Q1 2021 Carlisle Companies Inc Earnings Call
Okay.
Good afternoon, My name is Kavita and I'll be your conference operator today at this time I would like to welcome everyone to the Carlisle companies first quarter 'twenty 'twenty One earnings conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, we will conduct a question and answer session.
Now I turn the call over to Mr. Jim G. On the courthouse, Carlisle Vice President of Investor Relations. Jim. Please go ahead.
Thank you Kavita good afternoon, everyone and welcome to Carlyle's first quarter 'twenty 'twenty, One earnings conference call.
We released our first quarter financial results. After the market closed today and you can find both of our press release and earnings call Slide presentation in the Investor Relations section of our website Carlisle Dot com.
On the call with me today are Chris Koch, Chairman, President and Chief Executive Officer, and Bob Roche, Our Chief Financial Officer.
Today's call will begin with Chris discussing business trends experienced during the first quarter of 2021 views of what's to come and context around our progress toward an unwavering commitment to achieving vision 2025.
Bob will discuss the financial details of Carlyle's first quarter performance and current financial position.
Following Chris and Bob's remarks, we will open the lineup for questions before we begin please refer to slide two of our presentation, where we note that comments made on this call may include forward looking statements based on current expectations of future events and the potential effect on Carlisle operating and financial performance that involve risks and uncertainties, which could cause.
Actual results to be materially different.
A discussion of some of these risks and uncertainties as provided in our press release and in our SEC filings on forms 10-K and 10-Q.
Those considering investing in Carlisle should read these statements carefully and review reports, we filed with the SEC before making an investment decision.
Today's presentation also contains certain non-GAAP financial measures. We've provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financials in our press release and in the appendix of our presentation materials.
And we've also have historically provided in supplemental tables, which are available on our website.
With that I introduce Chris Koch, Chairman, President and CEO of Carlisle.
Thanks, Jim Good afternoon, I'd like to welcome everyone to our first quarter 2021 earnings call I Hope all of you your families coworkers of friends are staying safe and healthy as we collectively manage through what is hopefully the beginning of the end of the COVID-19 pandemic.
Reflecting on the last 12 months of uncertainty I take great pride in how roughly one year ago. The Carlisle team handled the immediate threats born out of the pandemic.
Our first actions were to ensure our teams of Carlisle were taking the steps necessary to provide a safe work environment.
We ensure that our team members had access to health care continue to be paid it had companies support for the difficult situations. Many we're facing.
We enacted strict health and safety protocols based on the C. D C World Health organization and best in cl<expletive> peer actions of the recommendations, which contributed to a low infection rate of Carlisle across the globe.
Our next steps were to support our highly engaged and flexible work force as they took very proactive measures to ensure we supported our customers that we're providing essential services to the economy. We wanted to ensure that they can count on Carlisle to be there to provide the right product to the right place at the right time.
Where we've come to call the Carlisle experience.
Turning to slide three now throughout 2020 and essential part of leadership job was to cut through the confusion misinformation and complexity present in our daily lives of communicated clear direct and simple strategic vision for the organization that would inform our priorities educate our collective mission.
Guide our everyday actions of work the Carlisle, we call. This vision 2025.
On this compelling strategic framework gave us clear direction and consistency of mission during the tumultuous past year and will continue to guide our efforts as we accelerate into the recovery.
In 2021.
During the past 12 months Carlisle again proved its ability to navigate varying economic cycles with steadiness and focus while delivering strong financial performance Reconfirming, our conviction of vision 2025, and its key strategies.
The first quarter of 2021 continues to validate the hard work effort and commitment by all Carlisle employees to our stakeholders and signals that operational momentum is building across our platforms.
Moving to slide four due to the strength of our C. C. M. C F T and C. B S businesses, our revenue was flat year over year. Despite a very tough comparison to quarter one of 2020.
The well understood impact of the COVID-19 pandemic on the commercial aerospace markets continued to weigh on the I T results and it had a significant negative impact on the first quarter of this year.
More than offsetting this was outstanding performance at CCM, where our team delivered $6 three per cent year over year revenue growth of tremendous achievement when considering the first quarter of 2020 was one print the percent higher than 2019, and Q1 of 19 was 12% higher than 2018.
Additionally, we are encouraged by C. B S rebound from a multi year sector decline of demand for off highway vehicles and.
And lastly, CFT continues to build on its second half 'twenty 'twenty performance.
And we're encouraged with Cft's global end market strengthening.
Our strong results in rapid recovery from the initial shock of the early stages of the pandemic reinforce our confidence in the Carlisle team's ability to achieve its vision 2025.
The first quarter results highlight how we continue to execute on our long term strategies, including maintaining the highest standards in providing the carlisle experience to our customers.
