CSW INDUSTRIALS, INC.

Previous wording

CSW Industrials, Inc. (the “Company,” “CSWI,” “we,” “our” or “us”) is a diversified industrial growth company with a strategic focus on providing niche, value-added products in the end markets we serve. We operate in three business segments: Contractor Solutions, Specialized Reliability Solutions and Engineered Building Solutions. Our products include mechanical products for heating, ventilation, air conditioning and refrigeration (“HVAC/R”), plumbing products, grilles, registers and diffusers (“GRD”), building safety solutions and high-performance specialty lubricants and sealants. End markets that we serve include HVAC/R, architecturally-specified building products, plumbing, electrical, general industrial, energy, rail transportation and mining. Our manufacturing operations are concentrated in the United States (“U.S.”), Vietnam and Canada, and we have distribution operations in the U.S., Australia, Canada and the United Kingdom (“U.K.”). Our products are sold directly to end users or through designated channels in over 100 countries around the world, primarily including the U.S., Canada, the U.K. and Australia.

Current wording

CSW Industrials, Inc. (the “Company,” “CSW,” “we,” “our” or “us”) is a diversified industrial growth company with a strategic focus on providing niche, value-added products in the end markets we serve. We operate in three business segments: Contractor Solutions, Specialized Reliability Solutions and Engineered Building Solutions. Our products include mechanical products for heating, ventilation, air conditioning and refrigeration (“HVAC/R”), plumbing products, grilles, registers and diffusers (“GRD”), building safety solutions and high-performance specialty lubricants and sealants. End markets that we serve include HVAC/R, architecturally-specified building products, plumbing, electrical, general industrial, energy, rail transportation and mining. Our manufacturing operations are concentrated in the United States (“U.S.”), Vietnam and Canada, and we have distribution operations in the U.S., Australia, Canada and the United Kingdom (“U.K.”). Our products are sold directly to end users or through designated channels in over 100 countries around the world, primarily including the U.S., Canada, the U.K. and Australia.

Previous wording

Many of our products are used to protect the capital assets of our customers that are expensive to repair or replace and are critical to their operations. We have a source of recurring revenue from the maintenance, repair and overhaul and consumable nature of many of our products. We also provide some custom engineered products that strengthen and enhance our customer relationships. The reputation of our product portfolio is built on more than 100 well-respected brand names, such as AC Guard®, Air Sentry®, Balco®, Cover Guard®, Deacon®, Dust Free®, Falcon Stainless®, Greco®, Jet-Lube®, Kopr-Kote®, Leak Freeze®, Metacaulk®, No. 5®, OilSafe®, PF WaterWorks TM, PSP Products TM, RectorSeal®, Safe-T-Switch®, Shoemaker Manufacturing®, Smoke Guard®, TRUaire® and Whitmore®.

Current wording

Many of our products are used to protect the capital assets of our customers that are expensive to repair or replace and are critical to their operations. We have a source of recurring revenue from the maintenance, repair and overhaul and consumable nature of many of our products. We also provide some custom engineered products that strengthen and enhance our customer relationships. The reputation of our product portfolio is built on more than 100 well-respected brand names, such as AC Guard®, Air Sentry®, Aspen Manufacturing TM, Balco®, Cover Guard®, Deacon®, Dust Free®, Falcon Stainless®, Greco®, Jet-Lube®, Kopr-Kote®, Leak Freeze®, Metacaulk®, No. 5®, OilSafe®, PF WaterWorks TM, PSP Products TM, RectorSeal®, Safe-T-Switch®, Shoemaker Manufacturing®, Smoke Guard®, TRUaire® and Whitmore®.

