Q3 2024 RPM International Inc Earnings Call

Good morning, everyone and welcome to the RPM International fiscal third quarter 2024 earnings call.

Operator: Good morning, everyone, and welcome to the RPM International fiscal third quarter 2024 earnings call. All participants will be in a listen-only mode.

All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the Starkey followed by zero.

Operator: Should you need assistance, please send 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 1 on the touchtone telephone.

After todays presentation, there will be an opportunity to ask questions to ask a question you May press star and one on a touchtone telephone.

Operator: Withdraw your questions. You may press the star and, 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.

With your all 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.

Matthew Schlarb: Thank you, Jamie and welcome to RPM Internationals conference call for the fiscal 2020 for third quarter.

Matthew Schlarb: 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 Chairman 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 its RPM website.

Matthew Schlarb: Joining today's call are Frank Sullivan, Rpms, Chairman and CEO, who is dialing in remotely today, Rusty Gordon Vice President and Chief Financial Officer, and Michael <unk>, Vice President Controller, and Chief Accounting Officer.

Matthew Schlarb: Call is also being webcast can be accessed live or replayed on the RPM website at www Dot RPM and dotcom.

Matthew Schlarb: 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 from.

Matthew Schlarb: For more information on these risks and uncertainties. Please visit Rpm's reports filed with the SEC.

Matthew Schlarb: During this conference call references maybe 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.

Matthew Schlarb: Also please note that our comments will be on an as adjusted basis and all comparisons are to the third quarter of fiscal 2023, unless otherwise indicated you provided a supplemental slide presentation to support our comments on this call can be accessed in the presentations and webcast section of the European website at Www Dot R. P M.

Matthew Schlarb: 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've provided a supplemental slide presentation to support our comments on this call. It can be accessed in the Presentations and Webcasts section of the RPM website at www.rpminc.com.

Matthew Schlarb: Tom.

Matthew Schlarb: 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 Coatings 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, and this change has no impact on our consolidated results. At this time, I would like to turn the call over to Frank.

Matthew Schlarb: Additionally, as a reminder, certain businesses in Asia Pacific that were previously part of the construction products group and now being managed and reported under the performance coatings group effective June one 2023.

Matthew Schlarb: As a result, all references to CPG and TCG today reflect the updated structure the recast businesses generate approximately $100 million in annual sales and this change has no impact on our consolidated results.

Matthew Schlarb: At this time I'd like to turn the call over to Frank.

Frank C. Sullivan: 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.

Frank C. Sullivan: Thank you, Matt and thank you to everybody for participating on our call today.

Frank C. Sullivan: 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 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.

None: 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.

Frank C. Sullivan: 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, generating 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.

None: Which generated our ninth consecutive quarter of record sales and EBIT results.

None: Margins expanded and we had our fourth consecutive quarter of record cash from operations.

None: During this trailing 12 month period, we generated $1 billion and $260 million in cash flow from operating activities far exceeding any previous 12 month period and Rpm's history.

Frank C. Sullivan: Much of this has been driven by improvements in working capital, which has been a particular area of focus with our MAP 2025 initiative. Turning to slide four, sales growth was led by our construction products group and our performance code, which benefited from their focus on repair and maintenance.

None: Much of this has been driven by improvements in working capital, which has been a particular area of focus with our map 2025 initiatives.

None: Turning to slide four sales growth was led by our construction products group and our performance coatings group.

None: These segments benefited from their focus on repair and maintenance as well as their ability to serve strong demand from infrastructure reassuring and high performance building projects with their engineered solutions.

Frank C. Sullivan: 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 Codings Group, contributed to sales growth in Q3. Due to challenging market conditions, volume declines in the consumer and specialty product segments continue. Consumer was negatively impacted by lower DIY takeaway and retail customers who continue to tightly manage inventory levels, partially offset by market share gains. Volumes declined in the specialty products group due primarily to challenging comparisons in the legend brand's disaster restoration business.

None: Favorable timing of some project completions, particularly in the performance coatings group contributed to sales growth in Q3.

None: Due to challenging market conditions volume declines in the consumer and specialty product segments continued.

None: Consumer was negatively impacted by lower DIY takeaway and retail customers, who continue to tightly manage inventory levels.

None: Our fully offset by market share gains.

None: 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.

Frank C. Sullivan: There were signs of stabilization in our core specialty OEM market. 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.

None: 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.

None: We achieved record adjusted EBIT is our map 2025 benefits inclusive of the commodity cycle recovery drove a 170 basis point improvement in margins.

Frank C. Sullivan: We achieved record adjusted EBIT as our MAP 2025 benefits, inclusive of the commodity cycle recovery, drove a 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 the cycle, 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.

