CSW Industrials 2027 財年第二季財報電話會議：營收成長 31%，EBITDA 創新高

重點摘要

• 2027 財年第二季營收年增 31%，達創紀錄的 3.61 億美元，其中包括 10.2% 的合併有機成長。
• 調整後 EBITDA 成長 33%，達創紀錄的 9,700 萬美元，調整後 EBITDA 利潤率擴張 50 個基點至 26.8%。
• 調整後 EPS 成長 24% 至 3.66 美元。成長幅度落後於調整後 EBITDA，主因併購活動及股票回購後，淨利息費用增加了 1,110 萬美元。
• 承包商解決方案（Contractor Solutions）實現 13% 的有機成長，而專業可靠性解決方案（Specialized Reliability Solutions）實現約 13% 的有機成長，並將調整後 EBITDA 利潤率擴張 490 個基點至 21.5%。
• 營業現金流達到創紀錄的 9,500 萬美元，使 CSW Industrials 得以償還 9,100 萬美元的債務。淨債務對 EBITDA 比率由上一季的 2.37 倍下降至 2.1 倍。
• 管理層預計 2027 財年調整後 EBITDA 與 EPS 將實現顯著成長，同時擁有強勁的自由現金流，並繼續尋求可提升效益的併購機會。

核心財務數據

自調整後 EPS 中扣除的項目包括：稅後已收購無形資產攤銷 1,150 萬美元（或每股 0.70 美元），以及與併購相關的整合成本 90 萬美元（或每股 0.05 美元）。

業務與營運表現

承包商解決方案

營收成長超過 37% 至 2.86 億美元，占合併營收的 78%。併購貢獻了 5,100 萬美元，而有機營收增加 2,680 萬美元，增幅為 13%，定價與出貨量皆有貢獻。管理層表示，出貨量的貢獻略高於價格。

調整後 EBITDA 成長 31.5% 至 8,900 萬美元。由於運費與原料成本上升抵銷了部分定價效益，該部門利潤率由 32% 降至 31%。

該部門約 75% 的營收與替換及維修需求相關，約 25% 受新屋建案影響。管理層表示，這種產品組合支持了跨經濟週期的韌性。

CSW Industrials 已宣布將在今年晚些時候生效中個位數百分比的調價。公司預計這將因應運費、大宗商品及關稅相關成本的上升，但管理層警告，通膨與定價的時間差將給近期利潤率帶來壓力。

MARS 綜效已接近 1,500 萬美元，超過原定 1,000 萬美元的目標。所有已確認的行動均已落實，且隨著 CSW 迎來收購一週年，大部分節省金額均已實現。

專業可靠性解決方案

營收成長 28% 至 5,000 萬美元。併購貢獻了 580 萬美元，而受出貨量、定價、產品可用性及客戶服務推動，有機成長貢獻了 490 萬美元（約 13%）。

調整後 EBITDA 成長 66% 至 1,100 萬美元。利潤率擴張 490 個基點至 21.5%，高於該部門 20% 的長期目標。此改善反映了重組節省、定價、有利的產品組合以及高利潤率併購。

管理層表示，2026 財年的兩筆併購已基本完成整合，並認為長期來看利潤率仍有保持在 20% 以上的空間。2027 財年期間已宣布四次調價，以因應石油類原料成本上升。

工程建築解決方案

扣除 Greco 業務後，營收成長 2.4% 至 2,270 萬美元。調整後 EBITDA 為 440 萬美元，利潤率為 19%，而去年同期為 22%。

保留業務在該季度結束時的近四個季度接單出貨比為 1.05:1，且在手訂單健康。在專案定價改善及商業建築最終復甦的支撐下，管理層繼續以中長期利潤率保持在 20% 以上為目標。

CSW Industrials 正持續推進出售 Greco U.S. 的計畫以及撤出 Greco Canada 的策略。

管理層展望

管理層維持對 2027 財年積極的展望。扣除 Greco 業務後，公司預計每個部門都將實現有機營收與 EBITDA 的年成長。

在合併層面，管理層預計調整後 EBITDA 與 EPS 將顯著成長，且自由現金流強勁，較 2026 財年大幅增加。公司預計有機營收成長將超過其所服務終端市場的成長。

