CSW - NYSE

Greetings. Welcome to CSW Industrial Incorporated Fourth Quarter and Full-Year Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Alexa Huerta, Vice President of Investor Relations and Treasurer. Thank you. You may begin.

Thank you, Sherry. Good morning, everyone, and welcome to the CSW Industrial's fiscal 2025 fourth quarter and full-year earnings call. Joining me today on the call is Joseph Armes, Chairman, Chief Executive Officer and President of CSW Industrials; and James Perry, Executive Vice President and Chief Financial Officer. We issued our earnings release, updated investor relations presentation and Form 10-K prior to the market's opening today, all of which are available on the Investors portion of our website at www.cswindustrials.com. 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. 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.

Thank you, Alexa. Good morning, everyone. It is my pleasure to report that once again, our team has delivered record results for revenue, adjusted EBITDA, adjusted earnings per diluted share, and adjusted net income for the fourth quarter of fiscal year 2025. This morning, we reported fiscal fourth quarter revenue of $231 million as well as fiscal fourth quarter adjusted EBITDA of $60 million, adjusted earnings per diluted share of $2.24, and adjusted net income of $38 million. I'm also proud to note that the team delivered record results for the full fiscal year 2025 for revenue, adjusted EBITDA, adjusted earnings per diluted share, adjusted net income and cash flow from operations. We reported full-year revenue of $878 million, adjusted EBITDA of $228 million, including margin expansion of 70 basis points to 25.9%. Adjusted earnings per diluted share of $8.41, adjusted net income of $137 million and cash flow from operations of $168 million. Our resilient business segments have focused on our customers and on operational excellence. And as a result, we have outperformed the market -- the end markets we serve. James will provide further details of the performance in each of the three business segments for the last quarter of fiscal 2025. During the fiscal fourth quarter, we announced a definitive agreement to acquire Aspen manufacturing for $313.5 million and we were pleased to consummate this accretive and synergistic acquisition on May 1, 2025. The Aspen acquisition is the second largest acquisition our company has made and Aspen will expand our HVAC/R product offering with the addition of market leading evaporator coils and air handlers. Before I turn the call over, I'd like to thank our team for delivering solid growth for the fiscal full-year 2025. Our impressive results, strong balance sheet and capital allocation discipline have continued to fuel our success. We will be celebrating our 10-year anniversary as a public company later this year, and in anticipation of this milestone, we announced in late April, that the company will be moving to the New York Stock Exchange on June 9th. We believe this strategic move to the world's largest stock exchange will be beneficial to all shareholders and provide additional liquidity. And our team looks forward to joining the other outstanding industrial companies on the NYSE. I also wanted to share a few longer term metrics that demonstrate the execution and commitment of our dedicated team. Our revenue compound annual growth rate or CAGR since the spin off in October of 2015 is 14.1%. This average annual growth rate for the last 9.5 years has outpaced the markets we serve by a wide margin. Our adjusted EBITDA CAGR over the same period is 16.5%, which denotes that the team has delivered operating leverage on the revenue growth, despite our already having industry leading margins when we went public in 2015. In less than 10 years, we have grown our market cap over 1,000%, and total shareholder return is also over 1,000%. While I am pleased with the results that we have delivered and the value we have created for our shareholders over this past decade, I am equally optimistic as I look forward to what the company can accomplish over the next 10 years. At this time, I'll turn the call over to James for a closer look at our results. And following those comments, I'll return and conclude our prepared remarks.