Investing in high return capital projects to drive organic growth across our core platforms.
Working an active pipeline of acquisition targets, returning excess capital to shareholders through share repurchases and dividends.
<unk> on our ESG journey, and demonstrating the exceptional bolt exceptional excuse me and sustainable earnings power of.
Of the Carlisle business model.
It is our history of innovation investment and continuous improvements of sports more conviction than ever and Carlos future success.
Turn to slide five please.
The first quarter of 2021 continued to demonstrate the strength of the CCM franchise and reaffirms our commitment to reinvesting in this our highest returning business.
Our pivot to C. C. M that began with the introduction of vision 2025, several years ago was to US an obvious strategic choice after more than two decades of exceptional returns on capital strong organic growth and solid financial performance.
This is further bolstered by the now well understood value of the Carlisle experience.
And by the Carlisle experience, we mean.
Ensuring delivery of the right product at the right place at the right time.
We mean industry, leading investment in production facilities and R&D capabilities best.
Best in cl<expletive> Education for channel partners on the latest roofing products and installation best practices and award winning customer service team.
Continuing to innovate and provide value added products that ensure quicker easier and safer installation of our building envelope systems and solutions and an increasingly labor and material constrained environment.
And finally, and maybe most importantly, contributing products that provide a better environment for all stakeholders.
Taken and hold the Carlisle experience of South CCM has become a manufacturing engineering and commercial leader in the construction products industry.
Further evidence of our commitment to the Carlisle experience into investing in our highest returning businesses earlier. This week Carlisle announced plans to invest for the $60 million to build the innovative state of the art manufacturing facility in Sikeston, Missouri.
This investment will support our organic growth initiatives and also create jobs for the city of sites and the surrounding communities.
The building and its surrounding footprint, we'll incorporate the latest advances in lead building technologies and highest standards of sustainability.
The insulation materials manufactured here not only lower energy costs for building owners and operators, but also help reduce of buildings G. H G emissions.
Additionally, the sites central location will reduce the carbon footprint of CCM supply chain and improve material lead times for customers in the region.
Demand continues to grow for installation solutions, given the strong re roofing cycle underway in the U S as well as the growing needs to improve the energy performance of commercial buildings.
With that in mind, we felt this was the right time to expand our capacity and enhance the Carlisle experience for our customers in the Midwest.
Please turn now to slide six.
Now, let's turn to some specifics on our first quarter results were CCM exhibited the remarkable strength of its business model CCM organic sales grew nearly 6% year over year, reflecting strong demand for our sustainable building envelope solutions and underscoring the importance of the Carlisle experience March volumes were particularly strong more than offsetting.
The significant weather induced softness in February and.
And additionally bookings entering the second quarter are at record levels.
Fortunately, our conviction and a strong 2021 meant that we anticipated the market needs and drove elevated production levels. During the latter part of 2020 and into the winter months as others in the industry cast out on underlying demand we.
We did this as a commitment to our customers to ensure their needs would be met and continue to earn our places of the supplier of choice for their building envelope solutions.
CCM continues to benefit from the strong re roofing cycle in the United States, our products and solutions for nonresidential buildings are non discretionary and can only be deferred for so long.
We believe CCM volumes in 2021 should benefit from work postponed in 'twenty 'twenty due to the pandemic when.
Well, we maintain our conviction and the sustainability of the re roofing demand in the U S, where we continue to expect the market to grow from 6 billion to.
The $8 billion in the next decade.
Additionally, CCM is meeting head on the challenges from the significant acceleration of raw material and logistics cost inflation during the quarter.
Coming into the year, we were expecting an inflationary environment, coupled with strong demand and thus had prioritized selling price increases across most product categories at CCM to ensure we could continue to invest in and provide world cl<expletive> customer service to our customers our.
Of our procurement and supply chain teams are doing a great job of navigating a volatile and extremely tight marketplace again with the goal of providing the best in cl<expletive> Carlisle experience to our customers.
Turning to see I T. The first quarter results were in line with subdued expectations, giving the ongoing disruption in the commercial aerospace market.
Improving leading indicators, which include the expanding vaccine rollout increasing numbers of domestic travelers growing aircraft manufacturer backlogs and improvements in Cit's order books give us confidence that the I T is positioned for a sequential improvement going forward.
C F T delivered improved revenue and profitability performance in the first quarter driven by its reenergize commitment to new product innovation improve.
The improved operational efficiencies.
This discipline and integration of our newer platforms, we're especially pleased that new products accounted for over half of the volume growth in this quarter.
When it's C. B F. The significant actions taken to improve the business over the past few years are yielding expected results combined with demand for off highway vehicles and equipment, especially in AG and construction is driving very strong volumes C. B F is delivering positive and accelerated earnings growth of what looks to be a significant inflection.
