Carlisle (CSL) Q1 2025 Earnings Call

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DATE

Wednesday, Apr 23, 2025

CALL PARTICIPANTS

Chris Koch: Board Chair, President, and CEO

Kevin Zdimal: CFO

Mehul Patel: Vice President of Investor Relations

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Q1 Revenue: $1.1 billion revenue, flat year-over-year

Q1 Adjusted EPS: $3.61, down 3% from prior year

CCM Q1 Revenue: $799 million in Q1 2025, up 2% year-over-year

CWT Q1 Revenue: $297 million, down 5% compared to the prior year in Q1 2025

Share Repurchases: 1.2 million shares for $400 million during Q1 2025

2025 Free Cash Flow Projection: Approximately $1 billion

Vision 2030 EPS Target: $40 remains on track

SUMMARY

Carlisle reaffirmed its 2025 outlook despite Q1 challenges, projecting mid-single-digit revenue growth and a 50 basis point expansion in adjusted EBITDA margin, based on non-GAAP financial measures. The company expects CCM to benefit from reroofing activity and MTL acquisition synergies, while CWT anticipates improvements from automation initiatives and share gains.

Management cited strong structural trends supporting their business, noting that approximately 70% of U.S. nonresidential buildings are over 25 years old, representing significant reroofing potential, based on data from the 2018 Commercial Buildings Energy Consumption Survey.

The company reported minimal direct impact from tariffs due to predominantly North American sourcing, with over 90% of raw materials sourced within the region. They expressed concern about potential indirect consequences for contractors, distributors, and suppliers.

"Over 80% of our warranties sold now have 20-year terms up significantly from previous years." indicating a trend towards more comprehensive roofing solutions.

Carlisle plans to deploy approximately $1 billion into share repurchases in 2025, an increase from the original projection of $800 million.

INDUSTRY GLOSSARY

CCM: Carlisle Construction Materials segment

CWT: Carlisle Weatherproofing Technologies segment

EPDM: Ethylene Propylene Diene Monomer, a type of synthetic rubber roofing membrane

TPO: Thermoplastic Polyolefin, a single-ply roofing membrane

PVC: Polyvinyl Chloride, another type of single-ply roofing membrane

MDI: Methylene Diphenyl Diisocyanate, a key raw material in polyurethane production