假設無額外併購或大規模股票回購，2027 財年的利息費用預計約為 4,900 萬美元。無形資產攤銷預計約為 6,100 萬美元。

管理層預計 2027 財年 GAAP 稅率約為 22% 至 23%，調整後稅率約為 25% 至 26%，各季度將根據特定項目有所變化。

風險與關注焦點

• 運費、原料及石油類原料成本正上漲，而持續的關稅仍是費用逆風。
• 定價措施通常能在金額上抵銷成本增加，但實施延誤可能會在短期內給利潤率百分比帶來壓力。
• 併購及股票回購後債務增加，顯著增加了利息費用，不過償還債務使適用借貸利差降低了 25 個基點。
• 三個部門均面臨一定的冬季季節性因素，管理層表示這可能會適度減少下一季度的營收與獲利。
• 工程建築解決方案仍受到疲軟的商業建築市場影響，且退出 Greco 的時間點仍不確定。
• GAAP EPS 將反映利息費用增加及收購無形資產攤銷增加的全年影響。

法說會分析師問答重點

• 有機成長結構：管理層表示，出貨量與定價均支持了承包商解決方案（Contractor Solutions）與專業可靠性解決方案（Specialized Reliability Solutions）約 13% 的有機成長，其中出貨量貢獻略高。
• 定價能力：CSW 表示，尚未看到客戶對漲價的接受度出現重大變化。管理層將此部分歸因於其產品僅占系統總成本相對較小但高價值的比例。
• 維修需求：在經濟可行時，客戶繼續偏好維修。管理層將公司在承包商解決方案中 75% 的替換與維修曝險視為投資組合韌性的來源。
• 交叉銷售：收購 MARS 與 Aspen 創造了向現有客戶銷售新添加產品的額外機會。管理層表示，已贏得數個客戶，預計下半年將獲得更多已承諾的業務。
• 併購管道：管理層形容併購管道強勁，並指出活動略有增加。公司認為，如果市場疲軟改善了估值，其相對財務實力可能會對交易提供支持。
• SRS 利潤率：管理層表示，21.5% 的利潤率背後並無異常有利因素，並相信透過整合效益、定價與營運執行，長期來看還有進一步上升空間。

法說會完整逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Greetings. Welcome to the CSW Industrials Fiscal 2027 Second Quarter Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Alexa Huerta. Thank you. Alexa, you may begin.

Alexa Huerta

Thank you, Jasmina. Good morning, everyone, and thank you for joining CSW Industrials Fiscal 2027 Second Quarter Earnings Call. Joining me today on the call is Joseph Armes, our Chairman, Chief Executive Officer and President of CSW Industrials; and James Perry, our Executive Vice President and Chief Financial Officer.

Earlier today, we issued our earnings release, updated Investor Relations presentation and quarterly report on Form 10-Q. Each is available on the Investors section of our website at www.ir.csw.com. Today's call is also being webcast, and replay information is included in the earnings release.

Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements. These statements reflect our current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially.

Additional information about these risks is included in our earnings release, our comments on today's call, our annual report on Form 10-K and our other filings with the SEC. Except as required by law, we do not undertake any obligation to update any forward-looking statements.

I will now turn the call over to Joe.

Joseph Armes

Thank you, Alexa, and good morning, everyone. Today, we reported all-time record results in several metrics, including revenue, adjusted EBITDA, adjusted EPS and cash flow for the first half of fiscal 2027, underscoring the wisdom of our strategy, the excellence of our execution and the resilience of our business. Recent acquisitions have strategically expanded our product portfolio and enhanced our growth trajectory.

Consistent with our enduring capital allocation strategy, we prioritized debt reduction during the quarter, paying down $91 million in outstanding debt and further deleveraging the company. CSW also returned a total of $10.7 million in cash to shareholders, including $5.8 million in open market share repurchases and $4.9 million in dividends.

Our net debt-to-EBITDA ratio declined from 2.37x at the end of fiscal first quarter of 2027 to 2.1x at the end of the fiscal second quarter, driven by lower net debt and EBITDA growth. Our strong balance sheet continues to -- our strong balance sheet and record cash flow continues to give us the flexibility to pursue investment opportunities as they arise.

End market activity followed a more typical seasonal pattern during the quarter despite continued macroeconomic uncertainty. All 3 of our business segments delivered impressive top line results when excluding the Greco business from EBS, and we achieved consolidated EBITDA margin expansion.

Our Contractor Solutions segment delivered strong organic revenue growth of 13%, accompanied by 31.5% adjusted EBITDA growth. The addition of MARS and Aspen has broadened our product portfolio, expanded the repair solutions we offer and increased our scale.

