RPM International Inc.

Good morning, everybody, and welcome.

Thanks for joining us today for RPN's Investor Day. I'm Ashley. I'm Senior Director of Investor Relations at RPN. We really appreciate everyone making the trip, including those joining us online. So I'll start off with some legal language. based on current expectations that involve risks and uncertainties, which will cause actual results to be materially different. For more information on these risks and uncertainties, please review RPM's reports filed with the SEC. During this presentation, references may be made to non-GAAP financial measures. To assist you in understanding these non-GAAP terms, RPM is supposed to reconcile the most directly comparable GAAP financial statements on our website at www.rpmweek.com. And now I'll give you a brief overview of today's agenda. So we'll kick things off with our Chairman and CEO, Frank Sullivan. We'll give an overview of our agenda. Then Tim Kinzer, our Vice President of Operations, will provide more details on that in 2025. And then Rusty Gordon, our Vice President and Chief Financial Officer, will give us an update on our capital. Next, we'll have Tracy Crandall, who's our Vice President of Compliance and Sustainability, the Associate General Counselor. I'll shortly give you more details on Building a Better World, our PMS Sustainability Program. Then we'll have Paul Humigun, who's our CPG Group President, who will give you a deep dive into his and the incentives that he oversees. And then finally, Frank will wrap things up, and then we'll open the floor for him. So again, we appreciate you having everyone here today, and I'll turn it over to Frank. I'm Matt, Senior Director of Investor Relations with 15 year experience with other public companies. And so we are really pleased to have you here. And he's already making our investor outreach more effective, and so you'll be hearing more and seeing more of Matt. So Matt, thank you. I also want to introduce a number of RPM people that are here today as well, starting with Rusty Gordon, our Chief Financial Officer, and Rusty and his team have been doing a great job as we've evolved RPM from a holding company with a small type financial accounting team to being more center-led in a number of areas. Tina Sherman is in the back. opportunity very much. Tracy Crandall is here. She's our Associate General Counsel. Tracy's going to be talking to you today about our sustainability activities, our Building a Better World initiative, which she leads across RPM. It's been doing a great job. And we made a lot of progress in our sustainability efforts and with our Building a Better World initiative. So I'm looking forward to that. Thank you. Tammy Zolnar, the Senior Director of Communications. And then I think last but not least, we have Tim Kinzer. Tim is VP of Operations for RPM. You'll be hearing from Tim shortly after me. He had a incredible career in the power energy business. And thankfully for us, his wife didn't appreciate us traveling around activities and really did an extraordinary job in consolidating procurement, led to about $150 million in savings, a critical element of our successful 2020 NAFTA growth program. And now as VP of operations, he's leading the entire effort across the manufacturing operations and procurement. We'll be hearing from Tim shortly. And then lastly, Paul Benamoun. Paul is the group president of our Trentville Construction Products Group. Paul came to RPM in an IT capacity many years ago, was our SEP, Manufacturing and Operations, reporting directly to me, and then has been at Trenco for seven or eight years now, Paul? Tenth year. Tenth year at Trenco. And has pulled together our construction products businesses, which were very district, and today is our largest and highest performing operating entity And so again, I'm grateful. It's awesome to see in person a lot of folks that we've known for a long time and followed RPN as analysts or investors and also meet some new people. So thanks for being here. For 75 years, RPN has been building upon my grandfather's founding operating philosophy, hire the best people you can find, create an atmosphere to keep them and let them do their jobs. Over that 75-year period, we've been able to transform RPM at the appropriate times from a single manufacturing facility producing a single product, illumination 301, to my father's efforts beginning in the early 1970s through his retirement in 2002, and effectively doing an industry roll-up in the coatings and construction chemical space before anybody had coined that phrase. to the six-group structure that we began to organize our 40 or 50 independent operating companies into in 2002, really siloing those businesses, but getting a tremendous bang from reorganizing from a true holding company into the group. You all have seen these slides before, but from 2002 until 2016, we had a tremendous performance outperforming the broader market and our peers. And our performance was better than that because underlying that was the ultimate resolution over about a 15-year period of a building for asbestos liability challenge. And so I mentioned that reorganization. It really powered organic growth. It really allowed us to start to get synergies together. within our six groups in ways that rpm hadn't before and that worked for about 15 years the next transformation and probably the most profound one was driven by our 2020 map to growth operating improvement program We sought to take that entrepreneurial culture, close-to-market decision-making, allowing for our PM to drive organic growth that for most of our industry has been in excess of our industry averages, and marry it up with operating efficiency. And it was executed exceedingly well by Tim Kinzer, Rorty Hyde, Steve Kanuka, some of the operating efficiencies that were out there. As I remarked to our board with the incredible effectiveness of our MS168 focus on bringing lean manufacturing disciplines into our operations on a consistent basis and introducing continuous improvement into our businesses effectively. While lean manufacturing disciplines aren't new, they've been around for 40 years, they were new to RPM. and our people executed on them exceedingly well. I think the big aha between the operating efficiencies that we knew were out there, and concern about the entrepreneurial spirit, was that we could do both. And I think through the Amp2Growth program, we were able to prove that. This is our structure today, and what I think is most profound about it is RPM is solidly in the middle, and not at the top of the company structure. to be exceptional leaders and also reporting in four segments. So our investors, I think you have more visibility into our businesses and also really what we and our employees see in terms of how we're organized and how we think about attacking the market. Construction products group, creating and driving the market for high energy performance in the built environment as well as new construction. Our performance coding group, infrastructure. Our consumer group, principally North America, but also in the UK and Europe, really the drivers of unique niche platforms serving consumers that revolutionized Small Project Pay in North America and really had an incredible bond. But what happened there, and now their efforts are part of this new MAP25 that you'll see, is that we went from, in North America, in small project pain, patch repair, most of the categories we're in, 25 years ago, market shares in the mid-teens to 20%, and through being innovative, new product introduction, delivering more opportunities to consumers, to market shares that exceed 50%. And today, we are changing and be more consumer user-focused, and we're really excited about what's happening there. And then lastly, our specialty products group. Still that traditional RPM model being a great home for entrepreneurial companies. We're a very different collection of independent companies, but this will also serve as an incubator for potential future platforms. I'll just give you one example. coating for apples, a water wash coating for apples that inhibited browning of apples, really revolutionized sliced apples. We are why you can get sliced apples in a bag in the store. We are why a McDonald's student can serve apple fries. That product went off patent. We saw the results and the impact over the last four or five years. We've acquired some other 20% or higher, getting price where appropriate, driving incredible margin profitability. So the opportunity for us to create out of the specialty products group potentially new platforms in the future is very exciting for us. Lastly is the power of RPM. It's an entrepreneurial approach to customers with leading brands and innovation driving growth. It's today being center-led in manufacturing and operations and administration. And lastly, and most importantly, it's what we call the value of 168, operating with transparency, trust, and respect in all that we do and the connections across all of our businesses. We have a proud track record of delivering for shareholders. An important part of that is our dividend. We've grown our dividend with a dividend increase of 5% approved by our board yesterday and announced at our annual meeting 5%. annualized basis for at least one year, we will deliver to our shareholders $1.68 per share of cash dividends. That's an auspicious number for RPM. I want to conclude before I turn it over to Tim Kinzer. work through the COVID disruptions in our factories, in our plants, within our supply chain. The effort of our R&D people and our tech service people over the last two years, literally in the face of supply chain challenges, reformulate and recertify thousands of products. times of production because during the normal time in any particular week we had pretty raw materials that just didn't show up. It's been an extraordinary period of time and the 16,800 associates of Arcane Round and Glow are the ones that create our success. So I have the privilege of leading and as I said, as I turn it over to Tim Kinser, public company that makes it worth all the money he's paid? And my answer was, I get to do the abba dabba, and you guys get to do the do. And so with that, let me turn it over to Tim Kinzer, our VP of Operations, who has literally led a lot of the do in our successful 2020 MAP Growth Program, and will be the principal leader in our new MAP 2025 program. Thank you, Tim.

