Skip to content
    CSW
    Earnings call· Mar 2026(Q4 FY26)

    CSW INDUSTRIALS Q4 FY26 earnings call CSW

    May 26, 2026 Source

    Executive summary

    CSW Industrials Q4 FY26 — Record Revenue and Adjusted EBITDA Driven by Acquisitions and Organic Growth

    CSW Industrials concluded fiscal year 2026 with robust fourth-quarter results, marked by record revenue and adjusted EBITDA, largely propelled by strategic acquisitions and solid organic growth. The company successfully surpassed $1 billion in annual revenue, demonstrating effective capital allocation through both M&A and significant shareholder returns. Despite facing headwinds from higher interest expenses and acquisition-related margin dilution, CSW maintains a strong financial position and is focused on synergy realization and outperforming its end markets, particularly in the HVAC/R sector.

    Highlights

    5

    • Achieved record fiscal fourth quarter revenue of $309 million, up 34% year-over-year.

    • Delivered record adjusted EBITDA of $83 million, growing 39% from the prior year.

    • Reported record adjusted EPS of $3.14, an increase of 21% year-over-year.

    • Crossed the $1 billion mark in annual revenue for fiscal 2026, achieving a 15% revenue CAGR over 10 years.

    • Returned $146 million in capital to shareholders in FY26, including $128 million in share repurchases and $18 million in dividends.

    Concerns

    5

    • Adjusted EPS growth did not fully keep pace with revenue and EBITDA due to higher net interest expense of $13.4 million.

    • Adjusted gross margin declined 70 basis points to 43.5%, primarily due to acquisition-related dilution, inflation, and tariffs.

    • MARS Parts revenue declined 10.4% in the quarter, impacted by ERP integration delays and product SKU rationalization.

    • Operating cash flow was an outflow of $1.7 million and free cash flow was an outflow of $6.8 million in Q4 FY26.

    • Incurred $15.6 million impairment expense and $2.1 million in expenses related to the strategic exit of the Greco businesses.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year 2027 Interest Expense
    approximately $46 million
    medium materiality
    High
    Full-year 2027 GAAP Tax Rate
    approximately 23%
    low materiality
    High
    Full-year 2027 Adjusted Tax Rate
    approximately 26%
    low materiality
    High
    Full-year 2027 Consolidated Adjusted EPS Growth
    significant growth
    high materiality
    High
    Full-year 2027 Consolidated Revenue Growth
    growth
    high materiality
    High
    Full-year 2027 Consolidated Adjusted EBITDA Growth
    growth
    high materiality
    High
    Full-year 2027 Consolidated Free Cash Flow Generation
    strong generation with significant growth from FY26 level
    high materiality
    High
    Full-year 2027 Specialized Reliability Solutions EBITDA Margin
    higher full year
    medium materiality
    High
    Full-year 2027 Engineered Building Solutions EBITDA Margin (excluding Greco)
    higher full year
    medium materiality
    High
    MARS Parts Run Rate Synergies
    in excess of $12 million
    medium materiality
    High
    MARS Parts Run Rate EBITDA Margin
    greater than a 30%
    medium materiality
    High
    Greco Canada Exit Additional Costs
    $1 million to $2 million
    low materiality
    High
    Contractor Solutions Organic Growth (through cycle)
    mid to high single-digit
    medium materiality
    High
    Contractor Solutions Pricing Run Rate
    mid-single digits
    medium materiality
    Medium