Together, these capabilities position us to continue to serve customers more effectively and capture additional share of wallet growth through cross-selling. We continue to expect this segment to outgrow within markets served and deliver healthy mid- to high single-digit organic growth through the cycle.

Our Specialized Reliability Solutions segment delivered record results across the board, including EBITDA margin above our 20% target for this segment. The integration of the 2 recent acquisitions continue to drive accretion. Adjusted EBITDA margin expanded 490 basis points, and we expect margin performance to remain strong for the full fiscal year. Strong organic revenue growth of 12.7% was a result of pricing discipline, volume growth and strategic product placement and availability.

We continue to advance the planned exit of the Greco businesses within our Engineered Building Solutions segment. Excluding the Greco businesses, the segment delivered organic revenue growth, a solid EBITDA margin, and exited the quarter with a healthy order backlog and increasing book-to-bill ratio. We remain confident in this segment's outlook, differentiated product offering and margin trajectory.

At this time, I will turn the call over to James for a detailed review of our financial performance. And following his update, I will return with some closing comments.

James Perry

Thank you, Joe, and good morning, everyone. As Joe noted, CSW delivered another outstanding quarter, highlighted by record results and continued progress integrating our recent acquisitions. I will review our consolidated performance, segment results, cash flows and balance sheet.

For the second quarter of fiscal 2027, consolidated revenue increased $84 million or 31% year-over-year to a record $361 million. Growth was driven by strong organic performance and contribution from recent acquisitions. Consolidated organic revenue growth was 10.2%, reflecting impressive double-digit growth in the Contractor Solutions and Specialized Reliability Solutions segments as well as growth in the Engineered Building Solutions businesses that we will retain following the planned exit of the Greco businesses.

Adjusted gross margin was 42.1% compared with 43% in the prior year period, a decline of 90 basis points, primarily attributable to increased ocean and domestic freight expense as well as rising raw materials costs. Although we were impacted by this inflation as well as ongoing tariffs, planned pricing actions across our businesses offset most of the dollar increases.

Consolidated adjusted EBITDA for the fiscal second quarter rose to a record $97 million, an increase of $24 million or 33% from the prior year period. reflecting stronger market demand and the earnings power of our expanded product platform. Adjusted EBITDA margin expanded 50 basis points to 26.8%, supported by the contribution from recent acquisitions, strategic pricing actions, synergy and restructuring realization and disciplined cost controls as we grow. These results highlight the scalability of our business model and the margin opportunity embedded in our product portfolio.

Adjusted EPS for the fiscal second quarter was $3.66, an increase of 24% from the prior year period. As previously communicated, EPS growth trailed EBITDA growth primarily due to net interest expense, which increased by $11.1 million, reflecting the higher debt balance associated with significant acquisition activity and share repurchases over the past year.

Turning to items excluded from adjusted EPS. The fiscal second quarter included, on an after-tax basis, $11.5 million or $0.70 per share of acquired intangible amortization and $0.9 million or $0.05 per share of acquisition-related integration costs.

In Contractor Solutions, fiscal second quarter revenue was $286 million, accounting for 78% of our consolidated revenue and representing growth of more than 37% from the prior year quarter. Acquisitions contributed $51 million or 24% of growth, while our organic growth contributed $26.8 million or an impressive 13%.

Contractor Solutions delivered its third consecutive quarter of organic growth, supported by both pricing and volume. Of note, we now estimate that approximately 75% of this segment's revenues are tied to replacement and repair demand. Our revenues tied to new housing comprises only about 25%, positioning us very well in various economic cycles.

Contractor Solutions generated adjusted EBITDA of $89 million, representing a margin of 31% compared with $68 million and a margin of 32% in the prior year period. The year-over-year margin decline primarily reflected higher freight and raw materials costs, partially offset by pricing actions.

Of note, looking ahead, we announced a mid-single-digit price increase in this segment just this week to offset the rising costs. It will go into effect later this calendar year. As costs have risen quickly in recent months, there's a bit of a timing mismatch before pricing takes effect to offset cost.

I would like to provide one final update on the MARS synergies. We are approaching a total of $15 million in synergies related to the acquired MARS business, surpassing our originally stated target of $10 million. All of the synergies have been actioned and most have been realized as our first year of ownership comes to a close.