Thank you, Frank, and good morning. I am Tim Kinzer. I have been with RPM for 15 years. As Frank said, the first 11 were with DAP. And in 2018, at the start of our Map to Growth initiative, I came to the corporate office. I led the procurement work stream throughout Map 2020, and this morning I had the privilege of being able to talk a little bit about our Map 2025 plan. So I'm going to begin with a recap of our Map to Grow journey because it's very important as it ties into our Map 2025 plan. So this is a slide from our investor day in November of 2018. And the part that I'm focusing on here is the vision where we set out to transform RPM into a more connected and efficient company focused on operational excellence and continuous improvement. while maintaining the strengths of the entrepreneurial culture. The structural changes that we made included adoption of a center-led model for manufacturing, procurement, and administration. At the end of our fiscal 21, we exceeded our targets on efficiency improvements that were within our control by delivering savings of 320 million versus our communicated target of 200 million. As we move forward, it's important to understand, and I'll spend a few minutes on this, the activities that happened starting in March of 2020, with the first being the COVID lockdowns. This was a very significant event beyond just the lockdowns in that the oil and gas refineries ran at reduced rates for nine months during this timeframe due to less demand for gasoline and jet fuel. What this did was pull down feedstocks and lead to very low inventories during this time. In mid-February of 2021, winter stormed Murrigette, the Gulf Coast, and it caused many critical petrochemical facilities to go offline for months. This had a tremendous impact on the supply of feedstocks, materials, and their inventories, which were already very low due to refineries being down from the lockdowns. We also began to experience logistics challenges as ports became congested and the trucking industry became strained. In April of 2021, a major US producer of alkyd resins and a key supplier of RPMs suffered a catastrophic event that left alkyd resins significantly constrained in the US. And these events set the stage for extreme supply chain disruptions and unprecedented material inflation. And in February of this year, the Russian-Ukraine conflict began that has caused further uncertainty. The point of going through these is that through our map to growth initiatives, RPM was well positioned to take these challenges on. We worked closely with our suppliers, utilized our value engineering work to find alternative materials, insourced more materials than ever, and collaborated across the companies to ensure that materials that were short were utilized in the most effective manner to minimize the impact to our customers and our shareholders. The macroeconomic and industry challenges I just covered had a material impact on our ability to meet our MAP 2020 financial goals in FY21. These headwinds continued through fiscal year 22, and our margins were further challenged by worsening supply chain disruptions and inflation. Our consumer group was especially challenged as the full effect of the alkyd resin shortages began to have serious impacts throughout the industry. It is worth pointing out that these financial results would have been significantly worse if not for the contributions from the operating efficiency improvements that I've covered earlier from Map2Growth. Beyond the operating efficiencies of Map2Growth, we have laid a foundation for continued success. Critical activities to support our continued success has been to work to consolidate our ERPs to four common platforms from the 75 instances we had in fiscal year 18. This has allowed development and implementation of RPM-wide systems and better data analytics that will be key to our MAP 2025 initiatives. We've been working on Optimizing our footprint and consolidating our accounting locations to drive further efficiencies, we have repurchased 633 million of stock and adopted an improved goal setting methodology that allows for better long-term planning. And as previously mentioned, we have greatly increased our insourcing to address supply issues and better utilization of our assets. Perhaps the most significant benefit of our map to growth effort has been the enhanced collaboration and coordination across the R&D companies. The picture shown here is our four group presidents, Paul Hoevenboom from our construction products group who you'll hear from shortly, Dave Denstead from our performance codings group, Bill Spaulding from our consumer group, and Ron Holman from our specialty products group. These four are the leaders that champion the intercompany interactions that we call Connections Creative Value. We have instilled a culture that allowed for the successful implementation of global shared service centers, RPM-wide systems, and incentives that encourage collaboration. An excellent example of RBM's collaborative mindset is the purchase last year of the Corsicana, Texas chemical facility. This facility is managed by the construction products group, but all four RBM segments utilize materials produced at Corsicana. In fact, the primary beneficiary of the construction products group plant is the consumer group as the facility has developed the ability to produce alkaline resins to help us offset the loss of the industry supplier I spoke of earlier. This level of cooperation and collaboration positions RPM well as we move forward into MAP 2025. Just as we start, as I stated in our map to growth vision statement, RPM has transformed into a more connected and efficient company. We exceeded our operating efficiency targets and the enhanced collaboration and coordination throughout RPM not only helped us navigate the macroeconomic headwinds of the last several years, it has positioned us well for future success. Our view of MAP 2020 is that its completion was a milestone and not the finish line. We have not stopped our continuous improvement activities, and we have the resources, systems, and very importantly, the culture to position RPM for sustained profitable growth. And now let's shift to where we're going. In 2018, when we launched MAP2Growth, MAP was an acronym for Margin Acceleration Plan. Through MAP2Growth, we have successfully built a structure to accelerate our margins. As we launched MAP 2025, MAP is now an acronym for Margin Achievement Plan. And the margin we are most focused on achieving is a 16% even margin. This slide summarizes our MAP 2025 goals. We plan to grow our revenue to $8.5 billion. And as I mentioned on the previous slide, our focus is on achieving a 16% EBIT margin. We believe that most of the improvements driving the achievement of our EBIT goal will be reflected in cost of goods sold. Thus, achieving a gross margin of 42% will be critical to our success. Similar to our MAP 2020, these goals are on a run-rate basis to be fully realized in fiscal year 26. Our revenue growth was developed through a bottoms-up forecast from our operating companies and totals up to a 5% CAGR for the core growth revenue. We also expect revenue growth through strategic investments, that the operating companies are pursuing, as well as a new work stream for MAP 2025 called CS168, where we'll be implementing systems to drive commercial excellence. A few examples of the many strategic investments we are planning include CarbonLine diversifying their end markets, CPG driving the market through solutions to building efficiency, and investment that our specialty product group is making in Greensboro, North Carolina, to create an R.P.M. coding center of excellence that all of our operating groups will participate in. In addition, we expect to add $250 million of revenue from mergers and acquisitions. And lastly, our MAP 2025 plan assumes modest GDP growth. On this slide, we show the work streams that might be the significant drivers of the gross margin improvement on MAP 2025 planning. We plan to continue expansion of improvements in both manufacturing and procurement, and the newly added commercial work stream is also on this page. For the manufacturing work stream, we'll be expanding our very successful management system, or MS168, into additional facilities. We will continue to look for opportunities to optimize our footprint and use new approaches to plant efficiency, such as AI and Internet of Things that we have started activities on. In procurement, we will continue to expand our strategic supplier relationships which has proven advantageous for both our suppliers and our PM. We have also made investments in the procurement team to support expansion to additional categories. With our baseline of fiscal year 22 being near a cycle high, we do expect costs to return to a more historic normal during not 2025, so our plan does include a benefit from commodity cycle recovery. As I previously mentioned, the plan for our newest workstream, CS168, is to implement systems to drive commercial excellence through use of data analytics to receive appropriate value for the differentiated value our products deliver and increase the overall effectiveness of the sales force. Similar to MAP 2020, we have broken out the workstream savings into waves, with wave one being our fiscal year 23, and targeting a savings of 120 million of improvements. Wave two is our fiscal year 24, and we'll be adding an additional 160 million of improvements, and wave three, our fiscal year 25, with targeted improvements of 185 million. As we reported on our earnings call earlier this week, we are off to a very good start with 30 million of savings realized in our first quarter of fiscal year 23. On the EBIT bridge, we break out the contributions from organic sales, mergers and acquisitions, and the matched work streams. which as you can see is the most significant contributor to our unit improvement. We have also included offsets for SG&A inflation we expect to incur through MAP 2025. This is something we did not include in our MAP degrowth plan for MAP 2020. This shows our goals versus our baseline of fiscal year 22. Our targets include growing our revenue to $8.5 billion, as I've covered, and increasing our gross margin to 42%, largely through the benefits of the map or streams. The SG&A increase is to support our strategic growth revenue and SG&A inflation. The EBIT is being driven by the improvements in gross margin as well as contributions from our revenue growth. And lastly, I just want to comment a little bit. We have been and continue to experience an extremely volatile, uncertain, complex, and ambiguous time. As a result of this, there are factors that are outside of our control that could lead to us achieving our plan faster or slower. Some factors that could negatively impact the timing of achieving our plan include a global energy crisis, a prolonged recession, or a strong US dollar. On the upside, accelerated mergers and acquisitions, A larger commodity cycle recovery or strong GDP growth could all lead to achieving a plan soon. Thank you for your time, and I will now turn it over to Rusty Gordon to give the capital welcome.

