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CI

CSW INDUSTRIALS, INC. (CSWI)·Q1 2026 Earnings Summary

Executive Summary

  • Record Q1 FY26 revenue of $263.6M (+16.6% YoY), record net income of $40.9M (+6.0% YoY), and record EBITDA of $68.7M (+5.3% YoY). Adjusted EPS rose 2.5% to $2.85, while GAAP diluted EPS decreased 1.9% to $2.43 due to a higher share count post follow-on equity offering .
  • Gross margin contracted 370 bps to 43.8% on acquisition mix, unfavorable quarterly mix/volume leverage, and material cost inflation including tariff impacts; EBITDA margin contracted 280 bps to 26.1% .
  • Operating cash flow was strong at $60.6M and FCF $57.7M; the company paid down $40M of revolver borrowings post-Aspen deal, ending with net leverage of 0.2x under its credit facility .
  • Management reiterated expectations for full-year organic revenue and adjusted EBITDA growth in each segment, consolidated EPS growth, and stronger operating cash flow; estimate comparisons vs S&P Global consensus were unavailable via our system this quarter .

What Went Well and What Went Wrong

  • What Went Well
    • Record revenue, net income, EBITDA, and adjusted EPS; CEO: “I am very pleased to announce record revenue, net income, EBITDA, and adjusted EPS for the fiscal first quarter,” highlighting accretive contributions from Aspen, PSP Products, and PF WaterWorks .
    • Strong cash generation and balance sheet discipline: CFO at Q4 reiterated plan to repay revolver by year-end FY26 absent further M&A; in Q1 FY26, CSW generated $60.6M CFO and reduced revolver by $40M after funding Aspen .
    • Contractor Solutions scale-up: segment revenue +22.6% YoY to $196.7M, driven by acquisitions; segment EBITDA rose 11.6% to $65.0M (33.0% margin) despite margin dilution from acquisition mix .
  • What Went Wrong
    • Margin pressure: consolidated gross margin -370 bps to 43.8% and EBITDA margin -280 bps to 26.1%, driven by acquisition mix, unfavorable sales mix/volume leverage, and inflation including tariff impacts .
    • Organic softness: consolidated organic revenue declined 2.8% (−$6.2M) amid weaker housing/end-market demand and repair vs replacement dynamics in HVAC/R .
    • Segment margin compression beyond Contractor Solutions: SRS operating margin fell to 14.2% (from 19.4%) on commodity inflation, one-time facility consolidation costs, and mix; EBS EBITDA margin fell to 13.9% (from 20.1%) on tariffs, growth investments, and project mix .

Financial Results

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Millions)$193.649 $230.549 $263.646
Diluted EPS (GAAP)$1.60 $2.08 $2.43
Adjusted EPS ($)$1.48 $2.24 $2.85
Gross Margin (%)41.4% 44.2% 43.8%
EBITDA ($USD Millions)$42.027 adj. $59.759 adj. $68.742
EBITDA Margin (%)21.7% adj. 25.9% adj. 26.1%
Cash from Operations ($M)$11.600 $27.293$60.641
Free Cash Flow ($M)$8.452 $22.762$57.737
  • Estimates vs Actuals: S&P Global consensus for Q1 FY26 EPS and revenue was unavailable via our system; thus beat/miss analysis vs consensus cannot be shown this quarter .

Segment breakdown (Q1 FY26):

SegmentRevenue ($M)Operating Income ($M)Operating Margin (%)EBITDA ($M)EBITDA Margin (%)
Contractor Solutions$196.740 $52.759 26.8% $64.996 33.0%
Specialized Reliability Solutions$36.806 $5.241 14.2% $6.503 17.7%
Engineered Building Solutions$31.896 $3.999 12.5% $4.423 13.9%

KPIs and balance sheet:

  • Effective tax rate: 24.3% in Q1 FY26 .
  • Dividend: $0.27 per share (paid Aug 8, 2025; record date Jul 25, 2025) .
  • Net leverage (credit facility basis): 0.2x at quarter-end .
  • Interest expense (net): $1.0M in Q1 FY26 (vs $2.5M prior-year) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
Consolidated EPSFY26Expect EPS growth in FY26 (Q4 call) Reiterated expectation for consolidated EPS growth Maintained
Operating Cash FlowFY26Stronger YoY (Q4 call) Reiterated expectation for stronger YoY OCF Maintained
Contractor Solutions adj. EBITDA marginFY26“Low 30s” for FY26, impacted by acquisitions/tariffs (Q4 call) No update in Q1 materials Maintained
Aspen revenue growthFY26High single to low double-digit growth on $125M TTM; 11 months in FY26 (Q4 call) No update in Q1 materials Maintained
Aspen EBITDA marginFY26~24% for FY26 (Q4 call) No update in Q1 Maintained
Net interest expenseFY26~$5.3M for FY26 (Q4 call) Q1 showed $1.0M net interest expense in quarter; no full-year update Maintained
Effective tax rateFY26~26% (Q4 call) Q1 actual 24.3% (no full-year update) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25, Q4 FY25)Current Period (Q1 FY26)Trend
Tariffs and input inflationFreight/tariffs pressured margins; broad-based pricing actions; China COGS exposure ≤10% in FY26; shifting supply chain (Q4 call) -Gross margin contraction attributed in part to tariffs/material inflation ; EBS margin affected by tariffs; SRS margin hit by commodity inflation Continued headwind; pricing/supply-chain actions ongoing
Supply chain/inventoryBuilt inventory ahead of potential disruptions; seasonality; Aspen weighted to Q1-Q2 (Q4 call) Leverage of volumes/mix affected margins; acquisitions integrated; revolver paydown Normalizing; acquisitions integrated
End-market demandHVAC/R, electrical growth; repair vs replacement dynamics; GRDs tied to new housing (Q3/Q4 calls) Organic volumes down on weak housing; shift to repair vs replacement Softer organic; mix shift persists
Segment outlooksSRS: volume/mix swings; facility consolidation to benefit margins; EBS targeting 20% mid-term (Q4 call) -SRS/EBS margins down on tariffs/commodity costs and investments; EBS revenue +3.2% YoY Near-term pressure, longer-term margin goals intact
M&A strategyActive pipeline; revolver upsized to $700M; Aspen closed May 1 (Q4) - -Acquisitions (Aspen, PSP, PF WaterWorks) drove inorganic growth; deleveraging underway -Accretive M&A continues