Specialized Reliability Solutions revenue increased 28% to $50 million. Acquisitions contributed $5.8 million or 15%, while organic growth contributed $4.9 million or 13%, driven by volume growth, pricing actions and our continued focus on product availability and customer service.

Adjusted segment EBITDA in the second quarter was $11 million, an increase of 66% and adjusted EBITDA margin expanded 490 basis points to 21.5%. The improvement reflects restructuring savings from actions taken earlier this calendar year, multiple strategic pricing actions, favorable product mix and contribution from the higher-margin acquisitions. Integration of the 2 businesses acquired in the fiscal third quarter of 2026 is now substantially complete.

In response to rising costs for certain petroleum-based inputs in the Specialized Reliability Solutions segment, we have announced 4 separate price increases during fiscal 2027, including the most recent increase earlier this month. We continue to monitor input costs closely, and we'll take additional pricing as appropriate. Demand has remained resilient to date in this segment. And in fact, we recorded our highest ever incoming order day in early October.

Within Engineered Building Solutions, we previously announced our plan to sell the Greco U.S. business and strategically exit the Greco Canada business. The Greco U.S. business was classified as held for sale as of March 31, 2026. We will continue to update our progress on this as warranted on future earnings calls.

Excluding the Greco businesses, Engineered Building Solutions segment revenue was $22.7 million, an increase of 2.4% from the prior year period. Adjusted EBITDA was $4.4 million with an adjusted EBITDA margin of 19% compared with 22% in the prior year. The remaining EBS businesses continue to perform well, supported by a trailing 4-quarter book-to-bill ratio of 1.05:1 and a healthy backlog despite a shorter historical book-to-bill cycle, reducing the amount of revenue captured in the reported backlog. We have raised our prices as materials and freight costs have risen and expect to have another round of price increases in the near future across all of our product lines.

Turning to consolidated cash flow. Operating cash inflow reached a record $95 million in the fiscal second quarter compared with $62 million in the prior year quarter. This 54% year-over-year increase primarily reflected contributions from increased organic sales and acquisitions completed during fiscal 2026, partially offset by higher interest expense associated with increased borrowings.

Free cash flow, defined as cash flow from operations less capital expenditures, was an inflow of $92 million in the fiscal second quarter compared with an inflow of $59 million in the prior year period. As Joe mentioned, this allowed us to repay a significant amount of debt during the quarter, which led to a lower pricing tier for our revolver and term loan, essentially offsetting the most recent increase in rates by the Federal Reserve.

Our effective tax rate for the fiscal second quarter was 24.1% on a GAAP basis. We expect amortization of intangible assets to be approximately $61 million for fiscal 2027. At quarter end, we had $767 million of debt outstanding under our revolving credit facility and Term Loan A.

Reflecting the higher debt balance as compared to last year, fiscal second quarter interest expense was $12.5 million compared with $1.3 million in the prior year quarter. We currently expect fiscal 2027 interest expense of approximately $49 million, assuming no additional M&A or outsized share repurchase activity.

At quarter end, our net debt for covenant purposes was $734 million, resulting in a net debt-to-EBITDA leverage ratio of 2.1x. Accordingly, the interest rate on both debt instruments will now be SOFR plus 175 basis points, a 25 basis point reduction. As a reminder, in the third quarter of fiscal 2026, we entered into an interest rate swap that fixed SOFR at 3.42% for 3 years on $300 million of our Term Loan A balance. That fixed rate remains well below the current SOFR level and continues to generate meaningful interest expense savings.

We continue to maintain a strong balance sheet with a net debt-to-EBITDA well within our target range of 1x to 3x. This provides ample liquidity to support growth initiatives and broader capital allocation priorities. During the quarter, we repurchased approximately $5.8 million of our common stock in the open market at an average price of $298 per share. These repurchases reflect our confidence in CSW's long-term value creation opportunity and our disciplined approach to capital allocation.

Our outlook for fiscal 2027 remains positive, supported by buying patterns that are closer to historical norms. Excluding the Greco businesses within Engineered Building Solutions, we expect each segment to deliver year-over-year organic revenue growth and EBITDA growth, driven by resilient demand, acquisition contributions, cost management and continued strong execution.

At the consolidated level, we expect significant growth in adjusted EBITDA and EPS in fiscal 2027. GAAP EPS will reflect the full year impact of higher interest expense and increased intangible amortization from our recent acquisitions. As a result, adjusted EBITDA remains the clearest measure of our underlying profitability growth and the expanding earnings power of the business.