Thanks, Ken. I'm Rusty Gordon. I've worked at RPM 28 years, the last 10 years as CFO. And I will be brief today. So the first slide I have talks about capital allocation at RPM. And our number one priority, as I put it, is to protect that house, to make sure we maintain investment grade ratings, So RPM can access capital markets in all economic cycles to do acquisitions year in, year out. You know, when we talk about capital allocation today, as you're aware, the price for acquisitions has been very inflated, very high in multiples. And for those of you who great on acquisitions and a lot of the problem is overpaying for acquisitions. And at RPM, that low batting average is not our experience. We have a very high batting average because we have a lot of discipline and we tend to avoid some of those crazy multiples you might read about. And we're going to be really emphasizing internal growth and favoring that versus acquisitions. We have a lot of great opportunities. You'll see some today related to high performance buildings. That's something Tremco specializes in. We talked about building a center of excellence for coatings. We see a big opportunity to diversify our card line business outside of their oil and gas niche specialty. And the same with OEM coatings in our consumer division. We have consistently grown Rust-Oleum to cover more surfaces year in, year out. We're gonna be, as we resolve supply chain issues, getting back to finding more growth opportunities for that business, as well as the cleaner business. We've expanded there and that's a nice platform. So plenty of ideas for internal growth and when it comes to capital allocation, you'll see more funding for those initiatives. Also on the slide, we talk about our dividend increases. We have a growing dividend that's been valued by our shareholders and that dividend is a great way for RPM to return capital because it's a nice match for the Steady cash flows we generate being a maintenance driven business. So that's worked well for us. And share or purchase is something we've picked up a bit since we entered the MAP program in 2018. We're going to continue to do it at a minimum to offset dilution and we'll do more share or purchase when the opportunity exists. The last slide I have today is to talk about our debt structure. And this shows our debt maturities for the bonds and credit facilities that RPM uses to fund our growth. One comment I'll make is as we got to the end of the last calendar year, 2021, we saw some signs that credit markets we're probably not gonna get much better and more likely to get worse. So we did two things. First thing we did was early in January, we pre-funded a bond maturity that matures next month. You can see that on this chart. the 2022 300 million bond. We pre-funded that with an issuance back in early January of 2.95% because we did see that interest rates were more likely to go up, not down at that point. Second thing we did was that we had a term loan and revolving credit facility that was mature in 2023, and there was a lot of talk about recession in 2023, so we thought we should get ahead of that, and we amended those facilities this past summer to push those maturities out, as you can see on this slide, to 2025 and 2027. So the end result of this, as you can see, most of our maturities are long out. We have a duration of 13 years. average interest rate on our fixed debt of a little over 4%, which actually isn't too far from where the tenure of Treasury was at least a week or so ago. So we're in good shape there. We do have some flowing rate debt, but as our cash flow improves as we get through this supply chain mess, our hope is that we will be able to have some cash available to pay off some of those floating rate instruments. So with that, I will turn it over to Tracy Crandall. Tracy.