Thank you, Joe, and good morning, everyone. As Joe mentioned, during fiscal 2025, we delivered record revenue of $878 million, representing growth of 11%. $38 million of the growth was organic with the remaining $48 million of growth coming from the acquisitions of Dust free, PSP products and PF Waterworks, that we completed since February 2024. Operating leverage on this revenue drove 14% growth in adjusted EBITDA, along with 70 basis points of margin expansion and over 20% growth in adjusted earnings per diluted share. Our consolidated revenue during fiscal fourth quarter of 2025 was a record $231 million, a $20 million or 9% increase when compared to the prior year period. $13.5 million of the revenue growth came from the aforementioned acquisitions. The remaining growth was organic, primarily due to higher volumes and pricing actions in Contractor Solutions, offset somewhat by declines in the other two segments. Consolidated gross profit in the fiscal fourth quarter was $102 million, representing 9% growth over the prior year period. Our gross profit margin remained relatively flat at 44.2%, compared to 44.4% in the prior year period. The slight decrease from the prior year was primarily driven by decreased gross profit margins in both Specialized Reliability Solutions and Engineered Building Solutions, mostly offset by growth in Contractor Solutions. Our consolidated adjusted EBITDA during the fiscal fourth quarter increased by $4 million to a fiscal fourth quarter record of $60 million, which was 7% growth when compared to the prior year period. Our adjusted EBITDA margin declined by 60 basis points to 25.9% compared to 26.5% in the prior year quarter, as we had additional expenses related to our recently acquired companies, including investments to support their successful integration as well as inbound increased freight expense. Adjusted net income attributable to CSW in the quarter was a fiscal fourth quarter record of $38 million with a record $2.24 of adjusted earnings per diluted share compared to $32 million or $2.04, respectively in the prior year period, representing 19% growth in adjusted net income and 10% growth in adjusted EPS. The lower EPS growth as compared to net income was due to the higher share count from the successful follow-on equity offering in September, in which we issued an additional $1.265 million shares for $347 million in proceeds net of fees. This growth came as a result of the aforementioned performance in adjusted EBITDA and lower interest expense, which turned to interest income in the fiscal second quarter after the full repayment of our revolver balance with the proceeds from our follow-on equity offering. There were two non-recurring adjusting items to EBITDA, net income and EPS in the fiscal fourth quarter. The $2.1 million increase in the expected earn out consideration for the PSP Products acquisition due to revenue outperformance since the acquisition and $1.4 million of transaction expenses incurred during the quarter for the Aspen Manufacturing acquisition. Both of these adjusted items occurred in our Contractor Solutions segment. During the fourth quarter, our Contractor Solutions segment with $166 million in revenue accounted for 71% of our consolidated revenue and delivered $24.7 million or 17.5% growth, when compared to the prior year quarter. Of the revenue growth in the quarter, $13.5 million or 9.5% came from our recent acquisitions, while the remaining $11.2 million or 8% was driven by organic volume growth and pricing actions. This solid organic growth is in line with our stated mid to high single digit growth target in the Contractor Solutions segment. During the quarter, we had growth in the HVAC/R and electrical end markets. Adjusted EBITDA for the segment was $56 million or 33.7% of revenue compared to $47 million or 33.5% of revenue in the prior year period. The slight increase in adjusted EBITDA margin came from higher gross margins due to pricing actions, which offset increased freight expense, combined with a decrease in operating expenses as a percent of revenue. Our Specialized Reliability Solutions segment revenue decreased by 9% to $38 million as compared to the prior period. Revenue increased in the general industrial end market, but declined in the energy, rail transportation and mining end markets. The lower revenue was driven primarily by softer market demand, most pronounced early in the fourth quarter, which drove a decline in unit volumes versus the prior period, and also due to a stronger prior year fourth quarter due to a catch up from shipping issues at the end of the third quarter of the prior fiscal year. The segment EBITDA of $5.8 million in the fourth quarter represented a decrease of 30% from $8.2 million in the prior year period. The EBITDA margin contracted 450 basis points to 15.3% in the current period, driven primarily by a decrease in gross margins due to the lower volume, more growth coming from lower margin products and higher freight expenses related to the strategic management of international inventory ahead of tariffs. Our Engineered Building Solutions segment revenue decreased by 4% to $28.7 million compared to $30.1 million in the prior year period, driven simply by the timing of projects converting to revenue from backlog. I'll note that the prior year period had a large project completed that were not recur this year. Bidding and booking trends remained solid during the fiscal fourth quarter, which was one of the segment's highest booking quarters in our history, and our book-to-bill ratio for the trailing eight quarters remained at one-to-one. The backlog increased sequentially during the quarter with projects that will deliver favorable margin mix in future quarters as they convert to revenue. Segment EBITDA was 33% lower than the prior year period at $4.2 million or a 14.5% EBITDA margin compared to $6.2 million and 20.5% in the prior year period. The contraction in EBITDA margin in the current period was primarily due to a $1.2 million gain in the prior year period on the sale of an operating property that did not recur, which reduced gross margin during the current reporting period as well as operating expenses as a higher percentage of revenue. Transitioning to our strong balance sheet and cash flow. We ended our fiscal fourth quarter 2025 with $226 million of cash and reported cash flow from operations of $27 million in the quarter, up 22% compared to $22 million in the same quarter