RPM Reports Fiscal 2025 Third-Quarter Results

• Third-quarter sales of $1.48 billion, a decrease of 3.0% compared to the prior year
• Third-quarter net income of $52.0 million, diluted EPS of $0.40, and EBIT of $62.7 million
• Third-quarter adjusted diluted EPS of $0.35 and adjusted EBIT of $78.2 million
• Third-quarter cash provided by operating activities of $91.5 million, second highest third-quarter amount in company history
• Fiscal 2025 fourth-quarter outlook calls for flat sales and adjusted EBIT to be up in the low-single-digit percentage range

RPM International Inc. (NYSE:RPM), a world leader in specialty coatings, sealants and building materials, today reported financial results for its fiscal 2025 third quarter ended February 28, 2025.

Frank C. Sullivan, RPM chairman and CEO commented, "The unfavorable weather conditions we discussed in early January continued and became more widespread as the third quarter progressed. Unseasonably cold weather in the southern U.S. and wildfires in the west reduced demand in geographies that typically have more construction and outdoor project activity in winter months. In addition to weather, we faced difficult comparisons to the third quarter of fiscal 2024, when adjusted EBIT was up 31%."

He continued, "By prioritizing cash flow over profitability, we generated another quarter of strong cash flow as inventories declined $36 million versus last year. However, this disciplined inventory management, which is a key component of MAP 2025, also lowered production levels, which had a negative impact on fixed cost absorption in our seasonally smallest quarter. This, along with foreign currency headwinds and transitional costs from eight plant consolidations, pressured margins and more than offset MAP 2025 operational improvements."

Third-Quarter 2025 Consolidated Results

The third-quarter sales decline was primarily driven by unfavorable weather conditions, which reduced construction activity, and sluggish demand from specialty OEM manufacturing end markets. Foreign currency translation was also a headwind to sales.

Geographically, sales declines in North America were driven by adverse weather. In Europe, foreign currency translation offset growth generated by sales and marketing initiatives. Africa / Middle East declined slightly as it faced challenging comparisons to the prior year when sales increased 22.9%. The decline in Latin America and Asia / Pacific was driven by foreign currency translation headwinds and challenging comparisons to the prior year when sales increased 13.5% and 5.0% respectively.

Sales included a 1.8% organic decline, 0.5% growth from acquisitions net of divestitures, and a 1.7% decline from foreign currency translation.

The adjusted EBIT decline was driven by negative fixed-cost absorption from lower production levels, including disciplined inventory management to improve cash flow; foreign currency headwinds; and transitory costs related to MAP 2025 plant consolidations and start-ups. Corporate / other expenses also increased during the quarter, driven by higher M&A and compensation expenses. Additionally, comparisons to the prior year were challenging as adjusted EBIT increased 31.3% in the third quarter of fiscal 2024. MAP 2025 improvements and SG&A streamlining actions helped to offset the adjusted EBIT decline.

The adjusted diluted EPS decline was driven by the reduction in adjusted EBIT.

Third-Quarter 2025 Segment Sales and Earnings

CPG sales declined as unfavorable weather conditions limited construction and restoration activity, particularly in the southern and western U.S. Foreign currency translation was also a headwind to sales.

Sales included a 1.7% organic decline, 0.2% growth from acquisitions, and a 3.0% decline from foreign currency translation.

Compared to the third quarter of fiscal 2024 when adjusted EBIT increased 69.8%, adjusted EBIT declined as lower volumes reduced fixed-cost absorption and, as part of MAP 2025, two different plant consolidations resulted in temporary inefficiencies as production was being transferred. These headwinds were partially offset by SG&A streamlining actions.

PCG organic sales declined slightly compared to strong growth in the prior year when organic sales increased 9.2%. Fiberglass reinforced plastic structures grew double digits, driven by demand from data centers, while other businesses declined modestly as they faced challenging prior-year comparisons.

Sales included a 0.3% organic decline, a 1.1% increase from acquisitions net of divestitures, and a 1.6% decline from foreign currency translation.

Compared to the third quarter of fiscal 2024 when adjusted EBIT increased 45.1%, adjusted EBIT declined as lower fixed-cost utilization from reduced volumes, plant start-up costs, and negative foreign currency translation more than offset MAP 2025 improvements.

SPG's sales decline was primarily due to lower demand in specialty OEM end markets and the disaster restoration business, which was impacted by reduced remediation activity. This was partially offset by growth in the food coatings and additives business, which benefited from a prior acquisition.

Sales included a 10.9% organic decline, 1.4% growth from an acquisition, and a 0.6% decline from foreign currency translation.

The adjusted EBIT decline was driven by lower fixed-cost utilization from reduced volumes, as well as additional expenses at the new resin and innovation centers of excellence that SPG manages on behalf of all RPM segments. MAP 2025 benefits and SG&A streamlining actions partially offset these earnings headwinds.

The Consumer Group's organic sales grew modestly, driven by new product introductions and market share gains. This organic growth was offset by foreign currency translation headwinds.

Sales included 0.3% organic growth and a 1.0% decline from foreign currency translation.

