Q3 2024 Carlisle Companies Inc Earnings Call
Nicole: Good answer to my name is Nicole and I will be your conference call operator for today.
Nicole: At this time, I would like to welcome everyone to the Car-Lyle company's third quarter, 2020 for earnings conference calls.
Nicole: All lines have been placed in mute to prevent any background noise. After the speaker's remarks, we will conduct a questioning answer session. I would like to turn the call over to Mr. Mehul Patel, Carl Lyle's Vice President of Investor Relations. Mehul, please go ahead.
Nicole: Thank you and good afternoon everyone. Welcome to Carl Isles 3rd Quarter 2020 for earnings call. I'm Mehul Patel, Vice President of Investor Relations for Carl Isles.
Nicole: We released our third quarter 2024 financial results today and you can find both our press release and the presentation for today's call in the investor relation section of our website.
Nicole: On a call with me today, our Chris Koch, our board chair, president and CEO, along with Kevin Zdimal, our CFL.
Nicole: Today's call will begin with Chris providing key highlights of our third quarter results and some commentary on our progress towards vision 2030's goal of $40 of EPS.
Nicole: Kevin will follow Chris and provide an overview on a third quarter and year-to-date by nature performance and give an update on our most current outlook per remainder of 2024.
Nicole: Following up with Perry Marks, we will open up the line for questions.
Nicole: 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.
Nicole: Actual results could defer materially from the statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings.
Nicole: As Carla provides non-gap financial information, we provided reconceliations between gap and non-gap measures in our press release and in the appendix of our presentation materials which are available on our website. And with that, I will turn the call over to Chris.
Chris Koch: Thank you Mehul, good afternoon everyone and thank you for joining us today on Carlaus 3rd Quarter 2024 Ringscall. To start I'd like to direct your attention to slide three of the presentation.
Chris Koch: I'm pleased to share that Carl Alk continued to demonstrate the outstanding performance we've seen in 2024 into the third quarter, despite facing increased headwinds in the quarter, which negatively impacted sales, primarily in our residential end markets.
Chris Koch: The Spaties challenges and the additional impact of two major hurricanes, the Carlale team delivered record, third quarter results in both EBITDA margin and earnings per share.
Chris Koch: Parlos performance throughout this year underscores the resilience of our business model, the robustness of our key initiatives, and the perseverance of our team, and the effective execution of our vision 2030 strategies.
Chris Koch: The record achievements in profitability in the third quarter are even more rewarding and that our teams deliver the record third quarter results and an environment that, as mentioned, saw a weakening residential market when compared to our second quarter outlook.
Chris Koch: as well as disruptions tied to weather related and port strike events.
Chris Koch: In the third quarter, Carl out delivered sales of $1.3 billion, representing growth of 6% on a year over your basis, despite the negative sales impact of CWT.
Chris Koch: Across both CCM and CWT, we maintain our strong focus on pricing discipline, on driving a superior customer interface through the car-loud experience.
Chris Koch: and continued to deliver operating efficiencies through our well-known approach to driving continuous improvement the Carlisle operating system.
Chris Koch: These factors combined to deliver third quarter record bottom line results with a just at EPS growing 24% to $5.78 and a just at EBA-DOM margin expanding 60 basis points a year over year to 27.6%.
Chris Koch: Highlighting our commitment to continued margin expansion in both CCM and C2BT.
Chris Koch: CCM continues the positive momentum generated in the first half of 2024 into the second half of the year, with revenue growth of 9% and an impressive 110 basis points expansion in adjusted EBITDA margin, setting a new third quarter record of 32.8%.
Chris Koch: This growth was driven by the continued strength and re-roofing demand, along with the benefits from inventory normalization in the channel and the acquisition of MTL.
Chris Koch: As we've discussed throughout the year, we anticipated a significant positive impact from inventory normalization in 2024. And we are pleased that if materialized as expected, and in the order of magnitude, we had forecasted at the start of the year.
Chris Koch: In the third quarter, in line with our original projections, we saw an approximately $50 million benefit of sales from CCM inventory normalization, which now completes the lapping benefit we expected this year, and it was tied to the prior year's inventory destock.
Chris Koch: As a reminder, when we entered 2024, we had anticipated $375 million from a return to normal and
Chris Koch: Now turning to CWT
Chris Koch: While we were pleased with the progress of our new product introductions, retail at channel expansion and overall share gains within CWT, higher interest rates and affordability challenges resulted in a further slowing and new housing activity and repair and model during the quarter.
Chris Koch: These negative factors drove a sales decline of 3% year over year in CWT, including an expected low single digit price decline.
Chris Koch: That's it, our long-term positive outlook for CWT is unchanged given the well-known need for additional housing.
Chris Koch: A forecasted return to a better interest rate environment and success in key growth initiatives across commercial waterproofing. New product introductions and expansion in the Home Center channel.
Chris Koch: Overall pricing in the third quarter remained relatively stable and in line with our expectations for both the CCM and CWT segments. Much of this was driven by our proactive approach, pricing discipline, and our commitment to value-based pricing.
Chris Koch: Furthermore, the team's focus on operational excellence and strategic growth initiatives leaves us well positioned to capitalize on market opportunities as they arrive.
