Carlisle Companies Incorporated Aktie

Good afternoon. My name is Megan, and I will be your conference call operator today. At this time, I would like to welcome everyone to the Carlisle Companies Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would like to turn the call over to Mr. Mehul Patel, Carlisle's Vice President of Investor Relations. Mehul please go ahead.

Thank you, operator, and good afternoon. On behalf of Carlisle, welcome. Earlier today, we reported third quarter results. The press release and the slides are available on the Investor Relations page of our website. With me on the call are Chris Koch, our Chair of the Board, President and CEO; and our Chief Financial Officer, Kevin Zdimal. Chris will start with his perspective on pricing, raw materials, margins and competitive dynamics. Kevin will then review our financial results and fourth quarter outlook and Chris will follow with their Vision 2030 priorities, and then we'll take your questions.

Before we begin, please turn to Slide 2. Today's remarks contain forward-looking statements that reflect our current expectations and are subject to risks and uncertainties. Factors that could cause actual outcomes to differ are described in our SEC filings and today's press release, and we undertake no obligation to update these statements except as required by law. We will also refer to non-GAAP financial measures with reconciliations in today's presentation and press release.

With that, I'll hand the call to Chris, starting on Slide 3.

Thank you, Mehul, and good afternoon, everyone. Our third quarter results build on the strong demand we saw in quarter 2. Despite significant market volatility, we maintained high single-digit growth, and importantly, demand remained resilient through our pricing actions. We remain focused on superior capital allocation and our path towards $40 of adjusted EPS in 2030. With that, let me turn to the key areas of focus as we enter the fourth quarter, price cost, margins, demand and the competitive environment.

Let me start with pricing. We addressed the cost increases that began in quarter 1 with multiple price increases and freight surcharges. Historically, price realization has lagged cost increases by approximately 3 to 6 months, primarily because we honor existing quotes and firm orders already in our system. On our quarter 2 call, we said we expected price cost to be close to parity in quarter 3 and then turned slightly positive in quarter 4. Unanticipated cost increases in quarter 3 did not change the shape or the direction of that curve but pushed the timing of achieving [ parity ] out by 1 quarter. Price realization and our freight surcharges are gaining meaningful traction, and we now expect to reach price cost parity as we exit 2026. Pricing has not had a detrimental impact on demand, and we saw no additional pre-buying in the quarter.

Our July outlook assumed raw material and freight costs would stabilize. Instead, oil and diesel costs rose further pressuring petrochemical-based raw materials, freight and virtually all of our costs. U.S. diesel reached record levels of about $6.50 per gallon in late September and was approximately $6.35 as of yesterday, roughly 75% higher than 1 year ago. Reaching parity as we exit this year assumes stability in input costs and freight and no further deterioration in global markets. we would expect the pricing we now have in place to be a tailwind in 2027. That brings us to margins.

Adjusted EBITDA held at $348 million on 9% revenue growth as volume leverage and Carlisle Operating System productivity helped offset inflation. Due to the unexpected cost increases in the third quarter margins declined more than we expected. We view the pressure as a timing issue, not a structural one. The drivers of margin expansion remain intact, and those are increasing price realization, freight offsets, Carlisle Operating System productivity, CWT efficiency programs, operating leverage and new products. As costs normalize, we would expect margin expansion to resume. And with that, our Vision 2030 targets are unchanged.

On the demand side, re-roofing at CCM continues to be a consistent mid-single-digit contributor as it has been for decades. Despite seeing some pre-buying activity ahead of the price increases in Q2, our channel inventories remain at normal levels. We confirmed this through hundreds of [ Carlisle ] market survey interviews and real-time feedback from our almost 1,000 person sales force. Data centers continue to build momentum, driven by our newly formed and dedicated data center market team. Our premium TPO portfolio and our manufacturing capacity is benefiting data center customers as [ PVC ] supply remains constrained and as these customers discover the excellent attributes of [ TPO ] for data center roofs. We thus expect the trend towards premium TPO systems on data centers to continue to increase. These factors help offset softness in new construction, which is a positive as our near-term outlook does not assume a recovery in new construction markets overall.

At CWT, where residential is roughly 45% of revenue. Share gains and cost actions are offsetting residential softness in sales. We also expect no near-term recovery in residential end markets as mortgage applications list price and home sales have declined sequentially. On the competitive front, our distribution relationships remain healthy, productive and aligned. We continue to monitor new market entrants in their investments, but we have not seen any meaningful impact them on our volumes.

Finally, capital allocation. Our balance sheet is strong. Repurchases are on track for $1.2 billion this year, and we are proud to be a dividend king with 50 consecutive years of dividend increases. And of course, our M&A criteria have not changed.

With that, I'll turn the call over to Kevin for the financials. And I will return to discuss our progress towards Vision 2030 before we end the call.

Thank you, Chris, and good afternoon, everyone. I will review our third quarter results and then discuss our outlook for the fourth quarter. Let's begin on Slide 3.

Our third quarter results demonstrate our team's ability to execute with discipline through macroeconomic challenges. Revenue increased 9% to $1.5 billion and adjusted EPS increased 6% to a third quarter record of $5.92. Demand remained healthy and our strategic initiatives once again drove above-market revenue growth in both segments. Price realization also contributed meaningfully and increased throughout the quarter. Importantly, we have not seen a material change in demand from our pricing actions or geopolitical developments. We have also not seen a meaningful increase in project delays or cancellations. Higher input costs remain the primary challenge in the quarter. Renewed escalation of the conflict in the Middle East drove petroleum-based raw material diesel and freight costs higher than we anticipated in our July outlook.

On our July call, we expected price cost to be neutral in the third quarter and positive in the fourth quarter. However, costs continued to increase, which pushed our recovery time line out 1 quarter. We now expect to reach price/cost parity as we exit 2026. As we have seen in prior inflationary cycles, price realization typically lags rising costs, and that timing pressured our margins in the third quarter.

Turning to Slide 4. Third quarter revenue increased 9% to $1.5 billion. Healthy reroofing demand, strong volume and price realization that increased through the quarter more than offset continued softness in residential and nonresidential new construction. Adjusted EBITDA was essentially flat at $348 million, with an adjusted EBITDA margin of 23.8%, down 210 basis points year-over-year as raw material and freight costs increased faster than price realization during the quarter. Higher volume, disciplined cost management and Carlisle Operating System productivity helped offset that inflation and held adjusted EBITDA in line with the prior year. Record third quarter adjusted EPS of $5.92 increased 6% year-over-year, driven by higher segment earnings and an 8% lower diluted share count from share repurchases, partially offset by higher interest expense from the notes we issued in August 2025 and higher corporate compensation and benefit costs compared to the prior year.

Moving to CCM on Slide 5. CCM revenue increased 8% to $1.1 billion, driven by strong volume growth and price realization that built throughout the quarter. Reroofing demand remained healthy, growing mid-single digits, while new construction declined mid-single digits, and our end market grew low single digits overall. Chris will discuss the strategic initiatives behind our above-market growth.

On our second quarter call, we noted that customer prebuying ahead of announced price increases contributed a couple of percentage points to CCM's growth. Our strong third quarter volumes confirm that the vast majority of that growth came from end market demand. Channel inventories are at normal levels for this time of year, and October bookings remained strong. CCM adjusted EBITDA increased 1% to $306 million, with an adjusted EBITDA margin of 28.2%, down 200 basis points year-over-year. The margin decline reflects further raw material and freight inflation from where we started the quarter, which outpaced our price realization. This was partially offset by operating leverage on higher volume, Carlisle Operating System productivity and cost controls.

Turning to CWT on Slide 6. Revenue increased 9% to $379 million, as share gains and weather conditions that drove demand for roof coatings more than offset continued softness in residential and nonresidential new construction. CWT adjusted EBITDA increased 13% to $68 million, and adjusted EBITDA margin was 18%, up 60 basis points year-over-year. Structural cost savings and higher volume drove that improvement, more than offsetting raw material and freight inflation that outpaced price realization.

Importantly, the structural efficiency initiatives at CWT are substantially complete and the benefits are building. Our investments in automation, footprint consolidation and in-house expanded polystyrene resin production are contributing and synergies from our recent insulation acquisitions are beginning to show in our results. Together with our October pricing and updated freight surcharges, these actions position CWT for stronger margin performance in the fourth quarter and into 2027.

Turning to Slide 7 and our financial position. As of September 30, 2026, we had $547 million in cash and cash equivalents and $1 billion available under our revolving credit facility. Net debt to EBITDA was 1.8x within our target range of 1 to 2x. This balance sheet strength provides significant flexibility to continue investing in organic growth, pursue disciplined M&A opportunities and return capital to shareholders.

Moving to cash flow on Slide 8. Third quarter operating cash flow from continuing operations was $314 million, and free cash flow from continuing operations was $277 million after $37 million of capital expenditures. The year-over-year decrease primarily reflects higher working capital to support increased sales and higher raw material costs. For the first 9 months, free cash flow from continuing operations was $407 million, and we expect a strong fourth quarter consistent with our normal seasonality. During the quarter, we repurchased $350 million of shares, bringing year-to-date repurchases to $850 million, including $140 million of dividends, we have returned $990 million to shareholders so far in 2026. We also increased our quarterly dividend by 14%, marking our 50th consecutive annual increase. We remain on track with our full year repurchase target of $1.2 billion, while preserving the capacity to pursue acquisitions that meet our criteria.

Turning to our fourth quarter outlook on Slide 9. We expect consolidated revenue to grow high single digits year-over-year with both CCM and CWT up high single digits. At CCM, pricing and reroofing demand are expected to more than offset slower new construction. At CWT, pricing and share gains are expected to more than offset continued softness in end markets. We expect fourth quarter adjusted EBITDA margin to be flat year-over-year as the benefit of our pricing actions continues to build against elevated input costs. For the full year, we expect ROIC of approximately 25% and free cash flow margin of approximately 15%. In both segments, we expect price cost to improve as realization builds, and we expect the benefit of our pricing actions to carry into 2027. Consistent with our approach throughout the year, our outlook does not assume a recovery in new construction.

Turning to our Vision 2030 financial goals on Slide 10. We remain confident in our long-term targets of $40 of adjusted EPS and ROIC above 25%. Our path is founded on above-market organic growth, Carlisle Operating System productivity, disciplined capital return through share repurchases and targeted synergistic M&A when the right opportunities are available at the right price. These are flexible, independent levers, and our strategy does not depend on all of them contributing significantly in every year. As we demonstrated under Vision 2025, when we exceeded our EPS goal 3 years ahead of schedule, the trajectory toward the target can accommodate choppy periods.

With that, I'll turn the call over to Chris.

Thank you, Kevin. The third quarter again demonstrated our focus on managing what we can control. Despite renewed escalation in the Middle East driving higher input costs and soft new construction both CCM and CWT grew faster than their end markets. Revenue increased 9%, and we delivered record third quarter adjusted EPS. Our teams price for value, maintain spending discipline delivered the Carlisle experience and continued investing for long-term growth.

Now I'd like to cover our progress on Vision 2030, starting with growth and innovation and then pricing actions behind our fourth quarter and 2027 outlook. Reroofing anchors our business, and this quarter has returned to the consistent multiyear mid-single-digit growth that we are used to experiencing from a dip to the low single-digit growth that we saw in the first half of this year. Since we introduced Vision 2030, reroofing has grown every year through very different market conditions. Why is that? Because more than 70% of the nonresidential building stock in North America is over 25 years old and for a building owner, replacing a roof is not a discretionary decision. That recurring demand gives us a steady base in any market.

New construction remains soft in geopolitical developments and recent interest rate increases have made the timing of a recovery less certain, but our plans do not depend on a market recovery. Carlisle was built to outgrow its markets and perform throughout the cycle, not just at the peak, and that strategy is delivering results. CCM revenue increased 8% and CWT increased 9% ahead of their end markets all the while price increases were moving through the market. Customers continue to choose Carlisle for the Carlisle experience, which is the right products in the right place at the right time, supported by our experienced employees.

Of all our Vision 2030 levers, innovation is the one I'm most excited about because its impact compounds over time. And importantly, innovation clearly delivers on the idea that price to value is a key attribute of differentiation and margin expansion, especially when customers experience the value to their business that new products provide. Over the past year, our voice of the customer process grounded in outcome-driven innovation has generated hundreds of new product ideas and validated active projects in our stage gate pipeline, and those products will drive measurable benefits to our customers. That work is translating into more new products in the market. We have launched 9 of our 12 planned projects for 2026. The remaining launches are on schedule, and we remain on track to generate 25% of total sales from products introduced in the past 5 years.

A solid example of innovation can be found in 2 of this fall's launches that will take [ Primer ] out of the job. [ BlueSkinSA-HPX ] for commercial walls which can be applied without [ primer ] year-round and [ vapor CL TRs ] for roofing, which requires no primer unapproved substrates, both eliminate an installation step and create value for our contractors.

On the retail front, Home Depot now carries Henry's UltraTouch made with 100% recycled denim insulation in over half its stores and sales continue to improve in stores that have carried it for a year or more. This month, we also launched a [ pay-per ] faced version for markets where building codes require moisture control with a broader rollout plan for February. Our other recent inductions, including SeamShield, [ RapidLock, VP Tech and Appeal ] continue to gain traction with contractors looking to get their crews to the next job faster. The expansion of our Research and Innovation Center that we broke ground on earlier this year will help us sustain an increasing cadence of new product introductions, shorten our time to market, expand margins and strengthen the proprietary capabilities that differentiate Carlisle. That work now has new leadership and has demonstrated our commitment to a robust succession planning process.

Dr. [ Justin Scape ] joined Carlisle in September as Senior Vice President of Research and Development, succeeding Dr. [ John Dobson ], who retired as planned after roughly 15 years across Henry and Carlyle. I want to thank John for his contributions and welcome Justin to the team.

Turning to the pricing actions behind our fourth quarter and 2027 outlook. At CCM, 3 price increases are now in the market from April, July and August, and we have executed freight surcharges for a third time. At CWT, our second waterproofing increase is in effect in October, along with updated freight policies. On the supply side, the force majeure declarations on [ MDI ] and polyols that were declared in May have begun to lift. Because of this, we expect MDI pricing to ease as we exit the year. We are hopeful that as we exit 2026, we will also see resolution to the global conflicts currently underway. And with that resolution, a meaningful cost relief as we move through 2027.

As those costs normalize, the pricing now in place should become a tailwind for our margins next year. Our experience would suggest that margin expansion follows cost normalization after a period of raw material inflation. However, if costs remain elevated or increase, we will evaluate further pricing actions as we have in the past cycles. Our approach remains disciplined and deliberate and we like where we stand heading into 2027.

Through all the volatility of 2026, Carlisle continued to generate substantial cash flow. We view capital allocation as a core competency, not a byproduct of the business. Whether we are investing in our businesses, pursuing acquisitions or repurchasing shares, our objective is the same, deploy capital where it creates the greatest long-term value for our shareholders. In August, our Board raised the quarterly dividend 14% to $1.25 per share, our 50th consecutive annual increase. We're pleased to reach this milestone and join the fewer than 60 companies that are part of this class known as Dividend Kings. This milestone reflects the durability of our business model and our long-standing commitment to returning capital to shareholders.

On the M&A front, we remain focused on acquisitions within the building envelope that support our market leadership position add to our system selling approach and increase our content per square foot. We seek deals that fit our 4 criteria: an existing organic growth story, tangible hard cost synergies, a strong management team ready to take on more and the ability to deploy the Carlisle Operating System, the Carlisle Experience and our integration playbook. Our commitment to being superior capital allocators will not change, and our shareholders can count on it.

Stepping back and simply putting it, demand held through our pricing actions and price is catching up with cost inflation. We are growing faster than our markets, funding innovation and returning substantial capital to our shareholders, all in a volatile cost environment, and we expect the benefit of our pricing to keep building through the fourth quarter and into 2027.

Carlisle operates an imperative business model. Buildings have to be built, maintained and improved over time, and we serve that need largely in North America, we believe, is the best building products market in the world. Reroofing gives us a recurring foundation of demand, and our cash generation allows us to keep investing through the cycle. The structural drivers behind our business from energy efficiency and the push for labor savings to a persistent housing shortage remain opportunities for long-term growth. Our priorities are unchanged heading into 2027, operational excellence, a better Carlisle experience, accretive M&A and value-creating innovation. We expect these growth initiatives to help offset end market conditions that could remain similar to those today.

That focus keeps us on the Vision 2030 path, and we remain confident in our targets. And I repeat this a lot, but it's a good reminder to all of us none of this happens without dedicated and driven people. From our sales teams in the field to our innovators in the labs, to our teams and our plants and in customer service. Thank you. You stayed focused on our customers through a demanding quarter and it shows in our results. That is why 3 times in the past 10 years, we have issued broad-based equity grants to give our employees a personal stake in Carlisle's performance were driven by shared success.

Thank you all for your time and continued interest in Carlisle. And with that, I'll turn it back to the operator to open the line for questions.

[Operator Instructions] Your first question comes from the line of Tim Wojs from Baird.

Guys, good afternoon. Thanks for the time. Maybe just the first question I have, just -- can you talk about just what price realization was in Q3 and kind of what you exited the quarter with and what's in the guide for Q4, specifically for CCM? And you guys both mentioned that price cost to be positive in 2027. Is that just the timing dynamic of kind of pricing catching up to inflation? Or are you explicitly assuming that costs come down?

Yes. Tim, I think we made clear that we're seeing that price catch-up costs as we move through the third quarter and then into the fourth quarter. And I think as we exit '26, I said we're going to reach this parity. And then it will catch up and the pricing will exceed the cost. And I think even if [indiscernible] stay where they are today, we would expect to see some pricing tailwinds and then if they go down, obviously, it's even incrementally better. And then Kevin will touch on this specific pricing.

Yes. And the price realization, it's spot on to what we said in the Q2 call. We were about 4% in Q3 for CCM price increases. And then Q4 we're looking at about 7% of price realization on a year-over-year basis. So nothing has changed from a price realization. Obviously, the thing that changed was the raw material costs and freight that continue to escalate in Q3?

Okay. And then just on data centers, like is there a way to size the benefit that you're getting on the volume side from just kind of being more involved in the data center business this year? And is it just because capacity is constrained in [ PBC ]? Or is there really a more structural opportunity for TPO there?

[Operator Instructions]

Megan, I'll answer this question. Thank you for that reminder. And Tim and group, I think there's 3 things of data centers that are helping us. I'm not going to exactly give you the total dollar impact because I don't want to give that to competitors, obviously. But our business in the third quarter, I think, was up something like 200%. And 3 things that are really driving it. One, we assembled quite maybe almost a year ago, a dedicated data center team. That was one of the actions that we committed to. And included in that are some [ BOC ] things that are going to help us there.

