NYSE:CSL Carlisle Companies Q2 2023 Earnings Report $386.47 +6.68 (+1.76%) Closing price 05/2/2025 03:59 PM EasternExtended Trading$385.40 -1.07 (-0.28%) As of 05/2/2025 04:43 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Carlisle Companies EPS ResultsActual EPS$5.18Consensus EPS $4.73Beat/MissBeat by +$0.45One Year Ago EPS$6.15Carlisle Companies Revenue ResultsActual Revenue$1.53 billionExpected Revenue$1.58 billionBeat/MissMissed by -$51.80 millionYoY Revenue Growth-14.00%Carlisle Companies Announcement DetailsQuarterQ2 2023Date7/26/2023TimeAfter Market ClosesConference Call DateWednesday, July 26, 2023Conference Call Time5:00PM ETUpcoming EarningsCarlisle Companies' Q2 2025 earnings is scheduled for Wednesday, July 23, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Carlisle Companies Q2 2023 Earnings Call TranscriptProvided by QuartrJuly 26, 2023 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Afternoon. My name is JP, and I will be your conference operator today. At this time, I would like to welcome everyone to The Carlyle Company's 2nd Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, we will conduct a question and answer session. Operator00:00:19I would like to turn the call over to Mr. Jim Gianakoras, Carlyle's Vice President of Investor Relations. Call. Jim, please go ahead. Speaker 100:00:28Thank you. Good afternoon, everyone, and welcome to Carlyle's Q2 2023 earnings conference call. We released our Q2 financial results after the market closed today, and you can find both our press release and earnings call slide presentation in the Investor Relations section of our website, carlyle.com. On the call with me today are Chris Koch, Chair, President and Chief Executive Officer and Kevin Zimmel, Carlyle's Chief Financial Officer. Today's call will begin with Chris providing highlights of our Q2 results and a discussion of our current business outlook, and Kevin will discuss additional financial details and our updated outlook for 2023. Speaker 100:01:03Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to Slide 2 of our presentation, call, 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, slide. With that, I will turn the call over to Chris. Speaker 200:01:38Good afternoon, everyone, and thank you for joining us quarter on our Q2 2023 earnings call. The Q2 proved to be a nice recovery story for Carlyle With our performance evidence of the team's collective efforts to improve earnings and create value for all our stakeholders. We are grateful to all Carlyle employees for their continued perseverance in the face of significant challenges and for their contributions to making the 2nd quarter success. Most important is our team's commitment to continuously improving our businesses. As you know, in 2021, we decided to pivot Carlyle's portfolio of diversified industrial businesses towards becoming a building products pure play. Speaker 200:02:23Our recently announced sale of CFT represents another important step towards fulfilling that goal. Our building products businesses represented over 90% of our segment EBITDA from continuing operations in the Q2 of this year, Providing further evidence that our pivot is almost complete. We continue to believe that a pivot towards an innovative building products portfolio quarter with a focus on providing energy efficient solutions will allow our shareholders to benefit from the significant trends in greenhouse gas reduction and increased demand for green buildings and products, especially ones that require less labor to install. Our recently announced sale of CFT continues one of the themes we brought to Carlyle under Vision 2025, That being our desire to be a superior capital allocator and in turn drive superior shareholder returns. This goal was a primary factor in our decision to use the proceeds of the announced sale of CFT towards share repurchases this year. Speaker 200:03:28When combined with our share repurchases to date, our total capital devoted to buybacks in 2023 Will be approximately $900,000,000 At CCM, despite continued channel destocking activity in the 2nd quarter, Our teams collectively drove improved sales and excellent profitability. Margins improved significantly from a combination of volume increases, price discipline, cost management and efficiency gains through COS. The last three quarters of destocking at our distributors and contractors has been a challenge that was made more difficult by the uncertainty related to its quantity and duration. As we enter the second half of twenty twenty three, we have performed substantial work to understand the levels of inventory at distributors and contractors and reconcile that with current demand levels. Based on this work, we believe that the vast majority of destocking issues related to supply chain constraints from 2021 2022 In CCM, as in all of our Carlyle segments, we entered the second half of twenty twenty three With our efforts focused on leveraging solid underlying demand, capturing raw material gains and maintaining a positive price cost relationship. Speaker 200:04:48Taken together, These areas of focus give us confidence that we will deliver another solid earnings performance for Carlyle shareholders in the 3rd quarter. Our outlook would be even more optimistic if it weren't for some near term headwinds impacting the Building Products businesses. 1st and foremost, well known and well published information about this year's extreme temperatures across much of North America have negatively impacted contractors' days on the roof. Here in the Phoenix area, for example, we have had over 26 days of 110 degree plus temperatures and excessive heat warnings. These elevated temperatures have played a role in our contractors' ability to safely install roofs on schedule. Speaker 200:05:30Certainly, every roofing contractor in Carlyle's sphere of business quarter. Due to growing economic uncertainty, tighter financing conditions and the ever present tight labor market for roofing contractors. Even with these headwinds, we still anticipate continued strong demand for our energy efficient building products, particularly for non residential reroofing products. We remain very bullish on Carlyle's value creation runway quarter. Given strong and sustainable underlying reroofing demand, accelerating price to value gains through new and innovative products And an increasing awareness by architects, building owners, contractors, local governments and others call for the need to drive efficient energy usage, upgrade the energy efficiency of our buildings and decrease carbon emissions. Speaker 200:06:31Additionally, we believe that in both the non residential and residential construction markets, our ability to exceed the expectations of our customers and distribution partners Through the combination of the Carlyle experience and our Carlyle operating system, we'll drive significant opportunities for share and margin gains that will deliver increased returns for our shareholders. Our confidence in Carlyle's future rests on A multiyear backlog of reroofing projects in the U. S. Supporting a healthy baseline of activity for our largest business, CCM, quarter, which has recently been further enhanced by the Inflation Reduction Act and its emphasis on utilizing a significant pool of assets call to drive investment in energy savings. Solid nondiscretionary repair and remodel demand throughout the residential building envelope quarter that makes up approximately 50% of CWT revenue and provides reliable through the cycle sales growth. Speaker 200:07:29Our industry leading ability to meet the well known growing need for energy efficient solutions for buildings and to drive in carbon related emissions from buildings that as many of you know account for close to 40% of global energy emissions. Carlyle's robust pipeline of proprietary innovative new products coming to market accelerated by our increased investment in R and D. Our collective team's subscription to delivering the best in class Carlyle experience to all our stakeholders. And the financial flexibility and strategic optionality afforded us by Carlyle's fortress balance sheet and excellent cash flow generating ability. This strong financial position allows for Carlyle's disciplined value creating acquisition strategy, ability to comfortably fund internal growth initiatives and consistent and reliable return of capital to shareholders in the form of a growing dividend and opportunistic share repurchases. Speaker 200:08:31Turning to our results, please turn to Slide 3. In the second quarter, we delivered Consolidated sales of $1,500,000,000 adjusted EBITDA of $385,000,000 and adjusted EPS of $5.18 I'm very pleased with the 2nd quarter results as they are a superb reflection of our earnings power as a company and have resumed the continuous improvement trends we were on, especially as it relates to margins. CCM's channel destocking was, as we believe, transitory. Quarter. And while it was a challenge and caused some temporary impacts to CCM, it did not affect our fundamental business model. Speaker 200:09:13We remain focused on delivering products that support increasing demand for energy efficient buildings and meeting contractors' needs for innovative labor reducing products. Turning to CWT. Revenues in the 2nd quarter were generally in line with our expectations, quarter. While profitability was exceptionally strong, the CWT team continues to execute exceptionally well on realizing the synergies plan with the Henry acquisition and an outstanding job of integrating the legacy CCM businesses into the new segment of CWT. Needless to say, these efforts are delivering returns ahead of the original deal model. Speaker 200:09:55The team is also doing an excellent job of taking cost out through footprint reduction, leveraging customer relationships to drive increased sales across their businesses, improving efficiencies in our plants and Managing Price Cost Effectively. Building on the solid performance in the second quarter, we expect this positive EBITDA growth story to continue for the rest of the year and now expect CWT's EBITDA to grow year over year quarter despite the organic revenue declines expected for 2023, a truly outstanding accomplishment in a tough environment and with a relatively new management team. At CIT, we continue to benefit from the restructuring actions taken during the COVID pandemic that are now returning significant margin dollars to CIT as aircraft build rates rebound. The team has done an excellent job optimizing manufacturing footprint and improving on its product mix, which positions us well to leverage the recovery that is underway in aircraft production. CIT's backlog is notably higher than pre pandemic levels, giving us confidence that CIT has significant growth potential for the foreseeable future. Speaker 200:11:05Quarter. Taken together, CIT is leveraging sales extremely well in 2023 with EBITDA up 5 20 basis points year over year in the 2nd quarter and we expect to continue that solid leverage going forward. Please turn to Slide 4. In line with our strategy to pivot to a pure play premier building products company, we signed a definitive agreement to sell quarter. Carlyle Fluid Technologies for $520,000,000 with an intention to redeploy this capital into share repurchases in 2023. Speaker 200:11:40The sale of CFT represents another significant step forward in our efforts to build a diversified portfolio of premier energy efficient building envelope solutions and demonstrates our commitment to being capital allocators of the highest order. On a pro form a basis, we now expect sales from our building products businesses to constitute approximately 84% of consolidated Carlyle revenue in 2023, this up from 56% in 2016. Please turn to Slide 5. I'm pleased to share with all of you on the call today that our newest polyiso manufacturing quarter. In green building technology such as solar power generation and energy based load control systems, the facility will lower the carbon footprint of our supply chain and will improve lead times to customers. Speaker 200:12:41We're proud that Sikeston was designed and built to the highest current sustainability standards, quarter, including LEED Platinum specifications, which is a globally recognized symbol of certified sustainability achievement. Please turn to Slide 6. Our results continue to demonstrate that Vision 2025 has been the right strategy for Carlyle. Quarter. In addition to our world class team's improving business model, we've benefited from a strong balance sheet and excellent cash flow generation to provide both financial and strategic flexibility to execute and achieve our ambitious goals. Speaker 200:13:18Our business portfolio transformation sets the stage for a more focused, higher returning and better understood path for future sustainable value creation at Carlyle. The pillars of Vision 2025 are really well established and remain core to Carlyle's strategy going forward. Over the last few years, despite the multiple challenges our teams have faced, call. We continue to be guided by the clarity of mission as outlined by our strategic vision first announced 5 years ago. As we approach the completion of many of the milestones and goals of Vision 2025 last year, including exceeding our goal of $15 of GAAP EPS, We were simultaneously working on the successor to Vision 2025, a new strategic plan that will be introduced formally later this year. Speaker 200:14:07Vision 2,030 will be a plan committed to many of the same principles and pillars we use to establish Vision 2025. Quarter. And with it will come new levels of performance and expectations that are a required part of our culture of continuous improvement and of our Lean Sigma initiatives under sustainable value creation at Carlyle under Vision 2025 include: 1, drive mid single digit organic revenue growth 2, utilize the Carlyle Operating System or COS to drive continuous improvement and greater efficiency in our operations 3, build scale with synergistic accretive acquisitions 4, maintain a returns focused capital allocation