RPM Reports Record Fiscal 2025 Second-Quarter Results

• Record second-quarter sales of $1.85 billion, an increase of 3.0% over prior year
• Record second-quarter net income of $183.2 million, record diluted EPS of $1.42, and record EBIT of $227.6 million
• Record second-quarter adjusted diluted EPS of $1.39 increased 13.9% over prior year and record adjusted EBIT increased 7.7% to $255.1 million
• Strong second-quarter cash provided by operating activities of $279.4 million
• Fiscal 2025 third-quarter outlook calls for flat sales and adjusted EBIT to grow or decline by low-single-digits
• Fiscal 2025 full-year sales outlook reiterated at low-single-digit growth and adjusted EBIT outlook narrowed to 6% to 10% growth

RPM International Inc. (NYSE:RPM), a world leader in specialty coatings, sealants and building materials, today reported record financial results for its fiscal 2025 second quarter ended November 30, 2024.

Frank C. Sullivan, RPM chairman and CEO commented, "Across our businesses, RPM associates demonstrated their ability to capitalize on growth opportunities in a mixed economic environment, leading to all four of our segments generating positive volume during the second quarter, as well as record consolidated sales. The momentum of our MAP 2025 operating improvement initiatives also continued, including the hard work to streamline SG&A expenses. The combination of these efforts resulted in all segments growing adjusted EBIT to achieve record consolidated second-quarter adjusted EBIT for the 12^th consecutive quarter, record adjusted EBIT margin, and continued strength in operating cash flow."

He added, "Our Construction Products and Performance Coatings Groups continued generating good growth as they leveraged their focus on repair and maintenance and their technical products to serve high-performance construction projects. In our Consumer and Specialty Products Groups, sales grew as they expanded market share, residential end markets showed signs of stabilization, and weather conditions were favorable for most of the quarter."

Second-Quarter 2025 Consolidated Results

Sales growth was driven by higher volumes in all four segments as businesses leveraged their focus on repair and maintenance and capitalized on targeted organic growth opportunities. Businesses serving high-performance construction projects with technical solutions performed particularly well. Those serving residential end markets exhibited signs of stabilization and were aided by favorable weather.

Geographically, sales growth was generally solid across North American businesses and was mixed elsewhere. In Europe, MAP 2025 initiatives resulted in significantly improved profitability. Africa / Middle East generated strong organic growth driven by demand from high-performance construction and infrastructure projects, while Latin American sales declined due to foreign currency translation. Asia / Pacific sales declined due to challenging comparisons in the prior year when a large project was completed.

Sales included 3.7% organic growth, a 0.1% decline from divestitures net of acquisitions, and a 0.6% decline from foreign currency translation.

Adjusted EBIT and adjusted EBIT margin were second-quarter records, driven by MAP 2025 initiatives, improved sales and structural SG&A streamlining, which resulted in SG&A decreasing as a percentage of sales, partially offset by unfavorable mix. The commodity cycle was neutral during the quarter, and included pockets of inflation, particularly in the Consumer Group. Adjusted EBIT includes the negative impact of a $4.4 million bad debt expense from a Consumer Group customer bankruptcy.

Adjusted diluted EPS was a record, driven by adjusted EBIT growth, and strong cash flow, which resulted in $226.5 million in debt paydowns over the prior 12 months and lower interest expense.

Second-Quarter 2025 Segment Sales and Earnings

CPG sales were a record and were driven by turnkey roofing systems and services, which benefited from its restoration project focus, direct sales model, and high level of customer service. Hurricane activity negatively impacted some construction demand in the second quarter.

Sales included 4.9% organic growth, 0.1% growth from acquisitions, and a 0.7% decline from foreign currency translation.

Record second-quarter adjusted EBIT was driven by sales growth and MAP 2025 benefits, partially offset by unfavorable mix.

PCG achieved record second-quarter sales led by the flooring and protective coatings businesses serving high-performance construction projects. Growth was strongest in Europe, where MAP 2025 initiatives and improved collaboration generated positive results. Africa / Middle East growth was also strong, driven by demand from high-performance building and infrastructure projects.

