Good afternoon. My name is Kavita [ph] and I will be your conference operator today. At this time, I would like to welcome everyone to the Carlisle Companies First Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, we will conduct a question-and-answer session. I will now turn the call over to Mr. Jim Giannakouros, Carlisle's Vice President of Investor Relations. Jim, Please go ahead.

Thank you, Kavita [ph]. Good afternoon, everyone, and welcome to Carlisle's first quarter 2021 earnings conference call. We released our first quarter financial results after the market close today and you can find both our press release and earnings call slide presentation in the Investor Relations section of our website carlisle.com. On the call with me today are Chris Koch, Chairman, President and Chief Executive Officer; and Bob Roche, our Chief Financial Officer. Today's call will begin with Chris discussing business trends experienced during the first quarter of 2021, views of what's to come and context around our progress toward an unwavering commitment to achieving Vision 2025. Bob will discuss the financial details of Carlisle's first quarter performance and current financial position. Following Chris and Bob's remarks, we will open up the line for questions. Before we begin, please refer to slide two of our presentation where we note that comments made on this call may include forward-looking statements based on current expectations of future events and their potential effect on Carlisle's operating and financial performance that involve risks and uncertainties which could cause actual results to be materially differ. A discussion of some of these risks and uncertainties is provided in our press release and in our SEC filings on forms 10-K and 10-Q. Those considering investing in Carlisle should read these statements carefully and review reports we file with the SEC before making an investment decision. Today's presentation also contains certain non-GAAP financial measures. We provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financials in our press release and in the appendix of our presentation materials and we've also have historicals provided in supplemental tables which are available on our website. With that, I introduce Chris Koch, Chairman, President and CEO of Carlisle.

Thanks, Jim. Good afternoon. I'd like to welcome everyone to our first quarter 2021 earnings call. I hope all of you, your families, coworkers and friends are staying safe and healthy as we collectively manage through what is hopefully the beginning of the end of the COVID-19 pandemic. Reflecting on the last 12 months of uncertainty, I take great pride in how roughly one year ago, the Carlisle team handled the immediate threats borne out of the pandemic. Our first actions were to ensure our teams of Carlisle were taking the steps necessary to provide a safe work environment. We ensure that our team members had access to healthcare, continue to be paid and had company support for the difficult situations many we're facing. We enacted strict health and safety protocols based on the CDC, World Health Organization and best-in-class pure actions and recommendations, which contributed to a low infection rate at Carlisle across the globe. Our next steps were to support our highly engaged and flexible workforce as they took very proactive measures to ensure we supported our customers that we're providing essential services to the economy. We wanted to ensure that they can count on Carlisle to be there to provide the right product to the right place at the right time. Overall, we've come to call the Carlisle experience. Turning to Slide 3 now; throughout 2020 an essential part of leadership's job was to cut through the confusion, misinformation and complexity present in our daily lives and communicated clear, direct, and simple strategic vision for the organization that would inform our priorities, educate our collective mission, and guide our everyday actions of work. At Carlisle, we call this Vision 2025 and this compelling strategic framework gave us clear direction and consistency of mission during the tumultuous past…

Thanks, Chris. Starting with this quarterly call when referencing profitability, I'll be speaking to adjusted EBITDA margins and adjusted earnings. Please now turn revenue bridge on Slide 9 of the presentation. Revenue was flat in the first quarter driven by CCM, CFT and CBF offset by the well-documented commercial aerospace declines at CIT. Organic revenue declined 1.4%. CCM, CFT and CBF all delivered greater than 5% organic growth in the quarter. Acquisitions contributed 0.4% of sales growth for the quarter and FX was a 90 basis point tailwind. Turning to our adjusted EBITDA margin bridge on slide 10. Q1 adjusted EBITDA margin declined 180 basis points to 14.4%. Pricing and volume headwinds combined for 150 basis point decline driven by CIT. Acquisitions were a 10 basis point headwind. Freight, labor, raw material and other operating costs netted to a 140 basis point decline. COS benefits added 120 basis points. On Slide 11, we have provided an adjusted EPS bridge where you can see the first quarter adjusted EPS was $1.47, which compares to $1.67 last year. Volume, price and mix combined were $0.24 year-over-year decline. Raw material, freight, and labor costs were a $0.25 headwind. Interest and tax together were a $0.01 headwind. Partially offsetting the decline, share repurchases contributed 5%, COS contributed $0.16 and lower OpEx was a $0.09 benefit year-over-year. While COVID related volume declines at CIT clearly represented the most significant headwind during the quarter. Our CIT team did a commendable job, managing costs, leveraging COS to improve efficiencies and taking actions to position Carlisle for the recovery, while mitigating the pandemic's impact on earnings. Now, please turn to Slide 12 to review the first quarter performance by segment in more detail. At CCM the team again delivered outstanding results with revenues increasing 6.3% driven by volume…