Adjusted EBIT declined as MAP 2025 working capital efficiency initiatives resulted in lower production and fixed-cost utilization. The segment also experienced raw material inflation and challenging comparisons to the prior year, when adjusted EBIT grew 34.6%.

Cash Flow and Financial Position

During the first nine months of fiscal 2025:

• Cash provided by operating activities was $619.0 million, driven by working capital efficiency enabled by MAP 2025 initiatives. This compares to $941.1 million in the prior-year period when there was a larger working capital release as supply chains normalized.
• Operating working capital as a percentage of sales improved by 70 basis points to 20.7% compared to 21.4% in the prior-year period, driven by MAP 2025 working capital efficiency initiatives.
• Capital expenditures were $158.9 million compared to $138.1 million during the prior-year period with the increase driven by investments in shared RPM centers of excellence, including a newly opened production facility and distribution center, both in Belgium, as well as a new production facility in India and MAP 2025-enabled plant consolidations.
• The company returned $242.6 million to stockholders through cash dividends and share repurchases.

As of February 28, 2025:

• Total debt was $2.10 billion compared to $2.19 billion a year ago, with the $0.09 billion reduction driven by improved cash flow being used to repay higher-cost debt.
• Total liquidity, including cash and committed revolving credit facilities, was $1.21 billion, compared to $1.29 billion a year ago.

Definitive Agreement to Acquire The Pink Stuff

As previously announced, the company entered into a definitive agreement to acquire the Star Brands Group, the parent company of The Pink Stuff, a globally recognized leader in household cleaning products. Upon closing, The Pink Stuff will become part of the Consumer Group's Rust-Oleum cleaners business and expand Rust-Oleum's product offerings as well as its distribution channels including e-commerce, grocery and drug stores.

In calendar year 2024, The Pink Stuff generated approximately £150 million in sales, and the transaction is expected to close late in the fourth quarter of fiscal 2025 or early in the first quarter of fiscal 2026, subject to customary closing conditions.

Business Outlook

Sullivan added, "As we look toward the fourth quarter, macroeconomic conditions are challenging, but we are seeing pockets of positive momentum and are leveraging our focus on repair and maintenance in both construction and consumer end markets. As demonstrated in prior economic cycles, the ability of our products and services to extend asset life becomes even more attractive to end users when budgets are tight. Additionally, RPM associates continue to implement initiatives to outgrow our markets, including new product introductions, and achieve efficiency improvements. We anticipate that this will result in modest earnings growth in the fourth quarter with the financial benefits of MAP 2025 becoming even more evident when sustained volume growth returns."

"While the tariff situation is dynamic, most of our businesses have limited cross-border trade for raw material procurement and finished good sales. This helps mitigate the effects of tariffs; however, we are not immune, and we assume that raw material inflation will increase from low-single-digits to mid-single digits as a result of currently known tariffs. Our guidance does not assume any impact from the acquisition of The Pink Stuff since it is expected to close late in the fourth fiscal quarter of 2025 or early in the first quarter of fiscal 2026," Sullivan concluded.

The company expects the following in the fiscal 2025 fourth quarter:

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

Earnings Webcast and Conference Call Information

Management will host a conference call to discuss these results beginning at 10:00 a.m. ET 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 April 8, 2025, until April 15, 2025. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international callers. The access code is 4767461. 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 is ranked on the Fortune 500^® and employs approximately 17,200 individuals worldwide. Visit www.RPMinc.com to learn more.

For more information, contact Matt Schlarb, Vice President – Investor Relations & Sustainability, at 330-220-6064 or [email protected].

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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 fourth-quarter fiscal 2025 or full-year fiscal 2025 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.

Use of Key Performance Indicator Metric

To supplement the financial information presented in accordance with Generally Accepted Accounting Principles in the United States ("GAAP") in this earnings release, we use the key performance indicator ("KPI") metric of operating working capital as a percentage of sales, which is defined as the net amount of net trade accounts receivable plus inventories less accounts payable, all divided by trailing twelve-month net sales. We evaluate the working capital investment needs of our business to support current operations as well as future changes in business activity. For that reason, we believe operating working capital as a percentage of sales is also useful to investors as a metric in their investment decisions.

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 and regional 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) changes in global trade policies, including the adoption or expansion of tariffs and trade barriers; (h) 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; (i) risks and uncertainties associated with our ongoing acquisition and divestiture activities; (j) the timing of and the realization of anticipated cost savings from restructuring initiatives, the ability to identify additional cost savings opportunities, and the risks of failing to meet any other objectives of our improvement plans; (k) risks related to the adequacy of our contingent liability reserves; (l) risks relating to a public health crisis similar to the Covid pandemic; (m) risks related to acts of war similar to the Russian invasion of Ukraine; (n) risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability-related voluntary goals or regulatory requirements; (o) risks related to our or our third parties' use of technology including artificial intelligence, data breaches and data privacy violations; (p) the shift to remote work and online purchasing and the impact that has on residential and commercial real estate construction; and (q) 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, 2024, 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 press release.

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For more information, contact Matt Schlarb, Vice President – Investor Relations & Sustainability, at 330-220-6064 or [email protected]