Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will conduct a question and answer session. I would like to turn the call over to Mr. Mehul Patel, Carlyle's Vice President of Investor Relations. Please go ahead.
Mehul Patel: Thank you and good afternoon, everyone. Welcome to Carlyle's third quarter 2025 earnings call. I'm Mehul Patel, Vice President of Investor Relations for Carlyle. We released our third quarter financial results today, and you can find both our press release and the presentation for today's call in the investor relations section of our website. On a call with me today are Chris Koch, our board chair, president, and CEO, along with Kevin Zimmel, our CFO. Today's call will begin with Chris providing key highlights of the third quarter. Kevin will follow Chris and provide an overview of our Q3 financial performance and our outlook for the full year of 2025. Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to slide two 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 Carlyle 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.
Chris Koch: Thank you, Mehul. Good afternoon, and thank you for joining us for Carlyle's third quarter 2025 earnings call. Let's begin by turning to slide three of the presentation. Carlyle's third quarter results reflect the strength of the underlying CCM business offset by the ongoing challenging environment in both residential and non-residential new construction. This, along with the M&A activity in our commercial channel, was communicated in our early September commentary. The vast majority of the continued weakness in new construction is driven by the continuation of higher interest rates, affordability challenges, and economic uncertainty around inflation, coupled with job stability concerns and labor shortages. With respect to the post-M&A integration, as with any transaction, some turmoil and change was to be expected, and we anticipate that over the coming months, this will be resolved and we will return to a more stable situation. Despite this turbulence, third quarter revenues came in at $1.3 billion, up 1% year over year, only slightly below the expectations we discussed on our July second quarter earnings call. This allowed us to achieve an adjusted EPS of $5.61. In Q3, CCM continued to execute on its Vision 2030 initiatives and delivered another solid quarter, maintaining adjusted EBITDA margin of over 30% as recurring revenue from re-roofing activity provided a stable foundation amid near-term order volatility due to the previously discussed pressures and new construction demand and the temporary setbacks associated with challenges at a key distribution partner. Notably, reroofing demand, which represents approximately 70% of CCM's commercial roofing revenue, remains strong. This momentum in reroofing activity is driven by the aging commercial building stock, a growing backlog of roofs reaching replacement age, energy efficiency mandates, new product solutions that reduce labor, and the trust our customers place in the Carlisle experience and our premium warranties. Outside of new construction and distribution impacts, CCM's underlying business performance remained consistent with our expectations. While CCM's performance was a bright spot, we continue to face the well-known market challenges at CWT, which have negatively impacted the business over the last six quarters. Elevated mortgage rates have led to increased monthly payment levels contributing to suppressed demand. The imbalance in sellers and buyers of homes has made transactions more difficult. US housing supply has also made it difficult to afford a home. One estimate has shown that housing prices have risen over 45% since 2020, resulting in the medium home price of over $430,000 which is almost five times higher than the median household income across the country. The measures of housing stock availability point to a growing gap between supply and demand, the root of the affordability problem, which is amplified by declining productivity and a shortage of skilled labor. As a result, it takes longer to build a house than it has in past decades. It's estimated that at least 3 to 4 million additional homes need to be built to address the affordable housing shortage in the U.S. Despite the near-term challenges, imbalances, and volatility, we remain confident in our ability to create value for our shareholders through our Vision 2030 strategies and initiatives. Carlyle remains a market leader, operating an imperative business in the most attractive market globally. The megatrends of energy efficiency, labor savings, growing re-roofing demand, and the demand for residential housing will continue to drive superior, sustainable, and best-in-class financial performance for Carlyle. Carlyle's pivot in 2023 to a pure-play building products company has enhanced our focus on our industry-leading platforms, highlighted our leadership in attractive growth markets, and positioned us to deliver innovative building envelope solutions to our