Hi, I'm Tracy Crandall. I'm the RPM vice president of compliance and sustainability, and I am also the associate general counsel. I've been with RPM for 13 years, and I have been leading our sustainability program for the last year. At RPM, we call our sustainability program Building a Better World, and based on our materiality assessment, we focus on people, products, processes, and, of course, governance. For 75 years, RPM has valued and respected our place in the world as a steward of the environment. Our Building a Better World program represents our ongoing commitment to create a sustainable future founded on our values of transparency, trust, and respect. In recent years, we have doubled down on our commitment by implementing new data-driven systems and processes across our decentralized operations to bring good practices together with this more center-led, strategic approach to sustainability topics. Our initiatives prioritize areas where we can make the biggest impact. For example, this includes efforts to recruit diverse candidates, reduce water usage, and to design communications programs to engage and excite our employees about our sustainability efforts by showcasing the great work that they have been and continue to do to make our business and products more sustainable. As you will have likely seen, we released our 2021 sustainability report in August. In the report, we track our, I'm sorry, in it we report on our track record of sustainable product development achievements, operations advancements, contributing to increased energy efficiency and reduced greenhouse gas emissions, as well as our diversity and inclusion programming. We also explain our Building a Better World program and strategic approach, highlight our sustainability strategies, and detail our 2025 calendar goals. We are proud of the work achieved by our companies and associates to date, but recognize there is more work to do and are focused on using the Building a Better World program to take us to the next level in our sustainability journey. As I have said, Building a Better World is our commitment to building a sustainable future. We have organized our program into three pillars. Our products focuses on the energy efficiency advantages of the products that we make, as well as the impact the ingredients our products have on people and the environment. For example, we're looking at great chemistry and sustainable packaging alternatives. Our people, addressing diversity and inclusion, health and safety, and training and development in our processes. Focusing on the impacts our operations have on the environment and climate change. These sit on our longstanding foundation of good governance and ethical practices, through which we emphasize our core values of transparency, trust, and respect. I'll walk through each pillar in more detail, but first let me highlight our 2025 calendar sustainability goals that we released in our report. Using 2021 as a baseline year, our calendar 2025 sustainability goals are to reduce scope one and scope two greenhouse gas emissions from our facilities by 20% per ton of production and energy consumed in our facilities by 10% per ton of production. To reduce waste to landfill by 10% and increase recycling by 20% both per ton of production from our facilities. And finally, to identify and implement additional opportunities for water reuse and conservation and collaborate with our suppliers to do the same. Products and people focus goals will follow as we continue to develop initiatives as we gather and analyze data in the coming year to improve product profiles and associate experiences. Now back to our pillars. As part of our products pillar, we work to proactively to improve sustainability in our product formulations and in our packaging. With our product lines, customers can promote energy efficiency, reduce landfill waste, extend the useful life of renew and reuse products, and support the use of biobased and recycled materials. Our sustainability report showcases many of our sustainably advantaged products, including those on this slide. To highlight, Trenco CPG creates full-roof coating products, such as the AlphaGuard line, some products of which are bio-based and carry a USDA bio-referred label. These products reduce the heat island effect and enhance the ability of buildings to regulate temperature, leading to greater energy efficiency and reduce greenhouse gas emissions from the building. These products also restore roofs, thus avoiding tons of landfill waste because the oak roof remains in place and is simply overcrowded. Our daily success as a company depends on having a diverse and rich and engaged team of cathedral builders, people who find purpose in their work. This is a longstanding mindset and an essential component of the RPM entrepreneurial experience. As part of our people pillar, we embrace the ways our associates are different and strive to create a work environment where our associates feel included, invested in, and supported in their work and their community contributions. Granted, we could not take on the challenge of building a better world without the committed RPM associates around the globe who we involve in our sustainability efforts in a variety of different ways. We are also focused on adapting to matters affecting and things valued by our rapidly changing workforce. And we develop benefits offerings designed to support associates' mental, emotional, and physical well-being. For example, we recently redesigned our infertility benefits to better serve women without partners, same-sex couples, and women who are later in childbearing years. And we look for ways to offer learning opportunities to our associates to meet continuing training needs, stimulate personal growth and development, and advance in their roles. In fact, in response to our first employee engagement survey earlier this year, we are investing in an exciting new online training and development service offering. Our MS168 manufacturing system is the foundation for many process improvement efforts associated with Map to Growth. And it is critical to the achievement of our 2025 Building a Better World sustainability goals. This program has been implemented at 40 plants and is being rolled out at more facilities each year. It empowers our associates to maximize efficiency, to minimize waste in our facilities. Reducing waste ultimately improves the quality of our products and increases the overall operational efficiency in our facilities, thus reducing greenhouse gas emissions and the use of natural resources. We take climate risks seriously as we decide how to spend capital, where to expand our operations. In 2021, we conducted a review of our manufacturing and distribution centers to assess total water withdrawn water consumed, and facilities located in regions with high or extremely high water stress to guide capital expenditure and operational decision making. For our center-led environmental health and safety program, we conduct audits and deliver training, develop safety policies, and create goals to address areas for improvement for the safety and health of our employees. Since 2015, we imposed 31 outdated and energy intensive plants as part of our map to growth program. As we consolidated locations and became more operationally efficient, we significantly reduced greenhouse gas emissions, energy, and water use. We have limited data for 2015, but based on our estimates, we believe that compared to 2021 on a per ton of production basis, we reduced greenhouse gas emissions by a fabulous 40% approximately, and water by approximately an astounding 60%. A testament to the value of the MS168 program, to our sustainability success, and to facilitating the achievement of our Building a Better World 2025 goals. Our foundation of good governance is built off of a board of directors that is engaged in environmental, social, and governance issues and provides guidance to our cross-functional building a better world oversight committee, which I chair. We have had women leaders on our board for over 30 years. and recently added sustainability experience from two new directors, Julie Legacy, Chief Sustainability and Strategy Officer of Caterpillar Inc., and Elizabeth Whitehead, Executive Vice President, Sustainability and Strategy of Union Pacific Corporation. General Ellen Polakoski, our most recently appointed director, brings a wealth of executive leadership experience as a result of her role as a four-star general in the U.S. Air Force. Governance in our culture of transparency, trust, and respect is reinforced throughout our organization, through our code of conduct, and through our ethics and compliance training program that focuses on all employees, including management. As I stated earlier, we are proud of the accomplishments to date associated with our Building a Better World program and look forward to continuing to build a better world as we develop new initiatives and targets meet our 2025 sustainability goals as we look to the future we are excited about our prospects to stimulate engagement and drive change throughout our organization given this center-led sustainability approach the energy around our William & Earl program and our board support we are committed to being good corporate stewards with our products for our people and through our processes for the benefit of the environment We are prioritizing a number of different areas for future progress, some of which are highlighted on this slide, like the development of a renewable energy strategy and additional goals, as I said earlier. I'm excited and honored to lead RPM in its Building a Better World program, and on behalf of RPM and our committed associates, I thank you for supporting our commitment to build a better world. I will now turn the presentation over to Paul Huliglou, president of our construction finance group.

