Carlisle Companies Inc

NYSE:CSL

Earnings Call Analysis

Carlisle Companies Achieves Record Margins Amidst Market Challenges

In the third quarter of 2024, Carlisle Companies reported $1.3 billion in sales, up 6% year-over-year, and achieved record adjusted EPS of $5.78, representing a 24% increase. EBITDA margins expanded by 60 basis points to 27.6%. The Construction Materials segment showed strong growth with a 9% revenue increase, while the Commercial Waterproofing segment declined 3% due to market challenges. Carlisle anticipates 10% revenue growth for the year and affirms 150 basis points of margin expansion. Looking ahead, the company aims for $40 EPS by 2030, alongside a focus on innovation and strategic acquisitions to fuel growth.

Positive Financial Performance Despite Market Challenges

Carlisle demonstrated a robust performance in the third quarter of 2024, with total sales reaching $1.3 billion, reflecting a 6% increase year-over-year. The company achieved adjusted EBITDA margins of 27.6%, representing a 60 basis point improvement. Adjusted earnings per share (EPS) grew by an impressive 24% to $5.78, underscoring the company's ability to navigate ongoing headwinds in its residential markets, such as hurricanes and inflationary pressures.

Segment Performance: CCM and CWT

Carlisle's Construction and Commercial Materials (CCM) segment performed well, with revenues increasing by 9% to $998 million, benefitting from pent-up reroof demand and the acquisition of MTL. The adjusted EBITDA margin surged to a record 32.8%, marking a 110 basis-point improvement. Conversely, the Commercial and Industrial segment (CWT) experienced a decline in revenues by 3% year-over-year to $335 million, primarily due to weaker residential markets and anticipated price reductions in certain categories. CWT's adjusted EBITDA margin fell to 20.7%, a decrease of 270 basis points, largely due to strategic growth investments during this transitional phase.

Strength in Cash Flow and Shareholder Returns

Carlisle's cash flow remains strong, with free cash flow of $597 million for the first three quarters of 2024, an improvement of $22 million year-over-year. The company continues to return capital to shareholders, having repurchased $1.2 billion worth of shares year-to-date and paid $46 million in dividends. This commitment was reinforced by an 18% increase in dividends declared in August, marking 48 consecutive years of dividend increases.

Outlook for 2024 and Vision 2030 Goals

Looking ahead, Carlisle expects revenue growth of approximately 10% for the full year 2024, with adjusted EBITDA margins anticipated to expand by about 150 basis points. The forecast for the fourth quarter indicates low single-digit revenue growth. Furthermore, the company aims for record full-year EPS growth exceeding 25% compared to 2023. Carlisle is well-positioned to achieve its Vision 2030 targets, including $40 of EPS, with continued focus on innovation, increased R&D investment, and disciplined capital allocation.

Navigating Market Dynamics and Strategic Initiatives

In response to the challenges in the residential market caused by economic uncertainties and higher interest rates, Carlisle is committed to enhancing its operational excellence and pursuing innovation. The company is increasing R&D spending to reach 3% of sales by 2030, focusing on energy-efficient and labor-saving products. Additionally, the firm continues to explore synergistic mergers and acquisitions to enhance its building envelope portfolio, with plans to deploy $300 million to $500 million annually for these strategic acquisitions.

Conclusion: Solid Foundations for Future Growth

Carlisle's ability to deliver robust financial results amidst market headwinds reflects its resilient business model and strategic vision. With ongoing investments in innovation, a healthy pipeline for future acquisitions, and a strong balance sheet, Carlisle is set to create significant shareholder value and achieve its ambitious targets as outlined in its Vision 2030 framework.

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon. My name is Nicole, and I will be your conference call operator for today. At this time, I would like to welcome everyone to the Carlisle Companies Third Quarter 2020 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.

[Mehul Patel, executive]

Thank you, and good afternoon, everyone. Welcome to Carlyle's Third Quarter 2020 Earnings Call. I'm Mehul Patel, Vice President of Investor Relations for Carlisle. We released our third quarter 2024 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 our third quarter results and some commentary on our progress towards Vision 2030 goal of $40 of EPS. Kevin will follow Chris to provide an overview on our third quarter and year-to-date financial performance and give an update on our most current outlook for the remainder of 2024.

Following our prepared remarks, we will open up the line for questions. 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.

[D. Koch, executive]

Thank you, Mehul. Good afternoon, everyone, and thank you for joining us today on Carlisle's Third Quarter 2024 Earnings Call. To start, I'd like to direct your attention to Slide 3 of the presentation. I'm pleased to share that Carlisle continued to demonstrate the outstanding performance we've seen in 2024, into the third quarter despite facing increased headwinds in the quarter, which negatively impacted sales primarily in our residential end markets. Despite these challenges and the additional impact of two major hurricanes, the Carlisle team delivered record third quarter results in both EBITDA margin and earnings per share.

Carlisle's performance throughout this year underscores the resilience of our business model, the robustness of our key initiatives and the perseverance of our team and the effective execution of our Vision 2030 strategies. The record achievements in profitability in the third quarter are even more rewarding and that our teams delivered the record third quarter results in an environment that, as mentioned, saw a weakening residential market when compared to our second quarter outlook as well as disruptions tied to weather-related and port strike events.