Chris Koch: Now let's turn to Vision 2030.
Chris Koch: Our vision 2030 strategy continues to guide our focus on key growth drivers including energy efficiency, labor-saving solutions, and capturing a larger share of the expanding re-roofing market.
Chris Koch: We're doubling down on organic investments in innovation more than tripling our historical R&D investments to bring more energy efficient and labor saving products to market faster.
Chris Koch: We also remain committed to our pivot to a pure play building products platform and focused almost exclusively on the opportunities presented in the North American markets.
Chris Koch: Furthermore, we remain driven to be a superior capital allocator and demonstrated our commitment to returning capital to shareholders in the third quarter through our balanced approach of dividends and share repurchases.
Chris Koch: During quarter three, we repurchased 1.1 million shares for $466 million, bringing our year-to-day total to $1.2 billion.
Chris Koch: These third quarter purchases put us well on track to achieve our plan goal of $1.4 billion in share purchases in 2024.
Chris Koch: Additionally, we paid out $46 million in dividends this quarter and declared an 18% increase to our dividend in August, representing the 48th consecutive annual increase in dividends for Carl Alshire holders.
Chris Koch: These actions underpin our ongoing dedication to creating shareholder value and reflect our confidence in Carl Aus Growth trajectory.
Chris Koch: Our robust cash flow generation and pristine balance sheet continues to provide us with the flexibility.
Chris Koch: to reinvest in our businesses.
Chris Koch: and the ability to deploy capital to drive organic growth.
Chris Koch: Continuously improve our operations, pursue strategic acquisitions, and actively return capital to our shareholders, all while maintaining our focus on driving long-term value creation.
Chris Koch: To close outside three
Chris Koch: While we are slightly lowering our full year 2020 for outlook to 10% revenue growth for Carl Al, reflecting the ongoing challenges in the residential markets and the impact of the previously mentioned weather and strike events.
Chris Koch: We are pleased to reaffirm our expectation to achieve approximately 150 basis points of adjusted Ebedda margin expansion.
Chris Koch: I will now speak briefly to slides 4 through 8 as I discuss our recent progress against our vision 2030 goals.
Chris Koch: As a reminder, our Vision 2030 strategy builds on the success of Vision 2025 and gives us a clear roadmap to drive value creation in the next chapter of Carl Al's ongoing story of success.
Chris Koch: Under vision 2030, we are creating value for our shareholders through our portfolio of high-performing building envelope businesses with attractive secular trends.
Chris Koch: We are focusing on delivering the most innovative energy efficient and labor-saving products and solutions.
Chris Koch: to our customers through investment in our ever improving, parallel experience, delivering well understood and consistent value for price, leveraging a strong leadership focus and operating with a relentless focus on flawless execution driven by our COS culture.
Chris Koch: As a reminder, Vision 2030 focuses on 6 pillars.
Chris Koch: The first is the Carlisle operating system.
Chris Koch: Under Vision 2030, we will continue to drive our continuous improvement culture through the consistent application of COS across every function in the enterprise with the goal to drive savings of 1 to 2% of sales annually through operation efficiencies.
Chris Koch: Second is the Carl O'O Experience. The Carl O'O Experience has established us as a premium brand with a recognized value proposition backed by high quality products and exceptional service.
Chris Koch: Our commitment to our customers is embodied in the Carlisle experience, which means delivering the right products to the right place at the right time.
Chris Koch: We understand that we win with customers through superior products and solutions, exceptional service, and labor savings efficiencies, and we price our products to reflect that value.
Chris Koch: Third is innovation. We plan to increase our spend on our indeed 3% of sales by 2030 to accelerate the creation of new products and solutions that add value to our customers through advancements and sustainability, energy savings and labor efficiency.
Chris Koch: We will pursue innovation based on an intimate knowledge of our markets and a focus on innovation that responds to our customers' needs and opportunities to improve their businesses.
Chris Koch: 4th of Zdimal A
Chris Koch: We will focus on existing and adjacent categories that allow us to enhance our building envelope portfolio.
Chris Koch: We will seek opportunities to acquire assets that meet our well-understood criteria of an embedded organic grocery.
Chris Koch: An opportunity to deliver hard-cost synergies.
Chris Koch: A talent management team and the ability to deploy our Carlisle integration playbook.
Chris Koch: 5th is our Discipline to Proach the Capital allocation. Ultimately a superior capital allocators we seek to create value for our shareholders and deliver benefits for all our stakeholders.
Chris Koch: In line with our track record, we will continue to invest our cash responsibly into the highest ROSC opportunities.
Chris Koch: And lastly and perhaps more importantly, our sixth goal is attracting, motivating and retaining top performers to ensure we have the best talent to execute our strategic initiatives and drive above market growth.
Chris Koch: By executing our curly-stated initiatives and strategies reinforced by the progress we have made this year, we are on target to deliver art goal of $40 of EPS by 2030, while achieving over 25% our OIC and generating free cash flow margins in excess of 15%.
Chris Koch: Our M&A strategy, a key pillar of vision 2030, continues to progress as expected. We have a healthy pipeline of opportunities that can contribute to our vision 2030 goal to grow, and be a leading supplier of building envelope products and solutions.