Full Conference Call Transcript

Mehul Patel: Good afternoon, everyone. Welcome to Carlisle's First Quarter 2025 Earnings Call. I'm Mehul Patel, vice president of investor relations for Carlisle. We released our first quarter financial results today and you can find both our press release and the presentation for today's call in the Investor Relations section of our website. On the call with me today are Chris Koch, our board chair, president, and CEO along with Kevin Zdimal, our CFO. Today's call will begin with Chris providing key highlights of our first quarter, Kevin will follow Chris with an overview of our Q1 financial performance, and a reaffirmed outlook for 2025. Following our prepared remarks, we will open up the line for questions. Before we begin, please refer to Slide two of our presentation where we note that comments today will include forward-looking statements based on our current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties which are discussed in our press release and SEC filings. As Carlisle provides non-GAAP financial information, we provided reconciliations between GAAP and non-GAAP measures in our press release, and in the appendix of our presentation materials which are available on our website. With that, I will turn the call over to Chris. Thank you, Mehul. Good afternoon. Everyone, and thank you for joining us today. Starting with slide three of the presentation where we highlight our first quarter performance in progress, I'm pleased to report that the Carlisle team showed superb perseverance in driving our key initiatives in the first quarter of 2025 overcoming significant challenges, and post-election turmoil to deliver solid results. The first quarter challenges included the continued weakness in the residential construction markets, the negative impact of this winter's weather, especially in January and February, and the significant economic uncertainty and instability created by the ongoing US tariff actions. With tough year-over-year comparisons and with an ever increasingly complex macroeconomic backdrop, revenue of $1.1 billion was essentially flat year-over-year. Diluted EPS for Q1 was $3.13, and adjusted EPS was $3.61. As anticipated, and consistent with the trends we experienced as we exited 2024, the first quarter began with a slower start primarily due to unfavorable weather conditions in January and February across many of our key markets. Fortunately, improved weather conditions in March, and healthy reroofing activity helped to offset much of the unfavorable impact experienced in those first two months. In our CCM segment, in addition to the strong reroofing activity, Carlisle also benefited from our 2024 MTL acquisition. Both of these factors help offset softer conditions in the new commercial activity challenging prior year weather comps, and as anticipated, low single-digit price declines in CCM. The ongoing strength in reroofing demand, which represents 70% of CCM's commercial business, continues to be a key driver of our resilient performance helping to offset the more negative macro environment. For CWT, we continue to face headwinds in residential end markets due to buyer uncertainty, affordability challenges, higher interest rates, and lower housing turnover. As we've discussed previously, these residential market challenges were largely anticipated impacted most market participants, and are well understood. While we are optimistic that the underlying drivers of the residential end markets will ultimately bring significant growth and margin expansion in our CWT business, for now, we will continue to focus on areas in our control. We are making progress on many of our key investments and seeing gains in areas such as new product introductions, and factory automation within CWT. These efforts are expected to provide $3 million to $4 million of incremental adjusted EBITDA per quarter starting this quarter along with share gain initiatives. When we look at pricing across both CCM and CWT, we experienced modest declines as expected during the quarter with low single-digit price declines in both CCM and CWT. Based on the announced price increases and the start of the summer season, contractor expectations are that price increases will gain traction in the second quarter and we expect year-over-year pricing to be neutral for both CCM and CWT in the second quarter. Turning to the much-discussed subject of tariffs. As we alluded to in the Q4 2024 earnings call, over 90% of our raw materials are sourced within North America. Additionally, many of our materials that are sourced from Mexico and Canada are covered by USMCA, and are not subject to tariffs. Additionally, we import very little directly from China, approximately 5% of purchases. Because of Carlisle's predominantly North American sourcing position, we currently expect a negligible direct impact from tariffs in 2025. Turning to the indirect impact of tariffs. The indirect impact is much more difficult to quantify and forecast due to the complexity and many moving parts involved. Nonetheless, the current indirect impact of tariffs is minor for Carlisle overall and should remain so for the rest of 2025. While the impact from tariffs both direct and indirect may be limited, we do remain concerned that there may be unforeseen indirect consequences of the tariffs for our contractors, distributors, and suppliers. Along with the increased potential for a US recession the longer these conditions remain unresolved and businesses remain uncertain about the future. Nonetheless, we have increased conviction in our well-understood drivers to our businesses and our market intelligence. And we remain committed to our 2025 outlook. Our 2025 outlook is reinforced by the data from our latest Carlisle market survey conducted in early April. Feedback from those surveyed reinforces our positive outlook on the 2025 roofing season and our belief that commercial roofing volumes will be up low single digits. This low single-digit increase will be more heavily weighted to reroofing new construction demand, which we believe will be essentially flat for the full year. Additionally, pricing in our non-resi markets is showing signs of traction and our survey participants expect pricing to improve as the year progresses. Consistent with what we experienced starting in the second quarter 2024, 2025 full-year residential volumes are expected to be down low single digits and due to the continued negative impact of buyer uncertainty affordability challenges, higher interest rates, and lower housing turnover. Comments also suggest that inventory in the channel remains low by historical comparisons due to higher carrying costs, and economic uncertainty. During the quarter, we maintained our commitment to returning capital to our shareholders, repurchasing 1.2 million shares for $400 million bringing the total share repurchases since 2017 to $5 billion. Additionally, following the $1.6 billion in share repurchases in 2024, we now expect to deploy approximately $1 billion into share repurchases 2025. An increase over our original projected share repurchases of $800 million. As a reminder, we also increased our dividend by 17.6% last August our 48th consecutive year of increasing our dividends to our shareholders. These actions underscore our confidence in Carlisle's future growth prospects and our ability to generate significant free cash flow. We believe our approach to capital allocation continues to be a source of competitive advantage. We are disciplined, have always been disciplined, and will remain disciplined with an aim to keep our ROIC above 25%. Additionally, we will continue to allocate capital towards strategic M&A to enhance our leadership position within the building envelope. Invest in our key strategic initiatives and invest in significant capital expenditures to support growth innovation, and further operating efficiencies. Touching on M&A for a moment, our acquisition of MTL continues to exceed our expectations. We are on track to exceed $20 million of synergies well above our originally announced $13 million of synergies as the Carlisle integration playbook delivers substantial value through a disciplined approach. Similarly, we are utilizing the same playbook on our integrations of both Plastifab and ThermoFoam. ThermoFoam, as a reminder, continues to build our vertically integrated expanded polystyrene capabilities and adds geographic coverage in Texas, and the South Central United States. Please turn to slide four as I discuss the strong structural trends that continue to support our businesses. Approximately 5.9 million buildings exist in the United States according to the 2018 Commercial Buildings energy consumption survey. Of those, roughly 70% of US nonresidential buildings are now over 25 years old and represent a significant pool of potential buildings requiring reroofing activity. Based on our internal data, more than 80% of reroofing permits come from buildings over 25 years old. This pool of potential reroofing demand creates a consistent and somewhat predictable demand pattern. That demand pattern is demonstrated in CCM sales data from 2008 to 2025. It is extremely important to remember, and I want to emphasize, that Carlisle is an imperative business with a leading market share position in North America and what we believe is the world's best market for building products. By using the words imperative business, what we mean is that Carlisle provides key products and solutions to address a basic need of society. The need for buildings that protect and house us and are essential to our daily lives. Roofing, insulation, and weatherproofing are largely nondiscretionary and necessary components of the built environment. The fundamental need for our products and solutions combined with our market-leading position provides resilience for Carlisle even during periods of economic uncertainty. It's also important to recognize that many of these older buildings undergo multiple reroofing cycles during their lifetime. Buildings over 35 years old are 55% of the building footprint in the US and require their second or often third roof replacement. And as the 30% of buildings under 25 years old steadily roll into our addressable reroofing market, they reinforce the expanding pipeline of recurring revenue for decades to come. Turning to slide five, Beyond the dependable base of recurring reroofing projects, Carlisle is also benefiting from increasing revenue and profitability per square foot. This increased content is driven by several factors. Stricter building codes, increasing energy efficiency regulations, more severe weather events, leading to higher specification roofs, and the growing adoption of 20-year warranties which require more comprehensive systems and materials. This trend of increasing content per square foot is not new to Carlisle. In fact, it is directly aligned with one of our key pillars of our vision 2030 strategy. Innovation. Innovation drives differentiated products by first understanding the job to be done, and how we can provide a better solution