customers, all to drive superior financial returns for our shareholders. During the quarter, we also maintained our commitment to disciplined capital deployment. We repurchased 800,000 shares for $300 million and raised our dividend by 10%, marking our 49th consecutive annual increase. We also continued to integrate our recent acquisitions of Bonded Logic, ThermoFoam, and PlastiFab, and they continue to meet our expectations. Innovation is a core pillar of Vision 2030's playbook to create value, increase margins, and drive market share growth. Our innovation pipeline continues to deliver tangible marketplace results. The new products we've introduced over the past two years, including RapidLock, SeamShield, Appeal, and VPtech, are gaining meaningful commercial traction. These products are proven solutions that address real contractor pain points around installation speed, energy performance, and long-term durability. With our increased investment and substantial focus on the understanding of the voice of the customer, we anticipate impactful and revolutionary new product introductions over the next decade. What's particularly encouraging about these new products is how these innovations align with broader industry trends. Building owners increasingly prioritize energy efficiency to reduce operating costs. Contractors face persistent labor constraints that make productivity enhancing products more valuable. And our innovation roadmap specifically targets these market needs. This innovation strategy also directly supports our Vision 2030 objective of generating 25% of revenue from recently introduced products. It's a key driver of our plan to grow faster than our markets while expanding margins over time. Our M&A strategy is also creating meaningful value by expanding both our capabilities and our addressable markets. The MTL acquisition in 2024 has exceeded our expectations, allowing us to sell more content per roof through prefabricated metal edge systems, creating a more complete warranty, and enhancing our reputation as providers of complete building envelope solutions. The Plastifab and ThermoFoam integrations are also progressing and on track. We're capturing cost synergies while leveraging our national footprint to drive sales expansion. What's particularly powerful about our position in EPS insulation is our unique combination of in-house raw material production and the industry's most extensive geographic coverage in North America. This gives us structural cost advantages that enable us to serve national retail and distribution partners more effectively, than any competitor. The bonded logic acquisition opens an entirely new growth avenue. UltraTouch recycled denim insulation addresses the large fiberglass insulation market with a differentiated value proposition focused on sustainability and performance. As building codes and consumer preferences increasingly favor environmentally responsible materials, we're positioned to capture share in a sizable category where we previously had no presence. As we move into 2026, we are optimistic that M&A markets will become increasingly more productive for Carlyle. As economic conditions improve, confidence in acquisition target financials will strengthen, and the valuation gap between buyers and sellers will close, and we should see deal activity increase. This will bolster our long-term strategy of deploying capital in M&A to drive growth and market share. Meaningful bolt-on acquisitions will continue to play a significant role in our path to growth, and we hope to return to a pace of two to three acquisitions each year. Our operational initiatives continue to deliver solid returns on capital as well. Packaging automation investments in Kingman and Fernley, footprint consolidation initiatives, and expanding in-house solutions for adhesive applications through our new flexible fast adhesive product are three specific examples of key initiatives that are utilizing capital to create a fundamentally more efficient cost structure that will drive even stronger margin expansion when higher volumes return. Beyond cost actions, we're executing growth initiatives that diversify our revenue streams. Our Home Depot relationship is expanding to include single-ply roofing, insulation, flashing and air barriers, creating new selling channels for our products. Our cross-selling efforts in retail continue to build momentum. And the bonded logic addition gives us an entry into attractive insulation categories where we can leverage our existing relationships. The combination of these operational improvements and strategic growth initiatives are positioning CWT to expand margins as we move through 2026, especially if end market recovery accelerates. Our capital allocation approach remains a core competitive advantage. The $1 billion bond issuance we completed in the third quarter provides significant strategic flexibility and cash for near-term opportunities while keeping our net debt to EBITDA ratio comfortably within our one to