Chris Koch: With the sale of CIT completed in May on please to report that we've been able to deploy capital from the sale proceeds into meaningful acquisitions, demonstrating our ability to execute on our strategic plans and create value through M&A as part of Vision 2030.
Chris Koch: This rapid and strategic deployment of capital underscores our commitment to strengthening and growing our positions within the building envelope.
Chris Koch: With our solid balance sheet and robust cash flow, we are well positioned to capture additional value through M&A over the vision 2030 timeframe.
Chris Koch: We see opportunities in both existing and complementary categories including architectural metals, insulation, underlayments, sealant and adhesive and the many weatherproofing categories within CWT.
Chris Koch: As a reminder, our emanate playbook is built on four core criteria, an embedded organic row story.
Chris Koch: Hard-cost synergies.
Chris Koch: A strong management team.
Chris Koch: and the deployment of our Carlisle integration playbook.
Chris Koch: Our acquisition of MTL earlier this year and are recently announced agreement to acquire plastic fab, are recent examples of this strategy in action and the steady progress in M&A we are making against our vision 2030 goals.
Chris Koch: Let's focus on Plastofab from Mollin.
Chris Koch: The rationale for the acquisition of Plastofab is straight forward. It aligns perfectly with our Vision 2030 strategy.
Chris Koch: To enhance our best in class building envelope product portfolio.
Chris Koch: It establishes Carlisle as a leading manufacturer within the $1.5 billion North American expanded polystyrene insulation market and strategically provides vertically integrated polystyrene capabilities to our Insulfone business while adding scale, supporting retail channel growth and filling key geographic gaps.
Chris Koch: in the US and Canada. We expect this acquisition to generate approximately $14 million in annual cost synergies and be a creative tour adjusted EPS by approximately 30 cents in 2025.
Chris Koch: Recently our M&A strategy gained recognition in a Harvard Business Review article titled, A Better Approach to Mergers and Acquisitions. Carlisle has built a detailed integration playbook with clear milestones and goals.
Chris Koch: This approach coupled with our rigorous due diligence process gives us a competitive advantage in M&A execution. We were pleased to be able to share our approach to M&A through a well-distributed and well-respected periodical and hope it helps provide shareholders with more insight into our approach.
Chris Koch: Our success in M&A compliments our intensified focus on innovation, another key driver in our vision 2030 strategy.
Chris Koch: We're significantly increasing our R&D investment to $1 billion over the vision 2030 timeframe, aiming to derive 25% of our revenue from new products up from 15% today.
Chris Koch: Our approach categorizes innovation into three types, business life cycle, evolutionary and revolutionary. Each receiving equal focus and investment of about 1% of sales.
Chris Koch: Business Lifecycle Innovations currently 80% of our efforts focus on ongoing product improvements and cost reductions.
Chris Koch: Evolutionary Innovations address specific and real current on that customer needs.
Chris Koch: A great example is our new 16-foot TPO line. By doubling the width of the traditional 8-foot TPO roll, we reduce seams in the roof, which reduces the opportunities for leaks over the life of the roof.
Chris Koch: It also reduces labor by significantly increasing the square foot applied by the contractors installation team.
Chris Koch: Revolutionary Innovations drive dramatic business inflections with longer-term development timelines. New re-rupping insulation like our recently introduced denim-based ultra-touch product that's available at Home Depot is an example of a revolutionary product development idea.
Chris Koch: Our innovation efforts are already yielding results with products like seam shield and blue skin VP tech gaining rapid market acceptance.
Chris Koch: Seem Shield reduces cleaning time by 70% while increasing weld strength, directly addressing contractor pain points.
Chris Koch: Blue skin VP Tech combines multiple components into a single product, improving energy efficiency and cutting installation time by 30%.
Chris Koch: I'm particularly excited to highlight another innovative product that exemplifies our commitment to sustainability and customer value.
Chris Koch: Our Henry Roof Guard Roof Coding was recently named a finalist for Home Depot's innovative product of the year award.
Chris Koch: This recognition not only showcases our progress in innovation, but also reinforces the strength of our relationships with key channel partners like Home Depot and is another example of delivering value to our customers based on extensive market input.
Chris Koch: Roofguard represents our next generation of acrylic waterproof roof coating and hands with your attained for improved performance. Its premium hybrid formula offers better weather protection, solar reflectivity and longevity compared to standard acrylic reflective roof coatings.
Chris Koch: This innovation not only addresses our customers' needs for energy efficiency, but also aligns perfectly with our sustainability goals.
Chris Koch: The success of products like roof guard have contributed to CWT's Henry Brand being awarded home the post-building materials vendor of the year for the second time since 2022.
Chris Koch: This accolade underscores our commitment to innovation and customer satisfaction, serving as a prime example of the Carlisle experience and action. And we are very proud of the Henry team for being recognized by Home Depot again.
Chris Koch: These innovations not only enhance the Carlisle experience for our customer, but also drive margin expansion through pricing devalue.
Chris Koch: They demonstrate how our focus on innovation is directly contributing to our vision 2030 goals, positioning us to meet evolving market needs while driving sustainable growth and profitability. I'm extremely proud of our team's performance here today, as we progress towards our vision 2030 goals.