based on strong, voice of the customer content. These products are then designed to create value for our customers. This results in creating a preference for Carlisle's products and solutions, and allows us to price to that value and when compared to existing products. The ability to better address customer needs and wants, in turn enables Carlisle to capture a greater share of wallet and deliver superior margins. Our comprehensive warranties further enhance our ability to drive content growth. Carlisle warranties are a highly valued benefit desired by building owners who prefer complete system solutions rather than individual components. Over 80% of our warranties sold now have 20-year terms up significantly from previous years. These market dynamics present tremendous opportunities for Carlisle. And we're strategically positioning our innovation capabilities and initiatives to capitalize on them. By developing products that deliver superior energy efficiency, require less labor to install, and enable us to sell more value-added solutions per square foot. We're directly addressing the key needs of building owners and contractors. While driving our own growth and profitability. Turning to slide six, we remain committed to accelerating our innovation efforts to deliver margin enhancing, energy-efficient, and labor-saving solutions for our customers. As outlined in our vision 2030 strategy, we're investing significantly in R&D. With our new state-of-the-art research and innovation center in Carlisle, PA representing a critical part of this commitment. We continue to focus our innovation pipeline on three key areas. Evolutionary improvements to existing products, transformational new solutions, and business life cycle innovations that enhance efficiency, and reduce costs. Our product development efforts are yielding positive results across both CCM and CWT segments, with new products gaining traction in the market. In prior calls, we've highlighted several recent product introductions including SeamShield, Blue Skin VP Tech, and Ultra Touch. All three rollouts are resonating with customers responding to their VOC stated needs, meeting our price to value objectives, and our margin accretive to our portfolio. As we continue to work with customers to grow our pipeline of innovation opportunities, we remain disciplined in our approach. Our rigorous underwriting process ensures that every R&D investment is aligned with our financial and strategic objectives to drive profitable growth and maximize returns. Simply put, we built the right infrastructure to consistently bring margin enhancing energy-efficient, and labor-saving solutions for our customers. Our innovation investments are a critical component of our vision 2030 strategy and we expect our efforts to contribute meaningfully to our goal of generating 25% of revenues from new products by 2030. And with that, I'll turn it over to Kevin to provide additional financial details and color on our outlook for 2025. Kevin? Thank you, Chris. Starting with slide seven, I'll review our first quarter 2025 financial results. In the first quarter, we delivered revenue of $1.1 billion essentially flat compared to the first quarter of 2024. The acquisitions of MTL, Plastafab, and ThermoFoam contributed $50 million in the first quarter. However, were offset by a soft residential end market unfavorable weather in 2025 compared to favorable weather in 2024, as well as lower pricing in the first quarter from carryover pricing from 2024. Adjusted EBITDA margin for the quarter was 21.8%. Down 240 basis points from the first quarter of 2024. Adjusted EPS was $3.61 a 3% decrease from the prior year. The margin and EPS decline was due to a combination of lower volume in the quarter negative price cost, and investments in the business. Turning to our segment performance, starting with CCM on slide eight. First quarter revenues were $799 million up 2% year over year. The contribution from MTL was partially offset by a 1% decline in organic revenue. Revenue in the quarter was supported by recurring reroofing activity and customers accelerating approximately $15 million of orders to get ahead of anticipated tariff-related price increases. However, these increases were not enough to offset softer new commercial construction prior year weather comps, and lower carryover pricing from 2024. CCM's adjusted EBITDA was $217 million down 5% compared to the first quarter of 2024 with an adjusted EBITDA margin of 27.1%. A decrease of 180 basis points year over year. This margin compression was primarily due to lower carryover pricing and targeted investments in innovation and enhancement to the Carlisle experience. However, we continue to realize synergies from the MPL acquisition, which partially offset these headwinds. Moving to slide nine in our CWT segment. First quarter revenues were $297 million down 5% compared to the prior year. With organic revenue declining by 12%. This decrease was primarily due to softer residential end markets and impacted by affordability challenges, higher interest rates, and lower housing turnover. Along with lower demand for roof coatings impacted by fewer rain events. CWT's adjusted EBITDA was $46 million down 28% year over year with an adjusted EBITDA margin of 15.6%, a decrease of 510 basis points. This decline was a result of deleverage and lower revenue and negative price costs in the quarter. We remain confident in the investments we made including our automation projects and share gain initiatives. Our automation and factories cross-selling initiatives in the retail chains M&A synergies, and new product introductions are all progressing well. They should deliver benefits starting in the second quarter and accelerate into the second half of 2025 positioning CWT for improved performance going forward. Slide ten provides our first quarter 2025 adjusted EPS bridge for your reference. Moving to slide eleven, our balance sheet remains strong with a net debt to EBITDA ratio of 1.2 times, within our target range of 1 to 2 times. We ended the quarter with $220 million in cash and $1 billion available under our revolving credit facility. The strong liquidity position provides us with ample flexibility to continue investing in our businesses while also returning capital to shareholders. We maintain a balanced debt maturity schedule with a weighted average interest rate of 2.9% and a weighted average maturity of 4.8 years. Our EBITDA to interest ratio stands at 19.5 times reflecting our strong cash flow generation and modest debt levels. Turning to slide twelve and our cash flow performance. The first quarter is typically our lightest cash generating quarter as we pay down liabilities that grow throughout the year like accrued customer rebates and employee incentive compensation and we temporarily deploy more cash into working capital to prepare for the construction season. Cash generation this year was lighter than usual due to first quarter payments for higher year-end liabilities as well as the dynamics of the first quarter shipping pattern. January and February shipments were negatively impacted by weather and were followed by a very strong March, which shifted the time that cash provided by normal operating activities compared to the prior year. This will correct itself in the second quarter. We expect to generate full-year free cash flow of approximately $1 billion for 2025. Providing us with the financial flexibility to pursue our balanced capital deployment strategy. Looking ahead to our 2024 outlook on slide thirteen, we are reaffirming our expectations for mid-single-digit revenue growth for the full year with adjusted EBITDA margin expansion approximately 50 basis points. While we continue to monitor the potential impacts of tariffs, interest rate movements, and consumer behavior, we remain focused on executing vision 2030 and delivering on our full-year guidance. For CCM, we expect mid-single-digit revenue growth driven by continued strength in reroofing activity and the full-year benefit from the MTL acquisition. We anticipate expanding margins through price increases, volume leverage, and operational efficiencies through the Carlisle operating system. The second quarter for CCM will reflect a negative impact of the estimated that positively impacted the first quarter from accelerated purchases ahead of anticipated tariff-related price increases. For CWT, we expect high single-digit revenue growth primarily driven by share gains and a full-year impact of the Plasifab and ThermoFoam acquisitions. We anticipate margin improvements from acquisition synergies and the continued focus on the Carlisle operating system. Including the automation initiatives that we mentioned earlier. We expect total corporate and unallocated expenses of approximately $110 million for the full year. Capital expenditures are projected to be $150 million with depreciation and amortization of around $200 million and net interest expense of approximately $50 million. We anticipate our base tax rate to be between 23 and 24%. Overall, we remain on track to deliver record adjusted EPS for the full year 2025 with growth expected to exceed 10% year over year. We also expect to maintain our ROIC above 25% and free cash flow margin above 15%. Moving to slide fourteen, I want to emphasize that our Vision 2030 adjusted EPS target of $40 plus remains firmly on track. We have multiple paths to achieve an adjusted EPS growth rate in the mid-teens through 2030. Backed by our target organic revenue k year of over 5% consistent free cash flow margin above 15%, and disciplined capital deployment. Based on our Vision 2030 financial targets introduced in late 2023, we expect to generate cumulative free cash flow of more than $6 billion through 2030. This provides significant flexibility for share repurchases representing a combination of organic and inorganic path to achieve our EPS target. We have a proven track record of effectively deploying capital to drive shareholder value. As evidenced by our robust share repurchase program and successful M&A playbook. In summary, while the first quarter presented some weather and market-related challenges, our underlying business fundamentals remained strong. We're confident in our ability to navigate the current market environment and continue delivering solid results for our shareholders in 2025 and beyond. With that, I'll turn the call back to Chris for closing remarks. Thank you, Kevin. In conclusion, we remain confident in our full-year outlook and our progress towards our vision 2030 goal of $40 of EPS and exceeding 25% ROIC. I would once again like to take this opportunity to thank all of our Carlisle employees for their exceptional efforts and perseverance throughout this complex quarter. Your dedication has been instrumental in delivering resilient results. And thank you to all of you who are listening as well for your continued support and interest in Carlisle. That concludes our formal comments. Operator, are now ready for questions. Thank you. Tone phone. You will hear a prompt if your hand has been raised.