Previous wording

We expect to maintain a strong balance sheet in fiscal year 2025, which provides us with access to capital through our cash on hand, internally-generated cash flow, availability under our Revolving Credit Facility and proceeds from our recent follow-on equity offering. Our capital allocation strategy continues to guide our investing decisions, with a priority to direct capital to the highest risk adjusted return opportunities, within the categories of organic growth, strategic acquisitions and the return of cash to shareholders through our share repurchase and dividend programs. With the strength of our financial position, we will continue to invest in financially and strategically attractive expanded product offerings, key elements of our long-term strategy of targeting long-term profitable growth. We will continue to invest our capital in maintaining our facilities and in continuous improvement initiatives. We recognize the importance of, and remain committed to, continuing to drive organic growth, as well as investing additional capital in opportunities with attractive risk-adjusted returns, driving increased penetration in the end markets we serve. We remain disciplined in our approach to acquisitions, particularly as it relates to our assessment of valuation, prospective synergies, diligence, cultural fit and ease of integration, especially in light of economic conditions.

Current wording

We expect to maintain a strong balance sheet in fiscal year 2026, which provides us with access to capital through our cash on hand, internally-generated cash flow, and availability under our Revolving Credit Facility. Our capital allocation strategy continues to guide our investing decisions, with a priority to direct capital to the highest risk adjusted return opportunities, within the categories of organic growth, strategic acquisitions and the return of cash to shareholders through our share repurchase and dividend programs. With the strength of our financial position, we will continue to invest in financially and strategically attractive expanded product offerings, key elements of our long-term strategy of targeting long-term profitable growth. We will continue to invest our capital in maintaining our facilities and in continuous improvement initiatives. We recognize the importance of, and remain committed to, continuing to drive organic growth, as well as investing additional capital in opportunities with attractive risk-adjusted returns, driving increased penetration in the end markets we serve. We remain disciplined in our approach to acquisitions, particularly as it relates to our assessment of valuation, prospective synergies, diligence, cultural fit and ease of integration, especially in light of economic conditions.

Previous wording

All acquisitions are described in Note 2 to our consolidated financial statements included in this Quarterly Report. PF WaterWorks, L.P. ("PF WaterWorks") activity has been included in our results within our Contractor Solutions segment since the November 4, 2024 acquisition date. PSP Products, Inc. (“PSP”) activity has been included in our results within our Contractor Solutions segment since the August 1, 2024 acquisition date. Dust Free, LP. (“Dust Free”) activity has been included in our results within our Contractor Solutions segment since the February 6, 2024 acquisition date.

Current wording

All acquisitions are described in Note 2 to our consolidated financial statements included in this Quarterly Report. Aspen Manufacturing, LLC ("Aspen Manufacturing") activity has been included in our results within our Contractor Solutions segment since the May 1, 2025 acquisition date. PF WaterWorks, L.P. ("PF WaterWorks") activity has been included in our results within our Contractor Solutions segment since the November 4, 2024 acquisition date. PSP Products, Inc. (“PSP Products”) activity has been included in our results within our Contractor Solutions segment since the August 1, 2024 acquisition date.

Previous wording

Gross profit for the three months ended December 31, 2024 increased $6.1 million, or 8.3%, as compared with the three months ended December 31, 2023. The increase was primarily a result of the increased net revenue and the inclusion of recent acquisitions of Dust Free, PSP, and PF WaterWorks, and was partially offset by increased freight. Gross profit margin of 41.4% for the three months ended December 31, 2024 decreased as compared to 42.3% for the three months ended December 31, 2023. The decrease was driven primarily by the aforementioned increase in freight expense.

Current wording

Gross profit for the three months ended June 30, 2025 increased $8.0 million, or 7.5%, as compared with the three months ended June 30, 2024. The increase was primarily a result of the inclusion of the recent acquisitions of Aspen Manufacturing, PSP Products, and PF WaterWorks, and was partially offset by the impact from lower volume in the legacy business. Gross profit margin of 43.8% for the three months ended June 30, 2025 decreased as compared to 47.5% for the three months ended June 30, 2024. The decrease was driven primarily by the inclusion of recent acquisitions, unfavorable revenue mix and volume leverage, and an escalation in material and project costs.

