Carlisle Companies Incorporated

Good afternoon. My name is Selena, and I will be your conference operator today. At this time, I would like to welcome everyone to the Carlyle Company's first quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will conduct a question and answer session. I would like to turn the call over to Mr. Jim Giannacouros, Carlyle's vice president of investor relations. Jim, please go ahead.

Thank you, Selena. Good afternoon, everyone, and welcome to Carlisle's first quarter 2022 earnings conference call. We released our first quarter financial results after the market closed today, and you can find both our press release and earnings call slide presentation in the investor relations section of our website, carlisle.com. On the call with me today are Chris Koch, Chairman, President, and Chief Executive Officer, and Kevin Zimmel, our Chief Financial Officer. Today's call will begin with Chris updating our progress towards achieving our strategic plan, Vision 2025, highlights of our record first quarter, and a discussion of current trends. Kevin will discuss the financial details and updated outlook for 2022. Following Chris and Kevin's remarks, we will open up the line for questions. Before we begin, please refer to slide two of our presentation where we note that comments today will include forward-looking statements based on current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings. Carlyle provides non-GAAP financial information. You can find reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website. With that, I will turn the call over to Chris.

Thank you, Jim. Good afternoon, everyone, and thank you for joining us on our first quarter 2022 earnings call. Before we begin, as we mentioned in the press release, we are saddened by the ongoing conflict in the Ukraine and the impact it is having on so many individuals and families around the world. We hope a quick resolution will come to the situation. Turning to our quarterly results, I'm pleased to announce Carlyle Company's delivered outstanding performance in what continues to be a very challenging environment. Before reviewing the performance in more detail, I'd like to thank our teams for their extraordinary efforts that drove our record operating results. Their commitment and significant efforts to minimize disruptions for our customers, contractors, and distributor partners continue to be a competitive advantage for Carlyle, and it's helping to drive our business results to record levels. All of this despite significant issues within the supply chain, ongoing labor constraints, and rising prices for raw materials, labor, and services. Our goal at Carlyle is to drive continuous improvement and excellence throughout the organization and ultimately to deliver on the promise of the Carlyle experience to our customers. Our record performance in the first quarter reflected our team's remarkable dedication to Carlyle and to delivering Vision 2025. Please turn to slide three. Our record results continue to demonstrate that Vision 2025 which has provided the clarity and consistency of mission to guide our efforts since its launch in 2018, was the right path for Carlyle's future. In addition to our world-class team and proven business model, we've relied on a strong balance sheet and excellent cash flow generation to provide both financial and strategic flexibility to execute on our vision 2025 roadmap to drive earnings in excess of $15 per share by 2025. A significant portion of our success has been driven by the multi year process of reshaping our portfolio to a diversified building products focus. Placing our emphasis on our highest performing businesses when setting Carlisle up for accelerated and sustainable future value creation. Allow me to update you on the drivers of our vision 2025 strategy, these include drive 5% plus organic growth with operational leverage. In the first quarter, we delivered 45% organic revenue growth and adjusted EBITDA growth of over 150%. Utilize the Carlisle operating system to consistently drive efficiencies and operating leverage by targeting cost savings of 1% to 2% of sales annually. We delivered approximately 1% in the first quarter in line with our targeted range. Build scale with synergistic acquisitions. We have streamlined and optimized our portfolio through acquisitions and divestitures to build scale in our highest-returning building products businesses. Our recently announced segment structure, including construction materials and weatherproofing technologies, reinforced this objective. Continue to invest in and develop exceptional talent. In 2021, we deployed the Carlyle Leadership System, a holistic approach to talent management that incorporates mutually reinforcing processes and tools for the selection and development of high-caliber talent. and deploy over $3 billion into capital expenditures, share repurchases, and dividends. With the addition of first quarter capital investments of over $30 million into our businesses, share repurchases totaling $125 million, dividends paid of $29 million, we have now deployed over $2.6 billion since the launch of Vision 2025. Now let's return to the first quarter and look at the drivers of our record performance. Please turn to slide four. First, sustainable non-discretionary re-roofing demand continues to be a driver at CCM. The number of low sloped roofs requiring re-roofing with more energy efficient solutions over the next decade underpins our confidence in sustainable above market organic growth for the CCM segment. We expect CCM should continue to benefit from strong re-roofing demand, solid new construction demand, and a growing push to install energy efficient solutions in the near term, we expect continued mid high single digit annual volume growth boosted by pent up demand created by coven 19 shutdowns supply chain disruptions and continued Labor shortages in the construction sector. Second, we continue to demonstrate price leadership under the guide of vision 2025. we began to focus on earning price in the marketplace by delivering on the Carlisle experience, which means reliably providing our contractors, distributors, and other channel partners with energy efficient building solutions of the best quality at the right place at the right time. We wouldn't be able to provide the Carlisle experience or industry leading products without significant investment in employees, facilities, equipment, and R&D, including over $1 billion of capital invested in our businesses over the past decade. Earning price for the value we create in the marketplace is contributing to