CSW Industrials, Inc. (CSWI) CEO Joe Armes on Q4 2022 Results - Earnings Call Transcript

May 18, 2022 2:05 PM ETCSW Industrials, Inc. (CSWI)
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CSW Industrials, Inc. (NASDAQ:CSWI) Q4 2022 Earnings Conference Call May 18, 2022 10:45 AM ET

CompanyParticipants

Joe Armes - Chairman, CEO & President

James Perry - EVP & CFO

Adrianne Griffin - VP, IR & Treasurer

Conference Call Participants

Stefanos Crist - CJS Securities

Chris Howe - Barrington Research

Julio Romero - Sidoti & Company

Operator

Greetings, and welcome to CSW Industrials, Inc. Fiscal Fourth Quarter 2022 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 ow my pleasure to introduce your host, Adrianne Griffin, Vice President, Investor Relations and Treasurer. Thank you. you may begin.

Adrianne Griffin

Thank you, Doug. Good morning, everyone, and welcome to the CSW Industrials fiscal 2022 fourth quarter earnings call. Joining me today are 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, presentation, and Form 10-Q prior to the market’s opening today, which are available on the investor 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, in 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 Armes.

Joe Armes

Thank you, Adrianne. Good morning, and thank you for joining our fiscal fourth quarter conference call. I'm pleased to announce that in fiscal 2022, we continued our successful track record of delivering exceptional performance. Treating our employees well, serving our customers well, and managing our supply chains effectively, drove record results in growth and profitability. Fiscal 2022 represents our second consecutive year of record revenue, EBITDA, and earnings per share. Today, we reported record revenue of $626 million, nearly a 50% growth over the prior year. Of the $207 million in total revenue growth, half resulted from organic growth, with the remaining half coming from our TRUaire and Shoemaker acquisitions. EBITDA reached a record $133 million or 46% growth over the prior fiscal year. Finally, record adjusted EPS was $4.39, compared to $3.36 in the prior fiscal year. These outstanding accomplishments are attributable to our diversified business model, our disciplined capital allocation, and our commitment to operational excellence, which drove impressive operating leverage despite unprecedented global disruption and turmoil.

As compared to the prior year, sales increased in all segments, driven by volume growth and price increases. Our Contractor Solutions segment achieved record sales of $416 million, including record HVAC/R end market sales of $335 million, a $159 million or 91% total increase, including organic growth of $56 million. Our Contractor Solutions team, led by Don Sullivan, deserves recognition for exceeding our expectations again this year, while successfully integrating acquisitions, and managing significant challenges presented by inflation and supply chain constraints. I want to thank Don and his team for their extraordinarily good work. Our Engineered Building Solutions segment grew by $1.6 million or 1.7%. Scott Stratton and his team effectively marketed existing and newly developed products, and maintained market share gains due to competitive lead times, successfully overcoming the commercial construction end market decline during our fiscal 2021 and ‘22. As a result of this team's efforts, this segment's backlog reached an all-time high by the end of April, signaling a strong tailwind into fiscal 2023. Our Specialized Reliability Solutions segment achieved $38 million of organic revenue growth as demand returned in all end markets served, and operational execution improved. In fact, segment revenue in fiscal 2022 exceeded fiscal 2020 by 10.9%, or nearly $11 million. Mark Bass joined our team in June of 2021. He and his team have improved relationships with our largest customers, and have grown demand for our market-leading products. On the heels of solid execution in fiscal 2022, we remain confident in our impressive growth trajectory for that segment. During the last fiscal year, we executed on all aspects of our capital allocation strategy, investing $44 million with the Shoemaker acquisition, and $16 million in capital expenditures. We returned $23.5 million of cash to our shareholders through our share repurchase program and dividends. Subsequent to fiscal year-end, we increased our quarterly cash dividend by 13%, to $0.17 per share, indicating confidence in our fiscal 2023 outlook. And we have continued to repurchase shares. This was our second consecutive annual dividend increase, which followed a 17% per share increase in April of 2021.