Chris Koch: I am confident in our ability to continue delivering value for all our stakeholders. Our focus remains on demonstrating the strength of our margin resiliency through the Carlisle experience and driving superior returns on capital through our strategic initiatives.
Chris Koch: With that, I'll turn it over to Kevin to provide additional financial details. Kevin? Thank you, Chris. Our third quarter financial results continue to demonstrate Carl Ausstraink and our effective execution.
Kevin Zdimal: As shown on slide 9, we delivered a solid third quarter on both the top and bottom lines.
Kevin Zdimal: We grew sales to $1.3 billion, up 6% year over year driven by robust re-roofing activity, the return to normalization of inventory levels and our channels and the acquisition of MTL.
Kevin Zdimal: which more than offset the negative impact from the slower residential and markets.
Kevin Zdimal: We leveraged our top line performance to expand EBITDA, margin by 60 base to the point year over year to a record third quarter, 27.6%.
Kevin Zdimal: Furthermore, we grew adjusted EPS by 24% to a record, 3rd quarter, $5.78, reflecting the strong operating results margin expansion and the benefits of our ongoing share repurchase program.
Kevin Zdimal: Looking at our segment highlights, starting with CCM on slide 10.
Kevin Zdimal: CCM delivered 3rd quarter revenues of $998 million, up 9% year over year, reflecting pen-up, re-roof demand, the benefit of inventory normalization and the acquisition of MTO.
Kevin Zdimal: CCMs adjusted EBITDA increased 13% year over year to $328 million, and adjusted EBITDA margin expanded and impressive 110 base is 0.0 year to a record, 3rd quarter 32.8%.
Kevin Zdimal: Reflecting strong volume leverage on sales growth, favorable raw materials, and continued operational improvements driven by the car-law operating system.
Kevin Zdimal: Moving to slide 11, revenues at CWT were down 3% year over year to $300 and $35 million. Primarily due to softer, residential and markets and expected price to climb in select product categories.
Kevin Zdimal: Partially, offset by growth in our commercial business, share gain initiatives and the acquisition of polar industries.
Kevin Zdimal: CWTs adjusted EBITDAT decrease 14% year over year to 69 million dollars.
Kevin Zdimal: adjusted EBITDA margin contracted 270 base of 0.0 to 20.7% attributable to strategic investments in the business to support longer term growth initiatives.
Kevin Zdimal: As well as lower sales and the quarter as a result of broader residential market weakness from higher interest rates, as consumers take away and see approach the home purchases and R&R.
Kevin Zdimal: For your reference slide 12 provides a year over year, third quarter adjusted EPS bridge.
Kevin Zdimal: Moving to slide 13, our Casulo Performance remains strong.
Kevin Zdimal: Free cash flow from continuing operations for the first nine months of 2024 was $597 million.
Kevin Zdimal: Up $22 million year over year, reflecting robust earnings growth and discipline working capital management. We have invested $64 million in capital expenditures year to date.
Kevin Zdimal: Moving to slide 14, our balance sheet remains solid, with $1.5 billion in cash and $1 billion available under our revolving credit facility as of quarter end.
Kevin Zdimal: This solid liquidity along with a net leverage ratio of 0.5 times gives us a flexibility to invest in value creating opportunities while staying committed to delivering returns to our shareholders.
Kevin Zdimal: Moving this slide 15, in line with our Vision 2030 Capital Allocation Strategy, we're reinvesting in our high ROIC building product businesses through growth cap X.
Kevin Zdimal: and strategically deploying capital towards synergistic M&A opportunities to grow and enhance our building envelope portfolio while also returning significant capital to shareholders.
Kevin Zdimal: In the third quarter, we paid $46 million in dividends and repurchase $46 million in shares, bringing our year-to-date to $1.2 billion.
Kevin Zdimal: We have 4.5 million shares remaining under our current Repurchase Program.
Speaker Change: Carlos Financil strength, underpinned by consistent cash flow generation and prudent capital management, remains a key competitive advantage.
Speaker Change: It enables us to balance investments in organic growth, strategic MNA and shareholder returns, while maintaining the flexibility to navigate evolving market dynamics.
Speaker Change: This financial resilience combined with our operational excellence driven by the car law operating system, reinforces our confidence and achieving our vision 2030 objectives.
Speaker Change: Now moving to our full year financial outlook on slide 16.
Speaker Change: As Chris previously noted, we now expect our full year 2020 for revenue to grow approximately 10% over the prior year and we are reaffirming our expectations for adjusted EBITDA margins to expand by approximately 150 basis points.
Speaker Change: This outlook includes an expectation for fourth quarter revenue to grow low single digit within adjusted EBITDA margin of approximately 25% in the fourth quarter.
Speaker Change: As such, we expect record, fill year EPS in 2024, with growth and excess of 25% compared to the prior year.
Speaker Change: Additionally, we maintain our expectation to deliver free cash flow margins of at least 15% and ROSC and excess of 25%.
Speaker Change: This is directly aligned with the objectives outlined in our Vision 2030 strategy.
Speaker Change: To provide a tighter band on the Outlook, I will provide Outlook by segment for the fourth quarter.
Speaker Change: For CCM, we expect revenue to grow mid-single digit to a combination of volume growth and the benefit from the MTL acquisition, offsetting slightly lower pricing on year over year comps.