None: Map 2025 initiatives were a benefit to all businesses, particularly those that generated positive unit volume growth.

None: 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 Knapp map initiatives, we have put in place.

None: Some recent examples include capacity expansions increase.

None: Increasing R&D spending through the establishment of our innovation center of excellence and improving our data driven decision making capabilities.

We're also expanding our sales forces and training them to increase sales of higher margin products as well as introducing new products such as gaps one component wallen cavity spray foam, which is helping us win market share. This spring.

None: Moving to slide five the positive momentum from improved coordination outside the United States continued in the third quarter.

Frank C. Sullivan: Increasing R&D spending through the establishment of our Innovation Center of Excellence and improving our data-driven decision-making capability. 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 DAPT's One Component Wall and Cavity Spray Foam, which is helping us win market share this year. 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, and this was the result of RPM's heavy emphasis on engineered solutions for infrastructure investments in these geographies.

None: Emerging markets led growth for the company as a result of rpms heavy emphasis on engineered solutions for infrastructure investment in these geographies.

None: In Europe, we are taking share with our focused sales strategy.

None: After excluding the impact of the divested business sales in the region were roughly flat despite macroeconomic pressures in several economies.

None: Our focus on implementing map 2025 initiatives in the region generated strong EBIT margin improvement.

None: 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.

None: We remain focused on expanding margins accelerating organic growth and improving cash flow to achieve our map 2025 targets.

None: I'll now turn the call over to Michael Roche to cover our third quarter financial results in more detail.

Thanks, Brian.

Michael J. Laroche: Starting on slide six consolidated organic sales increased <unk>, 9% driven by positive volumes at construction products group and performance coatings group as well as higher pricing in all segments.

Michael J. Laroche: In Europe, we are taking share with our focus 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 margins. Overall, I'm proud of our associates' continued commitment to our math 2025 program, which consistently generates 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 target. I'll now turn the call over to Michael Laroche to cover our third quarter financial results in more detail. Thanks, Frank.

Michael J. Laroche: Effects from the 0.4% revenue.

Michael J. Laroche: That 2025 benefits, including the commodity cycle drove adjusted EBIT margin expansion of 170 basis points improved fixed cost leverage our construction products group and performance coatings group also contributed to better margins.

Michael J. Laroche: As Frank mentioned, we are investing in initiatives to accelerate organic growth and this contributed to an increase in SG&A during the quarter.

Michael J. Laroche: Send us to sell higher margin products and inflation in wages and benefits also added to the SG&A increase.

Michael J. Laroche: We continue to selectively raise prices the businesses with the most pronounced inflationary pressures and took extensive reduction actions at the end of fiscal year 2023 to help mitigate the SG&A rise.

Michael J. Laroche: Adjusted EPS increased 45% to 52.

Michael J. Laroche: Which was a third quarter record and was driven by the adjusted EBIT growth.

Michael J. Laroche: Interest expense declined in the quarter due to a $629 million debt reduction over the prior year as a result of record cash flow and this contributed to the adjusted EPS increase as well.

Michael J. Laroche: Starting on slide six, Consolidated Organic Sales increased 0.9% driven by positive volumes at Construction Products Group and Performance Codings Group, as well as higher pricing in all segments. FX was a 0.4% head to revenue. MAP 2025 benefits, including the commodity cycle, drove an adjusted EBIT margin expansion of 170 basis points. Improved Fixed Cost Leverage at Construction Products Group and Performance Codings Group also contributed to better margins. As Frank mentioned, we are investing in initiatives to accelerate organic growth, and this contributed to an increase in SG&A during the quarter. Incentives to sell higher-margin products, inflation, and wages and benefits also contributed to the SG&A increase. We continue to selectively raise prices at businesses with the most pronounced inflationary pressures and took expensive reduction actions at the end of fiscal year 2023 to help mitigate the SG&A rise. Adjusted EPS increased 40.5% to $0.52, which was a third quarter record and was driven by adjusted EBIT growth. Interest expense declined in the quarter due to a $629 million debt reduction over the prior year as a result of record cash flow, and this contributed to the adjusted EPS increase as well.

Michael J. Laroche: Now turning to the segment results starting with construction products group on slide seven.

Michael J. Laroche: Third quarter sales were a record and growth was led by concrete admixtures, which continued to benefit from resource and infrastructure projects, including in Latin America.

Michael J. Laroche: The segment also generated growth from increased demand for high performance buildings and market share gains.

Michael J. Laroche: Adjusted EBIT was led by map 2025 benefits driving a favorable product mix and improved fixed cost leverage from volume growth.