strategy, quarter, including organic investment to drive growth, a disciplined approach to our aforementioned M and A strategy and returning capital to our shareholders. Notably thus far in 2023, we've returned $327,000,000 to shareholders with share repurchases of 250,000,000 and $77,000,000 paid in dividends. And of course, none of this could be possible without continuing to rely on, invest in and develop our exceptional talent. Speaker 200:15:30Through the execution of Vision 2025, Carlyle has built a solid foundation leveraging a diversified workplace, decentralized management style, entrepreneurial spirit and a culture of continuous improvement, which will continue to guide our value creation journey in 2023 beyond and absolutely be core to our Vision 2,030 strategic plan. And with that, I'll turn it over to Kevin to provide additional financial details as well as our updated 2023 outlook. Kevin? Speaker 300:16:02Thank you, Chris. For segment highlights, please turn to Slide 7. CCM delivered 2nd quarter revenues of $948,000,000 down 15% from the prior year. The decline was due to continued destocking in the channel, disruptive weather and some project delays. Adjusted EBITDA margin was strong at 31% as we had positive price costs in the quarter. Speaker 300:16:30Quarter. Moving to Slide 8. Revenue at CWT decreased 20% primarily due to continued softness in residential demand. Adjusted EBITDA margin was 22.5 percent, expanding 390 basis points from the Q2 of 2022. Echoing Chris' comments earlier, the team continues to benefit from its focus on the integration of Henry, accelerated capture of targeted synergies, effectively rolling out COS and significant investment in operations throughout CWT to drive greater efficiencies in our businesses. Speaker 300:17:12Moving to Slide 9, CIT revenue increased 3% in the Q2 of 2023, reflecting strength primarily in our commercial aerospace platforms quarter as we benefit from the rebound in demand for new aircraft. Adjusted EBITDA margin expanded 5.20 basis points to 18% driven by price realization, leverage on restructuring activities and efficiencies gained from COS. Slide 10 provides the year over year bridge items to 2nd quarter adjusted EPS. Moving to Slides 1112, Carlyle ended the Q2 of 2023 with $379,000,000 of cash on hand $1,000,000,000 of availability under our revolving credit facility. We generated cash flow from continuing operations of $196,000,000 and invested $30,000,000 in capital expenditures. Speaker 300:18:14We deployed $200,000,000 towards share repurchases and paid $38,000,000 in dividends. As of the end of the second quarter, we have 2,300,000 shares available for repurchase under our share repurchase program. Turning to Slide 13. We have provided our updated 2023 financial outlook. For both CCM and CWT, we now expect revenue to decline year over year in the low teens range for the full year 2023. Speaker 300:18:47For CIT, we now expect revenue to increase year over year in the mid single digit range. For total company, we now expect year over year revenue to decline in the low double digits. We attribute the lower revenue expectations for the same items that proved to be headwinds in the Q2, namely destocking in the channel, disruptive weather and some project delays. Given the solid execution by our teams across Carlyle, We now have a more favorable outlook on full year EBITDA margins. Despite the double digit revenue decline, we expect consolidated margins to decline only 50 basis points year over year in 2023. Speaker 300:19:33We remain focused on disciplined pricing, quarter. With that, I turn it over to Chris for closing remarks. Speaker 200:19:51Thanks, Kevin. In closing, I once again would like to express my thanks and appreciation for the excellent work by all of our Carlyle employees in the Q2. Their perseverance and just plain hard work has returned us to delivering the results we've come to expect. I'd like to take a moment to share some important organizational changes that are occurring this week. First, all of you know Jim Gianakuris, our Vice President of Investor Relations. Speaker 200:20:22Jim has decided to leave Carlyle to pursue other opportunities. Jim was a covering analyst when I became CEO back in 2016. And I remember the dinner we had in New York in May of 2018, call, where I asked him if he wanted to join Carlyle and make our Investor Relations department the best there could be in the industry. Quarter. Since then, he has made significant contributions, enhancing and professionalizing our Investor Relations function here at Carlyle, As well as having an extremely positive influence on the corporate and segment finance teams. Speaker 200:20:58Jim has lived up to the promise of developing a truly world class Investor Relations department, and he will truly be missed. I wish him nothing but success and happiness in his future endeavors. And I know all of my fellow Carlyle employees feel the same way. Thank you, Jim. Stepping into the role of Vice President of Investor Relations will be Mehul Patel, who joined us when we acquired Henry Company in 2021. Speaker 200:21:26Mehul was most recently Vice President of Finance for CWT and many of you may have already met him as he's been representing Carlyle at investor conferences and roadshows for the past year. I am very excited to have Mehul backfill Jim's role and I know he will do an excellent job with the investment community. Additionally, Kelly Kaminski, who has been at Carlyle since 2016 and most recently serving as our Chief Accounting Officer, will be taking on the role of Vice President of Finance for CWT and replacing her in her role as CAO will be Steve Aldrich, who has been at Carlyle since 2012 in various finance positions, most recently as our Vice President of FP and A. I'd like to congratulate Kelly, Mehul and Steve on all their accomplishments and wish them the best of luck in their new roles. With Vision 2025 objectives and our core values well ingrained throughout Carlyle, I remain extremely optimistic for the long term success of Carlyle. Speaker 200:22:29We We will continue to benefit from the flexibility afforded us by an incredible brand and reputation and take advantage of our strong capital position and superb cash flow generating capabilities. Despite near term and potentially growing economic challenges, we will continue to drive a culture of first, pursuit of excellence in everything we do, of continuous improvement, of an entrepreneurial mindset and a commitment to superior capital allocation. We also believe the secular growth afforded us by both non discretionary reroofing demand and increasing needs for improving the energy efficiencies of buildings Pave the Way for Long Term and Significant Value Creation. We'll continue to take the necessary actions to navigate an increasingly complex operating environment, continue to deliver the Carlyle experience to our customers and create value for all stakeholders of the company. And that concludes our formal comments. Speaker 200:23:26Operator, we are now ready for questions. Operator00:23:31Thank you. Quarter. Ladies and gentlemen, we will now conduct a question and answer session. Speaker 200:23:44Question. Operator00:23:44Your first question comes from the line of Brian Blair from Oppenheimer. Your line is now open. Speaker 400:23:52Thank you. Good afternoon, guys. Speaker 200:23:54Good afternoon. Speaker 500:23:57I was Speaker 400:23:57hoping you could provide a little more color, walk us through how the quarter played out for CCM, specifically in terms of destocking, we know has been headwind for a while. How did that influence April May operations relative to June? What's your sense of where channel inventory now And how does that impact your progression into Q3? Speaker 300:24:21Yes, several things there. The first on the destock, Yes. So that destock going into the quarter, we were expecting around $100,000,000 and we're slightly above that for the quarter, About $120,000,000 in the second quarter of destock, remaining destocking. We think we Have around $50,000,000 to go in the Q3 that continues from some of the weather. And as Chris mentioned, as far as Labor on the roof has been a challenge for the contractors, so that's delayed a piece of that. Speaker 300:24:56So as going through the quarter, I mean, April, May, June, no significant differences. I mean, it ramped up in the second quarter as we'd expect versus the 4th or the Q1. So Nothing of note there. Speaker 400:25:12Okay. Understood. And then we can obviously back into a second half figure given your revised GCM sales outlook for the full year, but how should we think of the sales cadence Q3, Q4? Obviously, there's noise that has impacts operations through Q2 a bit into Q3 that you just walked through and then easy comps start to kick in Q4. If you could quantify expectations anymore, that would be helpful. Speaker 200:25:40Yes, Brian, Chris, I think that Q3 is going to look a lot like Q2 with a couple of exceptions. Obviously, Kevin talked about that. A little bit of continued destocking. Actually, one of the things that we haven't talked about that should be talked about is that In addition to the destocking, now we have this idea of restocking. The demand is still there, but I think there are a couple of things that before Kevin gets into a few more items That I think you should be aware of, which is that I think there's been a hesitation to load in the type of stock that we've seen in the past. Speaker 200:26:15So my assessment after doing the work is that we're going to see a little bit of a slow start post July 5, but the demand will pick up as people get more comfortable with the quarter, as we get closer to the end of the year and jobs Obviously, start to weather has less of an impact on the jobs and those pick up as well as distributors get A bit more comfortable bringing inventory. And I think with interest rates rising, obviously, the carrying cost of having inventory is higher. Also, we have this idea that's been put out there. You all analysts have talked about it too that there might be some pressure from some of our competitors to lower price, which we didn't see in the quarter, by the way. Quarter pricing was flat. Speaker 200:26:59But I think that might be causing People to pause a little bit to say, will I be able will I be putting in high cost inventory when there might be lower cost inventory coming? I don't see that happening, but That concern could be there. And then I think we also have to look that it's been a very good, I guess you saw by OC's with their residential shingle business. It's been a good for them, bad for weather, but a good spring In terms of roofing in the resi side, and I think that also has consumed a little bit of that working Capital that goes to inventory in the form of increased resi shingles in that. So I think when we look at the Q3, it plays out the same as Kind of the 2nd quarter demand, underlying demand is still good, pricing should be flat and we still see the trends Continuing. Speaker 200:27:50So just a little color from me there, but Kevin, I don't know if you had anything. Speaker 300:27:54Yes. So that all shakes out to the 3rd quarter being a couple percent, 2%, 3% better than the 2nd quarter. And then as you look to the 4th quarter, typically we're down 4th quarter versus the 3rd about 15%, but without the destock in the 4th quarter, it will be less than that 15% down in the 4th quarter. Speaker 400:28:17Very helpful color. Margin performance was Definitely a highlight of Q2 and that was across the board. Yes. But with the scale of CCM, obviously, very needle moving to have some margin upside relative to expectations. I assume that price cost was a solid lever there. Speaker 400:28:38Kevin, I believe last quarter guidance of $40,000,000 to $60,000,000 full year benefit for price cost. Wondering if you could give us an updated figure on that and Also offer a little directional insight as to how we should think about the margin cadence through the year and And netting to the 50 basis points improvement on a consolidated basis relative to the prior year. Speaker 300:29:03Yes. So on the price cost, as you said, we were at $40,000,000 to $60,000,000 in our previous guidance there. Now we think we're around $60,000,000 to $80,000,000 So we've upped that number and that dropped right to the bottom line where we're talking down 50 basis points this year. So maybe looking at those margins, we think we can get the CCM margins right to about 30% this year for the full year. And then as you look to CWT, I think we can get them to up maybe 3.50 to 400 basis points on the year. Speaker 300:29:41And then CIT would be up to about 17% for the full year. So 2 50 to 300 basis point improvement there. Speaker 400:29:52Excellent. Appreciate the detail. Thanks again, guys. Yes. Speaker 200:29:56Thanks, Brian. Operator00:30:00Your next question comes from the line of Tim Wojs from Baird. Your line is now open. Speaker 600:30:06Yes. Hey, guys. Good afternoon. And good working for you with you and best wishes on the new ventures. Maybe just starting off, Chris, just on the backlog. Speaker 600:30:24I guess, how What are you kind of hearing when you're talking to contractors or distributors about the backlog? And I guess, when you think about days on the roof And maybe the heat claim having an impact on some of that. I mean, how do you kind of triangulate between that versus Maybe kind of a weaker demand backdrop. Speaker 200:30:45Yes, Tim, we thanks for that question by the way and thanks for acknowledging Jim and Appreciate that. We did a lot of work in the Q2. I'm not going to go into all the detail, it'd be too long in this call, but we could take it up later around. We spent a lot of money and a lot of time and effort into understanding that. And a lot of that came out of the Q4 and the Q1 where We didn't feel we had all the information we should have had. Speaker 200:31:11So we've done a couple of things. One was we enacted a net promoter score For Carlyle, and that's been very helpful to us. That ties into what was actually