Speaker Change: For CWT, we expect 4th quarter revenue to decline low single digit vs a 4th quarter of 2023. The main drivers for CWT is key growth initiatives partially offsetting the soft the residential and markets.
Speaker Change: In summary, our third quarter results of revenue up 6% and adjusted EPS up 24% year over year to a record, third quarter, $5.78.
Speaker Change: Demonstrate, the strength and resilience of our business model, as well as our ability to execute effectively in a dynamic market environment. The progress we have made here today reinforces a momentum we are building towards our vision 2030 goals.
Speaker Change: As we look ahead, we are excited about the opportunities to further leverage our operational excellence, drive innovation and win in our end markets.
Speaker Change: With our strong financial position, discipline, capital, allocation, strategy and commitment to continue to improve the car law operating system, we believe we are well equipped to deliver long-term value creation.
Speaker Change: With that, I turn it over to Chris for closing remarks.
Chris Koch: Thank you, Kevin. In conclusion, I want to reiterate our confidence in Carl Ausstrategic Direction under Vision 2030. As we move forward, our ability to innovate with a focus on energy efficiency and labor-saving solutions puts us on the right path to drive a bug market growth and superior financial results.
Chris Koch: Our record third quarter results, cash flow generation, and overall 2024 performance continued to give us confidence that we are firmly on track towards our vision 2030 goals of $40 of EPS.
Chris Koch: 25% ROIC, 15% free cash flow margins, 25% EBITDA margins, and mid-single digit organic growth.
Chris Koch: The pivot of Carlisle's business model to an easier to understand and higher returning building products portfolio continues to provide many strong catalysts for growth.
Chris Koch: When combined with our robust free cash flow engine, strong balance sheet, enhanced focus on innovation, a robust pipeline of potential acquisitions and a proven M&A integration playbook.
Chris Koch: Harleil is clearly positioned to create significant additional value for all our shareholders and research goal of $40 of EPS under Vision 2030.
Chris Koch: I would also like to take this opportunity to express my continued thanks to all of Carl Alzim Police for their exceptional efforts and perseverance in this challenging environment. And once again let me extend my sincere congratulations to the Henry team on their Home Depot Award.
Chris Koch: Thank you all as well for your continued support, investment and interesting car allow. That concludes our formal comments, operator, we are now ready for questions.
Chris Koch: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question please press the star, follow me at number one on your touchstone phone.
Speaker Change: You will hear a prompt that their hands have been raised. Should you wish to decline from the polling process, these threats are followed by the number two. If you are using a speaker phone, please click the hand set with her pressing any keys.
Speaker Change: for your first question.
Speaker Change: Our first question will be coming from Timothy Wos from Beirnd. Please go ahead.
Timothy Wos: Hey guys, good afternoon, thanks for the time. Maybe just on volumes.
Timothy Wos: in the CCM business if you can maybe kind of take a step back and kind of give us some color on where you think.
Timothy Wos: Maybe either industry sales are or kind of we're industry volumes are, you know, kind of in the third quarter and maybe year to day.
Timothy Wos: I guess as you look at next year I mean I know it's early but you know how do you think about the volume kind of puts and takes you know to next year with new construction and then it seems like regroup continues to have some decent momentum.
Timothy Wos: Yeah, I think you're right. I'll just take a look at it in the 25 first-時候 suit Kevin had to want to stay about key three by
Timothy Wos: I think 25 can we continue to be optimistic on that from a couple of perspectives. I think obviously a lot of economic uncertainty going on in the elections. Obviously there was hope for more interest rate cuts you did materialize.
Timothy Wos: and the people maybe sitting on the side lines there. We also were going to the fourth quarter after just having.
Timothy Wos: Basically got back to normal on the inventory restocking and no one was going to really restock into the light quarters of the year. Too heavily, then we had a little bit of weather. I think Stabilize after the election, industry cuts, we think there may be some opportunity for some pricing obviously, still see inflation and labor or medical costs, these things.
Timothy Wos: as well as more innovation that we have coming out of the effects of some...
Timothy Wos: Positive Things on Acquisition, some new channel opportunities for us. So I think 25 for us, we would say, we'll get in the last day, so you know we haven't had a...
Timothy Wos: A load-in into the construction season in quite a while. I'm as probably as an accurate, but I would say it probably hasn't been since COVID.
Timothy Wos: and that used to be a nice boost to the year. So I think there's some opportunities for some inventory improvements when people have confidence in the economy again. So with that, I'll turn to Kevin and see what he'd like to do about the third quarter of the lives.
Timothy Wos: Thank you for watching.
Kevin Zdimal: I would say the industry was up about 3%, which would have been the same for our CCM business.
Kevin Zdimal: There was some things at the end of the quarter as you know with some of the weather events with the hurricanes as well as reports strike that that impacted us a little more than 1% in the quarter so that would have been against that 30% volume that we would have seen.
Kevin Zdimal: You know, it's been a month in.
Speaker Change: I just want to thank you. I like to cross the verticals where else is educational office. I think it was kind of that way in 23 as well.
Speaker Change: is not in too bad to shave this for us how the volume is getting distributed and I think you can and you're probably already aware that we've seen that so.