We also expect to generate strong free cash flow in fiscal 2027, a significant growth from the fiscal 2026 level. Finally, we still expect our fiscal year 2027 GAAP tax rate to be approximately 22% to 23% and the adjusted tax rate to be approximately 25% to 26%. Quarterly rates will vary based on specific items.

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

Joseph Armes

Thank you, James. CSW delivered an impressive fiscal second quarter 2027 with revenue growth of 31% and margin expansion, supported by volume leverage, acquisition integration and synergy realization. Recent acquisitions are filling in previous product portfolio gaps, strengthening our wallet share through new business with legacy customers through cross-selling and accelerating our growth trajectory.

All teams are executing with discipline while delivering strong above-market profitable growth. Our planned exit of the Greco businesses further demonstrates our commitment to active portfolio management and long-term shareholder value creation.

Our execution strategy for the year remains consistent. We will prioritize driving long-term shareholder value, allocating capital efficiently on a risk-adjusted returns basis, maintaining balance sheet resilience, outgrowing all of the end markets we serve, rigorous cost management and accelerating profitability.

We still expect full year organic revenue growth in excess of our end markets, along with significant growth in adjusted EBITDA, adjusted EPS and free cash flow. At the same time, we will continue to pursue accretive acquisitions that enhance our portfolio and strengthen our ability to serve our customers. CSW takes considerable pride in being a trusted partner to our customers and in making it as easy as possible to do business with us.

Our Contractor Solutions segment was just recently named Home Depot's 2025 Plumbing Partner of the Year, which is an important recognition from a valued retail and distribution customer. This award reflects the team's outstanding customer service and operational excellence, and I want to congratulate the entire Contractor Solutions team, including its leader, Jeff Underwood, on this outstanding achievement.

In closing, I want to thank our CSW Industrials team who collectively own approximately 4% of the company, including our ESOP, for their continued performance and commitment. And I also want to thank our shareholders for your continued interest in and support of CSW Industrials.

So now, Jasmina, we are now ready to open the line for questions.

Operator

[Operator Instructions] Our first question is from Jon Tanwanteng with CJS Securities.

分析師問答

Unknown Analyst

It's actually [ Jeremy ] on for Jon. Can you break out the organic volume growth versus price in the Contractor Solutions business and what you're expecting there for the remainder of the year?

James Perry

Yes, [ Jeremy ], it's James. Thanks for being on for Jon this morning. Good to hear from you. I'll say this, in both Contractor Solutions and Specialized Reliability Solutions, which each had about 13% organic growth, really, really proud of Jeff and Mark and their teams in those businesses for that type of growth in this environment. Price and volume both contributed. Volume was a little more than price in each, but both were significant contributors.

In terms of going forward, other than forecasting, we expect organic growth for the rest of the year, we're not able to get that much detail looking for the remaining quarters of the fiscal year. But as Joe said, we expect organic growth above the end markets in both segments as well as EBS, and we do expect to have positive momentum.

Unknown Analyst

And then you mentioned that you may see some near-term margin percentage headwinds from inflation. Having said that, you've historically had really good pricing pass-through power. So are there any changes to your profit dollar expectations going forward versus last quarter?

James Perry

No, that's a good distinction, [ Jeremy ]. This is James again. When we push pricing through, our first priority is to cover the dollar impact from cost increases. We've done that in SRS, as we said 4 times already this fiscal year. Contractor Solutions had a price increase mid-summer and just this week announced another price increase, a little earlier than we normally do. That will go into effect, a mid-single-digit price increase, later this calendar year. Normally, that's a January, February type event.

As we look at the last couple of months and the next couple of months, when we put in place the July price increase, we tried to cover what costs had come through, but didn't necessarily and weren't able to anticipate diesel continuing to go up, some commodity prices continuing to go up and ocean freight continuing to rise. So this price increase we're putting in December covers that and what we anticipate going forward.

But you've got a little bit of a timing mismatch. We always try to stay ahead of that. Some of those costs, as you know, take a few months to come through the system in inventory, like ocean freight and the overseas commodity costs. But things like over-the-road trucking with the diesel spike we've seen in the last few months, certainly since the spring, that that's continued with record diesel prices. Those are pretty real-time commodity prices here in the U.S., but inventory turns faster.

So the team has done a great job managing that as well as they can. We're playing a bit of catch-up on this new price increase. So you're going to have a little timing mismatch and a little margin headwind. The goal is always, as I said, and you emphasized, to cover margin dollars across the board and then continue to work back towards the same margin percentages as we go through the next fiscal year.