Sales included 3.3% organic growth, a 1.1% decline from divestitures net of acquisitions, and a 0.8% decline from foreign currency translation.

Adjusted EBIT was a second-quarter record and was driven by MAP 2025 benefits and sales growth.

SPG's sales growth was driven by the disaster restoration business's response to hurricane activity and strength in the food coatings and additives business, which benefited from a previous acquisition. Specialty residential OEM demand showed signs of stabilization during the quarter.

Sales included 2.4% organic growth, 1.5% growth from an acquisition and 0.5% growth from foreign currency translation.

Adjusted EBIT increased as a result of MAP 2025 benefits and improved sales.

The Consumer Group's sales growth was driven by market shares gains and stabilization in DIY takeaway, including the impact of favorable weather for most of the quarter. Customer inventory levels were generally steady during the quarter. The rationalization of lower margin products was a drag on sales, while strong growth continued in international markets due to targeted marketing campaigns.

Sales included 2.7% organic growth and a 0.7% decline from foreign currency translation.

Adjusted EBIT was a record, driven by MAP 2025 benefits, sales growth and the rationalization of lower-margin products, partially offset by $4.4 million in bad debt expense from a retail customer bankruptcy, and raw material and labor inflation.

Cash Flow and Financial Position

During the first six months of fiscal 2025:

• Cash provided by operating activities was $527.5 million, driven by improved profitability and working capital efficiency, both of which were enabled by MAP 2025 initiatives. This compares to a record $767.8 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 100 basis points to 22.0% compared to 23.0% in the prior-year period, driven by MAP 2025 working capital efficiency initiatives.
• Capital expenditures were $100.7 million compared to $89.3 million during the prior-year period and included investments in a newly opened production facility in Belgium and another in India, which is expected to open in the second half of fiscal 2025.
• The company returned $159.5 million to stockholders through cash dividends and share repurchases.
• The company acquired TMP Convert SAS late in the fiscal second quarter to expand its decking and landscaping offerings.

As of November 30, 2024:

• Total debt was $2.03 billion compared to $2.25 billion a year ago, with the $226.5 million reduction driven by improved cash flow being used to repay higher-cost debt.
• Total liquidity, including cash and committed revolving credit facilities, was $1.50 billion, compared to $1.51 billion a year ago.

Business Outlook

"We remain focused on things within our control in a mixed economic environment. These include leveraging our competitive strengths to outgrow our markets and implementing MAP 2025 initiatives. So far in the third quarter, the progress we are making in these areas is being offset by end market pressure caused by winter weather that is meaningfully harsher than the prior year. Overall, we anticipate sales and adjusted EBIT will be similar to the prior year in what is our seasonally slowest quarter. Construction Products and Performance Coatings Groups continue to execute well with their focus on high performance buildings, and maintenance and restoration projects. In our Consumer and Specialty Products Groups, stubbornly elevated mortgage rates and the unfavorable weather conditions have put pressure on sales in these segments," Sullivan concluded.

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

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

The company expects the following for full-year fiscal 2025:

• Consolidated sales increasing in the low-single-digit percentage range compared to prior-year record results, which is unchanged from the prior outlook.
• Consolidated adjusted EBIT increasing between 6% and 10% compared to prior-year record results, which is a narrower range than the previous outlook of mid-single-digit to low-double-digit growth.

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 January 7, 2025, until January 14, 2025. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international callers. The access code is 3824316. 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 third-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) 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, the ability to identify additional cost savings opportunities, and the risks of failing to meet any other objectives of our improvement plans; (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 or our third parties' use of technology including artificial intelligence, data breaches and data privacy violations; (o) the shift to remote work and online purchasing and the impact that has on residential and commercial real estate construction; and (p) 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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Matt Schlarb, Vice President – Investor Relations & Sustainability, at 330-220-6064 or [email protected].