last year, driven by increased net income. For the full fiscal year 2025, the company had a record cash flow from operations of $168 million or 2% growth compared to $164 million in the prior fiscal year. Our free cash flow defined as cash flow from operations minus capital expenditures was $22.8 million in the fiscal fourth quarter as compared to $17.5 million in the same period a year ago. This resulted in free cash flow per share of $1.35 in the fiscal fourth quarter as compared to $1.12 in the same period a year ago, which was even more impressive when considering the additional shares included in this year's quarter from the follow-on equity offering. Our free cash flow for the full fiscal year was $152.1 million as compared to $147.8 million in the prior fiscal year. That resulted in free cash flow per share of $9.32 for fiscal 2025 as compared to $9.48 in the prior fiscal year. The reduction in free cash flow per share on the higher free cash flow was due to the additional shares from the follow-on equity offering. As discussed last quarter, we repaid all of our borrowings under the revolver in September of 2024, utilizing the cash received from our follow-on equity offering. As a result, the company was able to eliminate most of our interest expense and invested net proceeds from the follow-on equity offering and money market accounts to generate interest income. As Joe mentioned, in the fiscal fourth quarter, we announced a definitive agreement to acquire Aspen Manufacturing for $313.5 million. We completed the acquisition subsequent to year end on May 1st, 2025. We used most of our cash on hand at that time and borrowed $135 million from our revolving credit facility to fund the transaction. I would also like to highlight that subsequent to the end of fiscal 2025, the company renewed, extended and upsized our revolving credit facility to $700 million earlier this month. The renewal of our revolver provides us with access to additional capital, allowing us to be nimble and opportunistic on growth opportunities. We are grateful to our banking partners for their support. Our effective tax rate for the fiscal fourth quarter was 24.6% on a GAAP basis and 24.7% when adjusted. As mentioned in this morning's earnings release, as we look into fiscal 2026, we anticipate delivering full-year growth in revenue and adjusted EBITDA for each segment as well as consolidated EPS growth and even stronger growth in operating cash flow than in fiscal year 2025. We expect Aspen's fiscal 2026 revenue to grow in the high single to low-double-digits off their trailing 12-month revenue of $125 million through our fiscal 2025 year end. Note that Aspen's quarterly revenue sequencing is weighted more heavily to our first and second fiscal quarters due to the nature of their products. As such, we expect the Contractor Solutions go forward quarterly revenue seasonality will be more pronounced than we've experienced in the past. We expect Aspen's EBITDA margin to be approximately 24% for the full fiscal year 2026 as we begin our work to improve the Aspen margins over time. The Aspen margin will vary from this full-year level from quarter-to-quarter due to the seasonality of the business. As a reminder, Aspen will only be included in our results for 11 months during fiscal year 2026, and two months in our fiscal first quarter due to the May 1st acquisition date. As I previously mentioned, the company borrowed $135 million from our revolving line of credit and use the remainder of our cash on hand from the follow-on equity offering to fund the Aspen acquisition on May 1st. So we are no longer forecasting quarterly net interest income. Beginning in May, the company will begin incurring interest expense on our revolver borrowings. We anticipate paying off our current borrowings outstanding by the end of fiscal year 2026, if the company does not have further acquisitions throughout fiscal year 2026. Note that we continue to actively seek acquisitions, but do not include that in our forecast. With that context, we currently anticipate approximately $5.3 million in net interest expense for the full-year, with the second fiscal quarter being the highest level. Our amortization of intangible assets will increase significantly over the prior year due to our acquisitions, most prominently from the Aspen acquisition. We currently expect that the Aspen acquisition will add approximately $9.5 million of amortization expense in fiscal year 2026. This is our preliminary internal estimate and will be finalized during the fiscal year. In our first quarter 10-Q, we will provide the initial results of our purchase price allocation. Note that this forward-looking outlook was included in the quarterly investor presentation that we posted to our website this morning. We expect Contractor Solution's overall adjusted EBITDA margin for the full fiscal year 2026 to be in the low 30s versus the recent margins closer to the mid-30s as we layer in our acquisitions and the expected impact of tariffs. We are anticipating an overall cost of goods sold impact from increased tariffs, and we will update you each quarter as warranted on this highly fluid situation. We have taken broad based action on pricing for our contractor solutions products to offset the new tariffs. Our approach as always is to prioritize protecting margin dollars, and we know that this approach can result in some margin compression. And we continue to make strategic changes to our global supply chain to minimize the impact of tariffs and other potential disruptions. We also remain highly focused on cost discipline across the company, especially in the current economic environment. During fiscal year 2026, Specialized Reliability Solutions and Engineered Building Solutions are each expected to have higher full-year EBITDA margin on higher revenue than the prior year. We expect to see EPS growth in fiscal 2026, although the company does not anticipate EPS to grow as a percentage as much as revenue and EBITDA due to the additional shares outstanding from the follow-on equity offering, increased interest expense and the increased intangible amortization from recent acquisitions. Thus, we continue to focus on EBITDA as the best comparable measure of our profitability growth over time. We currently forecast our fiscal 2026 tax rate to be 26%, which may vary from quarter-to-quarter due to specific items. With that, I'll now turn the call back to Joe for his closing remarks.