two times target range. This enhanced financial capacity positions us to pursue multiple value creation paths simultaneously. Year to date, we've deployed $1 billion in share repurchases, taking advantage of valuation opportunities, and we are now raising our share buyback target to $1.3 billion for the year. The 10% dividend increase, our 49th consecutive annual increase, demonstrates our confidence in the business's ability to generate cash flow. We expect to generate approximately $1 billion of cash flow from operating activities this year, providing substantial capacity for continued innovation investments, strategic M&A that meets our discipline criteria, and ongoing capital returns to shareholders. Our track record of balanced, opportunistic capital deployment reflects our commitment to maximizing long-term value creation. Looking ahead and keeping in mind the near-term transitory headwinds our markets are facing, we are revising our full-year 2025 guidance to flat revenue with adjusted EBITDA margin down 250 basis points. While macroeconomic and distribution channel uncertainties persist, We remain confident in our Vision 2030 targets and ability to drive value creation through our recurring re-roofing leadership, operational improvement initiatives, and consistent execution of our Vision 23 initiatives. As a reminder, the structural advantages underpinning our businesses remain fully intact. We compete in attractive end markets with favorable long-term fundamentals. The secular trends supporting our growth, recurring re-roofing demand, energy efficiency requirements, adoption of labor-saving technologies, and the persistent housing shortage all continue to create meaningful tailwinds. As a reminder, our Vision 2030 strategy provides clear direction through four key pillars, product innovation to drive differentiation and above-market growth, operational excellence through COS, exceptional customer service via the Carlisle experience, and strategic M&A to enhance capabilities and expand our addressable markets. We remain firmly committed to our Vision 2030 targets of $40 of adjusted EPS and maintaining an ROIC of 25% or greater, which we expect will generate over $6 billion in cumulative free cash flow through 2030, along with our anticipated organic revenue CAGR exceeding 5%. And we have multiple pathways to achieve these ambitious goals. In summary, Carlisle's third quarter performance once again showcased the earnings power of CCM. Despite the significant challenges in the new construction market and distribution channels, sales grew and adjusted EBITDA margin remained above our Vision 2030 target of 25%. With that, I'll turn it over to Kevin to provide additional financial details and color on our outlook for 2025. Kevin?
Kevin Zimmel: Thank you, Chris, and good afternoon. I'll review our third quarter financial results starting on slide four. We generated revenue of $1.3 billion in the third quarter, an increase of 1% compared to the third quarter of 2024. The acquisitions of Plastifab, ThermoFoam, and BondedLogix contributed $39 million of revenue in the quarter. Organic revenue declined 2% from the previous year as solid commercial re-roofing was offset by the continuation of soft new construction activity in both residential and commercial end markets, as well as residential repair and remodel. Adjusted EBITDA for the quarter was $349 million, resulting in an adjusted EBITDA margin of 25.9%. a decrease of 170 basis points from the prior year. This decrease was mainly due to lower volumes at CWT and our continued investments in innovation and enhancements to the Carlisle experience. Adjusted EPS was $5.61, down 3% compared to last year. This year-over-year decline was the result of low organic earnings from the previously mentioned market challenges and additional net interest expense partially offset by the benefit of share repurchases and contributions from our strategic acquisitions. Turning to our segment performance on slide 5, CCM reported third-quarter revenue of $1 billion, essentially flat year-over-year, reflecting the current construction environment. Re-roofing growth has remained stable as building owners continue to address aging roof systems that must be replaced. However, headwinds exist as macroeconomic uncertainty has continued to put pressure on new construction as cautious builders delay project starts and the impact from near-term volatility caused by the consolidation of distributors, manufacturers, and contractors in our industry. CCM's adjusted EBITDA was $303 million, down 8% compared to the prior year. Adjusted EBITDA margin for the quarter was 30.2%, which declined 260 basis points primarily due to materials inflation driven by ongoing supply disruptions on ATO out of China and anti-dumping duties on PCPP from China and in addition to our continued investments in innovation and enhancements to the Carlisle experience. Moving to slide six, CWT reported third quarter revenue of $346 million, up 3% year over year with the