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Consolidated
    Record revenue and adjusted EBITDA for the fiscal fourth quarter. Growth primarily driven by acquisitions and consolidated organic revenue growth concentrated in Contractor Solutions and Specialized Reliability Solutions. Adjusted gross margin decreased 70 bps due to acquisition-related dilution, inflation, and tariffs. Adjusted EBITDA margin increased 90 bps due to acquisitions, strategic pricing, and lower freight costs.
    Organic Revenue Growth: 2.8%Adjusted Gross Profit: $135 millionAdjusted Gross Margin: 43.5%Adjusted EBITDA Margin: 26.8%
    		$309 million34%—$83 million
    Contractor Solutions
    Strong revenue growth driven by acquisitions, with a return to organic growth against a strong comparable quarter. Pricing actions more than offset a slight unit volume decline. Aspen significantly outperformed the market. MARS Parts revenue decline due to ERP integration and SKU rationalization. Adjusted EBITDA margin compression reflects acquisition-related dilution ahead of full synergy realization, partially offset by pricing and improved domestic freight efficiency.
    Percentage of Consolidated Revenue: 76%Acquisition Growth: $67 million (40.3%)Organic Growth: $4.3 million (2.6%)Aspen Revenue Growth: 10.4%Aspen Revenue Growth (since acquisition): 13.5%MARS Parts Revenue Decline: 10.4%Pro Forma Organic Revenue Growth (including MARS and Aspen in prior year): 5.5%Adjusted EBITDA Margin: 31.7%
    		$237 million43%—$75 million
    Specialized Reliability Solutions
    Revenue increase included contributions from recent acquisitions and organic growth, partially offset by continued softness in the general industrial end market. Adjusted EBITDA margin expanded significantly due to higher-margin acquisitions, pricing actions, and a favorable product mix. Targeted restructuring actions initiated in Q4 FY26, with financial benefits taking full effect on April 1. Three separate price increases implemented in Q1 FY27 to offset rising input material costs.
    Acquisition Growth: $5.2 million (13.7%)Organic Growth: $3.3 million (8.8%)Adjusted EBITDA Growth: 73.7%Adjusted EBITDA Margin: 21.8%
    		$46 million22.4%—$10.1 million
    Engineered Building Solutions
    Revenue decreased, but EBITDA increased due to a favorable project mix that more than offset higher material costs. Pricing actions are ongoing, with additional increases planned project-by-project. The segment finalized a plan to sell the Greco U.S. business and exit the Greco Canada business, which are increasingly noncore.
    EBITDA Growth: 17%EBITDA Margin: 17.6%Trailing 8-Quarter Book-to-Bill Ratio: 0.9:1Smoke Guard and Balco Backlog Growth: 13%
    		$27.6 million-4%—$4.9 million
    Engineered Building Solutions (excluding Greco)
    Excluding the Greco businesses, the segment showed strong revenue growth and improved adjusted EBITDA margin, reflecting stronger underlying performance of the remaining business lines. The remaining businesses are growing backlog faster than revenue, generating a strong future revenue stream, and are well above the long-stated goal of 20% EBITDA margin.
    Adjusted EBITDA Margin: 25.8%Trailing 8-Quarter Book-to-Bill Ratio: 1.05:1
    		$21.7 million10.5%—$5.6 million

    Operational metrics

    38
    Annual Revenue
    $1 billion
    FY26

    Company crossed the $1 billion mark in annual revenue during fiscal 2026.

    Revenue Compound Annual Growth Rate
    15%
    10 years

    Achieved over the 10 years since spin-off as an independent public company.

    Capital Allocated to Acquisitions
    over $1.7 billion
    10 years

    Allocated to accretive acquisitions over the last 10 years.

    Capital Returned to Shareholders
    $146 million
    FY26

    Aggregate capital returned to shareholders in fiscal 2026.

    Net Debt-to-EBITDA
    2.55x
    Q4 FY26

    Ended the fiscal year at a net debt-to-EBITDA ratio comfortably inside the target leverage range.

    Net Interest Expense
    $13.4 million
    Q4 FY26

    Higher net interest expense impacted EPS growth, reflecting the shift from a net cash to a net debt position.

    Impairment Expense (net of tax)
    $13.6 million
    Q4 FY26

    Related to impairment of goodwill, intangible assets, and other long-lived assets, connected with the planned strategic exit and disposition of the Greco business line.

    Restructuring and Asset Write-down Expense (net of tax)
    $1.6 million
    Q4 FY26

    Connected with a planned strategic exit and disposition of the Greco business line within Engineered Building Solutions.

    Acquisition-related Transaction and Integration Cost (net of tax)
    $3 million
    Q4 FY26

    Excluded from adjusted EPS.