Speaker Change: Yeah, I mean to your point like nuclear structures down this year, right? So I mean, and a lot of it is central. A lot of it is kind of stender on the warehouse vertical, right?
Speaker Change: Yeah, okay. And I think we're constructing all the stuff.
Speaker Change: I'm just a M&E kind of funnel and the pipeline and I just kind of the piece.
Speaker Change: You've done two acquisitions or two tuck-in acquisitions here in the last couple of quarters. I mean, are there a pretty sizable pipeline of these tuck-in type acquisitions that are pretty attractive for national profiles?
Speaker Change: I mean if you're able to do a couple of these here, I mean you could really start to get some momentum on the synergies and the capital deployment.
Speaker Change: Yeah, actually, you know, I still think...
Speaker Change: prices are a little bit high versus what they were a few years ago but after we get our synergies and synergies just a number.
Speaker Change: They've been looking really good and it goes back to the four things we're looking for. You know we're looking for that again at Girl's Story.
Speaker Change: We're looking for heart synergies, good management team. We've got those both in MTL and Plastafab. The other thing is, you said at the tucking and that ability to get those synergies, but also added dimension to the two businesses. And I think it's really nice that MTL was a good acquisition for our existing CCM business around Drexel and Peterson. Got a great manager and Tony Mowinger and things were bringing efficiencies, were bringing to the existing business by adding MTL. And then you like a Plastafab and it really reinforces.
Speaker Change: that Frank Gray's concept built around national distribution on being a national brand, and really enhancing the Karlox experience of me part of his.
Speaker Change: and the Ford Co. is a 24 hour delivery anywhere in the country. So we'll get past the process of having against a build-out that EPS network as well. So they're really good fits. And we do see more of those. We do see more opportunities around the building envelope. And I think, you'll see more of that from us certainly in 25 and beyond.
Speaker Change: Yes, there is a bigger scale. The scale and size of them, we would expect to continue to deploy about 3 to 500 million into these both on acquisitions a year for it in that few years.
Speaker Change: Okay, great. And then Kevin just a clarification that's 3% industry volume number that you quoted. You guys will closer to make single digits. Just to make sure the map works.
Kevin Zdimal: Yeah, when you take into account some of the D-stock, then that puts us at the higher end there. Yep, I was excluding the D-stock impact.
Speaker Change: Gotcha. Okay. Sounds good. I'll hop back in queue.
Speaker Change: Thanks, Jim.
Speaker Change: Thank you. Our next question will be
Speaker Change: Hi, good evening. So maybe just turning to CCM margins, obviously very strong performance in the quarter. You cited some positive raw material environment. Could you just talk about the price contribution to margins in the quarter and anything else that drove that expansion?
Speaker Change: Yes, so price cost was neutral in the quarter for CCM and as you said it was very good margins up over a hundred basis points to a record and for us that really demonstrates the
Speaker Change: with the power of the business where we can get these record margins, expand the margins without getting price, because that's been a lot of the story in past years is we needed the price to get the margins, but now with utilizing the Carlisle operating system throughout CCM, that's driving these higher margins.
Speaker Change: Thank you. Thank you.
Speaker Change: Or from Florida and around the Gulf. But obviously we'll get some pick-up from that. We hope people recover quickly, there was a lot of damage. And I think more importantly than the weather, the biggest impact is probably around what kind of you know November, December we have across the country, and whether we get a nice dry, warm spring.
Speaker Change: Fall or we get wet weather and more snow early in the north So, you know, that's always the factor But I think for the most part the opportunity and the impact kind of wash each other out the quarter fourth quarter
Speaker Change: I appreciate it. If I could just add one more, you've talked about the ramping of the R&D investments to 3% of sales. Can you just talk about how we see that spending step up and maybe what the contribution will be for next year? Thank you.
Speaker Change: Yeah, we would expect to increase it around 50 basis points a year as we move forward to 2030. So, we're not going to get to 3% next year or even the following year. It's more of this steady increase of it throughout the next five years.
Speaker Change: I appreciate the color. Thank you.
Speaker Change: Our next question will be coming from Susan Macari. Please go ahead.
Susan Macari: Thank you. Good afternoon, everyone.
Susan Macari: My first question is digging a little...
Susan Macari: Good afternoon. My first question is digging into the re-roof side of things again. Can you talk a little bit about what the latest survey of your contractors has shown? Has that changed any over the last quarter? And how are you thinking about their positioning as they look to the fall and year end? And then how do you also within that think about the opportunities to capture some of that business given the MTL and the other acquisitions?
Speaker Change: Well, the survey that we do really reflected everything I think you've written and others have written about more pressure on new and more pressure on.
Speaker Change: the Rezzy side of the business and obviously that's been reflected in more numbers than just ours and I think it's pretty well understood. Very, very kind of...
Speaker Change: positive on re-roofing, you know, as we look out.
Speaker Change: and we kind of bifurcate this into a near-term look at what re-roofing is doing. But on the long-term, all those roofs that we've seen, and we've talked about this before, that are put on in the 2008, 2009, 2010, 2012, you know, these all come back at a higher price.
