RPM International Inc.

Good day and welcome to the RPM International fourth quarter and fiscal year 2024 earnings conference call. All participants will be in 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 then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to hand the call over to Matt Schlarb. Please go ahead.

Thank you, Andrea. Welcome to RPM International's conference call for the fiscal 2024 fourth quarter and full year. Today's call is being recorded. Joining today's call are Frank Sullivan, RPM's chair and CEO, 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, 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 review 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 to the fourth quarter of fiscal 2023 unless otherwise indicated. We have 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. 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 coding scope effective June 1st, 2023. As a result, all references to CPG and PCG today reflect the updated structure. This change has no impact on consolidated results. At this time, I would like to turn the call over to Frank.

Thank you, Matt, and good morning. I'll start our conference call with a high-level review of our results, then Mike LaRoche will provide more details on our fourth quarter and full-year financials. Matt Schlarb will then give a balance sheet update and discuss how we are using innovation to grow, after which Rusty Gordon will cover our outlook, then we'll be pleased to answer your questions. I'll begin on slide three with our fourth quarter results. Overall, we're pleased with how RPM's associates executed. Despite challenging end markets in several of our businesses, we leveraged MAP 2025 improvements to generate our 10th consecutive quarter of record adjusted EBIT. For the year, sales were a record, and adjusted EBIT increased approximately 12% to a record which was within the guidance we provided a year ago. This included approximately $160 million of MAP 2025 benefits on a run rate basis, or roughly $100 million through the P&L in fiscal 24. Although a portion of these are being temporarily masked by lower fixed cost utilization from reduced volumes. In addition to margin expansion, MAP 2025 has played a critical role in our ability to structurally improve working capital throughout the entire year. This resulted in record cash flow from operating activities of $1.12 billion during fiscal 24, an improvement of over $545 million from fiscal 2023, and $356 million, or 46% more than our previous annual record cash flow. We used a portion of this cash to reduce debt by approximately $557 million during the year and the resulting lower interest expense helped us grow adjusted EPS by 14.7% to a fourth quarter record and by 14.9% for the full year to a record $4.94 per share. Moving to slide four, Our construction products group led growth during the quarter with broad-based strength in most of their businesses, with roofing and its differentiated turnkey offerings demonstrating particular strength. Consumer also executed well during the quarter as they achieved market share gains, upgraded product mix, and realized MAP25 benefits to generate record adjusted EBIT despite a sales decline due to continued DIY softness. After multiple years of achieving record results, our performance cuttings group declined in the fourth quarter as they faced challenging comparisons to the prior year and experienced negative headwinds from the timing of project completions, something we highlighted on our prior earnings call. In the specialty products group, some end markets showed signs of bottoming out, but we continued to remain challenged in this segment. The economic situation remains very challenging. However, we did a good job managing what we can control with a focus on MAP25 and margin improvements to generate record adjusted EBIT and record levels of cash flow. Turning to geographies on slide five, North America, Africa, and the Middle East grew. And while sales declined in other regions, we're still executing well in these areas. European sales declined 4% due to FX headwinds and divestitures in the performance codings group. However, their profitability improved meaningfully as targeted MAP25 initiatives in the region gained momentum, including those focused on generating favorable product mix. Excluding FX, sales in Latin America grew mid-single digits as we continue to benefit from product-serving infrastructure projects. Pacific is performing well under our new management structure. However, fourth quarter sales declined due to challenging comparisons as a large project was completed in the prior year period. To summarize our performance, in the face of several end market and economic challenges, we have realized good improvements in gross margins as a result of our MAP25 initiatives. In addition to gross profit benefits, MAP25 is allowing us to better leverage the power of RPM to create a more efficient and streamlined SDNA structure. We took several SDNA reduction initiatives in the fourth quarter, which will benefit us as we work our way through fiscal 2025. As economic headwinds persist, it's important to remember that the improvements we are making are structural. While they are helping us navigate near-term challenges, their benefits will be even more apparent as end markets eventually recover and we begin to generate better organic growth. I'd now like to turn the call over to Mike LaRoche to cover our financial results in more detail. Thanks, Frank. Starting on slide six, consolidated organic sales increased 0.4% as pricing was slightly higher and volumes overall were flat. FX was a 0.7% headwind to revenue, and divestitures net of acquisitions decreased sales by 0.1%, resulting in a modest decline in sales for the quarter. Even margins expanded 90 basis points, which was driven by MAP 2025 benefits, improved fixed cost leverage at the construction products group, and favorable mix at the consumer group. SG&A increased during the quarter, driven by incentives to sell higher margin products, long-term growth investments, and compensation and benefits. As Frank mentioned, we implemented 2025-enabled initiatives to streamline our SG&A structure in the fourth quarter, and those benefits will be realized in fiscal year 2025. Adjusted EPS increased 14.7% to $1.56, which was a record. Driven by the adjusted EBIT growth, and lower interest expense, as strong cash flow allowed us to repay debt during the quarter. Next, moving to the construction products group results on slide 7. The segment experienced broad-based strength, with roofing and wall systems performing particularly well. The growth came from both new building construction and renovation, and we gained market share in construction chemicals. They also generated growth in product-serving infrastructure projects. including those that reduce both the cost and carbon footprint of their construction. Some of these, including grinding aids, which reduce the amount of energy needed to produce cement, and synthetic fibers that serve as a substitute for steel rebar and produce significantly lower CO2 emissions and require less labor to install. The rise in adjusted EBIT was led by improved fixed cost leverage from volume growth, MAP 2025 benefits, and driving a favorable product mix. On slide 8, the performance codings group sales declined as they faced challenging comparisons to the prior year period when sales grew 10.8% and the unfavorable timing of project completions as some were pulled forward into the third quarter while other projects are experiencing delays. Additionally, Europe had pockets of weakness. FX and the prior divestiture of the non-core European service business also pressured sales. Adjusted EBIT declined as a result of lower sales and reduced fixed cost leverage from volume declines. This was partially offset by MAP 2025 benefits. Moving to slide 9, specialty products group sales declined primarily due to challenging comparisons to the prior year period for the disaster restoration business. In the prior year, customers were rebuilding inventories that had been depleted as a result of increased storm activity and bursting pipes from freezing weather in prior quarters. Overall, specialty OEM markets, particularly those related to residential, remained soft. The reduction in adjusted EBIT was driven by the sales and volume declines, which resulted in unfavorable fixed-cost absorption. On slide 10, the consumer group gained share with the help of new products and grew in markets outside the U.S., which helped to offset continued softness in the DIY space. The rationalization of lower-margin products also contributed to the sales declines. Matt's 2025 initiatives and an improved mix resulted in record EBIT, which is partially offset by underabsorption associated with lower volumes and higher expenses from wages and benefits. Now I'll turn the call over to Matt, who will cover the balance sheet and cash flow and provide an update on innovation.