Thank you, James. To summarize, during the fiscal fourth quarter of 2025, we posted record quarterly results for revenue, adjusted EBITDA, adjusted earnings per share and adjusted net income. Our impressive 9% plus revenue growth included both inorganic growth from our recent acquisitions and strong organic volume growth in Contractor Solutions. Looking ahead to the full fiscal year of 2026, we will continue to focus on delivering sustainable growth that exceeds the markets we serve. We will continue to identify and pursue accretive acquisitions of innovative companies and products that are synergistic to our existing portfolio. I would like to take a moment to welcome the most recent group of employees to join the CSW family in connection with our acquisition of Aspen Manufacturing. Aspen Manufacturing is one of the largest independent evaporator coil and air handler manufacturers for the HVAC/R industry and is a recognized leader in product quality and indoor comfort. All of Aspen's products are designed, engineered and assembled in the US. Bringing this line of HVAC/R equipment and the Aspen team under the CSW umbrella will expand our current product offering and allow us to distribute these products through our existing distribution centers across the US. At CSW, we are committed to an employee centric culture, where we focus on recruiting and retaining great talent, offering rewarding careers and recognizing team members who excel, while providing them the opportunity to earn a safe, secure and dignified retirement. I could not be more proud to announce that CSW Industrials has recently been certified as a great place to work for the third year in a row. This recognition is a testament to our focus on core values such as accountability, citizenship, teamwork, respect, integrity, stewardship and excellence. How we succeed matters and our success is shaped by the collaborative efforts of our team members. It's my pleasure to also announce that our board has recently approved a profit sharing ESOP contribution for fiscal 2025 equaled 6% of each US employee salary, as well as an additional profit sharing 401(k) contribution of 3% for fiscal 2025, which is in addition to our already healthy 6% match. As always, to close my prepared remarks, I just want to thank the dedicated team here at CSW Industrials, who collectively own approximately 4% of our company through the employee stock ownership plan, as well as all of our shareholders for your continued interest in and support of CSW Industrials. So operator, we're now ready for questions.

