Carlisle Companies Incorporated

Thank you and good afternoon, everyone.

Welcome to Carlyle's first quarter 2025 earnings call. I'm Mehul Patel, Vice President of Investor Relations for Carlyle. We released our first quarter financial results today, and you can find both our press release and the presentation for today's call in the Investor Relations section of our website. On the call with me today are Chris Koch, our Board Chair, President, and CEO, along with Kevin Zimmel, our CFO. Today's call will begin with Chris providing key highlights of our first quarter financial Kevin will follow Chris with an overview of our Q1 financial performance and a reaffirmed outlook for 2025. Following our prepared remarks, we will open up the line for questions. Before we begin, please refer to slide two of our presentation where we note that comments today will include forward-looking statements based on our current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties which are discussed in our press release and SEC filings. As Carlyle provides non-GAAP financial information, we provided reconciliations between GAAP and non-GAAP measures in a press release and in appendix of our presentation materials, which are available on our website. With that, I will turn the call over to Chris.

Thank you, Mahul. Good afternoon, everyone, and thank you for joining us today. Starting with slide three of the presentation where we highlight our first quarter performance and progress, I'm pleased to report that the Carlyle team showed superb perseverance in driving our key initiatives in the first quarter of 2025, overcoming significant challenges and post-election turmoil to deliver solid results. The first quarter challenges included the continued weakness in the residential construction markets, the negative impact of this winter's weather, especially in January and February, and the significant economic uncertainty and instability created by the ongoing U.S. tariff actions. With tough year-over-year comparisons and with an ever-increasingly complex macroeconomic backdrop, revenue of $1.1 billion was essentially flat year-over-year. Diluted EPS for Q1 was $3.13, and adjusted EPS was $3.61. As anticipated and consistent with the trends we experienced as we exited 2024, the first quarter began with a slower start, primarily due to unfavorable weather conditions in January and February across many of our key markets. Fortunately, improved weather conditions in March and healthy re-roofing activity helped to offset much of the unfavorable impact experienced in those first two months. In our CCM segment, In addition to the strong re-roofing activity, Carlisle also benefited from our 2024 MTL acquisition. Both of these factors help offset softer conditions in the new commercial construction activity, challenging prior year weather comps, and as anticipated, low single-digit price declines in CCM. The ongoing strength in re-roofing demand, which represents 70% of CCM's commercial business, continues to be a key driver of our resilient performance, helping to offset the more negative macro environment. For CWT, we continue to face headwinds in residential and markets due to buyer uncertainty, affordability challenges, higher interest rates, and lower housing turnover. As we've discussed previously, these residential market challenges were largely anticipated, impacted most market participants, and are well understood. While we are optimistic that the underlying drivers of the residential end markets will ultimately bring significant growth and margin expansion in our CWT business, for now we will continue to focus on areas in our control. We are making progress on many of our key investments and seeing gains in areas such as new product introductions and factory automation within CWT. These efforts are expected to provide $3 to $4 million of incremental adjusted EBITDA per quarter starting this quarter along with share gain initiatives. When we look at pricing across both CCM and CWT, we experience modest declines as expected during the quarter with low single-digit price declines in both CCM and CWT. Based on the announced price increases and the start of the summer season, contractor expectations are that price increases will gain traction in the second quarter, and we expect year-over-year pricing to be neutral for both CCM and CWT in the second quarter. Turning to the much-discussed subject of tariffs. As we alluded to in the Q4 2024 earnings call, over 90% of our raw materials are sourced within North America. Additionally, many of our materials that are sourced from Mexico and Canada are covered by USMCA and are not subject to tariffs. Additionally, we import very little directly from China, approximately 5% of purchases. Because of Carlyle's predominantly North American sourcing position, we currently expect a negligible direct impact from tariffs in 2025. Turning to the indirect impact of tariffs, the indirect impact is much more difficult to quantify and forecast due to the complexity and many moving parts involved. Nonetheless, the current indirect impact of tariffs is minor for Carlyle overall and should remain so for the rest of 2025. While the impact from tariffs, both direct and indirect, may be limited, we do remain concerned that there may be unforeseen indirect consequences of the tariffs for our contractors, distributors, and suppliers. Along with the increased potential for a U.S. recession, the longer these conditions remain unresolved and businesses remain uncertain about the future. Nonetheless, we have increased conviction in our well-understood drivers to our businesses and our market intelligence, and we remain committed to our 2025 outlook. Our 2025 outlook is reinforced by the data from our latest Carlisle Market Survey conducted in early April. Feedback from those surveyed reinforces our positive outlook on the 2025 roofing season and our belief that commercial roofing volumes will be up low single digits. This low single-digit increase will be more heavily weighted to re-roofing the new construction demand, which we believe will be essentially flat for the full year. Additionally, pricing in our non-resi markets is showing signs of traction, and our survey participants expect pricing to improve as the year progresses. Consistent with what we experienced starting in the second quarter of 2024, 2025 full-year residential volumes are expected to be down low single digits due to the continued negative impact of buyer uncertainty, affordability challenges, higher interest rates, and lower housing turnover. Comments also suggest that inventory in the channel remains low by historical comparisons due to higher carrying costs and economic uncertainty. During the quarter, we maintained our commitment to returning capital to our shareholders, repurchasing 1.2 million shares for $400 million, bringing the total share repurchases since 2017 to $5 billion. Additionally, following the $1.6 billion in share repurchases in 2024, we now expect to deploy approximately $1 billion into share repurchases in 2025, an