contributions from recent acquisitions. Organic revenue declined 8% from the prior year due to lower volumes resulting from continued softness in commercial new construction and residential end markets as affordability challenges and higher interest rates continue to negatively impact demand. CWT's adjusted EBITDA was $60 million, a 13% year-over-year decline. CWT's adjusted EBITDA margin decreased 330 basis points from the prior year to 17.4% for the third quarter. This decrease was primarily the result of the impact of volume deleverage. Turning to slide eight, our financial position remains strong with flexibility to execute our superior capital allocation strategies. As of September 30th, we had approximately $1.1 billion of cash and cash equivalents and $1 billion available under our revolving credit facility. During the third quarter, we issued $1 billion of debt. This strategic financing enhances our liquidity and provides additional capacity to pursue growth initiatives while maintaining our net debt to EBITDA ratio of one to two times. As of September 30th, our net debt to EBITDA ratio was 1.4 times, well within our target range. Moving to slide nine, we have generated free cash flow of $620 million in the first nine months of 2025, and we are on track to exceed our free cash flow margin target of 15% for the full year. Our strong, consistent cash generation continues to support our balanced approach to capital deployment. Year to date, we have invested $199 million in the business through $91 million of capital expenditures and $108 million in acquisitions. We also returned over $1.1 billion to shareholders through $1 billion of share repurchases and $135 million of dividends. As Chris previously mentioned, we're now increasing our share buyback target to $1.3 billion for the full year of 2025. Our revised full-year outlook for 2025 is on slide 10. We now expect full-year consolidated revenue to be flat year over year. This more conservative sentiment is based on our third quarter results and the fourth quarter outlook from our recent Carlisle market survey, which includes softer conditions and non-residential construction compared to the prior survey. We expect CCM fourth quarter revenue to be down low single digits as continued strength and re-roofing will be more than offset by new construction and distribution channel headwinds. CWT fourth quarter revenue is expected to increase low single digits, as recent acquisitions are expected to more than offset continued market softness. We anticipate full-year adjusted EBITDA margins to decline approximately 250 basis points compared to 2024, with fourth quarter adjusted EBITDA margins expected to be approximately 21%. primarily due to volume deleverage and strategic investments in the business. Before I close, I'd like to provide perspective on our current performance by highlighting Carlyle's long-term track record, as shown on slide 11. Over the past 17 years, from the 2008 global financial crisis through the pandemic and subsequent supply chain disruptions, we've consistently delivered resilient, strong margins across multiple economic cycles. This steady advancement reinforces our confidence in navigating today's dynamic market. Our business fundamentals remain strong. We are executing well on our key initiatives and maintaining our focus on investing in innovation, enhancing the Carlyle experience, and driving operational excellence through the Carlyle operating system. Our strong balance sheet Superior capital allocation and our proven track record of performing through challenging economic cycles gives us confidence in our ability to achieve our Vision 2030 targets and create substantial value for our shareholders. I'll now hand it back to Chris.
Chris Koch: Thank you, Kevin. In conclusion, Carlyle delivered third quarter results that demonstrate the resilience and strength of our imperative business model. While we continue to navigate the unanticipated volatility and challenges of 2025, our focus remains clearly on our vision 2030 strategy and the factors within our control. Innovation-driven organic growth, operational excellence through the Carlyle operating system, exceptional service through the Carlyle experience, attracting and retaining top talent, and superior capital allocation. As always, Our results of future success would not be possible without the extremely talented and hardworking teams we have here at Carlisle. Their perseverance and commitment to stakeholder success shines exceptionally bright in these challenging times. I'd like to thank you for listening today and for your continued support and interest in Carlisle. That concludes our formal comments. Operator, we are now ready for questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. For the sake of time, we kindly request each person limit themselves to one question to give everyone the opportunity to participate in the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from Tim Walsh from Bear. Please go ahead.