In the third quarter, Carlisle delivered sales of $1.3 billion representing growth of 6% on a year-over-year basis despite the negative sales impact of CWT. Across both CCM and CWT, we maintained our strong focus on pricing discipline on driving a superior customer interface through the Carlisle experience and continued to deliver operating efficiencies through our well-known approach to driving continuous improvement, the Carlisle Operating System. These factors combined to deliver third quarter record bottom line results with adjusted EPS growing 24% to $5.78 and adjusted EBITDA margin expanding 60 basis points year-over-year to 27.6%, highlighting our commitment to continued margin expansion in both CCM and CWT.

CCM continued the positive momentum generated in the first half of 2024 into the second half of the year with revenue growth of 9% and an impressive 110 basis points expansion in adjusted EBITDA margin, setting a new third quarter record of 32.8%. This growth was driven by the continued strength in reroofing demand, along with the benefits from inventory normalization in the channel and the acquisition of MTL. As we've discussed throughout the year, we anticipated a significant positive impact from inventory normalization in 2024, and we are pleased that it materialized as expected, and in the order of magnitude, we had forecasted at the start of the year.

In the third quarter, in line with our original projections, we saw an approximately $50 million benefit of sales from CCM inventory normalization, which now completes the lapping benefit we expected this year and it was tied to the prior year's inventory destock. As a reminder, when we entered 2024, we had anticipated $375 million from a return to normal inventory levels. Now turning to CWT. While we were pleased with the progress of our new product introductions, retail channel expansion and overall share gains within CWT, higher interest rates and affordability challenges resulted in a further slowing in new housing activity and repair and remodel during the quarter. These negative factors drove a sales decline of 3% year-over-year in CWT, including an expected low single-digit price decline.

That said, our long-term positive outlook for CWT is unchanged given the well-known need for additional housing, a forecasted return to a better interest rate environment and success in key growth initiatives across commercial waterproofing, new product introductions and expansion in the home center channel. Overall pricing in the third quarter remained relatively stable and in line with our expectations for both the CCM and CWT segments. Much of this was driven by our proactive approach, pricing discipline, and our commitment to value-based pricing. Furthermore, the team's focus on operational excellence and strategic growth initiatives leaves us well positioned to capitalize on market opportunities as they arrive.

Now let's turn to Vision 2030. Our Vision 2030 strategy continues to guide our focus on key growth drivers, including energy efficiency, labor-saving solutions and capturing a larger share of the expanding reroofing market. We're doubling down on organic investments in innovation more than tripling our historical R&D investments to bring more energy efficient and labor-saving products to market faster. We also remain committed to our pivot to a pure-play building products platform and focused almost exclusively on the opportunities presented in the North American markets. Furthermore, we remain driven to be a superior capital allocator and demonstrated our commitment to returning capital to shareholders in the third quarter through our balanced approach of dividends and share repurchases.

During quarter 3, we repurchased 1.1 million shares for $466 million, bringing our year-to-date total to $1.2 billion. These third quarter purchases put us well on track to achieve our planned goal of $1.4 billion in share repurchases in 2024. We Additionally, we paid out $46 million in dividends this quarter and declared an 18% increase to our dividend in August, representing the 48th consecutive annual increase in dividends for Carlisle shareholders. These actions underpin our ongoing dedication to creating shareholder value and reflect our confidence in Carlisle's growth trajectory. Our robust cash flow generation and pristine balance sheet continue to provide us with the flexibility to reinvest in our businesses and the ability to deploy capital to drive organic growth, continuously improve our operations, pursue strategic acquisitions and actively return capital to our shareholders, all while maintaining our focus on driving long-term value creation.

To close out Slide 3, while we are slightly lowering our full year 2024 outlook to 10% revenue growth for Carlisle, reflecting the ongoing challenges in the residential markets and the impact of the previously mentioned weather and strike events, we are pleased to reaffirm our expectation to achieve approximately 150 basis points of adjusted EBITDA margin expansion. I will now speak briefly to Slides 4 through 8 as I discuss our recent progress against our Vision 2030 goals. As a reminder, our Vision 2030 strategy builds on the success of Vision 2025 and gives us a clear road map to drive value creation in the next chapter of Carlisle's ongoing story of success.

Under Vision 2030, we are creating value for our shareholders through our portfolio of high-performing building envelope businesses with attractive secular trends. We are focusing on delivering the most innovative, energy-efficient and labor-saving products and solutions to our customers through investment in our ever-improving Carlisle experience, delivering well understood and consistent value for price leveraging a strong leadership focus and operating with a relentless focus on flawless execution, driven by our COS culture.

As a reminder, Vision 2030 focuses on 6 pillars: the first is the Carlisle Operating System. Under Vision 2030, we will continue to drive our continuous improvement culture through the consistent application of COS across every function in the enterprise, with the goal to drive savings of 1% to 2% of sales annually through operation efficiencies; Second is the Carlisle experience. The Carlisle Experience has established us as a premium brand with a recognized value proposition backed by high-quality products and exceptional service. Our commitment to our customers is embodied in the Carlisle experience, which means delivering the right products to the right place at the right time. We understand that we win with customers through superior products and solutions, exceptional service and labor savings efficiencies, and we price our products to reflect that value; Third is innovation. We plan to increase our spend on R&D to 3% of sales by 2030 and to accelerate the creation of new products and solutions that add value to our customers through advancements in sustainability, energy savings and labor efficiency.