increase over our original projected share repurchases of $800 million. As a reminder, we also increased our dividend by 17.6% last August, our 48th consecutive year of increasing our dividends to our shareholders. These actions underscore our confidence in Carlyle's future growth prospects and our ability to generate significant free cash flow. We believe our approach to capital allocation continues to be a source of competitive advantage. We are disciplined, have always been disciplined, and will remain disciplined with an aim to keep our ROIC above 25%. Additionally, we will continue to allocate capital towards strategic M&A to enhance our leadership position within the building envelope, invest in our key strategic initiatives, and invest in significant capital expenditures to support growth innovation, and further operating efficiencies. Touching on M&A for a moment, our acquisition of MTL continues to exceed our expectations. We are on track to exceed $20 million of synergies well above our originally announced $13 million of synergies as the Carlyle Integration Playbook delivers substantial value through a disciplined approach. Similarly, we're utilizing the same playbook on our integrations of both Plastifab and ThermoFoam. ThermoFoam, as a reminder, continues to build our vertically integrated expanded polystyrene capabilities and adds geographic coverage in Texas and the South Central United States. Please turn to slide four as I discuss the strong structural trends that continue to support our businesses. Approximately 5.9 million buildings exist in the United States according to the 2018 Commercial Buildings Energy Consumption Survey. Of those, roughly 70% of US non-residential buildings are now over 25 years old and represent a significant pool of potential buildings requiring re-roofing activity. Based on our internal data, more than 80% of re-roofing permits come from buildings over 25 years old. This pool of potential re-roofing demand creates a consistent and somewhat predictable demand pattern. That demand pattern is demonstrated in CCM sales data from 2008 to 2025. It is extremely important to remember, and I want to emphasize, that Carlyle is an imperative business with a leading market share position in North America in what we believe is the world's best market for building products. By using the words imperative business, what we mean is that Carlyle provides key products and solutions to address a basic need of society, the need for buildings that protect and house us and are essential to our daily lives. Roofing, insulation, and weatherproofing are largely non-discretionary and necessary components of the built environment. This fundamental need for our products and solutions combined with our market-leading position provides resilience for Carlyle even during periods of economic uncertainty. It's also important to recognize that many of these older buildings will undergo multiple re-roofing cycles during their lifetime. Buildings over 35 years old are 55% of the building footprint in the US and require their second or often third roof replacement. And as the 30% of buildings under 25 years old steadily roll into our addressable re-roofing market, They reinforce the expanding pipeline of recurring revenue for decades to come. Turning to slide five, beyond the dependable base of recurring re-roofing projects, Carlyle is also benefiting from increasing revenue and profitability per square foot. This increased content is driven by several factors, stricter building codes, increasing energy efficiency regulations, more severe weather offense leading to higher specification roofs, and the growing adoption of 20-year warranties, which require more comprehensive systems and materials. This trend of increasing content per square foot is not new to Carlyle. In fact, it is directly aligned with one of our key pillars of our Vision 2030 strategy, innovation. Innovation drives differentiated products by first understanding the job to be done and how we can provide a better solution based on strong voice of the customer content. These products are then designed to create value for our customers. This results in creating a preference for Carlyle's products and solutions and allows us to price to that value and increase the dollar content per square foot when compared to existing products. The ability to better address customer needs and wants in turn enables Carlyle to capture a greater share of wallet and deliver superior margins. Our comprehensive warranties further enhance our ability to drive content growth. Carlyle warranties are a highly valued benefit desired by building owners who prefer complete system solutions rather than individual components. Over 80% of our warranties sold now have 20-year terms, up significantly from previous years. These market dynamics present tremendous opportunities for Carlyle, and we're strategically positioning our innovation capabilities and initiatives to capitalize on them. By developing products that deliver superior energy efficiency, require less labor to install, and enable us to sell more value-added solutions per square foot, we're directly addressing the key needs of building owners and contractors while driving our own growth and profitability. Turning to slide six, we remain committed to accelerating our innovation efforts to deliver margin-enhancing, energy-efficient, and labor-saving solutions for our customers. As outlined in our Vision 2030 strategy, we're investing significantly in R&D, with our new state-of-the-art research and innovation center in Carlisle, PA, representing a critical part of this commitment. We continue to focus our innovation pipeline on three key areas. Evolutionary improvements to existing products, transformational new solutions, and business lifecycle innovations that enhance efficiency and reduce costs. Our product development efforts are yielding positive results across both CCM and CWT segments, with new products gaining traction in the market. In prior calls, we've highlighted several recent product introductions, including SeamShield, BlueSkin VP Tech, and UltraTouch. All three rollouts are resonating with customers, responding to their VOC stated needs, meeting our price-to-value objectives, and are margin accretive to our portfolio. As we continue to work with customers to grow our pipeline of innovation opportunities, we remain disciplined in our approach. Our rigorous underwriting process ensures that every R&D investment is aligned with our financial and strategic objectives to drive profitable growth and maximize returns. Simply put, we built the right infrastructure to consistently bring margin-enhancing, energy-efficient, and labor-saving solutions for our customers. Our innovation investments are a critical component of our Vision 2030 strategy, and we expect our efforts to contribute meaningfully to our goal of generating 25% of revenues from new products by 2030. And with that, I'll turn it over to Kevin to provide additional financial details and color on our outlook for 2025. Kevin? Thank you, Chris.