Christian Koch : Yes. Kevin will hit you with a couple of other ones, but I was really pleased. One thing I’d like to note is — and I give a lot of credit to Frank here and the team coming in and Mehul is part of that, coming right into Carlisle from Henry and getting all the synergies we need. And I think there’s still more to be taken out there on synergies. That will be one driver. And then looking at the business, and Frank did a really nice job of quickly acting to, we exited a business, a rubber business. We consolidated a few factories and the teams jumped on board with COS. Now COS is one where I see a lot of potential, because the COS, we’ve done a lot with plans and assessments, and we’re just starting to get into spending that capital.
And I think there’s a long runway there with COS. So that’s a positive. But I think you’ll continue to see streamlining of the operations, better operations themselves, operating efficiency through COS. And then Kevin has got a couple of other things he’ll touch on.
Kevin Zdimal : Yes, Chris, at the key highlights there, but the other one was selling initiatives. They’re doing a good job on that piece of it. Obviously, you don’t see at all with what’s happening in resi right now, but that’s been a positive. And yes, we expect continued improvement into 2024 and into 2025 as well from that number. So year-over-year improvement in each of the upcoming years.
Christian Koch : And we’ve got a little bit of jumping back and forth. We got a little — we’ve got some new products too that are very exciting that Frank has. And Henry won the — they were supplier of the year at Home Depot recently. And I think that’s another channel that is new to all of us here at Carlisle, and I know probably new to you, too, but Frank is doing a good job of finding ways to create opportunities with the Carlisle products and bring them potentially into that channel as well as look at potential acquisitions that could help us strengthen our position there. So overall, we’ve got a lot of nice kind of vectors going on here to drive to that aspirational margin of, let’s say, 30, 30 plus.
Operator: And your next question comes from the line of Saree Boroditsky from Jefferies.
Saree Boroditsky : Obviously, a large portion of CCM is driven by reroofing demand. Can you just talk about the appetite in the ability of building owners to push out jobs if they decide to patch a roof. And if they do patch it, how much time does that buy them?
Christian Koch : Well, we’ve got Mehul here who, and by the way Saree, good afternoon, we have Mehul who’s the Henry expert on patching and roof coatings. And I think he can touch on that. I think one of the things for me that’s always been a constraining item is the amount of routes that we put on that are under warranty. And I know Henry has a warranty related to their roof coatings. But I think when we talk about roof warranties, the thing that to me in terms of how far can you push out is always how far do you want to risk that warranty. And generally, our warranties are 20 years or so, people start looking at getting these roofs, reroofed at the 17, 18, 19 year time frame. And obviously, with the labor constraints we have today that can be extended.
But I think you can push it out a little bit, but ultimately, it’s really about the value of what’s underneath in your business. You don’t want leaks in data centers. You don’t want leaks in hospitals or education facilities and those kind of things. And so I think that pushing it out creates a really — it’s a pretty big risk profile for people to do it. But when they do it, and I think it’s again probably a small percentage in most cases. Now with tougher economic times, remember, there will be more. But hopefully, they’ll use Henry coatings. And Mehul, maybe you want to talk about how long those Henry coatings can sustain the life of a roof.
Mehul Patel : Yes, absolutely. So Saree, on the Henry side, they offer several roof coating applications. They have roof mastics, which they could do in the short term, by themselves 1 or 2 seasons to restore an existing roof that’s not in horrible shape, that’s not damage you’re leaking. There are silicon roof coating applications that could extend it further maybe 5 years or so. But a lot of these roofs that are getting completely replaced, they’re probably past that cycle and you’re going to require 1 or 2 years of that temporary roof patching solution that Henry offers.
Saree Boroditsky : Understood. And then just to make things clear in the guidance, I think in your 4Q 2023 outlook for adjusted EBITDA up 200 basis points. What’s the base case for that? Is that with CIT and CFT? Without? Can you just help us understand where we’re coming from with the up to 200 basis points?
Kevin Zdimal : Yes, that’s we’re taking CIT out of both the ’22 and ’23 number.
Saree Boroditsky : Got it. Okay. That’s helpful. And then I guess last one. Can you talk about the competitive environment into next year, just given these potential market headwinds that you’ve discussed? And maybe think about a framework for how we think about price/cost if we do see lower market end market demand given some of your commentaries on oil prices.
Christian Koch : Well, I think you’ve seen a pretty competitive market this year. I think we have to complement the teams that we’re competing against. I mean, as we said when Elevate was for sale at that time Firestone, and Holcim purchased them, we get good operators that would come in, and I think they’ve lived up to that. And certainly, their acquisition of Malarkey and Duro-Last and these things, they’ve proven they know how to run a good playbook there. GAF is always a good competitor, great quality company. And so I think we won’t see any real changes in the competition. It’s tough. It’s been tough. And everybody will continue to invest in R&D, I’m sure and continue to invest in their channel and in factories. So I don’t really see much change there.
On the price/cost, I think — as I said, I think we’ve had pretty good stability there. We may see some opportunity for some price action if raws were to take a dramatic increase due to what we’re seeing in the Middle East or some other disruption. But I don’t really see that right now. So I think all in all, to me, it’s going to be a little bit of more in the same. And I just reserve the right there that we’re here in October. And we’ll have more color on that as we get closer to December, and we get through things. So we’ll be able to give you more of that.