Unknown Analyst

Super helpful. That makes sense. And if I could just squeeze one more in. What are you guys seeing in terms of the M&A pipeline? Are you seeing opportunities increase or decrease in the current environment, especially against the backdrop of rising rates?

Joseph Armes

You bet, [ Jeremy ]. This is Joe. Yes, we've been very, very pleased with the pipeline. A number of opportunities that we have seen and continue to see, analyze and diligence, so we have not seen any decrease at all. In fact, I'm pleased with a little bit of an uptick in activity there, and I think that bodes really well for the future. And we view ourselves as financially strong on a relative basis compared to others. And so a little bit of softness in the market sometimes can be helpful to us on valuation and just our relative ability to transact. So we're pretty bullish on that and feel good about the robust pipeline that we see.

Operator

Our next question is from Tim Wojs with Baird.

Timothy Wojs

I think I know the answer to this question, but I'm going to ask it anyway. A couple of the HVAC OEMs, the equipment OEMs, just over the last couple of months, have had trouble putting pricing into the market. I think it's kind of related to the size of the tariffs, and it's mostly on the equipment side. But is that anything that kind of you've heard in terms of your pricing increases and your ability to pass through price, acknowledging that's not always easy? But has there been any change in kind of the customer acceptance of price in your eyes?

Joseph Armes

Tim, we hear about the affordability and the price increases that have been harder for the OEMs. I would just remind you and you know well, but I mean, our products are so much lower priced, low cost, high value, a very small portion of the total kind of cost of a replacement of a new system. And so we don't seem to have the same dynamics that the OEMs have on price increases. So it's not a material issue for us at this point. And so it's always easier from my office to pass along the price increase than it is from Jeff's. But no, we don't see that as a concern at this point.

Timothy Wojs

Okay. Okay. And then I mean, this is kind of in the weeds, but like the side discharge units have gotten a lot more kind of -- have become more prominent, I think, in the industry. Does that -- do you have any sort of differences in content as you think about those types of units versus kind of a standard vertical discharge unit?

James Perry

Tim, I'll let Jeff chat with you later on about specifics there. We haven't seen anything dramatically different, but I think Joe and I might get over our skis if we get too detailed on that. I know you asked that with some of the OEMs this week, and I learned a little bit from that as well. But why don't we let Jeff address that with you offline as well.

Timothy Wojs

Okay. Okay. I'll sneak another one in then. Just the acceleration in kind of double digit, the acceleration, it looks like in volume, how much of that would you guys ascribe to just the industry getting a little bit better sequentially versus your initiatives kind of incrementally gaining some steam?

James Perry

Yes, I'll say a few things, Tim. Yes, I think we saw things were healthier this year. As we pointed out in our remarks, 75% of our business is replace and repair, and I think that's remained pretty healthy. Only 25% is new housing-focused right now. And so we're able to lean into what people are buying. People are repairing their units. They're replacing when they need to, not as much on the new construction, obviously, as you well know.

So I think the market is in a healthy place. I'll remind you, last year, organic growth was negative, so it doesn't hurt that the comp gets a little bit easier. And then as Joe pointed out in his remarks, these acquisitions have given us a lot of cross-selling opportunities and how important that is, our legacy customers want to buy more product from us. So adding Aspen, adding MARS, those type things -- MARS wasn't quite organic yet, but it will be here in 4 more days. But those type products, we did a lot of product rationalization and moved some of the MARS product line over to RectorSeal, the legacy business, which is organic.

So a lot of that cross-selling is important, and that really supercharges our growth opportunity, which is why we have confidence in maintaining our return to organic growth.

Joseph Armes

Yes. I would just add, yes, I think our team is doing an outstanding job, and I would absolutely give them credit for really outperforming and that cross-selling and wallet share growth gains, really, really impressive and just a great job by the team.

Operator

Our next question is from Tomo Sano with JPMorgan.

Tomohiko Sano

Maybe just on Specialized Reliability Solutions, SRS, margins reached 21.5% this quarter, already above your long-term target of 20%. How should we think about the sustainability of that margin level? Is there further upside as you realize synergies? Or was there some unusual favorable mix this quarter?