    Nonrecurring Inventory Write-down (net of tax)
    $900,000
    Q4 FY26

    Excluded from adjusted EPS.

    Other Restructuring Costs (net of tax)
    $400,000
    Q4 FY26

    Excluded from adjusted EPS.

    Amortization of Acquired Intangible Assets (net of tax)
    $12.1 million
    Q4 FY26

    Excluded from adjusted EPS.

    Consolidated Revenue Increase
    $78 millionup 34% YoY
    Q4 FY26

    Consolidated revenue increased compared to the prior year quarter, driven mainly by acquisitions.

    Adjusted Consolidated Gross Profit
    $135 millionup 32%
    Q4 FY26

    Adjusted consolidated gross profit for the fiscal fourth quarter.

    Adjusted Gross Margin
    43.5%down 70 bps
    Q4 FY26

    Primarily due to acquisition-related dilution, inflation, and some material cost and the impact of tariffs.

    Adjusted EBITDA Margin
    26.8%up 90 bps
    Q4 FY26

    Driven by the addition of recent acquisitions, strategic pricing actions and lower freight costs.

    MARS Parts Run Rate Synergies
    in excess of $12 million
    by November anniversary

    Updated expectation for MARS Parts run rate synergies, with confidence based on already actioned synergies and SKU rationalization.

    MARS Parts Run Rate EBITDA Margin
    greater than 30%
    by November anniversary

    Expected to attain by the first anniversary of ownership in November.

    Duckt-Strip Acquisition Multiple
    7x
    trailing 12-month

    Based on trailing 12-month EBITDA multiple paid for Duckt-Strip acquisition.

    Duckt-Strip Trailing EBITDA
    approximately $3 million
    trailing 12-month

    Assumed in the purchase price for Duckt-Strip.

    Duckt-Strip Incremental EBITDA to CSW
    about $2 million
    annual

    Expected incremental EBITDA to CSW, as CSW already participated in a portion of the business prior to acquisition.

    Specialized Reliability Solutions Restructuring Pre-tax One-time Charges
    $0.5 million
    Q4 FY26

    Associated with restructuring activities in the fiscal fourth quarter, with financial benefits fully taking effect on April 1.

    Greco Canada Exit Expenses
    $2.1 million
    Q4 FY26

    Recognized in connection with the planned strategic exit of the Greco Canada business.

    GAAP Effective Tax Rate
    27.1%
    Q4 FY26

    GAAP effective tax rate for the fiscal fourth quarter.

    Adjusted Tax Rate
    22%
    Q4 FY26

    Modestly below normal range due to discrete items that can vary quarter-to-quarter.

    GAAP Effective Tax Rate
    22.5%
    FY26

    GAAP effective tax rate for the full fiscal year.

    Adjusted Tax Rate
    24.7%
    FY26

    Adjusted tax rate for the full fiscal year.

    Amortization of Intangible Assets
    approximately $61 million
    FY27 annualized

    Expected on an annualized basis for fiscal 2027, stepping up meaningfully due to significant acquisitions in fiscal 2026.

    Outstanding Debt
    $871.5 million
    quarter end

    Outstanding across revolver and Term Loan A at quarter end.

    Net Debt for Covenant Calculation
    $843 million
    quarter end

    Resulting in a net debt-to-EBITDA leverage ratio of 2.55x.

    Interest Rate Swap
    3.42%
    3 years

    Executed in Q3 FY26 to fix SOFR at 3.42% for 3 years, remaining well below the current SOFR rate.

    Stock Repurchased
    $35 million
    Q4 FY26

    Repurchased in the open market during the quarter.

    Stock Repurchased
    $128 million
    FY26

    Total repurchased for the full fiscal year.

    Employee Stock Ownership Plan Contribution
    6%
    FY26

    Board of Directors approved a profit-sharing ESOP contribution for fiscal 2026.

    401(k) Profit-Sharing Contribution
    3%
    FY26

    Additional profit-sharing contribution on top of existing 6% match.

    Employee Ownership
    approximately 3%
    current

    CSW Industrials team collectively owns approximately 3% of the company.