Two, we're obviously benefiting from the constraint in the industry on TPO and that kind of thing. And then three, I would say that we're benefiting from a greater awareness of Carlisle just being in the market and being a better provider and people take advantage of the Carlisle Experience. And I think it was pretty obvious earlier that we weren't there to the level we needed to be. And once we got in the game, people are seeing, yes, we have alternatives and other solutions as well as we've got a lot of capacity to be able to address their needs. And in really in a market where I think right now, speed is of the essence the Carlisle Experience of that right product, right place, right time and being able to exceed expectations is really benefiting us. So I think those are the 3 things that drove that growth in the third quarter.

And then as we go into fourth quarter next year, we want to get more on the front end of this and be a key part of the specifications that we do in all the other areas that we serve to. So that sums it up.

Your next question comes from the line of Susan Maklari with Goldman Sachs. Please go ahead.

Thank you. Good afternoon, everyone. Hello, everybody. My question is on the competitive environment that you're seeing? And how you're thinking about investing in the Carlisle experience and your service levels. And what that means for your ability to compete, especially in this kind of an environment that we're seeing and drive the outperformance that you've delivered for the last 2 quarters now relative to the market.

Thanks, Sue. I think -- it's a difficult environment for every. The volatility that's there. It doesn't contribute to anyone's planning and they don't want to have any waste out there. And I think that really hits on the Carlisle Experiences. It's just Carlisle has built up over all these years, just wonderful relationships on specifications. People can rely on our teams coming in there. While others may be looking to have cost cutting or maybe not adding as much as we mentioned, we continue to invest through the cycle. I think we have something like over 1,000 salespeople. I was just reading our NPS scores and there was a great correlation between frequency of contact with your salesperson and success at your job site. So I think at your office.

So I think this idea that Carlisle has an unbelievable structure put in place, and we continue to enhance it and just continue to drive that relationship, that steadiness, that reliability when it starts with order entry and getting -- being in a specification and then taking that out and being having your call answered right away or having a great rep call on you with immediate answers to your problems. And then moving it through our factories and seeing our team deliver something like let's say, 98% on-time delivery plus. So you know it's going to be there.

And then really warranty plays a big role as well. I think the investment in the warranty and the service we do in terms of inspections and things like that. Obviously, it gets you paid quicker, gives you confidence as an end user that you've got a great product on the roof and then the service afterwards in terms of training and other things like that.

So I think when we look at competition, I think we want to continue to invest to be the leader because we believe that I think it showed in the third quarter that even in a rising pricing environment where we tend to be the price leader, we're not seeing any suffering demand because I think people are seeing the value and that points right to innovation again. And what we want to do is drive innovation that provides value that we can actually monetize both the distributor of the contract or everyone in the system and can monetize that value creation we can to in terms of greater content per square foot in terms of greater margin per square foot.

Okay. That's very helpful. And just in general, how would you contextualize the competitive backdrop today?

I think the competitive backdrop is, I'm going to say, relatively unchanged. We've got some very good competitors that are out there. We've competed against them for a long time. They're well known. They have good leadership teams. You know the names. They're extremely professional. We mentioned years ago when [ John Omar ] went over to [ GAF ] and we saw the team at [ Ameris ] be created that we knew those were improvements in the management team.

So I'd say the competitive environment is still quite robust. I think the team's competitors do a good job every day. We have seen a couple of new entrants, but as we mentioned, as of yet, no real impact on us and our teams.

Your next question comes from the line of Bryan Blair from Oppenheimer.

You noted that structural cost savings continue to ramp at CWT from automation footprint consolidation, in-house resin capacity, likely some other factors as well. If we were to assume flat volume going forward, which is hopefully conservative given the share gains that your team is experiencing there. What would be the carryover cost savings or equivalently, the margin lift in 2027 under those circumstances?

Yes, I'll take that one. So Bryan, thanks for the question. As we talked about these investments that we made to improve operating efficiency at CWT, those were all substantially completed at the beginning of this year. So just as a reminder, for this year, we expect somewhere between $20 million and $30 million of contribution from these investments. We'll get a little bit of benefit carryover in Q1. And from these specific investments we made, the [indiscernible] gets that many more.

But with that said, there are a big runway where there's a lot more opportunities through similar types of investments and more automation, more maturity in COS and other things that we could do there. So we still believe the runway to get up to 30% is there through 2030 to get to our Vision 2030 targets, we have CWT getting up to 25%.

Yes. And Bryan, I'll just add and Mehul can jump in on this, too. But the progress that we made really got masked. I mean the team did an excellent job. And if they -- some are situation at CCM, if the cost has kind of continued to increase and overwhelm some of CWT's progress in the third quarter. I think Mehul told me it was multiple hundreds of basis points that without that rise, if we had just been where we were at the end of the second quarter, I think we would have had I mean what would you say, 500 basis points or something CWT improvement.

So it's real, it's there. Unfortunately, that continued escalation around materials and that lagged the pricing and certainly the diesel and freight [ search ] situation, took a lot of that good press that would have been in CWT and would have shown the great progress the team is making kind of masked it and so they didn't get credit for it.

Your next question comes from the line of Tomo Sano from JPMorgan.

Maybe on CCM, reroofing grew mid-single digit this quarter. So given everything that's changed recently, are you seeing any change in removing activities, whether in project timing, customer behavior or the pipeline as you look into 2027?

No, Tomo, we're not. Thanks for the question. As we mentioned, I think, in every one of these conference calls, that's a significant part of our business. We view it almost in a annuity-like manner in the sense that when you tend to work with Carlisle on your original roof, I think, and it's probably true with our competitors as well that you tend to stay with that when you do the reroof you set of distributors are doing a great job of paying attention to [indiscernible] age. Our contractors are providing service every day on those roofs and making repairs and that. And so there's quite a relationship there.

As well as we have the warranty data. And so we keep a really good track record of where we are with these jobs and when they need to be reverted and as many people, not just me even at other companies. They've said, reroofing is just not an option. You can delay it a little bit, but ultimately, you got to do that. So I don't see any change in reroofing demand as we go into the fourth quarter and as we go into 2027. And obviously, we like to see new construction to because that means more roofs to be roofed in 17 to 25 years as we keep going forward. I won't be around for that. But obviously, the building stock that we had 15 to 20 years ago, as Mehul articulated, is still moving through the system and providing great demand on that 70% of business of ours that is reroofing.

Your next question comes from the line of David MacGregor from Longbow Research.

Congratulations on the [indiscernible]. So many questions. We just get one shot. So I guess we got a picker spot. It's interesting you talked about demand remains resilient to pricing actions, but -- and I guess if reroof is truly an elastic demand, that's the way it should be. But you kind of believe at some point, there's some demand elasticity here. Maybe it's people parsing the size of the project due to their limited cost budgeting or there's something that comes into play there. This theoretical abstract that reroof being perfectly demanded elastic. How should we think about that? I mean if we see 2027, and we end up in kind of a inflationary macro environment where we continue to see inflation and where should we be watching for the first signs or what are you watching for the first signs that maybe there is some reaction by the market.

I don't think I don't think there's really anything on reroofing that I would point to. I do think we've already seen some pretty have the impacts and what I would call scenarios play out over the last 10 years. I think about COVID and what happened. And we had supply constraints. And we had -- everybody was going to work from home, and we were never going to build any more buildings downtown anymore and that kind of thing. And then we had the movement around energy efficiency, which is still there, but it was had maybe bigger impact, and there were going to be constraints in that manner because we know buildings eliminated a lot of GHG emissions.

And then we move into the tariff situation and election and tariffs impacted raw material supplies and it impacted demand, and we've seen Chinese manufacturing roll out here. We look at Europe and when we look at the presence of electric cars in Europe and things like that. And again, another major shock in terms of what's happening here with the conflicts, the global complex. And that's where, I guess, having been in the seat now almost 11 years. You run through these things and I am equally amazed as you are at the just strength and resiliency of the reroofing business. But I think it just points to the simple fact that it's not discretionary that it is -- we still continue to provide a lot of value around reroofing.

Like I said, our contractors and distributors spend a lot of time with these customers, making sure that their roofs are intact, they're there. And frankly, it's not a big cost or percentage of what a company was doing. Let's take a major international freight company that has buildings around the world and has a program for reroofing their warehouses that are storing packages every day at our airport, which are hundreds of airports where they're doing this.

I think in the grand scheme of things, they're more concerned about not having the cost or insurance liabilities of having a leaky roof than they really are worrying about the marginal cost of a roof. It doesn't mean they don't do on capital allocation, doesn't mean they're also not concerned about it. But in their spend, that is more of what I would just say a must-have than a, hey, it'd be nice to have.

And so I think on the reroofing side, I just don't see after I've been here for 11 years, much, it's going to come up, it's going to change that. And I think where you get the flex is around things like labor. We still are labor constrained, and so that's going to have an impact on -- even if there's a slowdown, you still have new construction work to do. And what does that impact I think new construction itself, if it picks up at all is good if it goes down, while we're already seeing it down. And then we always talk about residential construction being part of our portfolio. And I think we are absorbing that right now, what are we at a 14.5-year low on homebuilding or something. And so I think we've seen a lot of the things that you mentioned, and we still seem to be resilient and coming through it okay.

Yes. Good. Well, congratulations on all the progress and particularly on the CWT side as well.

Your next question comes from the line of [ Garik Shmois ] from D.A. Davidson.

You're expecting EBITDA margin to be flat in the fourth quarter. I was hoping you could unpack that by segment. And then just a clarification. Can you remind us just how long the lag is from when you start to see any relief on MDI and polyols with some of the supplier constraints easing, how quickly could we start to see some of that potential benefit show up?

Yes. [ Derik ], I'll let Kevin handle the second one, but the first one, the second one around MDI and polyols Mehul may want to comment as well. I've been a little closer to the MDI. We are already -- we're going to see some reduction, probably a couple of percentage points, maybe a little bit more as we move through the fourth quarter and then into Q1 even in the situation we're in right now. So that specifically for MDI, I think that lifting of the force majeure and then it has really been impactful and we'll get some relief immediately here in the fourth quarter.

Some of the relief will be delayed until Q1, obviously, because of the -- just the movement, physical movement of it to our factories. And then Mehul, you've been looking at polyols a little bit more, you might want to have a comment on what you think is happening there in the quarter.

Yes. Similarly to MDI, the force majeure that limited supply, those are all improving. As a reminder, we had shortages of carbon monoxide and chlorine that impacted MDI. There was a fire at a supplier polyols. The supply is back up. And typically, what we've seen is 2/3 of the cost is driven by the supply demand dynamic. So we should expect to see improvement as we go into 2027 on both of these communities.

Then on your margin question, yes, we still are being impacted by the higher raw material and freight costs as we talk about second half of the fourth quarter, we should be at price [indiscernible], but we'll have some negative, maybe about $10 million of negative in both segments. And with that, that brings our EBITDA margins that we're looking at, at CCM is flat year-over-year and then about 100 basis points of improvement at CWT. And then overall, for the company, flat EBITDA margins when you take into account the corporate expense.

Your next question comes from the line of Ryan Merkel from William Blair.

Fourth quarter gross margin, I was hoping you could provide a little color on what you think that might look like. I was kind of thinking flat year-over-year, but correct me if that's wrong. And then what's your estimate this year for raws and freight dollar inflation since it's higher?

For which period on the [ rosin ] freight, were you talking?

[ Ross in freight ] for '26 at this point.

Yes. So for gross margins, they would be about flat at CCM and then we see improvement on the CWT side really to that [indiscernible] of about 100 basis points of improvement. Year-over-year on the [ raws ] and the freight, that's a freight that's just continued to escalate throughout the year. That's been the biggest item that we've had for increasing prices to pass along to catch up on the freight cost. That's been more of a delay than the raw material side, but both have been playing catch up on each of them.

Yes. And just to give you a sense, Ryan, in terms of the magnitude of the increases we're looking at from a raws and freight combined standpoint in Q2 were up about double digits from a percentage standpoint. In Q3, that's jumped up to high teens and with the Q4 levels that we're seeing assuming cost save, where they're at right now, we would expect somewhere between mid-teens and high teens up in Q4 as well.

Your next question comes from the line of Keith Hughes from Truist Securities.

You had talked earlier in the call about like the CCM, you're thinking price is going to be up around 7% in the fourth quarter. Just a couple of things on that. One, would it end the quarter at a faster pace as you implemented during the fourth and thinking about going into next year? And also that would imply volume would be based on the guidance of low single digits. Anything to read there on demand?

Yes. So on demand, we have the end market being up a couple of percent. And then as you said, price up 7%, so high single digits for the fourth quarter maybe there's some conservatism in there overall. So that is how we're looking at from the top line.

As the quarter goes on, I think that number of 7% pretty much is in place at in October, and then that just carries on through November, December. So it's not like we will exit December at 8% plus number. But it's hard to say exactly how the quarter will play out at this point?

Your next question comes from the line of Adam Baumgarten from Vertical Research Partners.

Just to clarify on the price cost exiting the year. That assumes you get to the pricing number that you talked about in 4Q and that input stay stable from where they are today, correct? That does not include any incremental pricing?

That is accurate. We are just what we are seeing the price realization continue and it's continued [indiscernible] climb based on the raws of today and the price increases that are implemented. That doesn't include any actions -- further actions.

There are no further questions at this time. I'll hand the call over to Chris Koch for closing remarks. Please go ahead.

Thank you, Meghan, and thanks, everyone. We appreciate those thoughtful questions and your continued interest in Carlisle. I look forward to talking with you in February where we'll cover the fourth quarter and give the full results of 2026, along with more details on our expectations for the rest of '27 at that time. So that concludes the call, and thanks again.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon. My name is Rebecca, and I will be your conference call operator today. At this time, I would like to welcome everyone to the Carlisle Companies Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Mr. Mehul Patel, Carlisle's Vice President of Investor Relations. Mehul, please go ahead.

Second Quarter 2026 Earnings Call. I'm Mehul Patel, Vice President of Investor Relations. We released our second quarter financial results earlier today, and you can find both our press release and the presentation for today's call in the Investor Relations section of our website.

Joining me today are Chris Koch, our Board Chair, President and CEO; and Kevin Zdimal, our CFO. Today's call will begin with Kevin, who will walk through our Q2 financial performance and updated full year 2026 outlook. Chris will then follow with closing remarks and an overview of our long-term value creation strategy. Following our prepared remarks, we will open up the line for questions.

But before we begin, please refer to Slide 2 or we note that today's comments will include forward-looking statements based on current expectations. Actual results could differ materially due to a number of risks and uncertainties, which are disused in our press release and SEC filings. As Carlisle provides non-GAAP financial information, we have included reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, both of which are available on our website.

With that, I will turn the call over to Kevin on Slide 3.

Thank you, Mehul, and good afternoon, everyone. I will review our second quarter results and discuss our updated outlook for the full year. Let's begin on Slide 3. Our record second quarter results reflect the Carlisle team's relentless focus on execution and operational discipline, continuing our track record of delivering results through challenging macro environments.

Revenue was a record $1.6 billion, increasing 8% year-over-year and adjusted EPS increased 12% to a record $7.03. These results demonstrate our unwavering commitment to operational excellence through disciplined pricing, productivity from the Carlisle operating system and strong commercial execution, we delivered solid growth and profitability despite a significant increase in petroleum-based raw materials and freight costs stemming from the conflict in the Middle East and related supply chain disruptions.

Inflation and several supplier force majeure events impacted key inputs across our roofing and insulation product lines. Our response was timely and commensurate with the cost pressure we expect in the coming months. Since the start of the conflict, we have announced three broad-based price increases and implemented freight surcharges to offset higher raw material and freight costs. As we have seen in prior inflationary cycles, price realization typically lags rising costs.

As I mentioned on the first quarter call, we expected to see negative price cost in Q2 as we work through committed quotes and the required notification period to customers. We expect the benefit of our pricing actions to build through the second half of 2026, turning positive in Q4.

Turning to Slide 4. Second quarter revenue increased 8% to a record $1.6 billion, driven by solid performance in both CCM and CWT, healthy reroofing demand, execution of our strategic initiatives, including improved traction in data centers and a couple of percentage points from customer prebuying ahead of announced price increases more than offset, continued softness in new construction.

Adjusted EBITDA increased 6% to $412 million with an adjusted EBITDA margin of 26.2%, down 70 basis points year-over-year as a result of the expected impact of raw material and freight cost increasing faster than pricing realization during the quarter. Carlisle Operating System productivity improvements, disciplined cost management and synergies from recent acquisitions helped offset some of that pressure. Record adjusted EPS of $7.03 increased 12% year-over-year was driven by higher operating earnings and share repurchases, partially offset by higher interest expense.

Moving to CCM on Slide 5. CCM delivered record revenue of $1.2 billion, an increase of 8% year-over-year. Reroofing demand remained healthy, growing approximately 3% while commercial new construction declined mid-single digits. The vast majority of CCM's high single-digit revenue growth resulted from strong commercial execution and the success of our strategic initiatives while customer prebuys ahead of announced price increases contributed a couple of percentage points of growth.

Adjusted EBITDA increased 5% to $363 million and adjusted EBITDA margin was 30.7%, down 90 basis points year-over-year. Margin performance was in line with the expectations we discussed last quarter and reflects the benefits of higher volumes, partially offsetting elevated cost inflation during the period. Importantly, achieved margins above 30%, despite significant raw material and freight inflation, underscoring the strength of our business model, the resilience of reroofing demand and the effectiveness of the Carlisle Operating System.

Turning to CWT on Slide 6. Revenue increased an impressive 10% to $389 million through solid execution on share gain initiatives, which more than offset continued softness in residential and nonresidential new construction end markets. Adjusted EBITDA increased 5% to $74 million and adjusted EBITDA margin was 19%, down 90 basis points year-over-year. While margin was impacted by the same inflationary pressures affecting CCM, CWT's margin improved 380 basis points sequentially from the first quarter. This improvement reflects the benefits of structural efficiency initiatives we implemented over the past year and CWT's relentless focus on costs.

Investments in automation, footprint consolidation and in-house expanded polystyrene resin capacity are now largely in place and beginning to generate operating leverage. We expect those benefits to continue building through the rest of the year and drive further margin improvement in the second half.

Turning to Slide 7 and our financial position. As of June 30, 2026, we had $665 million in cash and cash equivalents and $1 billion available under our revolving credit facility. Net debt to EBITDA was 1.7x comfortably within our target range of 1 to 2x. This balance sheet strength allows us to continue investing in the business to drive organic growth, pursue disciplined M&A opportunities and return significant capital to shareholders.

