Shares of Crawford United Corporation (CRAWA Quick QuoteCRAWA - Free Report) have gained 6.4% since the company reported its earnings for the quarter ended March 31, 2025. This compares to the S&P 500 Index’s 0.5% gain over the same time frame. Over the past month, the stock has gained 13.6%, outperforming the S&P 500’s 4.3% growth.

Revenue and Earnings Performance

For the first quarter of 2025, Crawford United reported revenues of $43.3 million, representing a 12.7% increase from $38.4 million in the year-ago quarter. Net income rose to $3.1 million from $2.9 million, a 4.5% year-over-year increase. Earnings per diluted share came in at $0.88, up 3.5% from $0.85 in the same quarter last year. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)

Operating income rose 6.9% to $4.9 million from $4.6 million in the year-ago quarter. The company also reported EBITDA of $6.8 million, an increase of 1.8% compared with the prior-year period’s $6.7 million.

Segment Performance

Commercial Air Handling Equipment sales rose 24.1% year over year to $21.1 million from $16.9 million in the year-ago quarter, driven primarily by the acquisition of Rahn Industries. Operating profit for the segment rose 8.2% to $4.9 million from $4.5 million, though operating margin declined 340 basis points (bps) due to Rahn’s relatively lower-margin coil products. Excluding Rahn, the segment’s margin improved 140 bps.

Industrial and Transportation Products revenue increased 3.6% to $22.2 million from $21.5 million in the year-ago quarter. The modest growth was attributed to the acquisition of Advanced Industrial Coatings (AIC). However, operating profit declined 9.1% to $1.4 million from $1.6 million in the year-ago quarter, as seasonality affected AIC's performance and Heany Industries faced elevated input costs that were not yet offset by pricing adjustments.

Other Key Business Metrics

Gross profit improved 17.7% to $12.1 million from $10.2 million in the year-ago quarter, with margins expanding 110 bps to 27.8% from 26.7%, reflecting the growing contribution of the higher-margin Commercial Air Handling segment. Selling, general and administrative (SG&A) expenses grew 26.4% to $7.2 million from $5.7 million in the year-ago quarter, primarily due to the integration of newly acquired businesses and investments in personnel. Interest expenses increased 37.3% to $0.3 million from $0.2 million due to higher average debt balances following recent acquisitions, partially offset by a decline in interest rates.

Operating cash flow declined significantly to $0.4 million from $2.8 million in the prior-year quarter. The decrease was largely attributed to the timing of milestone billing in the Commercial Air Handling segment. Financing cash inflows rose to $12.5 million from $5.1 million, as the company tapped its revolving credit facility to fund acquisitions.

Management Commentary

CEO Brian Powers expressed satisfaction with the record-breaking sales figure, which exceeded the prior high by $3.8 million. He emphasized that the company's growth trajectory remains intact, backed by its diversified model and ongoing pursuit of strategic acquisitions. Powers reaffirmed confidence in achieving long-term goals and expanding both top-line and bottom-line performance.

Factors Influencing Results

The acquisitions of Rahn Industries and AIC were the primary catalysts for the quarter’s revenue and earnings expansion. While these additions brought top-line benefits, they also introduced transitional challenges. Rahn’s contribution skewed segment margins lower within Commercial Air Handling, while AIC's seasonality limited its immediate profitability. Meanwhile, the integration of Heany Industries weighed on margins due to input cost pressures. Profitability was aided by a favorable shift in sales mix and a lower effective tax rate of 25.7%, down from 27.7% in the prior year due to increased research and development tax credits.

CRAWA’s elevated SG&A costs reflect its broader strategy of positioning for scalable growth. Moreover, acquisition-related expenses and amortization of right-of-use assets further impacted bottom-line results, as evidenced by the non-GAAP adjustments included in the EBITDA metric.

Guidance

No formal financial guidance was issued by Crawford United. However, management reiterated its strategic focus on acquisition-driven growth and operational improvement. Powers’ statement suggests that M&A will remain a core lever for expansion in the coming quarters.

Other Developments

Crawford United completed the acquisition of Rahn Industries on Jan. 2, 2025, for $12.7 million in cash. Rahn is a leading HVAC coil manufacturer serving OEM and aftermarket customers across healthcare, industrial, energy and defense sectors. The acquisition was financed via the company’s revolving credit facility. Rahn contributed $4.3 million in sales and $0.1 million in net income during the quarter.

Additionally, final purchase accounting adjustments were made to the 2024 Heany acquisition, resulting in increased goodwill. The integration of Heany and AIC, both acquired in 2024, continues, with AIC contributing modestly to revenues and nearly breaking even in net income during the quarter.

Crawford United remains active under a previously announced share repurchase program with 298,488 shares authorized for buyback as of March 31, 2025.