RPM INTL INC earnings calls

call start / greeting

Q (Mizuho): The operator opened the Q&A and the analyst greeted management.

A: Management acknowledged the greeting.

education and healthcare outlook

Q (John Roberts · Mizuho): Will education and healthcare markets rebound like CPG? Are you offsetting headwinds there and are provisions increasing for customer bankruptcies?

A: They expect a rebound in both school and healthcare activity, but roofing work delayed may not show until spring next year. They said provisions are appropriate and noted a prior bankruptcy charge and a write-off for a defense contractor, with potential recovery opportunities.

"But given the nature of our Tremco roofing business in particular where it is most acute, If we do not see it this fall, it really will not show up in terms of activity until the spring of next year." — Frank C. Sullivan (CEO·CHAIR)

transition to next caller

Q (BMO): The operator introduced the next analyst from BMO and greetings were exchanged.

A: Management exchanged greetings with the next analyst.

"Good morning, Frank." — Frank C. Sullivan (CEO·CHAIR)

CPG weakness details

Q (John McNulty · BMO): How much of CPG weakness was due to education/healthcare vs polyol raw material shortages, and are shortages resolved? Also, what drove consumer organic sales lift—volume or shelf wins?

A: Polyol shortages hurt Construction Products Group but production shortages are behind them while inventory catch-up remains in Q2. Consumer improvement came from share gains, new placements, and category wins (pink stuff, abrasives, Ready Seal, primers) despite weak retail foot traffic.

next caller intro

Q (Deutsche Bank): Operator introduced Deutsche Bank; brief greeting.

A: Management greeted the caller.

full-year guide change reasons

Q (David Begleiter · Deutsche Bank): You lowered full-year guidance by about $25 million at midpoint; what components caused the reduction? Also, will pricing lag costs in Q2?

A: They cited assumptions about inflation remaining elevated, timing of Construction Products Group recovery (Tremco roofing), higher fuel and freight costs, and instituted freight surcharges and price increases. They covered dollar-for-dollar inflation in Q1 and expect modestly better in Q2, noting FIFO accounting causes reporting lag but expecting margin improvement over time.

"So it is a little bit of a swag in the sense I think we have some good visibility into Q2." — Frank C. Sullivan (CEO·CHAIR)

next caller intro

Q (BofA): Operator introduced Bank of America; greetings were exchanged.

A: Management greeted the caller.

warranty charge details

Q (Matthew · BofA): Can you explain the warranty charge and whether more charges are expected?

A: The charge relates to a specific Construction Products Group business unit in Europe and likely closure of that unit; details will be given at investor day. They are reviewing underperforming product lines and business units and do not anticipate further warranty issues there.

"that is related to a specific business unit of the Construction Products Group in Europe." — Frank C. Sullivan (CEO·CHAIR)

consumer growth and Europe

Q (Citi): What drove consumer growth in Q1—new products, share wins? And what happened in Europe?

A: European sales growth mostly came from acquisitions and internal profitability actions like distribution consolidation. Consumer growth came from shelf space and market share gains, new products, and wins across channels including grocery and digital, which offset soft economic backdrop.

"European sales growth is primarily driven by acquisition activity." — Frank C. Sullivan (CEO·CHAIR)

next caller intro

Q (Baird): Operator introduced Baird; greeting exchanged.

A: Management greeted the caller.

"Good morning, Frank." — Frank C. Sullivan (CEO·CHAIR)

demand change from rates/oil

Q (Ghansham Panjabi · Baird): Have higher rates and oil caused changes in underlying demand or customer conversations? Also, for consumer growth guidance differences, are shelf-space and new products the drivers?

A: Long-term they see strength in PCG and Euclid; school and hospital slowdowns are viewed as temporary tied to local/state funding and expected to free up after the election, with WTI backlog rebuilding. Consumer Q2 growth guidance reflects new product and shelf-space wins despite weak consumer takeaway and housing headwinds.

price vs volume and buybacks

Q (Fermium): What was price vs volume company-wide and in consumer? And will buyback pace continue given recent large buybacks?

A: Consolidated price was up about 2% and unit volume rose low to mid single digits in consumer and PCG; Construction Products Group was modestly negative. The board authorized a larger share repurchase and they expect buybacks to continue at current or higher levels.

"So typically, you know, they have not provided price on a segment basis." — Russell L. Gordon

next caller intro

Q (UBS): Operator introduced UBS; greetings exchanged.

A: Management greeted the caller.

"Hey. Hey, good morning." — Frank C. Sullivan (CEO·CHAIR)

pricing cadence and CPG margins

Q (Josh Spector · UBS): Are you having trouble getting pricing in segments and how will pricing ramp? Specifically, is pricing weak in CPG and will margins improve after Q1?

A: They expect Q2 pricing around 2.5% to 3.5% and are adding freight surcharges; consumer and many CPG increases took effect end of Q1/start of Q2 and new increases are being initiated in Q2 across other groups. CPG faced absorption and transition costs (Toronto to Georgia) but they expect to cover inflation and regain margin through the year.

"So I would expect price in Q2 to be somewhere in the 2.5% to 3.5% range." — Frank C. Sullivan (CEO·CHAIR)

next caller intro

Q (Wells Fargo): Operator introduced Wells Fargo; greetings exchanged.