Moving to cash flow on Slide 8. For the second quarter, operating cash flow from continuing operations was $244 million. And free cash flow from continuing operations was $203 million, reflecting the expected working capital impacts during the peak construction season. Capital expenditures were $42 million. During the quarter, we repurchased $250 million of shares, bringing year-to-date purchases to $500 million. Including $90 million of dividends, we returned $590 million to shareholders in the first half of 2026.

Given our strong cash generation, and recent stock price levels versus our internal assessment of the intrinsic value of our shares, we are increasing our full year repurchase target from $1 billion to $1.2 billion, which will bring our total share repurchases to more than $7 billion over the last 10 years.

Now turning to our updated outlook on Slide 9. Based on our first half performance, continued momentum in our strategic growth initiatives and the pricing actions we have taken, we are raising our full year 2026 revenue outlook to mid-single-digit growth but lowering margins 50 basis points to now reflect flat adjusted EBITDA margin year-over-year. The change in our margin outlook reflects the additional raw material and freight inflation impacts stemming from the extended conflict in the Middle East and related supply chain disruptions. We expect pricing to recover those costs, but with the previously discussed lag in timing.

Importantly, our structural margin expansion initiatives remain on track and our long-term margin outlook remains unchanged. With that consolidated outlook, we now expect CCM revenue growth up mid-single digits with reroofing up 3% to 4%, new construction down low single digits and pricing realization building through the second half. We expect CWT revenue growth also up mid-single digits with meaningful margin improvement in the second half as the benefits of our structural initiatives continue to build. We continue to expect full year ROIC of approximately 25%, free cash flow margin of approximately 15% and double-digit adjusted EPS growth in 2026.

Finally, turning to Vision 2030 financial goals on Slide 10. We remain confident in our long-term targets of $40 of adjusted EPS and ROIC above 25%. Despite a challenging environment over the last 2 years for new construction and a difficult deal environment where sellers' expectations continue to be elevated relative to our valuation, we remain on track to meet our 2030 objectives.

Through the end of 2026, we expect our adjusted EPS CAGR since launching Vision 2030 to exceed 11%. We believe that our strong operational performance, a relentless focus on the Carlisle experience, investment and innovation, pursuit of accretive M&A and superior capital allocation keeps us well positioned to achieve our long-term objectives.

With that, I'll turn the call over to Chris.

Thank you, Kevin, and thank you all for joining us today on our Q2 earnings call. I'll begin by briefly emphasizing some points that Kevin touched on. But before I do, let me first address the rumors in the market recently regarding a Carlisle effort to acquire Owens Corning. We have not publicly commented on these rumors. And today, I would like to reiterate our stance by clearly stating Carlisle does not comment on rumors or speculation.

Turning to our second quarter performance and market conditions. The quarter demonstrated exactly what we mean when we say we focus our teams on what we can control, a hallmark of our results-driven culture. Despite significant macroeconomic headwinds, including the Middle East conflict, higher oil prices and the continued multiyear drag from new construction markets, we delivered record revenue and record adjusted EPS. We also took decisive pricing actions in response to the significant events and ongoing conflict in the Middle East.

We also made meaningful progress on structural improvements at CWT and continued to convert our innovation pipeline into commercial wins. The recent geopolitical events along with ongoing uncertainty around future interest rates have clouded the timing of a new construction market recovery. The increase in our revenue outlook assumes no such improvement for new construction in 2026.

Instead, our revised outlook is built on continued superior capital allocation, relentless focus on operational excellence, delivering the Carlisle experience and bringing to market the latest and innovative products and services to benefit our contractors. As a reminder, Carlisle is uniquely positioned to benefit from being a market leader with a 109-year history, built on delivering innovative products to the strongest building products market in the world, the United States.

We are also benefiting from our focus on reroofing. With 70-plus percent of our sales driven by reroofing, we have benefited from its largely noncyclical nature and its steady mid-single-digit growth over the last 2 decades. Combined with our strong cash generation, we are positioned to deliver steady performance through almost any economic environment.

With that context, I'd like to provide an update on our key Vision 2030 initiatives and why we believe Carlisle remains well positioned to create long-term value for shareholders. Innovation remains central to our organic growth strategy and underpins our efforts to deliver 5-plus percent organic growth. This quarter showed that our growing pipeline of new ideas generated by our new VOC process, is translating into increased commercial momentum. We shipped the first orders of our award-winning ThermaThin 7 polyiso insulation in June, slightly ahead of schedule.

The initial project utilizing our new R7 product was an energy efficiency, building code-driven win. It was all about helping a customer meet energy code requirements within a constrained roof assembly height. ThermaThin 7 was the answer. Why? Because ThermaThin 7 delivers approximately 23% higher or value per inch than standard polyiso in many conditions, helping reduce material layers, roof height, number of delivery truckloads, crane lifts and installation time. ThermaThin 7 is one of a dozen new products we will launch in 2026, with half of them already launched in the market, including our temperature-sensing adhesive gun and 16-foot SeamShield. Additional launches, including our high-yield closed cell spray foam are scheduled for August.

On the retail side, Henry's UltraTouch denim insulation is now stocked in nearly half of home depot stores nationwide and delivering improving sales at stores it has been in for a year. While these recently introduced products will take time to ramp, more meaningful contributions will build into 2027. Our expanding new product pipeline, which will be enhanced and supported by our new addition to our research and innovation center positions us to sustain an increasing cadence of new product introductions into the next decade.

Importantly, we are on track to achieve our Vision 2030 goal of generating 25% of total sales from products introduced in the past 5 years. Innovation investment in new product introductions are a significant point of differentiation in the marketplace and will provide a meaningful response to competitive threats. And as the competitive landscape evolves, our focus on proprietary building envelope innovation, technical selling, co-driven application expertise and contractor productivity tools will distance us from the competition.

While innovation is a key driver to growth. I also want to spend a few minutes on M&A because capital allocation is one of Carlisle's core competencies and an important driver of long-term shareholder value creation. Our approach over the last decade has not changed. We remain focused on targets within the building envelope that add to our organic growth prospects increase our connection to our contractors, enhance our product offering, strengthen our market positions and increase our content per square foot. We've made a commitment to being superior capital allocators. That will not change.

We seek to do deals that fit our four criteria: one, an existing organic growth story; two, tangible hard cost synergies; three, a strong management team; and four, the ability to deploy our Carlisle integration playbook. These are the foundation of our successful approach to M&A. Importantly, we require a clear path to value creation. Through the Carlisle Operating System and the Carlisle experience, we look to accelerate growth, expand margins and improve returns while maintaining the disciplined ROIC thresholds that have guided our capital allocation for decades. Whether investing organically, pursuing acquisitions, repurchasing shares or increasing dividends, our objective is the same, deploy capital where it creates the greatest long-term value for our shareholders.

Our track record speaks for itself. Henry is a strong example. Even against softer residential end markets, it continues to deliver on profitability we underwrote with EBITDA margins running in line with our original deal model and synergies exceeding the initial target by 65% despite the challenging end markets.

Before I close, I want to take a moment to reflect on what I believe defines Carlisle as much as any product line or market position. And that is our track record as a superior capital allocator. And what that has meant for our shareholders over the long term. Carlisle was best understood, not merely as a roofing products company, but as a capital allocation story. For more than 5 decades through recessions, market cycles and the transformation of our portfolio from a diversified industrial conglomerate to the focused pure-play building products company we are today, one thing has remained constant. A relentless focus on ROIC and strong cash generation.

That discipline is not a recent development. It is foundational to who we are and how we operate, regardless of the business in our portfolio at any given time. Our industry-leading ROIC of approximately 25% and free cash flow margin above 15% are not targets we aspire to. They are the results of this philosophy applied consistently and compounded over time. We have repeatedly converted operating profits into cash and redeployed that cash at attractive rates of return through portfolio optimization, disciplined M&A, share repurchases and dividends. The result has been sustained long-term value creation for our shareholders.

Next month, Carlisle will announce its 50th consecutive annual dividend increase. That achievement will place us in an elite group becoming what some call a Dividend King. In fact, fewer than 60 publicly traded companies in the United States today have achieved this milestone out of thousands of public companies. It is a testament to the durability of our business model to the dedicated management teams that have led this business since 1976 with the same core philosophies, a commitment to financial strength, and to providing our owners returns that few companies can claim they have demonstrated for half a century.

Reaching this milestone reflects the strength and consistency of Carlisle's capital allocation model. It means we have sustained margin resilience and generated strong free cash flow through every environment we have navigated, including periods of significant macro disruption, portfolio transformation and end market headwinds. We're deeply proud of this record and equally committed to sustaining it.

As we look forward, same capital allocation philosophy built on ROIC discipline and a relentless focus on value creation will continue to guide every decision we make, and our shareholders can count on that. Stepping back, everything we accomplished this quarter connects to the same foundation. Carlisle operates an imperative business in what we believe is the world's best building products market, and we hold leading positions across key product lines. Over 70% of the nonresidential building stock in North America is more than 25 years old, underpinning the recurring reroofing demand that anchors our resilience through cycles.

Those advantages give us conviction to raise our full year revenue outlook even without assuming any improvement in the end market demand. We remain committed to being best-in-class operators and disciplined capital allocators, delivering on our Vision 2030 strategy through growing sales, both organically and with bolt-on acquisitions, expanding margins and increasing free cash flow.

As our employees all know, they do the work necessary to fulfill our commitments and deliver on our promises. From our sales teams currently educating the market on our new products to our innovators bringing us new solutions to everyday issues to our factory teams making our products with industry-leading safety, we recognize their efforts and thank everyone for another solid quarter. Thank you to all on the call for your time and continued interest in Carlisle.

And with that, I'll turn it back to the operator to open the line for questions.

[Operator Instructions] Your first question comes from Susan Maklari with Goldman Sachs.

My question is around the Vision 2030 targets that you've outlined and talked about. Can you give us a bit more color on how the new products are positioning you to achieve those long-term targets on an organic basis. And how we should also be thinking about the improvement in the margins that you're seeing as you're realizing the benefits of the Carlisle operating system and other efficiencies and productivity that are coming through?

Yes, Sue, thanks for the question. Innovation, we added it in 2025 our Vision 2030 strategy. We think it's one of the key axis for Carlisle to invest in, so we were going to end and we continue to make investments and we'll be at 3%, hopefully, within the near future. We're funding products that are really like ThermaThin 7 producing a lot of real tangible value to the contractor.

We want the contract or benefit. We want to see the building owners have a benefit, and our distribution channel partners have a preference for stock in Carlisle because of that end user demand. So when you think ThermaThin 7, we're creating value as we saw in the example that I mentioned in the call, by everybody in that chain and what we're really our plan is to increase our profitability by increasing their profitability. So if you think about the cost per square foot, it is going up and an R7 insulation is higher priced, of course.

So there's revenue growth there embedded in the -- in that scenario. But there's also increased margin. That increased margin comes from us really splitting in essence, the profitability that we would take with the contractor, distributor and other people in the chain, including the building owners. And that shows up in different ways, whether we talk about the number of cranes you need, truckloads, installation time, labor savings, things like that or just operating the building more efficiently.

So I think when you lead innovation, ThermaThin 7, while it might not be the biggest product we launch over the next 5 years, it's absolutely representative of what we're trying to do here by creating that value, increasing revenue and then increasing really profitability per square foot. And remember, our goal is going to be 25% of sales right, introduced x amount of years. And so that will start to move everything up. It will start to generate organic growth on the top line and then hopefully have an impact on the margins as we go to the future.

And then when you look at the Carlisle Operating System, I mean, we've always targeted 1% to 2% of sales as our savings during the year. COS continues to do a great job for us. We continue to, as we said in the call, think about how we spend our money. Are we doing it efficiently, return on invested capital, how do we put CapEx into the business under the COS enterprise and think about how we perform our tasks, should we use automation.

Now we're putting in a lot of robotic equipment into the factories that increase productivity, reduce safety concerns, increase efficiency, reduce scrap, things like that. So COS is alive and well. There are even applications around AI that COS will start to take on. So I think you'll continue to -- I don't think I know you'll continue to see COS be a contributor to that margin profile as well.

Your next question comes from Timothy Wojs with Baird.

Maybe just first question, 8% organic growth in CCM. I know you called out a couple of points there from prebuy, but that's definitely the strongest growth there we've seen in several quarters. Just I guess if you could give us a little bit of color on the pricing piece and then you have a little bit more infill than maybe we do, but what's your feel on what the market actually grew in the second quarter and how you performed relative to that?

Tim, I'll take the first one on this -- on the market. We do our Carlisle market survey. I think when we look at the overall market, we're seeing the new construction pretty much what we thought it was going to be down low single digits. And then when we look at reroofing, we've said it's consistently been in that low single digits to maybe mid-single digits. I think there are big pockets.

Obviously data centers are one that continue to be a higher growth area. You see that, I think, in the PVC sales across companies. One thing I would say is there's been a little bit of a constraint on the ability to get PVC in the data center market. And so what we're seeing now is some of the specs are opening up, and we're seeing premium TPO be a substitute because it was a fine product to use. We could also use EPDM and other things. But in the past, it had been pretty much a PVC market.

Now it's opening up to TPO to address that need by end users and contractors to get these jobs done and get them up and running. So obviously, opening up that aperture into premium TPO helps us because, obviously, that's a sweet spot for us, and there's some nice market growth in there. But I think overall, the market is pretty much what we thought it was. It's overall pretty much flat.

Yes, Tim, as you look at pricing in the second quarter, that's where for us, we have pricing announcements that we have out there, three of them, as you know. They take time to ramp up. You have jobs, whether it's jobs that were previously bid and you protect those jobs or some pricing in place for notification with distributors. So it takes time for all the pricing to flow through first quarter or second quarter here was low single digits. We expect that to ramp to mid-single digits in Q3 and then high single digits in Q4.

Okay. Okay. That's helpful. And then maybe just if you could help us a little bit on the modeling just to think about kind of the price cost impact in CCM on the EBITDA line? And then just another question. MDI supply has been tight. Have you had any issues accessing or getting supply of DI? And have you heard of others that have had issues with that?

Yes, Tim, on the MDI, we talked about it, I think, at the end of the first quarter call where I said we're concerned about prices going up. And then I think I mentioned that my concern was that eventually, if this thing continued, we'd start to get supply issues. And that's what we're seeing with MDI. And they're not necessarily all related to the Gulf and what's going on there, had some issues with chlorine and things like that.

For us, we have been able to get our supply of MDI. We appreciate the supply chain and the commitment they made to Carlisle. I would say that our thoughts would be, though, that there are others who might be a little bit more constrained on that, but we don't have, obviously, information that we can tell you that for sure.

And then, Tim, to help you with the modeling, yes, as we look at it, Q3 for CCM, we're expecting around a 29% EBITDA Q4, we're looking around 28%, and that's full year right about 29% for CCM. CWT, we're expecting to be up for the full year 100 basis points on EBITDA with -- that's about 250 basis points in both Q3 and Q4 for improvement.

Your next question comes from Tomo Sano with JPMorgan.

So Chris, you mentioned COS at Henry. What's the one biggest driver of success there? And on CWT, with a 380 basis point sequential margin improvement, how much is coming from Kingman automation and EPS insourcing? How should we think about the second half demand and margins, please?

Maybe we'll take the -- how much of the margin is coming from Kingman and from the EPS and those improvements in CWT. Mehul, do you want to handle that one?

Yes. Tomo. So as you know, we said this in the past with those self-help initiatives and margin expansion at CWT for the full year, we're expecting around $20 million of margin expansion. And all those investments are in, so we're starting to see the contribution, which did help our Q2 results. If you look at the automation piece of it, that was approximately $3 million of contribution. the footprint consolidation, another $1 million. And then on the expanded polystyrene in-house capabilities that we added, that's adding around $2 million to $3 million in the quarter. But again, as I said, for the full year, it's $20 million. So we'll continue to see traction grow in the second half.

And Tom, I missed -- I think we had a connection issue. I missed the first part of your question. Can you repeat that, please?

Sure, Chris. So what's the one biggest driver of success of COS at Henry, Carlisle operating system at Henry, please?

At Henry, yes. Well, I think the #1 key driver of success is just culture. I think when we implement COS in any new acquisition, it tends to be something that brings people together. And we couple it up with our real 2-in-the-box methodology for deal integration where we're putting someone from Henry with someone from Carlisle. And I would say at Henry, our leaders at that time, we had Steve Schwar running the one side from Carlisle, who is now Vice Chairman for us running our metal business.

And we had Frank Ready, who runs CWT, both very committed to driving safety, to driving efficiency, to driving being smart capital allocators in that. And so I think it's the culture that Henry was owned by private equity. They did an excellent job. They got a great return for their dollar.

What Carlisle brings is a different system, a different commitment to safety and things like that. And I think once people see that at the beginning of the acquisition that they're involved, that they are -- they have a framework. I think the Henry people embraced it. And that, to me, the culture is really the biggest driver.

Your next question comes from Bryan Blair with Oppenheimer.

I was hoping you could remind us of the key share gain initiatives at CWT. Those certainly seem to be reading through. Maybe drill down on the products and categories involved. And if it's possible, quantify the magnitude of run rate share capture.

Yes. So overall, Bryan, I'll take that one. Share gain, obviously, was a huge contributor to CWT's top line performance, 8% organic growth with markets down 3%, 4%. So overall solid performance, and it's all coming from traction on all the work that they've been doing around the share gain initiatives. So it's mainly around the waterproofing and the spray foam parts of that business within waterproofing, advanced waterproofing. That's a cold fluid applied waterproofing technology that's used in the commercial space. That's growing over 50%. It's contributing approximately $15 million this year.

The second one is UltraTouch. That's the new product that we launched through the Bonded Logic acquisition. That's in roughly half the stores. That's gaining some traction. It's probably growing $4 million to $5 million this year. And then within spray foam, we started a new go-to-market strategy, selling direct to contractor through our own delivery vans.

We started in the Southeast market. We're expanding that into additional markets out West and the Southwest. That's approximately $10 million for the full year. And then you have a pretty significant traction on what we call base share gain growth on base categories, we're expanding into additional channels and distributors between wood coatings and roofing underlanding. So all that together is driving the growth in while the markets are still down for CWT.

Your next question comes from Ryan Merkel with William Blair.

I wanted to ask on price/cost. What is included in guidance for price cost hit this year in dollars and then for the margin guide, was the move to flat EBITDA margins. Was that all price cost timing? Or is there something else in there?

Yes. The move on the margins was 100% related to the price cost. As you know, we've had rapid inflation on both raw materials and freight. And so that ends up being a negative to us for the year. The second quarter was a minus about $40 million on the price cost at CCM. It was immaterial at CWT, a couple of million dollars there. So that piece of it was Q2, Q3, we look to get back to neutral there. And then Q4, a little bit positive. So that's what flows through the year on the price cost.

