Carlisle Companies Inc: Form 10-Q for the period ended Jun 30, 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

We are proud of the Carlisle team’s ability to deliver diluted EPS from continuing operations of $5.87. Our ability to hold second quarter revenues flat at $1.4 billion and maintain margins above our Vision 2030 target in a second quarter that saw continued deterioration in new construction markets speaks to the resiliency of our pure play building products business.

Our second quarter results demonstrate the underlying strength in our re-roofing markets at CCM and showcase our capacity to achieve top-tier margins even in a sluggish new construction landscape. The commercial re-roofing market is meeting mid-single-digit growth expectations, contributing reliable recurring revenue and accounting for approximately 70% of CCM's commercial roofing business.

CCM’s solid performance in the quarter was offset by lower-than-expected results at CWT, influenced by continued declines in the residential end-markets. While residential end-markets were not expected to rebound in the quarter, the continued deterioration in key growth drivers—housing starts, interest rates and builder sentiment—put additional pressure on CWT sales.

Last quarter we maintained our positive outlook on the 2025 roofing season based on increased market confidence in rising stability on the macroeconomic front, positive contractor sentiment reflected in our April Carlisle Market Survey, and the prospect of a more normal construction season. Many CCM contractors entered the second quarter with solid backlogs and anticipated robust activity, suggesting a strong market load-in typical of historical construction seasons. Unfortunately, the external risks that we identified in the first quarter materialized during the second quarter, leading to an increase in project delays, smaller-than-expected distributor inventory load-in related to commercial construction, and a slowdown in new construction bidding as economic uncertainties made decision-making more difficult. Insights from over 150 participants in the July Carlisle Market Survey confirmed this negative shift in contractor and distributor sentiment had accelerated in the quarter. The July survey also reflected that expectations of a continuation of those pressures will persist throughout the remainder of 2025.

Throughout the quarter, we remained committed to our key strategic pillars to drive to our Vision 2030 financial goals. We maintained our focus on operational excellence through the Carlisle Operating System, completing major automation capital projects within our CWT factories. We also continued to enhance the Carlisle Experience by investing in technical and customer service personnel to better support our customers. And we continued to meet our commitment to superior capital allocation, returning $343.1 million to shareholders through dividends and share repurchases.

We continued to execute our proven Mergers & Acquisitions playbook to strategically allocate capital toward acquisitions that align with our Vision 2030 strategy. Our most recent acquisition of selected assets of Bonded Logic, Inc. and Phoenix Fibers, LLC (collectively, "Bonded Logic") strengthens our portfolio of innovative solutions for more energy-efficient buildings and enhances our position in the North American insulation market. This acquisition also supports the growth of our Henry UltraTouch denim insulation product, which was named a 2025 finalist for The Home Depot Merchandising Innovation Award—an honor recognizing products that are transforming the home improvement industry. Additionally, we expect annual synergies from our recent acquisitions of MTL Holdings LLC ("MTL"), PFB Holdco, Inc ("PFB"), and selected assets of ThermaFoam Operating LLC, PowerFoam LLC, and ThermaFoam Real Estate LLC (collectively, "ThermaFoam") to exceed $34 million, while gaining traction in cross-selling opportunities through our comprehensive building envelope systems approach.

During the quarter, we advanced our innovation agenda, earning market recognition and awards for several new product launches including our dual-tank Flexible Fast Adhesive, Blueskin VP Tech, and the Henry UltraTouch insulation product.

As we enter the second half of 2025, we remain focused on executing our Vision 2030 strategic initiatives to bolster our market leadership and secure a premium position through the Carlisle Experience. We will continue to enhance efficiency via automation, emerging AI technologies, and the Carlisle Operating System; expedite growth-driven innovation initiatives; and leverage synergies from integrating our strategic acquisitions. Coupled with disciplined capital deployment, we are committed to achieving our Vision 2030 financial objectives, built on the strength of our imperative business model, reinforced by well-known re-roofing drivers with the advantages of being a market leader in North America.