Operator: Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Tim Wojs from Beard. Your line is now open. Hey. Hey, guys. Good good afternoon.

Chris Koch: Afternoon.

Kevin Zdimal: Hey. May maybe just you know, kinda kinda first on on maybe the volume cadence. Within maybe CCM through the quarter and and kinda into April. If you could just give us a little bit of color on that and kinda what you're hearing from a a season perspective from some of the contractors around things like backlog and and stuff like that kinda heading into the busier season.

Chris Koch: Hey, Tim. Thanks. Interesting question. You know, we had our Carlisle market survey We we tried to publish as much as we could about that to let you know what's happening there. I think we look at that. There's a there's a good tone out in the market of optimism despite what we have seen in the press and that our our contractor base is pretty optimistic and the volumes seem to be building. When I was just in with about a hundred and twenty five contractors, at one of the CCM signature events where they recognized contractors, and I was really surprised that how many people are optimistic about the construction season. And the jobs that are out there. Arguably, the new construction is a little bit less you know, optimistic less optimistic about that. But I think we know the reasons why there, but the reroofing is strong. As we go into the summer. Kevin will hit on the actual volumes a little bit. As well. Yes. In January and February started slow. Those were both challenged by weather was the biggest challenge in both those months. But then once we got to March, it really picked up. Part of that was making up for some of that weather days that were lost in the first couple of months of the year. So that picked up in March, and it continues into April. We're seeing favorable order patterns as we are three weeks into the second quarter. So that's been favorable.

Tim Wojs: Okay. And then I guess just on on the the cost basket, has has anything changed, you know, in in terms of the composition of that? I think last quarter, you had kinda outlined that you know, costs in CCM might be call it, plus or minus, I guess you've got some sourcing of maybe MDI from from China. I guess, is is that a headwind? You know, how how about, like, kind of TPO polymers, those types of things? I guess, if you know, some of that underlying basket has changed at all and and kind of what you're expecting now for for the full year?

