Q3 2023 Carlisle Companies Inc Earnings Call

Good afternoon, My name is and I'll be your conference operator today at this time I would like to welcome everyone to the Carlisle companies first quarter 2023 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 and I would now like to turn the call over to Mr. Behold Butzel, Carlos Vice President of Investor Relations Ma'am. Please go ahead.

Thank you and good afternoon, everyone welcome to Carlyle's third quarter call I'm Mehul Patel head of Investor Relations for Carlisle.

We released our third quarter financial results to date 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 Simmel, our CFO.

Today's call will begin with Chris He will provide highlights of our third quarter results and accomplishments followed by cabin, who will provide an overview on our financial performance and an update on our outlook for 2023.

Following our prepared remarks, we will open up the lines 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 current expectations actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our pre.

This release and SEC filings.

At Carlisle provides non-GAAP financial information, we've provided reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are also available on our website with that I will turn the call over to Chris. Thank you <unk>. Good afternoon, everyone and thank you for joining us on Carlyle's third quarter.

2023 earnings call in the third quarter, we reached a significant milestone in carlyle's 105 year history, moving from a diversified industrial portfolio of businesses to our building products portfolio of businesses.

The pending sale of C. I T will mark the final step in the successful completion of our pivot to become a best in class pure play building products company.

Our journey to become a focused building products portfolio began in 2021, when we as part of our superior capital allocation methodology made the strategic decision to enhanced vision 2025, and the future of Carlisle by allocating our future cash flow and human capital into investments that would reinforce.

And expand our businesses that have consistently delivered the highest returns we're confident that our focused portfolio of innovative products services and solutions in the building envelope space that drive energy efficiency labor reduction and a price to the value provided will benefit our employees customers and communities while allowing.

To our shareholders to capitalize on industry, leading returns importantly, we deliver products services and solutions with a clear value proposition and a significant financial return for end users and contractors alike, ensuring their businesses operate more effectively when coupled with the Carlisle experience. These innovative products services and.

<unk> will create a significant and clear differentiation for Carlyle and the competitive building envelope marketplace of today and tomorrow. This new building products focus of Carlisle and the accompanying key strategic actions will build on the strong foundation of vision 2025, and will form the key principle.

These are our next strategic plan vision 2030, which will be released in December we're proud of what our team has accomplished under vision 2025, and look forward to sharing with all of you. The next phase of value creation at Carlisle with the December launch of vision 2030, turning to our third quarter results on slide three in the third quarter.

<unk> C I T.

Carlisle achieve consolidated sales of $1 3 billion adjusted EBITDA of $340 million and adjusted EPS of $4 68 per share.

Our sales in the third quarter were negatively impacted by the effect of increasing interest rates driven by the ongoing Federal reserve actions. In addition to the interest rate impact. The third quarter was also negatively impacted by tighter lending standards and increasingly conservative sentiment at contractors and distributors with respect to their inventory levels as we enter the traditionally.

Lighter fourth and first quarters, we are nonetheless pleased that despite the sales declines are third quarter margin performance pricing position and market share remain consistent with our expectations CCM and CWT together delivered remarkable EBITDA margin performance of 27% in the quarter, marking a 100.

[noise] basis point improvement year over year as well as a sequential improvement from the second quarter CCM delivered a second consecutive quarter of 30% plus EBITDA margins and CWT drove a solid 90 basis point improvement in EBITDA margins sequentially. This performance showcases our ability to maintain strong margins through.

Economic cycles, our market position brand strength and price discipline complemented by the value we provide to customers through the Carlisle experience and efficiency gains driven by the Carlisle operating system are and will remain pillars of strength for carlyle's future under vision 2030 at CCM our team.

Remains focused on executing their proven long term strategies, which have yielded consistent success over the last two decades.

This focus involves maintaining our brand strength through the Carlisle experience solving end user problems through innovation and driving efficiencies through Pos and operational excellence.

One additional market note the destocking headwinds, we faced over the past four quarters, largely in commercial roofing or behind us setting the stage for a more normal 2020 for buying profile CWT delivered another exceptional quarter with 37% growth in EBITDA year over year.

Revenues performed largely as expected, reflecting the impact of the challenging residential housing market, but offset by the non discretionary R&R exposure derived from cwt's commercial and residential roof coating solutions. The CWT team continues to excel in realizing synergies related to the Henry acquisition achieving.

<unk> efficiencies through Pos and factory consolidations.

And enhancing margins through system selling initiatives.

Building on this solid performance in the third quarter, we expect the positive EBITDA growth story to continue with CWT, especially as we continue to invest in operating efficiencies and scale volume through investments and share gain initiatives. Please turn to slide four.

While we acknowledge the near term challenges driven by higher interest rates tighter lending conditions and industry wide concerns over the timing of restocking actions, we remain exceedingly bullish on carlyle's longer term value creation runway.

As I mentioned earlier with our pivot to a pure play building products portfolio now essentially complete we are a more efficient and focused organization positioned extremely well to benefit from the attractive long term secular trends that include a robust re roofing cycle, increasing demand for energy efficient buildings are.

Need for solutions that increase labor efficiency on the roof and the desire for innovation to deliver value throughout the construction process and ultimately building ownership I.

I wanted to spend a minute to highlight our key drivers of success and why we are positioned to win within this backdrop.

CCM is benefiting from our multi year backlog of re roofing projects in the U S with 40% of total roof square footage requiring replacement in the next 10 years.

This backlog is helping to ensure consistent and reliable demand CW Ts revenue with 50% derived from repair and remodel demand across the building envelope and in both commercial and residential markets provides balanced exposure to mitigate the ebbs and flows of the economic cycles, 65% of Carlisle sales are.

Derived from LEED certified products, clearly demonstrating the growing demand for energy efficient solutions and integrated systems to reduce carbon related emissions from buildings, we have a growing pipeline of innovative products and are significantly increasing our investment in R&D to develop more environmentally sustainable products with improved performance and <unk>.

Integrated system solutions that are easier to install in 2023, we have delivered $290 million of sales from products introduced in the last three years. The Carlisle experience has established us as a premium brand with a recognized value proposition backed by high quality products and exceptional service, ensuring we deliver the raw.

Right products at the right place and at the right time, and lastly, we have significant financial flexibility. Thanks to our robust balance sheet and strong cash flow generation, allowing us to fund disciplined value, creating acquisitions internal growth initiatives and provide for the consistent and reliable return of capital to shareholders.

Through almost a half century of growing dividends and in the last five years significant and opportunistic share repurchases.

Please refer now to slides five and six for our progress on sustainability sustainability is a very important focus for Carlyle as an organization Carlyle is committed to being a responsible environmental stakeholder and we strongly believe that creating a more sustainable environment is also productive and economically beneficial for our share.

Holders.

In December of last year, we announced our goal to achieve net zero emissions by 2050.

While 2050 is still quite a few years away, we recognize the need to start taking action today to meet this target on time.

Hold ourselves accountable and show measurable short term progress we created two near term emissions reduction targets by 2030 in conjunction with the science based targets initiatives also known as S. B T I.

First we committed to a 38% reduction in both our scope one production G. H G emissions from the manufacturer of our products and our scope two operational G. H G emissions from purchased energy in our operations. We also committed to a 48% reduction in our scope three upstream and downstream.

G H G emission intensity as we transition to lower carbon feedstocks.

For each of these targets, we focused on three pillars.

The first pillar is manufacturing if energy efficient products as an example in 2020 to Carlyle sold more than $3.5 billion worth of lead qualified products to the residential and commercial building industry.

Our customers will save as much as 155 million megawatt hours over the lifetime of those products, which is enough energy to power almost 14 million homes in the U S for a year and.

In addition, we converted over 50% of our spray foam blowing agents from traditional HFC formulas to more environmentally friendly H F O formulations as.

As a reminder, hfcs are 1000 times more carbon intensive that H F. O's. So this action resulted in reductions of almost 10000 tons of scope one G. H G emissions and over 200000 tons of scope three emissions while at the same time contributed to over $2 million in annual cost.

Savings.

This transition from H F. CS to H F. O's comes 13 years ahead of the mandated E. P. A H F C phasedown requirements positioning Carlyle as a leader in the spray foam insulation sustainability landscape.

The second pillar is lowering emissions across our facilities and manufacturing processes.