All right. Thanks, Bob. Entering the second quarter of 2021, we are very optimistic about the remainder of the year. From record backlogs at CCM to growing positive trends in CIT aerospace markets to recovery in both CBF and CFT coupled with excellent sourcing and price discipline. We're confident in our ability to deliver solid results for our shareholders. We will continue to seek to deploy capital into strategic acquisitions, share repurchases and dividends. While there are still uncertainties around the pandemic for the full year of 2021, we anticipate the following. At CCM supported by a strong multi-year reroofing base project deferrals that occurred in 2020, positive momentum in our newer businesses of architectural metals and polyurethanes and expansion of our European business. We now anticipate revenue growth of low double-digits in 2021. At CIT given improving leading indicators, including a vastly better COVID-19 outlook increasing daily TSA screenings for domestic travel and improving airline financials translating into increased manufacturers' orders CIT's financial performance has stabilized and is positioned for sequential improvement going forward. That said, we anticipate pressures remain near term, given a very difficult year-over-year comparison in the first and second quarters, we continue to expect CIT revenue will decline in the mid to high single-digit range in full year 2021. At CFT with end markets strengthening especially general industrial and improvements in the team's execution of our key strategies, we continue to expect low double-digit growth in 2021. And at CBF supported by strengthening demand in core markets, price resolving and growing backlog, we now expect over 30% year-over-year growth in 2021. And finally for Carlisle as a whole, we expect low double-digit growth in 2021. In closing, I want to once again express my gratitude to our dedicated employees their families, our business partners and all those associated with Carlisle's success. Given our 100-year history and the resilience of this company has shown in times of adversity and uncertainty, we remain confident in Carlisle's outlook, our strong financial foundation, cash generating capabilities, unwavering commitment to our Vision 2025 strategic plan and to providing products and services essential to the world's needs. This concludes our formal comments. Kavita [ph], we are now ready for questions.

[Operator Instructions] And our first question comes from Bryan Blair with Oppenheimer.

Good afternoon, guys. Very solid start to the year.

Yes. Thanks, Bryan. Good afternoon.

I was wondering if you could offer a little more detail on CCM volume trends through the quarter. I guess I'm most interested in the -- what I assume was an inflection in March. Our read was that February was tough and then there was a freeze throughout a good portion of the month. January wasn't great, flat to slightly up, so that implies a very strong margin momentum into the second quarter, which is consistent with having record bookings, but curious if you could quantify that level of momentum?

Yes, I think, we pretty consistently with you. But I'd also say the third quarter and fourth quarter the teams were already seeing a return to some pretty solid numbers in backlog is continuing to be quite stable and growing. And then we did say I think in the fourth quarter call that we came into the year with momentum and the first quarter was going to be fairly good and I think as we've talked about, we did anticipate a strong 2021 coming off of the tough 2020 where we had some adds that we knew we're going to come back specifically in distributor stocking for instance and we also know there'll be a big backlog they hadn't been addressed in 2020. So, yes, you're right, January was I think was good. I think it continue to trend. February was a dip created some uncertainty out there. I think people were wondering how many days were lost at the roof and then March did come back and I think March just reflected though what we anticipate at all along. 2020 was going to be a good year that we were going to get some distributor restocking that contractors going to have more flexibility going on under the roof and we were going to see momentum build so.

I appreciate that color. And how is your team thinking about second quarter growth for CCM and if we work off of the 719 in the first quarter and think of historical seasonality and again with record bookings going into the quarter that implies very significant second quarter growth versus obviously a weak comp, but nonetheless very significant growth. Anything you could quantify would be appreciated?