Tim Walsh: Hey, guys. Good afternoon. Thanks for the time. Hey, I'll stick to one question as you asked. But I guess on destocking, could you just kind of frame the impact in the third quarter and what's included in the fourth quarter? And I guess, as you've had discussions with your channel partners, I guess, what's driving the destocking? And as we think about next year, can we kind of enter 2026 with kind of a clean slate from a channel inventory perspective?
Chris Koch: Yeah, Tim, with respect to destocking, I think as we move into Q4, we've always seen this. We're going to have Q4 and Q1. They're our lightest quarters of the year. We always see some. Some reduction in inventory from where we were in the second and third quarters. Obviously, we built inventory towards the end of the first quarter and the second quarter for the season. So when we did our market survey, we actually, for the fourth quarter, we saw kind of normal seasonal patterns, somewhere around 1.5 to 2 months. So really, for us, there was, I would say, that normal destocking. There might have been a little bit more as certain distributors were Work through some things. You know, I think we touched on this M&A transaction. You know, as Carlisle, we've done a lot of M&A and we understand how difficult those first years are. And you're adjusting management teams. You're doing those other things. So there could be some effect there. But, you know, overall, we don't see a major impact on destocking. Could be a positive effect. uh if we go into 2026 and we get some of the macroeconomic issues resolved we get a little bit of a turnaround in new construction both on the resi and non-resi and if we can get this interest rate uh you know situation figured out and get some demand back there it could be a real positive as we head into the q2 26. all right thanks a lot thank you
Operator: And your next question comes from Susan McClary from Golden Saks. Please go ahead.
Susan McClary: Thank you. Good afternoon, everyone.
Chris Koch: Hello, Sue.
Susan McClary: Hi. My first question is talking a bit about the Carlisle experience and how you can leverage that in this kind of an environment to gain share. And with that, can you talk a bit about what you're seeing in terms of the competitive backdrop and how you're leveraging the Carlisle experience to respond to that?
Chris Koch: Right. Well, you know, I think you've got a couple things going on. We've talked about declining, you know, new construction in both areas. I think people want to obviously use their labor more efficiently. We still have a labor shortage. Obviously, there's been even more publicized about the impact on construction, you know, builders, construction markets from some of the immigration actions and things like that. So I think the Carlyle experience that we talk about where it's the right product at the right place at the right time, you're going to show the value here in helping contractors and builders operate more effectively. It also spills out into some of the other attributes, too, with technology. or areas, excuse me, with some of our distributors where it can enable them to respond quicker to jobs, be a better service to their customers as well, maybe perhaps carry lower inventory. I know at the Home Depot, one of the key relationship strengths for Henry when we looked at their acquisition was was the 24-hour response time nationally was a very big competitive advantage, and I think they've leveraged that to basically now if you went into a Home Depot store and you look at the Henry Isle, most of it, you know, there's very little competitive product there in the Henry space. So I think that points to how you can distance yourself from competition with better service. You know, we're investing in more Carlisle experience. One is a program right now that we've enhanced our ability to tell contractors where their shipment is. So they, much like we do on a, on a retail side where we can see when the shipment leaves the, the manufacturer, and then we can see where it is in the warehouse at either UPS or United or the postal service or FedEx. And then we can see when it's going to be delivered. We're building that capability too. And again, to help the, contractor, the roofer, know how to deploy and when to deploy labor and not waste that. If it's not coming in, they can redeploy it to a different job. So some big competitive advantages. You know, we measure our experience with a net promoter score, and when we look at those scores, we continue to see gains from the investments we've made in customer service.
Susan McClary: Okay. That's a great color. And then following up on that, Can you also talk a bit about your willingness to invest in the business given the current environment relative to the robust cash flows that you're seeing? I also noticed that it looks like you took the guide for CapEx down a bit this year. Can you just talk about the interplay between R&D, the investments long-term, and what you're seeing near-term and how that fits in with the cash generation?