Carlyle's leadership in driving environmental management at our factories as reflected by our qualifying an additional nine facilities. This year to ISO 14001, the environmental management standard. We now have 42% of Carlisle facilities qualified to ISO 14001. This year, we also launched energy Manny.

All of our programs at our Montgomery, New York in Tooele, Utah plants to drive the necessary enhancements to be prepared for ISO 50001 certification by the end of 2025, both programs are yielding significant waste and energy savings ultimately, reducing our carbon footprint and returning value to our shareholders.

Earlier this year, we invested over $125 million and our new Sikeston, Missouri Polyol. So facility. This investment as Sykes and represents the latest in manufacturing advances and is another example of our commitment to reduce emissions from our facilities through the latest advancements in green building technology, including Seoul.

Power generation and energy base load control systems.

We're extremely pleased that sikeston meets the highest sustainability standards, including LEED platinum specifications.

We are also pleased that pending final certification by the United States Green Building Council Sikeston will be the first lead V for platinum manufacturing facility in the entire country.

The lead V for standard as a performance based approach to efficiency management that calls for measurable results throughout our buildings lifecycle and we are proud to lead our industry in this transformation.

Our third pillar is reducing landfill waste. This includes developing programs and partnerships to recycle an upcycle materials away from landfills.

As an example, Carlyle is piloting a program to recover and recycle roofing materials, which has helped divert 95000 metric tons of waste from landfills since inception of the program this year.

These are just a few examples of our ongoing sustainability efforts and I encourage all of you to take a look at our 2022 corporate sustainability report, which we published at the end of August and is posted on our website. It contains superb information, including clear examples of how our products reduce carbon footprint and buildings reduce emissions.

In our operations and how we plan to reduce waste to landfills.

Please turn to slide seven.

Our earnings power and margin sustainability in this challenging environment demonstrates the success of vision 2025.

As a reminder, the pillars for sustainable value creation at Carlisle under vision 2025 included.

One drive mid single digit organic revenue growth.

To utilize C O S to drive continuous improvement and drive greater efficiency.

Three build scale with synergistic and accretive acquisitions.

Four maintain a returns focused capital allocation strategy, including organic investment to drive growth a disciplined approach to M&A and returning capital to shareholders and notably thus far in 2023 we returned $699 million to shareholders with share repurchases of $580 million.

And $119 million paid in dividends.

And of course, none of this could be possible without continuing to rely on invest in and develop exceptional talent.

With vision 2025 targets achieved in the pivot effectively complete we will now turn division 2030. The next phase in our 105 year journey as a company vision.

Vision 2030 will continue to build upon vision 2025, but with a focus on building products as I mentioned earlier vision 2030 will be released in December and will provide comprehensive details about our path to further value creation for all Carlyle stakeholders and with that I'll turn it over to Kevin to provide additional financial details.

As well as our updated outlook for the fourth quarter, Kevin. Thank you Chris for segment highlights. Please turn to slide eight CCM delivered third quarter revenues of $914 million down 16% from the prior year. The decline was due to the remaining destock of 50 million.

Dollars that we expected and challenging end markets driven by higher interest rates tighter lending conditions and project delays adjusted EBITDA margin was strong at 32% as we maintained pricing discipline, while holding share which drove positive price cost in the quarter. In addition, CCM.

Drove cost reductions through operating efficiencies supported by our continuous improvement culture and the Carlisle operating system moving to slide nine revenues at CWT decreased 15%, primarily due to residential demand weakness and project delays adjusted EBITDA margin was 23.

0.4%, expanding 890 basis points from the third quarter of 2022 the.

The CW T team continues to excel in realizing synergies with the Henry acquisition, achieving operational efficiencies through C. O S and enhancing margins through system selling initiatives Slide 10 provides a year over year bridge items to the third quarter adjusted EPS.

Moving to slides 11, and 12 Carlisle ended the third quarter of 2023 with $108 million of cash on hand, we repaid our $300 million senior notes on September 1st and have $1 billion of availability under our revolving credit facility, we generated cash.

Flow from continuing operations of $390 million and invested $30 million and capital expenditures, we deployed $330 million towards share repurchases and paid $42 million in dividends as of the end of the third quarter, we have 8.6 million shares.

All ball for repurchase under our share repurchase program turning to slide 13, we have provided our updated Q4 2023 financial outlook for.

For CCM, we expect year over year revenue to decline, 3% to 5% in the fourth quarter.

For CWT, we expect year over year revenue to decline approximately 10% in the fourth quarter for the total company, we expect year over year revenue for the fourth quarter to decline, 5% to 7% we attribute the lower revenue primarily to the challenging markets and overall economic uncertainty.

Which is causing project delays.

Given the solid execution by our teams across Carlyle EBITDA margins are expected to increase approximately 200 basis points year over year. Despite the lower volume expectations. We remain focused on disciplined pricing, which is leading to better price cost capture this year.

Efficiencies and managing costs through our continuous improvement efforts with that I turn it over to Chris for closing remarks, thanks, Kevin in closing I. Once again would like to express my thanks and appreciation for the excellent work done by all of Carlyle's employees in the third quarter their perseverance and commitment to vision 'twenty 'twenty four.

Five has allowed us to continue to deliver solid results and maintain an optimistic outlook for the future and that concludes our formal comments operator, we are now ready for questions.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by Don on your telephone keypad.

Please don't dump acknowledging your request questions will be taken in the order received and should you wish to cancel your request. Please press. The star followed later to one moment. Please for your first question.

Okay.

And your first question comes from the line of Tim <unk> from Baird. Please go ahead.

Hey, guys good afternoon.

Yes.

Maybe just two.

Star.

I know you gave us.

The guidance ranges for.

Q4, with the segments and kind of total company I was kind of curious if there are any kind of base case kind of planning assumptions that you'd be able to kind of share on 24 at all.

Yeah, just kind of high level puts and takes as we kind of think about.

And margins.

Yes, Tim.

Kind of early as you know we were going through our 2020 for planning right now and wrapping things up with the division. So we still need to get their final looks in that we'd like to.

Update in greater detail when we launched vision 2030 in December so there'll be some more.

Other months and we'll have that under our belt, we'll be able to give you a little more perspective on our outlook for 'twenty four but I think Kevin will share a few things that might help with with our perspective on where we think 'twenty four is going.

Yeah. So on that we do have some tailwind from the Destocking. So that'll be a positive for 2020 for pricing. That's remained stable where we are in the third quarter expect that to continue into the fourth quarter and into 2024, So maybe down a couple of percentage overall overall for 'twenty.

24.

End market demand as Chris says too early to discuss that piece of it. So ATM I think on the pricing thing too if I give a couple of things to Kevin thing I've been very surprised at all the we've heard a lot of feedback in the markets around.

Competitor action, but one thing its been good going into 'twenty for US as you saw our margins held the same our pricing was rent was in fact, basically flat and core CCM for the third quarter and we've had a real stability there and so I think theres been this rationality in the market. Despite a lot of talk from from all of the compare.

Unknown Executive: Good afternoon.

Inna: My name is Inna and I will be your conference operator today. At this time, I would like to welcome everyone to the Carlisle Company's third quarter, 2023 Earnings Conference Call, online sub-and-place unmute to prevent any background noise. After the speakers remarks, we will conduct a question and answer session.

<unk>, despite volumes being down and I think thats, a positive sign going into two.

Mehul Patel: And I would now like to turn the call over to Mr. Mehul Patel, Carlisle's Vice President of Investor Relations, Mehul, please go ahead. Thank you and good afternoon, everyone. Welcome to Carlisle's third quarter call. I'm Mehul Patel, head of Investor Relations for Carlisle. We released our third 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, our Chris Koch, our board chair, president and CEO, along with Kevin Zdimal, our CFO.

2024, I do think Roz, if we give a little perspective, there may be a little bit of pressure. There I think again thats dependent on what's happening in the middle East and although we don't have a direct correlation of oil prices you know that a lot of our raws come out or indirectly related to oil so.

And then we've got some good gains there continuous CWT I think that trend you saw in the third quarter with Frank ready in the CWT team.

They're taken action on a bunch of fronts that should help us continue to see that margin expansion and get more to our aspirational levels, which are a lot closer to CCM for CWT and then I think last we continue to work on innovation.