Previous wording

Operating expenses for the three months ended December 31, 2024 increased $4.1 million, or 8.9%, as compared with the three months ended December 31, 2023. The increase was primarily due to added expenses related to the inclusion of Dust Free, PSP, and PF WaterWorks in the current period, including amortization of intangible assets, as well as increased expenses related to business acquisitions and integrations, including a $0.9 million acquisition broker fee. The decrease in operating expenses as a percentage of revenues was attributable to revenue increasing by a greater percentage than the increase in operating expenses.

Current wording

Operating expenses for the three months ended June 30, 2025 increased $8.2 million, or 15.7%, as compared with the three months ended June 30, 2024. The increase was primarily due to added expenses related to the inclusion of Aspen Manufacturing, PSP Products, and PF WaterWorks in the current period, including amortization of intangible assets. The decrease in operating expenses as a percentage of revenues was attributable to revenue increasing by a greater percentage than the increase in operating expenses.

Previous wording

Operating income for the three months ended December 31, 2024 increased $2.0 million, or 7.3%, as compared with the three months ended December 31, 2023, as a result of the increase in gross profit, partially offset by the increase in operating expenses, as discussed above.

Current wording

Operating income for the three months ended June 30, 2025 decreased $0.2 million, or 0.3%, as compared with the three months ended June 30, 2024, as a result of the increase in gross profit, partially offset by the increase in operating expenses, as discussed above.

Previous wording

Net interest income of $2.0 million for the three months ended December 31, 2024 improved $4.7 million as compared to the net interest expense of $2.8 million for the three months ended December 31, 2023. Net interest expense of $1.9 million for the nine months ended December 31, 2024 decreased $8.2 million as compared to the nine months ended December 31, 2023. The changes in the three and nine months ended December 31, 2024 were due to the reduced average borrowing under our Revolving Credit Facility, as a result of strong operating cash flows generated and the repayment of the outstanding balance under our Revolving Credit Facility, as discussed in Note 7, using the proceeds from the equity offering. The interest income generated by our cash proceeds from the equity offering and invested in money market funds also contributed to the net interest expense decrease.

Current wording

Net interest expense of $1.0 million for the three months ended June 30, 2025 decreased $1.5 million as compared to the net interest expense of $2.5 million for the three months ended June 30, 2024. The decrease in the three months ended June 30, 2025 was due to the reduced average borrowing under our Revolving Credit Facility and the interest income generated by the cash proceeds, invested in money market accounts, from the Equity Offering prior to the funding of Aspen Manufacturing acquisition on May 1, 2025.

Previous wording

Other expense, net decreased $8.1 million to net expense of $0.3 million for the three months ended December 31, 2024 as compared with net expense of $8.4 million for the three months ended December 31, 2023. During the three months ended December 31, 2024, a non-cash $0.9 million tax indemnification asset related to the Falcon Stainless, Inc. (“Falcon”) acquisition was released and recognized in other expense. During the three months ended December 31, 2023, a non-cash $8.5 million tax indemnification assets related to the T.A. Industries, Inc. (“TRUaire”) and Falcon acquisitions were released and recognized in other expense. The remaining change is attributed to foreign currency gains/losses related to transactions in currencies other than functional currencies.

Current wording

Other income, net of $0.5 million for the three months ended June 30, 2025 increased $0.3 million, as compared to the net income of $0.3 million for the three months ended June 30, 2024. The increase is resulted from the foreign currency gains/losses related to transactions in currencies other than functional currencies.

Previous wording

For the three months ended December 31, 2024, we earned $31.3 million from operations before taxes and provided for income taxes of $4.3 million, resulting in an effective tax rate of 13.8%. For the nine months ended December 31, 2024, we earned $133.6 million from operations before taxes and provided for income taxes of $31.2 million, resulting in an effective tax rate of 23.3%. The provision for income taxes differed from the statutory rate for the three and nine months ended December 31, 2024 primarily due to state income tax (net of federal benefit), executive compensation limitations, and provision for global intangible low-taxed income (“GILTI”); offset by release of uncertain tax positions (“UTP”) due to lapse of statute, excess tax deductions related to equity compensation, foreign currency rate impact on the cumulative unrepatriated foreign earnings, foreign tax credits and foreign-derived intangible income (“FDII”).