the healthy profitability improvement we generated in the first quarter, and we expect continued contribution over the balance of the year. Third, we continue to seek synergistic and accretive acquisitions. Our newest segment, Carlisle Weatherproofing Technologies, was created soon after our acquisition of the Henry Company in September of 2021. Henry enhances CWT's total building envelope solutions value proposition. And with a balanced exposure to new construction and restoration, we have increased the size of our served markets and potential sales. Specifically, CWT's expanded portfolio is now more relevant to end users looking for increased energy efficiency with approximately 70% of segment revenue driven by sustainable solutions added to a solid home center retail business CWT has another avenue for growth. As we've upgraded our talent and processes around integrating acquired businesses into Carlisle over the last three years, I'm pleased to share with you that Henry's integration continues to go very well. Notably, we anticipate synergy capture beyond our initial $30 million target by 2025 and reiterate Henry's accretion estimate of $1.50 of EPS for 2022. Fourth, since launching Vision 2025, We've remained focused on being a disciplined and superior capital allocator. Our strong operating cash flow enables Carlyle to remain financially and strategically flexible in order to drive value through a balanced approach. This approach includes investing heavily in organic growth, returning capital to shareholders in the form of dividends, opportunistic share repurchases, and as I just mentioned, continuing to seek accretive M&A. As a reminder, 2022 will be our 46th consecutive year of paying dividends and increasing dividends. And we remain on track to deploy $175 million in capital expenditures this year with a large share dedicated to funding growth projects in our building products segment. Fifth, we remain firmly committed to sustainability and ESG. Please turn to slide five. We are proud that our business model is squarely in the middle of global esg trends as our products enable a more efficient use of energy and buildings. More energy efficient buildings lower greenhouse gas emissions on a large scale as evidenced by the fact that over 30% of ghg emissions annually are attributed to the operation of buildings. Approximately $2.5 billion of our sales last year were from lead qualified products. And we estimate over 150 million megawatt hours of energy will be saved over the lifetime of those products in their buildings. As a further example, in the last 20 years Carlisle's insulation products have saved our customers nearly 290 million megawatt hours of energy or more than enough power to power every household in California for a year. With our pivot to building products and related sales expected to grow this year and beyond, Carla's contribution to creating a more sustainable planet will only accelerate. And to that end, we continue to make significant progress towards our goal of delivering a net zero commitment in 2022. I will now ask you to turn to slide six, where we highlight our performance in the first quarter of 2022. Revenue increased 59% year over year, with organic revenue up 45%. All segments contributed to this growth. Adjusted diluted EPS increased 209 percent year-over-year to $4.26 as higher volumes, price, and cost discipline more than offset inflation and operational disruptions our teams faced during the quarter. For segment highlights, please turn to slide seven. CCM delivered an outstanding quarter despite the severe challenges across its supply chain and the impact of labor and raw material constraints. CCM experienced solid top line growth due to continued strong demand, product mix, new product sales, and capturing price earned by delivering on the Carlisle experience. Contractor backlogs are quite healthy, and bid activity remains very strong. Our contractors continue to note that material supply is their biggest challenge currently, and according to industry information source associated builders and contractors, more than 75% of contractors are indicating that they have recently suffered some setback in delivering construction services with supply issues more challenging than labor. Given our investment in and focus on sourcing materials and being held accountable to convert and ship our products with reliable delivery dates, CCM continues to be the market leader for our customers. Moving to slide eight. Sales were very strong at our newly created segment, Carlyle Weatherproofing Technologies. up approximately 30% year-over-year on a pro forma basis, driven by growth across all segments despite supply shortages. We continue to drive the Carlyle experience through CWT and its organization, especially at Henry, which gives us confidence that we will, as in CCM, earn the value of our products and services. Despite raw material supply and tight labor market challenges, order volumes remain exceptionally strong, which we expect will leverage nicely in 2022. As we called out in the earnings release, we are very pleased with the integration and contribution of Henry to our results and remain excited about the future of CWT under Frank Reddy and our new leadership team. Moving to slide nine, CIT revenue increased 18.7% year over year in the first quarter of 22 with balanced growth in its commercial aerospace and medical technologies platforms. Backlog continues to grow across the major parts of CIT and now stands higher than pre-pandemic levels. We are encouraged by the recertification and accelerating deliveries of the 737 MAX and impending resumption of 787 deliveries later in the year. As we approach the summer travel season, trends are also positive for international travel. This would be a welcome change for the past two years and longer term should support a resumption in wide body production. On to CFT. On slide 10, CFT generated revenue growth of 8.1% year over year. We continue to be pleased by the progress CFT has made over the last year plus, including increased introduction of new products, improved operational efficiencies, price realization, and an improved customer experience. We are confident combining these actions with growing backlog will deliver strong revenue growth and incremental margins in the mid 40% range this year. And we continue to make progress towards our goal of 50% plus incremental margins commonly seen in our competitors. And with that, I'll turn it over to Kevin to discuss some additional financial details and our updated outlook for the remainder of 2022. Kevin? Thank you, Chris.