Thank you. [Operator Instructions] One moment while we poll for questions. Our first question is from Jon Tanwanteng with CJS Securities. Please proceed.

Good morning. Thank you for taking my questions and congrats on a nice quarter. I was wondering if you could go over a little more detail the impact of tariffs on your COGS maybe you saw on a trailing basis, if any and what your assumptions are by segment going forward with Vietnam, especially in focus.

Yes. Sure, John. Good morning, it's James. Thanks for being on as always. Appreciate your coverage. Tariffs is obviously very dynamic. There's not a lot of trailing impact yet, just given the lag of that and when tariffs came into play as you may recall, in our fiscal third quarter, we brought in extra inventory as well as early in the fourth quarter to get ahead of any potential tariffs. So we've been working through that inventory the last couple of months. So there's not much trailing impact. As we go forward, as a reminder, despite the current pause on tariffs, there's still a 10% tariff everywhere and 30% plus in China. And as, we do have some of our product that comes out of China. We expect for fiscal '26 for that number to be at/or a little less than 10%. As I mentioned, we've been working hard to strategically move things around. The addition of Aspen, which is fully United States based helps that percentage as well. Vietnam continues to be important to us with our facility there. We have no owned facilities internationally outside of in Vietnam. Vietnam is in the 30s now as a result. So we're watching the tariffs very closely. Obviously, the current pause is helpful in the near-term. And as I mentioned, we've had some broad braced pricing action on certain products that have been impacted and that's a product-by-product type conversation. So we do expect that there's going to be an impact. We do expect that we'll weather that well, working closely with our customers on that. And again, as we continue to strategically work our way out of areas like China into other areas that have less impact there, I think we're going to come out of the other end in really good shape.

Okay, great. Thank you. And then just in regards to the M&A pipeline, you mentioned being able to pay off your debt, your revolver by the year end, you're increasing the size of your revolver. Is there more in the pipeline that would utilize that capacity or is that more of a -- just in case as you can move forward?

Well, Jon, this is Joe. As you know, I mean, we have been acquisitive since the beginning. And so we will continue to do that. We take a very disciplined approach. And so we never forecast acquisitions. We have said since the equity offering that we feel like we can fund the typical strategic product line extension type acquisitions that are smaller through our free cash flow that we generate through operations. The revolving line of credit is available for chunkier sizable acquisitions like Aspen Manufacturing that we just closed and like TruAir, that we did several years ago. So the revolver is there so that we can be opportunistic. And we think that the target list for acquisitions is very, very robust and strong and there's still a lot of consolidation and a lot of innovation that we can acquire over the next few years. I would say that there seems to be a bit of a sorting out. And as we sit here today, we would likely wait for some of the uncertainty to settle down before we did anything with international manufacturing. But domestic manufacturing like the Aspen Manufacturing acquisition would still be very, very actionable in the short term.

Got it. Thank you. And then just one last question on Aspen. Do you believe that to be accretive to your margins over the longer-term? What's the -- I guess, the upside there as you bring into your distribution and try to do your product improvements on the business.

Yes, Jon, I think given where the margins are now at 24%, I think accretion to the consolidated margin is a goal of ours in the kind of near to mid-term. We're a couple of points from that, accretive to the contractor solutions margins in the 30s, that's a stronger to a higher bar to get over. Given the nature of that product being more in the equipment space and the accessory space, the margins just aren't quite as opportunistic there, but we do think there's a good path to see accretion in the near-term to the consolidated margin. I will also say, as I mentioned in my script, that we're really highly focused on the EBITDA from that acquisition. You're going to have intangible amortization as I detailed and is in the investor deck online. You've got interest expense for a little while, those kind of things. But from an EBITDA accretion perspective, it's accretive day one from a dollar perspective, but the margins on consolidated, we think we will get there in the kind of near to mid-term.

