Carlisle Companies Incorporated

Good afternoon. My name is Rebecca and I will be your conference call operator today. At this time, I would like to welcome everyone to the Carlyle Company's second quarter 2026 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 will now hand the conference over to Mr. Mehul Patel, Carlisle's Vice President of Investor Relations. Mehul, please go ahead.

Kevin Zdimal, our CFO. Kevin Zdimal, Stephen Wallace, Stephen Aldrich Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to slide 2 where we note that today's comments will include forward-looking statements based on current expectations. Actual results could differ materially 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 have included reconciliations between GAAP and non-GAAP measures in our press release and an appendix of our presentation materials, both of which are available on our website. With that, I will turn the call over to Kevin on slide three.

Thank you, Mehul, and good afternoon, everyone. I will review our second quarter results and discuss our updated outlook for the full year. Let's begin on slide three. Our record second quarter results reflect the Carlyle team's relentless focus on execution and operational discipline, continuing our track record of delivering results through challenging macro environments. Revenue was a record $1.6 billion, increasing 8% year over year, and adjusted EPS increased 12% to a record $7.03. These results demonstrate our unwavering commitment to operational excellence. Through disciplined pricing, productivity from the Carlisle operating system, and strong commercial execution, we delivered solid growth and profitability, despite a significant increase in petroleum-based raw materials and freight costs stemming from the conflict in the Middle East and related supply chain disruptions. and several supplier force majeure events impacted key inputs across our roofing and insulation product lines. Our response was timely and commensurate with the cost pressure we expect in the coming months. Since the start of the conflict, we have announced three broad-based price increases and implemented freight surcharges to offset higher raw material and freight costs. As we have seen in prior inflationary cycles, price realization typically lags rising costs. As I mentioned on the first quarter call, we expected to see negative price costs in Q2 as we worked through committed quotes and the required notification period to customers. We expect the benefit of our pricing actions to build through the second half of 2026, turning positive in Q4. Turning to slide 4, second quarter revenue increased 8% to a record $1.6 billion, driven by solid performance in both CCM and CWT. Healthy Roofing Demand, execution of our strategic initiatives, including improved traction and data centers, and a couple percentage points from customer pre-buying ahead of announced price increases more than offset continued softness and new construction. Adjusted EBITDA increased 6% to $412 million, with an adjusted EBITDA margin of 26.2%, down 70 basis points year-over-year, as a result of the expected impact of raw material and freight costs increasing faster than pricing realization during the quarter. Carlyle Operating System productivity improvements, disciplined cost management, and synergies from recent acquisitions helped offset some of that pressure. Record-adjusted EPS of $7.03 increased 12% year-over-year was driven by higher operating earnings and share repurchases, partially offset by higher interest expense. Moving to CCM on slide 5. CCM delivered record revenue of $1.2 billion, an increase of 8% year-over-year. Reroofing demand remained healthy, growing approximately 3%, while commercial new construction declined mid-single digits. The vast majority of CCM's high single-digit revenue growth resulted from strong commercial execution and the success of our strategic initiatives, while customer pre-buys ahead of announced price increases contributed a couple percentage points of growth. Adjusted EBITDA increased 5% to $363 million and adjusted EBITDA margin was 30.7%, down 90 basis points year over year. Margin performance was in line with the expectations we discussed last quarter and reflects the benefits of higher volumes partially offsetting elevated cost inflation during the period. Importantly, CCM achieved margins above 30% despite significant raw material and freight inflation, underscoring the strength of our business model, the resilience of re-roofing demand, and the effectiveness of the Carlisle operating system. Turning to CWT on slide 6, revenue increased an impressive 10% to $389 million through solid execution on share gain initiatives which more than offset continued softness in residential and non-residential new construction and markets. Adjusted EBITDA increased 5% to $74 million, and adjusted EBITDA margin was 19%, down 90 basis points year over year. While margin was impacted by the same inflationary pressures affecting CCM, CWT's margin improved 380 basis points sequentially from the first quarter. This improvement reflects the benefits of the structural efficiency initiatives we implemented over the past year and CWT's relentless focus on costs. Investments in automation, footprint consolidation, and in-house expanded polystyrene resin capacity are now largely in place and beginning to generate operating leverage. We expect those benefits to continue building through the rest of the year and drive further margin improvement in the second half. Turning to slide 7 and our financial position. As of June 30, 2026, we had $665 million in cash and cash equivalents and $1 billion available under our revolving credit facility. Net debt to EBITDA was 1.7 times, comfortably within our target range of 1 to 2 times. This balance sheet strength allows us to continue investing in the business to drive organic growth, pursue disciplined M&A opportunities, and return significant capital to shareholders. Moving to cash flow on slide 8. For the second quarter, operating cash flow from continuing operations was $244 million, and free cash flow from continuing operations was $203 million, reflecting the expected working capital impacts during the peak construction season. Capital expenditures were $42 million. During the quarter, we repurchased $250 million of shares, bringing year-to-date purchases to $500 million. Including $90 million of dividends, we returned $590 million to shareholders in the first half of 2026. Kevin Zdimal, Stephen Aldrich Now turning to our updated outlook on slide 9. Based on our first half performance, continued momentum in our strategic growth initiatives, and the pricing actions we have taken, we are raising our full year 2026 revenue outlook to mid-single digit growth, but lowering margins 50 basis points to now reflect flat adjusted EBITDA margin year over year. The change in our margin outlook reflects the additional raw material and freight inflation impacts stemming from the extended conflict in the Middle East and related supply chain disruptions. We expect pricing to recover those costs, but with the previously discussed lag in timing. Importantly, our structural margin expansion initiatives remain on track and our long-term margin outlook remains unchanged. With that consolidated outlook, we now expect CCM revenue growth up mid-single digits with re-roofing up 3-4%, new construction down low single digits, and pricing realization building through the second half. We expect CWT revenue growth also up mid-single digits, with meaningful margin improvement in the second half as the benefits of our structural initiatives continue to build. We continue to expect full-year ROIC of approximately 25%, free cash flow margin of approximately 15%, and double-digit adjusted EPS growth in 2026. Finally, turning to Vision 2030 financial goals on slide 10. Thank you for watching. Through the end of 2026, we expect our adjusted EPS CAGR since launching Vision 2030 to exceed 11%. We believe that our strong operational performance, a relentless focus on the Carlyle experience, investment and innovation, pursuit of accretive M&A and superior capital allocation keeps us well positioned to achieve our long-term objectives.