Chris Koch: Today's call will begin with Chris. He will provide highlights of our third quarter results and accomplishments, followed by Kevin, who will provide an overview on our financial performance and an update on our outlook for 2023.

And I know that should be there should be some good tailwind, even though they are not huge with new products, both in CCM and CWT.

Okay. Okay. No. That's helpful. Thanks, and then.

Unknown Executive: Following our prepared remarks, we will open up the lines for questions.

Unknown Executive: Before we begin, please refer to slide two of our presentation where we note that comments today will include forward-looking statements based on current expectations. Actual results could defer 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-gap financial information, we've provided recommendations between gap and non-gap measures in our press release and in appendix of our presentation materials, which are also available on our website.

Just just given the announcement you guys made last month around selling CIP and kind of moving that to discontinued operations. I mean can you just.

Maybe I'll elaborate a little bit on what that sale price or if that's a process looks like and maybe kind of give us a little bit at the timeframe there.

Yes, I think first of all pretty conventional process.

Yes.

I think most of the interest would have been in is from strategics, we have a few parties in the in the <unk>.

Chris Koch: With that, I will turn the call over to Chris. Thank you, Mahool.

Process process is going very smoothly and we're happy with it I think we would like to have a.

Chris Koch: Good afternoon, everyone, and thank you for joining us on Carlisle's third quarter 2023 earnings call. In the third quarter, we reached a significant milestone in Carlisle's 105-year history moving from a diversified industrial portfolio of businesses to a building products portfolio of businesses. The pending sale of CIT will mark the final step in the successful completion of our pivot to become a best-in-class, pure-play, building products company. Our journey to become a focus-building products portfolio began in 2021 when we, as part of our superior capital allocation methodology, made the strategic decision to enhance Vision 2025 and the future of Carlisle by allocating our future cash flow and human capital into investments that would reinforce and expand our businesses that have consistently delivered the highest returns.

The contract signed sometime in the fourth quarter and so you can take kind of if you work back from that you can probably tell where we are in the process based on our announcement of what we have done it and then I think we probably closed right. After the first of the year. If we can close sooner than that that would be great, but now it's going well and good interest in.

An exciting process.

It's a great business and we've been pleased by the response.

Okay, Okay, Great and then just the last one for me.

I don't think the fluid sale is reflected in the ended the quarter balance sheet and I think you were expecting or expecting to use the proceeds from that for buybacks. So I guess, what would your buyback assumption would be in the fourth quarter I mean could you actually buyback.

Use all of the proceeds in the fourth quarter to buy stock back or does that bleed into the first half.

Chris Koch: We're confident that a focused portfolio of innovative products, services and solutions in the building envelope space, the drive energy efficiency, labor reduction, and a price to the value provided will benefit our employees, customers, and communities while allowing our shareholders to capitalize on industry leading returns. Importantly, we deliver products, services, and solutions with a clear value proposition and a significant financial return for end users and contractors alike, ensuring their businesses operate more effectively.

Yes, so our plan that we talked about on the last call was $900 million for the year and that was based on we were planning on $400 million and the additional 500 million for CFT. So that's really the number that we're looking at is a total of $900 million and you are correct.

<unk>, we closed on it officially first week of October, but that that number of 900 million stays the same.

Chris Koch: When coupled with the Carlisle experience, these innovative products, services, and solutions will create a significant and clear differentiation for Carlisle in the competitive building envelope marketplace of today and tomorrow. This new building products focus of Carlisle and the accompanying key strategic actions will build on the strong foundation of Vision 2025 and will form the key principles of our next strategic plan, Vision 2030, which will be released in December.

Okay, Okay, very good I'll hop back in queue. Thanks, guys.

Thanks, Tim.

Thank you and your next question comes from the line of Bryan Blair from Oppenheimer. Please go ahead.

Thanks, Good afternoon guys.

Hey, good afternoon, Brian.

I appreciate all the detail on Han run rate CCM dynamics just to level set. So what is your team is seeing in the first month of Q4 does that align with the.

Chris Koch: We are proud of what our team has accomplished under Vision 2025 and look forward to sharing with all of you the next phase of value creation at Carlisle with the December launch of Vision 2030.

Down 3% to 5% guidance or is there some reliance on further easing of comps in November and December.

No I think I think October actually we were pleased with how October shaping up.

Chris Koch: Turning to our third quarter results on slide three. In the third quarter, excluding CIT, Carlisle achieved consolidated sales of $1.3 billion, adjusted EBITDAV $340 million, and adjusted EPS of $4.68 per share. Our sales in the third quarter were negatively impacted by the effect of increasing interest rates driven by the ongoing Federal Reserve Actions.

Obviously with this dynamic environment I think we have the same concerns you do is to is to win.

What's happening, but it's been positive both from a.

Billings bookings perspective, and what we're seeing going into November.

Chris Koch: In addition to the interest rate impact, the third quarter was also negatively impacted by tighter lending standards and increasingly conservative sentiment at contractors and distributors with respect to their inventory levels as we enter the traditionally lighter fourth and first quarters. We are nonetheless pleased that despite the sales declines, our third quarter margin performance, pricing position, and market share remain consistent with our expectations. CCM and CWT together delivered remarkable EBITDAV margin performance of 27% in the quarter, marking a hundred basis point improvement year over year as well as a sequential improvement from the second quarter. CCM delivered a second consecutive quarter of 30% plus EBITDAV margins and CWT drove a solid 90 basis point improvement in EBITDAV margins sequentially. This performance showcases our ability to maintain strong margins throughout economic cycles.

Understood.

And price cost remains a good guy.

What has been realized year to date and is there an updated.

Full year guide on that front.

Yeah. So we gave a range last time for CCM is $60 million to $80 million for the full year and we expect we can narrow that range too.

$70 million to $80 million 40 year and about three quarters of that has been realized at this point.

Got it I appreciate that detail and then last one the step up in seat WT margin has been nice.

And yes, there is obviously a lot of noise playing out quarter by quarter, but if we balanced the second and third quarter of last year relative to this year 600 base 650 basis points or so.

Margin expansion, how should we think of the breakout of the drivers there.

Clearly price cost has been.

Chris Koch: Our market position, brand strength, and price discipline complemented by the value we provide to customers through the Carlisle experience and efficiency gains driven by the Carlisle operating system are and will remain pillars of strength for Carlisle's future under vision 2030. At CCM, our team remains focused on executing their proven long-term strategies which have yielded consistent success over the last two decades. This focus involves maintaining our brand strength through the Carlisle experience, solving end user problems through innovation, and driving efficiencies through COS and operational excellence.

Again, a good guy for that segment synergies are reading through.

I believe you've exited a less profitable or unprofitable business.

Just curious if you can provide any detail on what the drivers are there and what we should expect going forward. Chris I believe you said that the aspirational margin target is much closer to CCM. So that's quite.

Quite compelling if you can make that happen.

Yes, Kevin I think it was a couple of other ones, but I was really pleased one thing I'd like to note is it.

It gives them a lot of credit to Frank and the team coming in in <unk> as part of that coming right into Carla.

Chris Koch: One additional market note, the destocking headwinds we faced over the past four quarters, largely in commercial roofing, are behind us, setting the stage for frame our normal, 2024, buying profile. CWT delivered another exceptional quarter with 37% growth in EBITDA year over year. Revenues performed largely as expected, reflecting the impact of the challenging residential housing market, but offset by the nondiscretionary R&R exposure derived from CWT's commercial and residential roof coating solutions. The CWT team continues to excel in realizing synergies related to the Henry acquisition, achieving operational efficiencies through COS and factory consolidations, and enhancing margins through system selling initiatives.

Carlisle from Henry and getting all the synergies we needed and I think there's still more to be taken out there are synergies that will be one driver.

And then looking at the business and frankly, a really nice job of.

Chris Koch: Building on this solid performance in the third quarter, we expect the positive EBITDA growth story to continue with CWT, especially as we continue to invest in operating efficiencies and scale volume through investments and share gain initiatives.

Quickly acting too we exited a business a rubber business, we consolidated a few factories and the teams jumped on board with POS now see us.

Is one where I see a lot of potential because we've.

We've done a lot with plans and assessments and we're just starting to get into spending that capital and I think there's a long runway there with CLS. So thats a positive, but I think you'll continue to see.

Streamlining of the operations.

Better operations themselves operating efficiencies through Pos and then Kevin has got a couple of other things Youll touch on.