Chris Koch: Well, with respect to tariffs, Tim, you know, we did say there was basically zero impact And I I wanna hit tariffs first and then Kevin can hit the underlying things. When we look at q two, again, not much impact there. And three and four, it looks like, you know, there might not be as much impact there as well, but that's gonna be that's pretty fluid, I think, three and four, given, you know, what we see from the administration. Each day on we're gonna do with China and that. On MDI specifically, there really wasn't any impact in the change in in the pricing basket in q one. That gets locked in for ninety days. You know, we had that let's call it an RFP in in q four, and that was for the first quarter. Locked in, you know, locked in q one or excuse me, q two at the end of March. Slight increases low single digit. So then Q3 gets locked in in June. One of the impacts on MBI that I think we have to take a look at those that they're in addition to the tariffs. And, you know, one of the major producers is Chinese there, there's also also the an anti dumping case that BASF, I believe, and Dow brought against the import. So we're getting a little bit of upward pricing pressure, and I would think that you know, the all the the industry participants would would use that and we would see some upper pricing pressures we get through the year. But for us, through q two, you know, maybe a little impact low single digits.

Kevin Zdimal: Hey, Tim. This is Kevin. On the raw materials for the year, we still expect them exclusive any of any further tariff increases. We expect raw materials to be neutral for the year First half, we'd say slightly positive in the first half of the year and then slightly negative in the second half of the year.

Tim Wojs: Okay. Great. I'll hop back in queue. Thanks, guys. Nice job.

Operator: Thanks, Tim. Your next question comes from the line of Susan Maklari from Goldman Sachs. Your line is now open.

Susan Maklari: Hello. Good afternoon, everybody.

Chris Koch: Good afternoon.

Susan Maklari: First, hi, Chris. My first question is, you know, you talked about the momentum that you're seeing on a lot of the new products and the innovation that you're bringing to the market, In this kind of a macro environment, how are some of your customers thinking about the value that those offerings bring? And is that actually helping or or perhaps offsetting any perhaps shift to some of the repair side versus a full replacement of the roof in this kind of an environment?

Chris Koch: Do I don't think that anybody is delaying a replace if they need to do it. There it might be on the margin, but I think with with most of our customers, they've been in the queue for a while. We I'll go back to the biggest constraint, I think, which is labor. We know labor's constrained. And so I I think whether it's in resi or non resi, if you're in the queue to get a roof done and you've been planning it and specing it and getting anything arranged for, let's say, you know, many months, if not a year, to delay it or to jump out of the queue might put you back so far that it's not it's not really viable. So I I think that bleeds into innovation and what we're seeing. And that is we're seeing a lot of people talking about labor efficiency. Right? How can you get off the roof faster How can we get more jobs done with the existing labor? And that manifests itself, and I think helps us to gain share and maintain share with the things we've done. Now, arguably, most of our innovation has been around the Carlisle experience and delivering, you know, the right product, the right place, the right time. We've also had a lot of you know, work in operational you know, improvements and innovation where we're producing, I think, a better product that has less quality defects and is gonna be on the roof for longer, and and it's gonna be a less of a hassle to put down. You can look at the sixteen foot line, and it's just, you know, less labor. And also less seams and less opportunity to leak. And then I think the one we're really working on is this hardcore innovation around new products that'll be game changing, like, let's say, doubling our value of insulation or something like that where we can get the same RO value with half the the content on the roof, which means you know, you need half the people to that you have on a job site to take it up. But I think right now, people are concentrating on that. They're looking at AI solutions. I think contractors are looking at ways they can interface with their manufacturers quicker and back office operations. So it's all out there. I I think what, you know, we talk about most of all is on product side, and we tend to neglect all the improvements we've made on you know, the customer experience side and on the operational side, but they're all meaningful.

Susan Maklari: Yeah. Okay. That that's really helpful. And then maybe switching to the cash generation of the business. When you think about the changes that have come through in the profile and the businesses that you're you're in today, how do you think about your ability to generate really strong cash and positive free cash flow even if the macro does further weaken in there. I know you reiterated your guide for this year, but can you just talk about some of those levers that you can pull and how we should think about what this business can do even if things don't turn out as we currently anticipate.

Kevin Zdimal: Yeah. So what we've seen, you know, in past years when we've had any dips in revenue, we end up having really good cash flow years. If you go back, you can go back to 2008 and see when the dip in the revenue was then. And we had excellent cash flow generation. A lot of it, because we're bringing down working capital and get that benefit. So not something we're looking to have happened, but if it did happen, that's where we're pretty strong on the cash flow side. Our business hasn't changed that much from 2008 to now when you take out the non-building products companies. So just talk about where we are today with building products. We're confident that we'll be able to generate this positive cash flow this year. We're looking at the 15% of sales. So about a billion dollars. Of free cash flow and really don't have concerns on that even if there was that dip in revenue because of what we can do on the working capital side. Longer term, when we look at Vision 2030, so through that period, we're expecting to generate $6 billion of free cash flow between now and then.

Susan Maklari: Yeah. Okay. That that's great color. Thank you both, and good luck with everything.

Chris Koch: Thanks, Sue. Thank you.

Operator: Your next question comes from the line of Bryan Blair from Oppenheimer. Your line is now open. Thank you. Afternoon, guys.

Chris Koch: Afternoon, Bryan.

Bryan Blair: You you mentioned pricing being roughly neutral for for q two and full year cost being neutral ish. Given our reads, a bit more accommodated than that. I'm just curious how PowerTeams thinking about q two price cost and then the phasing for the full year.

Kevin Zdimal: Yes. We look at q two. We think both price and cost will basically be neutral And then second half of the year, consistent with what we're thinking, on our year-end call is that we see pricing up low single digits. In the second half of the year. And that and with the raw material cost being neutral. We're seeing a positive you know, 1% on the year from price cost.