We will pursue innovation based on an intimate knowledge of our markets and a focus on innovation that responds to our customers' needs and opportunities to improve their businesses; Fourth is M&A. We will focus on existing and adjacent categories that allow us to enhance our building envelope portfolio. We will seek opportunities to acquire assets that meet our well-understood criteria of an embedded organic growth story. An opportunity to deliver hard cost synergies, our talented management team and the ability to deploy our Carlisle Integration Playbook; Fifth is our disciplined approach to capital allocation. Ultimately, as superior capital allocators, we seek to create value for our shareholders and deliver benefits for all our stakeholders. In line with our track record, we will continue to invest our cash responsibly into the highest ROIC opportunities; And lastly and perhaps more importantly, our sixth goal is attracting, motivating and retaining top performers to ensure we have the best talent to execute our strategic initiatives and drive above-market growth.

By executing on our clearly stated initiatives and strategies, reinforced by the progress we have made this year, we are on target to deliver our goal of $40 of EPS by 2030 while achieving over 25% ROIC and generating free cash flow margins in excess of 15%. Our M&A strategy, a key pillar of Vision 2030 continues to progress as expected. We have a healthy pipeline of opportunities that can contribute to our Vision 2030 goal to grow and be a leading supplier of building envelope products and solutions. With the sale of CIT completed in May, I'm pleased to report that we've been able to deploy capital from the sale proceeds into meaningful acquisitions demonstrating our ability to execute on our strategic plans and create value through M&A as part of Vision 2030.

This rapid and strategic deployment of capital underscores our commitment to strengthening and growing our positions within the building envelope. With our solid balance sheet and robust cash flow, we are well positioned to capture additional value through M&A over the Vision 2030 time frame. We see opportunities in both existing and complementary categories, including architectural metals, insulation, underlayments, sealants and adhesives and the many weather-proofing categories within CWT. As a reminder, our M&A playbook is built on 4 core criteria: an embedded organic growth story, hard cost synergies, a strong management team and the deployment of our Carlisle integration playbook, our acquisition of MTL earlier this year and our recently announced agreement to acquire PlastiFab are recent examples of this strategy in action and the steady progress in M&A, we are making against our Vision 2030 goals.

Let's focus on PlastiFab for a moment. The rationale for the acquisition of PlastiFab is straightforward. It aligns perfectly with our Vision 2030 strategy to enhance our best-in-class building envelope product portfolio. It establishes Carlisle as a leading manufacturer within the $1.5 billion North American expanded polystyrene insulation market and strategically provides vertically integrated polystyrene capabilities to our Insulfoam business while adding scale, supporting retail channel growth and filling key geographic gaps in the U.S. and Canada.

We expect this acquisition to generate approximately $14 million in annual cost synergies and be accretive to our adjusted EPS by approximately $0.30 in 2025. Recently, our M&A strategy gained recognition in a Harvard Business Review article titled A Better Approach to Mergers and Acquisitions. Carlisle has built a detailed integration playbook with clear milestones and goals. This approach, coupled with our rigorous due diligence process gives us a competitive advantage in M&A execution. We were pleased to be able to share our approach to M&A through a well-distributed and well-respected periodical and hope it helps provide shareholders with more insight into our approach. Our success in M&A complements our intensified focus on innovation, another key driver in our Vision 2030 strategy.

We're significantly increasing our R&D investment to $1 billion over the Vision 2030 time frame, aiming to drive 25% of our revenue from new products, up from 15% today. Our approach categorizes innovation into 3 types: business life cycle, evolutionary and revolutionary each receiving equal focus and investment of about 1% of sales. Business life cycle innovations currently 80% of our efforts focus on ongoing product improvements and cost reductions. Evolutionary innovations address specific and real current unmet customer needs. A great example is our new 16-foot TPO line. By doubling the width of the traditional 8-foot TPO role, we reduce seams in the roof, which reduces the opportunities for leaks over the life of the roof. It also reduces labor by significantly increasing the square foot applied by the contractors installation team. Revolutionary innovations drive dramatic business inflections with longer-term development time lines. New reroofing insulation like our recently introduced denim-based UltraTouch product that's available at Home Depot is an example of a revolutionary product development idea.

Our innovation efforts are already yielding results with products like Seam Shield and Blue Skin VP Tech gaining rapid market acceptance. Seam Shield reduces cleaning time by 70% while increasing weld strength directly addressing contractor pain points. Blue Skin VP Tech combines multiple components into a single product, improving energy efficiency and cutting installation time by 30%. And I'm particularly excited to highlight another innovative product that exemplifies our commitment to sustainability and customer value. Our Henry Roofguard roof coating was recently named a finalist for Home Depot's Innovative Product of the Year Award. This recognition not only showcases our progress in innovation, but also reinforces the strength of our relationships with key channel partners like Home Depot and is another example of delivering value to our customers based on extensive market input.

Roof Guard represents our next-generation acrylic waterproof roof coating enhanced with urethane for improved performance its premium hybrid formula offers better weather protection, solar reflectivity and longevity compared to standard acrylic reflective roof coatings, this innovation not only addresses our customers' needs for energy efficiency, but also aligns perfectly with our sustainability goals. The success of products like Roof Guard have contributed to CWT's Henry brand being awarded Home Depot's Building Materials Vendor of the Year for the second time since 2022. This accolade underscores our commitment to innovation and customer satisfaction, serving as a prime example of the Carlisle experience in action, and we are very proud of the Henry team for being recognized by Home Depot again. These innovations not only enhance the Carlisle experience for our customer, but also drive margin expansion through pricing to value.