Yes, Chris at the key highlights there, but the other one was selling initiatives they've done a good job on that piece of it obviously you don't see at all with whats happening in resi right now, but that's been a positive and yes. We expect continued improvement in the 2024 and into 2025 as well.

Chris Koch: Please turn to slide 4. While we acknowledge the near-term challenges driven by higher interest rates, tighter lending conditions and industry wide concerns over the timing of restocking actions, we remain exceedingly bullish on Carlisle's longer-term value creation runway. As I mentioned earlier with our pivot to a pure-play building products portfolio now essentially complete, we are a more efficient and focused organization positioned extremely well to benefit from the attractive long-term secular trends that include a robust re-roofing cycle, increasing demand for energy efficient buildings, a significant need for solutions that increase labor efficiency on the roof, and the desire for innovation to deliver value throughout the construction process, and ultimately building ownership.

From that number so year over year improvement in each of the upcoming years.

And we've got a little bit of Hebei jumping back and forth. We've got a little we've got some new products to that are very exciting that Frank has.

Anyone that they were a supplier of the year at home depot recently, and I think Thats. Another channel that is new to all of US here at Carlisle and I know, probably new to you too, but Frank's doing a good job of finding ways to create opportunities with the carlile products and bring them potentially into that that channel.

As well as look at potential acquisitions that could help us strengthen our position there. So overall, we've got a lot of nice.

Chris Koch: I want to spend a minute to highlight our key drivers of success and why we are positioned to win within this backdrop. CCM is benefiting from a multi-year backlog of re-roofing projects in the US with 40% of total roof square footage requiring replacement in the next 10 years. This backlog is helping to ensure consistent and reliable demand. CWT's revenue with 50% derived from repair and remodeled demand across the building envelope and in both commercial and residential markets provides balanced exposure to mitigate the ebbs and flows of the economic cycles.

Kind of vectors going on here to drive to that aspirational margin, let's say, 30% 30 plus.

Understood so encouraging thanks, Ken.

Yes, you bet.

Thank you and your next question comes from the line of sorry for Randy <unk>.

From Jefferies. Please go ahead.

Hi, Thanks for taking my question.

Obviously, a large portion of CCM and Sherman, maybe roofing demand can you talk about the appetite any ability at building owners pushout jobs. If they decide to patch here is did they do patch at how much time does that by them.

Chris Koch: 65% of Carlisle sales are derived from lead certified products, clearly demonstrating the growing demand for energy efficient solutions and integrated systems to reduce carbon related emissions from buildings. We have a growing pipeline of the innovative products and are significantly increasing our investment in R&D to develop more environmentally sustainable products with improved performance and integrated system solutions that are easier to install. In 2023, we have delivered $290 million of sales from products introduced in the last three years.

Well, we've got them, a whole here, who and by the way sorry, good afternoon.

We have a whole who's the Henry expert on patching and roof coatings and I think he can touch on that I think one of the things for me. It's always been a constraining item is the amount of roofs that we put on that are under warranty and I know Henry has a warranty related to there.

Roof coatings, but I think when we talk about roof warranties. The thing that to me in terms of how far can you push out is always how far do you want to risk that warranty and generally our warranties are 20 years or so people start looking at getting these roofs.

Chris Koch: The Carlisle experience has established us as a premium brand with a recognized value proposition backed by high quality products and exceptional service, ensuring we deliver the right products at the right place and at the right time.

Rerouted the 17, 18, 19 year timeframe and obviously with the labor constraints, we have today that can be extended but.

Chris Koch: And lastly, we have significant financial flexibility thanks to our robust balance sheet and strong cash flow generation, allowing us to fund disciplined value creating acquisitions, internal growth initiatives, and provide for the consistent and reliable return of capital to shareholders through almost a half century of growing dividends.

I think you can push it out a little bit, but ultimately it's really about the value of what's underneath it in your business. You cant you don't want leaks in data centers, you don't want leaks in hospitals or education facilities, and those kind of things inside.

Think that pushing it out creates a really it's pretty big risk profile for people to do it but but when they do it and I think it's again.

Probably a small percentage in most cases now with tougher economic times remember there'll be more but.

Unknown Executive: Please refer now to Slide 5 and 6 for our progress on sustainability.

Hopefully they use Henry coatings in the whole maybe you want to talk about how long those Henry coatings Ken.

Chris Koch: Sustainability is a very important focus for Carlisle as an organization Carlisle is committed to being a responsible environmental stakeholder and we strongly believe that creating a more sustainable environment is also productive and economically beneficial for our shareholders. Quite a few years away, we recognize the need to start taking action today to meet this target on time. To hold ourselves accountable and show measurable short-term progress, we created two near-term emissions reduction targets by 2030 in conjunction with the Science-based targets initiatives also known as SBTI.

And sustain the life of a roof, yes, absolutely so sorry.

Henry Tsai they offer are several roof coating applications. They have moved <unk>, which they could do in the short term by themselves one or two seasons.

Can we store and existing route that's not in horrible shape, that's not damage or leaking there are.

Silicon with coating applications that could extend it further maybe five years or so but instead.

Instead of getting completely replaced their probably pass that cycle and you are going to require one or two years of that temporary patching solution that <unk> offers.

Hi.

Understood.

Chris Koch: First, we committed to a 38% reduction in both our scope one production GHG emissions from the manufacture of our products and our scope two operational GHG emissions from purchased energy in our operations. We also committed to a 48% reduction in our scope three upstream and downstream GHG emission intensity as we transition to lower carbon feedstocks.

The color there and then just clear in the guidance.

For Q, turning to the outlook for adjusted EBITDA up 200 basis points.

Base case for that is that with the AT&T ft without how can you just help us understand where were coming from with the up 200 basis points.

Yes, that's with taking <unk> out of both the 'twenty, two and 'twenty three number.

Chris Koch: To reach these targets, we focused on three pillars. The first pillar is manufacturing if energy efficient products. As an example in 2022, Carlisle sold more than $3.5 billion worth of lead qualified products to the residential and commercial building industry. Our customers will save as much as 155 million megawatt hours over the lifetime of those products which is enough energy to power almost 14 million homes in the US for a year. In addition, we converted over 50% of our spray foam blowing agents from traditional HFC formulas to more environmentally friendly HFO formulations.

Got it okay. That's helpful.

Last one.

Can you talk about the competitive environment into next year, just given us these potential macro headwinds that you've discussed and maybe think about a framework for how we think about price cost if we do see lower market and market demand given some of your commentary on oil prices.

Well I think you've seen a pretty competitive market. This year I think we have to complement the teams they were competing against I mean, as we said when the.

Chris Koch: As a reminder, HFCs are 1,000 times more carbon intensive than HFOs, so this action resulted in reductions of almost 10,000 tons of scope one GHG emissions and over 200,000 tons of scope three emissions while at the same time contributed to over $2 million in annual cost savings. This transition from HFCs to HFOs comes 13 years ahead of the mandated EPA HFC phase-down requirements positioning Carlisle as a leader in the spray foam insulation sustainability landscape.

Elevator is for sale at the time, Firestone and wholesome purchased them, we get good operators that would come in and I think they've lived up to that and certainly the acquisition of Marchi and <unk> and these things they are proven they know how to run a good playbook there.

As always a good competitor great quality company and so I think we won't see any real changes in the competition, it's tough it's been tough.

Everybody will we will continue to invest in R&D I'm sure and continue to invest in their channel and in factories. So I don't really see much change there on the price cost I think as I said I think we've had pretty good stability there.

We may see some opportunity for some.

Price.

Action, if raws were too.

Take a dramatic increase to what we're seeing in the middle east or some other disruption, but I don't really see that.

Chris Koch: The second pillar is lowering emissions across our facilities and manufacturing processes. Carlisle leadership and driving environmental management in our factories is reflected by our qualifying and additional nine facilities this year to ISO 14,0001, the Environmental Management Standard. We now have 42% of Carlisle facilities qualified to ISO 14,0001. This year, we also launched energy management programs at our Montgomery, New York and Tuala Utah plants to drive the necessary enhancements to be prepared for ISO 50,0001 certification by the end of 2025. Both programs are yielding significant waste and energy savings, ultimately reducing our carbon footprint and returning value to our shareholders.

Right now so I think all in all to me, it's going to be a little bit of more in the same end.

I would just reserve the right there that we're here in October.

