Carlisle Companies Incorporated

Good afternoon. My name is Joelle and I will be your conference call operator today. At this time, I would like to welcome everyone to the Carlyle Company's fourth quarter 2025 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. Mehul Patel, Carlyle Vice President of Investor Relations. Mehul, please go ahead.

Thank you and good afternoon, everyone. Welcome to Carlyle's fourth quarter 2025 earnings call. I'm Mehul Patel, Vice President of Investor Relations for Carlyle. We released our fourth 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, Chris Koch, our Board Chair, President, and CEO, along with Kevin Zimmel, our CFO. Today's call will begin with Chris providing key highlights for the full year and the fourth quarter. Kevin will follow Chris and provide an overview of our Q4 financial performance and our outlook for the full year of 2026. Following our prepared remarks, we will open up the line for questions. But 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. As Carlyle provides non-GAAP financial information, we provided 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 on slide three.

Thank you, Mehul, and welcome to our fourth quarter 2025 earnings call. I want to thank everyone for joining us today as we close out 2025 and look ahead to 2026. One note, this call will be slightly longer than our normal calls, as is our year end, and we'd like to provide additional transparency and clarity, especially with the elevated levels of uncertainty we see in our markets today. For the full year 2025, Carlyle delivered solid results in a very challenging environment. Of note, we generated $5 billion in revenue, adjusted EPS was $19.40, adjusted EBITDA margins were 24.4%, and ROIC was approximately 25%, which is not only well above our cost of capital, but is also considered best in class. we take a great deal of pride in consistently operating at this level. Looking ahead, we remain convinced that driving adjusted EPS to $40 per share and maintaining ROIC above 25%, as contemplated under Vision 2030, are the right long-term goals to maximize value creation for our shareholders. We were extremely pleased with our cash flow performance in 2025, which was our fourth consecutive year of generating more than $1 billion of operating cash flow. Free cash flow was $972 million, representing free cash flow margins of 19.4%, well ahead of our Vision 2030 target of 15%, and again, best in class. The M&A environment in 2025, while active overall, presented challenges in our target markets as sellers expected elevated valuations for quality assets, and we remained disciplined with limited appetite to deploy capital into premium priced acquisition targets that exhibited less than premium results in the recent past. So with M&A activity more muted, we continued to lean into share repurchases as an attractive use of capital, especially given our expected returns on those share repurchases. Ultimately, we repurchased $1.3 billion of Carlisle shares in 2025. In addition to share repurchases and consistent with our past practices, we returned $181 million to shareholders through dividends in 2025. August marked our 49th consecutive annual dividend increase, up 10% year over year, and we are excited for the prospect of reaching the half-century mark this coming summer. Our 2025 performance clearly positions Carlisle as a leading cash return story in the building product sector. We are pleased with our ability to maintain a strong balance sheet and ample financial flexibility to consistently invest in our business, especially the areas of customer experience, operational excellence, and innovation, while simultaneously pursuing disciplined, value-creating acquisitions when opportunities meet our return thresholds. Turning to slide four, for the fourth quarter, we generated revenue of approximately $1.1 billion. Adjusted EPS was $3.90, and adjusted EBITDA margin was 22.1%. During the quarter, we also returned $346 million to shareholders through share repurchases and dividends. More importantly, in 2025, we stayed disciplined in our activities and focused on things we could control. Guided by Vision 2030, we advanced our innovation agenda, continued to automate our operations, strengthened our leadership team, and further enhanced the Carlisle experience for our customers. Those same priorities are part of the core pillars that will drive our performance in 2026 and beyond, regardless of broader market conditions. Speaking of core pillars, let me now turn to the core of Carlisle's strengths since the 1970s. our commercial roofing and broader building envelope business at CCM. The largest part of our continuing performance story at CCM has been the re-roofing market. Re-roofing is a significant part of Carlisle's ability to deliver consistent sales and earnings growth. Re-roofing is driven by the non-discretionary need to maintain, upgrade, or repurpose North America's vast and aging non-residential building stock. Looking at our re-roofing business, it is important to note that at CCM, re-roofing represents roughly 70% of the business. When one couples this with the fact that over 70% of the US non-residential footprint is older than 25 years, and roofs typically need to be replaced every 20 to 30 years, it is apparent that this market provides consistency and resiliency to our overall business. Looking at the re-roofing market, re-roofing permits have grown at a low single digit rate over the past years. And when you layer on 150 to 200 basis points of content per square foot growth per year, you get the mid single digit growth in re-roofing demand we are forecasting for the foreseeable future. Re-roofing is not optional for building owners. It is an imperative investment to keep assets operational, safe, code compliant, and increasingly energy efficient. And North America is the most attractive roofing and