They demonstrate how our focus on innovation is directly contributing to our Vision 2030 goals positioning us to meet evolving market needs while driving sustainable growth and profitability. I'm extremely proud of our team's performance year-to-date. As we progress towards our Vision 2030 goals, I am confident and our ability to continue delivering value for all our stakeholders. Our focus remains on demonstrating the strength of our margin resiliency through the Carlisle experience and driving superior returns on capital through our strategic initiatives. With that, I'll turn it over to Kevin to provide additional financial details. Kevin?

[Kevin Zdimal, executive]

Thank you, Chris. Our third quarter financial results continue to demonstrate Carlisle's strength and our effective execution. As shown on Slide 9, we delivered a solid third quarter on both the top and bottom lines. We grew sales to $1.3 billion, up 6% year-over-year, driven by robust reroofing activity, the return to normalization of inventory levels in our channels and the acquisition of MTL, which more than offset the negative impact from the slower residential end markets. We leveraged our top line performance to expand EBITDA margins by 60 basis points year-over-year to a record third quarter 27.6%.

Furthermore, we grew adjusted EPS by 24% to a record third quarter by $1.78 on reflecting the strong operating results, margin expansion and the benefits of our ongoing share repurchase program. Looking at our segment highlights, starting with CCM on Slide 10. CCM delivered third quarter revenues of $998 million, up 9% year-over-year. reflecting pent-up reroof demand, the benefit of inventory normalization and the acquisition of MTL. CCM's adjusted EBITDA increased 13% year-over-year to $328 million and adjusted EBITDA margin expanded an impressive 110 basis points year-over-year to a record third quarter 32.8%, reflecting strong volume leverage on sales growth favorable raw materials and continued operational improvements driven by the Carlisle Operating System.

Moving to Slide 11. Revenues at CWT were down 3% year-over-year to $335 million, primarily due to softer residential end markets and expected price declines in select product categories, partially offset by growth in our commercial business, share gain initiatives and the acquisition of Polar Industries. Adjusted EBITDA decreased 14% year-over-year to $69 million. Adjusted EBITDA margin contracted 270 basis points year-over-year to 20.7% attributable to strategic investments in the business to support longer-term growth initiatives as well as lower sales in the quarter as a result of broader residential market weakness from higher interest rates as consumers take a wait-and-see approach to home purchases and R&R.

For your reference, Slide 12 provides a year-over-year third quarter adjusted EPS bridge. Moving to Slide 13. Our cash flow performance remains strong. Free cash flow from continuing operations for the first 9 months of 2024 was $597 million, up $22 million year-over-year, reflecting robust earnings growth and disciplined working capital management. We have invested $64 million in capital expenditures year-to-date. Moving to Slide 14. Our balance sheet remains solid with $1.5 billion in cash and $1 billion available under our revolving credit facility as of quarter end. This solid liquidity, along with a net leverage ratio of 0.5x gives us the flexibility to invest in value-creating opportunities while staying committed to delivering returns to our shareholders.

Moving to Slide 15. In line with our Vision 2030 capital allocation strategy, we're reinvesting in our high ROIC building product businesses through growth CapEx and strategically deploying capital towards synergistic M&A opportunities to grow and enhance our building envelope portfolio while also returning significant capital to shareholders. In the third quarter, we paid $46 million in dividends and repurchased $466 million in shares, bringing our year-to-date share repurchases to $1.2 billion. We have 4.5 million shares remaining under our current repurchase program. Carlisle's financial strength underpinned by consistent cash flow generation and prudent capital management remains a key competitive advantage.

It enables us to balance investments in organic growth, strategic M&A and shareholder returns. While maintaining the flexibility to navigate evolving market dynamics. This financial resilience, combined with our operational excellence driven by the Carlisle Operating System reinforces our confidence in achieving our Vision 2030 objectives. Now moving to our full year financial outlook on Slide 16. As Chris previously noted, we now expect our full year 2024 outlook for revenue to grow approximately 10% over the prior year, and we are reaffirming our expectations for adjusted EBITDA margins to expand by approximately 150 basis points.

This outlook includes an expectation for fourth quarter revenue to grow low single digit with an adjusted EBITDA margin of approximately 25% in the fourth quarter. As such, we expect record full year EPS in 2024, with growth in excess of 25% compared to the prior year. Additionally, we maintain our expectation to deliver free cash flow margins of at least 15% and ROIC in excess of 25%. This is directly aligned with the objectives outlined in our Vision 2030 strategy. To provide a tighter band on the outlook, I will provide outlook by segment for the fourth quarter. For CCM, we expect revenue to grow mid-single digit through a combination of volume growth and the benefit from the MTL acquisition, offsetting slightly lower pricing on year-over-year comps.

For CWT, we expect fourth quarter revenue to decline low single digit versus a fourth quarter of 2023. The main drivers for CWT is key growth initiatives, partially offsetting the softer residential end markets. In summary, our third quarter results of revenue up 6% and adjusted EPS up 24% year-over-year to a record third quarter $5.78 and demonstrate the strength and resilience of our business model as well as our ability to execute effectively in a dynamic market environment. The progress we have made year-to-date reinforces the momentum we are building towards our Vision 2030 goals.

As we look ahead, we are excited about the opportunities to further leverage our operational excellence, drive innovation and win in our end markets. With our strong financial position, disciplined capital allocation strategy and commitment to continued improvement through the Carlisle Operating System, we believe we are well equipped to deliver long-term value creation. With that, I turn it over to Chris for closing remarks.