We will have more color on that as we get closer to December and we get through things. So we'll be able to give you more than.

Great. Thanks, I'll pass it on.

Thanks, Larry.

Thank you and your next question comes from the line of Gavin Choice from Loop capital. Please go ahead.

Hi, Thanks for taking my question I, just wanted to follow up one more time on hey, good evening.

Just on the margin outlook for the fourth quarter.

The 200 basis points of express Youre expecting would you expect CCM margins to be up year on year.

Chris Koch: Earlier this year we invested over $125 million in our new Sykeston, Missouri Polyiso Facility. This investment in Sykeston represents the latest in manufacturing advances and is another example of our commitment to reduce emissions from our facilities through the latest advancements in green building technology, including solar power generation and energy base load control systems. We are extremely pleased that Sykeston meets the highest sustainability standards, including lead platinum specifications. We are also pleased that pending final certification by the United States Green Building Council, Sykeston will be the first lead V4 Platinum Manufacturing Facility in the entire country. The lead V4 standard is a performance based approach to efficiency management that calls for measurable results throughout a building's life cycle, and we are proud to lead our industry in this transformation.

Fourth quarter or is all of the gains coming from CWT, just given how strong the margin ramp in spend there.

It's a balanced piece between CCM and CWT ports as I said earlier or last quarter. We're looking at CCM. The target's, 30% 40 year on EBITDA, So that implies improvement in the fourth quarter and then yes, absolutely with CWT they continue to improve.

Last quarter, it said up to 350 basis points, we're probably more like 400 to 450 basis point improvement year over year for the full year for CWT.

Perfect guys that's helpful. One.

Going to ask just.

Some of the discussions around project delays and CWT just wanted to get more clarity there or is that mostly on the residential side given that was kind of a category that was softer.

Chris Koch: Our third pillar is reducing landfill waste. This includes developing programs and partnerships to recycle and upcycle materials away from landfills. As an example, Carlisle was piloting a program to recover and recycle roofing materials, which has helped divert 95,000 metric tons of waste from landfills since inception of the program this year.

Or are you seeing project delays on nonresidential.

Gotcha.

And I'd say, it's more on the commercial side.

And I'd say more.

Got the factories, the commercial lending standards things like that are tightening up we're finding that people need more than one.

Chris Koch: These are just a few examples of our ongoing sustainability efforts, and I encourage all of you to take a look at our 2022 Corporate Sustainability Report, which we published at the end of August and is posted on our website. It contains superb information, including clear examples of how our products reduce carbon footprint and buildings, reduce emissions in our operations, and how we plan to reduce waste to landfills.

That source when they go out to do these where they used to be able to do it with one then.

And then I think labor Garik is always the the constraint at all of this we don't see really.

Labor.

<unk> changing much we think labor continues to be.

What it is and we don't see a lot of people being added to the labor roles in the construction industry over the next few years, which again is why we play so much emphasis on the Carlisle experience and on labor saving products, because we think thats still a gating item.

Chris Koch: Please turn to slide 7. Our earnings power and margin sustainability in this challenging environment demonstrates the success of Vision 2025. As a reminder, the pillars for sustainable value creation of Carlisle under Vision 2025 included 1. Drive mid-single digit organic revenue growth 2. Utilize COS to drive continuous improvement and drive greater efficiency 3. Build scale with synergistic and accretive acquisitions 4. Maintain a return-focused capital allocation strategy, including organic investment to drive growth, a disciplined approach to M&A, and returning capital to shareholders.

Got it Okay last one for me just on inventories and CCM in the channel.

Encouraging to hear the Destocking largely run its course finally.

As you look to 'twenty four.

Sure we were a little bit early but would you expect distributors to manage their inventory.

Normal seasonal.

Patterns or just given some of the macro uncertainties at this point as a base case would be prudent to expect distributions to take a more conservative view.

Are there any inventories for this how big.

Chris Koch: And notably, thus far in 2023, we've returned $699 million to shareholders with share repurchases of 580 million and $119 million paid in dividends. And of course, none of this could be possible without continuing to rely on, invest in, and develop exceptional talent.

Well inventory is a use of cash right. So when you have.

The interest rate levels, we have today and with people borrowing and things like that I think theyre going to be managing their inventory levels pretty tightly it's going to be a line item I think every CEO and business leader is going to be looking at as we get into Q4 and through to Q1, just because again those are seasonally light and I think they would be managing the inventories tightly anyway.

Chris Koch: With Vision 2025 targets achieved and the pivot effectively complete, we will now turn to Vision 2030, the next phase in our 105-year journey as a company. Vision 2030 will continue to build upon Vision 2025, but with a focus on building products. As I mentioned earlier, Vision 2030 will be released in December and will provide comprehensive details about our path to further value creation for all Carlisle stakeholders.

So maybe you can say that's the double whammy of having a.

Seasonally like couple of quarters, coupled with some higher interest rates, but I think as we go into the year I think were thinking that 2024 is going to look a lot more like a normal year, where we've had the COVID-19 experience and the destocking experience in and we get back to some level of normalcy and see inventory levels get back up to.

Kevin Zdimal: And with that, I'll turn it over to Kevin to provide additional financial details as well as our updated outlook for the fourth quarter. Kevin? Thank you, Chris.

Where they've been historically say in 2019 to to service. What we still think is a really positive outlook for the industry longer term.

Kevin Zdimal: For segment highlights, please turn to slide 8. CCM delivered third quarter revenues of $914 million, down 16% from the prior year. The decline was due to the remaining destock of $50 million that we expected, and challenging end markets driven by higher interest rates, tighter lending conditions, and project delays.

Yeah, Okay. Thanks for that appreciate it best of luck.

No problem.

Thank you and your next question comes from the line of Citibank Mcgregor from Longbow Research. Please go ahead.

Yes. Thank you for taking the question and good afternoon, everyone.

Good afternoon.

Just quickly I think I cut the price cost numbers for CCM, but.

Kevin Zdimal: Adjusted EBITDA margin was strong at 32%, as we maintained pricing discipline while holding share, which drove positive price costs in the quarter. In addition, CCM drove cost reductions through operating efficiencies supported by our continuous improvement culture and the Carlisle operating system.

Missed them, if you said them for CWT.

What would those look like.

CWT overall.

Full year.

$40 million plus.

Okay.

Okay.

Kevin Zdimal: Moving to slide 9, revenues at CWT decrease 15% primarily due to residential demand weakness and project delays.

Thanks, Kevin.

And then just a question on the industry capacity, both for GPO Anthropologie ISO.

Going into 2020 for industry capacity be up in percentage terms for each of those two categories versus say 2022 or 2021 looking back over two to three years.

Kevin Zdimal: Adjusted EBITDA margin was 23.4%, expanding 890 basis points from the third quarter of 2022. The CWT team continues to excel in realizing synergies with the Henry acquisition, achieving operational efficiencies through COS and enhancing margins through system selling initiatives.

Well Im looking back over as to what's been added and I think we've always said this industry has been pretty rational in terms of adding <unk>.

<unk>, we did add our sakes in line for our polyol so.

We did add our 16 foot line and Carlyle.

Kevin Zdimal: Slide 10 provides a year-over-year bridge items to the third quarter adjusted EPS. Moving to slide 11 and 12, Carlisle ended the third quarter of 2023 with $108 million of cash on hand. We repaid our $300 million senior notes on September 1 and have $1 billion of availability under a revolving credit facility. We generated cash flow from continuing operations of $390 million and invested $30 million in capital expenditure. We deployed $330 million toward share repurchases and paid $42 million in dividends. As of the end of the third quarter, we have 8.6 million shares available for repurchase under our share repurchase program.

<unk>, obviously no change in <unk> in the industry.

A couple of years ago, we cycle out of facility I think in Maryland, and I think gaas quite have added one in eastern Pennsylvania for TPS, Paul Yes. So so.

I think thats it PVC no real additions there that I can think of so I think industry capacity is.

So compared to the historical averages were right in line with where we probably should be given market growth in that I don't see any massive additional capacity being added or have having been added.

So I would say.

I mean would you can think about what you've added what JF has added is there any way to express as a percentage over our base.

Maybe two years ago.

Well, we used to say that one factory at least in Tpa I apologize so added about 5% to 7% capacity of the industry I think that's probably the.

The industry is growing I mean, I think thats still probably a good number.