    Contractor Solutions Organic Revenue Growth (pro forma)
    5.5%
    Q4 FY26

    Pro forma metric reported following $1 billion of capital deployed towards these acquisitions.

    Aspen Revenue Growth
    13.5%
    since acquisition

    Aspen has grown significantly outperforming the market since its acquisition on May 1 of last year.

    Industry KPIs

    3
    MetricValueDetails
    Price costmid-single digits%
    Order backlog13%%
    Book to bill ratio0.9:1

    Orderbook & backlog

    2
    Engineered Building Solutions Trailing 8-Quarter Book-to-Bill Ratio0.9:1Q4 FY26

    remained steady

    Engineered Building Solutions (excluding Greco) Trailing 8-Quarter Book-to-Bill Ratio1.05:1Q4 FY26

    Remaining businesses within EBS are growing backlog faster than revenue, generating a strong future revenue stream.

    Deals & partnerships

    7
    MARS PartsAcquisition of HVAC/R parts distributor$650 million

    Largest acquisition to date, part of Contractor Solutions segment.

    Aspen ManufacturingAcquisition of HVAC/R coil and air handler manufacturer$313 million

    Part of Contractor Solutions segment. Aspen has grown 13.5% since acquisition.

    Duct-StripAcquisition of differentiated electrical cable for HVAC mini split systems$21 million

    Completed in Q4 FY26, strong strategic fit within Contractor Solutions, adds a differentiated high-value product.

    Hydrotex Holdings and ProAction FluidsAcquisition of specialized lubrication and fluid solutions businesses$26.5 million combined

    Acquired in Specialized Reliability Solutions segment.

    FlairIncremental minority investment in HVAC/R controls technology company$4.8 million

    Flair has developed an innovative suite of HVAC/R control products, including smart grills, registers, diffusers, and ductless thermostat controls.

    Greco U.S. businessPlanned sale of Greco U.S. business

    Classified as held for sale as of March 31, 2026, as it is increasingly noncore to CSW.

    Greco Canada businessStrategic exit of Greco Canada business

    Strategic exit due to changes in the Canadian market, including a recession in multifamily housing and tough input costs, making it noncore.

    Risks & headwinds

    8
    Higher Net Interest Expenseongoing

    $13.4 million in Q4 FY26

    Mitigation: Prudent capital management, debt paydown as capital allocation priority.

    Margin Dilution from Recent Acquisitionsshort-term

    Adjusted gross margin down 70 bps to 43.5%

    Mitigation: Synergy realization, strategic pricing actions, cost discipline.

    Inflation and Material Cost Increasesongoing

    Impacted adjusted gross margin; three price increases in SRS in Q1 FY27

    Mitigation: Pricing actions, freight savings, strategic supply chain changes, cost discipline.

    ERP Integration Delays (MARS Parts)Q4 FY26

    MARS Parts revenue declined 10.4% in Q4 FY26

    Mitigation: Integration completed, fulfillment rates in line with expectations by quarter-end.

    Softness in General Industrial End Marketongoing

    Partially offset SRS organic growth

    Mitigation: Targeted restructuring actions in SRS, focus on higher-margin acquisitions and favorable product mix.

    Canadian Multifamily Housing Market Depressionongoing

    Contributed to strategic exit of Greco Canada business

    Mitigation: Strategic exit of noncore businesses to focus on higher-return opportunities.

    Geopolitical Impacts on Ocean Freight Costssince Q4 FY26

    Ocean freight up 25-30% in recent months

    Mitigation: Strategic supply chain changes, thoughtful pricing adjustments with lag effect.

    Indirect Commodity Price Impacts from Tariffsongoing

    Experienced indirect effects during FY26

    Mitigation: Pricing actions, factor higher costs into bids, applications for tariff refunds.

    What to watch in Q1 FY27

    5

    MARS Parts Run Rate Synergies

    by November anniversary
    Currentin excess of $10 million actioned
    Targetin excess of $12 million

    Why it matters

    Achievement of synergy targets is crucial for improving profitability and validating acquisition rationale.

