Carlisle Companies Inc: Form 10-Q for the period ended Mar 31, 2025

Carlisle Companies Incorporated (“Carlisle”, the “Company”, “we”, “us” or “our”) is a leading supplier of innovative building envelope products and solutions for more energy efficient buildings. Through our building products businesses, Carlisle Construction Materials ("CCM") and Carlisle Weatherproofing Technologies ("CWT"), and family of leading brands, we deliver innovative, labor reducing and environmentally responsible products and solutions to customers through the Carlisle Experience. Carlisle is committed to generating superior stockholder returns and maintaining a balanced capital deployment approach, including investments in our businesses, strategic acquisitions, share repurchases and continued dividend increases.

Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of our financial statements with a narrative from the perspective of Company management. All references to "Notes" refer to our Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q.

Executive Overview

With perseverance and a commitment to achieving Vision 2030, our team overcame challenges from the continued softness in the residential construction market, the negative impact of this winter’s weather, and the significant economic uncertainty created by recent tariffs. Despite these headwinds, Carlisle delivered revenue of $1.1 billion, essentially flat year-over-year, with diluted EPS of $3.13. Better weather in March contributed to positive momentum that continues into April, the start of our U.S. summer construction season.

Despite the broad tariff actions, we remained relatively unaffected by the tariffs in the first quarter with over 90% of our raw materials sourced in North America and over 90% of our sales in North America. At the current levels, the tariffs should have a minimal impact in the second quarter. While the direct impact of the current tariffs may be limited, we do remain concerned regarding the increased potential for a further slowdown in the state of the U.S. economy in the second half of 2025.

Feedback from our latest Carlisle Market Survey (“CMS”) conducted in early April reinforces our positive outlook on the 2025 roofing season. Survey participants expect a low-single-digit increase in commercial roofing volumes, driven more by re-roofing than new construction demand. Participants also expect commercial roofing prices will increase low-single-digits with increases starting in the second quarter, consistent with prior expectations. Our survey results also suggest that inventory levels in the channel remain lower than normal due to higher carrying costs and economic uncertainty. Participants expect residential volumes will decrease low-single-digits due to continued buyer uncertainty, affordability challenges, higher interest rates and low housing turnover that has impacted this part of the industry since the second quarter of 2024.

Our acquisition playbook continues to deliver results. Our recent acquisitions of MTL Holdings LLC ("MTL"), PFB Holdco, Inc. ("PFB"), and select assets of ThermaFoam Operating LLC, PowerFoam LLC, and ThermaFoam Real Estate LLC, (collectively, "ThermaFoam") contributed $50 million of revenue in the first quarter, and we expect all three of these acquisitions to exceed our original synergy projections.

Consistent with our commitment to generate superior shareholder returns through a balanced capital deployment approach, we are raising our 2025 target level of share repurchases from $800 million to $1 billion. During the first quarter, we repurchased 1.2 million shares for $400 million.

As we move forward in 2025, we will continue to invest in accelerating our introduction of innovative energy-efficient and labor-saving solutions, improving the Carlisle Experience, and optimizing operating efficiencies through the Carlisle Operating System. Our recent innovation efforts are bolstering our Voice of the Customer process and accelerating our speed-to-market through initiatives like our innovation accelerator program that was recently announced.

Summary of Financial Results

(in millions, except per share amounts and percentages)

(1) Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of, these items.

Consolidated Results of Operations

Revenues

(in millions, except percentages)

Revenues were flat in the first quarter of 2025, primarily reflecting higher sales in our non-residential construction end-market of $19.3 million driven by recent acquisitions, partially offset by lower sales in our residential construction end-market of $15.7 million driven by lower construction activity and unfavorable weather conditions.

Gross Profit

(in millions, except percentages)

Gross margin decreased in the first quarter of 2025, primarily due to lower sales volume in our CWT segment.

Selling and Administrative Expenses

(in millions, except percentages)

Selling and administrative expenses increased in the first quarter of 2025, primarily due to higher wage and benefit expenses of $10.7 million, amortization expense of $7.2 million, and acquisition costs of $5.3 million, all driven by the acquisitions of MTL, PFB and ThermaFoam.