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 second quarter and the first six months of 2025, primarily reflecting higher sales in our non-residential construction end-market of $6.7 million and $26.0 million, respectively, driven by recent acquisitions, offset by lower sales in our residential construction end-market of $4.2 million and $19.9 million, respectively, driven by lower new construction activity.

Gross Profit

(in millions, except percentages)

Gross margin decreased in the second quarter and the first six months of 2025, primarily due to increased unit costs resulting from higher absorption of fixed costs on lower volumes.

Selling and Administrative Expenses

(in millions, except percentages)

Selling and administrative expenses increased in the second quarter and the first six months of 2025, primarily due to higher wage and benefit expenses of $2.3 million and $13.0 million, respectively, amortization expense of $4.1 million and $11.3 million, respectively, and other acquisition-related costs of $2.0 million and $7.3 million, respectively, all driven by the acquisitions of MTL, PFB, ThermaFoam, and Bonded Logic.

Research and Development Expenses

(in millions, except percentages)

Research and development expenses increased in the second quarter and the first six months 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 second quarter and the first six months 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 second quarter and the first six months of 2025, primarily due to a lower invested cash balance and lower yields.

Income Taxes

(in millions, except percentages)

The provision for income taxes on continuing operations decreased during the second quarter and the first six months 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 23.2% and a tax benefit of $12.6 million from discrete activity primarily related to excess tax benefits from stock compensation and reduced prior year tax liabilities.

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)

(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 second quarter and the first six months of 2025, primarily due to higher sales in the non-residential construction end-market of $4.7 million and $20.7 million respectively, driven by the acquisition of MTL. CCM’s operating margin and adjusted EBITDA margin decreased in the second quarter and the first six months of 2025, primarily due to higher operating costs, investments in innovation and Carlisle Experience enhancements.

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)

(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 second quarter and the first six months of 2025 primarily reflected lower sales in the residential construction end-market of $6.2 million and $20.8 million respectively. Lower sales volumes due to continued softness in new construction activity were partially offset by the acquisitions of PFB and ThermaFoam. CWT’s operating margin and adjusted EBITDA margin decrease in the second quarter and the first six months of 2025 was primarily due to increased unit costs resulting from higher absorption of fixed costs on lower 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 the capital 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 $288.9 million for the first six months of 2025 decreased by $58.0 million compared to the first six months of 2024, primarily due to lower income from continuing operations of $60.5 million and higher working capital uses of $30.7 million. Compared to 2024, working capital uses increased by $28.2 million for accounts receivable due to timing of sales and $32.6 million for accounts payable due to timing of expenses and payments. Working capital uses also increased by $20.4 million for other current liabilities paid in the first six months of 2025 related to accrued employee incentive compensation and taxes payable that were higher at December 31, 2024 compared to December 31, 2023. Working capital uses decreased $50.8 million due to lower inventory investments in the first six months of 2025 compared to the first six months of 2024.

Investing Activities

Cash used in investing activities of $165.9 million for the first six months of 2025 primarily reflected the purchases of ThermaFoam for $52.9 million and Bonded Logic for $57.7 million, and capital expenditures of $57.8 million. Cash provided by investing activities of $1,526.6 million for the first six months of 2024 primarily reflected proceeds from the sale of Carlisle Interconnect Technologies, net of cash disposed, of $1,995.3 million, partially offset by the purchase of MTL for $412.8 million, net of cash acquired, and capital expenditures of $57.4 million.

Financing Activities

Cash used in financing activities of $808.9 million in the first six months of 2025 primarily reflected share repurchases of $700.0 million and cash dividend payments of $88.3 million. Cash used in financing activities of $741.9 million in the first six months of 2024 primarily reflected share repurchases of $700.0 million and cash dividend payments of $81.7 million, partially offset by net proceeds of $43.7 million from the exercising 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)

25

(in millions, except percentages)

(in millions, except percentages)

26

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; 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, interest rate and currency exchange rate fluctuations, and tariffs. 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.

There have been no material changes in the Company’s market risk for the six months ended June 30, 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 June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

b. Changes in internal control over financial reporting. During the second 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.