Good afternoon. My name is Bethany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Carlisle Companies Third 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 would like to turn the call over to Mr. Jim Giannakouros, Carlisle’s Vice President of Investor Relations. Jim, please go ahead.

Thank you, Bethany. Good afternoon, everyone, and welcome to Carlisle’s third quarter 2021 earnings conference call. We released our third quarter financial results after the market closed today, and you can find 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 CFO. Today’s call will begin with a business update from Chris, highlighting third quarter results, current trends and context around our continued progress towards achieving our strategic plan, Vision 2025. Bob will discuss the financial details of Carlisle’s third quarter performance and current financial position. Following Chris and Bob’s 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 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 different. A discussion of some of these risks and uncertainties is provided in our press release and in our SEC filings. 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’ve provided a reconciliation 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. With that, I introduce Chris Koch, Chairman, President and CEO of Carlisle.

All right. Thanks, Jim. Good afternoon, everyone, and thank you for joining us on our third quarter 2021 earnings call. I can start by saying I hope all of you, your families, coworkers and friends are returning to some semblance of your pre-pandemic lives while remaining safe and healthy. As you all know very well, the challenging and uncertain environment that we have experienced since the pandemic began in early 2020 continued through the third quarter of 2021. This year has truly been a story of two halves. We entered 2021, global prospects remained highly uncertain, new virus mutations were occurring, and we were slowly and unevenly emerging from lockdowns. Entering the second quarter, the rollout of vaccine started to gain momentum as access to vaccines became widespread and the extraordinary stimulus being injected into the global markets took hold. We began to turn a corner and slowly return to our pre-pandemic activity, which, in turn, drove increased economic growth in the world that was woefully unprepared to absorb the rates of gain. During factory shutdowns, stressed labor markets and lack of supply manifested themselves in increased inflation. The major challenges to normal business operations. These dynamics, coupled with the Delta variant spiking in the summer months and the effects of Hurricane Ida made the third quarter even more challenging. Thankfully, as we exited September, we seem to be past the Delta outbreak peak, and we’re optimistic that recently enacted remedies to ensure stability in labor markets and easing of constrained conditions and our supply chains will take hold. Carlisle’s team leveraged our continuous improvement culture, exhibiting grit and determination to deliver on the Carlisle experience, which I’m happy to report drove outstanding performance, including record third quarter revenue. Simply put, we have asked a lot of our employees over…

Thanks. As Chris mentioned earlier, we had a strong third quarter. There are some items -- several items that I’m especially pleased with. CCM’s ability to offset challenging operating cost conditions by focusing on delivering Carlisle experience, the growing backlog at CIT and CFT, our successful senior notes issuance, our disciplined approach to capital deployment in the form of share repurchases and dividends, continued investment in our high ROIC businesses to drive organic growth, and finally, our portfolio optimization actions, including divesting CBF and the acquisition of Henry Company. Please turn to revenue bridge on slide 9 of the presentation. Revenue was up 25% in the third quarter driven by volume growth at all of our businesses, price and the acquisition of Henry. Organic revenue was up 19%, driven by CCM, which delivered 23.3% organic growth. Acquisitions contributed 4.8% of sales growth for the quarter, and FX was a 30 basis-point tailwind. On slide 10, we have provided an adjusted EPS bridge. We can see third quarter adjusted EPS was $2.99, which compares to $2.35 last year. Volume, price and mix combined accounted for $2.15 of the year-over-year increase. Raw material, freight and labor costs were a $1.75 year-over-year headwind. Acquisitions contributed $0.15, Interest and tax together were a $0.05 tailwind, share repurchases contributed $0.06, COS contributed $0.09 and higher OpEx was an $0.11 headwind year-over-year. Now, let’s turn to slide 11 to review the third quarter performance by segment in more detail. At CCM, the team again delivered outstanding results, with revenues increasing 29%, driven by volume price, contributions from Henry, along with a 10 basis-point foreign currency translation tailwind. All of CCM’s product lines delivered double-digit percentage growth. CCM effectively managed raw material inflation headwinds experienced in the quarter with disciplined pricing, proactive sourcing and allocating products to…