Year.
For this business.
Please turn to slide seven.
Our ESG efforts also continue to gain momentum under Dave Smith, our recently appointed Vice President of sustainability.
In early April we published our 'twenty 'twenty sustainability report in conjunction with the launch of a New award winning ESG focused website.
These launches collectively share details of Carlisle century, long journey and provide a deeper look into the socially responsible approach we undertake to create value for all stakeholders of the company.
The bite you to read what we have published on the sustainability section of our website at Carlisle Dot com.
I'd also like the highlight how important the Carlisle operating system was the Carlisle throughout the past year and will continue to be as we drive to deliver vision 2025 during.
During the pandemic year of 2020, and the 13th year of our C. O S journey, our teams leaned heavily on C O S to navigate through significant uncertainty.
The first quarter again demonstrated the value of C. O S. As we delivered 1.2% savings as a percentage of sales well within our target of 1% to 2% annually.
Moving to slide eight.
Before Bob updates you on our financial performance I wanted to give you a quick update on capital deployment. We continue to seek synergistic acquisitions that are currently working on a robust pipeline.
As has been the case for the last four years, we remained active on share repurchases buying back $150 million worth of shares during the first quarter, and we paid $28 million worth of dividends.
We remain opportunistic on share repurchases and we'll continue to balance our cash position with the opportunities within the robust M&A pipeline.
We believe the strong performance in the first quarter across all platforms of Carlisle is a product of staying the course on our strategies I'm proud of how the team met the challenges of the past year and believe Carlisle is in a solid position to accelerate through the recovery.
Bob will now provide operational and financial detail about the first quarter and review our balance sheet and cash flow Bob.
Thanks, Chris starting with this quarterly call when referencing profitability I'll be speaking to adjusted EBITDA margins and adjusted earnings.
Please now turn revenue bridge on slide nine of the presentation.
Revenue was flat in the first quarter, driven by CCM, CFT and CBF offset by the well documented the commercial aerospace declines of the I T.
Organic revenue declined one 4%.
CCM CFT and CBF, all delivered greater than 5% organic growth in the quarter ACA.
Acquisitions contributed four percentage of sales growth for the quarter and FX was the 90 basis point tailwind.
Turning to our adjusted EBITDA margin bridge on Slide 10.
Q1, adjusted EBITDA margin declined 180 basis points to 14, 4%.
Pricing and volume headwinds combined for a 150 basis point decline driven by the I T.
Acquisitions were a 10 basis point headwind.
Freight labor and raw material on other operating costs netted to a 140 basis point decline.
Of course benefits added 120 basis points.
On slide 11, we have provided an adjusted EPS Bridge, where you can see the first quarter adjusted EPS was $1 47, which compares to $1 67 last year.
Volume price and mix combined were 24 cent year over year decline.
Raw material freight and labor costs were a 25 cent headwind.
And tax together war of one cent headwind.
Partially offsetting the decline share repurchase contributed 5% C. O S contributed 16 cents.
And lower Opex was the nine cent benefit year over year.
While COVID-19 related volumes declines at Citi clearly represented the most significant headwind during the quarter. Our team did a commendable job managing costs leveraging C O S to improve efficiencies and taking actions to position Carlisle for the recovery, while mitigating the pandemic impact on earnings.
Now please turn to slide 12 to review the first quarter performance by segment in more detail.
Ah.
At CCM the team again delivered outstanding results with revenues, increasing six 3% driven by volume and.
And 60 basis points of foreign currency translation tailwind.
CCM continued to exhibit its resilience with solid U S. Commercial roofing performance. Despite continued COVID-19 related restrictions in some areas and severe weather in February.
Our European and architectural metals teams were solid contributors of the quarter's revenue performance.
Adjusted EBITDA margin at CCM was 21% in the first quarter of 50 basis point improvement over last year, driven by the higher volumes D.
Oh of savings and cost management, partially offset by wage and raw material inflation.
Please turn to slide 13 of reused Cit's results.
Revenue declined 36% in the first quarter.
It's been well publicized just the coin was driven by pandemic impact on commercial aerospace markets.
While the hovering in the aerospace could be prolonged we are confident that there will be of resumption of growth with the continued rollout of the COVID-19 vaccine and airlines returning the profitability.
And our medical platform, where sales were up nicely in the quarter year over year. We continue to expect sequential improvement from pent up demand as the impacts of Covid on hospital Capex on postponement of elective surgeries East. Additionally, our project pipeline is robust on our backlogs on permanent.
Cit's adjusted EBITDA margin decline year over year to seven 1% driven by commercial aerospace softly, partly offset by savings from C. O S and lower expenses, while the actions taken by the 18th 2020 to rightsize, our footprint and reduce the overall workforce with difficult we are positioned to deliver sequential improvement.