James Perry

Yes, Tomo, this is James. Thanks for being on. As always, I appreciate your coverage. Nothing unusual this quarter. The team is doing a great job. We had some restructuring back in our fiscal fourth quarter, calendar first quarter, that's fully embedded now. Both acquisitions are just about fully integrated. We've got everything in our facility out here east of Dallas on the Rockwall plant that you've seen before, Tomo. And we're picking up those synergies, picking up the benefit of the integrations.

Team is doing a great job. They've got good demand in their business. We talked about earlier this month that we had our biggest ever order quarter, but orders remain solid. Pricing has come through now with those price increases we had. We'll remind you there's some seasonality. This next quarter tends to soften just a little on the top line and bottom line, not too dramatic, but softens just a little bit in both SRS, really across the board. All 3 segments have a little bit of a winter seasonality.

But overall, we're very confident in the long-term 20-plus percent margins. Now you're at 21.5% this quarter. And we would tell you that, overall, yes, there's upside here. Mark and his team are doing a great job running that business. The customers really rely on them around the globe for product, which is, with the supply chain issues, a key factor right now, and our ability to push through price, push through freight costs as we need to, those type things. So yes, we would tell you that there's room to continue to grow that margin line.

Tomohiko Sano

And on EBS, excluding Greco, the backlog sounds healthy, and you've talked about the improving backlog quality, but margins were still 19.3% this quarter. What needs to happen to get margins back into the low 20s? And when should we start to see the benefit from higher-margin products in the backlog?

James Perry

Sure, Tomo, James again. Great question. Yes, the team is doing a great job. The commercial construction market, you look at ABI and any kind of metric, and it remains pretty soft. So the team is doing a great job keeping that book-to-bill above 1 at 1.05 on a trailing 4-quarter basis. The backlog is doing well. Scott and his team are really putting forth good efforts getting things in.

You're still working through some projects that weren't priced quite as strongly necessarily and with some rising commodity prices that hit you a little bit. We've said the long-term goal there is for 20%. Last year, you were a little above 20% this quarter. Last quarter, you were a little above. That's a relatively small business, and you've got a few projects that can make a big difference in the margin. You put out a couple of million dollar project in the quarter or a $1 million project in the quarter with really good margins or a little weaker margins, that can move the needle quite a bit.

So you're hovering around that 20% consistently now, which was our goal. And we would tell you we still have all the confidence that, medium and long term, you're going to be above 20% and growing from there as the business continues to pick up good projects. And as the commercial construction market does come back at some point, you'll really have a nice tailwind.

Tomohiko Sano

Great. Congrats on the quarter.

James Perry

Thank you, Tomo.

Operator

Our next question is from Susan Maklari with Goldman Sachs.

Charles Perron-Piché

This is Charles Perron in for Susan. I guess my first question, I just want to talk a little bit more about what you're seeing in terms of Contractor Solutions. Are you seeing maybe a little bit more shift to repair versus replacement, given the macro environment that we're in today? And what does that mean for your business if you're seeing some of that?

Joseph Armes

Well, yes, I mean, I think we've been seeing that for some time now. Several quarters, we have commented that our acquisitions, which increased our exposure to the repair market were really well timed. And the increased focus on repair, folks wanting to repair versus replace because of the cost increase, as we mentioned, it was discussed earlier, of the OEM equipment. We're really well positioned in that regard, as James quoted, at 75% repair and replace versus new residential construction.

So we like the portfolio where it is right now. It provides resilience through the cycles, and there will be another cycle. And so we do want some exposure to the replacement and to the new resi construction. And so -- but I think what you're seeing here is really, really resilience in a portfolio that's well balanced and allows us to thrive through kind of any cycle.

James Perry

And Charles, I'll remind you, Jeff said this before and reminds us, if you can repair, you're going to repair. If you can get away with a $100 repair or $1,000 repair, you're going to do that over replace. So yes, that shift is real, but you're almost always going to pick that option in that scenario. But that's why, as Joe said, we lump together repair and replace at 75% because that can move back and forth.

Charles Perron-Piché

Got it. That's very good color. I guess my follow-up is, in your prepared remarks, you talked about your continued effort to drive productivity across the business to further expand your margins over time. Can you provide a little bit more details about some of the initiatives that are going on right now? And how do you think about the potential upside that it could provide to margin?

James Perry

One thing I would say, and Joe says this a lot, and we really subscribe to this with last year's $1 billion of acquisitions, just because we grow at the top line doesn't mean we need to add overhead or anything like that within the facility or the corporate or kind of business segment type level. So I think we're doing a great job with cost discipline. The team is always looking to get more efficient.