Thanks, Bob. Entering the third quarter, we continue to be optimistic about the remainder of 2021 and the first half of 2022. There are numerous reasons for this optimism, including record backlogs at CCM, supportive trends in CIT’s aerospace markets, growing strength at CFT, improvements in our supply chain, the impact of positive and proactive pricing actions, and significant traction in our ESG journey, all the while leveraging COS and the Carlisle experience to deliver innovative products to our customers. For these reasons, we’re confident in our continued ability to deliver results for all Carlisle stakeholders. For full year 2021, we anticipate the following: At CCM, the underlying reroofing trends that have provided a solid foundation for growth over the past decade, picked up in the second half of 2021 after a pause in 2020. Through the pandemic, we continue to invest in CCM in order to ensure we would be ready when demand returned. In addition, our expansion further into the building envelope; the increasing importance of energy-efficient products; contributions from Henry; and our proactive pricing actions have positioned CCM well for continued growth over the coming quarters. Considering this momentum, we are increasing our anticipated revenue growth to mid-20% in 2021. At CIT, we are encouraged by the recovery in narrow-body commercial aircraft. While this first step to recovery is encouraging, demand for wide-body aircraft driven by international travel remains muted in 2021. We anticipate this demand will return to previous levels as COVID concerns subside and countries relax their travel restrictions. In addition, CIT’s medical business has built a record backlog. Taken together and coupled with significant restructuring at CIT over the past 18 months, CIT is now positioned to take advantage of the ongoing recovery. We continue to expect sequential improvements and now expect CIT revenue will only decline in the mid-single-digit range in full year 2021. At CFT, with end market strengthening due to increasing industrial capital expenditures and improvements in the team’s execution of our key strategies, including new product introductions accelerating, growth in our new platforms and price discipline, we continue to expect mid-teens revenue growth in 2021. And finally, for Carlisle as a whole, we are now increasing our expectations to deliver high-teens revenue growth in 2021. As we progress through the final quarter of 2021, we are tracking to deliver a record year despite one of the most challenging time periods in our history. We remain committed to our Vision 2025 goals of $8 billion in revenues, 20% operating income and 15% ROIC, all driving to exceed $15 of earnings per share by 2025. Despite the continued uncertainties around COVID, stressed supply chains, raw material shortages, labor inflation and winter weather, Carlisle’s resilient employees have adhered to our COVID protocols, shown respect for each other in the workplace, focused on safety, most importantly, remained focused on delivering results for all our Carlisle stakeholders. With that, we’ll conclude our formal comments. Bethany, we’re now ready for questions.

Certainly. We will now begin the question-and-answer session. The first question comes from the line of Bryan Blair with Oppenheimer.

I was hoping to dig in a little more on CCM’s underlying demand trends and outlook. Last quarter, you had cited orders close to -- I think it was 2x normalized levels. How did 3Q trend compare to that? What kind of momentum do you have into 4Q, understanding that’s a seasonally lighter period we’re now in? And how is your team thinking about the disconnect that we’ve had, at least over the recent past in terms of order rates versus revenue? On that front, is there any further clarity on percentage of firm orders and adding to pent-up demand and backlog entering 2022 versus the double order when it was there in response to supply concerns?

Bryan, let me first start and Bob can jump in. I think the demand has just continued. We see more traction as we progress into Q3 and as we enter Q4. And we’ve seen backlogs increase, and we’ve seen orders push out. I think we’re now into the second quarter of 2022, something that in the past -- that length of ordering or at least that time period of delivery has not really been seen before in a large scale. So, yes, the demand continues. I think, fourth quarter will be an abnormal fourth quarter in the sense that, yes, we have been seasonally affected in the fourth quarter usually. But, I think with the backlog, it will be as much as we can get shipped, and as much really importantly, as roofers can put down. I mean, obviously, they have work that needs to get done. And we’re going to be constrained or they’re going to be constrained by two things, I think, labor availability and then weather. So, stay tuned, but I think should we have a good fall and good early winter, and by that, I mean open days on the roof, I think things will continue in a positive direction. And then, on the double booking in that, I think our team has done something very interesting, which is they’ve put in some -- and I’m not going to go into details, but they’ve put in some mechanisms that have really taken out that double booking in our bookings. And even with doing that, things remain strong and lead times continue to extend. Bob, do you want to add anything?

No. You’ve covered, Chris.

All good to hear. And you’re obviously putting through a lot of price, encouraging to see price cost back into positive territory. As prices continue to climb, have you sensed any pushback in the channel? Are there concerns about demand destruction with potentially shifting project economics going forward?

