RPM International Inc.

Good morning, everyone, and welcome to the RPM International Fiscal Third Quarter 2024 Earnings Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and one on a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Matt Schlarb, Senior Director of Investor Relations. Sir, please go ahead.

Thank you, Jamie, and welcome to RPM International's conference call for the fiscal 2024 third quarter. Joining today's call are Frank Sullivan, RPM's Chair and CEO, who is dialing in remotely today, Rusty Gordon, Vice President and Chief Financial Officer, and Michael LaRoche, Vice President, Controller, and Chief Accounting Officer. This call is also being webcast and can be accessed live or replayed on the RPM website at www.rpminc.com. Comments made on this call may include forward-looking statements based on current expectations that involve risks and uncertainties, which could cause actual results to be materially different. For more information on these risks and uncertainties, please visit RPM's reports filed with the SEC. During this conference call, references may be made to non-GAAP financial measures. To assist you in understanding these non-GAAP terms, RPM has posted reconciliations to the most directly comparable GAAP financial measures on the RPM website. Also, please note that our comments will be on an as-adjusted basis, and all comparisons are for the third quarter of fiscal 2023, unless otherwise indicated. We provided a supplemental slide presentation to support our comments on this call. It can be accessed in the Presentations and Webcast section of the RPM website at www.rpminc.com. Additionally, as a reminder, certain businesses in Asia Pacific that were previously part of the Construction Products Group are now being managed and reported under the Performance Codings Group, effective June 1, 2023. As a result, all references to CPG and PCG today reflect the updated structure. The recast businesses generate approximately $100 million in annual sales This change has no impact on our consolidated results. At this time, I'd like to turn the call over to Frank.

Thank you, Matt, and thank you to everybody for participating on our call today. I'll start with a high-level review of our third quarter results, then I'll turn the call over to Mike LaRoche to discuss the financials in more detail. Matt will then provide an update on the balance sheet on organic growth investments in emerging markets, and Rusty will cover our outlook for the balance of the year. At the end of the prepared remarks, we'll be pleased to answer your questions. I'll begin on slide three with our third quarter results. In addition to our strategic balance and focus on repair and maintenance, positive momentum with our MAP 2025 operational improvement initiatives continued in the third quarter, which generated our ninth consecutive quarter of record sales and EBIT results. Margins expanded, and we had our fourth consecutive quarter of record cash from operations. During this trailing 12-month period, we generated $1,260,000,000 in cash flow from operating activities, far exceeding any previous 12-month period in RPM's history. Much of this has been driven by improvements in working capital, which has been a particular area of focus with our MAP 2025 initiatives. Turning to slide four, sales growth was led by our construction products group and our performance coatings group. These segments benefited from their focus on repair and maintenance, as well as their ability to serve strong demand from infrastructure, reshoring, and high-performance building projects with their engineered solutions. Favorable timing of some project completions, particularly in the performance coatings group, contributed to sales growth in Q3. Due to challenging market conditions, volume declines in the consumer and specialty product segments continued. Consumer was negatively impacted by lower DIY takeaway and retail customers who continue to tightly manage inventory levels, partially offset by market share gains. While volumes declined in the specialty products group due primarily to challenging comparisons in the Legend Brands disaster restoration business, there were signs of stabilization in our core specialty OEM markets. As expected, pricing was positive in all segments as we catch up with inflation, including continued inflation in wages, benefits, and insurance. On a consolidated basis, pricing during the quarter was up approximately 1% quarter over quarter. We achieved record adjusted EBIT as our MAP 2025 benefits inclusive of the commodity cycle recovery drove 170 basis point improvement in margins. MAP 2025 initiatives were a benefit to all businesses, particularly those that generated positive unit volume growth. It is imperative that throughout cycles we invest in initiatives to leverage our entrepreneurial spirit and generate volume growth that will allow us to fully realize the benefits from the MAP initiatives we have put in place. Some recent examples include capacity expansions increasing R&D spending through the establishment of our Innovation Center of Excellence, and improving our data-driven decision-making capabilities. We are also expanding our sales forces and training them to increase sales of higher-margin products, as well as introducing new products, such as DAP's one-component wall and cavity spray foam, which is helping us win market share this spring. Moving to slide five, the positive momentum from improved coordination outside the United States continued in the third quarter. Emerging markets led growth for the company as a result of RPM's heavy emphasis on engineered solutions for infrastructure investments in these geographies. In Europe, we are taking share with our focused sales strategy. After excluding the impacts of a divested business Sales in the region were roughly flat despite macroeconomic pressures in several economies. And our focus on implementing MAP 2025 initiatives in the region generated strong EBIT margin improvement. Overall, I'm proud of our associates' continued commitment to our MAP 2025 program, which has consistently generated efficiencies, higher levels of cash flow, and record results. We remain focused on expanding margins, accelerating organic growth, and improving cash flow to achieve our MAP 2025 targets. I'll now turn the call over to Mike LaRoche to cover our third quarter financial results in more detail.