[D. Koch, executive]

Thank you, Kevin. In conclusion, I want to reiterate our confidence in Carlisle's strategic direction under Vision 2030. As we move forward, our ability to innovate with a focus on energy efficiency and labor-saving solutions puts us on the right path to drive above-market growth and superior financial results. Our record third quarter results, cash flow generation and overall 2024 performance continue to give us confidence that we are firmly on track towards our Vision 2030 goals of $40 of EPS and 25% ROIC, 15% free cash flow margins, 25% EBITDA margins and mid-single-digit organic growth.

The pivot of Carlisle's business model to an easier to understand and higher returning building products portfolio continues to provide many strong catalysts for growth. When combined with our robust free cash flow engine, strong balance sheet, enhanced focus on innovation, a robust pipeline of potential acquisitions and a proven M&A integration playbook, Carlisle is clearly positioned to create significant additional value for all our shareholders and reach our goal of $40 of EPS under Vision 2030. I would also like to take this opportunity to express my continued thanks to all of Carlyle's employees for their exceptional efforts and perseverance in this challenging environment. And once again, let me extend my sincere congratulations to the Henry team on their Home Depot Award.

Thank you all as well for your continued support, investment and interest in Carlisle. That concludes our formal comments. Operator, we are now ready for questions.

[Operator]

[Operator Instructions]. Our first question will be coming from Timothy Wojs from Bern.

[Timothy Wojs, analyst]

So maybe just on volumes. In the CCM business, if you could maybe kind of take a step back and kind of give us some color on where you think maybe either industry sales are or kind of where industry volumes are kind of in the third quarter and maybe year-to-date? And I guess as you look at next year, I mean, I know it's early, but how do you think about the volume kind of puts and takes to next year with new construction? And then it seems like reroof continues to have some decent momentum.

[D. Koch, executive]

Yes, I think you're right, Tim, I'll just take looking into '25 first, and I'll see Kevin, would want to say about Q3. But I think '25, we continue to be optimistic on that from a couple of perspectives. I think, obviously, there's a lot of economic uncertainty going to the elections. Obviously, there was hope for more interest rate cuts, it did materialize. I think people may be sitting on the sidelines there. We also are going into the fourth quarter after just having basically got back to normal on the inventory restocking and no one was going to really restock into the like quarters of the year too heavily.

Then we add a little bit of weather. I think things stabilize after the election, interest rate cuts, we think there may be some opportunity for some pricing. Obviously, we still see inflation in labor, medical costs, these things. as well as more innovation that we have coming out, the effects of some positive things on acquisition, some new channel opportunities for us. So I think '25 for us, we would say it looks good. And then last, I'd say, we haven't had a load in into the construction season in quite a while. It's probably isn't accurate, but I'm going to say it probably hasn't been since COVID. And that used to be a nice boost to the year. So I think there's some opportunities for some inventory improvements when people have confidence in the economy again. So with that, I'll turn it to Kevin and see if you'd like to say about the third quarter volumes.

[Kevin Zdimal, executive]

Yes, in Q3 for CCM I would say the industry was up about 3%, which would have been the same for our CCM business. There was some things at the end of the quarter, as you know, with some of the weather events with the hurricanes as well as the port strike that, that impacted us a little more than 1% in the quarter. So that would have been against that 3% volume that we would have seen.

[D. Koch, executive]

One thing -- just one thing to add to. If I look across the verticals, warehouses, educational office, that kind of thing. Really, when we look in '24, the big one that's been a drag and it was kind of that way in '23 as well as been warehouses. Everything else is not in too bad a shape as far as how the volume is getting distributed. And I think you can and you're probably already aware of that, that we've seen that.

[Timothy Wojs, analyst]

Yes. I mean, to your point, like new construction is down this year, right? So I mean -- and a lot of it is central -- a lot of it is kind of central on the warehouse vertical. Right?

[D. Koch, executive]

Yes.

[Timothy Wojs, analyst]

Yeah. Okay.

[D. Koch, executive]

And I think construction yes, okay. enough.

[Timothy Wojs, analyst]

No, that's right. That's really fine. And then just on just the M&A kind of funnel and the pipeline and I guess kind of the pace. I mean, you've done kind of two acquisitions or two tuck-in acquisitions here in the last couple of quarters. I mean, are there -- is there a pretty sizable pipeline of these tuck-in type acquisitions at a pretty attractive financial profiles because I mean if you're able to do a couple of these a year, I mean you could really start to get some momentum on the synergies and the capital deployment.

[D. Koch, executive]

Yes. Actually, I still think prices are a little bit high versus what they were a few years ago. But after we get our synergies and synergy adjusted number, they've been looking really good. And it goes back to the four things we're looking for. We're looking for that organic growth story. We're looking for hard synergies, good management team. We've got those both in MTL and PlastiFab. The other thing is you said at the tuck-in that ability to get those synergies, but also added dimension to the two businesses. And I think it's really nice that MTL was a good acquisition for our existing CCM business around Drexel and Petersen, got a great manager in [ Tony Manger ] and things we're bringing -- efficiencies we're bringing to the existing business by adding MTL.

And then you look at Plastifab and it really reinforces that Frank as concept is built around national distribution on being a national brand, on really enhancing the Carlisle experience. I mean part of his core competency to Home Depot is a 24-hour delivery anywhere in the country. So we really get past positivity again to build out that EPS network as well. So they're really good fits, and we do see more of those. We do see more opportunities around the building envelope. And I think you'll see more of that from us certainly in '25 and beyond.

