• Record second-quarter net sales of $1.79 billion, up slightly from the prior year
• Record second-quarter net income was $145.5 million, record diluted EPS was $1.13, and record EBIT was $220.9 million
• Second-quarter adjusted diluted EPS of $1.22 increased 10.9% over prior year and adjusted EBIT increased 10.4% to $236.9 million, both records
• All-time record quarterly cash provided by operating activities of $408.6 million
• First-half fiscal 2024 cash provided by operating activities of $767.8 million already larger than previous 12-month fiscal year record
• Fiscal 2024 third-quarter outlook calls for flat sales and adjusted EBIT growth of 25% to 35%
• Fiscal full-year 2024 outlook calls for revenue growth of low-single digits and adjusted EBIT growth of low-double digits to mid-teens

RPM International Inc. (NYSE: RPM), a world leader in specialty coatings, sealants and building materials, today reported record financial results for its fiscal 2024 second quarter ended November 30, 2023.

“For eight consecutive quarters, we have generated record sales and adjusted EBIT, and we are making good progress toward achieving our MAP 2025 profitability goals by becoming a more efficient and collaborative organization. At our investor day last year, we discussed two other key components of MAP 2025 – improving cash flow conversion and investing to accelerate organic growth. We have made great progress with cash flow, as our $767.8 million cash from operating activities through the first six months of fiscal 2024 has already exceeded our previous 12-month fiscal year record. Our organic growth investments are yielding successes, particularly in high-performance buildings and turnkey flooring systems, where we are gaining share,” said Frank C. Sullivan, RPM chairman and CEO.

“Our Construction Products Group and Performance Coatings Group, the segments focused on coatings and high-performance buildings, led growth in the second quarter. They benefited from their focus on maintenance and repair, as well as their positioning to sell highly engineered solutions into growing end markets. Demand in DIY and specialty OEM markets remained weak; however, we overcame these challenges by successfully executing MAP 2025 initiatives to expand gross margins by 320 basis points and generate double-digit adjusted EBIT growth.”

Second-Quarter 2024 Consolidated Results

Consolidated

Fiscal 2024 sales were a second-quarter record and were in addition to strong growth in the prior-year period when sales increased 9.3%. Pricing was positive in all segments as they catch up with cost inflation. Volume growth was strongest in businesses that were positioned to serve solid demand for infrastructure, reshoring and high-performance building projects with engineered solutions, which was more than offset by lower DIY consumer takeaway at retail stores and weak demand from specialty OEM end markets.

Geographically, sales growth was strongest in markets outside the U.S. A new management team and focused sales strategy in Europe contributed to 8.9% growth, and Africa/Middle East and Asia/Pacific benefited from improved coordination under PCG management that resulted in 13.0% and 6.4% sales growth, respectively.

Sales included a 0.3% organic decline, a 0.2% decline from divestitures net of acquisitions, and 0.5% growth from foreign currency translation.

Selling, general and administrative expenses increased due to incentives to sell higher-margin products and services; investments to generate long-term growth; and inflation in compensation, benefits and healthcare expenses. These increases were partially offset by expense reduction actions taken in the fourth quarter of fiscal 2023.

Fiscal 2024 second-quarter adjusted EBIT was a record and in addition to strong growth in the prior-year period when adjusted EBIT increased 36.4%. This growth was driven by gross margin expansion of 320 basis points, aided by MAP 2025 initiatives, including the commodity cycle, a positive mix from shifting toward higher margin products and services, and improved fixed-cost leverage at businesses with volume growth.

Second-Quarter 2024 Segment Sales and Earnings

Construction Products Group

CPG achieved record second-quarter sales with strength in concrete admixtures and repair products as a result of increased demand for engineered solutions serving infrastructure and reshoring-related projects, as well as market share gains. Businesses serving high-performance building construction and renovation also performed well. Demand in markets outside the U.S. was strong and was driven by infrastructure-related demand in Latin America and a more focused sales strategy in Europe.

Sales included 6.1% organic growth, 0.6% growth from acquisitions, and 1.4% growth from foreign currency translation.

Record second-quarter adjusted EBIT was driven by the positive impact of MAP 2025 initiatives, favorable mix, and improved fixed-cost leverage from volume growth. Variable compensation increased as a result of improved financial performance and was partially offset by expense reduction actions implemented at the end of fiscal 2023.

Performance Coatings Group

PCG generated record second-quarter sales, which were in addition to strong results in the prior-year period, driven by growth in engineered turnkey flooring systems serving reshoring capital projects and market share gains. Strong growth in Asia/Pacific and Africa/Middle East, which were all recently aligned under PCG, also contributed to the record sales.