Research and Development Expenses

(in millions, except percentages)

Research and development expenses increased in the first quarter of 2025, primarily due to higher new product development expenses. The increase in research and development expenses is consistent with a key pillar of Vision 2030 to drive innovation with a commitment to investing in the creation of new products and solutions that add value through advancements in sustainability and energy and labor efficiencies.

Interest Expense

(in millions, except percentages)

Interest expense decreased in the first quarter of 2025, primarily due to lower long-term debt balances associated with the redemption of $400.0 million of 3.50% notes in December 2024. Refer to Note 10 for further information on our long-term debt.

Interest Income

(in millions, except percentages)

Interest income decreased during the first quarter of 2025, primarily due to lower yields.

Income Taxes

(in millions, except percentages)

The provision for income taxes on continuing operations decreased during the first quarter of 2025, primarily due to lower pre-tax income. The year-to-date provision for income taxes included taxes on earnings at an anticipated rate of 23.3% and a tax benefit of $5.8 million from discrete activity primarily related to reduced prior year tax liabilities and excess tax benefits from employee stock compensation.

Segment Results of Operations

Carlisle Construction Materials

This segment produces a complete line of premium energy-efficient single-ply roofing products and warranted roof systems and accessories for the commercial building industry, including ethylene propylene diene monomer ("EPDM"), thermoplastic polyolefin ("TPO") and polyvinyl chloride ("PVC") membrane, polyisocyanurate ("polyiso") insulation, and engineered metal roofing and wall panel systems for commercial and residential buildings.

(in millions, except percentages)

(1) Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of, these items.

CCM’s revenue increased in the first quarter of 2025, primarily due to higher sales in the non-residential construction end-market of $16.0 million driven by the acquisition of MTL and positive end-market demand partially offset by the year-over-year impact of negative weather and lower carryover pricing from 2024. CCM’s operating margin and adjusted EBITDA margin decreased in the first quarter of 2025, primarily due to the lower carryover pricing from 2024.

Carlisle Weatherproofing Technologies

This segment produces building envelope solutions that drive energy efficiency and sustainability in commercial and residential applications. Products include high-performance waterproofing and moisture protection products, protective roofing underlayments, fully integrated liquid and sheet applied air/vapor barriers, sealants/primers and flashing systems, roof coatings and mastics, spray polyurethane foam and coating systems for a wide variety of thermal protection applications and other premium polyurethane products, block-molded expanded polystyrene insulation, engineered products for HVAC applications, and premium products for a variety of industrial and surfacing applications.

(in millions, except percentages)

(1) Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of, these items.

CWT’s revenue decrease in the first quarter of 2025 primarily reflected lower sales in the residential construction end-market of $14.6 million, resulting from lower new construction activity and lower retail sales due to the drier-than-normal West Coast winter, partially offset by the acquisitions of PFB and ThermaFoam. CWT’s operating margin and adjusted EBITDA margin decrease in the first quarter of 2025 primarily reflected a decline in volumes.

Liquidity and Capital Resources

We believe that our current cash reserves, available credit facilities, and anticipated operating cash flows are adequate to meet our short-term projected business requirements for at least the next 12 months and our long-term financial requirements, including the repayment of outstanding principal balances on existing notes by their respective maturity dates.

Additional sources of liquidity may be obtained through access to public markets, subject to market conditions. The Company may consider such access for purposes that include the repayment of outstanding debt and the funding of acquisitions. For further details regarding long-term debt, refer to Note 10.

Management retains discretion over the allocation of available cash and may deploy resources toward capital expenditures, acquisitions, strategic investments, dividends, or share repurchases.

(in millions)

Operating Activities

Cash provided by operating activities of $1.8 million for the first three months of 2025 decreased by $161.7 million compared to the first three months of 2024, primarily due to lower income from continuing operations of $30.8 million and higher working capital uses of $108.5 million. Working capital usually increases in the first quarter as year-end liabilities are paid and the construction season ramps up. Compared to 2024, working capital uses increased by $29.1 million for accounts receivable due to timing of sales and $28.1 million for accounts payable due to timing of expenses and payments. Working capital uses also increased by $45.7 million for other current liabilities paid in the first quarter related to accrued employee incentive compensation and taxes payable that were higher at December 31, 2024 compared to December 31, 2023.