Speaker Change: have to be regrouped within 20 years. So the outlook for Q4 has been positive across the board. Obviously, we talked about the impact of what weather can do, and there can be some impact on the margins. And then going into 2025, I was actually surprised that the...
Speaker Change: on a return to volume and I think again I spoke to the you know uncertainty now and the macroeconomic conditions that are here uncertainty people being concerned but the 25 look more positive and then surprisingly there was some positive expectation around price.
Speaker Change: that that would be a positive as we headed into 25. So early days, right? These are projections. This is across a wide group of contractors, but I think good news on that commercial side.
Speaker Change: yeah okay and then can you talk a bit about your inventories within CCM how those are going into the end of the year and any thoughts on your production
Speaker Change: Yeah, and Sue, before I get to the inventories, you asked about MTL and what's happening. You know, MTL continues to make great strides to integrate into the specifications at CCM. As always, a reminder, MTL has patents and things like this, and we're bringing those into our warranty. We're bringing our Salesforce teams together. I mean, it's only been about six months.
Speaker Change: but we're getting good traction there we're seeing places where even Henry now is getting into the game where we will bid on a a national chain and we'll suddenly see that you know Henry might be in there bringing MTL in or bringing CCM or vice versa so there's really good synergies there and I'm really pleased with how quickly
Speaker Change: Brian and his team have integrated and really started to push that whole idea of
Speaker Change: issues. Spend some money!
Speaker Change: And, you know, that's OTD to promise and then the first time fill rate. So I think we continue to have pretty good service and it continues to get better in the quarter.
Speaker Change: Okay, all right. Thanks for all the color. Good luck with everything.
Speaker Change: Hey, you bet. Thank you so much.
Speaker Change: Next question will be coming from David
Speaker Change: Yeah, good afternoon, and thanks for taking my questions.
Speaker Change: Good afternoon, David.
Speaker Change: Well, I think, you know, when we look at additions, maybe we take it into two different groups. You know, we look at the big three that, you know, us and our two big competitors have been here for a long time and use it as part of an integrated system. I mean, we look at the re-roofing.
Speaker Change: We do have others that have announced they're going to come in. I think this is an interesting statement.
Speaker Change: I think it's going to be polyiso in the market, but it's not the same type of capacity as I would say out of those.
Speaker Change: I think there's been some capacity added and or at least talked about being added and I don't understand how that might integrate into you know the markets we serve.
Speaker Change: I would say the impact was negligible. So, you know, obviously, there's a lot more to being in this building envelope business than just showing up with a TPO line and a poly iso line. While that's a great start, I'm sure for someone.
Speaker Change: seems to be.
Speaker Change: Quite a bit compared to what we're used to. I think we'll be okay with it.
Speaker Change: Good. Thank you for that detail. That's a great answer. Can you just walk us through your outlook for each of your principal raw material inputs in terms of price trends and what you're seeing there?
Speaker Change: Yeah, I think we had talked about MBI for the year.
Speaker Change: When we look overall, you know, that's where we're getting to, you know, some savings that those that are down are overwhelming it But for the most part, it's been stable through the year and much as we expected I think some of it obviously depends on on demand And in the resi markets, obviously that's been down but overall, you know relatively stable
Speaker Change: Good. Last question for me is just on CWT and you talked about EBITDA, adjusted EBITDA being down 14%. Can you just bifurcate for us the investments that were made there versus the volume deleverage?
Speaker Change: obviously I'll say it but you already know it, its interest rates, affordability, election uncertainty, you know and then we had a little bit of an impact
Speaker Change: from the Spray Foam side of the business, where a little bit of irrational pricing from some competitors that had a bit of an impact, but let's say that made up a third.
Speaker Change: David Morgan, CFO Alphabet and Google
Speaker Change: So you've heard us talk about here being initiatives within CWT across expansion in the Home Depot retail side of the business as well as expanding into the national builders with their full system offerings and then advanced
Speaker Change: Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: to drive our strategy there.
Speaker Change: And then you hear us talk about R&D as part of Vision 2030, so on CWT you heard about products like Blue Skin, BP Tech, we're investing in that, in R&D. And then lastly, as part of our cross-selling and selling the full system across the different
Speaker Change: CWT businesses. We've been investing in IT and systems and tools to make it a better customer experience. So that kind of gives you an idea of where we're spending the additional money and it's going to support further long term growth and as we continue to grow we should get a good return and see margins improve going forward.
Speaker Change: Thanks for the detail. Good luck.
Speaker Change: Thanks David.
Speaker Change: Next question will be coming from Brian Blair from Oppenheimer.
Brian Blair: Hi, Stephanie, I guess.
Stephanie: Hey, good afternoon, Brian.
Brian Blair: Chris you mentioned likely neutral Q4 impact from the from the hurricanes obviously there's some you know headwind from the first
Brian Blair: When that hit in Q3, just to level set, what was the total impact between the port strikes and the initial impact of the first hurricane, top line and margin, to the extent that can be quantified?
Chris Koch: Yeah in the top line it's about 10 to 15 million of impact in the third quarter and yet to the bottom line you can do our incrementals off of that so 40%
Chris Koch: Explode down due to the hurricanes right now. Obviously in the southeast the focus is on the essential jobs and the repairs They're not doing as much work on new projects, but that's what we think will kick in in 2025
Speaker Change: Okay, understood.