The team in Vietnam does a tremendous job with their efficiency goals every year. We get readouts all the time on their initiatives there, how they're getting more efficient in that facility, working with the labor pool that they have, getting more through that plant. The dozens of containers a week we bring over here is a testament to that and what a good job they're doing in that facility. We have freed up a lot of capacity since we bought that company almost 6 years ago now.

But I'd say, across the board, every business right now, all 3 of our business leaders are challenging themselves and their team to find ways to get more productive. As I said, when you grow organically or through acquisition, not necessarily adding the overhead that you might need there, doing more with the same amount of folks you have. And as we grow that top line, $1.3 billion and beyond on a run rate-type basis, I think you'll see margin opportunity continue to be there for us.

Operator

Our next question is from Sam Reid with Wells Fargo.

Eric Cohen

This is Eric on for Sam. Just want to ask about -- you've got volume growth in CS and SRS. I'm just curious if you're seeing anyone take preloading ahead of the price increases that you've already taken. It sounds like there's more coming, so people are just trying to get ahead of that, and sort of what you're seeing from the channel inventory levels?

James Perry

Yes, Eric, thanks for being on. This is James. Appreciate that. Yes, I'd say this, I'll separate the 2. In SRS, you've had 4 price increases this year. You had 3 in a row, back in the spring and early summer, and then we just put one forth a couple of weeks ago. And we haven't seen that. I talked about we had our biggest order day ever earlier this month. That was a couple of weeks ahead of the price increase. But Mark and the team tell us that they don't really see that. People either need the product or they don't. And so it's not that big a thing.

Contractor Solutions, we just put -- we had our price increase back in July. We just announced this week another price increase for later this calendar year. Like I said, that's a little earlier than normal to cover the cost that we've had, that we've gotten hit with on the freight, both domestic and ocean as well as commodity costs and ongoing tariffs. But that's normal. Normally, that might have been maybe January, we're doing a little bit earlier this year, but people aren't buying product months ahead of time, that would have gone through this last quarter for that. So you occasionally, the week before, may see people take a little product, but you didn't see an impact of that in the quarter, no.

Eric Cohen

Great. That's good color. And just on -- you talked about the cross-selling opportunities and some of the acquisitions expand market wallet share opportunities. I wonder if you can just dive in a little more of what you're seeing from the increase in wallet share. And on MARS, you also raised the synergy target. I believe this is the fourth time now you've done it. Can you just talk about where you're getting the incremental upside from? And is there any further upside from here?

James Perry

Yes, I'll talk about MARS. I think we'll always say that we're looking for efficiencies and synergies. We won't report that anymore now that we're at the 1-year anniversary. We will tell you that our internal goal was always well ahead of $10 million, but we were proud to announce $15 million. And I'll say we didn't necessarily intend to talk about it this quarter, but the team kept finding synergies. So we wanted to update that for you from last quarter.

Yes. So they'll become organic here in a few days as we hit the 1-year anniversary. So what becomes the synergies just versus productivity efficiencies gets pretty blended at that point. But really proud of the work the team has done there to get those synergies, some of those ahead of schedule. We said we thought $10 million in the first year. We've already hit $15 million. I don't think we thought we'd hit $15 million in the first year. That was a little further out. So really proud of that.

In terms of cross-selling and wallet share, that's just an ongoing piece we have. We just had midyear reviews with all the teams and Jeff and the team at Contractor Solutions talked about new business opportunities we had with existing customers, wins we had in the first half, wins that are coming in the second half that have been committed. Joe talked about winning the Plumbing Partner of the Year with Home Depot. That's a part of that, too. We bought a small plumbing company a couple of years ago, and the team that came with that really knows how to sell to the retail channel, found more and more legacy products that they could sell into the retail channel, and that went into that award that we received.

And so folks like Home Depot, folks like our distribution customers want to continue to buy more of our products, we've got to figure out the best fit for them, be sure they understand where the distribution centers are and build those relationships. Those are often years long sales cycles because we're displacing somebody else. But we continue to see win after win from that team and really proud of the work they've put in.

Operator

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Joe Armes for closing comments.

Joseph Armes

Yes. Thank you, Jasmina. I just want to thank everybody for joining us. Really, really proud of the outstanding quarter and the financial results that we reported today and look forward to our next time to do this next quarter. So thank you for your support.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.