[Kevin Zdimal, executive]

The scale and size of them, we would expect to continue to deploy about $300 million to $500 million into these bolt-on acquisitions a year for the next few years.

[Timothy Wojs, analyst]

Okay. Okay. Great. And then, Kevin, just a clarification. That 3% industry volume number that you quoted, you guys were closer to mid-single digits, just to make sure the math works.

[Kevin Zdimal, executive]

Yes. When you take into account some of the destock, then that puts us at the higher end there. Yes, I was excluding the [ destock ] impact.

[Operator]

SP1 Our next question will be coming from Saree Boriditsky from Jefferies.

[Saree Boroditsky, analyst]

So maybe just turning to CCM margins, obviously, very strong performance in the quarter. You cited some positive raw material environment. Could you just talk about the price contribution to margins for the quarter and anything else that drove that expansion?

[Kevin Zdimal, executive]

Yes. So price cost was neutral in the quarter for CCM. And as you said, it was very good margins up over 100 basis points to a record. And for us, that really demonstrates the power of the business where we can get these record margins, expand the margins without getting price because that's been a lot of the story in past years as we needed to price to get the margins, but now with utilizing the Carlisle Operating System throughout CCM that's driving these higher margins.

[Saree Boroditsky, analyst]

And then you guys don't usually talk a ton about storm activity, but just given some of the recent hurricanes, how do we think about the potential for additional construction demand versus having lower days on the roof in the short term?

[D. Koch, executive]

Probably neutral, I would say. I think we definitely had some impact at the end of September and then into October. Their factories primarily Florida and around the Gulf. But obviously, we'll get some pickup from that. I mean we hope people recover quickly. There was a lot of damage. And I think more importantly than the -- if we talk about weather, the bigger impact as those wash out is probably around what kind of November, December, we have across the country and whether we get a nice dry warm fall or we get wet weather and more snow early in the north. So that's always the factor. But I think for the most part, the opportunity and the impact kind of wash each other out in the quarter -- fourth quarter.

[Saree Boroditsky, analyst]

Appreciate it. If I could just add one more. You've talked about the ramping of the R&D investments to 3% of sales. Can you just talk about how we see that spending step up and maybe what the contribution will be for next year?

[Kevin Zdimal, executive]

Yes. We would expect to increase around 50 basis points a year as we move forward to 2030. So we're not going to get to 3% next year. or even the following year. It's more of this steady increase of it throughout the next 5 years.

[Operator]

Our next question will be coming from Susan Maklari.

[Susan Maklari, analyst]

My first question is digging a little -- my first question is digging into the reroof side of things again. Can you talk a little bit about what the latest survey of your contractors has shown. Has that changed any over the last quarter? And how are you thinking about their positioning as they look to the fall and year-end? And then how do you also within that, think about the opportunities to capture some of that business given the NPL and the other acquisitions?

[D. Koch, executive]

Right. Well, the survey that we do really reflected everything I think you've written and others have written about more pressure on new and more pressure on the resi side of the business. And obviously, that's been reflected in more numbers than just ours, and I think it's pretty well understood. Very kind of positive on reroofing as we look out. And we kind of bifurcate this into a near-term look at what reroofing is doing. But in the long term, all those roofs that we've seen, and we've talked about this before that are put on in the 2008, 2009, 2010, 2012, these all come back at a higher price and have to be reviewed within 20 years. So the outlook for Q4 has been positive across the board.

Obviously, we talked about the impact of what weather can do, and there can be some impact on the margins. And then going into to '25. I was actually surprised that the kind of initial indicators were positive both on return to volume. And I think, again, I spoke to the uncertainty now in the macroeconomic conditions that are here. Uncertainty people being concerned. But the '25 was more positive. And then surprisingly, there was some positive expectation around price that would be a positive as we headed into '25. So early days, right? These are projections. This is across a wide group of contractors, but I think good news on that commercial side.

[Susan Maklari, analyst]

Yes. Okay. And then can you talk a bit about your inventories within DCM, how those are going into the end of the year? And any thoughts on your production?

[D. Koch, executive]

Yes. And Sue, before I get the -- you asked about NPL and what's happening. MTL continues to make great starts to integrate into the specifications at CCM as a reminder, has patents and things like this, and we're bringing those into our warranty. We're bringing our sales force teams together. I mean it's only been about 6 months but we're getting good traction there. We're seeing places where even Henry now is getting into the game where we will bid on a national chain, and we'll suddenly see that Henry might be and then they're bringing MTL in or bringing CCM or vice versa. So there's really good synergies there.

And I'm really pleased with how quickly Brian and his team have integrated and really started to push that whole idea of the building envelope platform that we want. On inventory, as you know, inventory turns have been better. We're fine. Our deliveries continue to increase in terms of on-time delivery rate. It's always been good, but it has gotten better as we moved through the quarter. And that's OTD to promise and then for sandfill rate. So I think we continue to have pretty good service, and it continues to get better in the quarter.

[Operator]

Next question will be coming from David MacGregor from Longbow Research.

[David S. MacGregor, analyst]

Chris, can you just talk about the polyiso market? And it seems as though you've gotten a lot of new capacity that's a lot -- a relative large increase, I guess, in the amount of new capacity that's come to market in the last year. It seems like pricing has been a little slobby. How are you thinking about that market right now and how it can absorb that capacity over the next year or so?