No, I don’t really think so. I think, people understand that it’s in a very inflationary time. I think the key thing now is can you get product, I think it gets passed on early in the year. I would say there was more pushback in the first quarter where the demand hadn’t picked up yet. But as things have accelerated, I think people are focused on getting jobs done. I think also, I’ll give a tip of hat to the guys at Greco today and David Low, who made a nice comment that people do a fair job of recapturing the costs, right? But, we still have to make sense to what the end user customer is doing at the decision point of sale. And I think our CCM team has done a really good job of that of balancing that idea that it’s not like we made big gains in price over raws. We’re saying we’re neutral. So, we’re attempting to secure raw materials so they can complete their jobs and not trying to take advantage of the situation. So again, they’ve been making decisions to come to Carlisle consistently, and we haven’t seen any degradation in jobs or movement of jobs due to price.

Understood. Your commentary on early stage tender integrations was very positive. Any other color you can offer there? And specifically, what drives your confidence in -- or increasing confidence in exceeding the $1.25 in year one? And specifically, does that contemplate any price cost tailwinds, or what’s your commentary independent of that lever?

Yes. I would say that, first of all, our confidence in this is we’ve gotten -- we had a lot of confidence going as we did our due diligence and looked at what the Henry team has done over at least the last six years. And we talked about that on the call after we purchased them and Bob’s talked about it and Jim, I know has too. We’ve gotten to know the team better. I can tell you that. And we are very impressed with Frank Ready and the team that he’s assembled. They’ve stayed on post acquisition. They’re doing a great job. They continue to operate. There hasn’t been any delay. We’ve had a really good job by our corporate integration team supporting the CCM and Henry folks, and things have gone really smooth. So, tip of the hat to both teams and how quickly they’ve come together and really focused on growth in that. In terms of the pricing in that, I would say that Henry is a premium brand. It’s well-recognized by their end users. It’s demanded by their end users. And I think they’ve had the same success as CCM has had and going to their channel partners and saying, we’re seeing escalated raw material costs. We’re seeing availability struggles that we need to pay more to get that product, but we can get it to you and they’re fulfilling but they’re having to fill at higher cost. And I think, the channel partners and end users have understood that, and we’ve just seen good execution there. So, I think, in general, a great team, continued execution on what they were doing anyway and really good integration is just increasing our optimism for 2022.

The next question comes from the line of Saree Boroditsky with Jefferies.

Can you just talk through your increase in guidance for CCM sales to be up mid-20%? How should we think about the contribution from Henry and your assumptions on price versus volume? And then, any color on the carryover of pricing actions into 2022?

And maybe I’ll take the first one on the carryover and Bob can handle the previous one. The pricing actions, again, we talked about being neutral. We do think those pricing actions will carry through as long as demand holds up, which it is. And I think we will see if there is any continued increase in either labor or freight or raw materials or any of that, we will obviously take actions to offset that. But, I don’t see any issue with that carrying through, and I think it will probably carry through at least to the first half of 2022. So, that’s pretty much just what we’ve been doing and been pretty consistent through the year on price and why we’re driving price. And I think it’s been clearly communicated to the channel as well and to -- and everyone understands. And Bob, you might want to address that comment of Saree’s.

Yes. Saree, the -- I’m going to say, the guidance for base CCM continues to be the high-teens and then we’re adding in Henry to the tune of 5% or 6%.

Understood. And then, you made a comment about orders going out to second quarter of 2022. How does that work from a price cost perspective? Do these orders go out to prior pricing levels, so there should be more of a lag in realized pricing than is typical?

No. In fact, Saree, what’s really happened recently has been that a lot of these orders are being priced at the time of shipment. So, we’ll see that those orders are really -- they’re placed, but they’re not being given pricing that we’re going to have to recognize later. If there is escalation, we’ll price to that escalation.

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

You cited weather as a headwind in the release. Is that mostly on the supply side with the storms in Gulf Coast? Was there a cost impact, if so? And also, do you see any push-out of demand given some of the weather headwinds that you might have experienced? And I guess, what I’m ultimately getting at is it possible at all to quantify how much the weather impacted the margin side?

Yes. It’s interesting, Garik, if it was a normal quarter, we probably would have been able to quantify. We would have said something like two or three days off the roof, but we didn’t, I think with everything else going on and all the puts and takes. It obviously impacted demand, if there’s a hurricane coming through the central part of the United States, obviously, we’re not going to have people on roofs. They’re going to be taking care to be safe and other things like that. I would say, though, it probably impacted a supply chain that was already under stress, even more than it did demand. And so, yes, the demand gets pushed out. As we said, if you’re going to reroof for roof or if you’re going to do a job, you’re going to have to do it. And if you can’t get it done that day, you got to do it in the future. And then, on the supply chain, I think it’s just -- as I said, it aggravated the situation more, probably put a little bit greater upward pressure on either supply availability or pricing or maybe both.