But yes, when you look at margins, that's going to have a hit on the margins. And also as you get that additional revenue, as you know, from that pricing and you don't have the additional EBITDA dollars, that has a dilutive impact on the margins. So margins did go down. The outlook, as you know, on the revenue was increased from low single digits to mid-single digits for the year. That implies high single-digit growth in the second half at both CCM and CWT and really both Q3 and Q4 for both of those businesses at that high single-digit growth rate.

Your next question comes from David MacGregor with Longbow Research.

Let's talk about CWT. Is CWT turning the corner here? I mean I know there's been a lot of work put in here. Frank and his team have been laser-focused on the minutia of turning this thing around. It looks like it's starting to move. You've made a lot of investments. It looks like you're realizing on those investments now. Can you get this back to like 2023 margins with a full year of 2027 benefit?

Yes, David, I mean, the question, turning the corner, I think the whole team and Mehul knows them very well. When you look at all the initiatives, I mean, getting the Ultra Touch launch and out into Home Depot, the real performance on this polyiso and shifting the market strategy and going direct and really creating value there by the team in polyurethanes.

I mean, Mehul mentioned the waterproofing and things like this. All this is great. It just doesn't drive a lot of volume on dollars or EBITDA margins, right? So what we really need is we really need that market turnaround. I mean that's what's been holding it back. So when we look at -- your guess is good as mine here, someone -- I think I would agree with this. They said that it's not a question in resi markets of when the recovery. It is a question of when it recurs, not if. And I think that's where we are.

The team continues to do what they can. We mentioned doing things under their control, and they're making good progress, pleased with everything on all fronts from safety up to raw material production in Canada, where we're controlling more of that on EPS. So we've got it across the business. The issue is we need some volume. And once we get that, I've always said, I think I'm aspirational of getting to 35% in this business over time with new products and some more M&A and bolt-on M&A there, which I think will happen.

But the timing, I'd like to think we'll get through this conflict that we'll get interest rates in a better position, and we'll get homebuilding back on track and we'll be there. But yes, I don't see it happening before the end of the year and even next year, I just see that team needing to focus on self-help, right, introducing new products, driving more efficiency, more automation, things like that to drive margin. So margin will improve. It just will improve a lot faster if we get some volume to throw on it.

So I mean there's a lot going on in that segment. There's a lot of diverse businesses lines. But what's the incremental margin? What should that volume when it recovers? What should your leverage at?

Yes, it's around 33% to 35%. And then as Chris mentioned, as we get more operating efficiencies, our goal is to get that incremental higher.

Okay. And with regard to M&A, is this a business you would continue to allocate new capital to from an M&A standpoint? Or I mean, I don't mean bolt-ons, but maybe something a little more transformative or more substantial.

I don't think the business needs a transformative piece. I think we're starting to get really built out around this idea of the building envelope. We got MTL and we improved our position on Edge metal for CCM. We start to get a little bit heavier into the metal panel business, which we can expand. There could be some opportunities there.

When we look at EPS, we talked about having a nationwide system of EPS manufacturing that would mimic Henry's sealants business and one of the huge value propositions to Home Depot. So EPS, we've probably got a couple of areas still left to fill that we're working on, specifically the Southeast, that will happen. When I look at polyurethane foams, that's been a tough market, as you know.

Pricing hasn't been very good. We've had some players there that might have had some different objectives. But this move, again, I compliment the team to taking a different market approach to be able to show the value to the contractor. So I think in every one of those areas, there's opportunities to add these bolt-ons and expand.

And it goes back to the four criteria really that we got to have those hard synergies. And I think when you start looking at transformative deals in CWT, you're talking now a new leg. And then I wonder how we fulfill our 4 criteria. I think we could get the organic growth story, but I would be hard-pressed to figure out how we're going to get the synergies that we talked about delivering on the Henry acquisition. So yes, I don't see us going in that direction as much as seeing us continue to drive the performance we have in increasing margins that way.

Your next question comes from McClaran Hayes with Zelman & Associates.

Maybe sticking with CWT. That segment does touch a lot of different end channels. Just be helpful if you could share maybe what you're embedding in your volume outlook across those different end channels within CWT for the year.

Yes, I can take that one. So overall, markets for us, we're not assuming any improvement from the first half into the second half. So it's steady. The comps do get easier. So from an end market standpoint, we're assuming down about 2%. You look at residential new construction has started off down high single digits.

In the second quarter, it was somewhere between mid-single digits and high single digits. And in the second half, things aren't getting better, but with easier comps, as I mentioned, it's going to be down low single digits in our assumptions. The commercial new segment, that one has deteriorated further. So we're assuming down mid-single digits in the second half. And the R&R pieces for both commercial and residential, we're assuming flat. So you put those together, overall CWT in the second half, both Q3 and Q4 down a couple of points.

That's helpful. And are you seeing any difference in your ability to pass on price across those end channels?

Overall, we haven't had any challenges in the majority of the business. I would say expanded polystyrene is one area where we've seen more competitive pressure, and it's been more difficult. But waterproofing hasn't been any issues within polyurethane spray foam, the initial price increase that we announced, I haven't had any issues. But with the MDI and polyol with the force majeures with seeing elevated costs, there is some price cost pressure, but we've been able to get the first price increase.

There are no further questions at this time. I will now turn the call back to Chris Koch for closing remarks.

Thanks, Rebecca. This concludes our second quarter earnings call. Thanks, everyone, for your participation. and we look forward to speaking with you at the next earnings call. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon. My name is Colby and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Carlisle Companies First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Mr. Mehul Patel, Carlisle's Vice President of Investor Relations. Mehul, please go ahead.

Thank you, and good afternoon, everyone. Welcome to Carlisle's First Quarter 2026 Earnings Call. I'm Mehul Patel, Vice President of Investor Relations for Carlisle. We released our first quarter financial results today, and you can find both our press release and the presentation for today's call in the Investor Relations section of our website. On the call with me today are Chris Koch, our Board Chair, President and CEO; along with Kevin Zdimal, our CFO.

Today's call will begin with Chris providing key highlights for the first quarter, Kevin will follow Chris and provide an overview of our Q1 financial performance and our reaffirmed outlook for the full year of 2026. Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to Slide 2 of our presentation, where we note that comments today will include forward-looking statements based on our 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 Carlisle provides a non-GAAP financial information, we provided reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website.

With that, I will turn the call over to Chris on Slide 3.

Thank you, Mehul, and good afternoon, everyone, and thank you for joining us today. Carlisle's first quarter results exemplify the focus and execution our teams consistently deliver even in challenging operating environments. .

Revenue for the first quarter was $1.1 billion, down 4% year-over-year, driven primarily by 2 timing-related factors. First, winter weather delayed projects and shipments across many regions in North America. Second, last year's first quarter benefited from approximately $15 million of tariff-related order pull forward from Canadian customers, which did not repeat this year. Despite those headwinds, the underlying fundamentals of the business performed as expected and delivered better EBITDA margins in the quarter despite the sales challenges. As we reflected in our year-end 2025 call, improving profitability was the top priority for 2026.

Q1 results reflected strong execution on that priority with adjusted EPS rising to $3.63, up 1% versus last year and adjusted EBITDA margin expanding by 50 basis points to 22.3%. It's important to underscore that margin expansion in the quarter was a result of our focused efforts, particularly worth noting in a quarter where volumes were pressured. The margin improvement reflects work that has been underway for several quarters. Our teams have been systematically driving productivity, improving manufacturing efficiency, tightening cost discipline and simplifying execution across the network, effectively using all parts of the Carlisle Operating System or COS.

Those actions will continue to compound over time and will drive our forecasted margin expansion under our Vision 2030 goals. This is another reminder that Carlisle was built to perform through cycles, not just at peaks regardless of the environment. Q1 was a demanding quarter operationally, and the team responded exactly the right way. We stayed focused on the areas we can control, cost discipline, thoughtful pricing execution and supporting customers through innovation and the Carlisle experience.

That execution is clearly reflected in our results. Underlying demand trends in our end markets were consistent with the information from our Q1 outlook based on the Carlisle market survey, with weather being the key variable that caused a slight shortfall to projections for the quarter. Reroofing activity grew low single digits, continuing to provide the stable, recurring demand base that defines Carlisle's resilience across economic cycles.

Commercial reroofing remains our primary revenue engine accounting for roughly 70% of CCM's commercial roofing business, supported by an aging installed base with 20- to 25-year roof life cycles and increasing content per square foot, driven by innovation that improves energy efficiency and reduces labor costs. We also understand to protect and grow our position in the market, we must drive to be the leader in specifications, systems performance, comprehensive warranties, the Carlisle experience and most importantly, trust with contractors, architects and building owners, areas where Carlisle continues to lead.

Importantly, orders improved as the quarter progressed, and we exited March with better momentum than we entered the year. April activity to date has been encouraging with reroofing work in line with seasonal norms and backlog conversion improving as weather disruptions have subsided. Offsetting this is the continued uncertainty and new construction related to the issues we have discussed before, notably interest rates and economic and geopolitical uncertainty.

While we remain early in the quarter, the level of order activity we are seeing gives us increased confidence in the trajectory of the business as we move into the second quarter and into the heart of the roofing season. However, at the same time, we remain cautious about the second half given the ongoing geopolitical volatility. New construction remains soft across both residential and nonresidential markets as expected.

Our full year outlook does not assume a near-term recovery. Higher for longer interest rate environment continues to weigh on construction activity and our plans appropriately reflect that reality. Turning to pricing and input costs. Recent geopolitical escalation has materially increased uncertainty in global energy markets. Rising oil prices impacted our petrochemical linked raw materials and freight. We acted quickly in mid-March announcing price increases across both CCM and CWT effective mid-April and implementing real-time freight surcharges to drive more immediate recovery.

In addition, we announced a second round of price increases at CCM today to offset the additional cost pressures that disruptions in the petrochemical supply chain are driving. Those actions are beginning to work their way through the market, and we expect price/cost dynamics to improve sequentially through the remainder of 2026. It is also important to be clear that we are constantly evaluating the actions in the market by our suppliers and will act accordingly to address any misalignment.

More specifically, heightened risk surrounding the Iran conflict and sustained disruption through the Straits of Hormuz introduces uncertainty, which we are monitoring very closely. If volatility persists, structural cost levels reset higher, we are prepared to take additional pricing actions as needed. Our approach remains disciplined and deliberate. We've seen this type of situation play out repeatedly during periods of significant disruption, whether during the global financial crisis, the COVID-19 pandemic or now amid elevated geopolitical risk, Carlisle has demonstrated exceptional margin sustainability.

That durability is reinforced by the discipline embedded in Vision 2030, the depth and tenure of our team, our recurring reroofing revenue base, the fact that over 90% of our revenue is generated in North America and our superior capital allocation approach. Another important contributor to that durability is the way Carlisle allocates capital. We view capital allocation as a core competency, not a byproduct of the business.

Across cycles, we have consistently prioritized returns over growth for growth's sake, investing organically where we have durable, competitive advantage, pursuing acquisitions only when they meet our stated criteria and returning excess capital to shareholders when that represents the highest and best use. This balanced and disciplined approach continues to differentiate Carlisle and supports our ability to compound value over time.

Based on our execution and the actions already underway, we are reaffirming our full year 2026 outlook of low single-digit revenue growth and approximately 50 basis points of adjusted EBITDA margin expansion. Kevin will now walk through the financials in detail. Kevin?

Thank you, Chris, and good afternoon, everyone. I will review our first quarter financial results and then provide additional details on our full year outlook for 2026, which is unchanged from the outlook we provided in our previous earnings call.

Beginning with consolidated results on Slide 4. First quarter revenue of $1.1 billion was down 4% compared to last year. As Chris mentioned earlier, the 2 primary drivers of that decline were the adverse impact of this winter's harsh weather, limiting the number of days that roofing contractors were able to spend on the roof and the absence of approximately $15 million of tariff-related pull forward that benefited the first quarter of 2025.

M&A contributions from our recent acquisition slightly offset the organic shortfall. Adjusted EBITDA was $235 million in the quarter, resulting in adjusted EBITDA margin of 22.3%, a 50 basis points improvement from the first quarter of 2025. The margin expansion on decreased revenue is the result of strong execution led by COS-driven productivity gains, procurement discipline and efficient management of selling and administrative costs.

Adjusted EPS was $3.63 for the quarter, up 1% year-over-year. This increase was driven by share repurchases, which more than offset lower organic earnings and higher interest expense. Our segment performance starts on Slide 5. CCM generated first quarter revenue of $758 million, a 5% decline year-over-year, reflecting lower volumes due to this winter's weather and last year's tariff-related pull forward, along with continued softness in commercial new construction activity, partially offset by solid reroofing growth.

CCM adjusted EBITDA was $208 million in the quarter, down 4% year-over-year. However, adjusted EBITDA margin increased 30 basis points to 27.4%. COS productivity gains, disciplined procurement and selling and administrative cost controls all contributed to the improvement in the EBITDA margin.

Moving to CWT on Slide 6. CWT reported Q1 revenue of $294 million, down 1% year-over-year. The slight decline reflects contributions from recent acquisitions which mostly offset volume pressure from continued softness in both residential and nonresidential new construction activity. CWT adjusted EBITDA was $45 million, down 3% year-over-year. Adjusted EBITDA margin was 15.2%, a decrease of 40 basis points compared to the first quarter of last year. This margin decrease reflects the impact of lower volumes, partially offset by the benefits of internal initiatives including footprint consolidation and the expansion of in-house production of expanded polystyrene resin from our Plasti-Fab acquisition.

We continue to see a clear path to meaningful margin expansion at CWT over the balance of 2026 as these actions compound and integration synergies built. For your reference, Slide 7 provides our first quarter adjusted EPS bridge.

Turning to Slide 8. Carlisle's financial position remains strong. As of March 31, 2026, we had $771 million in cash and cash equivalents and $1 billion available under our revolving credit facility. Our net debt-to-EBITDA ratio was 1.7x, within our target range of 1x to 2x. This financial strength continues to provide us with significant flexibility to invest in innovation and capital expenditures, pursue synergistic M&A and consistently return cash to shareholders.

Moving to our cash flow on Slide 9. Seasonality, Q1 is a quarter where we deploy cash to pay down year-end incentives and rebate liabilities and build working capital ahead of the construction season. Net cash used in operating activities was $45 million in the quarter and free cash flow used in continuing operations was $73 million, reflecting a $125 million post year-end settlement of an accrued tax related liability.

Excluding this tax-related payment, operating cash flow improved year-over-year as we deployed less cash into working capital. During the quarter, we invested $28 million in capital expenditures. We also returned $296 million to shareholders through $250 million of share repurchases and $46 million of dividends and we are maintaining our pace toward our annual repurchase target for 2026 of $1 billion.

Now turning to our outlook on Slide 10. Oil cost volatility, interest rate uncertainty and prolonged geopolitical conflicts are adding broader macroeconomic pressure to an already soft new construction market. However, based on our progress to date, we are reaffirming our 2026 outlook. We continue to expect full year consolidated revenue growth in the low single-digit range. And with our recent price increase announcements, we now expect revenue growth at the higher end of that range, along with double-digit growth for EPS.

Our consolidated full year revenue outlook reflects CCM revenue growth in the low single digits driven by higher prices, continued strength in reroofing more than offsetting slower new construction and CWT revenue also up low single digits as contributions from higher prices and share gain initiatives more than offset continued end market softness. Consistent with our guidance at the beginning of the year, we still expect consolidated adjusted EBITDA margins to expand by approximately 50 basis points for the full year supported by price realization building through the year to offset raw material increases.

Continued COS-driven productivity gains across both segments and the structural operational improvement actions underway at CWT. We will continue to execute the levers within our control while remaining mindful of the macro risk and limited visibility in this dynamic environment. We remain confident in Vision 2030 and our long-term financial targets of $40 of adjusted EPS and 25%-plus ROIC. Our path to Vision 2030 is founded on organic growth anchored in steadily increasing reroofing demand and content per square foot.

COS led margin improvements in both segments, disciplined capital return through share buybacks and targeted synergistic M&A when the right opportunities are available at the right price. These are flexible, independent levers. Our strategy does not depend on all of them contributing significantly in every year. As we showed under Vision 2025, the trajectory towards the target can accommodate choppy periods and cumulative execution across these levers over time is what ultimately drives us to our destination.

With that, I'll turn the call back to Chris for closing remarks.

Thanks, Kevin. Overall, the first quarter was challenging, but the team delivered results with the kind of perseverance and disciplined execution that compounds over time and ultimately distinguishes Carlisle from its peers. While we are very cognizant of the volatility that continues in the markets, what we are targeting for 2026 is designed to place a minimal reliance on new construction from current levels or a broader macro tailwind.

We remain an imperative business with a leading position in what we believe is the most attractive building products market in the world. The structural demand drivers in North America are secular and intact. Our balance sheet is strong our operational capabilities are advancing and our capital allocation remains disciplined. We remain very confident in Carlisle's position as we move further into 2026.

Before I close, I want to acknowledge and thank the Carlisle employees who produce these results through their daily effort and commitment to excellence. Over the years, they have made the commitment to ensuring our success. Thank you all for your time and continued interest in Carlisle. We look forward to providing further updates as the year progresses.

And with that, I'll turn it over to the operator to open the line for questions.

[Operator Instructions] And with our first question, it comes from Susan Maklari with Goldman Sachs.

My first question is talking a bit about demand. Can you give us an update on the new products how they're doing in the market, the path for further introductions that you expect this year? And within that, can you talk a bit about how these product offerings and the service that Carlisle has for contractors helps in terms of price elasticity. And do you think that, that's partially what you're seeing when you're talking about the level of activity and the improvement that you're getting into the spring season? .

Okay. So I'll try to remember that. .

New products. So that's good, questions, too. The new products we are forecasting to release just over 10 -- 10, 12 new products this year. Probably the biggest one is our ThermaThin R-7 insulation, which I'm sure you've read about and others have too, what it's doing for our value R-value per square inch. And the implications of this for cold storage for reduced inches on the roof in terms of insulation or being able to put more insulation for [ linear and vertical ] inch, is really pretty significant.

So we've been now doing testing. We launched at IRE we won 2 awards. I was really proud that we won 2 awards that really symbolize 2 different sectors. One was around basically specifiers and people who are industry experts, for a new product award. And then the other 1 was just the people that were coming to the show and voted I think, is the best new product at IRE. So that's really nice to see that, let's just call it, specifiers and contractors both thought there's a value proposition in that.

Now that product is gathering momentum in terms of recognition, more testing. We do have test sites that are out now that people are getting to use the product and give us feedback on it, not so much to determine whether it's a good product or not, but just how it works and validating some of the other things we wanted to know about it from a marketing perspective. But that won't really hit the market in terms of delivery still, probably July of this year, deliveries will start.