Turning now to our acquisition integration update. The Shoemaker integration is progressing well, and we look forward to having the first full year of Shoemaker results included in our Contractor Solutions segment in fiscal year 2023. We also completed the formal integration of TRUaire into RectorSeal, including the full ERP implementation at TRUaire. This critical step improves our ability to stock RectorSeal products in all seven distribution centers across the United States, providing geographic proximity to better serve our customers. This is a significant enhancement for our customer service model, as we now provide one point of contact, one invoice, and enhanced visibility on inventory and pricing through our digital ordering platform. We are now positioned better than ever to be the reliable partner for our customers. Our M&A strategy remains active, with many of our best ideas generated organically from within our organization. Our capital allocation decisions remain focused on maximizing shareholder value on a risk-adjusted returns basis. This disciplined approach favors our current platforms, serving the same customers and end markets through our extensive distribution channels. The strength of our balance sheet provides ample capacity to act decisively and quickly on acquisitions as opportunities arise.

Each quarter, we provide an update on our commitment to treat our employees well, and our distinctively employee-centric culture. This quarter, I would like to expand upon our pay-for-performance culture. For fiscal year 2022, our Board of Directors recently approved annual performance bonus and profit-sharing incentive payments for all of our domestic employees. As we shared previously, all domestic employees are also eligible participants in our employee stock ownership plan, which provides direct alignment of interest with our shareholders. Our profit-sharing programs include a 6% ESOP contribution and a 3% discretionary 401(k) match, which is in addition to our standard 6% 401(k) participant match, providing for a safe, secure, and dignified retirement, along with our competitive profit-sharing programs, are two of the ways we strive to remain an employer of choice, to retain quality talent, and to maintain turnover rates that are lower than industry averages. In fact, recently, we completed our annual retention review and our company-wide retention rate exceeds manufacturing industry averages. I would be remiss if I did not acknowledge the dedication of our TRUaire Vietnam team members. Immediately prior to the pandemic lockdown last fall, our facility in Vietnam regularly employed 1,300 team members. In a very short period of time, this was reduced to only a few hundred employees who for three months lived at our facility, manufacturing and shipping product to continue supplying our customers. During this period, we paid a premium to those at the facility, and a stipend to those employees who remained on standby status. Our approach to compensation was both the right thing to do, and it helped us to quickly restore production. Once the restrictions were lifted, we had over 800 employees on site within a week. And today, we are at full strength, with 1,400 employees. And I am especially proud of all that our team accomplished in the face of this unprecedented adversity. Our products remain in high demand, and our team is working hard to meet that demand. Our collective efforts have positioned our company for long-term sustainable growth and profitability.

And now, at this time, I'd like to turn the call over to James for a closer look at our results, and then I'll conclude our prepared remarks with some stronger - some longer strategic outlook.

James Perry

Thank you, Joe, and good morning, everyone. Our consolidated revenue during fiscal fourth quarter 2022, was $173 million, a 30% increase compared to the prior year period. Consolidated gross profit in the fiscal fourth quarter was $72 million, representing 32% growth, with the incremental profit resulting predominantly from the Shoemaker acquisition, increased organic sales volumes, and pricing initiatives.

Gross profit margin was 42%, as compared to an adjusted gross margin in the prior year period of 43%. The gross profit margin decline resulted from inflation and cost of goods sold, which outpaced revenue growth. Fiscal fourth quarter EBITDA increased 17% to $37 million as compared to the prior year period. Our EBITDA margin was 21% in the current year period, and 24% as adjusted in the prior year period, with the decline primarily due to the lower gross profit margin.

Reported net income attributable to CSWI in the fiscal 2022 fourth quarter, increased to $18 million, or $1.17 per diluted share, compared to $10 million or $0.66 in the prior year period. In the prior year period, adjusted for approximately $2 million of TRUaire acquisition and JV formation costs, and $2 million for the purchase accounting effect, prior year adjusted net income and EPS were $15 million and $0.93, respectively. After the adjustment of prior year, our EPS grew by 25%. I'll note that we did not make any adjustments to our reported earnings in the current fiscal quarter.

Transitioning to a discussion of our segments, our Contractor Solutions segment, with $120 million of revenue, accounted for 69% of our consolidated revenue, and delivered $33 million or 37% of total growth, as compared to the prior year quarter, comprised of organic revenue growth of $25 million, and inorganic growth of $8 million from the TRUaire and Shoemaker acquisitions. Quarterly segment adjusted EBITDA was $35 million or 29% of revenue, compared to $29 million or 33% of revenue in the prior year period.

Our TRUaire manufacturing facility in Vietnam continues to increase productions steadily. As a reminder, the facility was shipping an average weekly rate of 32 containers in December and January, and achieved a new high of 44 containers last week. For further context, in the weeks prior to the reduced production levels last fall, we were shipping an average of 36 containers per week, with a low of nine containers per week during the lockdown period. The recent container shipping levels provide a strong inventory position to restock our distribution centers and meet customer demand.