Speaker Change: And Chris, you've walked through some of the puts and takes for TCM looking to 2025. Maybe do the same with CWT. How are you thinking about recovery prospects, continued watch items, related swing factors, etc.?
Chris Koch: Yeah, well, I think, you know, you've got a lot of really positive things. Mehul mentioned a couple of them. We've obviously expanded our retail channel. That was a great synergy that we, you know, we don't build into the $30 million of synergies that we...
Chris Koch: Thank you.
Chris Koch: Pat and the Henry deal, that came as a bonus. So the expansion into the...
Speaker Change: Interest rate cuts that it will be needed will help. We've got to get people moving. That affordability is an issue. We do know there's a backlog in housing stock so let's see that happen. CapEx gets deployed
Speaker Change: So I think that as well as CapEx.
Speaker Change: And we haven't talked about it much on this call, but we did invest a lot into automation into CWT, things like autofill, taking really labor out of the equation, automating that, and increasing both the quality, reducing the waste.
Speaker Change: and increasing the efficiency of our factories in Frankston and Ice.
Speaker Change: It may not have been as impactful as these investments. Obviously, if the volume is there to run through it, the incrementals have been pretty good and we were on a good pace to do that before we saw that further deterioration. So, we just look for this rebound in the resi and repair and remodel markets and I think it'll be there. Whether it happens in the first quarter...
Speaker Change: Our next question will be coming from Adam Baumgarten from Delmon
Adam Baumgarten: Hey guys, good afternoon. Just on the price cost.
Adam Baumgarten: Any change to the outlook to a flat for the year at this point?
Speaker Change: No, not on, I assume you're talking on the CCM side.
Adam Baumgarten: Yeah, just because I think he said it was flat in 3Q, right?
Adam Baumgarten: Yep.
Speaker Change: Okay, cool. And then just on CCM specifically, on pricing, just curious what you saw throughout the quarter, especially kind of later in the quarter and into 4Q, and maybe what you're hearing from your distribution customers around price competition.
Speaker Change: Yeah, and I think it's been, it's been pretty, I wouldn't say it's widely disseminated, but I think for pricing...
Speaker Change: You're...
Speaker Change: We're seeing relative stability. I mean, I think back to a few years ago when there was a, you know, raw materials would go down and we would just see pricing tied to raw materials. And I think as we pushed,
Speaker Change: price discipline and as we push price to value, um, it's been pretty good. Uh, to see our competitors investing in a new factories investing in innovation, investing in their sales teams and really ensuring that they get paid for those investments.
Speaker Change: They're making so again, I think just what we got as I said earlier in the call what we got out of our survey
Speaker Change: was a relatively stable pricing environment throughout the year. I think Kevin had said at the beginning of the year we would probably be down 2% for the year and I think we're gonna be pretty close to that.
Speaker Change: Despite all the issues that have gone on through the year, and then I think going into 2025, the feedback was that there might be some upside to pricing from our survey. So, we'll see how that plays out, but that is a good thing when our contractor base and our other value chain are thinking like that.
Speaker Change: Great. Thanks a lot. Best of luck.
Speaker Change: And our last question for today will be coming from Garrick Moyes from Luke Capital.
Garrick Moyes: Derek, thank you man.
Garrick Moyes: Hey, thanks for squeezing me in. So just two questions on CWT, just first on pricing. It remains down, and I think that's fairly consistent with what you saw earlier in the year. But just wondering, maybe similar to.
Garrick Moyes: to the earlier question on CCM, if the pricing cadences changed at all in CWT.
Garrick Moyes: both q3 which we had as well as in q4
Speaker Change: And Garrick, one thing I will add, just going back to our last earnings call when we talked about additional pricing pressure on spray foam.
Speaker Change: Outside of that, everything is in line. There's no pricing pressure. We're holding prices stable, similar to CCM, and declines that Kevin mentioned, that's pretty much in line with what we said on the last earnings call.
Garrick Moyes: No, great. Appreciate the color there. And then.
Garrick Moyes: Just on the trends in CWT during the quarter and the outlook, just give them the disconnect on what you're looking for, you know, coming out of 2Q. And I think it implied maybe mid-single-digit type revenue growth.
Garrick Moyes: in the back half of the year, you know, kind of appreciate the residential, you know, it remains weak, but, you know, any more color as to, you know, maybe either sales trends throughout the quarter or, you know, any...
Garrick Moyes: of
Garrick Moyes: you know, the residential markets, the affordability, the fact that people aren't moving. And I think those, I think earlier in the year, you know, we had a lot of talk about even three interest rate cuts and then we got one and that was it and I think that
Garrick Moyes: ProblemSolvers.com
Garrick Moyes: And, again,
Speaker Change: Okay. No, I appreciate that. Thanks and welcome to Q4.
Kirk: Okay, thanks Kirk.
Speaker Change: There are no further questions at this time. I'll handle the call over to Chris Coke for closing remarks. Please go ahead.
Chris Koch: Thanks everybody. This concludes the third quarter call for Carlisle. Thanks for the participation. Thanks for the great questions. Look forward to speaking with you all on our next call. Thank you.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.