Bryan Blair: Okay. Fair enough. MTL updates have a very consistently positive. We knew that was a really good asset that you guys acquired, and know, clearly synergistic with your metals platform. You know, with the updates, it's been you know, I guess, exceedingly positive. Just curious if you're willing to speak to revenue run rates, you know, current margin, where you now see that business over the next couple of years in terms of financial contribution and then, you know, quick follow-up just how the m and a pipeline is looking you know, given the uncertainty of the macro backdrop, how that is you know, played out for for

Chris Koch: Yeah. Bryan, let me try to give you the NPL thing. Extremely pleased with the MTL MTL team with how the integration went. Our team that worked on the integration, as you know. I think the last couple, we've we've exceeded our expectations or deal model expectations. MTO is no different. But the team there, I have a lot of confidence in the team. Tony Malinger, who who ran MTL before, has taken over the metal business. So we have that changed. We've had some people from within Carlisle, some experts in both the market side, customer service side, and operation side come in and augment Tony's already a good team. So we're we're doing things like spreading CLS into the culture, and it's being well received. We got a safety culture that, you know, we take great pride in and you know the results there. I think we're in the effort you know. Probably 15%, 10% of manufacturing companies and we're spreading that in there. Again, well received. What's been really neat to see is the collaboration We've got a couple of projects recently that you know, Tony's team has led where they're bringing in other Carlisle products, both Henry and CCM products, and we're putting packages together that are are, you know, getting into the specific creating that that solution that we talked so much about. That's gonna give us additional stickiness, give us some probably better margin profiles, new customers, So that's going well. We're also seeing NTL continually increase their integration with CCM. So, you know, one of the things we did not have in our portfolio is when we would put on our roofs for CCM, the Edge Metal was well, it might have been MTL, but it wasn't ours. Now MTL is working with CCM to get that in the spec. We're making good progress on that. Obviously, we can do it pretty easily with the architect. We have to make sure our contractors are pulled along as well, and it and it works for them. But making great strides in there. MTL team continues to innovate. You know, that was one of the big strengths of MTL was they had something like thirty plus patents which we hadn't seen in the metal business before. So that's going well. And we're leveraging our Peterson and Drexel metal businesses that started this off. You know Drexel and Bryan Particle's business started all last a couple years ago. And so things are good. I I would imagine we would continue to expand that portfolio. There are many other metals. That we can especially on the commercial side and facades, insulated metal building panels, roofing, things like that that I think Tony and the team will continue to expand in and we'll leverage both the Henry business and and the CCM business to to continue to further that The m and a pipeline has been good. We're giving we had you know, I would say, looks at deals and some at various stages, but I would say that the uncertainty created by you know, some of the actions taken over the last few months has made it a little bit more difficult to make things progress. I think there's obviously some disconnect there on risk. That buyers probably don't want to include in their off or may reduce it that sellers don't wanna have happen. So there that that happens. And then there's just the whole idea of how do you project your returns going out if indeed tariffs stay in place so they don't stay in place. When we look at these deal models, I think it's hard for the two parties to get together and I would expect though that when you know, this stuff gets resolved, which it will, we're confident of that, We get some certainty. A lot of these deals will come to market then. Yeah. No.

Bryan Blair: Very helpful color on on MCL and I also on the deal environments and and understood on that front. Thank you.

Chris Koch: Yep. You bet, Bryan. Your next question comes from the line of Garik Shmois from Loop Capital Markets. Your line is now open.

Garik Shmois: Oh, hi. Thanks. Just want to follow-up on VR. Comment around the fifteen million of prebuying that you saw in the first quarter. Just want to get your observation whether or not you consider that a normal level of prebuying or you're seeing anything unusual just given the strength in March and April thus far? Then maybe some color on how inventory is are at distribution.

Chris Koch: Hey, Garik. How are you doing? I I would say the the prebuy is really related to I'm an isolated Canada for the most part. I'm sure there's somebody could find. There's a dollar somewhere that wasn't. But most of it was Canada, and I think that the impact was pretty minimal. I I mean, we have no we have no issues supplying it. We understood the rationale for doing it. I don't think it'll be a meaningful impact as we go forward. It might be a little bit of an impact, but I don't think it'll be a meaningful impact as we go forward. It might be a little bit of an impact, you know, couple pennies or something in the in q two. But it's not gonna disturb anything, you know, happening. In a major way. Yeah. I can't remember your second part of your question. Question. I apologize. You you asked me about

Garik Shmois: Yeah. It was just on inventories. Oh, inventories. Yeah. Of course. Anything. Perfect. Yeah. Of course.

Chris Koch: Inventories, I mean, you know, we we set it in our our current market survey. We thought inventories were still fairly light. You know, that had been an assumption we've had coming into the year. I think one things we communicated was that its inventory stayed light, and we had a a fairly good roofing season, it would be beneficial to pricing and some other things as well. And in fact, we were going to build a bit of inventory going into the you know, the seats and to make sure we could address what we thought was gonna be a pretty decent season, which is turning out, you know, as we March and April are are turning out to be pretty good. So I would say there's still some likeness of inferring the channel. Obviously, interest rates and some uncertainty, as well as you know, the big thing that no one has really talked about at least is its impact on entry is the QXO deal on Beacon. Beacon is a a major distributor in the country, and I can't imagine that during a lead up to an acquisition, you're building inventory. I think you're trying to probably keep it as clean as you can, and then we'll see what happens after the deal closes. But I would say in general, inventory is you know, probably where it was in the first quarter, fourth quarter, and people are wary in their thinking about the carrying costs and working capital associated with higher levels of inventory. And certainly, you don't want to sit on it if if the season doesn't turn out to be what you thought it was.