So that's been good. It's creating a lot of enthusiasm, but not really impacting any growth in Q1 or Q2. We have a new gun for our foam adhesives that has come out that again introduced but will be really reflected in more Q2, we'll start to sell that. So a lot of these new products, the growth is going to come.

I won't say it's second half loaded, but yes, I mean, it'll be back basically second half loaded. And so then try to shorten this up. When you get into service and new products and how they help, it really does differentiate us in the eyes of the contractor. And again, we've had 2 things we want to do. One is we want to increase energy efficiency, which is important to specifiers and building owners, but then the other one is get labor off the roof. And as we know, we already have issues with labor.

We want to grow as an industry, we're going to have to find ways to use the existing labor pool more efficiently. And things like ThermaThin and our new [indiscernible] gun and things like that, APEEL, our SeamShield. These are the kind of things that are really, really designed to get the contractor to be able to put that down. And when you couple that up with another labor saving initiative, which is the Carlisle experience, is truly is labor saving because it's about the right product at the right place at the right time. It means you don't have contractors standing around wondering where the shipment is when it's going to be there in this kind of stuff.

They can depend on us. And I think that plays into growth because I think it means that when you deliver on new products and you deliver on service, Obviously, you get stickier with your customer, you get stickier with your architects, people depend on you, and hopefully, that allows you to grow share as well as when we've been talking about this increase the profitability on sales dollars per square foot because people -- as we said, we're going to price the value.

So hopefully, I covered enough of that for you.

Yes. No, that was perfect. And then my second question is on the CWT margins. Can you talk about the effort that are coming through there, how we should think about the path of improvement and your ability to realize some level of expansion this year despite the tough environment?

Right. Well, this was -- this profitability growth in CWT was key for [ Frank Ready ] and his team over CWT. I think they're well underway. We've put goal in this year of getting as close as we could to 20%. we want to show return to those margins that when we bought Henry, we had expected, which is, let's say, mid-20s and we wanted to get to 30. Frank and his team are committed to that. Obviously, the volumes in the resi side and what's impacted, Frank, have been tough to overcome.

But the team has done a lot of good work. Automation has been a sizable impact. Footprint consolidation has been a sizable impact, in sourcing. And so when we look at Q1, we would have made more traction towards our 20% goal. In fact, I'm still pleased with what they did. But would have made more traction if the mix had been a little different. Our sales had a heavier mix on the foam side and that was a lower margin sale than the retail side that we had anticipated in our plan are having. So there's a little bit of a drain there to all the good things they've done. But still even with that, there -- I think they're going to have good traction. And I think it will play out pretty linearly along Q2, Q3 and Q4. And then hopefully, we can get some rebound in volume, which will really make a huge difference.

Okay. So is it reasonable then to assume that you start to see some year-over-year expansion in the second quarter, and it will grow from there.

Yes. As we see it play out during the year, we think we'll see improvement from quarter-to-quarter. So Q2 might be around 19% and then improving to 22% in Q3. And overall, for the year in our guidance that we provided, we're looking for at least 100 basis points of margin improvement year-over-year for CWT.

Your next question comes from the line of Timothy Wojs with Baird.

Maybe just on the pricing piece. I guess what are you seeing -- I mean, I guess, pricing on the first round's only been effective for a couple of weeks. But I guess any sort of context or commentary you could give us on just kind of what you're seeing in terms of stickiness there. And then I guess, secondly, usually, when you need price, it's because of demand-driven inflation, not -- and it's just more kind of a supply side shock. So I guess does that change how the industry deals with price or how contractors accept price? Just kind of -- it is a little different this time. So if you could just kind of walk through how you think that plays out.

Yes, I'll start, Tim, and Kevin can jump in on his comments as well We did have the 2 price increases, 1 in March and then 1 in April. Obviously, the effective date of the first one is around April 15. And then as you know, how the mechanics work on this, we are protecting jobs that were quoted to -- contracts already had orders in there. We didn't go back and retroactively increase those that wouldn't be terribly fair to them. So we'll see it move through into the second quarter and then into the third quarter. .

And I think the stickiness with the price increases is going to be pretty good. I don't think this is -- in terms of line of sight to the driver. I don't think there's anybody out in our contractor base, our distributor base that doesn't see what's happening on the news every night and doesn't see the price of oil and doesn't understand, these are derivatives of the petrochemical industry that we are selling. And so I think people understand that, certainly on freight charges with diesel, fuel and things like that. That's also hitting people that are moving around job sites with their own diesel fuel in their trucks and things like that.

So I think the stickiness will be there. I also think there will be resolved throughout the industry because, again, I don't think -- this isn't a unique event for one manufacturer or one distributor, one contractor. We're all experiencing this. We're all it's broad-based. So I think the stickiness will be good. And then we'll have to watch it play out, but obviously, that's what's going to be important in the second quarter to see how that plays out. When you think about the usually, it's in a rising demand situation. I mean that is unique.

I think that's one of the concerns from the Fed is that we're in given the stagflation thing, right? But certainly, the inflation is going to be there. But I think the dynamic for us is going to be, I'd say, relatively. I don't want to say muted, but look, we're going to just control the things we can control. We want to continue to drive innovation. We want to continue to drive efficiency. We want to continue to take labor off the roof. We want to continue to provide that value proposition on new products and these kind of things to our Carlisle contractors and our specifiers.

And so I think as we go through it, that's what we were trying to get across and the message is that, look, we can't control what's going to happen on that geopolitical front. But what we can do is continue to provide the best service. We can continue to provide innovation, we can continue to provide help in making sure that we're giving our contractors and distributors the best service they can. And hopefully, that results in us either gaining a little bit of share or maintaining it as we roll through this difficult time. I think we also have the feeling that in this case, there's probably resolution sooner than later, but it's a little bit different than the resi housing crisis that we're going through. This -- we'll have a little bit sooner than that a resolution, I should say. .

Okay. Great. And then I guess, Kevin, just you kind of went through the expectations on margins for CWT. Any chance you could do that on CCM for us?

Sure. CCM, we get into the second quarter. We think we'll be approaching that 31% of EBITDA for Q2, and then we can exceed slightly exceed that 31% in Q3. And then for Q4, right around 28%. So full year, about 50 basis points of improvement for CCM.

[Operator Instructions] Your next question comes from the line of Bryan Blair from Oppenheimer.

follow-up to Tim's first question. We know that you're still expecting low single-digit revenue growth for 2026, but you've announced a fair amount of pricing since last quarter. In the revised reaffirmed guide, what are you now baking in for volume versus price for CCM and CWT for the year?

Yes, it's really the same for both CCM and CWT as we went into the year or in our year-end call, we had said low single digits, and we talked at the bottom of that range, so probably 1%. And now we're talking at the top end of that low single-digit range, so 3%. And all of that improvement is price. So as Chris talked about price, we'll see some price in the second quarter as we go through it and then much more so as we get into Q3.

And so second half of the year is where we see more of that price increases. But no doubt, we will see some in Q2 as well. For the full year, it's hard to put the full number on it. So for now, what we put in there is just increase that to 3% for the year. Now that can change as we're going through the year, and we'll update again at end of next quarter.

And I think, Brian, just 1 thing just to add, and it might be sitting out there as a question as the old price raws, right? You think about what we've tried to do is just balance of this out and make sure that the price we're covering those raw material increases with price offsets. So I think we started the year, we thought there might be a little bit of a favorable from raws as we went through the year. And now it's just going to -- our forecast is probably to hold it neutral.

Your next question comes from the line of Tomo Sano with JPMorgan.

I'd like to double-click on distribution channel inventories. There has been industry-wide discussion about the consolidation, leading inventory destocking and order volatility with the distributors, including QXO and other key channel partners. Are you seeing signs of the distributor inventory levels and ordering patterns returning to more normalized levels? And how would you characterize the current activities in your distribution channels? And if you could talk about some dynamics of the consolidations and channel the partners for the shorter-term and medium-term employees.

I think if you look at inventory, I would say that we're still -- we're moving into what we would think would be a more normal inventory situation has improved for the construction season, and that's normal. There needs to be more out there so that the increase in activity can be sustained and distributors can provide that service levels that they need to.

I would say, though, we went into the fourth quarter. I think as we discussed the people were destocking and carrying less inventory, obviously, with higher interest rates and economic outlook, it wasn't as fantastic. And so I think in the first quarter, we saw a continuation in inventory levels of maybe the fourth quarter. And that's part of the momentum that we got there -- when we get to April and we get close to the construction season. I think then we see a pickup in distributors' willingness to carry inventory. If they see that economic activity and billing activity is good.

Now we saw ADI and you did 2, we're 49.8, getting close to that 50 level where it is expansion. So that might be supportive of carrying a little bit more inventory for people. We might also see a little more inventory being picked up because of the price increases. There might be that effect as we get into the second quarter. So that's kind of the situation there. And then you asked about the dynamic, broader dynamic with distribution. And I would say that the QSO situation that we've talked about many times, they continue to improve as we and we continue to have great conversations with them as we move through the year, like we said back in September that acquisitions are tough to go through in integrations and the team continues to work well with our teams and continue to make progress.

So that's a good one. We also have excellent relationships with the other distributors that we sell to, good programs, good progress. broader the QXO acquisition, recently TopBuild and some of the other things that have taken place in the industry are not as impactful to Carlisle, if we take the TopBuild acquisition, for example, that business, a lot of insulation that Carlisle doesn't play in that market, the resin insulation, the [indiscernible] in that.

And then when you pair with [ Beacon ] with Beacon's significant presence in Shingles, we're not in Shingles either. So coming together there, I think, it doesn't have as big impact on Carlisle, as you might think. And what we need to do with QXO is focus on those initiatives that we started the year with, and that we work so hard with their team on to get back to the levels that we've been used to with CXO and Beacon. So that's our report on the distribution activity. .

Your next question comes from the line of Ryan Merkel with William Blair.

I wanted to ask about 2Q revenue. Can we assume normal seasonality that would put as you like up 2% year-over-year for 2Q. And then, Chris, you mentioned that March exited better. Did you see trends improve once the weather got better?

Yes, I'll take that 1 first, and then Kevin can take the other one. Yes, definitely, the weather. Obviously, we thought weather in the first quarter was probably -- this is always a ballpark number, but we thought it was about 3 days in which we probably put around $30 million, $35 million of impact on the top line. And so as we got into March and the weather got a little bit better, yes, things pick up.

I think that has something to do with the momentum. And then I do think ABI was right. I think things were a little bit better. If you look at the sectors out there that we typically look at in warehousing and things like that, they did show better trend, I would say, than we have seen last year. If you think about warehouses, our outlook was is more around 2% compared to last year, which was down 5%.

Educational buildings last year. I think thought the industry was down about 13%. And it's seeing some positive growth. So I think in general, the ABI is reflecting accurately what we're seeing. So that contributed. And then obviously, once the price increase hit, there's some activity there too. If You have anything out there to get ahead of it. So that all contributes to that momentum we saw exiting March and into April. .

In your quarterly question on the revenue. As we look at it, we really look at it in buckets. It's a very seasonal business and for us, Q1, Q4 at a lighter quarter. So if you look at CWT, typically 23% of their revenues in Q1, 23% in Q4 and then Q2 and Q4 are about equal at 27% a piece. CCM is a little bit different than that. They get about 20% of their revenue in Q1. Q2 is about 30% of their revenue, and then Q3 is a little bit later than Q2 and then Q4 is a balance of that. .

Your next question comes from the line of David MacGregor with Longbow Research.

Chris, I wanted to just go back to the idea of elasticity of demand here, just talk about that a little bit, get your thoughts on the extent to which the rapid onset of higher project costs could give rise to project deferrals or maybe even just a limiting effect on the scope of jobs.

And I guess, given that we're focused on volume here, let me just ask you if warranty expiration is still a business driver at this point or whether you're seeing people maybe approach this a little bit differently than they might have in the past.

Yes. That's a good question around the idea that the project delays, we have seen some project delays. But frankly, we're seeing them really when we got into the August, September time frame of last year is really when it started. We thought there was going to be interest rate cuts from the Fed. We had things coming into the year and it didn't work out that way. And now this year, definitely this Middle Eastern crisis is causing issues that are probably causing some people to have some projects delays and look at them.

But it hasn't been an impact we might have thought, again, I referenced the ABI and what we've seen happening out there even in our Carlisle market survey. So I think it might be one that people are waiting. Obviously, if it continues and it's a longer crisis, I think at least our feedback from the petrochemical industry is recovery could be short now. The longer it keeps going, the more destruction. Obviously, the longer it takes to recover, right, which has a bigger impact on prices.

And then you start to get into something, David, around and it's almost like labor, you get into this idea that there isn't enough supply. And so if there's not enough supply, are you really going to delay your project because if you delay your project, you can't get materials then you might be in a bad situation. So I think labor constraints are one that keeps people thinking about, do I want to delay because if I delay my project and that labor gets reallocated and I've got to get back in the queue, I might be looking at next year before I can get it done.

And then that ties into the warranty. And I think warranty is still a driver because I think on the bigger projects, maybe not on smaller projects like the house you can do it. But I don't know there'll be a warranty on a house, but let's just use that example. But on a bigger project, I don't think building management teams, I think they price the warranty. They want the warranty in place at corporations, they don't want to be exposed. And so again, I think you get back in the queue as quickly as you can to make sure that, that warranty when it expires, it's replaced with the reroof and a new warranty, I just don't think people want that risk of that exposure for a roof.

It's an important part of the building. But they actually probably want to do what they're doing inside the building, which is move product around like a FedEx or an Amazon or it's manufactured things like others, they don't want to be thinking about the roof and whether they've got an issue there. So I think the bigger one for me, I said to Kevin, is we want to look at the availability of supply and make sure that as things extend that could be the fact we're really worried about not so much the inflation right now. I don't know if that answer makes sense, but hopefully it does.

Your next question comes from the line of Garik Shmois with Loop Capital.

Just wanted to clarify just on the revenue guidance in CCM. I just wanted to square the slightly higher guide kind of moving towards the higher end of low single digits. It seems like it's driven by pricing, but I want to be clear if there's any change to your volume expectations, especially as you're starting to see momentum here in March and April. And if there could be some conservatism there, just getting the magnitude of the price increases that you're putting through?

Yes, certainly, it would be uncertainty with the geopolitical situation, we don't know how much that could impact demand or not. So as we enter Q2, that's where we're doing with that guide low single digits at 3%. Maybe it does get better in the second half of the year. But for now, that is a bit of a conservative guide.

Your next question comes from the line of Adam Baumgarten with Vertical Research Partners.

Just on the price increases, I think in March, the ones you announced in March for April, we're about 5% to 7% on membranes and poly A just curious what the magnitude of the incremental price increases you announced today is? And then just given all that and the change in guidance to the higher end of the low single-digit range kind of implies that the realization is relatively low, maybe that's conservative. Just curious on that. And then just what we're thinking about for price cost in 2Q?

Yes. So on price cost for Q2, we're looking at offsetting any of the cost increases with price. So -- and that's the same actual assumption for Q3 and Q4. So we're looking at full year being neutral on the price cost that Chris talked about. On the pricing, as the quarters go, it is obviously really hard to predict right now how much pricing we'll see, how much raw material inflation we'll see. .

We are seeing it today on the raw material increases, and that's why the second announcement came out. And yes, I would expect that to stick in the marketplace for what we have out there for the price increases. Obviously, if that all goes through, you're going to see a higher revenue number for us for the year, but the EBITDA dollars number will be not incremental for that pricing because it's just offsetting raw material inflation.

And for the second price increase, it was the same as the first approximately 5% to 8%. So very similar to what you saw in the March announcement.

Your next question comes from the line of McClaren Hayes with Zen Associates.

8 Yes, just on the raw material piece. Wondering if you could give us a sense of the magnitude of the input cost inflation that you're baking into your guidance?

I'll take that one. So overall, as Chris or Kevin mentioned, our pricing is moving from low single digit range to the higher range is basically a couple of points of price. So our price cost assumption is neutral. So that basically implies a similar level of raw material inflation as you do the math on that, that implies it's about high single-digit raw material inflation as a percentage of raws for the full year. .

Your next question comes from the line of Keith Hughes with Truist.

[Operator Instructions]

Okay. Sorry, I don't know what happened. Let me start again. So on the last answer, the high single-digit raw material inflation. I assume you probably have some up less than that. Can you give us sort of a feel what's the range of the inputs that are coming in year-to-date? .

Yes, Keith, as you know, MDI, that's our biggest raw material purchase. Just walked up from the top 2 or 3 to give you a sense. That one is up double digits. That's impacted by both supply-demand dynamics as well as benzene, which is up pretty significantly. It's in petrochemicals, our TPO resins, which is closely linked to propylene. That's up double digits for us. That ties very closely to the propylene index. That's why we're available. And then Polyol, that's also tied to some supply demand dynamics as well as diethylene glycol, that's up in the high single-digit range.

I think on polyol, there's been some shortages with the plant outage, does that cause any problem?

For us, both polyols or polyiso insulation and CCM as well as on our spray foam in CWT. It has a bigger impact on our CWT just with the type of polyols we use, but we're in a pretty good position with options that we have to get volume.

Our last question comes from David MacGregor with Longbow Research.

Chris, I just wanted to talk -- I was hoping you could talk about acquisitions made over the past couple of years and the synergy capture versus your initial plans and the possibility that you could squeeze a little more out of that this year if needed to offset some of the dynamics we've been talking about in price and cost.

Right. Well, as you can imagine, with all the acquisitions. I would say if we look at the top end of the MTL acquisition has been exceptional in every way, we continue to expand there, the management team has done a really nice job of managing through this raw material situation as well as taking share and coming up with new products and things like that. So the MTL acquisition is right. When I look at Plasti-fab, another great acquisition, I think Mehul can touch on some of the effects of the vertical integration there around EPS feed and that, that the team has done. They continue to, and [indiscernible] capital to invest in automation and strengthen their manufacturing things in Canada.

And so that's been another great acquisition. The ones that filled in on EPS were geographies we needed to fill in. They're doing a good job, again, of creating that global -- or not global, excuse me, U.S.-wide or North American wide EPS network. So I think they're performing. I think the bigger impact to all of them. They're meeting their deal models. They're doing what they basically said we thought they were going to do.

And the bigger issue is volume. I mean outside of really the MTL, which is more in the commercial roofing side of it. The others are in CWT, and you can see what's happened with the CWT business. Now I go back to what I was saying again about what the team has done to improve margin expansion. And they'll continue to have footprint consolidation. They'll continue to insource where they can. They'll continue to put automation and place technology, introduce new products. Can we squeeze any more out of them? We can, but you're going to step -- really the push to 20. If we want to get back to the mid-20s, some volume increase would help. And so obviously, we like this ABI increasing, and we'd love to see some recovery in housing and help on that side. That would be the bigger driver.