Yes, I'll let Bob address. But I think the seasonality thing I would kind of forget that. I think it's -- again the last year was an exceptional year. And I think there are some forces that overwhelm any seasonality that might be there but Bob you want to give some more specific.

Yes, Bryan, on second quarter we're expecting over 20% growth off a weak last year. So I think you know the normal bump from Q1 to Q2 was there, but the year-over-year is definitely going to be bigger than usual because of the weakness last year.

Okay, fair enough. And then any updated thoughts you can offer on price cost outlook input costs have been less than cooperative that's well understood, you have been aggressive on price. We know there is traction there. How do you see that shaking out on a full year basis. And how should we think about first versus second half dynamic.

Yes, I'm thinking about, what, at least from my perspective what we talked about at some of the other calls, which where we thought we were going to be relatively flat in 2021 that we were being the team was being very aggressive on price. Again I think the anticipated what was going to happen in the year. Very well I think the news is going to be high demand, there's going to still be labor constraints and I think they knew this idea of having product would be important especially inflationary times. So when we look at Q1 and Q2. I think for Q1. I mean, from my perspective, relatively flat on price cost. I think Q2 might be a little bit negative. And then as we roll into Q3 and Q4 we turn flat and then maybe a little positive, so net-net for the year. I'm thinking flat. Bob, you want to add anything.

Yes, Bryan, just even with what Chris said about the second quarter. We still believe I think adjusted EBITDA margins relatively flat year-on-year even with the slight pressure we may see.

Okay. Excellent, Chris. I appreciate that. I'll leave it there.

All right. Thanks, Bryan.

And our next question comes from Tim Wojs with Baird.

Hey, guys. Good afternoon. Nice start to the year.

Thank you.

Maybe just first question, could you just talk a little bit about kind of material availability maybe not for yourself to selling. It sounds like you guys are fine, but perhaps maybe just kind of the broader industry and kind of what you're hearing around lead times and kind of how those compared maybe relative to your own business?

Yes, I think you're right, I think our team has done a good job of ensuring that we have supply and things are getting tighter. We're able to I think keep everybody satisfied for right now, but across the business I think there are those who are perhaps struggling. I know, on the form side, there has been polyols been tough to get MDI. I think for some people has been cut tough to get. I think even on the fasteners and steel decking has been surprisingly. I think tough to get. So, yes, I think in a broad sense Tim across what we're seeing it's getting a little bit worse you know and that's putting pressure obviously on the ability to deliver product and I think for some folks lead times extending. But as I said, I think for us we're keeping our customers satisfied and filled. So we'll see what happens there because at the demand rates things continue like this, it's going to put even more pressure. I do think as the year goes through though suppliers will caught up, they will have caught up to what they took out in 2020 and probably as we look at the back half of the year, things should normalize, but I think this summer is going to be interesting.

Okay. And then, if I remember correctly, distributors, really, really tightened up in April last year. Are you seeing that significantly loosen up, are they kind of scrambling for inventory?

Well, I think that some of the record bookings obviously are people who are restocking. Last year we had that big hit. We did talk about in the second quarter, we talked about people not putting in that normal load for the year, I think now there is probably that normal load plus there was the -- there is the backlog from last year's jobs didn't get completed. And then we might have I would say some buying where people are worried about being able to deliver jobs in July and August and want to make sure they get a priced and get them in inventory at least have a line of sight to being able to deliver.

Okay. Okay, good. And then just free cash flow conversion, it looks the same, but I think it's actually off adjusted net income now. I guess from a dollar perspective what I guess it's change relative to before, because I guess if you put it relative to would be significantly higher, right?

Yes, relative to GAAP it was higher. The new metric that we have is on adjusted net income, Tim.

Okay. And I guess what changed?

Yes, nothing has changed.

But you had 120 on GAAP last time I know you have 120 on the adjusted in terms of conversion, right?

We did. We leave some room for conservatism on the preliminary call for free cash flow conversion. So the math is the same.

I got you. Okay, good. Okay, great. I'll hop back. Thanks, guys. I appreciate it. Good luck.

Okay. Thanks, Tim.

And our next question comes from Saree Boroditsky with Jefferies.