happening in our perception visavisour competitors done by a world class organization. We talked over 600 contractors, distributors and other points. So we got a very good data set there. Speaker 200:31:34Started that basically back in April. At the same time, we started to look at this backlog thing. We really wanted to understand. Obviously, we didn't understand Completely in Q4, the level of inventory that was out there. We think we had a good handle on distribution. Speaker 200:31:49I think what we missed in some ways The inventory that was on the contractor and maybe at the job site. So we went through, we did that. And that also was about Probably about 600 contacts, 500 to 600 contacts that we've been updating through the quarter. So I think we've got a good handle on where the backlog is. I get Good confidence there on this statement that people have been reducing it. Speaker 200:32:12I think it would be misleading to say it's over. That's a tempting thing to say the destocking It will spill into Q3. What I would say is there are pockets of that though obviously all distributors are not alike. And You go to the Northeast and there was a lot of rain in the second quarter and we think that impacted it. So maybe they didn't destock as fast as somebody might have somewhere else. Speaker 200:32:33So We've got a good handle on backlog. I think the backlog is, as I said, coming down. And I really do believe that part of this issue with a little bit lower demand to us in Q3 and Q4 is really going to relate to that idea of how quickly the distributors Wanted to stock back up and we're getting back to normal. When we look at the Q4, we just see the same demand patterns going Kevin has talked about on numerous occasions and you all have the graphs on that. But I think when we get to 24, we're going to see that normal cadence That idea of then a more traditional load in from distribution as we get into the season in 24. Speaker 200:33:16Really, as you know, that's kind of been missing through the whole thing. We missed it when COVID hit. Hit in February, we never got the big load in. And then we really rolled right into that heavy demand through 'twenty quarter. Everything went out to distribution and not really in an organized fashion. Speaker 200:33:30It was more of whatever you could get. So I feel pretty confident about what we're seeing and that the underlying demand is really good. I'll give you 2 other things on that. I know I'm extending the question, but This demand, when Jim talked about reroofing, I mean, we know that's there. We've talked about it. Speaker 200:33:47We understand the length of Life of a Roof. We understand how roofing building owners feel about warranties and that. And I think our reroofing estimates are pretty good. When we move to this energy efficiency thing, I just saw a couple of data points that air conditioners, for example, Department of Energy just released today, 6 All electricity consumed in the United States are produced, it goes electric or goes to air conditioners. You're putting that on a grid that already has issues and then we've got significant warming trends. Speaker 200:34:20And then I saw that GM, Hyundai and Honda are building another 30,000 plugs by 2,030, but would take us to 6,030 to drive electric vehicles. But in fact, we need 182,000. So I think when we look at What the solution is going to be. It's going to be around green insulation. It's going to be around making buildings tighter. Speaker 200:34:42And that falls right into what CCM and Henry deliverance. So I think we've seen that and I feel very good about that underlying demand and that that will continue. Quarter. And then just quickly on the days on the roof, a couple of data points. People we've heard throughout the southern states From Southern California to Florida, we've heard that they're trying to work earlier, but shortened days as you start to get into the noon, 1 o'clock, it's just too hot on a roof. Speaker 200:35:08And so we've seen some compression there and you can't really do it in the dark. So you get some compression on the workday. And then something I heard recently was people are also trying to get the work done in 3 days and that there may be some changes in order pattern during the summer here where We're seeing a lot of activity Monday, Tuesday, Wednesday, but then as we get to Thursday, Friday, the crews are just not as effective. They're worn out, they're hot and people are handling So when we think about how many days on the roof, I can't give you a number for that, but it's got to be kind of like what we would see With a heavy rain or something like that where we would probably say 2 to 3 days in the quarter. Speaker 600:35:50Okay. All right. No, that's all helpful. I appreciate that. And then maybe just on CWT, just I guess what drove I mean, is that a good jumping off point on a go forward basis? Speaker 200:36:15Tim, we have Mehul with us. We didn't announce him in the beginning of the call. And I think I'm going to turn that call over there to Tim Mehul, let him have a shot at it and then we'll get Kevin back him up. Speaker 700:36:24Perfect. Thanks, Chris. Tim, nice to meet you. Great question, Tim. So overall for CWT, as Kevin mentioned, saw a really strong performance on margin. Speaker 700:36:38To your first question, in terms of what's driving it, there are several factors. One is really strong pricing discipline. We're leveraging our investments in sales excellence and ability to influence in market demand with our mostly internal sales force. So in a declining raw material environment, that's creating a positive tailwind for us. The second thing is dampening out inefficiencies from 2022. Speaker 700:37:03Obviously, there are significant supply chain challenges that sub optimized our ability to supply from the optimal plant. So that's corrected now and we're doing a good job getting back to normal there. The 4th thing, Kevin and Chris talked about synergies. We're doing a really good job quarter. That's creating a positive tailwind. Speaker 700:37:27And then lastly, really strong performance on our plants in a declining volume environment. Call. We're really taking advantage and making the right calls, right adjustments, really variabilizing our costs as much as possible, which is helping us in a declining volume environment. Lastly, to your question in terms of a jumping off point, all these things I mentioned, they're going to stay. So I think this is good margin for us for 2024 and there's continuing to be upside as well, right? Speaker 700:37:55As we try to continue to drive continuous improvement, the COS system that Carlyle has. The Henry team is embracing it. That's going to continue to provide tailwinds for us to drive margins up even further year 2, year 3 and forward. Speaker 600:38:12Okay. Okay, sounds great. Thanks so much guys. Appreciate it. Speaker 400:38:15You bet, Tim. Operator00:38:18Your next question comes from the line of Garik Shmois from Loop Capital. Your line is now open. Speaker 800:38:24Call. Hi. Thank you. Just wanted to follow-up just on the CCM margins and the 30% that You're speaking to for this year. Just curious if you could speak to maybe your confidence in that as a jumping off point moving forward in light of Some of the competitive pressures, Chris. Speaker 800:38:43You acknowledge recognizing your pricing is flat right now, but it seems like maybe the market is bracing for Speaker 200:38:53Yes, I think it's a good I think it's very sustainable. In fact, I would be disappointed if we didn't return to some of the margins we've seen in that we saw in 'twenty two. I think some of the things that we question. Number 1, I know there are one off bidding that people We're talking about in terms of pricing, lack of pricing discipline, but what I'd tell you is those tend to be infrequent and that the general consensus out there is There is good pricing discipline. I think we have as we talked about earlier when we saw some management changes in one of our competitors And we saw a different organization purchase one of our competitors. Speaker 200:39:35I think I'll give them both compliments. I think those are upgrades into both situations. So, certainly, both those parties are understand what value creation is about and how to drive value creation for those companies, which I'm assuming they want to do. We also look at new products. We've got things like the 16 foot line. Speaker 200:39:52We've got our Cav Group 2. We've got the appeal product. We continue to work on new coatings in Henry. We continue to make gains in different channels. And I think what we're finding is that our products and the value proposition we have Are really becoming ROI based. Speaker 200:40:10This idea of energy efficiency and that a roof is not just a roof, but a roof now is A key component of lowering energy consumption and driving an ROIC means that you start to shift off of this idea that we have In some way a roof can be exchanged between Carlyle or someone else. I mean each one of us is going to bring added value through that. We talked about the Carlyle experience. I think Carlyle experienced to a certain degree was a very positive in terms of pricing. I think in the pre-twenty 19, we used to say we would get There was a 5% to 7% premium to our products on the Carlyle experience just because contractors could rely on the right product at the right place at the right time. Speaker 200:40:50When you were spending a third on materials and 2 thirds on labor, if you had labor sitting around, it wasn't a good value, you'd be better to pay the 5% to a company that got you the product when you need Obviously, COVID came along, changed that, upended it. There was a lot of confusion. And as we return and as we talk about this Q3 And people wanted to be more efficient with their inventory. Obviously, we pay kind of a penalty because if you deliver faster and you could supply just in time product, There's kind of a weird benefit to not benefit, but penalty on that, which is that people then will rely on us and not put us in the inventory. So We're still going to be working on the Carlyle experience and we still think in an increasing demand world like we have around ESG and other things The new products, superior customer service will continue to differentiate product. Speaker 200:41:38And so I like that. On the other side, on the COGS side, you can see what we're doing on raw materials. We're using them a lot more efficiently. You can see what we're doing on automation in Sikeston. View visit, which we hope people will visit the Sikeston facility, you are seeing the latest generation of ISO, polyiso production and it is extremely efficient. Speaker 200:42:00And so I think when you look at those things, we look at The margins in 2022 and think that's what we're aspirational to. So I don't really look out to the next few years and think we'll see any Lower than the margins we've seen this year of 30%. Speaker 800:42:18Got it. No, that's helpful. My follow-up question is on CWT. I was wondering if Maybe go into the revenue guidance revision in a little bit more detail and can appreciate the, I guess weaker housing market, but the builders have been certainly more optimistic of late. So just wondering if you're seeing any of that As an opportunity, and just any additional color on the change in the CWT revenue guidance would be great. Speaker 700:42:51Yes. So Tim, couple of things. One is project delays that is impacting the CWT business, both on commercial and residential side. So that's a key driver for the change in overall guidance. The second thing, there is still some destocking is to a lesser degree, not even close to what we're seeing on the CCM side, but nonetheless, similar reasons is negatively impacting CWT. Speaker 700:43:18And then lastly, with the raws coming down, there are still cost for reducing price, but nonetheless, it's still a positive from a price cost standpoint. Speaker 800:43:30Got it. Okay. Quarter. Speaker 200:43:31Thank you. Hey, Gary, that was my full year by the way. Speaker 800:43:36Yes. I appreciate the answer. And of course, I'll Give my best to Jim as well and look forward to catching up down the road and working with Mehul in the future. Speaker 400:43:49Thanks, Gary. Operator00:43:52Your next question comes from the line of Saree Boroditsky from Jefferies. Your line is now Speaker 500:43:59open. Hi. Thanks for taking my question. So maybe a little switch to kind of focus on 2024 a bit. So given the impact of destocking this year in CCM, how should we think of this as a tailwind into next year? Speaker 500:44:12And if we're in a flattish demand environment, Speaker 200:44:18question. Sorry, Chris. Thanks. I'll turn it over to Jim for a more technical answer to this. But I think right now and you know what my answer is going to be and I'm sorry, but it's like 24 is too far out. Speaker 200:44:30We don't really want to make any statements around, I don't think the getting too refined. What I would say is I think directionally you are correct. I mean obviously with the if you think about legacy demand in the CCM markets being in that, Let's call it that mid single digit historical as a market growth and then we saw COVID take it down and then we saw the rebound in 2022 and we get back to that mid single digits for the market. And we see that happening. Obviously, not having the inventory and getting through the destocking should produce a nice in 2024 for us. Speaker 200:45:10And then we still do think that with the macro trends around The Investment Reduction Act, things like this, the reshoring, the things we're hearing that 2024 should be, I'll call it a more normal and also a more productive year than I'd say 2023 was on the top line. Speaker 500:45:34Given that more productive outlook into 2024, obviously margins, I think you mentioned 30% in CCM for this year. How do we think the operating How do we think about operating leverage as we head into next year then as you start to see the benefit of some growth? Speaker 300:45:48Yes. We should see 40 incrementals