Sales included 5.6% organic growth, a 0.5% decline from divestitures net of acquisitions, and no impact from foreign currency translation.

All-time record adjusted EBIT was driven by sales growth, favorable mix and improved fixed-cost leverage that was enhanced by MAP 2025 initiatives. The adjusted EBIT growth was achieved in addition to strong results in the prior-year period.

Specialty Products Group

SPG’s second-quarter sales decline was driven by weak demand in specialty OEM end markets, particularly those with exposure to residential housing. Sales were also negatively impacted by the divestiture of the non-core furniture warranty business in the third quarter of fiscal 2023 and challenging comparisons in the prior-year period when the disaster restoration business had strong results in response to Hurricane Ian. Higher selling prices partially offset this sales decline.

Sales included a 14.6% organic decline, a 2.7% reduction from divestitures, and 0.7% growth from foreign currency translation.

Adjusted EBIT was negatively impacted by the sales decline and unfavorable fixed-cost leverage. The divestiture of the non-core furniture warranty business also contributed to the adjusted EBIT decline. Investments in long-term growth initiatives weighed on adjusted EBIT margins and were partially offset by expense-reduction actions in the fourth quarter of fiscal 2023.

Adjusted EBIT excluded a $4.0 million expense related to an adverse legal ruling for a divested business.

Consumer Group

The Consumer Group’s second-quarter sales decline was driven by reduced DIY takeaway at retail stores as housing turnover hit multi-year lows and consumers focused their spending on travel and entertainment, as well as certain retailers destocking inventories. These pressures were partially offset by market share gains, strength in international markets, and higher pricing to catch up with inflation. The Consumer Group faced challenging comparisons to the prior-year period when sales grew 15.3%.

Sales included a 5.1% organic decline, no impact from acquisitions, and foreign currency translation headwinds of 0.1%.

Record second-quarter adjusted EBIT was driven by gross margin expansion enabled by MAP 2025 initiatives and strength in international markets. This growth was in addition to strong prior-year results when adjusted EBIT increased 180.3%.

Cash Flow and Financial Position

During the first six months of fiscal 2024:

• Cash provided by operating activities was $767.8 million, which exceeded the previous 12-month fiscal year record, compared to $190.9 million during the prior-year period, and included an all-time quarterly record of $408.6 million during the second quarter of fiscal 2024. The increase was driven by increased profitability and improved working capital management, including MAP 2025 initiatives.
• Capital expenditures were $89.3 million compared to $113.5 million during the prior-year period, driven by the timing of investments, including those related to MAP 2025 initiatives, which are expected to accelerate in the second half of fiscal 2024.
• The company returned $138.3 million to stockholders through cash dividends and share repurchases and achieved its 50^th consecutive year of dividend increases.

As of November 30, 2023:

• Total debt was $2.25 billion compared to $2.84 billion a year ago, with the $592.4 million reduction driven by improved cash flow being used to repay debt.
• Total liquidity, including cash and committed revolving credit facilities, was $1.51 billion, compared to $880.0 million a year ago.

Business Outlook

“We expect business conditions in the third quarter to generally be similar to the second quarter, with strength in our CPG and PCG segments, international markets, and market share gains offsetting continued weakness in DIY and specialty OEM demand. Adjusted EBIT growth is expected to accelerate, driven by less challenging prior-year comparisons and MAP 2025 benefits, which should more than offset lower volumes in certain businesses and investments we are making to accelerate future growth and efficiencies,” Sullivan added. “For the remainder of the year, we are leveraging our focus on repair and maintenance; our strong position serving demand for infrastructure, high performance buildings and reshoring projects; and MAP 2025 to deliver another year of record sales and adjusted EBIT.”

The company expects the following in the fiscal 2024 third quarter:

• Consolidated sales to be flat compared to prior-year record results.
• CPG sales to increase in the mid-single-digit percentage range compared to prior-year record results.
• PCG sales to increase in the mid-single-digit percentage range compared to prior-year record results.
• SPG sales to decrease in the mid-teen percentage range compared to prior-year record results.
• Consumer Group sales to decrease in the low-single-digit percentage range compared to prior-year record results.
• Consolidated adjusted EBIT to increase 25% to 35% compared to prior-year record results.

The company expects the following in the full-year fiscal 2024:

• Consolidated sales to increase in the low-single-digit percentage range compared to prior-year record results. The previous outlook was for mid-single-digit percentage growth.
• Consolidated adjusted EBIT to increase in the low-double-digit to mid-teen percentage range compared to prior-year record results. This outlook is unchanged from the prior outlook.