Garik Shmois: Okay. That's that's super helpful. Just my follow-up question is just on on the cost basket, you know, specifically related to non North America. Costs and and MDI specifically. You know, it just getting just a ton of questions on NDI, and just wondering how you're thinking about Yep. Sourcing and if you're looking, you know, to you know, move your, you know, supplier base away from China and just kind of any mitigation efforts that that you're planning on coming in place.

Chris Koch: Yeah. I don't think our strategy is is changing much. I mean, we've always had a pretty would say, competitive you know, RFP process. Our purchasing team does a great job. We've we've been a big supply or big, excuse me, purchaser of MDI for a long time. We have good relationships with all of the major manufacturers. You know, they do move around from time to time. But I would also say, you know, you get a certain formulation embedded in what you're producing in the factory, and there is some stickiness there that you're not inclined to change. Doesn't mean we can't change, and we do when we need to. But I think the team does a good job of balancing that. So as I explained earlier, you know, really, because we're doing this in ninety day blocks, for us, I'd say with what we're seeing in terms of potential price increases, we'll probably stick to our strategy. But that doesn't mean that if things change, we we won't take action there. You know? We always think of these things in a couple of ways. Right? Probably three ways. Right? When you have this happen, is it temporary? It could be a pass it through? Or do you, two, not do anything and just absorb the margin? Or three, do you you know, make a a transition to a new supplier and move it around So we have those options, and I think we're in a good position. Like I said, I think our team's always done a good job of keeping us in supply of MDI, not having any shortages. We're able to fulfill our obligations to our customers, and at the same time, producing what I think is probably the we probably buy one of the lowest cost in the industry.

Garik Shmois: Understood. No. Thanks for that. That's a look.

Chris Koch: Yep. Thank you.

Operator: Your next question comes from the line of Adam Baumgarten from Dellman and Associates. Your line is now open.

Adam Baumgarten: Hey, guys. Just on the Yeah. Maintain guide for the year, it just that implies a decent step up on a year over year basis for, you know, revenue growth and and EBITDA margin. Expansion to get to that target. I guess, much visibility do do you have to that improvement? And and maybe more specifically on the CWT organic growth and just margins across both businesses?

Kevin Zdimal: Yeah. As we look at the the range we put out there. I mean, we do mid single digit revenue growth approximately fifty basis points of improvement on EBITDA As we went into the year, we were probably on the higher end of those ranges, and now we're probably at the lower end of those ranges, but we're still confident in those numbers overall as we look at the individual Yeah. We see CCM. For sure at that fifty basis points of improvement. They do need the price in the second half of the year to happen. CWT we think we'll be back in that twenty two percent range starting in q two and through the balance of the year. So showing improvement in that business as well for the full year. And then yeah, overall on a consolidated basis looking at that fifty basis points of improvement.

Adam Baumgarten: Okay. Great. Thanks.

Operator: Your next question comes from the line of David MacGregor from Longbow Research. Your line is now open.

David MacGregor: Hi. Good afternoon, everyone. Just to stay on that last question. Hey. I hope everything's going well with you guys. Wanna stay on that last question. And specifically with respect to CWT, you're guiding up high single digits. When we talked last quarter's call, you were expecting that residential markets would show moderate second half recovery. Is that still the expectation? Or what's changing in terms of the composition of the expectations that leave the guidance unchanged?

Kevin Zdimal: Yes. We look at the best overall. We have new first half of the year. We would have new on the resi side down mid single digits and second half of the year, obviously, much harder to predict on it. Flat to up low single digits. Overall, down low single digits for the new Res eight r and r we look at that on the resi side, down low single digits first half of the year, We have that up. In the second half of the year. The low single digits, which makes it flat for the year. So r and r look and new being down. The and we as we look at commercial, on the reroofing side on commercial, this is up mid single digits for the full year each of the quarters. And then on commercial, we have that down low single digits first half of the year and up low singles in the second half of the year. So flat for the year.

Chris Koch: David, I think there's a couple other things that should help us as we move through the year. You know, Ultra Touch, which we've been talking about, continues to expand presence across the nation and our relationship with the you know, major retailer. We have some other things, VP Tech, that's taking hold. All of these are you know, labor reducing and and and I would call efficient from an ROIC perspective. That's been good. We continue to make some channel gains. As the team expands the EPS, expanded polystyrene footprint. We've got, obviously, the addition to PlastiFAT and ThermoFam. And once we get through the integration, they should pick up speed. And they have some set some sales synergies there, some things in Canada that the PlastFAT thing can team can work on. Hopefully, show some results as the North as the US team helps them with their relationships up there. So we've we've got some good things there. Weather's another one. You know, Mehul, you know, educates Kevin and I on how dry weather is great for CCM, but it may not be great for roof coatings where you need, you know, rainy weather for people to identify that they have a a roof leakage problem. On the resi side, and then they head to one of the major retailers to pick up a Henry product. And we know we've had some dry weather. Obviously, it's been helping. CCM, but it hasn't been helping CWT on that side. And we also think that when there's that extended period, it usually takes about four to six months for that to recover, which with what we've seen puts us into that second half. So there are some positives. In the second half, and then we have the normal things we're doing around automation in the factories. We've got projects like the Kingdom Project I talked about that's a full factory automation project underway right now that'll also have some impact on margins. So yeah. We're a little bit more positive as we go along. You know, it's been three years, I think, since we've had Henry and the team has come in, and we continue to find things for them to work on and and even though they're being pulled down, pretty pretty you know, remarkably in a lot of ways with negative energy in the resi markets. The team's pretty resilient. They keep making a lot of progress on new product development and other things. So, hopefully, their initiatives will pay off, and we think they gain momentum through the year. Got it.