on that growth. And as you said, adding to Chris' piece on the top line, that destock Plus 10% impact on 2024 versus 2023. Speaker 500:46:06Perfect. I appreciate the color. And I have to say, Jim, you'll be very missed and we wish you the best of luck in your next endeavor. Speaker 800:46:14Thanks. Operator00:46:18Your next question comes from the line of Dan Oppenhaim from Credit Suisse. Your line is now open. Speaker 900:46:25Great. Thanks very much. I was wondering if you can talk a little bit more in terms of CWT, in terms of I guess curious about the project delays that were mentioned. I think residential is what a quarter of CWT, but only a portion of that is then new residential. And I guess, sort of wondering about it overall, like The significance of sort of in the revenue guidance of lower volumes from residential versus product delays versus some of the pricing? Speaker 700:46:56Yes. So this is Mehul here again. For CWT, the project delays Overall, I mean, it's not like a significant amount of the change. I would say from a percentage standpoint, I would attribute maybe 20% of it to project delays and that's going to come through a combination of Labor, just availability of labor on the construction sites, the challenges getting labor, so projects are getting extended out and then taking longer to get on to the next project. The second thing is financing, right, both on the commercial side, which is also another 25% of our Market exposure for commercial starts. Speaker 700:47:38Financing is creating project delay just from taking longer to get projects financed. Speaker 900:47:48Got it. That's great. And then on The margin side, you talked about some of the continuous improvement and sort of being a tailwind. With some of the restructuring, are all the benefits of the restructuring sort of in place now? Is that What we saw in the margins this quarter will sort of be set or was that sort of still some to come as we go into 3Q? Speaker 700:48:10Yes. He will continue to benefit us as we go forward. And that was my earlier comment on we still have continuous runway to continue to expand margins on CWT. Speaker 900:48:23Great. Thank you. Operator00:48:32Call. Your line is now Speaker 600:48:34open. Hey, good afternoon, everyone. Operator00:48:36Just on Speaker 700:48:37the project delays, maybe on Speaker 400:48:39the commercial side, are there any specific end market verticals that are weaker than others as you look across it? And also, are you seeing flat out project cancellations at this point? Speaker 200:48:50Adam, yes, good question. Haven't seen really anything on cancellations. I'm sure there are Probably some out there, but I would say they'd probably be the 3rd Sigma where somebody it's not really related to anything other than they're just not good business people and that's a bad joke. But We do if I say there aren't any, somebody will find 1. When we look at the segments, I think this year, we've seen some negative impact on the warehouses. Speaker 200:49:19I think that's been somewhat Well publicized around what's happening with Amazon warehouses and things like that. So it's been a little bit down there, although we've got places around the country like Phoenix here where warehouses Continue to be established, so there might be some movement there regionally. Education has been a good story this year, especially quarter. During the year, educational work has actually improved pretty significantly since 2021 and is at about the same pace of growth as 2022. We look at office buildings. Speaker 200:49:50Obviously, that's another one that's pretty well advertised around work from home and that although I would say that the decline is less than I would have thought and I think we attribute a lot of that to when you're putting a flat roof on an office building like us that we think of, They tend to be 3, 4 story buildings, 1 story building, maybe manufacturing attached or something like that or warehousing. And so I think we have a little bit of a less of a work from home impact than say The Central Business District of San Francisco or Manhattan, where we're seeing some tough times in office buildings, but doesn't really reflect the low slope group. Stores have been kind of a little bit down, but not too bad. And then healthcare has actually been a good story. And I think that's another vertical that as we look at aging population and we look at extended care and we look at our healthcare system, I think We'll continue to see money put into expansions. Speaker 200:50:46I know here in town, we've got a lot of expansions with the Mayo Clinic and I think in Rochester as well, they've talked about a big building expansion. So That one's doing well. And then I think when you look at more of the multifamily housing in that, obviously, there's not enough of that stock in this country. And I think that will continue To be a good tailwind with the impact though of interest rates probably causing some of those projects to Come under question if rates stay at their 22 year high like they are as announced today. Hopefully that gives you enough color. Speaker 400:51:21Yes, it's great. That's helpful. And then just some of the step up in share repurchases Speaker 600:51:25you guys are implying in Speaker 400:51:26the back half. Any guidance on how you expect that to phase in, in 3Q and 4Q? Speaker 300:51:32Relatively balanced based on what we have remaining to purchase. Speaker 400:51:38Okay, great. Thank you. Speaker 200:51:40You bet, Adam. Operator00:51:43Your next question comes from the line of David MacGregor from Longbow Research. Your line is now open. Speaker 1000:51:51Yes. Good afternoon, everyone. And Jim, good luck to you, man. Speaker 400:51:57Thank you, sir. Speaker 1000:51:57Sorry, stop police. Exactly. So I wanted to just ask you about the main components within your cost basket. We talked about price cost and thank you for the detail on that. But if Just isolate the cost basket for a second and just talk about how prices you may see trending on the main components there? Speaker 200:52:20Well, I don't think we really like to get into that. But I would say you can look at MDI. That's obviously a big one That we track. I think there's a mistaken correlation there that a lot of people have to the price of oil. I mean MDI really more correlates to what's happening in the facility and what demand major chemical companies are seeing and petroleum companies on other feedstocks that come off of that, but MDI is seeing some reduction. Speaker 200:52:56I think we look at polyethylene, that's another one. EPSP It's a big one. We've got our synthetic and natural rubbers that we see, some oils. I think just overall, again, We're seeing very positive there. I mean, in a sense, it relates to Some of the demand factors that are occurring throughout the world. Speaker 200:53:19I don't think that a poor European economy hurts Us because I think that takes out some demand and people are looking for places to put their production. I think China, certainly the chemical petrochemical industry in Taiwan And China is probably also looking for places to put that. So I think generally, we're seeing those declines again. MDI has been a pretty good one. I'll leave it at that. Speaker 200:53:40But I think overall, as you look to second half of the year. You could see why we've upped that and to Kevin's point at 60 to 80, but we're probably looking more at the Upper end of that range, more like the 80 than the 60. So I know that didn't give you enough, but hopefully that helps you from a directional perspective. Speaker 1000:54:00Yes. Okay. Thanks for that. And then just with respect to CWT, you talked about the fact that or Mehul talked about the fact that there was Still some inventory there to deal with. I'm just wondering if we see an upturn in residential orders coming through, how How much of a delay are we looking at before you actually see that business hit your book? Speaker 1000:54:25I guess, how much of a water do Speaker 800:54:26we have to burn? Speaker 700:54:28Yes. Typically for us, once a residential project has started. Our products would go on somewhere between 5 6 months after the start. So you kind of think of that in terms of where residential starts are and improvement there in terms of how long it takes us to trickle through for our products to go on the project. I think as far as inventory goes, yes, I think as the residential market, it seems like it's kind of bottomed right now. Speaker 700:54:54As it improves, it should help us on the inventory side, definitely. Yes. Speaker 200:54:58And David, the only thing I would say, and McCool does a heck of a lot more about it than me, but I think one of the things we have to segregate in CWT is this idea of putting it on new Construction and then this idea of repair and remodel. So, we can see in half of our business, upticks in demand as quickly as a weather event occurred in California on a Friday and on Saturday morning or Sunday morning, we could have an out of stock position at Home Depot and be having to respond to that. So I think as you Spend more time with Mehul understanding that the difference between that new construction and that whole side of it and then that repair and remodel that We do a lot of work taking care of roofs before they get a new roof put on. So I think that's an important Relationship to understand because it does impact what happens to sales. I think a 5 to 6 month delay on probably is a little bit at the long end on the When you aggregate the whole business. Speaker 700:55:56Yes, absolutely. So when we talk about those residential starts, you got to remember that's 25% of the business. The other 25% on the residential side and there's also 25% on the commercial side. It's all R and R and a big component of that is really non discretionary roof coating projects, products that when you have a leak on your roof, you're not going to have a choice but use those products. So demand should be stronger in those areas, especially when there's weather events and high rain events. Speaker 1000:56:27Right. Okay. Last question for me. Thank you for that detail. Last question for me is just on the operating leverage. Speaker 1000:56:32And Clearly, you guys have done a tremendous job this quarter of managing decremental margins. There's been quite a bit of discussion on price cost, so I think we're good there. But just on the volume leverage, I know there was a previous question, maybe I'll come out of a slightly different way here. But I'm just trying to get a sense of you've clearly found something different in terms of managing Your fixed costs and your leverage. And I'm just trying to get a sense of how sustainable that might be going forward And whether we should be talking about updating our sense of what volume leverage is in these individual businesses. Speaker 300:57:08Yes. On the CCM side, certainly, I think that new number for incrementals for sure is 40%. I I mean some of that was a little bit higher than that on some of the decrementals just from some of the absorption issues that you have there. But going forward, We're expecting that 40% on the CCM side. And as far as CIT, They should also be in the 40% plus range. Speaker 300:57:36And then CWT is a little bit lower than that, right, more in the 30%. Speaker 200:57:41Yes. And David, I will look back to when we started in 2016 at where we were on adjusted EBITDA. When we talked about I think this is really where and I'm glad you brought it up because it talks about the power of COS and the power of what we're doing from a lean segment What our leadership is doing around continuous improvement automation, things like this. I mean, those margins, those adjusted EBITDA margins at CCM back in We're probably in that 21% range. We're now 22%, you're up over 30 And it's been a pretty steady progression to get there. Speaker 200:58:17It didn't go from 21 to 30, it went through 2023 and 2024 in that. And so I think That to me when I look back at that almost 8 year run of continuous improvement across a variety of volume levels tells me that these are very sustainable and the team knows for me that we got to get better every day. So I think we would continue to think we'll have More gains. And obviously, as you get into the 30s, they get tougher and tougher to get, but the team continues to add to the remarkable EBITDA journey, positive journey that they've had. Speaker 1000:58:54Great. Thanks guys. Speaker 200:58:59There are Operator00:58:59no further questions at this time. I will now hand over to Chris. Please continue. Speaker 200:59:04Well, thanks, JP. Appreciate it. This concludes our Q2 2023 earnings call. I want to thank everybody for their I do want to once again thank Jim for all the good times and great work he's done and Everything he's contributed, been a big part of Carlyle. And I know going forward, he'll be very interested in what we do and we'll be keeping in touch. Speaker 200:59:26And then Mehul, thanks for being on the call and taking up those questions so quickly. You're in. So here we go. And thanks everybody. Look forward to speaking to you at the next earnings call. Operator00:59:38Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCarlisle Companies Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Carlisle Companies Earnings HeadlinesCarlisle Companies (NYSE:CSL) Announces Board Resignations Under Governance GuidelinesMay 3 at 7:54 PM | finance.yahoo.comCarlisle Companies Announces Board Changes at Annual MeetingMay 1 at 4:53 PM | tipranks.comBuffett’s favorite chart just hit 209% – here’s what that means for goldA Historic Gold Announcement Is About to Rock Wall Street For months, sharp-eyed analysts have watched the quiet buildup behind the scenes. Now, in just days, the floodgates are set to open. The greatest investor of all time is about to validate what Garrett Goggin has been saying for months: Gold is entering a once-in-a-generation mania. Front-running Buffett has never been more urgent — and four tiny miners could be your ticket to 100X gains.May 4, 2025 | Golden Portfolio (Ad)CSL Quantitative Stock AnalysisMay 1 at 3:18 AM | nasdaq.comCarlisle Companies (NYSE:CSL) Lowered to Sell Rating by StockNews.comApril 30, 2025 | americanbankingnews.comCarlisle Companies sets $1 dividend for June 2April 29, 2025 | investing.comSee More Carlisle Companies Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Carlisle Companies? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Carlisle Companies and other key companies, straight to your email. Email Address About Carlisle CompaniesCarlisle Companies (NYSE:CSL) operates as a manufacturer and supplier of building envelope products and solutions in the United States, Europe, North America, Asia and the Middle East, Africa, and internationally. It operates through two segments: Carlisle Construction Materials and Carlisle Weatherproofing Technologies. The company produces single-ply roofing products, and warranted roof systems and accessories, including ethylene propylene diene monomer, thermoplastic polyolefin and polyvinyl chloride membrane, polyiso insulation, and engineered metal roofing and wall panel systems for commercial and residential buildings. It also offers building envelope solutions, including 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, block-molded expanded polystyrene insulation, and engineered products for HVAC applications. It sells its products under the Carlisle SynTec, Versico, WeatherBond, Hunter Panels, Resitrix, and Hertalan brands. Carlisle Companies Incorporated was founded in 1917 and is headquartered in Scottsdale, Arizona.View Carlisle Companies ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025)Williams Companies (5/5/2025)CRH (5/5/2025)Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 11 speakers on the call. Operator00:00:00Afternoon. My name is JP, and I will be your conference operator today. At this time, I would like to welcome everyone to The Carlyle Company's 2nd Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, we will conduct a question and answer session. Operator00:00:19I would like to turn the call over to Mr. Jim Gianakoras, Carlyle's Vice President of Investor Relations. Call. Jim, please go ahead. Speaker 100:00:28Thank you. Good afternoon, everyone, and welcome to Carlyle's Q2 2023 earnings conference call. We released our Q2 financial results after the market closed today, and you can find both our press release and earnings call slide presentation in the Investor Relations section of our website, carlyle.com. On the call with me today are Chris Koch, Chair, President and Chief Executive Officer and Kevin Zimmel, Carlyle's Chief Financial Officer. Today's call will begin with Chris providing highlights of our Q2 results and a discussion of our current business outlook, and Kevin will discuss additional financial details and our updated outlook for 2023. Speaker 100:01:03Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to Slide 2 of our presentation, call, 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, slide. With that, I will turn the call over to Chris. Speaker 200:01:38Good afternoon, everyone, and thank you for joining us quarter on our Q2 2023 earnings call. The Q2 proved to be a nice recovery story for Carlyle With our performance evidence of the team's collective efforts to improve earnings and create value for all our stakeholders. We are grateful to all Carlyle employees for their continued perseverance in the face of significant challenges and for their contributions to making the 2nd quarter success. Most important is our team's commitment to continuously improving our businesses. As you know, in 2021, we decided to pivot Carlyle's portfolio of diversified industrial businesses towards becoming a building products pure play. Speaker 200:02:23Our recently announced sale of CFT represents another important step towards fulfilling that goal. Our building products businesses represented over 90% of our segment EBITDA from continuing operations in the Q2 of this year, Providing further evidence that our pivot is almost complete. We continue to believe that a pivot towards an innovative building products portfolio quarter with a focus on providing energy efficient solutions will allow our shareholders to benefit from the significant trends in greenhouse gas reduction and increased demand for green buildings and products, especially ones that require less labor to install. Our recently announced sale of CFT continues one of the themes we brought to Carlyle under Vision 2025, That being our desire to be a superior capital allocator and in turn drive superior shareholder returns. This goal was a primary factor in our decision to use the proceeds of the announced sale of CFT towards share repurchases this year. Speaker 200:03:28When combined with our share repurchases to date, our total capital devoted to buybacks in 2023 Will be approximately $900,000,000 At CCM, despite continued channel destocking activity in the 2nd quarter, Our teams collectively drove improved sales and excellent profitability. Margins improved significantly from a combination of volume increases, price discipline, cost management and efficiency gains through COS. The last three quarters of destocking at our distributors and contractors has been a challenge that was made more difficult by the uncertainty related to its quantity and duration. As we enter the second half of twenty twenty three, we have performed substantial work to understand the levels of inventory at distributors and contractors and reconcile that with current demand levels. Based on this work, we believe that the vast majority of destocking issues related to supply chain constraints from 2021 2022 In CCM, as in all of our Carlyle segments, we entered the second half of twenty twenty three With our efforts focused on leveraging solid underlying demand, capturing raw material gains and maintaining a positive price cost relationship. Speaker 200:04:48Taken together, These areas of focus give us confidence that we will deliver another solid earnings performance for Carlyle shareholders in the 3rd quarter. Our outlook would be even more optimistic if it weren't for some near term headwinds impacting the Building Products businesses. 1st and foremost, well known and well published information about this year's extreme temperatures across much of North America have negatively impacted contractors' days on the roof. Here in the Phoenix area, for example, we have had over 26 days of 110 degree plus temperatures and excessive heat warnings. These elevated temperatures have played a role in our contractors' ability to safely install roofs on schedule. Speaker 200:05:30Certainly, every roofing contractor in Carlyle's sphere of business quarter. Due to growing economic uncertainty, tighter financing conditions and the ever present tight labor market for roofing contractors. Even with these headwinds, we still anticipate continued strong demand for our energy efficient building products, particularly for non residential reroofing products. We remain very bullish on Carlyle's value creation runway quarter. Given strong and sustainable underlying reroofing demand, accelerating price to value gains through new and innovative products And an increasing awareness by architects, building owners, contractors, local governments and others call for the need to drive efficient energy usage, upgrade the energy efficiency of our buildings and decrease carbon emissions. Speaker 200:06:31Additionally, we believe that in both the non residential and residential construction markets, our ability to exceed the expectations of our customers and distribution partners Through the combination of the Carlyle experience and our Carlyle operating system, we'll drive significant opportunities for share and margin gains that will deliver increased returns for our shareholders. Our confidence in Carlyle's future rests on A multiyear backlog of reroofing projects in the U. S. Supporting a healthy baseline of activity for our largest business, CCM, quarter, which has recently been further enhanced by the Inflation Reduction Act and its emphasis on utilizing a significant pool of assets call to drive investment in energy savings. Solid nondiscretionary repair and remodel demand throughout the residential building envelope quarter that makes up approximately 50% of CWT revenue and provides reliable through the cycle sales growth. Speaker 200:07:29Our industry leading ability to meet the well known growing need for energy efficient solutions for buildings and to drive in carbon related emissions from buildings that as many of you know account for close to 40% of global energy emissions. Carlyle's robust pipeline of proprietary innovative new products coming to market accelerated by our increased investment in R and D. Our collective team's subscription to delivering the best in class Carlyle experience to all our stakeholders. And the financial flexibility and strategic optionality afforded us by Carlyle's fortress balance sheet and excellent cash flow generating ability. This strong financial position allows for Carlyle's disciplined value creating acquisition strategy, ability to comfortably fund internal growth initiatives and consistent and reliable return of capital to shareholders in the form of a growing dividend and opportunistic share repurchases. Speaker 200:08:31Turning to our results, please turn to Slide 3. In the second quarter, we delivered Consolidated sales of $1,500,000,000 adjusted EBITDA of $385,000,000 and adjusted EPS of $5.18 I'm very pleased with the 2nd quarter results as they are a superb reflection of our earnings power as a company and have resumed the continuous improvement trends we were on, especially as it relates to margins. CCM's channel destocking was, as we believe, transitory. Quarter. And while it was a challenge and caused some temporary impacts to CCM, it did not affect our fundamental business model. Speaker 200:09:13We remain focused on delivering products that support increasing demand for energy efficient buildings and meeting contractors' needs for innovative labor reducing products. Turning to CWT. Revenues in the 2nd quarter were generally in line with our expectations, quarter. While profitability was exceptionally strong, the CWT team continues to execute exceptionally well on realizing the synergies plan with the Henry acquisition and an outstanding job of integrating the legacy CCM businesses into the new segment of CWT. Needless to say, these efforts are delivering returns ahead of the original deal model. Speaker 200:09:55The team is also doing an excellent job of taking cost out through footprint reduction, leveraging customer relationships to drive increased sales across their businesses, improving efficiencies in our plants and Managing Price Cost Effectively. Building on the solid performance in the second quarter, we expect this positive EBITDA growth story to continue for the rest of the year and now expect CWT's EBITDA to grow year over year quarter despite the organic revenue declines expected for 2023, a truly outstanding accomplishment in a tough environment and with a relatively new management team. At CIT, we continue to benefit from the restructuring actions taken during the COVID pandemic that are now returning significant margin dollars to CIT as aircraft build rates rebound. The team has done an excellent job optimizing manufacturing footprint and improving on its product mix, which positions us well to leverage the recovery that is underway in aircraft production. CIT's backlog is notably higher than pre pandemic levels, giving us confidence that CIT has significant growth potential for the foreseeable future. Speaker 200:11:05Quarter. Taken together, CIT is leveraging sales extremely well in 2023 with EBITDA up 5 20 basis points year over year in the 2nd quarter and we expect to continue that solid leverage going forward. Please turn to Slide 4. In line with our strategy to pivot to a pure play premier building products company, we signed a definitive agreement to sell quarter. Carlyle Fluid Technologies for $520,000,000 with an intention to redeploy this capital into share repurchases in 2023. Speaker 200:11:40The sale of CFT represents another significant step forward in our efforts to build a diversified portfolio of premier energy efficient building envelope solutions and demonstrates our commitment to being capital allocators of the highest order. On a pro form a basis, we now expect sales from our building products businesses to constitute approximately 84% of consolidated Carlyle revenue in 2023, this up from 56% in 2016. Please turn to Slide 5. I'm pleased to share with all of you on the call today that our newest polyiso manufacturing quarter. In green building technology such as solar power generation and energy based load control systems, the facility will lower the carbon footprint of our supply chain and will improve lead times to customers. Speaker 200:12:41We're proud that Sikeston was designed and built to the highest current sustainability standards, quarter, including LEED Platinum specifications, which is a globally recognized symbol of certified sustainability achievement. Please turn to Slide 6. Our results continue to demonstrate that Vision 2025 has been the right strategy for Carlyle. Quarter. In addition to our world class team's improving business model, we've benefited from a strong balance sheet and excellent cash flow generation to provide both financial and strategic flexibility to execute and achieve our ambitious goals. Speaker 200:13:18Our business portfolio transformation sets the stage for a more focused, higher returning and better understood path for future sustainable value creation at Carlyle. The pillars of Vision 2025 are really well established and remain core to Carlyle's strategy going forward. Over the last few years, despite the multiple challenges our teams have faced, call. We continue to be guided by the clarity of mission as outlined by our strategic vision first announced 5 years ago. As we approach the completion of many of the milestones and goals of