[D. Koch, executive]

Well, I think when we look at additions, maybe we take it into two different groups. We look at the big -- the big three that OS and our two big competitors have been here for a long time and use it as part of an integrated system. I mean we look at the reroofing volumes over the coming years. We look at North America, getting some reshoring. We look at what we're doing with the need for energy efficiency, I think we'll be fine with what's been added. We do have others that have announced they're going to come in. I think this is an interesting statement. I think it's going to be polyiso in the market, but it's not the same type of capacity, as I would say, out of those players that have a fully warranted system, national coverage, training centers tying it together with -- as I just mentioned to Sue, bringing in the metal and that kind of stuff.

So we still are looking to be the provider of the building envelope solution. We're looking to add pieces like PlastiFab, which is an insulation company, obviously. And so I think there's been some capacity added and -- or at least talked about being added, and I don't understand how that might integrate into the markets we serve. We've had this happen before, I think, 3 years ago, maybe 4 years ago, we had a competitor from Canada come down and put a facility in Maryland, and it was a TPO polyiso facility. And I think at the time, we'd had some questions around what's that going to do to the market?

Obviously, we don't ever talk about that on our calls and I would say the impact was negligible. So obviously, there's a lot more to being in this building envelope business than just showing up with a TPL and a polyiso line. While that's a great start, I'm sure for someone. We've got a lot of years of relationships and other things. Again, I like to think about Mahul and Frank talks about this to [indiscernible] it's not just adding a piece of Blue Scanner, vapor barrier, the EPS or the Board, it's putting them all together and then selling through a highly talented sales network architects and contractors and builders.

And so I think we're good. I think we've got a great outlook for North American construction markets. And so I think what we've added while seems to be quite a bit compared to what we're used to. I think we'll be okay with that.

[David S. MacGregor, analyst]

Good. That's a great answer. Can you just walk us through your outlook for each of your principal raw material inputs just in terms of price trends and what you're seeing there?

[D. Koch, executive]

Yes. I think we had talked about MDI for the year being a little bit down. I know our TPO resins were a little bit up. [indiscernible] resins -- or I should say polymers down. So when we look overall, that's where we're getting to some savings those that are down or overwhelming it. But for the most part, it's been stable for the year as much as we expected. I think some of it obviously depends on demand. And in the resi markets, obviously, has been down. But overall, relatively stable.

[David S. MacGregor, analyst]

Good. Last question for me is just on CWT and you talked about EBITDA -- adjusted EBITDA being down 14%. Can you just bifurcate for us the investments that were made there versus the volume deleverage.

[D. Koch, executive]

Yes. When we looked at it, we try to break it into something that we all at there's a lot of moving parts. But basically, about 1/3 of that was the deterioration in the resi markets. Both the resi new and the R&R were both down about mid-single digits. Obviously, I'll say a payer now, it's interest rates, affordability, election uncertainty. And then we had a little bit of an impact from the spray foam side of the business where a little bit of irrational pricing from some competitors that had a bit of an impact. But let's say that made up a third -- and then the second, third really was the investments and maybe I'll let Mahul go into what those investments are. He's our residential or I should say, CWT expert.

[Mehul Patel, executive]

Sure. Thanks, Chris. Dave, how are you? So you've heard us talk about urban initiatives within CWT across expansion in the Home Depot retail side of the business as well as expanding into the national builders with their full system offerings and then advanced water penetration. So those are areas where we're investing in the sales organization, adding people as well as equipment to drive our strategy there. In addition to that, we've had additional marketing and ad co-op programs at the retail channel as we expand into additional categories.

And then you hear us talk about R&D as part of Vision 2030. So on CWT, you heard about products like Blue Skin VP Tech. We're investing in that in R&D. And then lastly, as part of our cross-selling and selling the full system across the different businesses, we've been investing in IT and systems and tools to make it a better customer experience. So that kind of gives you an idea of where we're spending the additional money, and it's going to support further long-term growth and as we continue to grow, we should get a good return and see margins improve going forward.

[Operator]

Next question will be coming from Bryan Blair from Oppenheimer.

[Bryan Blair, analyst]

Chris, you mentioned likely neutral Q4, in fact, from the hurricanes. Obviously, there was some headwind from the first when that hit in Q3. Just to level set, what was the total impact between the port strengths and the initial impact of the first hurricane top line and margin to the extent that can be quantified?

[Kevin Zdimal, executive]

Yes. On the top line, it's about $10 million to $15 million of impact in the third quarter. And yes, to the bottom line, you can do our incrementals off of that. So is the impact there for the third quarter. And then, yes, as Chris said, we don't see it coming back in the fourth quarter, getting that pick up. But 2025 is when we'll see more of the recovery of that piece that was slowed down due to the hurricanes right now. Obviously, in the southeast, the focus is on the essential jobs and the repairs. They're not doing as much work on new projects, but that's what we think will kick in, in 2025.

[Bryan Blair, analyst]

Okay. Understood. And Chris, you've walked through some of the puts and takes for CCM looking to 2025, maybe do the same with the CWT. How are you thinking about recovery prospects, continued watch items related swing factors, et cetera?

[D. Koch, executive]

Yes. Well, I think you've got a lot of really positive things. I mean we will mention a couple of them. We've obviously expanded our retail channel. That was a great synergy that we don't build into the $30 million of synergies that we had in the Henry deal that came as a bonus. So the expansion into the retail channel has been good. We've talked about some of the different products, like I mentioned, the UltraTouch denim insulation. We've got some other projects that are going on. So I like that, Frank's VP Tech, really, this new product, the whole innovation pipeline thing in a microcosm and CWT, that team has done a pretty good job as even indicated by the supplier recognition at Home Depot.