Earnings Webcast and Conference Call Information

Management will host a conference call to discuss these results beginning at 10:00 a.m. EST today. The call can be accessed via webcast at www.RPMinc.com/Investors/Presentations-Webcasts or by dialing 1-844-481-2915 or 1-412-317-0708 for international callers and asking to join the RPM International call. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. The call, which will last approximately one hour, will be open to the public, but only financial analysts will be permitted to ask questions. The media and all other participants will be in a listen-only mode.

For those unable to listen to the live call, a replay will be available from January 4, 2024, until January 11, 2024. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international callers. The access code is 4125009. The call also will be available for replay and as a written transcript via the RPM website at www.RPMinc.com.

About RPM

RPM International Inc. owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services. The company operates across four reportable segments: consumer, construction products, performance coatings and specialty products. RPM has a diverse portfolio of market-leading brands, including Rust-Oleum, DAP, Zinsser, Varathane, DayGlo, Legend Brands, Stonhard, Carboline, Tremco and Dryvit. From homes and workplaces, to infrastructure and precious landmarks, RPM’s brands are trusted by consumers and professionals alike to help build a better world. The company employs approximately 17,300 individuals worldwide. Visit www.RPMinc.com to learn more.

For more information, contact Matt Schlarb, Senior Director of Investor Relations, at 330-220-6064 or mschlarb@rpminc.com.

Use of Non-GAAP Financial Information

To supplement the financial information presented in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”) in this earnings release, we use EBIT, adjusted EBIT and adjusted earnings per share, which are all non-GAAP financial measures. EBIT is defined as earnings (loss) before interest and taxes, with adjusted EBIT and adjusted earnings per share provided for the purpose of adjusting for one-off items impacting revenues and/or expenses that are not considered by management to be indicative of ongoing operations. We evaluate the profit performance of our segments based on income before income taxes, but also look to EBIT as a performance evaluation measure because interest income (expense), net is essentially related to corporate functions, as opposed to segment operations. For that reason, we believe EBIT is also useful to investors as a metric in their investment decisions. EBIT should not be considered an alternative to, or more meaningful than, income before income taxes as determined in accordance with GAAP, since EBIT omits the impact of interest and investment income or expense in determining operating performance, which represent items necessary to our continued operations, given our level of indebtedness. Nonetheless, EBIT is a key measure expected by and useful to our fixed income investors, rating agencies and the banking community all of whom believe, and we concur, that this measure is critical to the capital markets’ analysis of our segments’ core operating performance. We also evaluate EBIT because it is clear that movements in EBIT impact our ability to attract financing. Our underwriters and bankers consistently require inclusion of this measure in offering memoranda in conjunction with any debt underwriting or bank financing. EBIT may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results. See the financial statement section of this earnings release for a reconciliation of EBIT and adjusted EBIT to income before income taxes, and adjusted earnings per share to earnings per share. We have not provided a reconciliation of our third-quarter fiscal 2024 or full-year fiscal 2024 adjusted EBIT guidance because material terms that impact such measure are not in our control and/or cannot be reasonably predicted, and therefore a reconciliation of such measure is not available without unreasonable effort.

Forward-Looking Statements

This press release contains “forward-looking statements” relating to our business. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors (including those specified below), which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) global markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital, and the viability of banks and other financial institutions; (b) the prices, supply and availability of raw materials, including assorted pigments, resins, solvents, and other natural gas- and oil-based materials; packaging, including plastic and metal containers; and transportation services, including fuel surcharges; (c) continued growth in demand for our products; (d) legal, environmental and litigation risks inherent in our businesses and risks related to the adequacy of our insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon our foreign operations; (g) the effect of non-currency risks of investing in and conducting operations in foreign countries, including those relating to domestic and international political, social, economic and regulatory factors; (h) risks and uncertainties associated with our ongoing acquisition and divestiture activities; (i) the timing of and the realization of anticipated cost savings from restructuring initiatives and the ability to identify additional cost savings opportunities; (j) risks related to the adequacy of our contingent liability reserves; (k) risks relating to a public health crisis similar to the Covid pandemic; (l) risks related to acts of war similar to the Russian invasion of Ukraine; (m) risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability-related voluntary goals or regulatory requirements; (n) risks related to our use of technology, artificial intelligence, data breaches and data privacy violations; and (o) other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in our Form 10-K for the year ended May 31, 2023, as the same may be updated from time to time. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the filing date of this release.

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