Continuing to our Engineered Building Solutions segment, EBITDA was $2.2 million or 9% of fiscal 2022 fourth quarter revenue. As we mentioned last quarter, we added headcount in key markets to support our go-to-market strategy. Bidding and booking trends have continued to demonstrate the positive results from this decision. As of the end of the fiscal 2022 fourth quarter, our book-to-bill ratio for the trailing four quarters, improved to 1.1:1. And as Joe mentioned in his opening remarks, we entered May with a record backlog in this segment. These indicators provide a positive and solid trend, and a good starting point for fiscal 2023.

Our Specialized Reliability Solutions segment, posted another solid quarter of organic revenue growth of $9 million or 43%, due to incremental sales volumes, driven by improving end market dynamics and numerous price initiatives over the past fiscal year. During fiscal 2022, in response to rapidly rising cost inflation, we altered our pricing strategy, decreased the time between notice and effectiveness. We will continue to price our products to protect our profitability. Segment adjusted EBITDA margin improved to $5.3 million and 17% in the fiscal 2022 fourth quarter, compared to $3.5 million and 17% in the prior year.

Turning now to our fiscal full year results. We achieved record consolidated revenue of $626 million, representing 49% growth versus the prior year, with all segments reporting organic growth. In the current year, we reported a 46% increase in adjusted EBITDA to $133 million, equating to an adjusted EBITDA margin of 21% as compared to $91 million and 22% in the prior year. These results translated into record adjusted EPS of $4.39, compared to $3.36 in the prior year period.

As compared to the prior year, our Contractor Solutions segment, with $416 million of revenue, accounted for 66% of our consolidated total, and delivered $171 million or 70% total growth, comprised of organic revenue growth of $68 million, and inorganic growth of $103 million from the TRUaire and Shoemaker acquisitions. Segment adjusted EBITDA increased more than 50% to $124 million or 30% of revenue compared to $81 million and 33% of revenue in the prior year.

Continuing to our Engineered Building Solutions segment in the current fiscal year, this segment accounted for approximately 16% of our consolidated revenue at $97 million. This reflected a 2% increase over the prior year. During this time, the American Institute of Architects reported a 6% decline in comparable construction. Segment EBITDA was $13 million, a margin of 13%. The previously discussed positive backlog trends provide confidence in this new fiscal year.

Our Specialized Reliability Solutions segment posted organic revenue growth of nearly 50% or $38 million, due to incremental sales volumes, driven by strengthening end market dynamics, numerous price initiatives during the last year, and improved execution. Segment adjusted EBITDA and adjusted EBITDA margin improved to $15 million and 13%, compared to $9 million and 11% in the prior year. One additional note on this segment. In February of 2022, we ceased all business activity into Russia, which was immaterial to our fiscal 2023 budget.

Transitioning to the strength of our balance sheet. We ended fiscal 2022 with $17 million of cash and reported cash flow from operations of $69 million, a 4% increase over the prior year period. This was due to improved profit in accounts payable management, partially offset by $49 million for incremental strategic inventory investment to support strong demand and higher accounts receivable of $27 million, associated with the sales growth. The decision to hold more inventory over the last year has proved beneficial, as we're able to better meet customer demand when at times our competitors cannot.

As Joe mentioned in his opening remarks, during fiscal 2022, we invested in organic capital expenditures, acquisitions, dividends, and share purchases. Organic capital expenditures have been focused on enterprise resource planning systems, new product introductions, capacity expansion, continuous improvement, automation, as well as safety and compliance initiatives. Repurchases of shares under our share repurchase programs during the current and prior fiscal years, were $14 million or 126,000 shares, and $7 million or 115,000 shares, respectively. Subsequent to the end of the fiscal year, we have invested an additional $6.7 million and repurchased over 62,000 shares.

As part of our broad capital allocation strategy, we remain committed to opportunistic market repurchases, guided by our intrinsic value model. This fiscal year, we invested $36 million of acquisition capital in cash, partially funded with borrowings under our revolver. Due to these investments, as of March 31, 2020 2, $243 million was outstanding under our $400 million revolving credit facility, which resulted in a borrowing capacity of $157 million. This resulted in a leverage ratio in accordance with our credit facility of approximately 1.7 times debt to EBITDA, well within our stated range of one to three times. We remain committed to strong free cash flow generation, including working capital management, and sufficient liquidity to support our strategic objectives.