Vision 2025 last year, including exceeding our goal of $15 of GAAP EPS, We were simultaneously working on the successor to Vision 2025, a new strategic plan that will be introduced formally later this year. Speaker 200:14:07Vision 2,030 will be a plan committed to many of the same principles and pillars we use to establish Vision 2025. Quarter. And with it will come new levels of performance and expectations that are a required part of our culture of continuous improvement and of our Lean Sigma initiatives under sustainable value creation at Carlyle under Vision 2025 include: 1, drive mid single digit organic revenue growth 2, utilize the Carlyle Operating System or COS to drive continuous improvement and greater efficiency in our operations 3, build scale with synergistic accretive acquisitions 4, maintain a returns focused capital allocation strategy, quarter, including organic investment to drive growth, a disciplined approach to our aforementioned M and A strategy and returning capital to our shareholders. Notably thus far in 2023, we've returned $327,000,000 to shareholders with share repurchases of 250,000,000 and $77,000,000 paid in dividends. And of course, none of this could be possible without continuing to rely on, invest in and develop our exceptional talent. Speaker 200:15:30Through the execution of Vision 2025, Carlyle has built a solid foundation leveraging a diversified workplace, decentralized management style, entrepreneurial spirit and a culture of continuous improvement, which will continue to guide our value creation journey in 2023 beyond and absolutely be core to our Vision 2,030 strategic plan. And with that, I'll turn it over to Kevin to provide additional financial details as well as our updated 2023 outlook. Kevin? Speaker 300:16:02Thank you, Chris. For segment highlights, please turn to Slide 7. CCM delivered 2nd quarter revenues of $948,000,000 down 15% from the prior year. The decline was due to continued destocking in the channel, disruptive weather and some project delays. Adjusted EBITDA margin was strong at 31% as we had positive price costs in the quarter. Speaker 300:16:30Quarter. Moving to Slide 8. Revenue at CWT decreased 20% primarily due to continued softness in residential demand. Adjusted EBITDA margin was 22.5 percent, expanding 390 basis points from the Q2 of 2022. Echoing Chris' comments earlier, the team continues to benefit from its focus on the integration of Henry, accelerated capture of targeted synergies, effectively rolling out COS and significant investment in operations throughout CWT to drive greater efficiencies in our businesses. Speaker 300:17:12Moving to Slide 9, CIT revenue increased 3% in the Q2 of 2023, reflecting strength primarily in our commercial aerospace platforms quarter as we benefit from the rebound in demand for new aircraft. Adjusted EBITDA margin expanded 5.20 basis points to 18% driven by price realization, leverage on restructuring activities and efficiencies gained from COS. Slide 10 provides the year over year bridge items to 2nd quarter adjusted EPS. Moving to Slides 1112, Carlyle ended the Q2 of 2023 with $379,000,000 of cash on hand $1,000,000,000 of availability under our revolving credit facility. We generated cash flow from continuing operations of $196,000,000 and invested $30,000,000 in capital expenditures. Speaker 300:18:14We deployed $200,000,000 towards share repurchases and paid $38,000,000 in dividends. As of the end of the second quarter, we have 2,300,000 shares available for repurchase under our share repurchase program. Turning to Slide 13. We have provided our updated 2023 financial outlook. For both CCM and CWT, we now expect revenue to decline year over year in the low teens range for the full year 2023. Speaker 300:18:47For CIT, we now expect revenue to increase year over year in the mid single digit range. For total company, we now expect year over year revenue to decline in the low double digits. We attribute the lower revenue expectations for the same items that proved to be headwinds in the Q2, namely destocking in the channel, disruptive weather and some project delays. Given the solid execution by our teams across Carlyle, We now have a more favorable outlook on full year EBITDA margins. Despite the double digit revenue decline, we expect consolidated margins to decline only 50 basis points year over year in 2023. Speaker 300:19:33We remain focused on disciplined pricing, quarter. With that, I turn it over to Chris for closing remarks. Speaker 200:19:51Thanks, Kevin. In closing, I once again would like to express my thanks and appreciation for the excellent work by all of our Carlyle employees in the Q2. Their perseverance and just plain hard work has returned us to delivering the results we've come to expect. I'd like to take a moment to share some important organizational changes that are occurring this week. First, all of you know Jim Gianakuris, our Vice President of Investor Relations. Speaker 200:20:22Jim has decided to leave Carlyle to pursue other opportunities. Jim was a covering analyst when I became CEO back in 2016. And I remember the dinner we had in New York in May of 2018, call, where I asked him if he wanted to join Carlyle and make our Investor Relations department the best there could be in the industry. Quarter. Since then, he has made significant contributions, enhancing and professionalizing our Investor Relations function here at Carlyle, As well as having an extremely positive influence on the corporate and segment finance teams. Speaker 200:20:58Jim has lived up to the promise of developing a truly world class Investor Relations department, and he will truly be missed. I wish him nothing but success and happiness in his future endeavors. And I know all of my fellow Carlyle employees feel the same way. Thank you, Jim. Stepping into the role of Vice President of Investor Relations will be Mehul Patel, who joined us when we acquired Henry Company in 2021. Speaker 200:21:26Mehul was most recently Vice President of Finance for CWT and many of you may have already met him as he's been representing Carlyle at investor conferences and roadshows for the past year. I am very excited to have Mehul backfill Jim's role and I know he will do an excellent job with the investment community. Additionally, Kelly Kaminski, who has been at Carlyle since 2016 and most recently serving as our Chief Accounting Officer, will be taking on the role of Vice President of Finance for CWT and replacing her in her role as CAO will be Steve Aldrich, who has been at Carlyle since 2012 in various finance positions, most recently as our Vice President of FP and A. I'd like to congratulate Kelly, Mehul and Steve on all their accomplishments and wish them the best of luck in their new roles. With Vision 2025 objectives and our core values well ingrained throughout Carlyle, I remain extremely optimistic for the long term success of Carlyle. Speaker 200:22:29We We will continue to benefit from the flexibility afforded us by an incredible brand and reputation and take advantage of our strong capital position and superb cash flow generating capabilities. Despite near term and potentially growing economic challenges, we will continue to drive a culture of first, pursuit of excellence in everything we do, of continuous improvement, of an entrepreneurial mindset and a commitment to superior capital allocation. We also believe the secular growth afforded us by both non discretionary reroofing demand and increasing needs for improving the energy efficiencies of buildings Pave the Way for Long Term and Significant Value Creation. We'll continue to take the necessary actions to navigate an increasingly complex operating environment, continue to deliver the Carlyle experience to our customers and create value for all stakeholders of the company. And that concludes our formal comments. Speaker 200:23:26Operator, we are now ready for questions. Operator00:23:31Thank you. Quarter. Ladies and gentlemen, we will now conduct a question and answer session. Speaker 200:23:44Question. Operator00:23:44Your first question comes from the line of Brian Blair from Oppenheimer. Your line is now open. Speaker 400:23:52Thank you. Good afternoon, guys. Speaker 200:23:54Good afternoon. Speaker 500:23:57I was Speaker 400:23:57hoping you could provide a little more color, walk us through how the quarter played out for CCM, specifically in terms of destocking, we know has been headwind for a while. How did that influence April May operations relative to June? What's your sense of where channel inventory now And how does that impact your progression into Q3? Speaker 300:24:21Yes, several things there. The first on the destock, Yes. So that destock going into the quarter, we were expecting around $100,000,000 and we're slightly above that for the quarter, About $120,000,000 in the second quarter of destock, remaining destocking. We think we Have around $50,000,000 to go in the Q3 that continues from some of the weather. And as Chris mentioned, as far as Labor on the roof has been a challenge for the contractors, so that's delayed a piece of that. Speaker 300:24:56So as going through the quarter, I mean, April, May, June, no significant differences. I mean, it ramped up in the second quarter as we'd expect versus the 4th or the Q1. So Nothing of note there. Speaker 400:25:12Okay. Understood. And then we can obviously back into a second half figure given your revised GCM sales outlook for the full year, but how should we think of the sales cadence Q3, Q4? Obviously, there's noise that has impacts operations through Q2 a bit into Q3 that you just walked through and then easy comps start to kick in Q4. If you could quantify expectations anymore, that would be helpful. Speaker 200:25:40Yes, Brian, Chris, I think that Q3 is going to look a lot like Q2 with a couple of exceptions. Obviously, Kevin talked about that. A little bit of continued destocking. Actually, one of the things that we haven't talked about that should be talked about is that In addition to the destocking, now we have this idea of restocking. The demand is still there, but I think there are a couple of things that before Kevin gets into a few more items That I think you should be aware of, which is that I think there's been a hesitation to load in the type of stock that we've seen in the past. Speaker 200:26:15So my assessment after doing the work is that we're going to see a little bit of a slow start post July 5, but the demand will pick up as people get more comfortable with the quarter, as we get closer to the end of the year and jobs Obviously, start to weather has less of an impact on the jobs and those pick up as well as distributors get A bit more comfortable bringing inventory. And I think with interest rates rising, obviously, the carrying cost of having inventory is higher. Also, we have this idea that's been put out there. You all analysts have talked about it too that there might be some pressure from some of our competitors to lower price, which we didn't see in the quarter, by the way. Quarter pricing was flat. Speaker 200:26:59But I think that might be causing People to pause a little bit to say, will I be able will I be putting in high cost inventory when there might be lower cost inventory coming? I don't see that happening, but That concern could be there. And then I think we also have to look that it's been a very good, I guess you saw by OC's with their residential shingle business. It's been a good for them, bad for weather, but a good spring In terms of roofing in the resi side, and I think that also has consumed a little bit of that working Capital that goes to inventory in the form of increased resi shingles in that. So I think when we look at the Q3, it plays out the same as Kind of the 2nd quarter demand, underlying demand is still good, pricing should be flat and we still see the trends Continuing. Speaker 200:27:50So just a little color from me there, but Kevin, I don't know if you had anything. Speaker 300:27:54Yes. So that all shakes out to the 3rd quarter being a couple percent, 2%, 3% better than the 2nd quarter. And then as you look to the 4th quarter, typically we're down 4th quarter versus the 3rd about 15%, but without the destock in the 4th quarter, it will be less than that 15% down in the 4th quarter. Speaker 400:28:17Very helpful color. Margin performance was Definitely a highlight of Q2 and that was across the board. Yes. But with the scale of CCM, obviously, very needle moving to have some margin upside relative to expectations. I assume that price cost was a solid lever there. Speaker 400:28:38Kevin, I believe last quarter guidance of $40,000,000 to $60,000,000 full year benefit for price cost. Wondering if you could give us an updated figure on that and Also offer a little directional insight as to how we should think about the margin cadence through the year and And netting to the 50 basis points improvement on a consolidated basis relative to the prior year. Speaker 300:29:03Yes. So on the price cost, as you said, we were at $40,000,000 to $60,000,000 in our previous guidance there. Now we think we're around $60,000,000 to $80,000,000 So we've upped that number and that dropped right to the bottom line where we're talking down 50 basis points this year. So maybe looking at those margins, we think we can get the CCM margins right to about 30% this year for the full year. And then as you look to CWT, I think we can get them to up maybe 3.50 to 400 basis points on the year. Speaker 300:29:41And then CIT would be up to about 17% for the full year. So 2 50 to 300 basis point improvement there. Speaker 400:29:52Excellent. Appreciate the detail. Thanks again, guys. Yes. Speaker 200:29:56Thanks, Brian. Operator00:30:00Your next question comes from the line of Tim Wojs from Baird. Your line is now open. Speaker 600:30:06Yes. Hey, guys. Good afternoon. And good working for you with you and best wishes on the new ventures. Maybe just starting off, Chris, just on the backlog. Speaker 600:30:24I guess, how What are you kind of hearing when you're talking to contractors or distributors