David MacGregor: Thanks for that detail. That's helpful. And then I guess follow-up question. I was hoping within the context of that mid single digit growth guide that you're providing for the year, you could just talk about membrane membrane versus polyiso. And and what you're seeing in terms of, you know, market dynamics and and how you're expecting each of those to contribute to that mid single digit number?

Kevin Zdimal: Yeah. We don't really break that out, David, going through it. I mean, we do polyiso has been growing faster than the membrane has just from the more energy efficient buildings and putting more polyiso on each of the jobs, and that's when we look at price per square foot on the content for each of our jobs. That's been going up, and that's really been driven by a PolyISO piece of it, but breaking out individual revenue growth numbers haven't put that part out.

David MacGregor: Is there any way you can talk about market conditions there? Any kind of general commentary?

Chris Koch: General commentary on the on the different product categories? Yeah. You know, I mean, I think we go through the big ones at least in CCM, Maybe we'll could talk on CWT. But, I mean, in in CCM and our product categories, you look at APDM. I still think EPDM is a great solution. We're seeing that despite what people talked about years ago that EPDM was gonna be replaced by PTC and Polya and TPO, we haven't seen that. We've seen EPDM continue to have a a real, you know, solid market presence. And, in fact, I would just say we've even seen some positive growth there. Here in Q1. TPO continues to be a big solution to choice for people. It's it's reflective. We get a lot of positive shared you know, and gains against modified bit and that in the south where you get the reflectivity and obviously the insulation properties for the polyiso. Kevin mentioned how polyiso is growing. PVC has been a nice grower for us. You know, it serves a certain part of the market. When we look at our architectural metals business again, that is growing at a nice clip. I think people like the recyclability of of metal. The ability to use colors, the ability to produce a different architectural look to the to the business. So I I think on the CCM side, you know, it's really been a positive story in all the the categories. And, you know, our job here on innovation is to continue to innovate and add to that category. We think what we'd really like to see is five years, we have another roofing membrane we can talk about with some you know, pretty remarkable benefits, whether they be labor savings or energy efficiency. And, obviously, polyiso is something that is a great insulated product. We'd like to see another product category that perhaps has, let's say, two x The r value of polyisone has some other benefits whether whether it's enhanced flame retardancy or something like that. So do you wanna talk a little bit about product categories and and CVV team? Yeah. A lot of the same secular drivers that

Mehul Patel: Chris went over around energy efficiency, labor savings. So as you guys know, CWT, which is a broad portfolio Yep.

Kevin Zdimal: Cool. I I I think we got all this. I we're just trying to get yeah. I think we got all this. We're just trying to get

David MacGregor: some color on market conditions and and dynamics I think we understand the big picture.

Chris Koch: Yeah, I think, David, I think we've been pretty clear about the market dynamics. I mean, and we referenced the fact that reroofing continues to do well. We were at the contract event. I mentioned that. Our car market survey continues to show positives. I mean, really, in the resi markets, I mean, you know what it is. That remodeling or building new houses. It's pretty direct correlation between how conditions are, and I think that's been pretty well stated. But if you have something specific, and I'm sorry I took you on a a while to do shift there, but if you have something really specific you wanna answer, we could try to answer I would say we're a little bit hesitant to give out what we consider confidential information considering we've had so much talk of competitors coming in the market from places like you know, overseas and that. So we are a little bit more guarded on some of these numbers. But if you have a specific thing you'd like to

David MacGregor: Well, in that case, maybe I'll take it up with you offline. But maybe just last quick question. Could you just talk about the cadence on the tax line over the balance of the year to get to the twenty three twenty four?

Kevin Zdimal: That's pretty steady throughout the year. I went say it'd be anything different than the first quarter that that continued through. Each of the next three quarters. Thanks, John.

David MacGregor: Okay. Thank you.

Operator: Your next question comes from the line of Keith Hughes from Truist. Line is now open.

Keith Hughes: Thank you. What what what was the pricing number in the CWT segment in the first quarter?

Kevin Zdimal: It was down just about one percent.

Keith Hughes: One percent. And was that was that coming specifically out of spray foam or which which product in there?

Kevin Zdimal: Yeah. You're you're spot on. It is the spray foam product line that is down in the first quarter.

Chris Koch: Okay. There's talking a lot of price increases there particularly with some increases in the fire retardant, I guess,

Keith Hughes: do you think that will turn back around positive in the second quarter or will it take more in the second half? What's your view?

Chris Koch: I think on the AT that we've got, I think we'll continue to see it into the second quarter. I think we'll also continue to see the fasteners and plates that we mentioned that those were a significant industry impact. That was across the board for everybody, I think. It's putting on a roof, at least their type of roof. And then, yeah, So that'll that'll go through to the second quarter.

Keith Hughes: Okay. Thank you.

Chris Koch: Yep. Bet. There are no further questions at this time. I'll hand the call over to Chris Koch for closing remarks. Please go ahead. Well, thank you, and thanks everybody on the this first earnings call. We really appreciate all the questions. Hopefully, we've provided substantial details to help with the understanding of Carlisle. We again, thank you for your participation. I look forward to speaking on the next earnings call. Thanks very much.

Operator: Ladies and gentlemen, this concludes today's conference call. You for your participation. You may now disconnect.

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