The company's effective tax rate for fiscal 2022 was 26.4% on a GAAP basis, which differed from our previous expectation of 25%, due to an increase in state tax expense, net of federal benefits, and non-deductible executive compensation. We expect a 25% to 27% tax rate for the full 2023 fiscal year. As we look to fiscal 2023, we expect to have substantial revenue growth across all three segments, and at the consolidated level, which, when coupled with meaningful operating leverage, will result in strong year-over-year EBITDA and EPS growth.

As we look at our cadence of earnings across the four quarters, we believe our fiscal first quarter profitability comparison will be the most challenging year-over-year due to the higher cost of inventory that we expect to be sold this quarter. Having said this, we expect all four quarters to produce historically strong results, with our third quarter being the relative lowest due to traditional seasonality. We do not expect as much variability between quarters, however, as we've historically experienced, due to the acquired GRD businesses, TRUaire, and Shoemaker, which demonstrate less seasonality than the rest of our HVAC/R business.

As we look at our segments, we expect revenue growth in our Contractor Solutions segment to continue outpacing the categories we serve, driven by a combination of price appreciation and volume growth. Margins are in sharp focus, as we manage through ongoing volatility and international freight rates and inflation in materials. With the Engineered Building Solutions backlog at all-time highs, our team is focused on execution and expects to outperform the construction end market while maintaining margins. Our Specialized Reliability Solutions segment, expects to deliver another year of strong topline growth and improving margins.

With that. I'll now turn the call back to Joe for closing remarks.

Joe Armes

Thank you, James. As we conclude one fiscal year and begin another, I want to take a moment to reflect on a few metrics from a longer-term perspective. Our revenue CAGR from fiscal years 2017 through 2022, was 14%, and we expect to outpace that performance in fiscal 2023. Our adjusted EBITDA margin during this period was 20%, and we expect to maintain that performance in fiscal 2023. As we look ahead, we believe that our strong customer relationships, enviable distribution channels, best-in-class products with hard earned reputation for quality and innovation, attractive and diverse end market exposure, and our healthy balance sheet to execute on growth opportunities, gives us every reason to be enthusiastic about fiscal 2023. Prior to fiscal year 2021, we made a number of decisions that put us in a position of strength and gave us strategic options once the global COVID pandemic occurred. By treating our employees well, we maintained a dedicated, well-trained workforce, who diligently produced and shipped products that our customers needed during a period of uncertainty and turmoil. In conjunction with these efforts, we invested in inventory in order to serve our customers well as a resilient and reliable business partner.

When demand for our innovative value-added products accelerated, our team managed our supply chains effectively and diversified our sourcing to ensure that we had product on the shelves and available to our customers where and when they needed it. And now as we enter fiscal year 2023, all of these factors come together to position CSWI particularly well to deliver another exceptional year of top and bottom-line growth, and to provide compelling returns to our shareholders. As always, I’d like to conclude by thanking my colleagues here at CSWI, who collectively own approximately 4% of our company through our employee stock ownership plan. And also, to thank you, our shareholders, for your continued interest in and support of our company.

With that, operator, we're now ready to take question.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your question.

Stefanos Crist

Hi, this is Stefanos Crist calling in for John. Thanks for taking my questions. Can you just talk about trends in Q1 in each of your businesses? And maybe just, have you seen strong continuation of strong - of demand and inflationary pressures?

Joe Armes

Yes, I'll start. This is Joe. Yes, we've seen continued strong demand. We have not experienced any softness at this point. Inflationary pressures have seemed to have plateaued, although we're not extrapolating any of that forward at this point in our expectations. But yes, I would say our demand continues at very high levels. We're very pleased with recent activity.

James Perry

Yes. I would just add, as we look at sell-through rates with our distributors on the HVAC side, we're seeing - we're shipping a lot of product. We talked about containers coming over from Vietnam. So, we've restocked our inventory in the GRD space. Our distributors are producing good results as well from everything we see. We talked about the backlog at the end of April, which is a little unusual for us for Engineered Building Solutions, because we saw in April, very strong demand in that backlog group. We've seen that grow now for a few months and we wanted to point out a pretty real-time statistic there. And then, our Specialized Reliability Solutions, as industrial production maintained healthy levels, continues to see good demand. And as we mentioned, under Mark's leadership and some realignment of the sales team and some of the commercial efforts across the businesses, we're really seeing some good demand continue. And as Joe said, on the inflation side, we're seeing some freight rates come down temporarily. We'll see, as China starts shipping product again, what that does. We're not getting ahead of ourselves, but we've seen a little bit of easing in that pressure for now.

