uh, projects in the backlog, so that offsets that. So, you know, John I think we'd like to tell you that, you know, as we exit the fiscal year next year, you're really getting a lot closer to that goal that we've put out there. But again, we're going through the budget as we speak. So if, if you can, let me kind of put a pin in that till May, we'll give you a little better sense of expectation as we go through the, the budgeting process I just mentioned in terms of SRS I kind of give you the same answer but you know, they're in that 167% range, a little more consistently recently and with the Acquisitions coming in and with the restructuring, uh, that we've taken once we adjust that out here in the fourth quarter, I think you're closer to seeing that 20% sustainably in the next few quarters.
Great. And then final 1 from me, just a little more. Um, detail on the 2 smaller talk ends, you did. Um, any mention of on revenue and kind of what the margin was there, as well as the growth potential.
James Perry: We watch the weekly permits, we watch the weekly inventory numbers, the weekly mortgage rates, and that informs us on what we think we could expect, and we hope to see some continued optimism in the next couple of months.
We watch the weekly permits, we watch the weekly inventory numbers, the weekly mortgage rates, and that informs us on what we think we could expect, and we hope to see some continued optimism in the next couple of months.
We've seen this quarter, you know, so far could could could give us a little bit of positive signs. There is probably a little bit early. Um, you know, another thing I would mention is, you know, someone else mentioned on a call earlier this week in the industry that, you know, there's been a lot of repair business last year. And we think that continues this year, we're not sure when that shifts back obviously. Um, and obviously now with the diversification of Mars and Aspen, we've got good exposure, much better balance between repair and replace, but eventually those repair jobs turn into a replacement, you know? They, they may buy you a couple of years or a few years, but eventually those units do need to be replaced. But there's no doubt that the housing activity is key. And I think you've hit right on it, and when Charles asked earlier about organic growth rates, you know, if you can tell us what housing is going to do, we'll have a much better sense of that. And as our teams right now are going through the budget process, you know, our fiscal year being April 1st. We're going through the intense budget process right now. Obviously, housing activities will be key to that. So, we're watching the same data. You are. We watched the weekly permits, we watched the weekly inventory numbers, the weekly mortgage rates and
Jon Tanwanteng: Got it. Thank you. And then two quick timing questions. You mentioned higher margin backlog flowing through in EPS. When do you expect that to hit? Number one, and then number two, you mentioned trying to achieve the 20% margin consistently in SRS. What's the timeline or your expected schedule to arrive there?
Jon Tanwanteng: Got it. Thank you. And then two quick timing questions. You mentioned higher margin backlog flowing through in EPS. When do you expect that to hit? Number one, and then number two, you mentioned trying to achieve the 20% margin consistently in SRS. What's the timeline or your expected schedule to arrive there?
That informs us of what we think we could expect, and we hope to see some continued optimism in the next couple of months.
Yeah, John I would say both should be a creative to the margin profile of that segment. It's 1 of the reasons we did it. It gave us the benefit of both diversifying in markets and being your creative to our margin profile. So that's good. Um growth, we expect to be able again to uh, take uh, their momentum and also add, you know, our our sales
James Perry: Yeah, on EPS, you know, the better backlog has come in over the last couple of quarters, and those usually have anywhere from 16 to 18 months, you know, turnaround. So I think we'll start seeing that. We still have some of the lower margin, you know, projects in the backlog, so that offsets that. So, you know, John, I think we'd like to tell you that, you know, as we exit the fiscal year next year, you're really getting a lot closer to that goal that we've put out there. But again, we're going through the budget as we speak. So if you can let me kind of put a pin in that till May, we'll give you a little better sense of expectations as we go through the budgeting process I just mentioned.
James Perry: Yeah, on EPS, you know, the better backlog has come in over the last couple of quarters, and those usually have anywhere from 16 to 18 months, you know, turnaround. So I think we'll start seeing that. We still have some of the lower margin, you know, projects in the backlog, so that offsets that. So, you know, John, I think we'd like to tell you that, you know, as we exit the fiscal year next year, you're really getting a lot closer to that goal that we've put out there. But again, we're going through the budget as we speak. So if you can let me kind of put a pin in that till May, we'll give you a little better sense of expectations as we go through the budgeting process I just mentioned.