A: Management greeted the caller.

raw material assumptions and consumer pricing

Q (Abigail · Wells Fargo): What assumption do you make for Middle East conflict resolution and raw material costs? Also, does consumer trading down affect ability to push price increases?

A: They are not assuming de-escalation soon; they expect inflation to decelerate later but are not relying on immediate Middle East stability and note past periods of low inflation. On pricing, they are selective: some premium products (example 5-in-1 nozzle) can command higher prices where customers value them, while being mindful of price elasticity elsewhere.

next caller intro

Q (Seaport Research Partners): Operator introduced Seaport; greeting exchanged.

A: Management greeted the caller.

emerging markets and M&A

Q (Michael Harrison · Seaport Research Partners): What is driving emerging market momentum and does that make M&A there more attractive? Also, when will manufacturing inefficiencies turn into benefits?

A: They have reorganized a regional leadership and platform approach that increased Southern Hemisphere sales share from slightly less than 5% to 8% and sustained high double-digit growth, improving cash flow and margins. This gives them confidence to pursue small-to-medium acquisitions in those markets; they expect more successful, not large, additions and better integration capability than years ago.

"As recently as 5 years ago, the Southern Hemisphere developing world was slightly less than 5% of our consolidated sales." — Frank C. Sullivan (CEO·CHAIR)

leverage, buybacks, M&A capacity

Q (KeyBanc): Given higher interest rates, has your view on leverage or buybacks/M&A changed? Do you see stressed competitors making deals more attractive?

A: They aim to keep investment grade; they have about $1 billion liquidity and could use it and more while staying investment grade, with current debt/EBITDA well below 2.0. They see M&A opportunities at lower multiples, with PE less competitive now, and have dry powder for opportunistic buybacks.

"We have always operated with a goal of maintaining an investment grade rating." — Frank C. Sullivan (CEO·CHAIR)

next caller intro

Q (Vertical): Operator introduced Vertical Research; greeting exchanged.

A: Management greeted the caller.

"Good morning, Frank." — Frank C. Sullivan (CEO·CHAIR)

Sept month performance and segment differences

Q (Kevin McCarthy · Vertical): Was September better or worse than expected? Why did Performance Coatings outperform Construction Products?

A: Nothing material changed in outlook; they expect strong PCG, stable consumer gains, and sequentially better but still weak construction products. Performance Coatings is driven by industrial capital spending, onshoring, data center activity, and benefits from the platform approach, while Construction Products saw temporary slowdown after strong prior years.

"I think there is 2 primary reasons." — Frank C. Sullivan (CEO·CHAIR)

next caller intro

Q (RBC): Operator introduced RBC; greeting exchanged.

A: Management greeted the caller.

"Good morning, Frank." — Frank C. Sullivan (CEO·CHAIR)

longer-term margin targets

Q (Arun Viswanathan · RBC): How will raw material pressure evolve and can you pass costs by segment? Is the 16% EBIT / MAP actions still reachable longer term?

A: They expect to continue passing through inflation and gain margin as the year progresses, recovering 100% of margin loss and possibly more; freight surcharges are dollar-for-dollar and will normalize when freight falls. Previously stated gross margin goal of 42% remains in sight after the inflation cycle, and they will give detailed margin and cash flow plans at the November 9 investor day.

"I am highly confident as we get through this inflation cycle, we will meet or beat that 42% goal." — Frank C. Sullivan (CEO·CHAIR)

cash flow outlook

Q (JPMorgan): You grew cash flow and EBITDA; will cash flow from operations grow in 2027 versus 2026?

A: Yes, they expect cash flow from operations to grow driven by working capital improvement and continued earnings momentum. More detail will be provided at the November 9 investor day.

"And it will be a result of continued improvement in working capital, which we are very focused on." — Frank C. Sullivan (CEO·CHAIR)

medical costs and SG&A trend

Q (Jeff Zekauskas · JPMorgan): Can you quantify expected decreases in medical costs and is SG&A expected to be flat year over year?

A: They said corporate expense will improve year over year as large healthcare cost increases from last year are flattening; they did not provide exact numbers on the call but offered follow-up. Overall corporate other expense should be equal to or slightly down each quarter and SG&A should reflect that flattening trend.

"We had huge increases last year in healthcare expense, which we talked about quarter by quarter." — Frank C. Sullivan (CEO·CHAIR)

healthcare & education backlog detail

Q (Morgan Stanley): Is the healthcare and education slowdown due to a few projects, many projects, certain states, or delayed backlog and municipal funding?

A: It is a mix of all those factors: specific state-level delayed funding for projects, some large projects not repeating, and timing mismatches that push work into spring. They know of specific state projects that were delayed and are rebuilding WTI backlog.

"The simple answer is yes to all of the above." — Frank C. Sullivan (CEO·CHAIR)

PCG growth repeatability and gross margin cadence

Q (Evercore): Is PCG growth repeatable into Q2 and H2? And can gross margins turn positive year over year in Q3 as inflation eases?

A: PCG and CPG face tougher comps each quarter but the Q1 dynamics are continuing into Q2, so solid PCG results are expected including Southern Hemisphere growth. They expect margins to improve through the year as inflation declines, recover lost margin and possibly exceed prior gross margin goals, with 42% gross margin back in their line of sight after the cycle.

"I think we will start to see some improvement in margin as we get through the year." — Frank C. Sullivan (CEO·CHAIR)