Stefanos Crist

That's great. Thank you. And then just looking out beyond Q1, can you give us your thoughts on what a recessionary environment might look like across each of your businesses and maybe just some color on how they've performed in prior downturns?

Joe Armes

Yes. Again, this is Joe. I'll start. I would say, we're certainly not immune to macro trends. And so, we're not going to claim to be immune to that. However, historically, these businesses have performed well. The largest of our businesses, the Contractor Solutions, has performed exceedingly well during recessions. Remember, we do a lot of MRO-type work there, and the products that we provide for cleaning, for maintenance, for repair, is really an installed base business. And so, as the installed base has grown, the opportunities for HVAC contractors to use our products in the field, has grown. And in times of recession, sometimes people will repair versus replace. And so, we're able to serve that market as well. And so, consumable products in in our Specialized Reliability Solutions, are more resistant to downturns than capital equipment. And so, I would say the historical kind of backdrop, gives us confidence in recessionary periods. And again, we've got a balance sheet built for that, where we can make appropriate investments and work closely with our customers and our supply chain partners to increase efficiency and make sure that we are the single most reliable supplier to our customers during difficult times, which we've done during the pandemic.

Stefanos Crist

Perfect. Thank you. And if I could just squeeze in one more, just the decision to go from LIFO to FIFO. Could you talk about what went into making that decision and what you see as the impact going forward?

James Perry

This is James. I think I'll take that one. Yes, as we bought TRUaire, we bought Shoemaker, we've brought in more businesses, bigger company, and a couple of our larger businesses were all LIFO. And it just wasn't as logical anymore to have a couple of our larger businesses on a different inventory method and have to run through the accounting for all of that each quarter. So, it was a good time to bring that all together. A year ago, as you recall, we re-segmented our businesses as a result of TRUaire. And as we brought that in, and as we brought TRUaire onto our ERP system April 1 in anticipation of that, aligning the inventory accounting across the whole company was just logical. You'll see in our press release and then even more so in the 10-K that we filed early this morning, the results of that. It was a $0.04 benefit for the quarter. Not much. Taxes went the other way. So, at the end of the day, it didn't really affect earnings much net-net for the year. And you see our prior years, there wasn't much impact there. In an inflationary environment, sometimes it can have a bigger impact and it just didn't. So, it felt like a really appropriate time to do that at the end of the fiscal year, starting our new fiscal year April 1 with everybody on one system.

Stefanos Crist

Perfect. Thanks so much and thanks for taking my questions.

Operator

Our next question comes from the line of Chris Howe with Barrington Research. Please proceed with your question.

Chris Howe

Good morning, everyone. Thanks for taking my questions. First off, starting with Engineered Building Solutions, you mentioned the record backlog, a good month of April in filling that backlog. How should we think about the flow-through of that backlog or the mix of that backlog when we consider the construction end market and the optimism surrounding that market as we push through fiscal year ’23?

James Perry

Good morning, Chris. This is James. Good to hear from you. Thanks for being on the call. We feel really good about the backlog obviously, and we're being really selective on the projects we take, making sure the margin is there, things are priced appropriately. We're starting to see the California market open back up. Canada is opening back up. Those are two key markets for Smoke Guard and Greco, respectively. And Scott and his team, again, I mentioned earlier, have kind of reorganized how we go-to-market from a commercial standpoint. That's bearing fruit now. So, in direct response to your question, as we normally have in the Engineered Building solutions segment, these are longer-term projects. So, the flow-through is still going to take a while. We've talked the last year, so we've been filling in with some shorter-term, lower margin, more competitive projects. We've now been able to continue to have some of those fill-ins, but really now adding projects that are going to be six, nine, 12 months out. So, I think you're going to see the momentum in the year build, both from a topline and bottom-line perspective in that segment, as those projects come to bear. And then, we'll continue to sell into that market and start filling up the next fiscal year, fiscal 2024, with the same type of work.