Got it. Thank you and then 2 2. Quick timing questions you mentioned. Higher. Margin backlog flowing through an EBS. What did you expect that to hit number 1? And then number 2, you mentioned trying to achieve the 20% margin. Consistently in. SRS. What what's the timeline or or your expected schedules it to arrive there?
James Perry: In terms of SRS, I'd kind of give you the same answer, but, you know, they're, they're in that 16 to 17% range a little more consistently, recently. And with the acquisitions coming in and with the restructuring, that we've taken, once we adjust that out here in the Q4, I think you're closer to seeing that 20% sustainably in the next few quarters.
In terms of SRS, I'd kind of give you the same answer, but, you know, they're, they're in that 16 to 17% range a little more consistently, recently. And with the acquisitions coming in and with the restructuring, that we've taken, once we adjust that out here in the Q4, I think you're closer to seeing that 20% sustainably in the next few quarters.
Jon Tanwanteng: Great. And then final one from me. Just a little more detail on the two smaller tuck-ins you did. Any mention of on revenue and kind of what the margin was there, as well as the growth potential?
Jon Tanwanteng: Great. And then final one from me. Just a little more detail on the two smaller tuck-ins you did. Any mention of on revenue and kind of what the margin was there, as well as the growth potential?
Yeah, on EBS. You know the the better backlog is coming over the last couple of quarters and those usually have anywhere from 6 to 8 to 18 months, you know, turn around. So I think we'll start seeing that. We still have some of the lower margin, you know, uh, projects in the backlog, so that offsets that. So, you know, John I think we'd like to tell you that, you know, as we exit the fiscal year next year, you're really getting a lot closer to that goal that we've put out there. But again, we're going through the budget as we speak. So if, if you can, let me kind of put a pin in that till May, we'll give you a little better sense of expectations as we go through the, the budgeting process I just mentioned in terms of SRS, I'd kind of give you the same answer but you know, they're in that 167% range, a little more consistently recently and with the Acquisitions coming in and with the restructuring, uh, that we've taken once we adjust that out here in the fourth quarter, I think you're closer to seeing that 20% sustainably in the next few quarters.
Uh, would be a good, a good rate for that business. And we think we can do that and more, uh, with these Acquisitions, providing some Tailwind. But, um, the margin accretion is also really important to us on that, um, to, uh, to show over the next few quarters and John, in terms of Revenue, you know, pacing. You know, we said we had 2.3 million of contribution in the quarter from those that was just a couple of months worth. It's also, you know, for something like horizontal drilling, especially the bit of the slow season. Um, so I think, you know, that kind of run rate, you know, a million a month or so is what you were seeing. That's a little on the lower end of the seasonality. So, you know, you know that
Great. And then final one for me—just a little more detail on the two Small Talk ends you did. Any mention on revenue and kind of what the margin was there, as well as the growth potential?
James Perry: Yeah, John, I would say both should be accretive to the margin profile of that segment. It's one of the reasons we did it. It gave us the benefit of both diversifying end markets and being accretive to our margin profile, so that's good. Growth, we expect to be able, again, to take their momentum and also add, you know, our, our sales force to that, our distribution channels. They've opened up a couple of new end markets for us. Namely, would be food and beverage, where we've seen really nice growth, already, and then also agriculture, which is something we have not done any of. And so we've-- we're, we've got high hopes for that.
Joseph Armes: Yeah, John, I would say both should be accretive to the margin profile of that segment. It's one of the reasons we did it. It gave us the benefit of both diversifying end markets and being accretive to our margin profile, so that's good. Growth, we expect to be able, again, to take their momentum and also add, you know, our, our sales force to that, our distribution channels. They've opened up a couple of new end markets for us. Namely, would be food and beverage, where we've seen really nice growth, already, and then also agriculture, which is something we have not done any of. And so we've-- we're, we've got high hopes for that.
you see, you know, 15% or so Revenue opportunity, um, um, accretion from that. But, um, we'll give you a little more details as we get through a full quarter of owning these businesses and what that looks like. But the team is really excited, and Mark's already reported some good, um, opportunities in those businesses. Now that we own them in terms of, uh, sales, um, uh, up
Perfect, thank you.
Thanks John. Thanks John.
Okay, we have reached the end of the question and answer session. I'd now like to turn the call back over to Joe arms for closing comments.
Thank you, Rob. And thank you everyone for joining us for this, uh, quarterly uh, report and we appreciate your support and interest and look forward to talking to you again in May.