Performance throughout 2021.
Turning to slide 14.
Cft's sales grew 12, 9% year over year organic revenue improved five 3%.
Acquisitions added four 1% in the quarter and FX contributed 350 basis points.
<unk> nation in key end markets, driven by an improved industrial capital spending outlook in 2020, one coupled with new product introductions pricing resolve and efforts to upgrade the customer experience positions the ft to accelerate through the recovery.
Adjusted EBITDA margins of 15, 5% was of 590 basis point decline year over year. This the.
Klein, primarily reflects an FX gain of approximately $3 million from the previous year, partially offset by the growing volume.
Turning to slide 15, Cbf's first quarter organic revenue growth.
24% and FX had a positive three 7% impact driving cbf's organic total growth to 24, 1% in the quarter demand for agricultural and construction equipment was the primary contributor to the growth.
<unk> backlog continues to strengthen with bookings up 80% year over year.
Adjusted EBITDA margins were 13, 3% of 600 basis improvement driven by higher volumes and CLS savings.
On slide 16, and 17, we show selected balance sheet metrics, our balance sheet remains strong we ended the quarter with $767 million of cash on hand, and $1 billion of availability under our revolving credit facility.
We continue to approach capital deployment of balance and disciplined manner investing in organic growth through capital expenditures and Opportunistically repurchasing shares while also actively seeking strategic and synergistic acquisitions.
Free cash flow for the quarter was $47 $6 million of 57% improvement year over year.
Turning to slide 18, you can see the outlook for 2021, Inc.
And corporate items corporate expense is now expected to be approximately $120 million for the year driven by stock and incentive based compensation along with higher medical expenses, we continue to expect depreciation and amortization expense to be approximately 25 $225 million.
For the full year, we expect to invest in our businesses and still expect net capital expenditures of $150 million to $175 million.
Net interest expense is still expected to be approximately $75 million per the year.
And we still expect our tax rate to be approximately 25%.
Finally, we expect restructuring in 2021 to be approximately $20 million.
And with that I'll turn the call back over to Chris Alright, Thanks, Bob entering the second quarter of 2021, we are very optimistic about the remainder of the year from record backlogs at CCM to growing positive trends in Cit's aerospace markets to recovery in both C. B F. The CFT, coupled with excellent sourcing of price discipline, where <unk>.
And our ability to deliver solid results for our shareholders. We will continue to seek to deploy capital into strategic acquisitions share repurchases and dividends.
While there are still uncertainties around the pandemic for the full year of 2021, we anticipate the following.
At CCM supported by a strong multiyear re roofing base project deferrals that occurred in 2020 positive momentum in our newer businesses of architectural metals in polyurethane and expansion of our European business. We now anticipate revenue growth of low double digits in 2021.
Let's see I T, given improving leading indicators, including a vastly better COVID-19 outlook, increasing daily TSA screenings for domestic travel and improving airline financials translating into increased manufacturers orders Cit's financial performance has stabilized and is positioned for sequential improvement going forward.
That said, we anticipate pressures remain near term given a very difficult year over year comparison in the first the second quarter as we continue to expect C. I T revenue will decline in the mid to high single digit range and full year 2021.
At CFT with end market, strengthening, especially general industrial and improvements in the teams execution of our key strategies. We continue to expect low double digit growth in 2021, when it's C. B F supported by strengthening demand in core markets price resolving of growing backlog, we now expect over 30% year over year growth.
In 2021.
And finally for Carlisle was the whole, we expect low double digit growth in 2021.
In closing I want to once again express my gratitude to our dedicated employees their families our business partners and all of those <expletive>ociated with Carlisle success, given our 100 year history on the resilience of this company has shown in times of adversity and uncertainty we remain confident in Carlisle is outlook, our strong financial foundation cash generating capabilities.
Unwavering commitment to our vision 2025, strategic plan and to providing products and services essential to the world's needs. This.
This concludes our formal comments Kavita, we are now ready for questions.
And at this time, if you would like that flow.
A question Thats Star one on your telephone keypad.
Just a quick question.
And our first question comes from Bryan Blair with Oppenheimer.
Good afternoon, guys very solid start to the year.
Thanks, Brian Good afternoon.
I was wondering if you could offer a little more detail on CCM volume trends through the quarter I guess I'm most interested in the.
What I <expletive>ume was an inflection in March.
Our read was that February was tough and then there was a freeze threat of good portion of the months January wasn't great.
You know flat to slightly up so that implies a very strong margin momentum in Q and for the second quarter, which which is consistent with having record bookings.
Curious if you could quantify that.
Level of from now.
Yeah, I think the Butte pretty.