Chris Koch: Sure. Well, we're very lucky. to generate a lot of cash flow. I think the billion dollars that we've done in the last three or four years certainly helps us when we have to pay increased dividends, investment capex, M&A, and share buybacks and that. And I think on the R&D side, We're applying dollars right now, but when you think about what the front end on R&D is, at least enhancing what we've been doing now, a lot of the investment is in people, processes. I'll tell you one area where we've put a lot of money is in VOC. So for probably the last nine months to a year, we have a new leader in our organization. A voice of the customer area, Vice President, her name is Julie Hino. She's brought in a new process, and we're spending quite a bit of money proportionally to where we were on really working through customer insights. We've got a process for doing that. It takes time. So it's really a people process kind of investment right now. The goal there, obviously, to develop a consistent pipeline of strong customers you know, concepts that are really ready for concept testing and then to move through our stage gate process. And the goal there is to generate the type of R&D, you know, outcomes that you would want to see that are hundreds of millions of dollars in revenue, not tens. So super pleased with what we're doing there. And on top of that, I think we've talked before about how we're investing in our R&D campus, enhancing our testing ability, enhancing our performance, you know, ability to test projects instead of taking out factory time to put it in a pilot line and things like this. So that investment will increase. That's more mechanical as that. you know, concrete and girders and roofs and things like that. And that'll take more time to build, but that'll show up here in 2026 and beyond. And I think all of that, again, to take out labor from the job and increase energy efficiency. And I think we've got a good pipeline going there, but it's got to be based on that voice of the customer. That's a big component we want to add because we want to make sure they hit the mark when we launch them.
Kevin Zimmel: And then on your CapEx questions, Yeah, the CapEx was still up 30% year over year from 24 to 25, going from 100 million to 130 million, investing in automation, AI in factories would prevent a maintenance. So that investment continues. So the reduction in our outlook is just really we're a little too ambitious on some of the projects that we thought we'd get to in 25 that are sliding into 2026.
Susan McClary: Okay, that's great color. Thank you both, and good luck with the quarter.
Keith Hughes: Thanks, Sue. Thank you.
Operator: Thank you. And your next question comes from David McGregor from Longbow Research. Please go ahead.
Joe Nolan: Hey, good afternoon. This is Joe Nolan on for David. I just wanted to ask within CCM if you could talk about price versus volume, and if you could just give any detail on price cost in the quarter.
Kevin Zimmel: In a quarter, pricing was flat for us in the CCM segment. So all the offset would have been in volume, which was also flat. So both the volume and pricing flat in a quarter. On the raw materials, as I talked about, on the ATO and PCPP, those had a negative impact of $12 million, which was right in line with what we expected for Q3 on the raw materials.
Joe Nolan: Okay, great. And if you could just give an update on how to think about price cost in the 4Q, if there's anything changing there.
Kevin Zimmel: Yeah, really very similar to what the Q3 was. We're expecting price to be flat for CCM in Q4. Raw materials slightly lower than that, just because that's the fourth quarter is lower than third quarter on a volume side. So proportionately, that's what you'll see on the raw materials side. Slide for CCM.
Joe Nolan: Got it. All right. Thanks. I'll pass it on. Thank you.
Operator: Thank you. And your next question comes from from Loop Capital. Please go ahead.
Unnamed Analyst: Oh, hi. Thanks. I'm just following up on that. I was worried if you could provide the outlook for EBITDA margins in the fourth quarter by segment.
Kevin Zimmel: Yeah. So, as we look at CCM, You start with the volume. We're looking for volume to be down about a little single digits. Reroofing is still strong, but that being more than offset by the weaker new construction, as well as some of the lingering distribution channel volatility that we talked about. And then we have pricing, as I said, flat, some of the negative raw materials. That gets us down and continue to invest in what Chris was talking about on the Carlyle experience as well as innovation. That gets us to around 26% EBITDA margin for CCM in the fourth quarter. And then on the CWT side, we have revenues down low single, or I'm sorry, up low single digits overall. We have organic down mid single digits overall. And then, obviously, the acquisition is having a positive impact there to get us up low single digits. Pricing on CWT side down slightly less than 1%. No real impact from raw materials in the quarter. And that gets us the margins down 250 to 300 basis points compared to the prior year as a result of that lower organic volumes.