    We can now update our expectation for MARS Parts run rate synergies to be in excess of $12 million as well as attaining greater than a 30% run rate EBITDA margin by the first anniversary of our ownership in November. Our confidence is based on already actioning in excess of $10 million in synergies so far, in addition to the SKU rationalization process I mentioned earlier.

    Q&A highlights

    5

    Asked about the most significant inflation pressures in COGS, the company's pricing strategy to offset them, and whether the offset is expected at a dollar or margin percentage level, including timing.

    Management noted continued inflation from tariffs and indirect impacts, as well as recent increases in ocean freight and diesel costs. They have implemented multiple price increases in SRS and factor higher costs into EBS bids. In Contractor Solutions, the goal is to protect margin dollars, passing on necessary costs, and aiming to reduce costs over time to restore margin percentage. They noted a several-month lag in COGS flow-through for Contractor Solutions, allowing for thoughtful pricing decisions rather than knee-jerk reactions.

    “We've always said within Contractor Solutions that our goal is to protect the margin dollars. So we really just pass on what we need to I think our customers appreciate that. We've been pretty forthright about that in the market.”

    asked by Jonathan Tanwanteng · answered by James Perry

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Acquisitions and Portfolio Diversification

    CSW Industrials completed five highly synergistic cash flow accretive acquisitions in fiscal 2026, including MARS Parts ($650 million), Aspen Manufacturing ($313 million), and Duckt-Strip ($21 million) in the Contractor Solutions segment, and Hydrotex Holdings and ProAction Fluids ($26.5 million combined) in Specialized Reliability Solutions. These investments, totaling approximately $1 billion, have significantly diversified the company's portfolio and increased exposure to the HVAC repair cycle, providing a more balanced product offering. An incremental minority investment was also made in Flair, an HVAC/R controls technology company.

    02

    Capital Allocation and Balance Sheet Strength

    The company returned $146 million to shareholders in fiscal 2026 through $128 million in open market share repurchases and $18 million in dividends. Acquisitions were financed with a mix of cash on hand and low-cost debt, maintaining a net debt-to-EBITDA ratio of 2.55x, comfortably within the target range of 1x to 3x. This prudent approach ensures a strong and resilient balance sheet, providing flexibility for future growth opportunities and capital allocation priorities, including debt paydown and opportunistic share repurchases.

    03

    End Market Dynamics and Organic Growth

    Positive momentum in Contractor Solutions and Specialized Reliability Solutions continued through Q4 FY26, with order trends picking up in March and April for Contractor Solutions as distribution partners prepared for the peak cooling season. The company noted stabilization in the residential HVAC/R end market. With the addition of MARS Parts and Aspen, CSW has increased its exposure to the HVAC repair cycle, balancing its product offering to perform well as the repair versus replace mix changes during economic cycles. The company expects to outperform flat market conditions in FY27.

    04

    Greco Business Exit and Segment Realignment

    CSW finalized a plan to sell the Greco U.S. business and strategically exit the Greco Canada business, both part of the Engineered Building Solutions (EBS) segment, as they are increasingly noncore. The Greco U.S. business was classified as held for sale as of March 31, 2026. This decision resulted in a $15.6 million impairment expense and $2.1 million in exit-related expenses. Excluding Greco, the EBS segment demonstrated stronger underlying performance with a 10.5% revenue increase and an adjusted EBITDA margin of 25.8%, aligning with the long-stated goal of over 20%.

    05

    Inflation, Tariffs, and Mitigation Strategies

    The company continues to experience inflationary pressures at the COGS line, primarily from tariffs and indirect impacts, as well as increased ocean freight costs due to geopolitical events. While the recent 232 tariff interpretation is expected to be neutral for direct tariffs paid, indirect commodity price impacts are noted. CSW has implemented pricing actions in Specialized Reliability Solutions (three increases in Q1 FY27) and factors higher costs into bids for EBS projects. Contractor Solutions has a normal annual price increase, but no additional mid-year actions have been taken yet due to a several-month lag in cost flow-through.

    AI-generated summary of the company’s earnings call. Not investment advice.