As of late with you, but I'd also say the third quarter and fourth quarter of the teams were already seeing a return to some pretty solid numbers and backlog was continuing to be quite stable and growing and then we did say anything of the fourth quarter call. The we came into the year with momentum in the first quarter was going to be fairly good and I think as we've talked about we did anticipate the strike.
2021 coming off of the tough 2020, where you know we had some.
Ads that we knew were going to come back specifically in distributor stocking for instance of we also knew there'd be of a big backlog that hadn't been addressed in 2020. So yeah. You're right January was I think it was good I think of continued the trend February was.
Of that.
Created some uncertainty out there I think people are wondering how many days were lost on the roof and then March did come back in I think March just reflected though what we anticipated all along the 20th when he was going to be a good year that we were going to get some distributor restocking that contractors are going to have more flexibility going on under the roof.
And we were going to.
The momentum build so.
Okay I appreciate that color.
Is your team thinking about second quarter growth for CCM and if we work off of the 719 and the first quarter and think of historical seasonality and you know again with record bookings going into the quarter that that implies a very significant second quarter growth versus obviously a weak comp.
On.
But nonetheless very significant growth any anything you can quantify would be appreciated.
Let Bob address that but I think the seasonality thing that I would kind of forget that I think it's you know again the last year was up.
The exceptional year and I think there are some forces that overwhelm any seasonality of that might be there, but Bob you want to give some more specific yeah, Brian on second quarter, we're expecting over 20% growth off of weak last year. So I think the.
The the normal bump from Q1, the Q2 at the end.
But the year over year is that kind of.
B B.
Bigger than usual because of the the weakness last year.
Okay fair enough.
And then.
Any updated thoughts you can offer on price cost outlook input costs have been less than cooperative.
Well understood.
<unk> been aggressive on price, we know theres traction there.
How do you see that shaking out on a full year basis, and how should we think of the first part of second half dynamic.
Yes, I am thinking about what at least from my perspective of what we talked about it some of the other calls which where we thought we were going to be relatively flat in 2021 that we were being the team is being very aggressive on price again, I think the anticipated what was going to happen in the year very well I think the news is going to be high demand. There is going to still be labor constraints and I think they knew the this idea.
Of having product would be the important, especially inflationary times. So when we look at.
Q1, and Q2 I think for Q1 I from my perspective relatively flat on price cost I think Q2 might be a little bit negative and then as we roll into Q3 and four we turn flat and then maybe a little positive so net net for the year.
Thinking flat Bobby on it anything yeah, Brian just even with what Chris said about the second quarter.
We still believe I think adjusted EBITDA margins relatively flat year on year, even with the slight pressure we may see.
Okay excellent.
I appreciate that I'll leave it there.
Alright, Thanks, Brian.
And our next question comes from Tim Rodgers with Baird.
Hey, guys good afternoon.
Part of the year.
Yes.
Maybe just.
First question.
Could you just talk a little bit about kind of material availability.
Maybe not for yourself to the styling I'm thinking of guys are fine, but perhaps maybe just kind of the broader industry and kind of what youre hearing.
Around lead times.
You know kind of how those compare maybe relative to your own business.
Yeah, I think Youre right I think our team has done a good job of ensuring that we have a supply and if things are getting tighter we're able to I think keep everybody satisfied right now but across the business I think there of those who are.
Perhaps struggling I know on the phone side Theres been polyol, it's been tough to get M. D. I think for some people has been cut tough to get I think even on the the fasteners and steel decking has been surprisingly I think tough to get so yeah, I think in a broad sense, Tim across what we're seeing.
It's getting.
A little bit worse.
And that's putting pressure obviously on the ability to deliver product and I think for some folks lead times extending.
But as I said I think for us, we're keeping our customers satisfied and.
Filled so we'll see what happens, though because it the demand rates things continue like this it's going to put even more pressure I do think as of the year goes through though.
Suppliers will have caught up they'll they'll have caught up to what they took out in 2020 and probably as we look at the back half of the year things should normalize, but I think this summer is going to be.
Interesting.
Okay, Okay and then.
If I remember correctly distributors really really tightened up.
In April of last year or are you seeing that significantly loosen up.
Are they kind of scrambling for inventory.
Well I think that some of the book of record bookings, obviously are people who are of restocking in the last year, we had that big and we did talk about in the second quarter, we talked about people not putting in that normal load for the year I think now there's probably of that normal load plus there was the there was the backlog from last year's jobs.
It didn't get completed and then we might have the I would say some buying where people are worried about being able to deliver jobs in July and in August and want to make sure they get on price and get them.
And inventory at least have of line of sight to being able to deliver.
Okay. Okay. Good and then just the.
The free cash flow conversion.
Looks the same but I think it's actually off of adjusted net income now.