Current wording

For the three months ended June 30, 2025, we earned $54.4 million from operations before taxes and provided for income taxes of $13.2 million, resulting in an effective tax rate of 24.3%. The provision for income taxes differed from the statutory rate for the three months ended June 30, 2025 primarily due to state income tax (net of federal benefit), executive compensation limitations, and provision for global intangible low-taxed income (“GILTI”); offset by adjustment to tax payable, foreign tax credits, excess tax deductions related to equity compensation and foreign-derived intangible income (“FDII”).

Previous wording

For the three months ended December 31, 2023, we earned $16.4 million from operations before taxes and provided for income taxes of $7.1 million, resulting in an effective tax rate of 43.2%. For the nine months ended December 31, 2023, we earned $98.5 million from operations before taxes and provided for income taxes of $28.0 million, resulting in an effective tax rate of 28.4%. The provision for income taxes differed from the statutory rate for the three and nine months ended December 31, 2023 primarily due to the tax impact on the aforementioned release of the indemnification assets, the release of UTPs, the impact of US federal provision to return adjustments, state income tax (net of federal benefit), executive compensation limitations, and the inclusions related to foreign operations.

Current wording

For the three months ended June 30, 2024, we earned $52.8 million from operations before taxes and provided for income taxes of $13.9 million, resulting in an effective tax rate of 26.4%. The provision for income taxes differed from the statutory rate for the three months ended June 30, 2024 primarily due to state income tax (net of federal benefit), provision for GILTI, executive compensation limitations, and increases to penalties and interest on uncertain tax positions ("UTP"); offset by foreign tax credits and excess tax deductions related to equity compensation and FDII.

Previous wording

The Organization for Economic Cooperation and Development introduced a framework under pillar two (“Pillar Two”), which includes a global minimum tax rate of 15% that applies to fiscal year starting on or after January 1, 2024, with certain remaining provisions to be effective in 2025. Certain jurisdictions in which we do business have enacted laws implementing Pillar Two. Based on our current forecast, we do not expect the Pillar Two rules to apply to the Company in the near term. We are monitoring these developments and do not believe these rules will have a material impact on our financial condition and/or consolidated results.

Current wording

The Organization for Economic Cooperation and Development introduced a framework under pillar two ("Pillar Two"), which includes a global minimum tax rate of 15% applied on a county-by-country basis for companies with global revenues and profits above certain thresholds. Certain jurisdictions in which we do business have enacted laws implementing Pillar Two. We are monitoring these developments and do not believe these rules will have a material impact on our financial condition and/or consolidated results.

Previous wording

Specialized Reliability Solutions segment provides products for increasing reliability, efficiency, performance and lifespan of industrial assets and solving equipment maintenance challenges.

Current wording

The Specialized Reliability Solutions segment provides products for increasing reliability, efficiency, performance and lifespan of industrial assets and solving equipment maintenance challenges.

Previous wording

Net revenues for the nine months ended December 31, 2024 increased $1.9 million, or 1.7%, as compared with the nine months ended December 31, 2023. The increase was primarily due to increased unit volumes. Net revenue increased in the rail transportation and general industrial end markets and decreased in the mining and energy end markets.

Current wording

Net revenues for the three months ended June 30, 2025 was comparable to the three months ended June 30, 2024. Net revenue increased in the mining and energy end markets and decreased in the general industrial end market.

Previous wording

Net revenues for the three months ended December 31, 2024 increased $1.0 million or 3.4% as compared to the three months ended December 31, 2023 driven by backlog converting to revenue.

Current wording

Net revenues for the three months ended June 30, 2025 increased $1.0 million or 3.2% as compared to the three months ended June 30, 2024 driven by the strong backlog converting to revenue.