Got it. Thank you.

Thanks, Jon.

Our next question is from Susan Maklari with Goldman Sachs. Please proceed.

Thank you. Good morning, everyone.

Good morning, Susan.

Good morning. My first question is, I just want to follow up on the answers that you gave to the prior question with the 10% or less that will come from China in fiscal '26, is that as a percent of the COGS or as a percent of the portfolio sales, how should we think about what that number is exactly referring to?

Sure, Susan. Thanks for asking. This is James. That's on COGS and that is specific to Contractor Solutions. The other two segments, which last quarter were less than 30%, and it will be even less now with Aspen coming in, have virtually nothing that comes from overseas, a little bit here and there, but I'm referring to Contractor Solutions cost of goods sold for fiscal '26.

Okay. All right. That's helpful. And then just following up on the pricing. Can you give us some sense about how we should think about the magnitude and perhaps the timing of that pricing action coming through and the implications that we could see to the margins as we move through fiscal 2026?

Yes, we're still working through some of that. As you recall, in Contractor Solutions, we had a price increase January 1st with the increased freight expenses from last year. So that's been in effect all through the fiscal fourth quarter and now into the fiscal first quarter of 2026. The price increase that we -- I mentioned earlier kind of broad based and it's targeted by specific products based on their country of origin, certain customers, those kind of things, that's something that will take place likely during this quarter. We work through that with our customers. Obviously, that's very dynamic with all the changes that we see. So in terms of margin impact, you're starting to see the tariff costs come through, but we think we're matching that pretty well with pricing as we need to -- as we go through this quarter and through the fiscal year.

Okay. That's helpful. And then one last question. As you think about the setup into the busy spring and summer season. How are you thinking about the inventory on the ground? Are you seeing that your customers and the contractors have started to kind of focus perhaps more on some of these products as they've moved past some of the changes in the regulations on the refrigeration side? And did you see any pull forward or any actions in response to the tariffs that have been announced by your customers or in turn in the field?

I don't think we've seen anything terribly unusual. We had a nice fiscal fourth quarter with 8% organic growth in Contractor Solutions. We were really happy with the performance of that team on the ground. It's been a little later hot season, if you look at cooling days across the country so far. I think people have taken a bit of a wait and see approach at the very beginning of the quarter. But overall, things feel relatively normal. I think what you saw the pull forward on the equipment from the OEMs was probably more pronounced with the refrigeration change to be sure they have the new equipment as well as the old equipment. As we've said all along, that just hasn't affected us a whole lot. I think our normal seasonality and pattern of purchasing from our customers for the parts and accessories and now with Aspen, the evaporator coils, which are more of a replacement part has been pretty normal.

Okay. All right. Thanks for all the color and good luck.

Thanks, Susan.

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

Awesome. Thanks so much. I really appreciate all the context on Aspen, the detail you gave on the margin profile. I wanted to drill down a little bit on the swings in margins intra quarter just for modeling purposes. It sounds like overall margins running at around 24%. But maybe just give us some bands around that 24%, just so we have some guardrails for modeling.

Yes, Sam, this is James. That's hard. I think we'll be able to give you more clarity as we go through this first couple of quarters of owning Aspen. Obviously, we're looking to make improvements where we can. It's several hundred basis-points either side of that 24%. I can safely say that. How many hundreds of basis points it is. I think we're going to -- we'll learn as we go through this first year, because obviously, we'll get them into our accounting system and our operations and those kind of things. So I think it's early to give beyond that. We wanted to give you what we could and at least give you a sense of that 24% give you some sense of revenue, but being able to get detailed on the swings quarter-to-quarter is a little premature for us.