Okay. That's really helpful. Thank you last question from me.

Youre passing that pivot point now so congratulations on all the progress a gauge where you are now.

Presumably there is.

Quite a substantial inorganic growth chapter ahead of you I Wonder if you could just talk conceptually about.

Where within your business you see maybe the opportunities as you pursue that building envelope vision.

What are the big the big sort of white space opportunities for you within that building envelope opportunity.

Kevin Zdimal: Given the solid execution by our teams across Carlisle, EBITDA margins are expected to increase approximately 200 basis points year-over-year despite the lower volume expectations. We remain focused on discipline pricing which is leading to better price cost capture this year, operational efficiencies, and managing costs for our continuous improvement efforts.

Yes, we could.

So an extended discussion because the building envelope space.

She is from Windows doors garage doors, I mean, you guys shingles, you've got nails, we could get into all sorts of stuff, but I think for US you know if you.

Think about our core in what we do well, it's really going to be around that core.

Building envelope other roofing ideas.

Chris Koch: With that, I turn it over to Chris for closing remarks. Thanks, Kevin.

Things down the wall getting into the wall, but again that an idea that I think when we look at things, it's going to be either it's going to have synergies easier either in channel. So is it something that it helps us with the channel and obviously my comments on on the retail piece and the big box stores and that and having said that Frank has opened up a new channel for us.

Chris Koch: In closing, I once again would like to express my thanks and appreciation for the excellent work done by all of Carlisle's employees in the third quarter. Their perseverance and commitment to Vision 2025 has allowed us to continue to deliver solid results and maintain an optimistic outlook for the future.

Unknown Executive: And that concludes our formal comments operator.

There there is some interesting opportunities there we will get new products in there there are some things in roofing and there are some things in wall Claddings and things like that that we think we have certain processes and raw materials that could be added to that like insulated metal building panels are one that obviously, we do metal and we do.

Unknown Executive: We are now ready for questions. Thank you.

Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please pass star 4 by the one on your telephone keypad. You will read tweet on top acknowledging request questions will be taken in the order received. And should you wish cancel your request, please pass the star 4 by the two, one moment please for your first question.

So in those kind of things so that could be one that we would look at but I think youre going to find that there is enough for us to with channel and with core synergies, there too and products to <unk>.

Bryan Blair: And your first question comes from the line of team of watch from Baird, please go ahead. Hey, guys, good afternoon. Yeah, afternoon. Maybe just to start, you know, you gave us the guidance ranges for Q4, you know, with the segments in kind of total company. I was kind of curious if there were any kind of base case kind of planning assumptions that you'd be able to kind of share on 24 at all. You know, just kind of high level put some takes if we kind of think about, you know, revenue and margins.

Keep it pretty close to what we're doing now we think theres enough that it's not going to be too far afield.

I don't see us getting into nails for example are getting into some piece of equipment.

Related to cranes or something like that right. So it.

It'll be a more.

CCM CWT looking acquisition adhesive sealants.

As I said roofing materials metal things like that.

Where acquisition multiples right now Chris.

Okay.

They are moving I think this is one of the interesting things.

I think we all knew they were pretty high for the last couple of years.

Chris Koch: Yeah, Tim, it kind of early as you know, we were going through our 2024 planning right now and wrapping things up with the division. So we still need to get their final looks and that we'd like to update in greater detail when we launch vision 2030 in December. So there'll be some more, you know, we'll have another month and we'll have that under our bell a little bit. We'll give you a little more perspective on our outlook for 24, but I think Kevin will share a few things that might help with with our perspective on where we think 24 is going.

They are moving down I think for types of businesses, we look at probably in the eight to 10 range, maybe 911, something like that depending but I think.

There is also a value to be had a little bit lower as people get more realistic about.

The surge that came with Covid and what's happening in the markets. I also think same things in the private equity markets around wanting to seeing extended.

Monetization events, the time keeps expanding and so we think there may be some opportunities to <unk>.

To generate some.

A lower multiple and.

Chris Koch: Yeah, so on that we do have some talons from the destocking so that'll be a positive for 2024 pricing. That's remains stable where we are in the third quarter expect that to continue into the fourth quarter and into 2024. So maybe down a couple of percentage overall overall for 2024 the end market demand is precise too early to discuss that piece of it. So, Adam, I think I'm the pricing thing too if I give a couple of things to Kevin's thing.

Opportunities for exit by look at in that space.

Great. Thanks, very much and good luck.

Yes, Thank you David.

Thank you and your next question comes from the line of Adam Baumgarten from Zelman. Please go ahead.

Hey, guys good evening.

Good evening.

If we think about where you stand today and assuming a stable price stable costs on the input side, how does that look in terms of the impact of next year at this point.

Chris Koch: I've been very surprised that all the we've heard a lot of feedback in the markets around, you know, competitor action, but the one thing it's been good going into 24 is as you saw our margins all the same our pricing was was right was in fact basically flat in core CCM for the third quarter and we've had a real stability there. And so I think there's been this rationality in the market despite a lot of talk from from all of the competitors despite lines being down and I think that's a positive sign going into you know 2024.

Uh huh.

Yes.

Sorry, you're breaking up there I think he said if we look at stable price and stable costs. How does it look for next year again, we don't want to get too far into what next year looks like right now given what's happening in the markets, but again.

Our view on pricing has been that this year was a pretty tumultuous year as well on pricing was relatively stable and raws were relatively stable in fact, we're kind of beneficial but.

Chris Koch: I do think Ross, if we give a little perspective there may be a little bit of pressure there. I think again that's dependent on what's happening in the Middle East and although we don't have direct correlation oil prices you know that a lot of our rods come out or indirectly related to oil. So that and then we've got some good gains are continuing with CWT. I think that trend you saw in the third quarter with Frank ready in the CWT team.

Again, I think we're going to have to wait and see what happens in the markets, but our view into the fourth quarter as Kevin dictated or indicated is as good an another stable quarter Q1, we think Q1 of last year wasn't the best quarter. I think we were down in the high five hundreds in terms of revenue and that so this year if our exit point is.

Maybe somewhere in the 656 hundred 66 70 range for fourth quarter. Then we think that brings more stability answer the year could get off to a good start and then we.

Chris Koch: They're taking action on a bunch of fronts that should help us continue to see that margin expansion and get more to our aspirational levels which are a lot closer to CCM for CWT and then I think last you know we continue to work on innovation and I know that should be there should be some good tailwinds even though they're not huge with new products both in CCM and CWT.

Think.

If we can keep interest rates at a reasonable level and we can get some confidence back in the economy.

And stability I think the behavior.

Okay, and then I guess, if we think about demand into the fourth quarter given your implied guidance.

If we strip out the destocking in <unk>, it seems like <unk>, maybe a little bit lighter than usual if you could just.

Bryan Blair: Okay okay no that's that's helpful thanks and then just given you know the announcement you guys made you know last month around you know selling CIT and kind of moving out to discontinued operations I mean can you just maybe elaborate a little bit on what that sale price or that's a process looks like and and maybe you know kind of give us a little bit of the time for him there. Yeah I think the first of all pre-conventional process we you know think most of the interest would have been and is from strategics we have you know a few parties in the in the process process is going very smoothly we're happy with it I think we would like to have a contract signed sometime in the fourth quarter and so you can that kind of be work back from that you can probably tell where we are in the process based on our announcement and when we have done it and then you know I think we probably close right after the first of the year if we can close sooner than that that would be great but now it's going well and good interest and exciting process it's a it's a it's a great business and we've been pleased by the response.

Walk through the moving pieces there theres still.

Some other kind of one off type.

Like factors.

In that guidance.

Yeah really no one off things that just more of the things we talked about with some of the project delays would be the biggest piece and that's all around the interest rates and market uncertainty that the economic uncertainty that people try to delay some of those jobs.

Okay got it thanks best of luck.

Thank you.

Thank you Mr call. There are no further questions at this time. Please proceed.

Okay I want to thank everyone for joining us on the call.

And we look forward to first of all.

Launching our vision 2030.

In December and sharing all those details with you.

And we'll be in touch on that and then following up with their fourth quarter calls, we in the fourth quarter and move into 2024. So thanks very much and look forward to talking to all of you very soon.