I was wondering if you could maybe provide a little bit more color on what you’re seeing on the supply chain, your degree of confidence that it will return to some sort of normalization in 2022 would be helpful.

Right. Well, I think from the base premises, if we look back at 2020, when we look at the costs that we had on unit cost across MDI, TPO, polyiso, EPDM, those things, those were -- those are supplied at a certain level with certain capacity there. And really, the only thing that happened was we had COVID hit and people had more restricted work days. They shut things down, things like that. And prices escalated. When we look at the pricing escalation, most of it was done between the latter of Q2, I would say, probably June and then into Q3 and accelerated a bit into Q4. As they had to hire, you can see the rising cost of labor, you have to start up factories, you have increased shipping costs. I think we saw that this doesn’t affect us necessarily directly, but freight from containers from China had gone from, let’s say, 4,000, 5,000 to 25,000 on the spot market, I think. So, you see this happening. And I think our thought is that these things will get worked out. We know in the Port of Long Beach, I think they’ve gone to 7-day a week, 24-hour a day work. They’re going to see some reduction in the backlog there over time. It will take time to do it. And we think that plays out in the rest of the economy. And by the time we get to Q1, those same trends that were there in 2019 and the capacity and everything else comes back. And really, we haven’t seen the growth that would tell you that we’ve exceeded some of those capacities. And so, I think we go back to kind of ‘19, and we see some stabilization and reduction in at least in the lack of availability and hopefully some pricing as well.

Okay. And then, just my last question. Just in CCM, just given the momentum in your backlog, how much of this do you think is just underlying demand and just kind of the natural part of the commercial cycle that you’re in versus your ability to continue to take market share just given your capacity and service levels?

Yes. I wouldn’t read too much in the market share in the June through current date time frame. I think, we don’t have a lot of really concrete data that we’ve gained share. I think what we’ve seen anecdotally is that we’ve had more people that previously were with competitors come and ask us for products. That would tell me that we’re maybe in a little bit of a better position than others, but I can’t back that up with anything on numbers. So, I looked back to the way it was, like I said, in ‘19 before COIVD hit. And I don’t think where the competitors are there that the markets have changed that much. So, they’re going forward will see significant changes in market share. So, I think it’s really been demand has accelerated because last year went down and projects were delayed and projects were pushed aside and projects were postponed. And then, we came back, as we said in the first quarter, we thought things were going to be strong this year, we built inventory, we raised prices because we anticipated as the vaccines took hold and as reopenings occurred that demand would pick up. And as we’ve always said, with 70% of our business being in reroofing that these things have to get done and it would have to pick up some time. And so, I think a lot of this demand is spread evenly across all of our competitors and ourselves, and it’s just a response to the 2020 downturn. And that great mid-single-digit underlying trend that was there post 2010 just continues.

The next question comes from the line of Tim Wojs with Baird.

Maybe just sticking on supply a little bit, more on availability. Have you had any meaningful challenges actually getting supply in terms of commodities?

Yes. I would say, yes -- yes, definitely. I’m not going to point out which ones. But yes, there have been some instances. And that’s why we pointed to our sourcing team. They’ve done a heck of good job scouring the globe, trying to find stuff to make sure we can meet our customer demand.

Okay. I mean, has that -- is that what the easing is as you think of Q3 to Q4, it’s actually the availability?

Yes. I think that’s the first, I think that absolutely.

Okay. And then, I guess, just in the offseason, I mean, historically, you guys have used it as a time to build more inventory. I’m just trying to think about, as you prepare for next season, particularly in the membrane part of the business, how you’re thinking about kind of that pre-season inventory builds to support next season, if you can have a normal build, I guess, or be able to do a normal build?

I would think it would be disingenuous to say we’re going to have a normal build. I think, as we talk about getting everything we can out to keep people working and to keep these job sites and living up to our Carlisle experience, right? We make a big commitment with that and people expect it. As long as that demand holds, like I said, and the weather is good in the fourth quarter and the first quarter, we’re going to be shipping things out to put on roofs and support our contractors. Now, if there are days where we have a long weather periods of snow or that we’ll use that opportunity to build inventory, we’re not going to slow down. But, I think there will be some opportunity just because of the way the winter is in most of the United States. But, I also think if there’s any opportunity for people to catch up, they’re going to do it. So, I think we’ll have more information as we get kind of further into the quarter, see how things go. But, I think it’s going to be tough to build any real meaningful inventory in Q4 and Q1, like we usually do.