And there are no further questions at this time. I'll hand the call over to Chris Koch for closing remarks. Please go ahead.

Thanks, everybody. A very challenging time that we're facing working through all these issues. But this does conclude our first quarter call. We look forward to talking with you again on our second quarter call, and we'll have a lot more information about how things that put out on pricing and all of that for you then. Thanks very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon. My name is Joel, and I will be your conference call operator today. At this time, I would like to welcome everyone to the Carlisle Companies Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. After the speaker's remarks, we will conduct a question-and-answer session. I would like to turn the call over to Mr. Mehul Patel, Carlisle's Vice President of Investor Relations. Mehul, please go ahead.

Thank you, and good afternoon, everyone. Welcome to Carlisle's Fourth Quarter 2025 Earnings Call. I'm Mehul Patel, Vice President of Investor Relations for Carlisle. We released our fourth quarter financial results today, and you can find both our press release and the presentation for today's call in the Investor Relations section of our website.

On the call with me today, Chris Koch, our Board Chair, President and CEO; along with Kevin Zdimal our CFO. Today's call will begin with Chris providing key highlights for the full year and the fourth quarter. Kevin will follow Chris and provide an overview of our Q4 financial performance and our outlook for the full year of 2026.

Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to Slide 2 of our presentation, where we note that comments today will include forward-looking statements based on current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings. As Carlisle provides non-GAAP financial information, we provided reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website. With that, I will turn the call over to Chris on Slide 3. .

Thank you, Mehul, and welcome to our Fourth Quarter 2025 Earnings Call. I want to thank everyone for joining us today as we close out 2025 and look ahead to 2026. One note, this call will be slightly longer than our normal calls as it is our year-end, and we'd like to provide additional transparency and clarity, especially with the elevated levels of uncertainty we see in our markets today. For the full year 2025, Carlisle delivered solid results in a very challenging environment.

Of note, we generated $5 billion in revenue. Adjusted EPS was $19.40. Adjusted EBITDA margins were 24.4% and ROIC was approximately 25%, which is not only well above our cost of capital, but is also considered best-in-class. We take a great deal of pride and consistently operating at this level. Looking ahead, we remain convinced that driving adjusted EPS to $40 per share and maintaining ROIC above 25% as contemplated under Vision 2030 are the right long-term goals to maximize value creation for our shareholders.

We were extremely pleased with our cash flow performance in 2025, which was our fourth consecutive year of generating more than $1 billion of operating cash flow. Free cash flow was $972 million, representing free cash flow margins of 19.4%, well ahead of our Vision 2030 target of 15% and again best-in-class. The M&A environment in 2025, while active overall presented challenges in our target markets as sellers expected elevated valuations for quality assets and we remain disciplined with limited appetite to deploy capital into premium priced acquisition targets that exhibited less than premium results in the recent past.

So with M&A activity more muted, we continue to lean into share repurchases as an attractive use of capital, especially given our expected returns on those share repurchases. Ultimately, we repurchased $1.3 billion of Carlisle shares in 2025. In addition to share repurchases and consistent with our past practices, we returned $181 million to shareholders through dividends in 2025. August marked our 49th consecutive annual dividend increase, up 10% year-over-year. We are excited for the prospect of reaching the half century mark this coming summer. Our 2025 performance clearly positions Carlisle as a leading cash return story in the building products sector.

We are pleased with our ability to maintain a strong balance sheet and ample financial flexibility to consistently invest in our business, especially the areas of customer experience, operational excellence and innovation while simultaneously pursuing disciplined value-creating acquisitions when opportunities meet our return thresholds.

Turning to Slide 4. For the fourth quarter, we generated revenue of approximately $1.1 billion. Adjusted EPS was $3.90 and adjusted EBITDA margin was 22.1%. During the quarter, we also returned $346 million to shareholders through share repurchases and dividends. More importantly, in 2025, we stayed disciplined in our activities and focused on things we could control.

Guided by Vision 2030, we advanced our innovation agenda, continue to automate our operations, strengthen our leadership team and further enhance the Carlisle experience for our customers. Those same priorities are part of the core pillars that will drive our performance in 2026 and beyond regardless of broader market conditions. Speaking of core pillars, let me now turn to the core of Carlisle's strengths since the 1970s. Our commercial roofing and broader building envelope business at CCM.

The largest part of our continuing performance story at CCM has been the reroofing market. Reroofing is a significant part of Carlisle's ability to deliver consistent sales and earnings growth. Reroofing is driven by the nondiscretionary need to maintain, upgrade or repurpose North America's vast and aging nonresidential building stock.

Looking at our reroofing business, it is important to note that at CCM, reroofing represents roughly 70% of the business. When one couples this with the fact that over 70% of the U.S. nonresidential footprint is older than 25 years and roofs typically need to be replaced every 20 to 30 years. It is apparent that this market provides consistency and resiliency to our overall business.

Looking at the reroofing market, reroofing permits have grown at a low single-digit rate over the past years. And when you layer on 150 to 200 basis points of content per square foot growth per year, you get the mid-single-digit growth in reroofing demand we are forecasting for the foreseeable future. Reroofing is not optional for building owners. It is an imperative investment to keep assets operational, safe, code compliant and increasingly, energy efficient.

And North America is the most attractive roofing and building envelope market in the world, given a large and aging building base of low slope roofs, increasing energy efficiency regulation and pressure from rising utility rates, especially now with the outsized impact of AI and data centers consuming unprecedented levels of electricity, structurally high labor costs and a decrease in labor pool that increases contractors' desire for easy to install, labor-saving solutions and products that get them off the roof quicker.

And in most areas we operate in, a growing awareness of total cost of ownership and the life cycle performance with building owners, architects and specifiers. Within this market, Carlisle is a recognized leader and a differentiated provider of integrated building envelope solutions and systems comprised of roofs, walls, foundations, waterproofing and insulation. Our systems approach, long-term warranties and specification strength give Carlisle a meaningful and sustainable competitive edge, and it positions us to take advantage of a robust North American building products market for years to come.

Looking ahead, our operating narrative remains clear, well understood by our investors and consistent with what we saw drive our 2025 results, steady reroofing demand accompanied by a weaker new construction market.

In CCM, reroofing is expected to grow low to mid-single digits in 2026, broadly consistent with its long-term trajectory and our past experience. New commercial construction in CCM remains soft and saw continued declines in the second half of 2025. Based on our current indicators, including our Carlisle market survey, we are not projecting a sharp recovery in our 2026 plans, but we are assuming a gradual bottoming out midyear and an upward inflection in the second half of the year.

In CWT, we continue to see pressure from softer residential and nonresidential new construction, but we are seeing growth from our recent acquisitions of Plasti-Fab, ThermaFoam and Bonded Logic from our change in our selling approach in spray foam and from increased demand for energy-efficient and weather-proofing solutions. Kevin will provide more detail on our 2026 outlook. But at the consolidated level, we expect approximately low single-digit revenue growth and approximately 50 basis points of adjusted EBITDA margin expansion versus 2025.

Importantly, while we are setting conservative targets for 2026, given the end market uncertainties we face, our intent is anything but conservative. Over the next several years, we are very focused on growing sales faster than our end markets and expanding our EBITDA margins. Our Vision 2030 ambition continues to be to achieve adjusted EPS of $40 per share, EBITDA margins for Carlisle of at least 25% and ROIC of 25% plus.

Accompanying these targets are our goals of 30% plus EBITDA margins at CCM and 25% plus EBITDA margins at CWT. While we are not issuing a specific year for those levels today, we want to be clear about the direction of travel. We will get there by executing consistently on the key pillars of Vision 2030, which I'll touch on now.

Moving to Slide 6. Carlisle's performance strategy are built around 5 core pillars: one, operational excellence rooted in the Carlisle Operating System, or COS. Two, the Carlisle experience; three, innovation, four acquisitions and five, talent management. When we talk about operational excellence, we need to focus on the Carlisle Operating System because as we approach our second full decade of COS, it really has become our core continuous improvement methodology and permeates our culture.

Introduced in 2008, the Carlisle Operating System is how we run the company every day. It drives lean principles, standard work and continuous improvement across our plants, supply chain and offices. COS is also the framework that led us to top industry safety metrics. And in 2025, we expanded automation and AI into our COS programs across key manufacturing sites seeking improved change over time, reduce scrap and enhance safety and quality metrics. COS is a major reason we have maintained strong margins through a multiyear period of volatile volumes, inflation and supply chain disruption.

It will continue to be the engine behind our margin expansion objectives in both CCM and CWT. Moving to our next core pillar, the Carlisle Experience. The Carlisle Experience is our promise to our customers and that promises the right product to the right place at the right time, supported by people who understand the jobs and the challenges and have many years of experience in dealing with customers in our markets. The Carlisle experience touches many of our key stakeholders, contractors, distributors, architects and building owners.

For contractors operating in a tight labor market, our ability to ship complete on time orders directly to the job site is a real advantage. Our field technical teams and in-house roofers work alongside distributors, contractors, architects, and building owners to ensure systems are specified correctly and installed correctly.

Our long-dated warranties many over 20 years, are backed not just by a document but by knowledgeable and well-trained employees who drive excellent service and support across the life cycle of the roof. This reliability helps our contractor partners work more efficiently and win more projects, and it supports our ability to price the value by delivering that superior value at every touch point.

It also underpins our strong specification history. Roughly half of Carlisle sales are tied to project specifications where Carlisle is the preferred system of record. Innovation remains one of the most important drivers of our future growth and competitive differentiation. To that end, we will increase our investments in R&D and product development to 3% of sales under Vision 2030 with a clear objective. By 2030, 25% of Carlisle's revenue will come from products that are 5 years old or younger.

To achieve this, we have made substantial structural enhancements to our innovation engine. We implemented a robust voice of customer process to identify the most pressing contractor and building owner pain points. We refined and drove further discipline in our stage gate governance model for new product development to allocate resources to the products with the highest expected returns.

And lastly, we strengthened our innovation, leadership and cross-functional collaboration between R&D, manufacturing and our commercial teams. You can already see the results in the marketplace. ThermoThin 7 polyiso insulation and industry first delivers high or value per inch. This means building owners get superior thermal performance and contractors can use fewer boards to meet code, reducing trucks, fasteners, material handling and labor. Early feedback from this market launch has been outstanding.

Our newly launched temperature-sensing gun for flexible fast Adhesive. This new application device transforms adhesive application from a manual error-prone process to a controlled data-driven system with real-time temperature sensing and visual indicators -- it reduces installation errors, material waste and callbacks and it is included with every flexible fast dual tank system we sell.

Products like RapidLock, Samshield, APEEL and VP Tech continue to gain traction by addressing real contractor needs around installation speed, energy performance and long-term durability. And importantly, these are not science projects. They are commercial products generating revenue today, helping contractors work faster and safer and allowing building owners to meet increasingly stringent energy and performance standards.

They also support our desire to grow content per square foot by 150 to 200 basis points per year, a key component of our Vision 2030 expectations. The fourth pillar is acquisitions and importantly, acquisitions executed within a disciplined capital allocation framework. Over the past several years, we have strategically pivoted Carlisle to a pure play building products portfolio, focused on the building envelope, roof, wall and waterproofing.

We estimate our broader building envelope addressable market at approximately $70 billion and today, we have direct exposure to just under half of that. Our M&A strategy is straightforward, focus on bolt-on and adjacent acquisitions and the building envelope that enhance our systems offering and increase our content per square, target businesses where we can apply the Carlisle Operating System and the Carlisle Experience to improve operations gross sales and expand margins and maintain strict ROIC and return thresholds, ensuring deals are accretive to growth and returns over time.

Recent acquisitions such as MTL, Plasti-Fab, Thermafoam and Bonded Logic are good examples. MTL strengthens our position in prefabricated metal edge systems, allowing us to sell more content per roof and offer more complete warranty backed systems. Plasti-Fab and Thermafoam expand our capabilities in EPS insulation where scale gives us material cost advantages and broader geographic reach.

And Bonded Logic through UltraTouch Denim recycled insulation opens an attractive opportunity in sustainable insulation addressing customer demand for both performance and environmental attributes. We do not pursue acquisitions for headlines. We integrate, optimize and capture synergies, commercial, operational and supply chain related. That track record reinforces Carlisle's reputation as a superior capital allocator in our space. And last, but not least, is our fifth pillar, talent management.

Nothing we have discussed today would be possible without Carlisle's team of over 5,000 dedicated employees. We focus on attracting, developing and retaining people who want to win in the marketplace and grow their careers. At CCM, I'm excited about the recent leadership appointment that exemplifies this. In November, Jason Taylor joined us as President of CCM bringing deep distributor and contractor relationships from his extensive industry experience, his fresh perspective, combined with the strong familiarity of our business positions CCM exceptionally well as we execute our growth strategy.

Let me now turn to our Vision 2030 financial targets on Slide 7. We are reaffirming our Vision 2030 targets of $40 of adjusted EPS and more than 25% ROIC. We believe these targets are credible and achievable driven by low to mid-single-digit organic revenue growth led by reroofing volumes and content per square foot gains.

EBITDA margin expansion at both CCM and CWT as COS automation, AI and self-help initiatives compound, disciplined synergistic M&A focused on the building envelope and significant capital return through dividends and share repurchases. It is important to remember our history. Under Vision 2025, we achieved our EPS target 3 years early and that journey was not a straight line.

We managed through COVID, supply chain shocks, raw material inflation and shifts in construction activity. We expect a similar pattern as we execute Vision 2030. There will be quarters where new construction is soft, where raw material costs move against us or where competition intensifies. But our track record shows that Carlisle can adapt quickly adjusting price, mix, cost structure and capital deployment while staying true to our long-term strategy.

Vision 2030 is not simply a set of aspirational numbers. It is anchored in clear priorities and measurable actions across our 5 pillars: operational excellence through COS, exceptional customer service through the Carlisle experience, product and systems innovation, targeted synergistic acquisitions and talent management and leadership development across the enterprise. And with that, I'll turn it over to Kevin to go through the fourth quarter results in more detail. Kevin?

Thank you, Chris, and good afternoon, everyone. I will review our fourth quarter financial results and provide additional details on our full year 2026 outlook. Moving to Slide 8. We generated fourth quarter consolidated revenues of $1.1 billion, an increase of 0.4% compared to the prior year.

Our recent acquisitions of Plasti-Fab, ThermaFoam and Bonded Logic contributed incremental revenue of $30 million in the quarter. Organic revenue declined 3% due to the continuation of soft new construction activity in commercial and residential end markets, partially offset by solid commercial reroofing demand.

Adjusted EBITDA for the quarter was $249 million, resulting in an adjusted EBITDA margin of 22.1%, a decrease of 300 basis points compared to last year. This decrease was primarily due to strategic investments in the business to support our long-term growth as well as lower volumes at CWT.

Adjusted EPS was $3.90, down 13% year-over-year. This decline was driven by lower organic earnings and higher interest expense partially offset by the benefit of share repurchases and contributions from our strategic acquisitions. Our segment performance starts on Slide 9. CCM delivered fourth quarter revenue of $827 million, a decline of 0.8% year-over-year. The macroeconomic uncertainty we discussed on our third quarter call continued to pressure new construction activity in the fourth quarter which was mostly offset by the continuation of solid demand for commercial reroofing.

Fourth quarter adjusted EBITDA for CCM was $222 million, a 10% decline from the prior year. Adjusted EBITDA margin of 26.8% decreased 260 basis points, primarily due to our continued investments in innovation and other strategic initiatives to enhance the Carlisle experience, including investments in our customer service capabilities and digital tools that improve order visibility and make contractors' jobs easier.

Moving to CWT on Slide 10. CWT reported fourth quarter revenues of $301 million, up 4% year-over-year, supported by revenues from Plasti-Fab, ThermaFoam and Bonded Logic. Organic revenue declined 7% due to continued softness in residential and nonresidential new construction markets resulting in lower volumes. CWT's adjusted EBITDA was $48 million, down 10% from last year. CWT's adjusted EBITDA margin of 15.9% decreased 240 basis points year-over-year primarily due to increased unit costs resulting from higher absorption of fixed cost on lower volumes. For your reference, Slides 11 and 12 provide our fourth quarter and full year adjusted EPS bridges, respectively.

Turning to Slide 13. Carlisle financial position remains strong. As of December 31, we had $1.1 billion of cash and cash equivalents and $1 billion available under our revolving credit facility. This financial strength provides us with significant flexibility to execute our superior capital allocation strategy, including investing in innovation and capital expenditures, pursuing strategic M&A and consistently returning cash to our shareholders through share buybacks and dividends.

Moving to Slide 14. As Chris mentioned earlier, in 2025, we generated operating cash flow of over $1 billion for the fourth consecutive year. Free cash flow from continuing operations was a record $972 million resulting in a free cash flow margin of 19.4%, well above our Vision 2030 target of 15%.

During 2025, we invested $241 million in the business with $131 million in capital expenditures and $110 million in acquisitions. We also returned nearly $1.5 billion to shareholders through $1.3 billion of share repurchases and $181 million of dividends. Now turning to our 2026 outlook on Slide 15. We expect consolidated revenue growth in a low single-digit range for the full year of 2026. This reflects CCM revenue growth in the low single digits, driven by continued strength in reroofing offsetting slower new construction and CWT revenue also up low single digits as contributions from share gain initiatives offset continued end market softness.

Also want to provide some color on the quarterly cadence for revenue. With the recent harsh weather throughout most of the country, combined with a tariff pull forward in the first quarter of 2025 that we discussed on the Q2 earnings call, we expect first quarter 2026 revenue will be down low single digits versus last year.

On a positive note, harsh weather in the first quarter often leads to a strong construction season. Our full year guide assumes Q2 revenue will be flat year-over-year with a strong second half of the year, leading to full year sales growth of low single digits. We expect consolidated adjusted EBITDA margins to expand by approximately 50 basis points, supported by our focus on operational excellence cost-saving initiatives in both segments and volume leverage. We also plan to repurchase $1 billion of shares and maintain our industry-leading financial performance, including return on invested capital of approximately 25% and free cash flow margin over 15%, consistent with our Vision 2030 targets.

I will now hand it back to Chris for his concluding remarks.

Thank you, Kevin. In summary, Carlisle today is focused, strong and disciplined. We are generating substantial cash flow and returning significant capital to our shareholders, while preserving balance sheet strength for future opportunities. Our operating narrative is clear, steady reroof demand offsetting weaker new construction, particularly in CCM, with CWT positioned to benefit as residential and commercial construction recovers and as energy efficiency requirements tighten. .

We are accelerating innovation tied directly to customer needs with tangible products and solutions in the market today and a robust pipeline aligned to Vision 2030. We continue to integrate acquisitions with discipline, capturing synergies and strengthening our competitive position in key categories like prefabricated metal edge systems, EPS installation and sustainable insulation solutions such as UltraTouch sold through Home Depot.