As Frank mentioned, I've been 10 years with the construction products group, and we'll share a little bit today with you about that journey. In 2016, Frank approached me in what had a date at that point that highly fragmented, highly local, all over the world approach to building construction materials and said, want to form this global group and pursue that as a strategy. And I said, yes. And then that frankly, it took about three years to put all that together. And we unveiled that in July of 2019. So strategic realignment to drive growth and efficiency was sort of the tagline back then. And the group is really structured around two fundamental areas, the as-built and new building construction environment, air moisture and thermal management. as well as all the flooring in the building that would be seamless fire protection both active and passive than anything in the building and any of the concrete. And then on the other side, anything to do with infrastructure that is either about concrete or concrete protection. So since the group was put together as a reportable segment, you can see that the performance has been solid. And as Frank noted, we've been in a very, very challenged environment, but we've done a nice job at being able to leverage and grow sales, get that to the bottom line on the EBIT side, as well as improve our EBIT percent. So a very good start for us there. A key part of the changes, historically, what had been independent, really company-based, generally based upon when they were acquired and then within the geographies they were acquired. We went to a global brand strategy. We have nine of those. I'm not gonna walk you through all of them. You'll see a number of those in my examples later on when we post you at the test wall. And then two brands which remain regional. One, Viapol, which is a very strong brand in Brazil, exciting market for us. And the other is Key Resins, which is a very good flooring brand just here in North America. And then again, the key markets we served, as I mentioned, it's really any of the buildings in the, both as-built, already existing in the new construction, and then any of the key infrastructure assets. And you can see they sort of list the usual suspects there on the right. So before I talk about our group's theory of competition, I want to talk about RPM's theory of competition. And 1947 is the founding of RPM. And you see the lone wolf there. Very much a strategy of a highly decentralized entrepreneurial structure. Frank always shares great, great stories of his grandfather with his field sales team out there who had that decision-making authority, local key to the customer. Frank, I always remember that you educated us that for your grandfather, the customer was a salespeople, not the actual end customer. They were served by a steel sales organization. get up every day maniacally focused on maintaining this decision making as close to the customer as possible it's a key tenant that's really helped us out grow the market by a turn or two over our entire history but when the map program got unveiled in baltimore in november of 2018 it really was saying okay there's an inherent amount of operating inefficiency when you're that decentralized Could we work together as one monolithic team and gain all that operating efficiency of a highly integrated company? And of course, Kim presented on that at now MAP 2025, our second iteration. But that's really, for me, the concept of the Wolfpack, right? Where if you're familiar with the social dynamics of the Wolfpack, Wolfpack is where the strong look out for those who are less strong. And I think that's very much a key theme for what we do as RPM from a theory of competition. And that's certainly what we try to do within our group as part of that strategy. So now I'm going to shift to our group's theory of competition. So when we got together in 2016 to say, okay, what's going to make us unique and different in the marketplace? We realized that we were very, very successful when we created and drove the market. Now, that's a pretty, I think, audacious or bold statement. It's not serving the market. It says we will create and drive it. And I will share some examples with you today, both in this presentation and later on at our test wall, that give you a sense of how we do that. There are really three tenets to that is platforms. Good platforms make it easy to do good, hard things. IPP is an organization that was founded by Peter Diamandis of XPRIZE fame out there, a private flight to space, if you would do a little bit of research on him, and an incredibly dynamic individual. So whenever we're struggling, I always go back to saying either we're not connected properly to the platform, there's a platform issue, or we're outside of that, and I'll share with you on the next slide what that platform strategy looks like. Solving unique problems. CPG wins when we solve unique problems. PGH, that's me. Those are my initials. But I have stolen that from a number of other people, so that's my own paraphrasing of that. We get up every day looking to solve unique problems that nobody else has been able to solve. And for me, the more difficult the problem, probably the bigger the prize, and off we go. So that's sort of a key tenet in terms of what we focus on. And of course, if you can solve a unique problem, that is the core foundation of how you create the new market then based on that solution. In the last, a new scientific truth, I'll read this, a new scientific truth does not triumph by convincing its opponents to make them see the light, but rather because its opponents eventually died, and a new generation draws up that is familiar with it. It's been commented to me as Max Planck, famous physicist, but that's a rather dark quote. But it's appropriate for building construction materials, which are very, very slow to change, so If you're going to create and drive the market, it's a generational experience. It's a 20-year journey. Many of the things that we've done, Frank referenced illumination 301. That's a roof restoration coating, 1947. The roof restoration market, which we're a primary driver of, really didn't gain momentum until we focused on it in 2013. If you do the math, that's not one generation. That's three or four. So you have to have the persistence to see that through. And if you think of the market as a hockey stick, you live on the blade a torturously long time before you get the benefits of getting up on the stick. So again, that's a key theme. When we go and create and drive the market, it's a 20-year view, and we'll share some things again at the test wall with you, that many of those go back 20, 30, or 40 years, and we're just now gaining momentum in the marketplace. So this is what that platform approach looks like. When we got together in 2016, this pyramid was inverted, and really all the power was at a regional business platform level in order to serve the customer. Now all the power and how we're structured sits within our 12 platforms. I'll share a few of these platforms with you today. And then everything else is subordinate to that operationally, our field sales organization, our channels to market, and then again our regions. So I think we're very uniquely structured in the marketplace that these technology platforms are really the dominant driver and the key organizing strategic principle in the group. So this is the first example that I'll touch on. On the right you see macro trends. So these trends will appear on each subsequent slide. So I'll just cover these real quick and then I'll get to the specifics of the slide. So labor shortage, that's not new to anybody. We had a chronic labor shortage long before COVID and COVID really just absolutely amplified that for us. And that's really in all aspects of building construction materials Less feed in the street. Our competition is continuing to cut their SG&A. We're going in the opposite direction. We are getting more and more SG&A efficient. So I would say for every dollar of efficiency, 50 cents goes to the house and 50 cents goes into putting more feed in the street. So that's a dominant trend out there. We very often hear they only ever see us in the market. They don't see anybody else. Unmaintainable buildings. building you're in probably doesn't have a manual that says what do you do on your car when the windshield wiper wears out. You don't replace the car, you replace the wiper. Your buildings aren't typically built that way, so we're in this massive as-built environment. None of it was built to be maintained, so that's a huge opportunity for us. Zero landfill, of course, that's... very prevalent today and everybody's aware of the reasons we don't want to put things in landfill, certainly a primary area of methane. And I think just burying our waste is not a very great solution. Energy efficiency is becoming a heightened awareness of that, of course, all the time. Indoor air quality, we're very aware of that because of COVID, but indoor air quality is a lot more than that. It's occupant comfort and occupant comfort really enhances whether it's a school, your learning ability, or your ability to work, or just your ability to be comfortable with your family. So there's a lot there about occupant comfort. And lead with safety. There's two sides to that. We inherently want a safer workforce, our own workforce, for our customers' workforce. But there also is a whole trend in the industry to where people don't want to work in dangerous activities. So you're seeing a great difficulty in, especially today's labor force, labor shortage, getting people to go to the more difficult trades. So a big competitive advantage for us is if our processes and systems and so on are inherently more safe, that's going to make it more competitively compelling. Internet of things, monitoring, diagnostics, that's of course well known to all of you there. But diagnostics, we're probably the leader in all of the different aspects of the building and infrastructure and our own ability to do diagnostics. that the core strategy you have is restoration. You better be able to diagnose what you're restoring, because you're essentially taking ownership of that structure once you restore it. The chief procurement officer, there's a rule of thumb I use right now that probably a third of all buying decisions are made by people like Tim. And their procurement professionals, The old days of selling to the engineer your features and benefits, I think, are getting more and more difficult. So how do we bring value to a chief procurement officer? And it's a very different conversation than, oh, my product or systems are better or solve this problem. Method to buy, you see there. So again, the chief procurement officers went off and dictate to us, I want to buy this way, and so we need to be able to sell to them that way. Climate change volatility, there's a few key things here. First, a lot of construction practices require what I call good weather or a series of days of good weather. That's getting harder and harder to do. So if you have construction methods that don't require good weather that you can do in any sort of inclement or cold weather, you gain advantage. Or if you can operate in very short windows, if the restoration process takes an hour or two versus three to five days, then you can work in situations traditionally where you couldn't. And, of course, we're also getting more severe weather events, in particular because this entire as-built environment, both infrastructure and buildings, is more and more dense, right? So the level of destruction gets higher and higher. So our ability to have very, very durable structures is becoming more and more compelling. Of course, Hurricane Ian brought that to mind again this past week. And thermal stability and harmony. There are two things that fundamentally attack structure, quote, from the sun and its thermal movement and expansion. So the ability to control that, the best building or structure is completely thermally stable. And certainly if you're gonna restore something, whatever you restore it with has to be in harmony with the movement of that structure, right? So I'll get to this specific example. I think this is the most famous roof in all of Cleveland. This is our Quicken Loans arena downtown. And you see on the left, it says cost of neglect. So that roof, if it's run to failure, that's a $6.8 million cost for the Cavalier organization. So our primary competitive approach in this market is asset management, eliminate money to failure. You can kind of see if you get earlier in the process, then you're much more cost effective. We use an expression in roofing. The existing roof you have is the last roof you'll ever need. So there's a... prevailing thinking in the roofing industry is tear off and replaced, and we're about educating the owner about asset management, and then in that asset management approach, then bringing up products and systems to bear. The food applied roofing market in North America is approximately 800 million. That's 14% of roughly five and a half to six billion dollar low mill spoke market. Notice it says 14%. Every year