Investing Activities

Cash used in investing activities of $78.9 million for the first three months of 2025 primarily reflected the purchase of ThermaFoam for $52.9 million and capital expenditures of $29.0 million. Cash used in investing activities of $32.0 million for the first three months of 2024 primarily reflected capital expenditures of $32.5 million.

Financing Activities

Cash used in financing activities of $456.4 million in the first three months of 2025 primarily reflected share repurchases of $400.0 million and cash dividend payments of $45.2 million ($1.00 per share). Cash used in financing activities of $166.1 million in the first three months of 2024 primarily reflected share repurchases of $150.0 million and cash dividend payments of $41.5 million ($0.85 per share), partially offset by net proceeds of $26.3 million from the exercise of stock options.

Non-GAAP Financial Measures

EBIT, Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDA Margin

Earnings before interest and taxes ("EBIT"), adjusted EBIT, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA margin are intended to provide investors and others with information about our performance and our segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. As a result, management believes that these measures enhance the ability of investors to analyze trends in our business and evaluate our performance relative to similarly-situated companies. This information differs from net income, operating income, and operating margin determined in accordance with GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with GAAP. Our and our segments' EBIT, adjusted EBIT, adjusted EBITDA and adjusted EBITDA margin follows. These non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies.

(in millions, except percentages)

20

(in millions, except percentages)

(in millions, except percentages)

21

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally use words such as "expect," "foresee," "anticipate," "believe," "project," "should," "estimate," "will," "plans," "intends," "forecast," and similar expressions, and reflect our expectations concerning the future. Such statements are made based on known events and circumstances at the time of publication and, as such, are subject in the future to unforeseen risks and uncertainties. It is possible that our future performance may differ materially from current expectations expressed in these forward-looking statements, due to a variety of factors such as: increasing price and product/service competition by foreign and domestic competitors, including new entrants; technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; our mix of products/services; increases in raw material costs that cannot be recovered in product pricing; domestic and foreign governmental and public policy changes including environmental and industry regulations; the ability of our customers to maintain appropriate labor levels under U.S. immigration laws, policies and practices; the ability to meet our goals relating to our intended reduction of greenhouse gas emissions, including our net zero commitments; threats associated with and efforts to combat terrorism; protection and validity of patent and other intellectual property rights; the identification of strategic acquisition targets and our successful completion of any transaction and integration of our strategic acquisitions; our successful completion of strategic dispositions; the cyclical nature of our businesses; the impact of information technology, cybersecurity, artificial intelligence or data security breaches at our businesses or third parties; the outcome of pending and future litigation and governmental proceedings; the emergence or continuation of widespread health emergencies, including, for example, expectations regarding their impact on our businesses, including on customer demand, supply chains and distribution systems, production, our ability to maintain appropriate labor levels, our ability to ship products to our customers, our future results, or our full-year financial outlook; and the other factors discussed in the reports we file with or furnish to the Securities and Exchange Commission from time to time. In addition, such statements could be affected by general industry and market conditions and growth rates, the condition of the financial and credit markets and general domestic and international economic conditions, including inflation and interest rate and currency exchange rate fluctuations. Further, any conflict in the international arena, including the Russian invasion of Ukraine and war in the Middle East, may adversely affect general market conditions and our future performance. Any forward-looking statement speaks only as of the date on which that statement is made, and we undertake no duty to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which that statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of those factors, nor can it assess the impact of each of those factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

There have been no material changes in the Company’s market risk for the three months ended March 31, 2025. For additional information, refer to "PART II—Item 7A. Quantitative and Qualitative Disclosures About Market Risk" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 ("2024 Annual Report on Form10-K").

a. Evaluation of disclosure controls and procedures. Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation and as of March 31, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

b. Changes in internal controls. During the first quarter of 2025, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

There have been no material changes in the Company's risk factors disclosed in "PART I—Item 1A. Risk Factors" in our 2024 Annual Report on Form 10-K.