building envelope market in the world, given an enlarged and aging building base of low slope roofs, increasing energy efficiency regulation and pressure from rising utility rates, especially now with the outsized impact of AI and data centers consuming unprecedented levels of electricity, Structurally high labor costs and a decreasing labor pool that increases contractors' desire for easy-to-install, labor-saving solutions and products that get them off the roof quicker. And in most areas we operate in, a growing awareness of total cost of ownership and the lifecycle performance with building owners, architects, and specifiers. Within this market, Carlisle is a recognized leader and a differentiated provider of integrated building envelope solutions and systems comprised of roofs, walls, foundations, waterproofing, and insulation. Our systems approach, long-term warranties, and specification strength give Carlisle a meaningful and sustainable competitive edge, and it positions us to take advantage of a robust North American building products market for years to come. Looking ahead, our operating narrative remains clear, well understood by our investors, and consistent with what we saw drive our 2025 results. Steady re-roofing demand, accompanied by a weaker new construction market. In CCM, re-roofing is expected to grow low to mid single digits in 2026, broadly consistent with its long-term trajectory and our past experience. New commercial construction in CCM remains soft, and saw continued declines in the second half of 2025. Based on our current indicators, including our Carlisle market survey, we are not projecting a sharp recovery in our 2026 plans, but we are assuming a gradual bottoming out mid-year and an upward inflection in the second half of the year. In CWT, we continue to see pressure from softer residential and non-residential new construction, but we are seeing growth from our recent acquisitions of Plastifab thermofoam and bonded logic, from our change in our selling approach in spray foam, and from increased demand for energy-efficient and weatherproofing solutions. Kevin will provide more detail on our 2026 outlook, but at the consolidated level, we expect approximately low single-digit revenue growth and approximately 50 basis points of adjusted EBITDA margin expansion versus 2025. Importantly, While we are setting conservative targets for 2026, given the end market uncertainties we face, our intent is anything but conservative. Over the next several years, we are very focused on growing sales faster than our end markets and expanding our EBITDA margins. Our Vision 2030 ambition continues to be to achieve adjusted EPS of $40 per share, EBITDA margins for Carlyle of at least 25%, and ROIC of 25% plus. Accompanying these targets are our goals of 30% plus EBITDA margins at CCM and 25% plus EBITDA margins at CWT. While we are not issuing a specific year for those levels today, we want to be clear about the direction of travel. We will get there by executing consistently on the key pillars of Vision 2030, which I'll touch on now. Moving to slide six, Carlisle's performance and strategy are built around five core pillars. One, operational excellence rooted in the Carlisle operating system or COS. Two, the Carlisle experience. Three, innovation. Four, acquisitions. And five, talent management. When we talk about operational excellence, we need to focus on the Carlisle operating system because as we approach our second full decade of COS, It really has become our core continuous improvement methodology and permeates our culture. Introduced in 2008, the Carlyle operating system is how we run the company every day. It drives lean principles, standard work, and continuous improvement across our plants, supply chain, and offices. COS is also the framework that led us to top industry safety metrics. And in 2025, we expanded automation and AI into our COS programs across key manufacturing sites, seeking improved changeover times, reduced scrap, and enhanced safety and quality metrics. COS is a major reason we have maintained strong margins through a multi-year period of volatile volumes, inflation, and supply chain disruption. It will continue to be the engine behind our margin expansion objectives in both CCM and CWT. Moving to our next core pillar, the Carlisle experience. The Carlisle experience is our promise to our customers, and that promise is the right product to the right place at the right time, supported by people who understand the jobs and the challenges and have many years of experience in dealing with customers in our markets. The Carlisle experience touches many of our key stakeholders, contractors, distributors, architects and building owners. For contractors operating in a tight labor market, our ability to ship complete on-time orders directly to the job site is a real advantage. Our field technical teams and in-house roof designers work alongside distributors, contractors, architects, and building owners to ensure systems are specified correctly and installed correctly. Our long-dated warranties, many over 20 years, are backed not just by a document, by knowledgeable and well-trained employees who drive excellent service and support across the life cycle of the roof this reliability helps our contractor partners work more efficiently and win more projects and it supports our ability to price the value by delivering that superior value at every touch point it also underpins our strong specification history roughly half of carlisle sales are tied to project specifications where Carlyle is the preferred system of record. Innovation remains one of the most important drivers of our future growth and competitive differentiation. To that end, we will increase our investments in R&D and product development to 3% of sales under Vision 2030 with a clear objective. By 2030, 25% of Carlyle's revenue will come from products that are