that percent goes up one or two percent. We're the primary driver of that percentage going up and up, and we're certainly the primary player in that 796. So we're the ones creating and driving the market. If the market exists, how do we create it? We're constantly bringing restoration solutions to the market for what was inherently not restorable. So this year, Something we've been developing for eight years is called Alpha Grade. The single largest installed base of roofs out there is gravel surface built up roofs. They've inherently been unrestorable until our Alpha Grade system out there. And that's a big reason we have primary standing with many of the large enterprise customers out there. So that in essence creates a whole new restoration market for that roof type that didn't exist. On the other side, you see services is roughly 2x the size of the material market. We're the third largest roofing contractor in North America. So back to the CPO. Often somebody like Tim says, I want one throat to choke. I don't want to buy from a manufacturer, have a contractor, and they'll point fingers at each other. Who do I go to? So there's an increasing momentum in the marketplace of wanting to hold one party accountable. We're fairly unique in our ability to be held accountable on a national basis and even on a global basis. So we're big players on the right side of that equation. Okay, so we talked about one side of the building. Let's talk about the next four sides. You see a before and after picture here. You see on the right side the building that this before and after picture came from. So this is a good example of a building that probably got built in the 1970s, not built to be restored. And so on the left is something you see where they're trying to solve In that one interface you see there's probably seven or eight different areas where you can get air or water intrusion, and they're trying to solve them with a ceiling. You'll later on hear from Marcy Tyler, our director of building science, we love our ceilings, but ceilings can't solve a lot of problems. So in this case, the only way to solve something like that is with a gasket system. And you see that we have our range of solutions down below, right? There's a cliche that if all you have is a hammer, everything's a nail. So one of the things that's unique about us is we have all the different methods of restoration. So we don't have any one particular system. There's a range of choices. And you see here, there's some scaffolding on that building. And I'll quickly kind of go through the macro trends here. Labor shortage. If you were to, typically we walk into a building like this, they've already been presented what I call reskinning, right? So you basically have to scaffold and basically take off half the side, one floor at a time. And so the labor, the amount of labor to do that compared to a couple of people on a swing stage for a summer to redo this building, a dramatic difference. Plus being the street, again, we have a very strong of our presence and being able to support this type of restoration out in the field. Unmaintainable buildings. We seek out the unsolved problem that says this building cannot be restored, it cannot be maintained. How do we bring a system to the market to allow you to maintain that, right? So we seek that out. Is there a landfill? Nothing's gonna go in the landfill once we restore this. Energy efficiency will dramatically improve because all that air moisture and thermal leakage going on in that interface will be eliminated. Indoor air quality will be dramatically improved. You cannot control indoor air quality unless you can stop all the leakage going on and keep all of the moisture out of the building. Lead with safety. This is a much safer People want to do this work because you're just on a nice swing stage, typically used to clean the windows, as opposed to the scaffolding, much more dangerous work if you're to reskin that building. The chief procurement officer, again, method to buy. They'll dictate to us how you want to buy it. All of the different methods to buy, we're very, very prevalent in, and that's a big differentiator for us. Climate change volatility, you can do this work on the rainiest day, on the windiest day, on the coldest day. You could do this work in minus 20F. I wouldn't want to, right? I think that's a little cruel. But you can work in very cold or very hot temperatures or very wet, doesn't matter. And then again, the thermal stability, right? This solution needs to move with this building. You've ever been up pretty high in a building? You can feel sometimes movement is feet, you know, two, three feet. So our systems and solutions need to be able to move with that. That's one of the key reasons the ceiling won't work. All right, so we did two things on restoration. What about if we built new and didn't need to restore at all? So we're going to talk about insulated concrete forms here. That's our New York. You'll again see that at the test wall. It's a method of construction that we think is the strongest that's out there, incredibly energy efficient. I'll share with you in this example what those numbers look like. Tremendous amount of comfort. That comfort is the combination of your comfort with the air that's around you, but also the noise, the quietest way to build. And then more environmentally friendly, from a cradle to cradle life cycle. As you heard Gracie talk about how we're trying to improve our own operations, we think this is the most environmentally friendly way to build. What you see here is a school, Richardville Elementary School in Kentucky. It was the first school in North America to be net zero. Not only was it net zero, after the first year, they got a check from the utility for $37,000. It was net positive, right? And that really created a real stir out there that said, hey, not only is this possible, we should expect that. And this is really the prevailing method of school construction throughout all of Kentucky. The cost is comparable to a conventional school. Again, I mentioned all that recognition. The photovoltaics that went up on that roof, a school of that size usually is about three football fields of photovoltaics, but because of using ICF, this was only 40,000 square feet, so you reduce that asset, capital asset cost by 75%. It is the facility in the town you go to when there's a tornado warning. It can withstand winds of over 250 miles an hour, so incredibly durable. In a learning environment, we all know the importance of natural daylight. So you'll see in this structure, dozens of really large windows, so it doesn't really inhibit that, you know, we could build a completely impervious concrete structure, but that wouldn't be very people friendly. The design flexibility of this is unparalleled compared to conventional construction. So they have a highly suspended radius wall. It's a pretty neat design element. And this school is actually very close to the road, so the original school that was there, very noisy for the students. When you're in that building, it's absolutely whisper quiet. So back to the macro trends on the right. Of course, we covered the labor shortage. A very small crew can build this entire wall system compared to the large crew. There's also a speedy construction here. often one to four or one to five, meaning it will take four or five, six months to do a small crew can do in one month. So great speedy construction. Of course, I mentioned zero landfill because this building will last as long as you want it to. It's not going to degrade. Tremendous energy efficiency. I've shared with you the check they received. Indoor air quality because of its ability to inherently control the air moisture and thermal far better in conventional construction. Meant with safety, a much safer way to construct than traditional methods. Climate change and volatility, of course, being very, very durable, that's a good thing, but you can build this way no matter what the weather is, so there are no inherent weather delays. And then the thermal stability or harmony. This is 100% thermally stable gold. It doesn't contract and expand all gold out of concrete. Okay, I'm gonna shift gears here. On my original branding slide, you would see Tremco Power One, This is an example of one of our hospital customers, and it's an example of bringing things together across our entire group and all of RPM. So on this parking garage restoration, there will be Tremco, we'll seal where there are only two companies in the world that do these wide joints. We'll cover with you that later when we do, we host you what's unique and special about us. Euclid, which is on the concrete side. Rust-Oleum for protecting metal. WTI, our own self-performed capability. In this case, that's what the customer wanted. And Firewood Rig, which is a sister company for FRP composites on that parking garage. We also did the facade, that's Tremco, and drive it for the finishes. Wheel seal, again, for the joints. WTI, that is self-performed. And then roofing and HVAC restoration. So you've heard plenty about roofing, so we did that on a self-performed basis. Curier was a recent acquisition So everything I told you about roof restoration, we are now pursuing on HVAC and air handling, right? That's a market three times larger than roofing, all built on run to failure, already on the roof. We've already persuaded the customer about the benefit of asset management. Why not apply that to your air equipment? And so in this case, we did that for that hospital. And certainly again, the benefit of no tenant disruption key for a hospital, right? Needs to run 724. Legend Brands, that's an RPM sister company. You'll see later on about the importance of Legend Brand in doing roofing, right? And FiberGrade again on the composite side. So this is the ability to bring all these different things together. Frank's question from 2016 brought to life with one project, with one customer, one hospital. So we talked about platforms within my group. I think it's often not well understood that RPM itself is a terrific platform. So I'll give you three quick examples about my group working with the others. The first one is on the CPO side is Tremco working with Rustoleum. And Rustoleum had a terrific relationship with Grainger. There's nobody better than Grainger working with chief procurement officers to optimize your MRO spend. So we went to meet with Grainger to say, we'd like to partner with you so you can bring value to the chief procurement office for building restoration and building maintenance. So we have a big partnership with Grainger to do that today. Once we learned how to do that, then we went to Dave Denstead, who runs the Performance Codings Group, and says, well, your carboline, stoner, and fire brigade companies all have the same phenomena we do, but how to work with these chief procurement officers. Why don't you come with us? We'll introduce you to Grainger, and we'll partner with you about how to get that up and running. The second example I have is Tremco primarily serves what I call the tier one marketplace in terms of tier one contractors and specified work, but there's tier two and three and DIY. So we've really partnered with Rustoleum who excels at DIY and two-step distribution for how we serve the tier two, tier three and DIY marketplace. So a lot of exciting initiatives underway there. The third one, you see the word technology appear over and over. Legend Branch, we'll again show you later on when we host. Manfest Hauser is in biomaterials, so we're doing a lot of work ourselves on biomaterials, and Manfest Hauser has really educated us on that. Dayglo is a very, very sophisticated resin manufacturer, so a lot of our next generation resins to solve problems that couldn't be solved come from Dayglo. You see that down there, Finish Works, which has a very interesting business model, which we are piggybacking on in terms of how we go to market, partnering with them. And then last but not least, Wood Finishes, who's a high-end player in wood finishes, and you see a lot of that, those wood finishes coatings are starting to show up in our own products. Who knew, right, that wood finishes would translate to roofing, but some key breakthroughs there, working with them as a partner. So in closing, you know, I talked, So far, if you listen to me, you think, ah, you're about selling products and systems, but earlier I mentioned asset management, right? We really wanna persuade people on asset management. If you buy into asset management, then you're gonna be receptive to my restoration strategy. So in this case, what we're talking about here is fundamentally trying to raise up the industry, right, to better and better building and construction practices. Build once, build right, maintain forever, as opposed to run to failure. And this is really a summary of us saying our whole emphasis about putting more and more feet in the street so we can really help everybody and be present in the industry. We're very, very unique in being able to do that and invest in that on an ongoing basis. I'm gonna turn it over to Frank for some concluding comments.