Thank you.
James Perry: You know, that's a GDP plus business, and so, growth of, you know, mid-single digits organically, would be a good, a good rate for that business. And we think we can do that and more, with these acquisitions, providing some tailwind. But, the margin accretion is also really important to us on that, to, to show over the next few quarters. John, in terms of revenue, you know, pacing, you know, we said we had $2.3 million of contribution in the quarter from those. That was just a couple of months' worth. It's also, you know, for something like horizontal drilling, especially, the bit of the slow season. So I think, you know, that kind of run rate, you know, $1 million a month or so is what you were seeing.
You know, that's a GDP plus business, and so, growth of, you know, mid-single digits organically, would be a good, a good rate for that business. And we think we can do that and more, with these acquisitions, providing some tailwind. But, the margin accretion is also really important to us on that, to, to show over the next few quarters. John, in terms of revenue, you know, pacing, you know, we said we had $2.3 million of contribution in the quarter from those. That was just a couple of months' worth. It's also, you know, for something like horizontal drilling, especially, the bit of the slow season. So I think, you know, that kind of run rate, you know, $1 million a month or so is what you were seeing.
This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.
Yeah, John, I would say both should be a creative to the margin profile of that segment. It's 1 of the reasons we did it. It gave us the benefit of both diversifying in markets and being a creative to our margin profile. So that's good. Um, growth, we expect to be able again to, uh, take, uh, their momentum and also add, you know, our our sales force to that, uh, our distribution channels. Um, they've opened up a couple of new um, uh, in markets for us. Uh, namely would be food and beverage where we've seen really nice growth, um, already and then also agriculture, which is something we have not done any of. Um, and so we've we're we've got high hopes for that. Uh, you know, that's a GDP plus business. Um, and so, uh, growth of, uh, you know, mid single digits organically would be a good, a good rate for that business and we think we can do that and more uh, with these Acquisitions provide.
James Perry: That's a little on the lower end because of seasonality. So, you know, yeah, that... I think you could see, you know, 15-ish% or so revenue opportunity, accretion from that. But, we'll give you a little more detail as we get through a full quarter of owning these businesses and what that looks like. But the team is really excited, and Mark's already reported some good opportunities in those businesses now that we own them in terms of sales.
That's a little on the lower end because of seasonality. So, you know, yeah, that... I think you could see, you know, 15-ish% or so revenue opportunity, accretion from that. But, we'll give you a little more detail as we get through a full quarter of owning these businesses and what that looks like. But the team is really excited, and Mark's already reported some good opportunities in those businesses now that we own them in terms of sales.
Providing some Tailwind. But um, the margin accretion is also really important to us on that, um, to, uh, to show over the next few quarters. Hey, John in terms of Revenue, you know, pacing. You know, we said we had 2.3 million of contribution in the quarter from those that was just a couple of months worth. It's also, you know, for something like horizontal drilling, especially the bit of the slow season. Um, so I think, you know, that kind of run rate, you know, a million a month or so is what you were seeing that's a little on the lower end because the seasonality. So, you know, you know, that I think you could see, you know, 15% or so Revenue opportunity, um, um, accretion from that. But, um, we'll give you a little more details as we get through a full quarter of owning these businesses and what that looks like. But the team is really excited, and Mark's already reported some good, um, opportunities in those businesses. Now that we own them in terms of, uh, sales, um, uh, up
Jon Tanwanteng: Perfect. Thank you.
Jon Tanwanteng: Perfect. Thank you.
James Perry: Thanks, John. Thanks, John.
James Perry: Thanks, John.
Joseph Armes: Thanks, John.
Perfect, thank you.
Thanks John. Thanks John.
Operator: Okay, we have reached the end of the question and answer session. I'd now like to turn the call back over to Joe Armes for closing comments.
Operator: Okay, we have reached the end of the question and answer session. I'd now like to turn the call back over to Joe Armes for closing comments.
James Perry: Thank you, Rob, and thank you, everyone, for joining us for this quarterly report. And we appreciate your support and interest and look forward to talking to you again in May. Thank you.
Joseph Armes: Thank you, Rob, and thank you, everyone, for joining us for this quarterly report. And we appreciate your support and interest and look forward to talking to you again in May. Thank you.
Early uh report and we appreciate your support and interest and look forward to talking to you again in May.
Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Thank you.
This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.