Joe Armes

And Chris, this is Joe. I think it's really important to emphasize something James said there. And that is, we are absolutely persuaded that the quality of this backlog is much better than it's ever been as well. So, highest ever from a quantity standpoint, but also highest ever from a quality standpoint as it relates to quality projects, well thought out projects and contracts and pricing that is going to provide the kind of margins that we expect for that business.

Chris Howe

Okay, certainly points to continued year-over-year revenue growth in Engineered Building Solutions, considering your comments there. There's a good amount of retention within the backlog, given its quality.

James Perry

Yes.

Chris Howe

Okay. And then, shifting to the current quarter, you performed very well versus expectations. As we think about that pricing component, some of which was already in place, some of which is ongoing, how should we think about the incremental or the impact on revenue in Q4 and on margin, just from pricing? How much did you get?

James Perry

Yes. It's hard to break that up as you well know. In Q4, there was probably a little more that came from pricing than volume. For the full year, volume was the bigger factor when we look at it that way. We won't break it down in much more detail than that. That's tough to do segment by segment. But yes, we mentioned on our last earnings call that we'd had some pricing that was just coming into effect in Q4, kind of catching up with some of the inflation. We've seen some of the raw material and freight rates spike prior to that price increase. So, we did some good catch-up, and I think now we're really well positioned with the price increase we took during the fourth quarter and prices increases we've taken now already in the first quarter. We're going to continue to see nice price momentum. So, price was certainly a factor and that helped us maintain and then get a little ahead of profitability. So, to your point, the performance that Joe and I both talked about, the work that Don and his team and Scott and his team and Mark and his team have done with pricing, while continuing to push volume, really came through in Q4. And I think as we talked about, the substantial growth we see on the top and bottom-line across the board for fiscal ‘23, we're going to see that momentum continue.

Chris Howe

Okay. So, it seems you're going to stay sensitive and highly considerate of price on an ongoing basis, despite maybe some plateauing in the environment.

James Perry

Yes, we are. We've got our next round of price increases that - and some businesses have gone through. Some are coming up in the next couple of weeks in fact, given the notice period you give. And some of that pricing gets us a little ahead of where costs are right now. But as we mentioned earlier, there's still a lot of volatility in the cost. The freight rates have come down a little. You see that. You've seen some port congestion on the west coast clear up, but that's also - some of it is a result of China being shut down with their most recent COVID lockdown. So, a lot of folks expect that to come back up, but we feel right now that our pricing puts us in very good shape. And remember, we've always talked about across our businesses, we feel good about the stickiness of our pricing as well. So, if we were to see some inflation in sub side, we were to see some costs come down in the medium and longer-term, we think we'll be able to hold onto quite a bit of this pricing. That's historically how the markets work. There's always going to be some competitive pressure, but that's how we have the opportunity to continue to claw back at that margin. But from a dollar perspective, we feel very good about where we are this fiscal year.

Chris Howe

Okay. And then my last question and then I'll hop into the queue again. As we think about pricing, you mentioned the retention of price, some of which benefits from the low cost of your products for the TRUaire business. I haven't asked the question in some time since you acquired it. Now that you're up to 44 containers, how would you assess the competitive landscape for the TRUaire business right now?

James Perry

It remains tough. There's still a couple of larger competitors out there. There are some regional competitors. We bought Shoemaker, which gave us a nice foothold in the Pacific Northwest, and they do some things across the Northern interior of the country as well. Those two companies are now well integrated, working well with each other, looking at how we can go-to-market with each other's products most efficiently. So, that's working very well, which was the whole strategy behind bringing Shoemaker into the Contractor Solutions portfolio. But the competition remains strong, both from a price standpoint and just overall competitive marketing pressures. We think that with our direct supply chain from Vietnam that we control and with container volume picking back up and with the strong management, we've had our teams make a couple of trips over there, even in the last couple of months. And they come back with phenomenal stories of how well the team is doing. So, the management on the ground is doing well in Vietnam. The management on the ground here with our distribution centers is doing really well. And all that coming up to the Contractor Solutions management team, is going really well. We talked about being able to now have RectorSeal and TRUaire products in each other's distribution centers, now that we've merged the companies and brought the ERP system fully online for TRUaire. So, competitive pressures remain, without a doubt, but we think our teams are staying ahead of the competition in all aspects, and continue to be the leader in quality and the leader in kind of what customers are looking for.

Chris Howe

Great. Thanks for taking my questions. Appreciate it.