And we are investing in our people, ensuring that Carlisle remains a place where talented individuals can build careers while helping us deliver outstanding performance. Carlisle operates in an imperative business in what we believe is the most attractive building products market globally. The long-term trends of energy efficiency, labor savings and growing reroofing demand are firmly in our favor.

Coupled with our 5 pillars, the Carlisle Operating System, the Carlisle Experience, innovation, acquisitions and talent management and guided by Vision 2030 -- we are confident in our path to $40 of adjusted EPS and beyond. I'd like to thank all of our employees for their perseverance in 2025.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Susan Maklari with Goldman Sachs. .

This is Charles [ Brandon ] for Susan. Maybe first, I would like to discuss a little bit the Vision 2030 and get an update on where we are today. You considered the progress you've made since 2023, along with the changing macro environment, including a softer housing backdrop than you probably expected back then, which of the key pillars you highlighted earlier in this call, you think provide the greatest lever to reach your $40 objective? And can you still reach this objective organically? Or is M&A increasingly important to reach that $40 target given the progress today?

Well, the two pillars for me that are most important, I think, are the margin expansions at CWP, obviously, and that's going to come with a return to what I'll call it, market recovery. We had anticipated having [indiscernible] making progress on margins right now up to 25%. And obviously, with the resi housing markets, we went the opposite direction.

So that recovery is going to be an important part. The second one is technology. We're very excited at IRE. This year, we launched a couple of signature projects -- products ThermaThin, for sure, and then our new higher technology gun that has a lot of embedded controls in it.

The second thing I would say about that is I think we've got another 10 products we're going to launch this year new products across the board. So a big emphasis on new technology. And as we've said, new technology brings sales, but it's also going to bring a higher content per square foot and hopefully increase margins as we do that. And then you asked if we still think $40 of EPS is in play. We still do.

M&A was always going to be a part of that. We think that it continues to remain a key part of it. And as you've seen this year, we've -- we've done -- we did some acquisitions in 2025, but I think we would like to done more and maybe a little bit bigger. So we'll see if this disparity between buyers and sellers can get resolved and we can have a productive '26 on the M&A front, which will obviously help us a lot getting to that $40 of EPS.

Next question comes from Tomo Sano with JPMorgan.

And my first question is CCM demand trends and your strategies -- so based on the recent customer surveys and this distributor contract feedback and upcoming new entrants of the capacities? And how do you see the sustainability of the reroofing demand and any signs of the recovery in new constructions and pricing and strategies wise. Could you talk about that, please?

Well, first of all, thank you for recognizing my tenth anniversary. I appreciate that. It's nice for you to do that. It's been an excellent time with Carlisle for me. As far as CCM, I think we see CCM in a very good position. We said in this call in the greater detail that 30%-plus EBITDA margins are what we're driving towards.

We've always had good ROIC and CCM. If we touch on the market, obviously, the new construction market is not as vibrant as we'd like it to be, but we do see that coming back, especially under things like the Big Beautiful bill and more investment in the United States and perhaps some interest from overseas players building -- that's all good for us, right? So we see that happening. We also see resi plays a role in nonresi construction, commercial construction.

So we know that as residential housing demand increases and we have more people investing in their homes. We know that means more traffic at the Home Depot. We know that means more traffic at the Walmarts and the CVSs and we also know that those those companies will build as well.

So I think when the economy returns, we're going to see both a nice play -- or I should say when the economy returns when resi returns, we're going to see a nice play that overlaps into some of the the nonresi as well.

Pricing has been relatively good for us. I think that will be a positive for us as we start to build pricing into new technology. We continue to invest in actually at higher rates to be going in the new technology that's coming out of CCM and CWT and in the physical plant and in the PhDs and in the people that are bringing us out. So we really are putting a lot of new technology, and that will bring a lot of good things for CCM. So I think the outlook is good this year, of course.

The first quarter is going to probably look similar to the fourth quarter. It is our lightest quarter of the year, and just because we moved from December to January doesn't mean that trends changed all that much. But as we get into the reroof or the roofing season, we think we should see some pickup in bottoming out and then hopefully, new construction comes back. So I don't know if Kevin wants to add anything to that. .

Yes. I would say exactly that first quarter, we do think that we could be down, as Chris said, around 3% in the quarter, but then flat in the second quarter, and then it picks up in the second half of the year. And for the full year, we do expect revenue to be up low single digits for the year.

Next question comes from Garik Shmois with Loop Capital Markets.

I was wondering if you could speak to in your volume assumption for 2026. Are you anticipating any distributor restocking activity? And maybe if you could address some of the impacts of the disruption of distribution that you had called out in the prior quarter. Has that since resolved? .

Well, first of all, on that one, we definitely -- so there was an impact, what I would say is we also said that it would get resolved and they would make progress. And I'm pleased to say that I think progress has been made as we went into the fourth quarter. And that's a difficult time when you think about volumes, because in most cases, there is a desire to hold less inventory as you move into the fourth and first quarter. General seasonal destocking.

And so the fact that we saw progress with some of our channels that it had issues earlier in the year. I think that's a real positive sign. And obviously, they're going to work hard to continue to make progress moving to '26, and we should be the beneficiary of that. Also, when you think, Garik, about volume, even though there was a seasonal effect and we'd see it go down, I think higher interest rates cause people to want to have less working capital and inventory.

We made -- we think we're seeing less inventory. Our Carlisle market survey said that inventory levels were lower than the historical average in the respondents that we talked to. And I think as we move in, if we can get a positive start to the summer construction season, we should see some nice volume improvements as we move into Q2.

The next question comes from David MacGregor with Longbow Research.

I guess I wanted to ask you about the 2026 price outlook for Single Ply -- and it seems right now there's very little, if any, pricing in the market. Do you expect fundamentals may tighten once the season is underway and support a second half price increase or -- just how much forward visibility do you have right now in CCM? And how are you thinking about that pricing

Yes, I think that's a good question. And the market survey we had it pretty much like our results, it's been relatively flat, right? We've seen a little bit. But I'll say relatively flat, because it hasn't been a big move in either direction. Do we see the opportunity to see some pricing come back? We've said in the past that we had 4 keys to kind of making price move.

Obviously, it was reroofing demand being there continued labor shortage rational capacity expansion and then even a slightly positive new construction market. So I think if we think about new construction rebounding, that's the one to me, that everything else is kind of in play. I know we're seeing some additional capacity added. But I think on the commercial roofing side, it's rational. The labor shortages are still there. The reroofing market is still good. So if we could get that new construction to see a more positive '26 than in '25, then I do think it helps put some upward pressure on pricing.

And then obviously, that's kind of the traditional price increases that would happen maybe in that midyear time frame. I think the other one that you're going to -- it's going to be a little bit masked is this [ R7 ], for example, or other new technologies, where that price increase gets kind of embedded in the product. We elevate the price, but we're elevating the price because we're providing more value in that product and as we begin to replace old polyiso technology with [ R7 ] then there's an implied kind of pricing there increase. So it doesn't come out in a price line, but you do end up seeing it on the P&L.

Got it. And you characterized labor shortages as a constant, that's not getting worse at the job site labor.

I should say the concept of labor continuing to be in a shortage position and potentially, I think it could be getting a little worse, yes. So yes, a little bit of correct. You're absolutely right.

Your next question comes from Adam Baumgarten with Vertical Research Partners.

Just a couple of questions. How are you thinking about price cost for the year? And then also within your assumption for low single-digit revenue growth in CCM, does that build in that flattish pricing outlook?

Yes. So as we're looking at it, we do have a little bit of tailwind on the raw materials entering the year. We have, one, overall, it's been a deflationary environment in those key buckets that we have from polyols, PPO, resins, it's all MDI. It all been a positive trend where that's going. Obviously, steel that's negative from the steel side of it. So we do have a little bit of a mixed bag. We still have some of the ATO, [ PCTP ] that we talked about, a little carryover on that on a negative in the first quarter. So I don't see any benefit of [ raws ] in Q1.

But starting in Q2, we should start to see that the positive for [ raws ] come through. And then, yes, pricing in that flattish range, flat, down 1%, something like that for the full year is what we're looking at.

[Operator Instructions] Next question comes from Keith Hughes with Truist.

Kind of building on the last question, pricing in CWT. Could you talk about what it was in the quarter? And what kind of your expectations within this guidance and more it will be for 2026?

Yes. It's really in the quarter, it was down less than 1% in Q4. And then as we get into next year on CWT side, it's pretty flat is what we're looking at throughout the year. Obviously, it could be up a little bit or down a little bit, but we're looking at flat for the most for CWT pricing in 2026.

There are no further questions at this time. I'll hand the call over to Chris Koch for closing remarks. Please go ahead.

Well, thanks, Joel. This concludes our fourth quarter earnings call. I want to thank everyone for your participation, your patience and allowing us the opportunity to share results with you for the fourth quarter and full year of 2025. Looking forward to speaking with everyone at the next earnings call. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon. My name is Kelsey, and I'll be your conference operator for today. At this time, I would like to welcome everyone to the Carlisle Companies Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Mr. Mehul Patel, Carlisle's Vice President of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Carlisle's Third Quarter 2021 Earnings Call. I'm Mehul Patel, Vice President of Investor Relations for Carlisle. We released our third quarter financial results today, and you can find both our press release and the presentation for today's call in the Investor Relations section of our website. .

On the call with me today are Chris Koch, our Board Chair, President and CEO; along with Kevin Zdimal, our CFO. Today's call will begin with Chris providing key highlights of the third quarter. Kevin will follow Chris and provide an overview of our Q3 financial performance and our outlook for the full year of 2025. Following our prepared remarks, we will open up the line for questions.

But before we begin, please refer to Slide 2 of our presentation, where we note that comments today will include forward-looking statements based on current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties which are discussed in our press release and SEC filings. As Carlisle provides non-GAAP financial information, we provided reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials which are available on our website. And with that, I will turn the call over to Chris.

Thank you, Mehul. Good afternoon, and thank you for joining us for Carlisle's Third Quarter 2025 Earnings Call. Let's begin by turning to Slide 3 of the presentation. .

Carlisle's third quarter results reflect the strength of the underlying CCM business, offset by the ongoing challenging environment in both residential and nonresidential new construction. This along with the M&A activity in our commercial channel, was communicated on our early September commentary. The vast majority of the continued weakness in new construction is driven by the continuation of higher interest rates affordability challenges and economic uncertainty around inflation, coupled with job stability concerns and labor shortages.

With respect to the post-M&A integration, as with any transaction, some turmoil and change was to be expected, and we anticipate that over the coming months, this will be resolved and we will return to a more stable situation. Despite this turbulence, third quarter revenues came in at $1.3 billion, up 1% year-over-year, only slightly below the expectations we discussed on our July 2nd quarter earnings call. This allowed us to achieve an adjusted EPS of $5.61.

In Q3, CCM continued to execute on its Vision 2030 initiatives and delivered another solid quarter maintaining adjusted EBITDA margin of over 30% as recurring revenue from reroofing activity provided a stable foundation amid near-term order volatility due to the previously discussed pressures and new construction demand and the temporary setbacks associated with challenges at a key distribution partner.

Notably, reroofing demand, which represents approximately 70% of CCM's commercial roofing revenue remain strong. This momentum in reroofing activity is driven by the aging commercial building stock a growing backlog of roofs reaching replacement age, energy efficiency mandates, new product solutions that reduce labor and the trust our customers place in the Carlisle experience and our premium warranties. Outside of new construction and distribution impacts, CCM's underlying business performance remained consistent with our expectations.

While CCM's performance was a bright spot, we continue to face the well-known market challenges at CWT, which have negatively impacted the business over the last 6 quarters. Elevated mortgage rates have led to increased monthly payment levels contributing to suppressed demand. The imbalance in sellers and buyers of homes has made transactions more difficult. U.S. housing supply has also made it difficult to afford a home.

One estimate has shown that housing prices have risen over 45% since 2020, resulting in the medium home price of over $430,000, which is almost 5x higher than the median household income across the country. The measures of housing stock availability point to a growing gap between supply and demand, the root of the affordability problem, which is amplified by declining productivity and a shortage of skilled labor. As a result, it takes longer to build a house than it has in past decades. It's estimated that at least 3 million to 4 million additional homes need to be built to address the affordable housing shortage in the U.S.

Despite the near-term challenges, imbalances and volatility, we remain confident in our ability to create value for our shareholders through our Vision 2030 strategies and initiatives. Carlisle remains a market leader operating an imperative business in the most attractive market globally. The megatrends of energy efficiency, labor savings, growing reroofing demand and the demand for residential housing will continue to drive superior, sustainable and best-in-class financial performance for Carlisle.

Carlisle's pivot in 2023 to a pure-play building products company has enhanced our focus on our industry-leading platforms, highlighted our leadership in attractive growth markets and positioned us to deliver innovative building envelope solutions to our customers, all to drive superior financial returns for our shareholders.

During the quarter, we also maintained our commitment to disciplined capital deployment. We repurchased 800,000 shares for $300 million and raised our dividend by 10%, marking our 49th consecutive annual increase. We also continue to integrate our recent acquisitions of Bond & Logic, ThermaFoam and Plasti-Fab, and they continue to meet our expectations. Innovation is a core pillar of Vision 2030's playbook to create value, increase margins and drive market share growth.

Our innovation pipeline continues to deliver tangible marketplace results. The new products we've introduced over the past 2 years, including RapidLock, SeamShield, APEEL and VP Tech are gaining meaningful commercial traction. These products are proven solutions that address real contractor pain points around installation speed, energy performance and long-term durability. With our increased investment and substantial focus on the understanding of the voice of the customer, we anticipate impactful and revolutionary new product introductions over the next decade.

What's particularly encouraging about these new products is how these innovations align with broader industry trends. Building owners increasingly prioritize energy efficiency to reduce operating costs. Contractors face persistent labor constraints that make productivity-enhancing products more valuable. And our innovation road map specifically targets these market needs. This innovation strategy also directly supports our Vision 2030 objective of generating 25% of revenue from recently introduced products. It's a key driver of our plan to grow faster than our markets while expanding margins over time.

Our M&A strategy is also creating meaningful value by expanding both our capabilities and our addressable markets. The MTL acquisition in 2024 has exceeded our expectations, allowing us to sell more content per roof through prefabricated metal edge systems, creating a more complete warranty and enhancing our reputation as providers of complete building envelope solutions. The PlastiFab and ThermaFoam integrations are also progressing and on track. We're capturing cost synergies while leveraging our national footprint to drive sales expansion.

What's particularly powerful about our position in EPS insulation is our unique combination of in-house raw material production and the industry's most extensive geographic coverage in North America. This gives us structural cost advantages that enable us to serve national retail and distribution partners more effectively than any competitor.

The Bonded Logic acquisition opens an entirely new growth avenue. UltraTouch recycled denim insulation addresses the large fiberglass insulation market with a differentiated value proposition focused on sustainability and performance. As building codes and consumer preferences increasingly favor environmentally responsible materials, we're positioned to capture share in a sizable category where we previously had no presence.

As we move into 2026, we are optimistic that M&A markets will become increasingly more productive for Carlisle. As economic conditions improve, confidence in acquisition target financials will strengthen and the valuation gap between buyers and sellers will close, and we should see deal activity increase. This will bolster our long-term strategy of deploying capital in M&A to drive growth and market share. Meaningful bolt-on acquisitions will continue to play a significant role in our path to growth, and we hope to return to a pace of 2 to 3 acquisitions each year.

Our operational initiatives continue to deliver solid returns on capital as well. Packaging automation investments in Kingman and Fernley, footprint consolidation initiatives and expanding in-house solutions for adhesive applications through our new Flexible FAST adhesive product are 3 specific examples of key initiatives that are utilizing capital to create a fundamentally more efficient cost structure that will drive even stronger margin expansion when higher volumes return.

Beyond cost actions, we're executing growth initiatives that diversify our revenue streams. Our Home Depot relationship is expanding to include single ply roofing, insulation, flashing and air barriers, creating new selling channels for our products. Our cross-selling efforts in retail continue to build momentum, and the bonded logic addition gives us an entry into attractive insulation categories where we can leverage our existing relationships. The combination of these operational improvements and strategic growth initiatives are positioning CWT to expand margins as we move through 2026, especially if end market recovery accelerates.

Our capital allocation approach remains a core competitive advantage. The $1 billion bond issuance we completed in the third quarter provides significant strategic flexibility and cash for near-term opportunities while keeping our net debt-to-EBITDA ratio comfortably within our 1x to 2x target range. This enhanced financial capacity positions us to pursue multiple value creation path simultaneously. Year-to-date, we've deployed $1 billion in share repurchases, taking advantage of valuation opportunities and we are now raising our share buyback target to $1.3 billion for the year. The 10% dividend increase, our 49th consecutive annual increase demonstrates our confidence in the business' ability to generate cash flow.

We expect to generate approximately $1 billion of cash flow from operating activities this year, providing substantial capacity for continued innovation investments, strategic M&A that meets our disciplined criteria and ongoing capital returns to shareholders. Our track record of balanced, opportunistic capital deployment reflects our commitment to maximizing long-term value creation.

Looking ahead and keeping in mind the near-term transitory headwinds our markets are facing, we are revising our full year 2025 guidance to flat revenue with adjusted EBITDA margin down 250 basis points. While macroeconomic and distribution channel uncertainties persist, we remain confident in our Vision 2030 targets and ability to drive value creation through our recurring reroofing leadership, operational improvement initiatives and consistent execution of our Vision 2030 initiatives.

As a reminder, the structural advantages underpinning our businesses remain fully intact we compete in attractive end markets with favorable long-term fundamentals. The secular trends supporting our growth, recurring reroofing demand, energy efficiency requirements, adoption of labor-saving technologies and the persistent housing shortage all continue to create meaningful tailwinds.

As a reminder, our Vision 2030 strategy provides clear direction through 4 key pillars: product innovation to drive differentiation and above-market growth, operational excellence through COS, exceptional customer service via the Carlisle experience and strategic M&A to enhance capabilities and expand our addressable markets. We remain firmly committed to our Vision 2030 targets of $40 of adjusted EPS and maintaining an ROIC of 25% or greater, which we expect will generate over $6 billion in cumulative free cash flow through 2030, along with our anticipated organic revenue CAGR exceeding 5%, and we have multiple pathways to achieve these ambitious goals.

In summary, Carlisle's third quarter performance once again showcased the earnings power of CCM. Despite the significant challenges in the new construction market and distribution channels, sales grew and adjusted EBITDA margin remained above our Vision 2030 target of 25%.

With that, I'll turn it over to Kevin to provide additional financial details and color on our outlook for 2025. Kevin?