Okay. And then, could you just remind us when the TPO and polyiso capacity comes on next year, at least preliminarily?

Yes, go ahead.

Yes. TPO is going to be the first quarter. We’re going to be making the normal 12-foot sheets on it and then going to 16 later in the year as they, I’m going to say, stabilize the production process and then get it dialed in. And then, the polyiso is going to be late ‘22, early ‘23.

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

I guess, Chris, I wanted to ask you about a comment you made earlier with respect to the potential limitations you may face on growth, one of them being installation labor. And I guess to what extent do you think the installation labor availability use as a governor to 2022 growth? And what can you do about that? Is there anything -- do you any options, do you have any levers you can pull to work around those potential constraints?

Yes. Well, I think you’re right to cite that. It is true. I mean, we actually are constrained. We’re happy to most times be able to deliver everything our customers can apply to a roof, but we’re constrained by their ability to put it down. So, that’s a real issue. I don’t know how much we can do to alleviate that. But what we can do and what our team is doing is making products to take labor off the roof. And Bob just mentioned the new 16-foot TPO sheets that are going to be made in Carlisle PA. And we had a chance to see the progress on that line earlier this year. And it’s really remarkable, what an enduring feed it is. But more remarkable is the fact that that’s going to get a roof put down faster and allow our contractors to get off the roof quicker. We also have work we’ve done with CAV-GRIP, one of our adhesives and other things. We just keep trying to make the installation as quick as possible, obviously, still holding all the quality and technical specification we need, making sure all the product is there. This is a big one. If you think about that idea that we say getting the product at the right place at the right time, right, in the right quantity and all that, we pride ourselves on that. And it makes a huge difference because as we know, unless you have all the products there, you’re going to have labor standing around and that doesn’t benefit anybody. And then even on cleanup. We’ve talked about our -- I’ll cite a product called APEEL that we’ve talked about for a couple of years. I thought it was an extraordinary product. It’s a thin sheet that goes on that as opposed to having to wash the roof after an installation and clean it and bringing power washers up and that stuff. You simply peel this membrane off and you’re on your way. So, I think the CCM team is doing a heck of a job focusing their new product efforts on doing two things. One is really that whole ESG thing and making sure that we’re making our buildings more energy efficient and people are able to use our products to do that. And then the other one is just to deal with this labor component and take labor out of the process.

The second question was really kind of, I guess, at a much higher level. I’m just wondering to what extent you’re seeing any change in building codes that would, if anything at all, that might bode well for your business over the next couple of years or are building codes relatively static at this point and not an area where you’re seeing much revision?

No. I think building codes are definitely moving. We’ve had some incidents that have been positive this year and others that we know about that have been negative for everything from concrete to cladding and things like this globally that I know our building code people and our engineers and architects spend a lot of time trying to make these buildings safe as energy efficient as they can because there’s great returns, and they want their buildings to be the best buildings that are out there. And look, in our business, one of the biggest ones that happened was a few years ago when we started CCM going out and talking about the idea of having two layers of polyiso and it was increasing the value for a very reasonable price. And we used to have a calculator on iPad that would take the local rebates and things into that and allow building owners to see what adding another layer of insulation would do. What we found was that soon that became codified. And over the last few years, I think some of the big driver in our increased polyiso sales has been around the codification of that trend to double insulation and build it into the building code because increasing that, our value just had a great return for everyone. So, we will see that with some of the Henry products. We mentioned Blueskin. Once people start to see that a new product can help with the energy efficiency of a building, it gets through the architects. We do a lot of training, train our contractors on it. And then we can drive that through. And I think that type of product once people get to use it and see the results, then it can move into that code stage. But, to have the codes modified and improved is a pretty elaborate process and they have to make sure they’re doing the right thing and testing everything. So, it happens. It just happens over time. But yes, we’re seeing that.

There are no additional questions waiting at this time. I would like to pass the conference back over to Chris for any additional remarks.

All right. Well, thanks, Bethany. This concludes our third quarter 2021 earnings call. We want to thank everybody for their participation, and we look forward to speaking with you again at our next earnings call. Thanks very much.

This concludes the Carlisle Companies third quarter 2021 earnings conference call. I hope you all enjoy the rest of your day.