I guess from a dollar perspective, what I get the change relative to before because I guess, if you put it relative to GAAP it would be significantly higher right.
Yeah relative to GAAP it was higher.
On the new metric that we have is on adjusted net of the Houghton.
Okay.
And I guess what changed.
Again, nothing nothing has changed.
You had 120 on GAAP last time and now you have of 120 on on the cash.
Net.
In terms of the conversion rate.
We did.
We leave some room for conservatism on on the on.
On the preliminary call for.
Free cash flow conversion so.
And that the math is the same.
I gotcha okay.
Yes.
Okay, Great I'll hop back thanks, guys I appreciate it good luck.
Okay. Thanks, Tim.
And our next question comes from salary.
The <unk> with Jefferies.
Hi, good evening.
Typically of.
A positive sign when companies guarantees on capacity.
Facility and how all of this capacity the last before you think you're going to acquire another one.
Well I think we generally think that a place of plan adds somewhere between five and 10%.
The capacity of the industry and when you think the.
We're growing of the first quarter of 6% and we think that's going to continue I think it's just an appropriate level of capacity add and likely it'll take.
A couple of years to consume that.
We've seen competitors add plants I think over the last five or six years. It's been one every couple of years and that seems to have been the appropriate level of capacity too.
Not over.
Capacity is the industry and then have pressure on pricing.
And then maybe can you talk about what you saw from the end market perspective on CFT and D C and acceleration through the quarter how of orders trending.
I believe you of a decent amount of the auto exposure there so maybe any impact from Steve from production.
Right. So I think most of the things that I'll just the first one on the production issues, there and capacity when they're putting in these paint systems of the theater systems.
Typically it's the longer term project with the ROIC based.
The investment over multi years and so we haven't seen much in terms of negative impact over the long term.
<unk> of people.
Upgrading.
Either sealer decks or paint shops.
When we look at the general trends in industrial I think they are good I think I've been surprised at how.
Europe has been <unk>.
Wrong as it has been China has returned.
In North America, if anything it would be a little bit of the laggard.
But that's coming on strong now too so and market trends and I think you see that in C. B F as well, where we're seeing heavy equipment of that.
Pick up after many years of the kind of a malaise Bobby on anything or no.
Yeah.
Okay. Thanks for the question.
That's right.
And our next question comes from Garik <unk> with the loop capital.
Great. Thank you just spoke.
The spectra CCM volumes, you cited record bookings and.
That's clearly driving some of the strength here, but maybe you could flesh out what you're seeing maybe from a regional or end market standpoint, how is new construction versus re roofing of any regions standout in particular.
Yeah, I think the regions of the <unk>.
Phil stand out you know being headquartered in Phoenix, one of the interesting things that we see is how strong on building in the in the southwest has been and obviously in Texas, where there's a lot of talk about the migration of that occurs there Florida.
Will we see that surprisingly I think our our business, though pretty much everywhere has been pretty good and you know one of the leading indicators. We've always said for years has been when Razee construction is good.
Non or is he says the fall you know when you're building houses and expanding suburbs and things like that you tend to draw of long shopping centers in the places to eat.
Walgreens Cvs it was kind of thing so.
I think across the U S. It's been very good and you can see that in the resi as well for new construction, it's been a contributor Bob and I have talked for a while about how anything north of zero, probably really helps.
And it has been we think low single digit for new so that's been really good to add to what we articulated in this presentation and we have many times around how strong we think the re roofing backlog.
And growth and that has been and will be over the next decade. So.
It's kind of interesting figures, but I mean really if it's one of them.
About hitting on all cylinders pretty much doing it right now.
No that's encouraging.
Did you ship to the.
The price cost outlook.
Is this you reiterated it.
Is this predicated on getting or needing additional price increases or do you think what you secured so far this year should get you. There just given the visibility that you have on the cost side.
Yeah on what I articulated about the cost side I think is is a key part of that obviously, we are anticipating that suppliers will.
Get their capacity back online and we will see some modulation as we get into the third quarter and then into the fourth quarter. Obviously, if if things of anything substantial changes that that throws it off but given that I think where we are from a price perspective, I think our team was.
Very proactive and got ahead of this and that's what's embodied in this flat call for the year.
Great and then just lastly, just wondering on the supply side for CCM, just given how tight it is recognizing that maybe some rigor of manufacturers will be able to get their production in line later on this year, but just just given how strong the market appears to be.
For you and how strong the market appears to be when looking out over the next several quarters of several years, <expletive>uming a recovery do you think we're on the inflection point you've been talking about this for several years, but do you think will truly at an inflection point now for pricing in CCM.
Well I can't speak for the rest of the market, but I think given where we are on a on a variety of fronts. I mean first of all of the demand the labor constraints the.