Michael J. Laroche: On slide eight performance coatings group achieved record sales once again, driven by the demand for engineered solutions, serving reassuring projects.

Michael J. Laroche: Leading favorable timing of some project completions as well as market share gains.

Michael J. Laroche: Businesses in Africa, Middle East and Asia Pacific that were recently aligned under the performance group performance Coatings Group management contributed to the segment's growth driven by Rpms engineered solutions focused on infrastructure projects adjusted EBIT. It was a third quarter record driven by sales growth favorable mix.

Michael J. Laroche: And improved fixed cost leverage that was enhanced by map 2025.

Michael J. Laroche: Moving to slide nine specialty products group sales declined primarily due to challenging comparisons to the prior year period for the disaster restoration business when it benefitted from the response to freeze related to flooding, which did not recur to the same extent this year.

Michael J. Laroche: The divestiture of the non core furniture warranty business also contributed to the sales decline.

Michael J. Laroche: After several quarters of weakness specialty OEM markets began showing signs of stabilization during the quarter.

Michael J. Laroche: The reduction in adjusted EBIT was driven by the sales and volumes declined in the disaster restoration business, which resulted in unfavorable absorption as well as the divestiture of a non core furniture warranty business.

Michael J. Laroche: Now turning to the segment results, starting with Construction Products Group on slide 7. Third quarter sales were a record, and growth was led by concrete admixtures, which continued to benefit from reseating and infrastructure projects, including in Latin America. The segment also generated growth from increased demand for high-performance buildings and market share gains. The rise in adjusted EBIT was led by MAP 2025 benefits driving a favorable product mix and improved fixed cost leverage from volume growth. On slide 8, Performance Codings Group achieved record sales, once again driven by the demand for engineered solutions serving reshaping projects, including favorable timing of some project completions, as well as market share gains. Businesses in Africa, the Middle East, and Asia-Pacific that were recently aligned under the leadership of Performance Codings Group contributed to the segment's growth, driven by RPM's engineered solutions focused on infrastructure projects.

Michael J. Laroche: <unk> also continued strategic investments in long term growth initiatives, which were partially offset by expense reduction actions taken at the end of fiscal 2023.

Michael J. Laroche: On slide 10, the consumer group was pressured by weaker takeaway at retail stores from DIY customers.

Michael J. Laroche: Customers, maintaining lean inventories and the rationalization of lower margin products.

Michael J. Laroche: Market share gains, partially offset the decline in volumes.

2025 initiatives and the rationalization of lower margin products resulted in margin expansion, which was partially offset by under absorption associated with lower volumes and higher expenses from wages and benefits.

Michael J. Laroche: Now I will turn the call over to Matt who will cover the bad who will cover the balance sheet and cash flows and provide an update on emerging markets.

Matthew Schlarb: Thank you Mike moving to slide 11, the positive momentum and working capital improvements continued in the third quarter as inventories declined by $261 million compared to the prior year.

Matthew Schlarb: Year over year in the third quarter, we reduced working capital as a percentage of sales by 580 basis points to 21, 4%. This contributed to a record $173 million in cash flow from operating activities during the quarter.

Michael J. Laroche: Adjusted EBIT was a third quarter record driven by sales growth, favorable mix, and improved fixed cost leverage that was enhanced by MAP 2025. Moving to slide 9, specialty products group sales declined primarily due to challenging comparisons to the prior year period for the disaster restoration business, when it benefited from the response to freeze-related flooding, which did not recur to the same extent this year. The divestiture of the non-core furniture warranty business also contributed to the sales decline.

Matthew Schlarb: For the trailing 12 month period, you generated 1.2 dollars $6 billion in cash flow from operating activities, which is a record and wrapped her represents an increase of $969 million from the same period in the prior year.

Matthew Schlarb: We have used the strong cash flow to reduce debt by $629 million compared to the prior year and returned $210 million in cash to shareholders through dividends and share repurchases. During the first nine months of the fiscal year.

Matthew Schlarb: On slide 12, I'd like to highlight investments, we've been making in emerging markets. As we've previously discussed businesses in Asia Pacific Africa, and the Middle East have recently aligned under a new management structure.

Michael J. Laroche: After several quarters of weakness, specialty OEM markets began showing signs of stabilization during the quarter. The reduction in adjusted EBIT was driven by the sales and volumes decline in the disaster restoration business, which resulted in unfavorable absorption, as well as the divestiture of the non-core furniture warranty business. SVG also continued strategic investments in long-term growth initiatives, which were partially offset by expense reduction actions taken at the end of fiscal 2023. On slide 10, the consumer group was pressured by weaker takeaway at retail stores from DIY customers.