Unnamed Analyst: That's helpful. And I just wanted to follow us on the destocking piece. Can you speak to your market share in CCM, how you're viewing that relative to the industry and what the outlook is, just given the distributor dislocation of the chocolate right now?
Chris Koch: Yeah, Gary, thanks. Pretty much, as we said, the underlying situation in CCM is pretty much the same. I don't see any long-term market share changes that have occurred right now. If we look at what happened in Q3, and I touched on the things that can occur when you do a transaction and you also have significant management turnover at really all levels, we did lose some share in certain areas because of really just being tied to that distributor channel partner. And so very hard for us to, to change that because in at least one of those situations, we can confirm that we don't really have any other, uh, vehicle to get that to market as directed. They are our choice. So that old adage of when they sneeze, we catch a cold. Uh, that's what happened there. But as I said, and as we believe, uh, this is temporary, it happens. Uh, we would have expected, uh, some, you know, turbulence after, uh, After a big deal like that, it may continue in the third or fourth quarter. But overall, we think they're a great distribution partner. We think it will all get sorted out, and we'll be right back in the game where we should be. So a little minor effect, maybe Q3, Q4, but long-term, no real changes.
Unnamed Analyst: Okay. Thanks for your thoughts. I appreciate it, and best of luck. You bet. Thanks, Gary.
Operator: Thank you. Just as a reminder, we kindly ask to take the questions to one question per person. And your next question comes from Brian Blair from Oppenheimer. Please go ahead.
Brian Blair: Thanks. Good afternoon, guys. Hey, Brian. If the combination of channel dynamics and competitive influence drives a bit more of a direct model, a direct sale model going forward in the industry, How do you see your team's positioning there? What are the positives and negatives of that occurrence?
Chris Koch: Well, Brian, I think it already has happened. I think one of our competitors publicly stated that they're already doing something like 30% of their business direct, and we would estimate that many of the other competitors are there. So I think that dynamic's already in place. For Carlisle, frankly, we've lagged it. When you look over the years, Um, as recently as probably five years ago, we were probably doing somewhere between three and 5% direct. So it wasn't. Our preference had been to work with our distribution partners. They've done a great job for us. We still feel that's the optimal way to do it. But obviously, as our competitors have taken a more direct approach, we have too. So over the years, our team has already reacted. They've done a lot more work to connect directly to the end user. You can see in the Carlisle experience, we have projects where contractors can directly look at shipments, quoting, things like that. So we can provide that too. We... We ship, as a reminder, you know, 70% of our product direct to the job site. So we're already interfacing directly, you know, on that shipment from factory to job site. So that's fully capable. We can do that. But again, our preference has been to sell through distribution and these value distribution partners. So we're probably somewhere in that mid-teens direct right now. So, you know, about half of what our competitors are doing. And I think We'd like to continue to work with our distributor partners. But as you said, things are changing, and we can step up on that model as well. So it's one of the things I always liked about Carlisle. We have scale. We have a factory presence. We're housing great teams, great sales teams, 600-plus reps across the country. So I think from a flexibility standpoint – Wherever the market goes, we'll be able to do that. I mean, we're going to follow the lead of the contractor. However they want to buy, we're going to be able to do that for them.
Brian Blair: That makes sense. Thanks for the call. You bet. Thank you.
Operator: Thank you. And your next question comes from Tomo Sano from J.P. Morgan. Please go ahead.
Tomo Sano: Hello, everyone. Hello.
Brian Blair: Hello.