<unk> needs are you know you can get into ESG globally. There are a lot of trends. The just point to what we've been saying, which is this market is going to be a robust market and people are going to place a premium on.
Having a supplier that will deliver every time with the right product of the right place, but also of high quality product. That's innovative takes labor hours off the roof.
And our teams work.
Over the last years and investing in our R&D center and investing in training investing in.
The contract or education on application.
Things like this leads.
Leads us to believe that you know they're.
They're going to pay they will pay a premium for our company the delivers on their promises like that and so I think for us going forward. We've had this pricing resolved for the.
On a while now many years and yeah I think you know.
Our inflection point with three or four years ago, I think maybe the rest of the industry may get there, but I. The only thing I would figure because if if if people don't deliver on those things if you're not providing innovation if youre not providing.
Superior customer service, if you are not providing the.
Products that take labor off the roof and things like that then then I don't think the pricing situation is the same.
And you may not be at an inflection point so.
No understood. Thanks again.
Yeah, you bet.
And our next question comes from Joel.
The bank of Montreal.
Hey, guys How's it going.
Joel how are you doing the good to hear your voice.
Good to hear you guys too glad everyone's safe and it sounds like Kathy.
Making everybody money, that's what it's all of that.
Thank you.
Can you clarify what is price discipline mean in <unk>.
Well one of the things we know is that a large part over the years of our competitors are.
The growth of profitability has come through price and that idea that.
The same kind of thing as the CCM you create innovative products you provide excellent service and then you price it appropriately and you don't.
Now just because someone tells us the competitor has a good deal you don't lower price you stick to two pricing your product to the value of it provides so that's really what we mean there is the C. F. T. Now is delivering on time, there they've got good cash.
Customer service, we're working on some innovative products as we said on the call half of the volume in the first quarter was through new products. So I think we're starting to build that debt.
Business the way, we wanted to which meant we could continue to get price and be.
Discipline in how we do it we don't we're not getting into these price competition, we're selling the value.
Okay.
That smart like establish yourself as the premium brand.
They are a premium brand, they're a premium brand.
Can you talk a little bit about the CIP I'm sure you have a little more.
Sort of by insight just into what the customers are thinking and I'm thinking more 'twenty, two and 'twenty three I'm not really thinking about the second quarter, but anything you can help us with because I know we went into kind of this time last year. It was a little too much inventory in the channel on is that all cleaned out and just give us maybe a little bit of a deeper look of.
Of how that setting up for the next three years, yes.
Yes, I think its all of July of anything it all depends on travel and we're seeing increased travel at least we're seeing increased leisure travel.
Certainly in the U S. I know China travels picked up two I've I've looked at that I think Europe is a little bit soft still.
I think what has to what has to really start to come back and we hope we were gonna see that the summer and I think we feel it will come back is the business traveler and the international traveler.
And so that's what we're looking at and then when we start seeing revenue improve it at our major Airlines then we can start thinking about.
No them, adding routes back and adding.
The planes back into service and I think that's happening right now I mean, the things that we here are the there's a backlog in.
Simulators, where players have to get recertified that that seems to be everybody started to ramp up again, I think we're seeing more planes being brought out of the backlog of those places where they've been stored and then.
We have seen some increase in orders from airlines certain airlines to the aircraft manufacturers. So all of those things point to us to say the you know as we get into the back half of 2021, we should start to see things.
Really improving and then 'twenty to 'twenty two sheets should bring.
Bring us back to profitability in that and then marching forward from there.
Okay. So it sounds like maybe just a little bit too early to have.
Hi.
On a clear view or whatever and can you just talk quickly about acquisition valuation and then I'll leave you guys alone and thank you very much from the time.
No no from the.
I think the trend that's happened over the last couple of years, you know it well, but there's been increasing amounts of money in the market with the decreasing amount of <expletive>ets and so multiples continue to increase.
I think we saw it with the Firestone deal I think went out of somewhere around 12, which for construction products compared to five years ago is probably a couple of turns higher than it would've been so yeah as long as we have money out there and we have.
The strategics and the sponsors out there looking for <expletive>ets to buy and deploy capital and now we have snacks and other things.
Demand is high for <expletive>ets and in multiples continue to rise.
And can you do anything creative to get through Bob screens, like buying things for stock or not really.
The candidate buzzing of creative Guy So I can't do the creative because he won't won't respond to of Joel. He's just mean potatoes. So I Oh no. We just have to make sure. We're finding <expletive>ets that have great synergies and good strong organic growth programs embedded in in their businesses and I think when you look at where we are on the construction products are in CFT or.
Or and even in C. I T and medical there are businesses that have great products that have good runways with strong organic growth and Luckily in those markets. We know even of medical you know we've got bases that are big enough that we can make acquisitions that get synergies out of it and so I think that's.