Operator

Our next question comes from the line of Julio Romero with Sidoti & Company. Please proceed with your question.

Julio Romero

Hey, good morning, everyone. I wanted to start on the Contractor Solutions segment. The press release mentioned there was some increased OpEx in the segment. I think some of that was due to higher sales commissions, but maybe if you could speak to the segment OpEx in the quarter and how that should trend going forward.

James Perry

Yes, nothing unusual. Yes, you had some higher commissions as a result of higher sales. You had some ERP costs in the quarter of course as we brought that online. Nothing terribly unusual. So, going forward, I think we're going to continue to pick up on the operating leverage of - OpEx is up a bit where it needs to be. When you see the kind of growth that Contractor Solutions had this year, bringing on TRUaire and Shoemaker, as well as organic growth, you're going to need to pick up some OpEx and that's normal. But I think the leverage we're seeing, taking revenue all the way down to EBITDA and then through EPS at the consolidated level, we're seeing some nice leverage. And I think we're at the levels now from an OpEx perspective that we can see this year's growth see even more leverage as we work our way down the income statement.

Julio Romero

Got you. That's very helpful. And maybe switching gears to the Specialized Reliability Solutions segment, you had some really nice performance there. And you mentioned the change in the amount of time between pricing notice and effectiveness. How much of a driver was - of the improved performance was that change? And maybe if you could rank water more broadly, what the drivers of the improved performance have been for that segment.

James Perry

Yes. I'll jump in and then let Joe as well. We've certainly seen increased volumes in that business without a doubt. Demand has come back. Our go-to-market strategy has gotten better and more precise on going after the right products and the right customers in the right geographies, as we've talked about under Mark's leadership since last June. But pricing certainly had an impact. When you saw oil prices spike over the last few months, it's come down a bit, but still at elevated levels. We were able to get that through pretty quickly. And the team really took an approach starting kind of last late fall that oil prices were being pushed through to us very quickly, and we needed to get the price through very quickly. So, the backlog was re-priced. Customers had to reconfirm their orders and they did. As we've had subsequent price increases, and that's plural, in the months since then, we've pushed those through with very, very little notice. And we want to maintain the customer relationships and make sure that that's strong, but they need the product. And as we see costs come through that quickly, then we're pushing those through as well. Each of our segments have different approaches to that on what the market bears and what competitive pressure allows, but in that market, we've been very successful and have lost very little business by pushing that through. So, I think in terms of being what effect that's had, rather than a lag of a month or two, as we've had in the past, being able to get that through quickly brought that forward real time. So, as opposed to saying, hey, next quarter we'll see the effect, we saw it within a matter of days and weeks.

Joe Armes

Yes. Julio, this is Joe. The other thing I would add there is just volume really matters in that business. And so, as demand has come back, our operational efficiency and our overhead absorption has improved pretty meaningfully. And so, we're doing a better job of running that plant with the higher volume, and really doing a better job of taking advantage of the demand that's there. And so, there's a fair amount of operational excellence that's responsible for this. But obviously, the demand is a big driver.

Julio Romero

Yep, absolutely. And I guess, just last one for me is on the outlook. I believe I got most of your commentary, Joe, in the prepared remarks, but I believe you mentioned you expect revenue growth in all segments and then revenue growth of at least 14% for CSW overall and an EBITDA margin in the 20% range. Is that all about right?

Joe Armes

Yes. I think that's exactly what I said.

James Perry

Yes. Joe said we'll exceed that CAGR 14%, at least maintain the 20% EBITDA growth. And I talked about in my remarks that the first quarter has a tough comp. We had a really strong first quarter last year as demand was picking up, and we're going to have a really good first quarter this year. We expect all of our quarters to be historically strong, but that's the toughest comp. And then the other quarters, we think we've got nice comps to work against. Third quarter is a little softer than the other quarters, just remember, Julio, from a seasonality standpoint, but not nearly as much as before, given the strength of TRUaire and Shoemaker. And there's just less seasonality. So, we're going to have nice historically comparable results in all four quarters. Just remember that cadence. You have a little bit of dip in Q3, but overall, a lot of strength.

Julio Romero

Got it. Thanks very much for taking my questions.

Operator

There are no further questions in queue. I'd like to hand the call back to management for closing remarks.

Joe Armes

Great. Thank you, Doug. We just want to thank everyone for participating in this quarterly call and look forward to the next time we're able to be together. So, thank you for your interest in CSWI.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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