Tomo Sano: Thank you. I'd like to ask about the pricing. You mentioned that for Q4, CCM is expected to be flat-ish, while CWC may decline by about 1%. So looking ahead to 2026, would you expect new products, innovation products, and high-end product launch or other factors to support price increases? It's, of course, like depending on the demand and volume side, but could you touch about that outlook, please?
Chris Koch: Yeah, you know, one of the things that we would expect out of new products and enhanced customer services that we could extract value from that. That's why we do it, Thomas. I mean, that's the reason is we are trying to increase the content per square foot in terms of, you know, pricing and value. And we will price to value. We've talked about that. So, As we look to 2026, certainly if the volumes can return to a healthy level, I think we can expect to see us being paid for those advantages. Now, of course, we have to demonstrate the value to the building owner, to the contractor, to the architect. We have to communicate that the product enhancements we've made or our Carlyle experience or operational excellence has value. But I think we've done a good job of that. So the thing for us is really volume. And if you look at what we've always said sets up for a good year is that there is some level of new construction, you know, half a percent, one percent, but we can't have a declining new construction market. Second, We want to see rational capacity utilization, which we've seen. I think the market has added factories in a very rational fashion, so that's good. We have labor shortages still, and we think that's important to drive some of this pricing. And then lastly, this increasing re-roofing demand continues to be an underlying positive that we can rely on. So I think if those things are in place, and the only one that's not in place now really is new construction being positive. So if that turns around in 2026, I would expect to see some nice upward momentum on pricing.
Tomo Sano: Thank you, Chris.
Chris Koch: You're welcome.
Operator: Thank you. And your last question comes from Keith Hughes from Trust. Please go ahead.
Keith Hughes: Yeah, thank you. This disruption with distribution, was this something about inventory levels or price or what was the nature of it? And is it fully resolved that we won't feel it again on the first quarter in your results?
Chris Koch: I don't really know exactly what it was in those situations. I mean, I think each location probably was affected differently, you know, and integrations going on, like I said, management team changes, things like that. So, you know, across the country could be a variety of issues. You just know that in those situations we didn't capture the sale. So I think, I would expect because of the group and their expertise and their past experience that they'll get this resolved rather quickly. So we've got it, you know, going into Q4 and having some effects still. But my guess is they'll get it resolved and that 26 will be a year where they're going to want to come out and be fully intact and operational.
Keith Hughes: Okay. And just one question on pricing and security specifically. There's a lot of stuff going on with MDI and tariffs and anti-dumping and all that kind of stuff. Are you seeing pricing go up there or expected to go up near term with some of these cost pushes?
Chris Koch: You know, when we look at the raw material trends, and I, and Mehul can comment on this in maybe more detail, but when I look at the trends, you know, it's been kind of a mixed bag. Certainly MDI in 25 has seen an upward trend on price. But then you've got polyol that's seeing maybe a lower trend. And then we go to EPDM polymers, and they're on an increase. So in general, when I look across our raw material basket, it's probably a little bit more biased towards increases as we go into Q4. Okay. Does anyone want to add anything to that?
Mehul Patel: Yeah, Keith, just to add a little bit in terms of MDI and the anti-dumping duties that have been added. So while MDI prices have gone up to the first three quarters and it's up year over year, I would say quarter over quarter now it's still flat. So we're not seeing further increases. Just to add a little bit more on your CWT pricing question, Kevin noted that pricing is down less than 1% for CWT. So we're seeing some pricing pressure on select categories, mainly underlayments, which plays in the residential roofing segment, where there's some softer demand, as well as on the insulation categories. But it's a very small amount of price. Okay. Thank you. You're welcome.
Operator: Thank you. There are no further questions at this time. I'll hand the call over to Mr. Chris Koch for closing remarks. Please go ahead.
Chris Koch: All right. Thanks, Kelsey. Hey, this concludes our third quarter earnings call. I want to appreciate everyone's time. We know you're busy. Thanks for your participation. Thanks for the great questions. And look forward to speaking with you at our next earnings call.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect. Have a great day.