Management Commentary

  • CEO Joseph B. Armes (press release): “These results were driven by the outstanding performance of our strategic acquisitions of PSP Products, PF WaterWorks, and, most recently, Aspen Manufacturing...” and “Organic volumes were down... mostly driven by softer demand... weak housing activity... consumers' shift to repair... versus replacement.” .
  • CFO James Perry (prior quarter context): “We anticipate delivering full year growth in revenue and adjusted EBITDA for each segment... We expect Aspen’s EBITDA margin to be approximately 24% for the full fiscal year 2026... Contractor Solutions overall adjusted EBITDA margin for the full fiscal year 2026 to be in the low 30s... we have taken broad-based action on pricing to offset the new tariffs.” -.

Q&A Highlights

  • Tariff/pricing mechanics and COGS exposure (prior quarter, framing Q1 impacts): Management reiterated product-by-product pricing actions, China COGS exposure targeted at ≤10% in FY26 for Contractor Solutions, and continued supply-chain shifts (e.g., Vietnam) -.
  • SRS facility consolidation (Q1 context from call summaries): CFO indicated Texas consolidation yields cost savings and oversight benefits, supporting margin improvement over time .
  • Demand cadence and housing tie-ins (Q1 summaries): Repair vs replacement trend and GRD exposure to new housing drove intra-quarter softness, with some restocking observed in July (call recaps) .

Estimates Context

  • S&P Global (Capital IQ) consensus for Q1 FY26 EPS and revenue was unavailable via our system for CSWI; consequently, we cannot present a beat/miss analysis this quarter. We attempted to retrieve “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q1 FY26, but mapping for CSWI was not available in our S&P Global interface .

Key Takeaways for Investors

  • Inorganic-led top-line strength with near-term margin dilution: acquisitions (Aspen, PSP, PF WaterWorks) scaled revenue and EBITDA but pressured gross margin via mix; pricing and supply-chain shifts aim to offset tariff/material inflation -.
  • Organic softness tied to housing and repair-vs-replacement mix likely persists near-term; watch for summer seasonality effects and GRD restocking cadence (narrative from call recaps) .
  • Cash generation remains a core support: $60.6M CFO and $57.7M FCF in Q1, with continued dividend ($0.27) and rapid deleveraging to 0.2x net leverage post-Aspen .
  • FY26 framework intact: management maintained expectations for segment-level organic revenue and adjusted EBITDA growth, consolidated EPS growth, and stronger OCF; Contractor Solutions margin guide (low 30s) and Aspen margin (~24%) unchanged vs Q4 disclosure -.
  • Segment watch: SRS and EBS margins compressed on tariffs/commodity costs and growth investments; trajectory back toward mid-term targets hinges on cost normalization, mix, and conversion of higher-quality backlogs -.
  • Near-term focus items: tariff pass-through efficacy, Aspen integration synergies and seasonality (Q1-Q2-weighted), organic volume recovery in Contractor Solutions, and any update to FY26 net interest/tax guide as the year progresses - -.

Appendix: Additional Detail

  • Consolidated YoY deltas (Q1 FY26 vs Q1 FY25): Revenue +16.6% to $263.6M; GAAP EPS −1.9% to $2.43; Adjusted EPS +2.5% to $2.85; EBITDA +5.3% to $68.7M .
  • Dividend continuity: “twenty-sixth consecutive regular quarterly cash dividend” of $0.27 per share (paid Aug 8, 2025) .
  • Balance sheet snapshot: Cash $38.0M, long-term debt $95.0M, total assets $1.536B as of Jun 30, 2025 .

All citations: – (Q1 FY26 8-K and exhibit), – (Q4 FY25 8-K/press), – (Q4 FY25 call), – (Q3 FY25 8-K), – (Q3 FY25 press), and external call recaps .