Previous wording

Existing cash on hand, cash generated by operations and borrowings available under our Revolving Credit Facility (“Revolver Borrowings”) are our primary sources of short-term liquidity. Our ability to consistently generate strong cash flow from our operations is one of our most significant financial strengths; it enables us to invest in our people and our brands, make capital investments and strategic acquisitions, provide a cash dividend program, and from time-to-time, repurchase shares of our common stock. Additionally, we use our Revolver Borrowings and proceeds from the recent follow-on equity offering to support our working capital requirements, capital expenditures and strategic acquisitions. We seek to maintain adequate liquidity to meet working capital requirements, fund capital expenditures, make scheduled interest payments on debt and meet our contingent consideration obligations. Absent deterioration of market conditions, we believe that cash flows from operating and financing activities, primarily Revolver Borrowings, will provide adequate resources to satisfy our working capital, scheduled interest payments on debt, anticipated dividend payments, periodic share repurchases, contingent consideration obligations and anticipated capital expenditure requirements for both our short-term and long-term capital needs.

Current wording

Existing cash on hand, cash generated by operations and borrowings available under our Revolving Credit Facility (“Revolver Borrowings”) are our primary sources of short-term liquidity. Our ability to consistently generate strong cash flow from our operations is one of our most significant financial strengths; it enables us to invest in our people and our brands, make capital investments and strategic acquisitions, provide a cash dividend program, and from time-to-time, repurchase shares of our common stock. Additionally, we use our Revolver Borrowings to support our working capital requirements, capital expenditures and strategic acquisitions. We seek to maintain adequate liquidity to meet working capital requirements, fund capital expenditures, make scheduled interest payments on debt and meet our contingent consideration obligations. Absent a material deterioration of market conditions, we believe that cash flows from operating activities and financing activities (which would primarily consist of Revolver Borrowings), will provide adequate resources to satisfy our working capital, scheduled interest payments on debt, anticipated dividend payments, periodic share repurchases, contingent consideration obligations and anticipated capital expenditure requirements for both our short-term and long-term needs.

Previous wording

Our cash balance (including cash and cash equivalents) at December 31, 2024 was $213.8 million, as compared with $22.2 million at March 31, 2024.

Current wording

Our cash balance (including cash and cash equivalents) at June 30, 2025 was $38.0 million, as compared with $225.8 million at March 31, 2025.

Previous wording

For the nine months ended December 31, 2024, our cash provided by operating activities from operations was $141.1 million, as compared with $141.9 million for nine months ended December 31, 2023.

Current wording

For the three months ended June 30, 2025, our cash provided by operating activities from operations was $60.6 million, as compared with $62.7 million for three months ended June 30, 2024.

Previous wording

•Working capital used cash for the nine months ended December 31, 2024 due to higher inventories ($42.5 million), higher prepaid expenses and other current assets ($17.2 million), partially offset by lower accounts receivable ($32.3 million) and higher accounts payable and other current liabilities ($21.4 million).

Current wording

•Working capital provided cash for the three months ended June 30, 2025 due to lower inventories ($7.6 million) and lower prepaid expenses and other current assets ($0.7 million), partially offset by higher accounts receivable ($7.8 million).

Previous wording

•Working capital provided cash for the nine months ended December 31, 2023 due to lower accounts receivable ($17.8 million), higher accounts payable and other current liabilities ($9.6 million) and lower inventories ($7.8 million), partially offset by higher prepaid and other current assets ($6.7 million).

Current wording

•Working capital provided cash for the three months ended June 30, 2024 due to higher accounts payable and other current liabilities ($10.9 million) and lower prepaid and other current assets ($3.4 million), partially offset by higher inventories ($6.8 million) and higher accounts receivable ($1.0 million).

Previous wording

Cash flows used in investing activities from operations during the nine months ended December 31, 2024 were $98.6 million, as compared with $15.1 million used in investing activities for the nine months ended December 31, 2023.

Current wording

Cash flows used in investing activities from operations during the three months ended June 30, 2025 were $326.7 million, as compared with $3.2 million used in investing activities for the three months ended June 30, 2024.

Previous wording

•Capital expenditures during the nine months ended December 31, 2024 and 2023 were $11.7 million and $11.7 million, respectively. Our capital expenditures have been focused on capacity expansion (including $0.4 million and $2.5 million during the current and prior year periods for the Whitmore JV), enterprise resource planning systems, new product introductions, continuous improvement and automation of manufacturing facilities.