Hi, good evening. Typically a positive sign when companies are increasing capacity. What's the capacity of your new facility and how long will this capacity last before you think you're going to require another one?

Well, I think we generally think that a Polyiso plan add somewhere between 5% and 10% to the capacity of the industry. And when you think that we're growing in the first quarter 6% and we think that's going to continue. I think it's just an appropriate level of capacity add and likely it will take couple of years to consume that. We've seen competitors add plants I think over the last five or six years, it's been one every couple of years and that seems to have been the appropriate level of capacity to not over-capacitized the industry and then have pressure on pricing.

And then, maybe can you talk about what you saw from an end market perspective in CFT and do you see an acceleration through the quarter how orders trending. And then I believe you have a decent amount of auto exposure there. So maybe any impact you're seeing from production issues?

Right. So I think most of the things that I'll address the first one, the production issues there and capacity, when they're putting in these paint systems and sealer systems. Typically, it's a longer term project with an ROIC based investment over multi-years. And so we haven't seen much in terms of negative impact over the long-term visions of people upgrading, either sealer decks or paint shops. When we look at the general trends in industrial, I think they are good. I think -- I've been surprised at how Europe has been as strong as it has been, China has returned and North America if anything, will be a little bit of a laggard, but that's coming on strong now too. So end market trends and I think you see that in CBF as well where we're seeing heavy equipment and that pickup after many years of that kind of a malaise. Bob you want to add anything or?

No. I think that covers, Chris.

Okay. Thanks for the questions.

Thanks, Saree.

And our next question comes from Garik Shmois with The Loop Capital.

Great, thank you. Just with respect to CCM volumes you cited record bookings and that's clearly driving some of the strength here, but maybe you could flush out what you're seeing maybe from a regional or end market standpoint how new construction versus re-roofing and any region standout in particular?

Yes. I think, the regions that still stand being headquartered in Phoenix one of the interesting things that we see is how strong building in the Southwest has been and obviously in Texas where there's a lot of talk about the migration that occurs there Florida. We see that surprisingly I think our business so pretty much everywhere has been pretty good. And you know one of the leading indicators, we've always said for years has been win resi construction is good, non-resi tends to follow when you're building houses and expanding suburbs and things like that, you tend to draw long shopping centers and places to eat, Walgreens, CVS and kinds of thing. So I think across the US it's been very good and you can see that in the resi as well. For new construction, it's been a contributor Bob, and I've talked for a while about how anything north of zero probably really helps and it has been, we think low single-digit for new. So that's been really good to add to what we articulated in this presentation and we have many times around how strong we think the reroofing backlog and growth in that it has been and will be over the next decade. So it's kind of an interesting thing here, but I mean really, if it's when I think about hitting on all cylinders, pretty much doing it right now.

That's encouraging. What are the shut to the price cost outlook. Is this -- you reiterated it, is this predicated on getting or needing additional price increases or do you think, what you secured so far this year should get you there, just given the visibility that you have on the cost sites?

Yes. And what I articulated, about the cost side, I think is a key part of that, obviously, we are anticipating that suppliers will give their capacity back online and we'll see some modulation as we get into third quarter and then into the fourth quarter obviously if things anything substantial changes that throws it off, but given that I think where we are from a price perspective, I think our team was very proactive and got ahead of us and that's what's embodied in this flat call for the year.

Great. And then just lastly, just wondering on the supply side for CCM just given how tight it is and recognizing that maybe some manufacturers will be able to get their production in line later on this year, but just given how strong the market appears to be for you and how strong the market appears to be when looking out over the next several quarters and several years assuming a recovery. Do you think in an inflection point and you've been talking about this for several years. But do you think will truly at inflection point now for pricing in CCM?

Well, I can't speak for the rest of the market, but I think given where we are on a variety of fronts, I mean, first of all, the demand, the labor constraints, the productivity needs you can get it ESG global. There are a lot of trends that just point to what we've been saying which is this market is going to be a robust market and people are going to place a premium on having a supplier that will deliver every time with the right product, the right place, but also a high quality product that's innovative takes labor hours off the roof. And our teams work over the last few years and investing in our R&D center, investing in training, investing in contractor education on application things like this leads us to believe that they're going to pay, they will pay a premium for a company that delivers on their promises like that. And so I think for us going forward we've had this pricing resolve for a while now, many years. And I think our inflection point was three or four years ago. I think maybe the rest of the industry may get there, but the only thing I would say Garik s if people don't deliver on those things if you're not providing innovation, if you're not providing superior customer service, if you're not providing products that take labor off the roof and things like that then I don't think the pricing situation is the same and you may not be at inflection point so.