That's the only way we can make the model work because we have to have good strong organic growth and leverage with the synergies.
Okay, great. Thank you so much EBIT.
You bet.
And as a reminder to ask a question Thats Star one on your telephone keypad Star one to ask a question.
And our next question comes from Kevin Hocevar with Northcoast research.
Hey, everybody a nice start to the year there.
Thanks, Kevin.
Bob I'm wondering you mentioned.
CCM margin do you expect them to be flat in the second quarter compared to the prior year.
With the sales are expected to be up over 20% and price cost just a small headwind I guess why would that be the case, what would be the offsets there.
Well, it's a little bit of the the the price cost the Chris mentioned that we think the second quarter is going to be the toughest compare and then growing into the back half. So it's.
Okay.
Okay.
And.
In terms of the <unk>.
You guys.
I mentioned.
Matter of Ruth I think you had mentioned in the prepared remarks, when you were talking about CCM the matter of roofing in Europe did well wondering if you could just give a little bit more color there.
You didn't I don't think you mentioned polyurethane, so curious what you're seeing out of.
Each of those.
The businesses within CCM.
Well, we're really pleased with Europe, and the new management team. The they came in a little bit of while back.
We're impressed of the leader in and how things have really solidified and we invested in an expansion of Walter thousand were really pushing or of new products and that's going to continue to be a good story. So I just think the.
On the store in Europe is just a new management team with a really exciting outlook of really get it done attitude and Georg.
The gentleman, we brought in is a very.
Very experienced in European construction products markets, whose rents of big businesses and I think he is a great strategic direction. So that's that's fun to watch happen, we'd love that when people come in with great skill sets of can apply their their craft at Carlisle. Our architectural metals is another great story I mean.
The leaders of the businesses of Drexel and the Peterson are doing a great job I think Peterson had a record month all time record month in March so that that team is doing a great job Theyre also doing an excellent job of getting supply and maintaining price I think they had some very improved margins as we headed into March on a year over year base.
And historically were improved as well of the Drexel team continues to do a great job as well there.
And then Paul your things is great the only issue and Paul years, and he is really for US right. Now is the some of the materials of our to come by across the industry and everyone is kind of suffering on the M D and polyol.
And so we probably can't get as much as we would like to have and that's really.
The only thing I think that's constraining the growth in that market and that's a market, where we projected high single digit growth.
Out of polyurethane. So we still think that growth is there that that product line continues to be more and more accepted and desired in homes for its insulating properties in vapor barrier properties and it's just the very high performing installation. So there the three great.
Segments for CCM, there were three great additions and we like with the management teams are doing and how there are creating value.
Bob you want to add anything to the no.
Great.
And last one from me I'm curiosity. It seems like you guys are always focused on on GAAP EPS and GAAP EBIT.
You've always provided the adjusting items, but it always seems like the focus was the GAAP at the end of the day, but it seemed like a net.
This quarter the.
Focusing the shift to adjusted EPS and adjusted EBITDA, I guess as opposed to GAAP EBIT. So curious just curious.
The reason that you're shifting the focus there.
It does.
Are you also shifted it internally in terms of bonuses or anything in terms of how youre compensating.
Your employees more tied to adjusted EBITDA as opposed to GAAP EBIT or just curious the.
Yet there.
So I don't really think theres been much of a change there is certainly nothing with respect of compensation or anything that's happening at Carlisle.
GAAP company and.
Most important metric is the cash flow obviously.
And then return on invested capital. So we're we're still.
The same as we were the <unk>.
Move to add information and that's really what we did is we added information. We obviously after a four of GAAP. So anything we're doing is adding it was really driven by the investment community on our shareholders and then the desire for more information quicker.
And trying to take some work off of there the plate I mean, we obviously, we'd send out GAAP in say two or to investors and others. You have it you can make the adjustments, but I think for us to do that work in advance of try to just make it a little bit easier to digest the information.
On a.
More rapid timeframe and to take some burden off the investment community on the analysts that are they're doing the work on it was really the reason to do it and hopefully that in turn will will produce a better understanding of the Carlisle story.
And what's driving value here. So that's all it was it's not going to drive any changes on our performance on how we work and how we measure of capital investment or acquisitions, just to just an effort to provide more granularity to.
To the investment community.
Okay, great yes.
Very helpful. So I appreciate that I think guidance.
And there are no further questions at this time I'll turn the conference back over to Craig for closing remarks.
Thanks, Kavita. This concludes our first quarter 'twenty.
'twenty one earnings call I don't want to thank everybody for your participation and we look forward to speaking with you at the next earnings call. Thanks, the stay safe.
And that does conclude today's call. Thank you for your participation you may now disconnect.
Okay.
[music].