No, that's fair. And then just another quick one on Aspen. Just historically, has Aspen taken pricing kind of in line with the industry? Has it taken pricing ahead of the industry? And just maybe any context on price gaps versus some of the competitors in the air handle or evaporator coil space?

Yes, I think Aspen has done a good job, obviously as they've become part of our environment now May 1st and we're working with them on that. Couldn't really do anything before that and working with them, of course, but Aspen has done a good job of that. And I think that you'll see them react like the competitors do, then react as they need to. But again, Aspen doesn't have the tariff impact necessarily given that it's US based. So as we compete with evaporator coils and air handlers that have either components or the full system coming in from overseas, you have an opportunity there. But in general, Aspen is doing a good job with pricing and they'll fall under the same discipline that we do from a cost perspective and a pricing perspective with the rest of Contractor Solutions.

No, that's helpful. And then maybe if I could just squeeze one more in here tariff pricing. You sell into multiple channels, you sell into distributors, you sell into retailers. Talk to kind of how those pricing discussions have worked by channel? And then are you finding it easier to push pricing through on the distribution side versus, say, some of the home centers.

Yes. I don't think we bifurcate quite that much. Obviously, customer is a little bit different. We've always said where we are in the supply chain is important. So our ability to push pricing and that working its way through the system we feel comfortable with. But I think it's early and I don't think we get so precise to bifurcate retail versus distribution. As a reminder, we are heavily weighted towards distribution. Retail plays a role in some of the products, of course, but our ability to look at pricing and have good relationships and always think about the long-term with distributors is very important to us. As I mentioned, we're focused on the dollars, not the margin as much. So you may see a little bit of compression. We saw that saying you weren't with us at the time, but we saw that during COVID and we recovered that over time as some of those costs came back down. But again, we continue to focus on those distribution customers where we have relationships with retailers, we're having good discussions there as well.

Awesome. Thanks so much. I'll pass it on.

Thanks, Sam.

Our next question is from Jamie Cook with Truist Securities. Please proceed.

Hi, good morning. I guess two questions. One, just on we're in May and your quarter ended March. Just wondering if there was any change in demand as we entered into April and in May across the portfolio? And then my second question on Contractor Solutions. It sounds like organic growth is still expected to be healthy in 2026. Obviously, you're putting through price increases because of tariffs, do you assume volumes are still healthy or do you assume to what degree does higher pricing sort of have a negative impact on volumes? And then my last -- actually, why don't you -- my last question is sorry, just on Engineered Building Solutions. Organic growth was obviously negative, but you posted a strong book-to-bill and your bookings were up 18%. So just wondering when we should see that translate into positive organic growth for EBS. Thank you.

Yes, Jamie, thanks. And if I missed some of that, circle back, please. I'll start at the Engineered Building Solutions, again, we wanted to highlight historically strong booking quarter for us. And given things like the ABI Index and those kind of things, we're really proud of the team. We're focused on the direct sales of those smoke curtains. We're focused on the right projects that are still getting built and getting permitted. One thing that our leadership team has told us they're seeing a higher number of rebidding’s, which means projects are getting very close to getting done instead of just kind of that initial bid they throw out, but don't turn into a booking. So we had a really nice fourth quarter across the board, they're really bucking some of the industry trends based on the team's hard work there and the commercial sales efforts. And we think we're going to have a nice booking year in fiscal '26 as well. In terms of when that turns into revenue, obviously, some of it's rather near-term, things like smoke curtains can be near-term depending on when they're bid and booked. Some of those were 18 to 24 months out. But we do expect good top line growth as well as EBITDA and margin growth at EBS. Within Specialized Reliability Solutions, going back to your demand question, again, we had a soft fourth quarter, January, February were soft as we exited March, April and now into May, we've seen things pick up some. You still have a little bit of softness in the energy markets, for example, but the team is doing a good job finding opportunities. So I think that they're back to a nice order booking level and a nice sales level. And again, we expect revenue and EBITDA with margin growth in that segment as well. In Contractor Solutions, as I mentioned, 8% organic growth in the fiscal fourth quarter, we do expect kind of single to our mid to high single digit growth as we go mid and long-term in that business, that's going to vary a little bit quarter-to-quarter. We feel good about it. As I mentioned to one of the earlier questions, Jamie, it's been a slow hot season so far, but the group is still doing a great job of getting our product in customer's hands. So they have what they need as soon as it heats up. We do a great job of getting things out very near-term. Obviously, the fact that some of it comes from overseas, we have to plan accordingly. So we strategically placed the right inventory. So we feel good about the organic growth prospects there as well. And I'll mention, on top of introducing new products through the acquisitions we have, product innovation with those acquisitions and we will always include as part of our organic growth expectations, market share growth. The team is highly focused on continuing to offer more and more of the Contractor Solutions products to our customers and the more products we can offer our distribution customers, the more they want to do business with us. We make it easier to do business with technology, with shipments with invoice in one point of contact. So we're picking up share as we continue to add products.