about the backlog? And I guess, when you think about days on the roof And maybe the heat claim having an impact on some of that. I mean, how do you kind of triangulate between that versus Maybe kind of a weaker demand backdrop. Speaker 200:30:45Yes, Tim, we thanks for that question by the way and thanks for acknowledging Jim and Appreciate that. We did a lot of work in the Q2. I'm not going to go into all the detail, it'd be too long in this call, but we could take it up later around. We spent a lot of money and a lot of time and effort into understanding that. And a lot of that came out of the Q4 and the Q1 where We didn't feel we had all the information we should have had. Speaker 200:31:11So we've done a couple of things. One was we enacted a net promoter score For Carlyle, and that's been very helpful to us. That ties into what was actually happening in our perception visavisour competitors done by a world class organization. We talked over 600 contractors, distributors and other points. So we got a very good data set there. Speaker 200:31:34Started that basically back in April. At the same time, we started to look at this backlog thing. We really wanted to understand. Obviously, we didn't understand Completely in Q4, the level of inventory that was out there. We think we had a good handle on distribution. Speaker 200:31:49I think what we missed in some ways The inventory that was on the contractor and maybe at the job site. So we went through, we did that. And that also was about Probably about 600 contacts, 500 to 600 contacts that we've been updating through the quarter. So I think we've got a good handle on where the backlog is. I get Good confidence there on this statement that people have been reducing it. Speaker 200:32:12I think it would be misleading to say it's over. That's a tempting thing to say the destocking It will spill into Q3. What I would say is there are pockets of that though obviously all distributors are not alike. And You go to the Northeast and there was a lot of rain in the second quarter and we think that impacted it. So maybe they didn't destock as fast as somebody might have somewhere else. Speaker 200:32:33So We've got a good handle on backlog. I think the backlog is, as I said, coming down. And I really do believe that part of this issue with a little bit lower demand to us in Q3 and Q4 is really going to relate to that idea of how quickly the distributors Wanted to stock back up and we're getting back to normal. When we look at the Q4, we just see the same demand patterns going Kevin has talked about on numerous occasions and you all have the graphs on that. But I think when we get to 24, we're going to see that normal cadence That idea of then a more traditional load in from distribution as we get into the season in 24. Speaker 200:33:16Really, as you know, that's kind of been missing through the whole thing. We missed it when COVID hit. Hit in February, we never got the big load in. And then we really rolled right into that heavy demand through 'twenty quarter. Everything went out to distribution and not really in an organized fashion. Speaker 200:33:30It was more of whatever you could get. So I feel pretty confident about what we're seeing and that the underlying demand is really good. I'll give you 2 other things on that. I know I'm extending the question, but This demand, when Jim talked about reroofing, I mean, we know that's there. We've talked about it. Speaker 200:33:47We understand the length of Life of a Roof. We understand how roofing building owners feel about warranties and that. And I think our reroofing estimates are pretty good. When we move to this energy efficiency thing, I just saw a couple of data points that air conditioners, for example, Department of Energy just released today, 6 All electricity consumed in the United States are produced, it goes electric or goes to air conditioners. You're putting that on a grid that already has issues and then we've got significant warming trends. Speaker 200:34:20And then I saw that GM, Hyundai and Honda are building another 30,000 plugs by 2,030, but would take us to 6,030 to drive electric vehicles. But in fact, we need 182,000. So I think when we look at What the solution is going to be. It's going to be around green insulation. It's going to be around making buildings tighter. Speaker 200:34:42And that falls right into what CCM and Henry deliverance. So I think we've seen that and I feel very good about that underlying demand and that that will continue. Quarter. And then just quickly on the days on the roof, a couple of data points. People we've heard throughout the southern states From Southern California to Florida, we've heard that they're trying to work earlier, but shortened days as you start to get into the noon, 1 o'clock, it's just too hot on a roof. Speaker 200:35:08And so we've seen some compression there and you can't really do it in the dark. So you get some compression on the workday. And then something I heard recently was people are also trying to get the work done in 3 days and that there may be some changes in order pattern during the summer here where We're seeing a lot of activity Monday, Tuesday, Wednesday, but then as we get to Thursday, Friday, the crews are just not as effective. They're worn out, they're hot and people are handling So when we think about how many days on the roof, I can't give you a number for that, but it's got to be kind of like what we would see With a heavy rain or something like that where we would probably say 2 to 3 days in the quarter. Speaker 600:35:50Okay. All right. No, that's all helpful. I appreciate that. And then maybe just on CWT, just I guess what drove I mean, is that a good jumping off point on a go forward basis? Speaker 200:36:15Tim, we have Mehul with us. We didn't announce him in the beginning of the call. And I think I'm going to turn that call over there to Tim Mehul, let him have a shot at it and then we'll get Kevin back him up. Speaker 700:36:24Perfect. Thanks, Chris. Tim, nice to meet you. Great question, Tim. So overall for CWT, as Kevin mentioned, saw a really strong performance on margin. Speaker 700:36:38To your first question, in terms of what's driving it, there are several factors. One is really strong pricing discipline. We're leveraging our investments in sales excellence and ability to influence in market demand with our mostly internal sales force. So in a declining raw material environment, that's creating a positive tailwind for us. The second thing is dampening out inefficiencies from 2022. Speaker 700:37:03Obviously, there are significant supply chain challenges that sub optimized our ability to supply from the optimal plant. So that's corrected now and we're doing a good job getting back to normal there. The 4th thing, Kevin and Chris talked about synergies. We're doing a really good job quarter. That's creating a positive tailwind. Speaker 700:37:27And then lastly, really strong performance on our plants in a declining volume environment. Call. We're really taking advantage and making the right calls, right adjustments, really variabilizing our costs as much as possible, which is helping us in a declining volume environment. Lastly, to your question in terms of a jumping off point, all these things I mentioned, they're going to stay. So I think this is good margin for us for 2024 and there's continuing to be upside as well, right? Speaker 700:37:55As we try to continue to drive continuous improvement, the COS system that Carlyle has. The Henry team is embracing it. That's going to continue to provide tailwinds for us to drive margins up even further year 2, year 3 and forward. Speaker 600:38:12Okay. Okay, sounds great. Thanks so much guys. Appreciate it. Speaker 400:38:15You bet, Tim. Operator00:38:18Your next question comes from the line of Garik Shmois from Loop Capital. Your line is now open. Speaker 800:38:24Call. Hi. Thank you. Just wanted to follow-up just on the CCM margins and the 30% that You're speaking to for this year. Just curious if you could speak to maybe your confidence in that as a jumping off point moving forward in light of Some of the competitive pressures, Chris. Speaker 800:38:43You acknowledge recognizing your pricing is flat right now, but it seems like maybe the market is bracing for Speaker 200:38:53Yes, I think it's a good I think it's very sustainable. In fact, I would be disappointed if we didn't return to some of the margins we've seen in that we saw in 'twenty two. I think some of the things that we question. Number 1, I know there are one off bidding that people We're talking about in terms of pricing, lack of pricing discipline, but what I'd tell you is those tend to be infrequent and that the general consensus out there is There is good pricing discipline. I think we have as we talked about earlier when we saw some management changes in one of our competitors And we saw a different organization purchase one of our competitors. Speaker 200:39:35I think I'll give them both compliments. I think those are upgrades into both situations. So, certainly, both those parties are understand what value creation is about and how to drive value creation for those companies, which I'm assuming they want to do. We also look at new products. We've got things like the 16 foot line. Speaker 200:39:52We've got our Cav Group 2. We've got the appeal product. We continue to work on new coatings in Henry. We continue to make gains in different channels. And I think what we're finding is that our products and the value proposition we have Are really becoming ROI based. Speaker 200:40:10This idea of energy efficiency and that a roof is not just a roof, but a roof now is A key component of lowering energy consumption and driving an ROIC means that you start to shift off of this idea that we have In some way a roof can be exchanged between Carlyle or someone else. I mean each one of us is going to bring added value through that. We talked about the Carlyle experience. I think Carlyle experienced to a certain degree was a very positive in terms of pricing. I think in the pre-twenty 19, we used to say we would get There was a 5% to 7% premium to our products on the Carlyle experience just because contractors could rely on the right product at the right place at the right time. Speaker 200:40:50When you were spending a third on materials and 2 thirds on labor, if you had labor sitting around, it wasn't a good value, you'd be better to pay the 5% to a company that got you the product when you need Obviously, COVID came along, changed that, upended it. There was a lot of confusion. And as we return and as we talk about this Q3 And people wanted to be more efficient with their inventory. Obviously, we pay kind of a penalty because if you deliver faster and you could supply just in time product, There's kind of a weird benefit to not benefit, but penalty on that, which is that people then will rely on us and not put us in the inventory. So We're still going to be working on the Carlyle experience and we still think in an increasing demand world like we have around ESG and other things The new products, superior customer service will continue to differentiate product. Speaker 200:41:38And so I like that. On the other side, on the COGS side, you can see what we're doing on raw materials. We're using them a lot more efficiently. You can see what we're doing on automation in Sikeston. View visit, which we hope people will visit the Sikeston facility, you are seeing the latest generation of ISO, polyiso production and it is extremely efficient. Speaker 200:42:00And so I think when you look at those things, we look at The margins in 2022 and think that's what we're aspirational to. So I don't really look out to the next few years and think we'll see any Lower than the margins we've seen this year of 30%. Speaker 800:42:18Got it. No, that's helpful. My follow-up question is on CWT. I was wondering if Maybe go into the revenue guidance revision in a little bit more detail and can appreciate the, I guess weaker housing market, but the builders have been certainly more optimistic of late. So just wondering if you're seeing any of that As an opportunity, and just any additional color on the change in the CWT revenue guidance would be great. Speaker 700:42:51Yes. So Tim, couple of things. One is project delays that is impacting the CWT business, both on commercial and residential side. So that's a key driver for the change in overall guidance. The second thing, there is still some destocking is to a lesser degree, not even close to what we're seeing on the CCM side, but nonetheless, similar reasons is negatively impacting CWT. Speaker 700:43:18And then lastly, with the raws coming down, there are still cost for reducing price, but nonetheless, it's still a positive from a price cost standpoint. Speaker 800:43:30Got it. Okay. Quarter. Speaker 200:43:31Thank you. Hey, Gary, that was my full year by the way. Speaker 800:43:36Yes. I appreciate the answer. And of course, I'll Give my best to Jim as well and look forward to catching up down the road and working with Mehul in the future. Speaker 400:43:49Thanks, Gary. Operator00:43:52Your next question comes from the line of Saree Boroditsky from Jefferies. Your line is now Speaker 500:43:59open. Hi. Thanks for taking my question. So maybe a little switch to kind of focus on 2024 a bit. So given the impact of destocking this year in CCM, how should we think of this as a tailwind into next year? Speaker 500:44:12And if we're in a flattish demand environment, Speaker 200:44:18question. Sorry, Chris. Thanks. I'll turn it over to Jim for a more technical answer to this. But I think right now and you know what my answer is going to be and I'm sorry, but it's like 24 is too far out. Speaker 200:44:30We don't really want to make any statements around, I don't think the getting too refined. What I would say is I think directionally you are correct. I mean obviously with the if you think about legacy demand in the CCM markets being in that, Let's call it that mid single digit historical as a market growth and then we saw