Understood. Thanks again.

You bet.

And our next question comes from Joel Tiss with Bank of Montreal.

Hey, guys. How is it going?

Joel, how are you doing? Good to hear your voice.

All right. Yes, good to hear you guys too. Glad everyone's safe and it sounds like happy and making everybody money, that's what it's all about, right.

Thank you.

Can you clarify what is price discipline mean in CFT?

Well, one of the things, we know is that a large part over the years of our competitors growth and profitability has come through price and that idea that same kind of thing is in CCM you create innovative products, you provide excellent service, and then you price it appropriately and you don't just because someone tells you the competitor has a good deal, you don't lower price, you stick to pricing, your product to the value you provide. So that's really what we mean there is that CFT now is delivering on time there that we had good customer service. We're working on some innovative products as we said in the call. Half of the volume in the first quarter was through new products. So I think we're starting to build that business the way we wanted to which we could continue to get price and be disciplined in how we do it. We don't, we're not getting into these price competition, we're selling the value.

Okay. So that's smart like establish yourself as the premium brand and they are a premium brand there?

Yes, a premium brand.

Can you talk a little bit about CIT. I'm sure you have a little more sort of insight just into what the customers are thinking and I'm thinking more '22 and '23. I'm not really thinking about the second quarter, but anything you can help us with because I know we went into kind of this time last year, it was a little too much inventory in the channel and is that all cleaned out and just give us maybe a little bit of a deeper look of how that setting up for the next like three years.

Yes, I think it's all, Joel. I mean, it all depends on travel, and we're seeing increased travel at least we're seeing increased leisure travel, certainly in the US. I know China travel has picked up too. I've looked at that. I think Europe is a little bit soft still. I think what has there would have to really start to come back and we hopefully, we're going to see that the summer and I think we feel it will come back is the business traveler in the international traveler. And so that's what we're looking at. And then when we start seeing revenue improve at our major airlines then we can start thinking about them adding routes back and adding planes back into service. And I think that's happening right now, I mean, the things that we hear are that there is a backlog in simulators where players have to get re-certified that seems to be everybody starting to ramp up again. I think we're seeing more planes being brought out of backlog are those places where they've been stored and then we have seen some increase in orders from airlines certain airlines to aircraft manufacturers. So all those things point to us to say that as we get into the back half of 2021, we should start to see things really improving and then 2022 should bring us back to profitability in that and then marching forward from there.

Okay. So it sounds like maybe just a little bit too early to have a clear view or whatever. And can you just talk quickly about acquisition valuation and then I'll leave you guys alone. And thank you very much for the time.

No, no problem. The, actually I think the trend that's happened over the last couple of years, you know it well that there has been increasing amounts of money in the market with decreasing amount of assets and so multiples continue to increase. I think we saw with the Firestone deal. So I think what somewhere around 12, which for construction products compared to five years ago is probably a couple of turns higher than it would have been. So, yes, as long as we have money out there and we have strategics and sponsors out there looking for assets to buy and deploy capital and now we have specs and other things. Demand is high for assets and multiples continue to rise.

And can you do anything creative to get through Bob screens like buying things for stock or not really?

Can do Polyiso creative guy. So I can't do anything creative because he won't respond to it Joel it's just mean potato. So I, we, I know we just have to make sure we're fine and assets that have great synergies and good strong organic growth programs embedded in their businesses and I think when you look at where we are in the construction products are in CFT or in even in CIT in medical there are businesses that have great products that have good runways with strong organic growth and luckily in those markets, we now even in medical, we've got basis that are big enough that we can make acquisitions and get synergies out of it. And so I think that, that's the only way we can make the model work as we have to have good strong organic growth and leverage with those synergies.

Okay, great. Thank you so much.

You bet.

[Operator Instructions] And our next question comes from Kevin Hocevar with Northcoast Research.