So I'm going to wrap up our prepared remarks just to kind of summarize the things that we've been talking about. We, through the MAP program, have developed a culture of collaboration that is serving our P&M, our customers, and our shareholders exceedingly well. And we have been able to marry that entrepreneurial spirit that's the hallmark of kind of our foundational success with operating efficiency, but there's a lot more work to do. We've got a strong balance sheet and a very disciplined capital allocation program, and that will continue throughout the MAP program in the next few challenging years. Sustainability is an integral part of what we do and who we are. And RPM companies have been driving and building a better world for decades, but we have to get together and tell the RPM story so society demands better. and take all of that success of our businesses and hold us into an RPM approach to ESG. Tracy Crandall is really leading that effort both across our businesses to drive those sustainability improvements, but also to better communicate the sustainability story that's been part of RPM for decades. And then lastly, I appreciate you all being here because you're gonna get to touch and see more concretely with the tour at our Tremco sealants facility some of the things paul didn't talk about so i want to thank tracy and tim and paul for their presentations this morning and we have about 25 minutes uh for any questions if you like everyone just wants to raise their hand if you have a question

Just two questions. When you think about the 5% organic growth, it's been hard for anybody to grow 5% over the last couple years. Can you maybe talk about how much of that is sort of the economy and what you can do on your own in terms of volume growth? And then just to follow up, what type of free cash flow will you be able to generate over this time frame?

Sure. So on the growth, when you look over the last 20-year period, our organic growth, average basis about five and a half or six percent so i don't think these numbers are uh certainly out of reach um it is organic growth so it will be a mix of price and unit volume uh certainly we're benefiting significantly from price this year i think in uh in q1 of 17 percent 15 percent of 15 percent and so but we're anticipating that slowing down in the coming years so we think that five percent On the cash flow, I'll let Rusty address some of the cash flow dynamics. We have not put together for public disclosure the cash flow pieces of this yet. There are critical working capital goals internally and related to compensation about our MAPS program. Do you want to add to that, Rusty?

You hear me? Yes, when it comes to cash flow, our cash flow results have been poor because of the supply chain challenges. We've had to actually stock up when we can over the last year and a half just to be able to supply. And granted, not supply at the fill rates we cash flow, but Tim, I know you've looked at the MAP goals in regards to working capital and cash flow, so I'll let you comment on that.

Yes, so we have some targets around improving our working capital. We do expect to improve our working capital as a percentage be largely focused through better processes around our inventory as we might size our inventory coming out of all these supply chain challenges that we have it's going to be a key focus thank you kevin mcbarth the vertical research department

the vast majority would hit the COGS line. Is there a portion that hits SG&A as well? And if so, how much cost savings might there be there? The second part would be what is the cost to implement? And then third, obviously price and raw material costs can re-cab it or be a tremendous benefit on the gross margin line as the case may be as we've seen in recent years. what are you assuming in the plan for price contributions and raw material costs?

Okay, so Kevin, is this on? Yes. Kevin, the first question again, please. Any SG&A secrets? Okay, so our plan is, we do expect to, have some small amounts of administration savings, but it will not be material. We're making strategic investments into our growth revenue, and we also have the normal S&E inflation. So I did not call that out as a work stream. There still are some opportunities for consolidation around some accounting locations, but it will not be material in the overall MAPS savings. I'm sorry, next question. So on our cost to implement, we are currently looking at it being less than $200 million, with about half of that being in CapEx.

I would just add to that, the original MAP program cost to implement was probably about $300 million. 300 million and the difference is we were able to consolidate and close 31 manufacturing facilities in 2020 map to growth while there will be some modest footprint reduction in that 2025 we won't have the same level and so that's the significant difference between a 150 million and 200 million dollar cost to achieve

Please, your third question.

My third one is, what are you baiting in in terms of assumptions for price increases versus raw material cost trends as it relates to 42% gross margin?

So what we would expect, as I mentioned, is that we were near a cycle high in fiscal year 22. We have obviously been going out with price increases and reported 15%. We are still behind on catching up. We actually had sequential inflation as was discussed on the call in this first quarter. So right now we haven't seen the peak of that. I do expect that sometime during this period of not 2025 that we would get back to a more historic normal. And we're just going to have to, as we go through this continued inflation, we're going to have to continue to keep an eye on that and increase prices to stay up there.

I would add to that that the current savings that we identified in the Wage Plan are roughly 50% process improvements and consolidations that we believe we can affect. and the remainder, 50%, is a plug number for commodity cycle benefit. And that's one I'm certain we'll be wrong on. We'll either get more or less, depending on the timing and magnitude of the commodity cycle recovery and the related ability to maintain our prices. of our expected savings, roughly in half, between process that we can affect ourselves, regardless of economic circumstances, and supply, you know, amount of cycle benefits. Having said that, a critical element of our success, and we saw this in the original map, is driving those revenue gains, because you can be very efficient in your cost-price mix,

If you look at your cost of goods in fiscal 2022 versus 2021, it went up by around $600 million. How much of that was raws versus, sounds like, Frank, you're looking at a little over $100 million in savings. So what much was raws up in fiscal 2022?

The long-term inflation that we had in our fiscal year of 22 was north of 500 million. Okay.

And Paul, maybe one for you. And perhaps we'll get into this in more detail on that tour, but you got a couple of different brands that are involved in epoxy flooring and so forth. You got a couple of different brands that are involved.

They did when I got there. So I would say in general, no. I mean, there's far better cooperation in terms of how we deal In many cases, they go to market differently, so they rarely, if ever, collide. And the one or two times they do a year, I have sort of a standing rule, please call me first when somebody has to make a decision. And even between us and the other RPM groups that can exist, there's just a high level of cooperation between me and the other three presidents. I think philosophically, there's a lot of white space in our markets, and we have a lot of different ways to get there. And there ends up being a smidge of friction between the circles in that white space. And I think what we've done well within RPM now is at our group president level, we all talk to each other once or twice a year. It gets a little exciting.

Yeah, hi, Josh Spector with UBS. Just a question about some of the cross-selling or the different opportunities, one product, construction, consumer performance. You talked a lot about the president discussing that, but really what level of the organization are some of those decisions made where there might be the right product or a different avenue to sell it where there might be an opportunity? And are employees incentivized in some way to do that financially to encourage more of that?

so let me address that from a big picture perspective and then have paul and tim maybe address that so uh as paul referenced and and tim his prepared remarks um the probably the most fundamental change in our 2020 map program was the cultural change of rpm so the level of cooperation communication collaboration is extraordinary for those that have followed rpm 10 years ago we had six beefers They all stayed in their own space and out bumped heads, even a little bit to Paul. We've been talking about connections creating value for 15 years through the MAP period. our intra-company connections in terms of insourcing, not just including, of course, Canada had grown from 20 million, I think, 60 to 180, sorry, from 60 million to 180 million. And so that gives you a sense of what's happening there within our own businesses. And I'll let Paul or Tim address the You know, how does that get addressed at the level of the low-degree presence, I think, of your question?

Yeah, I think in the beginning, as I referenced, it was very much top-down. work together in harmony and now i think we're four or five years down the road on that there's a lot of relationships now at a much lower level and you know you're doing something right when they figure out their next strategic how we work together one other word we use in our our group a lot we call it strategic structure is a strategic we call strategic alignment how does your how does your selling activity line up to the strategy of the company and right in strategic alignment specific initiatives with sister companies very discrete metrics to where we both reward and punish that behavior so that's quite the journey we've made from not even being able to discuss

Yeah, I would just add on the materials side from an insourcing standpoint. We have four facilities that are capable of producing materials that other RPM companies can use. Of course, Stan is being one of them. We have a couple within our Dago organization. And we've developed a cost plus model that takes all negotiation out of it and through the use of the center-led team and the leaders of those organizations, they're able to see how they can help out companies cross-company. So it's been very effective, especially during the supply chain shortages. Some of these facilities were really able to step up and bail out some of the other companies when they understood what the need was.