Thank you, Chris, and good afternoon. I'll review our third quarter financial results starting on Slide 4. We generated revenue of $1.3 billion in the third quarter, an increase of 1% compared to the third quarter of 2024. The acquisitions of Plasti-Fab, ThermoFoam and Bonded Logic contributed $39 million of revenue in the quarter. .

Organic revenue declined 2% from the previous year as solid commercial reroofing was offset by the continuation of soft new construction activity in both residential and commercial end markets as well as residential, repair and remodel.

Adjusted EBITDA for the quarter was $349 million, resulting in an adjusted EBITDA margin of 25.9%, a decrease of 170 basis points from the prior year. This decrease was mainly due to lower volumes at CWT and our continued investments in innovation and enhancements to the Carlisle Experience. Adjusted EPS was $5.61, down 3% compared to last year. This year-over-year decline was a result of low organic earnings from the previously mentioned market challenges and additional net interest expense partially offset by the benefit of share repurchases and contributions from our strategic acquisitions.

Turning to our segment performance on Slide 5. CCM reported third quarter revenue of $1 billion, essentially flat year-over-year, reflecting the current construction environment. Reroofing growth has remained stable as building owners continue to address aging roof systems that must be replaced. However, headwinds exist as macroeconomic uncertainty has continued to put pressure on new construction as cautious builders delay project starts and the impact from near-term volatility caused by the consolidation of distributors, manufacturers and contractors in our industry.

CCM's adjusted EBITDA was $303 million, down 8% compared to the prior year. Adjusted EBITDA margin for the quarter was 30.2%, which declined 260 basis points, primarily due to materials inflation driven by ongoing supply disruptions on ATO out of China and antidumping duties on PCPP from China in addition to our continued investments in innovation and enhancements to the Carlisle Experience.

Moving to Slide 6. CWT reported third quarter revenue of $346 million, up 3% year-over-year with the contribution from recent acquisitions. Organic revenue declined 8% from the prior year due to lower volumes resulting from continued softness in commercial new construction and residential end markets as affordability challenges and higher interest rates continue to negatively impact demand.

CWT's adjusted EBITDA was $60 million, a 13% year-over-year decline. CWT's adjusted EBITDA margin decreased 330 basis points from the prior year, to 17.4% for the third quarter. This decrease was primarily the result of the impact of volume deleverage.

Turning to Slide 8. Our financial position remains strong with flexibility to execute our superior capital allocation strategy. As of September 30, we had approximately $1.1 billion of cash and cash equivalents and $1 billion available under our revolving credit facility. During the third quarter, we issued $1 billion of debt. This strategic financing enhances our liquidity and provides additional capacity to pursue growth initiatives while maintaining our net debt to EBITDA ratio of 1 to 2x. As of September 30, our net debt-to-EBITDA ratio was 1.4x, well within our target range.

Moving to Slide 9. We have generated free cash flow of $620 million in the first 9 months of 2025 and we are on track to exceed our free cash flow margin target of 15% for the full year. Our strong, consistent cash generation continues to support our balanced approach to capital deployment. Year-to-date, we have invested $199 million in the business through $91 million of capital expenditures and $108 million in acquisitions. We also returned over $1.1 billion to shareholders through $1 billion of share repurchases and $135 million of dividends. As Chris previously mentioned, we are now increasing our share buyback target to $1.3 billion for the full year of 2025.

Our revised full year outlook for 2025 is on Slide 10. We now expect full year consolidated revenue to be flat year-over-year. This more conservative sentiment is based on our third quarter results and the fourth quarter outlook from our recent Carlisle Market Survey, which includes softer conditions and nonresidential construction compared to the prior survey. We expect CCM fourth quarter revenue to be down low single digits as continued strength in reroofing will be more than offset by new construction and distribution channel headwinds.

CWT fourth quarter revenue is expected to increase low single digits as recent acquisitions are expected to more than offset continued market softness. We anticipate full year adjusted EBITDA margins to decline approximately 250 basis points compared to 2024 and with fourth quarter adjusted EBITDA margins expected to be approximately 21%, primarily due to volume deleverage and strategic investments in the business.

Before I close, I'd like to provide perspective on our current performance by highlighting Carlisle's long-term track record, as shown on Slide 11. Over the past 17 years from the 2008 global financial crisis through the pandemic and subsequent supply chain disruptions, we've consistently delivered resilient strong margins across multiple economic cycles. This steady advancement reinforces our confidence in navigating today's dynamic market.

Our business fundamentals remain strong. We are executing well on our key initiatives and maintaining our focus on investing in innovation, enhancing the Carlisle Experience and driving operational excellence through the Carlisle Operating System. Our strong balance sheet, superior capital allocation and our proven track record of performing through challenging economic cycles gives us confidence in our ability to achieve our Vision 2030 targets and create substantial value for our shareholders.

I'll now hand it back to Chris.

Thank you, Kevin. In conclusion, Carlisle delivered third quarter results that demonstrate the resilience and strength of our imperative business model. While we continue to navigate the unanticipated volatility and challenges of 2025, our focus remains clearly on our Vision 2030 strategy and the factors within our control: innovation-driven organic growth, operational excellence through the Carlisle Operating System, exceptional service through the Carlisle experience, attracting and retaining top talent and superior capital allocation. .

As always, our results of future success would not be possible without the extremely talented and hard-working teams we have here at Carlisle. Their perseverance and commitment to stakeholder success shines exceptionally bright in these challenging times. I'd like to thank you for listening today and for your continued support and interest in Carlisle. That concludes our formal comments. Operator, we are now ready for questions.

[Operator Instructions]

Your first question comes from Tim Wojs from Baird.

I'll stick to one question as you asked. But I guess on destocking, could you just kind of frame the impact in the third quarter and what's included in the fourth quarter? And I guess, as you've had like discussions with your channel partners, I guess what's driving the destocking? And as we think about next year, can we kind of enter 2026 with kind of a clean slate from a channel inventory perspective?

Yes, Tim. With respect to destocking, I think as we move into Q4, we've always seen this. We're going to have Q4 and Q1. They're our latest quarters of the year. We always see some some reduction in inventory from where we were in the second and the third quarter is. Obviously, we build inventory towards the end of the first quarter and in the second quarter for the season.

So when we did our market survey, we actually -- for the fourth quarter, we saw kind of normal seasonal patterns, somewhere around 1.5 to 2 months. So really for us, there was -- I would say that normal destocking, there might have been a little bit more as certain distributors work through some things. I think we touched on this M&A transaction. As Carlisle, we've done a lot of M&A, and we understand how difficult those first years are and your adjusting management team, you're doing those other things. So there could be some effect there.

But overall, we don't see a major impact on destocking. It could be a positive, if we go into 2026 and we get some of the macroeconomic issues resolved, we get a little bit of a turnaround in new construction, both on the resi and nonresi. And if we can get this interest rate situation figured out and get some demand back there, it could be a real positive as we head into the Q2 '26.

And your next question comes from Susan Maklari from Goldman Sachs.

My first question is talking a bit about the Carlisle Experience and how you can leverage that in this kind of an environment to gain share. And with that, can you talk a bit about what you're seeing in terms of the competitive backdrop and how you're leveraging the Carlisle Experience to respond to that?

Right. Well, I think you've got a couple of things going on. We've talked about declining new construction in both areas. I think people want to obviously use their labor more efficiently. We still have a blabber shortage. Obviously, there's been even more publicized about the impact on construction, builders, construction markets from some of the immigration actions and things like that.

So I think the Carlisle Experience that we talk about, where it's the right product at the right place at the right time, you're going to show the value here in helping contractors and builders operate more effectively. It also spills out into some of the other attributes to with -- or areas, excuse me, with some of our distributors where it can enable them to respond quicker to jobs, be a better service to their customers as well, maybe perhaps carry lower inventory.

I know at the Home Depot, one of the key relationship strengths for Henry when we looked at their acquisition, was the 24-hour response time nationally was a very big competitive advantage. And I think they've leveraged that to basically now if you went into Home Depot store and you look at the Henry Aisle, most of it, there's very little competitive product there in the Henry space. So I think that points to how you can distance yourself from competition with better service.

We're investing in more Carlisle Experience. One is a program right now that we've enhanced our ability to tell contractors where their shipment is. So they much like we do on a retail side where we can see when the shipment leaves the manufacturer and then we can see where it is in the warehouse at either UPS or United -- or the Postal Service or FedEx. And then we can see when it's going to be delivered. We're building that capability, too.

And again, to help the contractor, the roofer know how to deploy and when to deploy labor and not waste that. If it's not coming in, they can redeploy it to a different job. So some big competitive advantages. You know, we measure our experience with the Net Promoter Score. And when we look at those scores, we continue to see gains from the investments we've made in customer service.

Okay. That's great color. And then following up on that, can you also talk a bit about your willingness to invest in the business given the current environment relative to the robust cash flows that you're seeing. I also noticed that it looks like you took the guide for CapEx down a bit this year. Can you just talk about the interplay between R&D, the investments long term and what you're seeing near term and how that fits in with the cash generation?

Sure. Well, we're very lucky to generate a lot of cash flow. I think the $1 billion that we've done, I think, in the last 3 or 4 years, certainly helps us when we have to pay increased dividends, investment CapEx, M&A and share buybacks in that. And I think on the R&D side, we're applying dollars right now. But when you think about what the front end on R&D is at least enhancing what we've been doing now, a lot of the investment is in people, processes. I'll tell you one area where we put a lot of money is in VOC.

So for probably the last 9 months to a year, we have a new leader in our a voice of the customer area, Vice President, her name is Julie [indiscernible]. She's brought in a new process, and we're spending quite a bit of money proportionately to where we were on really working through customer insights. We've got a process for doing that. It takes time. So it's really a people process kind of investment right now.

The goal there, obviously, to develop a consistent pipeline of strong concepts that are really ready for concept testing and then to move through our stage gate process. And the goal there is to generate the type of R&D outcomes that you would want to see that are hundreds of millions of dollars in revenue, not 10s. So super pleased with what we're doing there. And on top of that, I think we've talked before about how we're investing in our R&D campus, enhancing our testing ability, enhancing our ability to tap projects instead of taking out factory time to put it in a pilot line and things like this.

So that investment will increase. That's more mechanical as that. And concrete and borders and roofs and things like that. And that will take more time to build, but that will show up here in 2026 and beyond. And I think all of that, again, to take out labor from the job and increase energy efficiency. And I think we've got a good pipeline going there. But it's got to be based on that voice of the customer. That's a big component we want to add because we want to make sure they hit the mark when we launch them.

And then on your CapEx question. Yes, the CapEx was still up 30% year-over-year from '24 to '25, going from $100 million to $130 million. Investing in automation, AI and factories with preventive maintenance. So that investment continues. So the reduction in our outlook is really -- we're a little too ambitious on some of the projects that we thought we'd get to in '25 that are sliding into 2026.

And your next question comes from David MacGregor from Longbow Research.

This is Joe Nolan, on for David. I just want to I just wanted to ask within CCM, if you could talk about price versus volume? And if you could just give any detail on price cost in the quarter?

In the quarter, pricing was flat for us in the CCM segment. So all the offset would have been in volume, which was also flat. So both the volume and pricing flat in the quarter. On the raw materials, as I talked about on the ATO and PCPP, those had a negative impact of $12 million which was right in line with what we expected for Q3 on the raw materials.

Okay. Great. And if you could just give an update on how to think about price cost into 4Q, if there's anything changing there?

Yes, really very similar to what the Q3 was, we're expecting price to be flat for CCM in Q4, raw materials, slightly lower than that just because that's a the fourth quarter is lower than third quarter on a volume side. So proportionately, that's what you'll see on the raw materials side for CCM. .

And your next question comes from Garik Shmois from Loop Capital.

Just following up on that. I was wondering if you could provide the outlook for EBITDA margins in the fourth quarter by segment?

Yes. So as we look at CCM, you'd start with the volume. We're looking for volume to be down about little single digits. Reroofing still strong, but that being more than offset by the weaker new construction as well as some of the lingering distribution channel volatility that we talked about. And then we have pricing, as I said, flat, some of the negative raw materials that gets us well and continue to invest and what Chris was talking about on the Carlisle experience as well as innovation that gets us to around 26% EBITDA margin for CCM in the fourth quarter. .

And then on the CWT side, we have revenues down low single -- or I'm sorry, up low single digits overall. We have organic down mid-single digits. And then, obviously, the acquisitions having a positive impact there to get us up low single digits. Pricing on CWT side, down slightly less than 1%. No real impact from raw materials in the quarter, and that gets us the margins down 250 to 300 basis points compared to the prior year as a result of that lower organic volumes.

That's helpful. And I just wanted to follow up on the destocking piece. Can you speak to your market share in CCM, how you're viewing that relative to the industry and with the outlook is just given the distributor dislocation that's happening right now?

Yes, Garik, thanks. Pretty much, as we said, the underlying situation in CCM is pretty much the same. I don't see any long-term market share changes that have occurred right now. If we look at what happened in Q3, and I touched on the things that can occur when you do a transaction and you also have significant management turnover at really all levels. We did lose some share in certain areas because of really just being tied to that distributor channel partner.

And so very hard for us to change that because -- and at least one of those situations we could confirm that we don't really have any other vehicle to get that to market as directed. They are our choice. So that adage when they sneeze, we catch a cold, that's what happened there. But as I said and as we believe this is temporary, it happens, we would have expected some turbulence at after a big deal like that, it may continue into the third or fourth quarter. But overall, we think they're a great distribution partner. We think it will all get sorted out and we'll be right back in the game where we should be. So a little minor effect maybe Q3, Q4, but long term, no real changes.

[Operator Instructions]

And your next question comes from Bryan Blair from Oppenheimer.

If the combination of channel dynamics and competitive influence drives a bit more of a direct model -- direct sale model going forward in the industry? How do you see your team's positioning there? What are the positives and negatives that that occurs?

Well, Brian, I think it already has happened that I think one of our competitors publicly stated that they're already doing something like 30% of their business direct. And we would estimate that many of the other competitors are there. So I think that dynamic is already in place for Carlisle. Frankly, we've lagged it. When you look over the years, as recently as probably 5 years ago, we were probably doing somewhere between 3% and 5% direct.

So it wasn't -- our preference has been to work with our distribution partners. They've done a great job for us. We still feel that's the optimal way to do it. But obviously, as our competitors have taken a more direct approach, we have, too. So over the years, our team has already reacted. They've done a lot more work to connect directly to the end user. You can see in the Carlisle Experience, we have projects where contractors can directly look at shipments, quoting, things like that. So we can provide that, too.

We we ship as a reminder, 70% of our product direct to the job site. So we're already interfacing directly on that shipment from factory to job sites. So that's fully capable we can do that. But again, our preference has been to sell through distribution and these value distribution partners. So we're probably somewhere in that mid-teens direct right now. So about half of what our competitors are doing. And I think we'd like to continue to work with our distributor partners. But as you said, things are changing and we can step up on that model as well.

So one of the things I always liked about Carlisle, we have scale. We have a factory presence warehousing, great teams, great sales team, 600-plus reps across the country. So I think from a flexibility standpoint, wherever the market goes, we'll be able to do that. I mean, we're going to follow the lead of the contractor. However, they want to buy, we're going to be able to do that for them.

And your next question comes from Tomo Sano from JPMorgan. .

I'd like to talk -- ask about the pricing. And you mentioned that for Q4, CCM is expected to be flattish while CWT may decline by about 1%. And so looking ahead to 2021, would you expect new products, innovation products and high-end product launch or other factors to support price increases? Is -- of course, like depending on the demand and volume side, but could you touch about that outlook, please?

Yes. One of the things that we expect out of new products and enhanced customer services that we could extract value from that. That's why we do it. I mean that's our that's the reason is we are trying to increase the content per square foot in terms of pricing and value. And we will price the value. We've talked about that.

So as we look to 2026, certainly, if the volumes can return to a healthy level, I think we can expect to see us being paid for those advantages. Now of course, we have to demonstrate the value to the building owner, to the contractor to the architect, we have to communicate the product enhancements we made or our Carlisle Experience our operational excellence has value. But I think we've done a good job of that.

So the thing for us is really volume. And if you look at what we've always said sets up for a good year is that there is some level of new construction, 0.5%, 1%, but we can't have a declining new construction market. Second, we want to see rational capacity utilization, which we've seen. I think the market has added factories in a very rational fashion. So that's good.

We have labor shortages still, and we think that's important to drive some of this pricing. And then lastly, this increasing reroofing demand continues to be an underlying positive that we can rely on. So I think if those things are in place. And the only one that's not in place now really is new construction being positive. So if that turns around in '26, I would expect to see some nice upward momentum on pricing.

And your last question comes from Keith Hughes from Truist.

This disruption with distribution. Was this something about inventory levels or price? Or what is the nature of it? And is it fully resolved that we won't feel it again in the first quarter in your results?

I don't really know exactly what it was in those situations. I mean I think each location probably was affected differently and integration is going on, like I said, [indiscernible] changes, and things like that. So across the country could be a variety of issues. You just know that in those situations, we didn't capture the sale. So I think I would expect because of the group and their expertise and their past experience that doesn't resolved rather quickly. So we've got it going into Q4 and having some effects still. But my guess is they'll get it resolved and the '26 will be a year where they're going to want to come out and be fully intact and operational.

Okay. And just one question on pricing rate specifically. There's a lot of stuff going on with MDI and tariffs and anti-dumping and all that kind of stuff. Are you seeing pricing go up there -- or expected to go up near term with some of these cost pressures?

When we look at the raw material trends, and Mehul can comment on this in maybe more detail, but when I look at the trends, it's been kind of a mixed bag. Certainly, MDI and '25 has seen an upward trend on price, but then you've got polyol that's seen maybe a lower trend. And then we go to EPDM polymers and they're on an increase. So in general, when I look across our raw material basket, it's probably a little bit more biased towards increases as we go into Q4. .

Mehul, do you want to add anything to that?

Yes. Keith, just to add a little bit in terms of MDI and the antidumping duties that have been added. So while MDI prices have gone up to the first 3 quarters, and it's up year-over-year, I would say, quarter-over-quarter now it's still flat. So we're not seeing further increases.

Just to add a little bit more on your CWT pricing question. Kevin noted that pricing is down less than 1% for CWT. So we're seeing some pricing pressure on select categories, mainly underlayments, which plays in the residential roofing segment, where there's some softer demand as well as on the insulation categories, but it's a very small amount of price.

There are no further questions at this time. I'll hand the call over to Mr. Chris Koch for closing remarks. Please go ahead.

All right. Thanks, Kelsey. This concludes our third quarter earnings call. I want to appreciate everyone's time. We know you're busy. Thanks for your participation. Thanks for the great questions, and look forward to speaking with you at our next earnings call.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect. Have a great day.