Current wording

•Capital expenditures during the three months ended June 30, 2025 and 2024 were $2.9 million and $3.1 million, respectively. Our capital expenditures have been focused on capacity expansion (including $0.3 million and $0.2 million during the current and prior year periods for the Whitmore JV), enterprise resource planning systems, new product introductions, continuous improvement and automation of manufacturing facilities.

Previous wording

•During the nine months ended December 31, 2024, we acquired PF WaterWorks for an initially estimated purchase price of $43.2 million, including $40.0 million in cash consideration and estimated working capital adjustment of $2.2 million at closing, as discussed in Note 2 to our consolidated financial statements in this Quarterly Report.

Current wording

•During the three months ended June 30, 2025, we acquired Aspen Manufacturing for an initially estimated purchase price of $325.9 million, including $313.5 million in cash consideration and estimated working capital adjustment of $12.4 million, at closing, as discussed in Note 2 to our consolidated financial statements in this Quarterly Report.

Previous wording

•During the nine months ended December 31, 2024, $2.5 million was paid to acquire long-term minority investments.

Current wording

•During the three months ended June 30, 2024, $0.5 million was paid to acquire a long-term minority interest investment.

Previous wording

Cash flows provided by (used in) financing activities during the nine months ended December 31, 2024 and 2023 were $149.9 million and $(119.5) million, respectively.

Current wording

Cash flows provided by (used in) financing activities during the three months ended June 30, 2025 and 2024 were $78.4 million and $(62.3) million, respectively.

Previous wording

•Net repayments on our Revolving Credit Facility (as discussed in Note 7 to our consolidated financial statements included in this Quarterly Report) of $166.0 million and $100.0 million during the nine months ended December 31, 2024 and 2023, respectively.

Current wording

•Net borrowings (repayments) on our Revolving Credit Facility (as discussed in Note 7 to our consolidated financial statements included in this Quarterly Report) of $95.0 million and $(51.0) million during the three months ended June 30, 2025 and 2024, respectively.

Previous wording

•As discussed in Note 11 to our consolidated financial statements included in this Quarterly Report, repurchases of shares under our share repurchase program of $13.7 million and $5.8 million during the nine months ended December 31, 2024 and 2023, respectively.

Current wording

•As discussed in Note 11 to our consolidated financial statements included in this Quarterly Report, repurchases of shares under our share repurchase program of $4.7 million and $4.7 million during the three months ended June 30, 2025 and 2024, respectively.

Previous wording

•In connection with the vesting of share awards, $7.2 million and $5.0 million were tendered by employees to satisfy minimum tax withholding requirements during the nine months ended December 31, 2024 and 2023, respectively.

Current wording

•In connection with the vesting of equity awards under our Long Term Incentive Plan, $4.4 million and $3.3 million were tendered by employees to satisfy minimum tax withholding requirements during the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Management’s discussion and analysis of financial condition and results of operations are based on our consolidated financial statements and related footnotes contained within this Quarterly Report. Our critical accounting policies used in the preparation of our consolidated financial statements were discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report. No significant changes to these policies, as described in our Annual Report, have occurred in the nine months ended December 31, 2024.

Current wording

Management’s discussion and analysis of financial condition and results of operations are based on our consolidated financial statements and related footnotes contained within this Quarterly Report. Our critical accounting policies used in the preparation of our consolidated financial statements were discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report. No significant changes to these policies, as described in our Annual Report, have occurred in the three months ended June 30, 2025.

Previous wording

•the ability to respond to anticipated inflationary pressure, including reductions on consumer discretionary income and our ability to pass along rising costs through increased selling prices;

Current wording

•the ability to respond to inflationary pressure, including reductions on consumer discretionary income and our ability to pass along rising costs through increased selling prices;

Previous wording

•the expected impact of accounting pronouncements; and

Current wording

•the expected impact of accounting pronouncements;