Lastly, I'll address one more thing there. Through the MAPs Growth Program, this new organization for our four group presidents and group CFOs and some of their senior leaders. We have changed our comp program to be more RPM equities, performance-based, but RPM equity in awarding, and more based on RPM consolidated goals. Pre-mapped growth, if you were one of our six group presidents, most of your compensation, even when it was equity-related, was generated by your performance to your group's regardless of what else happened at RPM. We fundamentally changed that at a more senior leader level, and it's got everybody's attention on a big ball. There's only one stock that trades, no matter what RPM company you operate in, and it's called RPM. So that's had a meaningful benefit as well, in terms of collaboration, to the benefit of the entire organization. a lot more growth opportunity that way you expect to bolt on a lot more things because you could probably take out another layer if you were to actually move it over the construction um sure i um we have consolidated from for six groups before uh has had some uh meaningful benefits but the performance coding strip in particular a carb line or a stone heart. They serve a more heavy industry capital spend in infrastructure. So we do all sorts for Intel. We're big in life electronics. We're big in pharmaceuticals, power, oil and gas, marine, water, wastewater. So more heavy infrastructure. the market differently. You could bang a lot of this together and get some additional efficiencies. The real question that we constantly balance is what do you lose in the close to the market driving revenue growth perspective if you did that? And so we think we've got our businesses optimized. business units revenues with the Performance Coatings Group, where I think a candid discussion between Dave Denstead and Paul Guggenboom resulted in, hey, these product lines are in your group, but we can serve the market better with them and vice versa. And again, in the old RPM, that would have never happened.

Yeah, so to build on that, there are parts of the world where we're completely consolidated. And either my team leads it or Dave's team leads it. Dave and I constantly talk about very openly and very cooperatively about where we really can get that leverage, especially, and we call it a rest of world, where there are either smaller markets, more difficult markets. So a high degree of partnership between us. In the more developed markets, like North America, the flooring partner for roofing is Stoneheart. And you're like, yeah, but you're a big flooring company in your own group. But the business model at Stoneheart is compatible with roofing. work with a car line or fire greater stonewater and we actually have within the CPG comp programs the direct incentives in alignment with where we think we align in the market where you will work with your sister company so at a local level the roofing rep in the stone art rep are constantly

cooperation at the field level as well a lot of that's changed as i referenced earlier a lot of that's changed over the last five six years it doesn't sound like you give up a lot of people together well uh i think what you want to maintain is the distinct approach to the market um our biggest asset on the shoulder balance sheet across our can we probably have two to three thousand sales people and they are highly experienced uh Tons of relationships. And so the thing that we're focused on that is really helping accelerate growth, and it's part of that CS168, is taking old line sales reps that have deep, deep relationships and know tons about the oil and gas market or tons about water and wastewater. And we are empowering those people. Think of it as empowering people with Salesforce.com. which is one thing that we're using. But we're using data in ways that we never had in the past. And it's real. It's real to the tune of a couple million bucks a month. And some of our businesses with an outside consulting firm, if we build database, Our focus more is on using our data, and this is a little bit like lean manufacturing disciplines. Not new to the world, but they were new to RPM. When we embrace them, you can see the power in our lower conversion costs. Big data and data lakes and the ability to use data effectively with really interesting tools isn't quite as old as lean manufacturing disciplines. But it ain't new to the world, but it's new to RPM and some of our sales forces. So that's where we're spending our time. One last point on that. Those efforts, John, tend to be driven on a consolidated spend basis. So there is no duplication. We have a shared service center in Coimbatore, India. Three years ago, we had 25 people there. This year, we have 282. And it's IT, it's accounting, and it touches every RPM business, including our corporate headquarters. So there's already a level of growing consolidation around the things I think you're asking about that we are doing. But we have no intention of consolidating sales forces or tech service reps. As you heard Paul, and if my grandfather was here, he would tell you the same thing. More feet on the street, the better, and he believed that. And he believed that if you had a business that was consolidating distribution or consolidating a sales force, ultimately you'd have a business whose revenue base is gonna go the wrong way. Now the key is, can we use more modern tools to to the sales force that we have. Great. We have time, I think, for one more question.

Good job, Melty, from VMO. So, a friend, I guess a couple of things. First of all, I know on your numbers that you just put up the other day, it seemed like a lot of the map tailwinds were in the consumer business. Is that how we should be thinking about it through the whole program? kind of evenly divided or does that even out and do we see some pretty chunky bids throughout the rest of the group and then i guess the other question would just be on the data analytics side we started to go through some of this before but data analytics helps on the cost side a lot but it does sometimes open up revenue opportunities can you help us to understand what maybe insights you're seeing that you've learned that we can add that can use going forward to drive the revenue a little bit harder to sure look

We have spent a significant amount upfront in the beginning of that 2025 on our consumer group. And it's because of the significant challenges they faced at Revenant in 2022. And they operated at profitability margin levels that were lower than in their history with RPM. And it was a function of the code and spikes and operations, and it was exacerbated by the COVID spikes in terms of just scrambling to do whatever we could and meet demand. And then as demand fell and as supply chain challenges surfaced, all of that hit our consumer group in general and was only in particular. So we spent a significant amount of time. I will tell you that by group, as you saw in the first quarter, a significant portion of our fiscal 23 our 23 benefit will be coming disproportionately from the recovery in our consumer group which had a great first quarter is going to have a great second quarter but are still not back to their historic uh high margins um and then i would tell you that in fiscal 24 and 25 you will see of MAP 2025 across all our businesses. So Tim or Paul wanted to add to that. And I think Paul in particular questions around the CS168 and is this just an efficiency thing or is it gonna open up avenues for other revenue?

Yeah, the big change that really took place over the last 10 years is we were inherently structured in field selling bottom up. So the local individual would determine their activity and what their focus was. A big change has been from an analytics standpoint. We're both, we're now also top down. So from the top, our group from the top down which is tied to what we call strategic alignment, where we now say, okay, from a sales activity standpoint, where to direct the activity, how to track the activity, and how to hunt, and then our field sales organization executes against it. So Frank, as you referenced, these are not new. They're just new to our behalf.

And I would add to that, John, to your last part of your question, there will be some opportunities to come up because some of our coming efforts will be to pool our data on a consolidated basis. And it's hard to know today what would come out of that. The selling tools will necessarily be specific to the large SBUs, but the ability to look at massive amounts of data, not only within groups of SBUs, but across RPM, I think is going to reveal some interesting things for us, but we're not there yet. But we're getting there quick. Tim, anything to add to that? No, I think you've covered it.

No, I think you said it very well.

So I think we have to get on the bus here to head over to our Tremco ceiling plan, and I just want to conclude for the people that are listening online, thank you for your participation today, for your interest in RPM. We certainly are living in an unprecedented, at least in modern economic history, just volatile and uncertain period of time, and so I'll conclude with We've laid out the details here. Certainly it will be revenue specific as to how much of that hits our bottom line. But out of $465 million in expected improvements and or efficiencies in NAP 2025, I believe there's $300 million plus that are elements that are within our control. And so we're really excited about executing on this plan. As we communicate our quarterly results starting in January. And so I want to thank everybody for your participation. For those that are going to the Trenfield plan, we're grateful for your presence. And I think your investment of time and some expense to get here will be well rewarded. And thank you for praising Rusty and Tim and Paul for presenting today.