Thank you.

Hopefully I covered it all, Jamie.

Yes, you did. Thank you.

Thanks.

[Operator Instructions] Our next question is from Andrew Kaplowitz with Citigroup. Please proceed.

All right, good morning. This is Natalia Bak on behalf of Andrew Kaplowitz.

Hi, Natalia.

Hi, Natalia.

First question I want to ask, just in Engineering or Engineered Building Solutions. Last quarter, you reiterated a 20% EBITDA margin target in the intermediate term. So as backlog quality improves, what's the timeline to approach that goal? Like are there any key hurdles at cost, scale or pricing you need to overcome to get there?

Yes, Natalia, great question. We still target that as the mid-term hurdle, whether we're there each and every quarter that will bounce around as it has. The only thing I would say that's a little in the face of that is there's a minimal tariff impact there as they do import some products, motors, for example, those kind of things. We've seen a little cost and it's a little harder to get pricing through that business because you bid projects. So we're working on that. Obviously, a little tariff relief is helpful. So we're going to bring in all the products we can at a little bit lower tariff than we thought we might have, but 20% is still the intermediate term hurdle. Are we there for the full year fiscal '26? Probably a little early to say that necessarily, but we're approaching it here as we go through quarter-to-quarter, yes.

Helpful. And then just in SRS, like margins compressed this quarter, but what specific factors contributed to the performance? But more importantly, what strategies are in place to address these challenges? Like I saw in the presentation, there's a mention of new product introductions and new deals in process. So maybe if you could expand on those points?

Yes, sure, Natalia. The biggest factor for Specialized Reliability Solutions as we've talked about is volume. And it was a soft January and February. Certainly compared to the prior year, we had some catch up last year from some shipments we missed. But volume matters in that business and the volume was soft in January and February, and that's just going to hit margins. Your absorptions aren't strong with your overhead. It's a pretty high fixed cost base there. Also, as we went through the mix in the quarter, we had a few more products that sold that were just lower margin products. That's going to vary quarter-to-quarter. So nothing is wrong with that business, nothing intuitively tells us that that's the new hurdle. We've talked about that being a 20% margin business as well. They've hit it several times. So I think more than anything, it's making sure we have the volume. One thing that's a little under the radar we've mentioned just in passing to folks, we relocated a facility from Pennsylvania down to our main facility here in Texas. And that's our highest margin group of products. And so, A, we eliminate a little bit of cost by moving that down here. But secondly, we've got more eyes on those products now. We're doing better with product development there, having it right here in the same lab, in the same facility. And so we're doing things like that structurally that will continue to push top line and bottom line growth and help those margins.

Got it. Helpful. That's all my questions. Congrats on the quarter.

Thanks, Natalia.

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

Thank you. And we just want to thank everyone for joining us for this fourth quarter and full-year conference call. Appreciate your support and look forward to the next time we'll be in contact. Thank you.