Hey, everybody. Nice start to the year there.

Hey, thanks, Kevin.

Wondering if Bob I want to revisit you mentioned CCM margin, do you expect it to be flat in the second quarter compared to the prior year-end. I guess with if sales are expected to be up over 20% and price cost just a small headwind. I guess, why would that be the case, what would be the offsets there?

Well, it's a little bit of the price cost that Chris mentioned that we think the second quarter is going to be the toughest compare and then growing into the back half. So it's --

Okay. And in terms of the, you guys mentioned metal roofs. I think you had mentioned in the prepared remarks, when you're talking about CCM that metal roofing in Europe did well. Wonder if you could just give a little bit more color there. And you didn't -- I don't think you mentioned Polyurethanes, so curious what you're seeing out of each of those businesses within CCM?

Well, we're really pleased with Europe and the new management team that came in a little bit while back. We're impressive leader and how things have really solidified. And we invested in expansion of Walter's house and we're really pushing our new products and that's going to continue to be a good story. So I just think the story in Europe is just a new management team with a really exciting outlook really get it done attitude and the gentlemen, we brought in, is a very experienced in European construction products markets. He runs big businesses. And I think he has great strategic direction. So that's fun to watch happen. We love that when people come in with great skill sets and can apply their craft at Carlisle. Architectural metals is another great story. I mean, both leaders of the businesses at Drexel and Petersen are doing a great job. I think Petersen had a record month all time record month in March. So that team is doing a great job. They're also doing an excellent job of getting supply and maintaining price. I think they had some very improved margins as we headed into March on a year-over-year basis and historically we're improved as well. The Drexel team continues to do a great job as well there. And then Polyurethanes is great. The only issue in Polyurethanes is really for us right now is that some of the materials are hard to come by across the industry and everyone is kind of suffering on the MDI and polyols. And so we probably can get as much as we would like to have and that's really the only thing I think that's constraining the growth in that market. And that's a market where we have projected high single-digit growth out of Polyurethanes. And we still think that growth is there that, that product line continues to be more and more accepted and desired in homes for its insulating properties and vapor barrier properties and it's just a very high performing insulations. So there are three great segments for CCM, there were three great additions and we like what the management teams are doing and how they're creating value. Bob, you want to add anything to that?

No.

Great.

And last one for me, out of curiosity, it seems like you guys have always focused on GAAP, EPS, and GAAP EBIT you've always provided the adjusting items, but it always seem like the focus was the GAAP at the end of the day, but it seemed like it is this quarter, the focusing to shift to adjusted EPS and adjusted EBITDA. I guess as opposed to GAAP EBIT. So curious -- just curious what the reason that you're shifting the focus there. And are you also shifting it internally in terms of bonuses or anything in terms of how you're compensating your employees more tied to adjusted EBITDA as opposed to GAAP EBIT or yes just curious the shift there?

So I don't really think there has been much of a change is certainly nothing with respect to compensation or anything. It's happening at Carlisle. We're a GAAP company and our most important metric is cash flow obviously and then return on invested capital. So we're still the same as we were. The move to add information and that's really what we did is we added information. We obviously after for GAAP. So anything we're doing is adding it was really driven by the investment community our shareholders and the desire for more information quicker and trying to take some work off of their plate. I mean we obviously would send our GAAP and say to our investors and others you have it, you can make the adjustments, but I think for us to do that work in advance and try to just make it a little bit easier to digest the information in a more rapid timeframe and to take some burden off the investment community and the analysts that are they're doing the work on. It was really the reason to do it and hopefully that in turn will produce a better understanding of the Carlisle story and what's driving value here. So that's all it was, it's not going to drive any changes in our performance and how we work and how we measure our capital investment or acquisitions. It's just an effort to provide more granularity to the investment community.

Okay, good. Yes, very helpful. So I appreciate that. Thanks guys.

And there are no further questions at this time. I'll turn the conference back over to Chris for closing remarks.

Thanks, Kavita [ph]. This concludes our first quarter 2021 earnings call. I want to thank everybody for your participation. And we look forward to speaking with you at the next earnings call. Thanks, and stay safe.

And that does conclude today's call. Thank you for your participation. You may now disconnect.