COVID take it down and then we saw the rebound in 2022 and we get back to that mid single digits for the market. And we see that happening. Obviously, not having the inventory and getting through the destocking should produce a nice in 2024 for us. Speaker 200:45:10And then we still do think that with the macro trends around The Investment Reduction Act, things like this, the reshoring, the things we're hearing that 2024 should be, I'll call it a more normal and also a more productive year than I'd say 2023 was on the top line. Speaker 500:45:34Given that more productive outlook into 2024, obviously margins, I think you mentioned 30% in CCM for this year. How do we think the operating How do we think about operating leverage as we head into next year then as you start to see the benefit of some growth? Speaker 300:45:48Yes. We should see 40 incrementals on that growth. And as you said, adding to Chris' piece on the top line, that destock Plus 10% impact on 2024 versus 2023. Speaker 500:46:06Perfect. I appreciate the color. And I have to say, Jim, you'll be very missed and we wish you the best of luck in your next endeavor. Speaker 800:46:14Thanks. Operator00:46:18Your next question comes from the line of Dan Oppenhaim from Credit Suisse. Your line is now open. Speaker 900:46:25Great. Thanks very much. I was wondering if you can talk a little bit more in terms of CWT, in terms of I guess curious about the project delays that were mentioned. I think residential is what a quarter of CWT, but only a portion of that is then new residential. And I guess, sort of wondering about it overall, like The significance of sort of in the revenue guidance of lower volumes from residential versus product delays versus some of the pricing? Speaker 700:46:56Yes. So this is Mehul here again. For CWT, the project delays Overall, I mean, it's not like a significant amount of the change. I would say from a percentage standpoint, I would attribute maybe 20% of it to project delays and that's going to come through a combination of Labor, just availability of labor on the construction sites, the challenges getting labor, so projects are getting extended out and then taking longer to get on to the next project. The second thing is financing, right, both on the commercial side, which is also another 25% of our Market exposure for commercial starts. Speaker 700:47:38Financing is creating project delay just from taking longer to get projects financed. Speaker 900:47:48Got it. That's great. And then on The margin side, you talked about some of the continuous improvement and sort of being a tailwind. With some of the restructuring, are all the benefits of the restructuring sort of in place now? Is that What we saw in the margins this quarter will sort of be set or was that sort of still some to come as we go into 3Q? Speaker 700:48:10Yes. He will continue to benefit us as we go forward. And that was my earlier comment on we still have continuous runway to continue to expand margins on CWT. Speaker 900:48:23Great. Thank you. Operator00:48:32Call. Your line is now Speaker 600:48:34open. Hey, good afternoon, everyone. Operator00:48:36Just on Speaker 700:48:37the project delays, maybe on Speaker 400:48:39the commercial side, are there any specific end market verticals that are weaker than others as you look across it? And also, are you seeing flat out project cancellations at this point? Speaker 200:48:50Adam, yes, good question. Haven't seen really anything on cancellations. I'm sure there are Probably some out there, but I would say they'd probably be the 3rd Sigma where somebody it's not really related to anything other than they're just not good business people and that's a bad joke. But We do if I say there aren't any, somebody will find 1. When we look at the segments, I think this year, we've seen some negative impact on the warehouses. Speaker 200:49:19I think that's been somewhat Well publicized around what's happening with Amazon warehouses and things like that. So it's been a little bit down there, although we've got places around the country like Phoenix here where warehouses Continue to be established, so there might be some movement there regionally. Education has been a good story this year, especially quarter. During the year, educational work has actually improved pretty significantly since 2021 and is at about the same pace of growth as 2022. We look at office buildings. Speaker 200:49:50Obviously, that's another one that's pretty well advertised around work from home and that although I would say that the decline is less than I would have thought and I think we attribute a lot of that to when you're putting a flat roof on an office building like us that we think of, They tend to be 3, 4 story buildings, 1 story building, maybe manufacturing attached or something like that or warehousing. And so I think we have a little bit of a less of a work from home impact than say The Central Business District of San Francisco or Manhattan, where we're seeing some tough times in office buildings, but doesn't really reflect the low slope group. Stores have been kind of a little bit down, but not too bad. And then healthcare has actually been a good story. And I think that's another vertical that as we look at aging population and we look at extended care and we look at our healthcare system, I think We'll continue to see money put into expansions. Speaker 200:50:46I know here in town, we've got a lot of expansions with the Mayo Clinic and I think in Rochester as well, they've talked about a big building expansion. So That one's doing well. And then I think when you look at more of the multifamily housing in that, obviously, there's not enough of that stock in this country. And I think that will continue To be a good tailwind with the impact though of interest rates probably causing some of those projects to Come under question if rates stay at their 22 year high like they are as announced today. Hopefully that gives you enough color. Speaker 400:51:21Yes, it's great. That's helpful. And then just some of the step up in share repurchases Speaker 600:51:25you guys are implying in Speaker 400:51:26the back half. Any guidance on how you expect that to phase in, in 3Q and 4Q? Speaker 300:51:32Relatively balanced based on what we have remaining to purchase. Speaker 400:51:38Okay, great. Thank you. Speaker 200:51:40You bet, Adam. Operator00:51:43Your next question comes from the line of David MacGregor from Longbow Research. Your line is now open. Speaker 1000:51:51Yes. Good afternoon, everyone. And Jim, good luck to you, man. Speaker 400:51:57Thank you, sir. Speaker 1000:51:57Sorry, stop police. Exactly. So I wanted to just ask you about the main components within your cost basket. We talked about price cost and thank you for the detail on that. But if Just isolate the cost basket for a second and just talk about how prices you may see trending on the main components there? Speaker 200:52:20Well, I don't think we really like to get into that. But I would say you can look at MDI. That's obviously a big one That we track. I think there's a mistaken correlation there that a lot of people have to the price of oil. I mean MDI really more correlates to what's happening in the facility and what demand major chemical companies are seeing and petroleum companies on other feedstocks that come off of that, but MDI is seeing some reduction. Speaker 200:52:56I think we look at polyethylene, that's another one. EPSP It's a big one. We've got our synthetic and natural rubbers that we see, some oils. I think just overall, again, We're seeing very positive there. I mean, in a sense, it relates to Some of the demand factors that are occurring throughout the world. Speaker 200:53:19I don't think that a poor European economy hurts Us because I think that takes out some demand and people are looking for places to put their production. I think China, certainly the chemical petrochemical industry in Taiwan And China is probably also looking for places to put that. So I think generally, we're seeing those declines again. MDI has been a pretty good one. I'll leave it at that. Speaker 200:53:40But I think overall, as you look to second half of the year. You could see why we've upped that and to Kevin's point at 60 to 80, but we're probably looking more at the Upper end of that range, more like the 80 than the 60. So I know that didn't give you enough, but hopefully that helps you from a directional perspective. Speaker 1000:54:00Yes. Okay. Thanks for that. And then just with respect to CWT, you talked about the fact that or Mehul talked about the fact that there was Still some inventory there to deal with. I'm just wondering if we see an upturn in residential orders coming through, how How much of a delay are we looking at before you actually see that business hit your book? Speaker 1000:54:25I guess, how much of a water do Speaker 800:54:26we have to burn? Speaker 700:54:28Yes. Typically for us, once a residential project has started. Our products would go on somewhere between 5 6 months after the start. So you kind of think of that in terms of where residential starts are and improvement there in terms of how long it takes us to trickle through for our products to go on the project. I think as far as inventory goes, yes, I think as the residential market, it seems like it's kind of bottomed right now. Speaker 700:54:54As it improves, it should help us on the inventory side, definitely. Yes. Speaker 200:54:58And David, the only thing I would say, and McCool does a heck of a lot more about it than me, but I think one of the things we have to segregate in CWT is this idea of putting it on new Construction and then this idea of repair and remodel. So, we can see in half of our business, upticks in demand as quickly as a weather event occurred in California on a Friday and on Saturday morning or Sunday morning, we could have an out of stock position at Home Depot and be having to respond to that. So I think as you Spend more time with Mehul understanding that the difference between that new construction and that whole side of it and then that repair and remodel that We do a lot of work taking care of roofs before they get a new roof put on. So I think that's an important Relationship to understand because it does impact what happens to sales. I think a 5 to 6 month delay on probably is a little bit at the long end on the When you aggregate the whole business. Speaker 700:55:56Yes, absolutely. So when we talk about those residential starts, you got to remember that's 25% of the business. The other 25% on the residential side and there's also 25% on the commercial side. It's all R and R and a big component of that is really non discretionary roof coating projects, products that when you have a leak on your roof, you're not going to have a choice but use those products. So demand should be stronger in those areas, especially when there's weather events and high rain events. Speaker 1000:56:27Right. Okay. Last question for me. Thank you for that detail. Last question for me is just on the operating leverage. Speaker 1000:56:32And Clearly, you guys have done a tremendous job this quarter of managing decremental margins. There's been quite a bit of discussion on price cost, so I think we're good there. But just on the volume leverage, I know there was a previous question, maybe I'll come out of a slightly different way here. But I'm just trying to get a sense of you've clearly found something different in terms of managing Your fixed costs and your leverage. And I'm just trying to get a sense of how sustainable that might be going forward And whether we should be talking about updating our sense of what volume leverage is in these individual businesses. Speaker 300:57:08Yes. On the CCM side, certainly, I think that new number for incrementals for sure is 40%. I I mean some of that was a little bit higher than that on some of the decrementals just from some of the absorption issues that you have there. But going forward, We're expecting that 40% on the CCM side. And as far as CIT, They should also be in the 40% plus range. Speaker 300:57:36And then CWT is a little bit lower than that, right, more in the 30%. Speaker 200:57:41Yes. And David, I will look back to when we started in 2016 at where we were on adjusted EBITDA. When we talked about I think this is really where and I'm glad you brought it up because it talks about the power of COS and the power of what we're doing from a lean segment What our leadership is doing around continuous improvement automation, things like this. I mean, those margins, those adjusted EBITDA margins at CCM back in We're probably in that 21% range. We're now 22%, you're up over 30 And it's been a pretty steady progression to get there. Speaker 200:58:17It didn't go from 21 to 30, it went through 2023 and 2024 in that. And so I think That to me when I look back at that almost 8 year run of continuous improvement across a variety of volume levels tells me that these are very sustainable and the team knows for me that we got to get better every day. So I think we would continue to think we'll have More gains. And obviously, as you get into the 30s, they get tougher and tougher to get, but the team continues to add to the remarkable EBITDA journey, positive journey that they've had. Speaker 1000:58:54Great. Thanks guys. Speaker 200:58:59There are Operator00:58:59no further questions at this time. I will now hand over to Chris. Please continue. Speaker 200:59:04Well, thanks, JP. Appreciate it. This concludes our Q2 2023 earnings call. I want to thank everybody for their I do want to once again thank Jim for all the good times and great work he's done and Everything he's contributed, been a big part of Carlyle. And I know going forward, he'll be very interested in what we do and we'll be keeping in touch. Speaker 200:59:26And then Mehul, thanks for being on the call and taking up those questions so quickly. You're in. So here we go. And thanks everybody. Look forward to speaking to you at the next earnings call. Operator00:59:38Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by