Bryan Blair: Okay okay good and then just just the last one for me um I don't think the fluid sale is reflected in the end of the quarter balance sheet and and I think you were expected or expecting to you know use the proceeds from that for buyback so I guess what would your buyback assumption be in the fourth quarter I mean could you could you actually buy back you know the you use all of the proceeds in the fourth quarter to buy stockback or just that will be in the first half. Yeah, so our plan that we talked about on the last call was 900 million for the year, and that was based on we were planning on 400 million and the additional 500 million for CFP.

Thank you, ladies and gentlemen that does conclude our conference for today. Thank you all for participating you may all disconnect.

Bryan Blair: So that's really the number that we're looking at is the total of 900 million and you're correct. We closed on officially first week of October, but that number of 900 million spaces, thanks. Okay, okay, very good. I'll hop back in cute. Thanks, guys. Thanks, Jim. Thank you.

Bryan Blair: And your next question comes on the line of Bryan Blair from Oppenheimer.

Unknown Executive: Please go ahead.

Unknown Executive: Next we have a new guest. Hey, good afternoon, Bryan. Appreciate all the detail on run rate CFM dynamics.

Chris Koch: Just a level set. What is your team seeing in the first month of Q4? Does that align with the down three to five percent guidance or is there some reliance on further easing of comms in November and December? No, I think I think October actually we're pleased with how October shaping up. Obviously with this dynamic environment, I think we have the same concern G2 is to win, you know, what's happening, but it's been positive both from a Billings bookings perspective and what we're seeing going into November.

Kevin Zdimal: Understood. Price cost remains a good guy. What has been realized your to date and is there an updated full year guide on that from? Yeah, so we gave a range last time for CCM of 60 to 80 million for the full year. And we expect we can narrow that range to 70 to 80 million for the year. And yeah, about three quarters of that has been realized at this point.

Chris Koch: Got it. Appreciate that detail. And then last one, the step up and CWT margin has been nice. And there's obviously a lot of noise playing out, you know, quarter by quarter. But if we balance the second and third quarter of last year, you know, relative to this year, 600 base, 650 basis points or so, margin expansion. How should we think of the, you know, clearly price cost has been again, a good guy for that segment.

Chris Koch: Synergies are reading through. I believe you've exited a less profitable or unprofitable business. I'm curious if you can provide in any detail on what the drivers are there and what we should expect going forward. Chris, I believe you said that the aspirational margins are very close to the CCM. So that, yeah, quite compelling if you can make that happen. Yeah, Kevin will hit you with a couple other ones, but I was really pleased with one thing.

Chris Koch: I'd like to know as if, you know, and I give some a lot of credit to Frank here on the team coming in. And the whole is part of that coming right into, you know, Carlisle from Henry and getting all the synergies we needed. And I think there's still more to be taken out there on synergies. That'll be one driver. And then looking at the business and frankly to a really nice job of quickly acting to we exited a business, a rubber business.

Chris Koch: We consolidated a few factories and the teams jumped on board with COS. Now, COS is one where I see a lot of potential because the COS, we've done a lot with plans and assessments and we're just starting to get into spending that capital and I think there's a lot. I think you'll continue to see, you know, streamlining the operations, better operations themselves operating efficiency through COS.

Kevin Zdimal: And then Kevin's got a couple other things he'll touch on. Yeah, Chris, the key highlights there, but the other one was selling initiatives. They're doing a good job on that piece of it. Obviously, you don't see it all with what's happening in Rezzy right now, but that's been a positive. And yet we expect continue improvement into 2024 and into 2025 as well from that number. So you're over here improvement in each of the upcoming years.

Kevin Zdimal: And we've got a little bit of he'd be jumping back and forth. We've got a little we've got some new products too that are very exciting that Frank has and you know, Henry one that they were a supplier of the year at Home Depot recently and I think that's another channel that is is new to all of us here at Carlisle and I know probably new to you too, but you know Frank's doing a good job of finding ways to create opportunities with the Carlisle products and bring them potentially into that that channel as well as look at potential acquisitions that could help us strengthen our position there. So overall we've got a lot of nice, you know, kind of vectors going on here to drive to that aspirational margin of, you know, let's say 30, 30 plus.

Unknown Executive: Understood. So encouraging. Thank you.

Unknown Executive: And your next question comes from the line of sorry for a bit. From Japanese please go ahead. Hi, thanks for taking my question.

Unknown Executive: Obviously a large portion of CCM is driven by re-roofing demand. Can you just talk about the appetite and the ability of building owners to push out jobs if they decide to patch a roof and if you patch it how much time does that buy them?

Unknown Executive: Well, we've gotten the whole here who and by the way, three good afternoon, we have a whole who's the Henry expert on patching and roof coatings and I think you can touch on that. I think one of the things for me that's always been a constraining item is the amount of roots that we put on that are under warranty. And I know Henry has a warranty related to their roof coatings, but I think when we talk about roof warranties, the thing that to me in terms of how far can you push out is always how far do you want to risk that warranty and generally our warranties are 20 years.

Unknown Executive: So people start looking at getting these roofs, you know, re-roofed at the 17, 18, 19 year time frame. And obviously with the labor constraints, we have today that can be extended. But you know, I think you push it out a little bit, but ultimately, it's really about the value of what's underneath in your business. And then she can't you don't want leaks and data centers, you don't want leaks and hospitals or education facilities and those kinds of things.

Unknown Executive: And so I think that pushing it out creates a really it's pretty big risk profile for people to do it. But when they do it, I think it's, again, probably a small percentage in most cases now with proper economic times, remember, they'll be more. And but, you know, hopefully they use Henry coatings and the whole maybe want to talk about how long those Henry coatings can sustain the life of a roof.

Unknown Executive: Yeah, absolutely. So sorry on the Henry side, they offer several roof coating applications. They have roof masks, which they could do in the short term by themselves one or two seasons to restore an existing roof that's not in horrible shape. That's not damage or leaking. There are silicone coating applications that could extend it further, maybe five years or so, but you know, a lot of these roofs that are getting completely replaced, they probably pass that cycle and you're going to require one or two years of that temporary patching solution that can we offer. Understood. And then, let's appreciate the color there.

Unknown Executive: And then, just to make it clear in the guidance, I think in your 4Q, 20 to the outlook for adjusted EBITDA up to 100 basis points, what's the base case for that? Is that with CIT and CFT without, how can you just help us understand where we're coming from with the up to 100 basis points? Yeah, that's what's taking CIC out of both the 22 and 23 number. Got it. Okay, that's helpful.

Chris Koch: And then, last one, can you talk about the competitive environment into next year, just given the potential market headwinds that you've discussed, and maybe think about a framework for how we think about price cost, if we do see lower market and market demand given from your commentaries on oil prices? Well, I think you've seen a pretty competitive market this year. I think we have to compliment the teams that we're competing against.

Chris Koch: I mean, as we said, when the, when the elevate was resailed, the time fires down and wholesome purchase them, you know, we get good operators that would come in. And I think they've lived up to that. And certainly, their acquisition of Malarkey and Durallas and these things, they've proven they know how to run a good playbook there. G-A-F is always a good competitor, a great quality company. And so I think we won't see any real changes in the competition.

Chris Koch: It's tough, it's been tough and, you know, everybody will continue to invest in R&D. I'm sure and continue to invest in their channel and in factories. I don't really see much change there. On the price cost, I think, you know, as I said, I think we've had pretty good stability there. We may see some opportunity for some price action if laws were to take a dramatic increase due to what we're seeing in the Middle East or some other disruption.

Chris Koch: But I don't really see that right now. So I think all in all to me, it's going to be a little bit of more and the same. And, you know, I just reserve the right there that we're here in October. And, you know, we'll have more color on that as we get closer to December and we get through things. So we'll be able to give you more of that.

Unknown Executive: Great. Thanks for passing on. Thank you.

Luke Capital: And your next question comes on the line of garbage noise from Luke Capital.

Unknown Executive: Please go ahead. Oh, hi. Thanks for taking that question.

Unknown Executive: I just want to follow up on more time and hey, good evening. I'm just on the margin outlook for the fourth quarter with the 200 basis points of expression you're expecting. Would you expect CCM margins to be up year on year in the fourth quarter? Or is all the gains coming from CWT just given how strong the margin ramp has been there? It's a balanced piece between CCM and CWT. Where as I said earlier or last quarter, we're looking at CCM to target 30% for the year on EBITDA.