I think the bigger things for us are really just around the economy and this affordability. I think a couple of interest rate cuts that will be needed will help -- we've got to get people moving again, that affordability is an issue. We do know there's backlog in housing stock. So let's see that happen. CapEx gets deployed. So I think that as well as CapEx, and we haven't talked about it much on this call, but we did invest a lot into automation into CWT, things like auto free spot of fill, taking or of labor out of the equation, automating that and increasing both the quality, reducing the waste and increasing the efficiency of our factories and Frank send a nice job there.

So again, to me, when we look at the quarter and we think about that 1/3, 2/3, I think, that 1/3 in the beginning, while it may not have been as impactful as these investments. Obviously, if the volume is there to run through it, the incrementals have been pretty good, and we were on a good pace to do that before we saw that further deterioration. So we sleep for this rebound in the resi and repair and remodel markets, and I think it will have a -- it will be there. Whether it happens in the first quarter, or not, I think I would look more towards the second half of the year, but we're confident we'll be there.

[Operator]

Our next question will be coming from Adam Baumgarten from Zelman.

[Adam Baumgarten, analyst]

Just on the price cost, any change to the outlook of flat for the year at this point?

[D. Koch, executive]

No. Not on -- I assume you're talking on the CCM side.

[Adam Baumgarten, analyst]

Yes. Just because I think you said it was flat in 3Q, right?

[D. Koch, executive]

Yes.

[Adam Baumgarten, analyst]

Okay. Cool. And then just on CCM specifically on pricing. Just curious what you saw throughout the quarter, especially kind of later in the quarter and into 4Q and maybe what you're hearing from your distribution customers around price competition?

[D. Koch, executive]

Yes. And I think it's been pretty -- I wouldn't say it's widely disseminated. But I think for pricing, we're seeing relative stability. I mean, I think back to a few years ago, when there was a raw materials will go down and we would just see pricing had to raw materials. And I think as we pushed price discipline and as we push price to value. It's been pretty good to see our competitors investing in and new factories, investing in innovation, investing in their sales teams and really ensuring that they get paid for those investments they're making.

So again, I think just what we got, as I said earlier in the call, what we got out of our survey was relatively stable pricing environment throughout the year. I think Kevin had said at the beginning of the year, we would probably be down 2% for the year, and I think we're going to be pretty close to that. despite all the issues that have gone out through the year. And then I think going into '25, the feedback was that there might be some upside to pricing from our survey. So we'll see how that plays out, but that is a good thing when our contractor base and our other tensor value chain or thinking like that.

[Operator]

And our last question for today will be coming from Garik Schois from Luke Capital.

[Garik Shmois, analyst]

So just two questions on CWT. Just first on pricing. It remains down, and I think that's fairly consistent with what you saw earlier in the year, but just wondering maybe similar to the earlier question on CCM, if the pricing cadence has changed at all in.

[Mehul Patel, executive]

Yes. It's steadily improved throughout the year where we're in the back half of the year is about 2% down. first half of the year was a little bit higher than that at CWT. So it has improved, we're expecting down a couple of percent in both Q3, which we had as well as in Q4.

[Kevin Zdimal, executive]

And Garik, one thing I will add, just going back to our last earnings call when we talked about additional pricing pressure on spray fill. Outside of that, everything is in line. There's no pricing pressure. We're holding prices stable similar to CCM and declines that Kevin mentioned, that's pretty much in line with what we said on the last earnings call.

[Garik Shmois, analyst]

No. Great. Appreciate the color there. And then just on the trends in CWT during the quarter and the outlook, just given the disconnect on what you're looking for coming out of 2Q, and I think it implied maybe mid-single-digit type revenue growth in the back half of the year kind of appreciate the residential. It remains weak. But any more color as to maybe either sales trends throughout the quarter or any specific product line or channels that just haven't materialized to the degree you expected?

[D. Koch, executive]

Yes. I think when we look at each segment, it's been pretty good, as Mahul said, I mean, relative to what our expectations were and coming to the year and then even in the second quarter. And I really don't think we can underestimate the impact of the residential markets affordability and the fact that people aren't moving. And I think those -- I think earlier in the year, we had a lot of talk about even 3 interest rate cuts and then we got one, and that was it. And I think that kind of has helped or not helped, but it hurt people because they're saying, well, maybe I'll stick around and wait and see if things get better and 2025. So why act now when I could maybe do it later. And then I think the bigger impact from a product line perspective has just been probably a little more deterioration in spray foam than we thought in that one segment.

And again, that's a tough one. It's a very compelling market. It's got a lot of energy efficiency benefits to it. It's a much better product from an R-value perspective. From a vapor barrier perspective, we're seeing a wide adoption and homebuilding, the sound bidding benefits units. It's a great product, but we've had some industry changes over the last 5 years where there's been acquisitions by one group and some regional players that have maybe taken some different actions. And so pricing has been a little bit worse there than we thought. And I'd say that would be the one thing that -- are those two things are the things that really impacted that CWT pricing in the third quarter and looking into the fourth

[Operator]

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

[D. Koch, executive]

Thanks, everybody. This concludes the third quarter call for Carlisle. Thanks for the participation. Thanks for the great questions. Look forward to speaking with you all on our next call. Thank you.

[Operator]

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