five years old or younger. To achieve this, we have made substantial structural enhancements to our innovation engine. We implemented a robust voice of customer process to identify the most pressing contractor and building owner pain points. We refined and drove further discipline in our stage gate governance model for new product development to allocate resources to the products with the highest expected returns. And lastly, we strengthened our innovation leadership and cross-functional collaboration between R&D, manufacturing, and our commercial teams. You can already see the results in the marketplace. ThermaThin 7 Poly-ISO Insulation and Industry First delivers high R-value per inch. This means building owners get superior thermal performance and contractors can use fewer boards to meet code, reducing trucks, fasteners, material handling, and labor. Early feedback from this market launch has been outstanding. our newly launched temperature sensing gun for flexible fast adhesive. This new application device transforms adhesive application from a manual, error-prone process to a controlled, data-driven system. With real-time temperature sensing and visual indicators, it reduces installation errors, material waste, and callbacks, and it is included with every flexible fast dual tank system we sell. Products like RapidLock, SeamShield, Appeal, and VP Tech continue to gain traction by addressing real contractor needs around installation speed, energy performance, and long-term durability. And importantly, these are not science projects. They are commercial products generating revenue today, helping contractors work faster and safer, and allowing building owners to meet increasingly stringent energy and performance standards. They also support our desire to grow content per square foot by 150 to 200 basis points per year, a key component of our Vision 2030 expectations. The fourth pillar is acquisitions, and importantly, acquisitions executed within a disciplined capital allocation framework. Over the past several years, we have strategically pivoted Carlisle to a pure play building products portfolio focused on the building envelope, roof, wall and waterproofing we estimate our broader building envelope addressable market at approximately 70 billion dollars and today we have direct exposure to just under half of that our m a strategy is straightforward focus on bolt-on and adjacent acquisitions in the building envelope that enhance our systems offering and increase our content per square foot target businesses where we can apply the carlisle operating system and the carlisle experience to improve operations growth sales and expand margins, and maintain strict ROIC and return thresholds, ensuring deals are accretive to growth and returns over time. Recent acquisitions such as MTL, PlastiFab, ThermoFoam, and Bonded Logic are good examples. MTL strengthens our position in prefabricated metal edge systems, allowing us to sell more content per roof and offer more complete warranty-backed systems. Plastifab and ThermoFoam expand our capabilities in EPS insulation, where scale gives us material cost advantages and broader geographic reach. And bonded logic through ultra-touch denim recycled insulation opens an attractive opportunity in sustainable insulation, addressing customer demand for both performance and environmental attributes. We do not pursue acquisitions for headlines. We integrate, optimize, and capture synergies. commercial, operational, and supply chain related. That track record reinforces Carlyle's reputation as a superior capital allocator in our space. And last but not least is our fifth pillar, talent management. Nothing we have discussed today would be possible without Carlyle's team of over 5,000 dedicated employees. We focus on attracting, developing, and retaining people who want to win in the marketplace and grow their careers. At CCM, I'm excited about the recent leadership appointment that exemplifies this. In November, Jason Taylor joined us as president of CCM, bringing deep distributor and contractor relationships from his extensive industry experience. His fresh perspective, combined with his strong familiarity of our business, positions CCM exceptionally well as we execute our growth strategy. Let me now turn to our Vision 2030 financial targets on slide seven. We are reaffirming our vision 2030 targets of $40 of adjusted EPS and more than 25% ROIC. We believe these targets are credible and achievable driven by low to mid single digit organic revenue growth led by re-roofing volumes and content per square foot gains. EBITDA margin expansion at both CCM and CWT as COS, automation, AI, and self-help initiatives compound. disciplined, synergistic M&A focused on the building envelope, and significant capital return through dividends and share repurchases. It is important to remember our history. Under Vision 2025, we achieved our EPS target three years early, and that journey was not a straight line. We managed through COVID, supply chain shocks, raw material inflation, and shifts in construction activity. We expect a similar pattern as we execute Vision 2030. There will be quarters where new construction is soft, where raw material costs move against us, or where competition intensifies. But our track record shows that Carlyle can adapt quickly, adjusting price, mix, cost structure, and capital deployment, while staying true to our long-term strategy. Vision 2030 is not simply a set of aspirational numbers. is anchored in clear priorities and measurable actions across our five pillars, operational excellence through COS, exceptional customer service through the Carlisle experience, product and systems innovation, targeted synergistic acquisitions, and talent management and leadership development across the enterprise. And with that, I'll turn it over to Kevin to go through the fourth quarter results in more detail. Kevin?