Unknown Executive: So that implies improvement in the fourth quarter. And then yeah, absolutely with CWT. They continue to improve last quarter and said up to 350 basis points. We're probably more like 400 to 450 basis point improvement year over year for the full year for CWT. Perfect. That's that's helpful.

Chris Koch: I wanted to ask just in some of the discussions around Project delays in CWT, we just want to get more clarity there. Is that mostly on the residential side given that was the kind of a category that was softer, or are you seeing Project delays on non-residents impacting that segment? I'd say it's more on the commercial side, and I'd say more, you got the factors, the commercial lending standards, things like that, or tightening up.

Chris Koch: We're finding that people need more than one, you know, debt source when they got to do these, where they used to be able to do it with one. And then I think labor, Garik, is always the constraint in all of this. We don't see really labor schools changing much. We think labor continues to be, you know, what it is, and we don't see a lot of people being added to the labor roles and in the construction industry over the next few years, which, again, is why we place so much emphasis on, you know, the car law experience and on labor saving products, because we think that's still a gaining item. Got it.

Chris Koch: Okay, that's one for me, just on inventories in CCM in the, in the channel, you know, encouraging you hear the destocking from largely runs course finally. As you look to 24, you know, so a little bit early, but would you expect distributors to manage their inventory more normal seasonal patterns or, you know, just given some of the macro uncertainties. At this point as a base case would be prudent to expect distribution to take more conservative view on their inventory is for the time being.

Chris Koch: Well, you know, inventory is a use of cash, right? So when you have the interest rate levels we have today and with people borrowing and things like that, I think they're going to be managing their inventory levels pretty tightly. It's going to be a line item I think every CEO and business leader is going to be looking at as we get into key four and through to key one just because again those are seasonally light and I think they would be managing the inventory is tightly anyway.

Chris Koch: So maybe you can say that's the double whammy of having a seasonally light couple of course couple with some higher interest rates, but I think as we go into the year, I think we are we are thinking the 2024 is going to look a lot more like a normal year. We've had the COVID experience and the destocking experience and we get back to some level of normalcy and see inventory levels get back up to where they've been historically saying 2019 to the service. What we still think is a really positive outlook for the industry longer term. Yeah, okay, thanks for that. Appreciate it. Best of luck. Thank you.

David Macgregor: And your next question comes on the line of David Maccregular from Longbow Research. Please go ahead. Yes, thank you for taking the question and good afternoon everyone. I want to just quickly, I think I caught the price cost numbers for CCM, but I missed them if you said them for CWT. What would those look like? CWT overall for the full year, more 40 million plus. Okay, nice Kevin.

Chris Koch: And then just a question on the industry capacity, both for TPO and for Paulie Iso, we can into 2024 industry capacity be up in percentage terms for each of those two categories versus state 2022 or 2021 looking back over two, three years. Well, you know, I'm looking back over to what's been added. And I think we've always said this industry's been pretty rational in terms of adding lines. We did add our cycling line for Paulie Iso.

Chris Koch: We did add our 16 foot line in Carlisle for TPO. Obviously no change in EPDM in the industry. A couple years ago, we saw I go out of facility, I think in Maryland and I think GAF might have added one in Eastern Pennsylvania for TPO and Paulie Iso. So I think that's it. PBC, no real additions there that I can think of. So I think industry capacity is still compared to, you know, the historical averages were right in line with where we probably should be given market growth and that I don't see any massive additional capacity being added or having been added.

Chris Koch: So I'd say, I mean, would you think about what you've added, what GAF has added? Is there any way to express as a percentage over a basement of maybe two years ago? Well, we used to say that one factory, at least in TPO and Paulie Iso added about five to seven percent capacity of the industry. I think that's probably as, you know, the industry is growing. I mean, I think that's still probably a good number.

David Macgregor: Okay, that's really helpful. Thank you.

Chris Koch: Last question for me is just, you know, you're passing that pivot point now. So congratulations on all the progress on getting to where you are now. Presumably, quite a substantial inorganic growth chapter ahead of you. What if you just talk conceptually about, you know, where within your business, you see maybe the opportunities you have to pursue that building envelope vision. What is the big, the big sort of white space opportunities for you within that building envelope opportunity?

Chris Koch: Yeah, you know, we could, that's an extended discussion because the building envelope space, you know, stretches from windows, doors, garage doors. I mean, you've got shingles, you've got nails, we could get into all sorts of stuff. But I think for us, you know, if you think about our core and what we do, well, it would, it's really going to be around that core building envelope other roofing ideas, things down the wall, getting into the wall.

Chris Koch: But again, that an idea that I think when we look at things, it's going to be either, it's going to have synergies either in channel. So is it something that helps us with the channel? And obviously my comments on on the retail piece and the big box stores and that and having said that Frank's opened up a new channel for us there. There's some interesting opportunities there. We look at new products and there are some things in roofing and there are some things in wall cladding and things like that that we think we have certain processes and raw materials that could be added to that like insulated metal building panels or one that obviously we do metal.

Chris Koch: And we do polyiso and those kind of things so that could be one that we would look at. But I think you're going to find that there's enough for us to with channel and with core, you know, synergies there too in products too. Keep it pretty close to what we're doing now. We think there's enough that it's not going to be too far-field. I don't I don't see us getting into nails, for example, or getting into some piece of equipment related to cranes or something like that, right? So it'll be a more CCM, CWT looking acquisition adhesive sealants, as I said, roofing materials, metal things like that.

Chris Koch: Where are acquisition multiples right now, Chris? They're moving, I think. This is one of the interesting things. You know, I think we all knew they were pretty high for the last couple of years, and I think they're moving down. I think for types of businesses we look at, probably in the 8-10 range, maybe 9-11, something like that, depending. But I think, you know, there's also a value to be had a little bit lower as people get more realistic about the surge that came with COVID and what's happening in the markets.

Chris Koch: I also think seeing things in the private equity markets around wanting to, you know, seeing extended monetization events at the time keeps extending. And so we think there may be some opportunities to generate some lower multiple and opportunities for exit by looking at that space.

David Macgregor: Great. Thanks very much. Good luck. Yeah, thank you, David. Thank you.

Adam Baumgarten: And your next question comes from the line of Adam Bogartan from Selman. Please go in. Hey guys, good evening.

Chris Koch: If we think about where you stand today, assuming just stable price, stable costs on the input side, how would that look in terms of the impact of next year at this point? I guess, sorry, you're breaking up there. I think you said if we look at stable price and stable costs, how does it look for next year? Again, we don't want to get too far into what next year looks like right now, given what's happening in the markets.

Chris Koch: But again, you know, our view on pricing has been that this year was a pretty to multiple years. Well, pricing was relatively stable and in Ross relatively stable. In fact, we're kind of beneficial. But again, I think we're going to have to wait and see what happens in the markets, but our view into the fourth quarter as Kevin indicated indicated is good and other stable quarter q1. We think q1 last year wasn't the best quarter.

Chris Koch: I think we were down the high five hundreds in terms of revenue and that. So this year, if our exit point is maybe somewhere in the six 566670 range for fourth quarter, then you know, we think that brings more stability and so the year could get off to a good start. And then we, I think if we can keep interest rates at a reasonable level and we can get some confidence back in the economy and stability. I think it could be a good deal.

Chris Koch: Okay, then I guess we think about the man into the fourth quarter or give it your implied guidance. And even if we strip out the destocking in three q, it seems like four keys, maybe a little bit lighter than usual. If you can just kind of walk through the moving pieces there if there's still, you know, some other kind of one off type, you know. Of like factors in that kind. Yeah, really no one off things that just more of the things we talked about with some of the project delays would be the biggest piece and that's all around the interest rates and market uncertainty that for economic uncertainty that people try to delay some of those jobs. Okay, got it.

Unknown Executive: Thanks best of luck. Thank you. Thank you, Mr. Cole. There are no further questions at this time. Please proceed.

Chris Koch: Okay, well, I want to thank everyone for joining us on the call and we look forward to, first of all, launching our vision 2030 in December and sharing all those details with you and we'll be in touch on that. And then following up with our fourth quarter clause, we end the fourth quarter and move into 2024. So thanks very much and look forward to talking to all of you very soon.

Unknown Executive: Thank you, ladies and gentlemen, that was a good conference for today. Thank you all for participating. You may all disconnect.