Matthew Schlarb: This alignment has resulted in improved coordination and growth has accelerated as we are better positioned to capture increasing demand for our engineered solutions serving infrastructure projects.

Matthew Schlarb: We've seen this growth continuing and we're making investments in new plants in Malaysia, and India to add capacity reduce shipping costs and improve our ability to serve our customers.

Matthew Schlarb: In line with our building a better World initiative. The construction of these plants incorporated several sustainability features including solar panels, rainwater harvesting and a solvent recovery system.

Matthew Schlarb: These plants are also incorporating map manufacturing improvement initiatives and will produce for multiple brands across RPM segments, demonstrating the increased collaboration between RPM businesses and it's been enabled by map.

Michael J. Laroche: Customers Maintaining Lean Inventories and the Rationalization of Lower Margin Products, market share games partially offset the decline in volumes. MAP 2025 initiatives and the rationalization of lower margin products resulted in margin expansion, which was 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 flows and provide an update on emerging markets. Thank you, Mike.

Matthew Schlarb: The Malaysia facility is scheduled to open in the first half of fiscal 2025, and the Indian plant is expected to come online in the second half of fiscal year 2025 now.

Matthew Schlarb: Now I'd like to turn the call over to Rusty to cover the outlook.

Russell L. Gordon: Thanks, Matt.

Russell L. Gordon: Our fourth quarter and full year outlooks are on slide 13.

Russell L. Gordon: Consolidated level fourth quarter sales are expected to be approximately flat compared to a record prior year period CPG is expected to lead growth with sales up low to mid single digits driven by demand for its solutions, serving infrastructure and institutional.

Matthew Schlarb: Moving to slide 11, the positive momentum in working capital improvements continued in the third quarter as inventories declined by $261 million compared to the prior year. Year-over-year, in the third quarter, we reduced working capital as a percentage of sales by 580 basis points to 21.4%. This contributed to a record $173 million in cash flow from operating activities during the quarter.

Russell L. Gordon: Projects and its focus on restoration and maintenance.

After multiple years of achieving record sales <unk> sales are expected to be approximately flat in the fourth quarter. This is primarily due to the timing of project completions include.

Matthew Schlarb: Over the trailing 12-month period, we generated $1.26 billion in cash flow from operating activities, which is a record and represents an increase of $969 million from the same period in the prior year. We have used this strong cash flow to reduce debt by $629 million compared to the prior year and returned $210 million in cash to shareholders through dividends and share repurchases during the first nine months of the fiscal year. On slide 12, I'd like to highlight investments we've been making in emerging markets. As we've previously discussed, businesses in Asia-Pacific, Africa, and the Middle East have recently aligned under a new management structure. This alignment has resulted in improved coordination, and growth has accelerated as we are in a better position to capture increasing demand for our engineered solutions serving infrastructure projects.

Russell L. Gordon: Including some that were pulled forward into the third quarter. Additionally, pseg's results will be impacted by our previously announced business divestiture.

SPG sales are expected to decline in the mid single digit percentage range.

Russell L. Gordon: The disaster restoration business remains challenged while specialty OEM market stabilize.

Russell L. Gordon: Albeit at low levels.

Russell L. Gordon: In consumer market share gains are expected to be more than offset by continued softness in DIY demand, resulting in sales declining in the mid single digit range.

With these continued share gains we believe we are poised to achieve accelerated growth with existing home sales and DIY markets ultimately recover.

Russell L. Gordon: Consolidated fourth quarter adjusted EBITDA is expected to increase in the high single digit percentage range compared to our record prior year period, driven by map 2025 benefits, which are being partially offset by under absorption from lower volume.

Matthew Schlarb: We've seen this growth continue, and we are making investments in new plants in Malaysia and India to add capacity, reduce shipping costs, and improve our ability to serve our customers. In line with our Building a Better World initiative, the construction of these plants incorporates several sustainability features, including solar panels, rainwater harvesting, and a solvent recovery system. These plants are also incorporating MAP manufacturing improvement initiatives and will produce for multiple brands across RPM segments, demonstrating the increased collaboration between RPM businesses that has been enabled by MAP. The Malaysian facility is scheduled to open in the first half of fiscal 2025, and the Indian plant is expected to come online in the second half of fiscal year 2025. Now I'd like to turn the call over to Rusty to cover the output.

Russell L. Gordon: Finally, our full year guidance is at the bottom of slide 13, we.

Russell L. Gordon: We anticipate that full fiscal year sales growth will be near the midpoint of our previous guidance of up low single digits.

Russell L. Gordon: And adjusted EBIT growth will be near the midpoint of our previous guidance.

Russell L. Gordon: Up low double digits to mid teens.

None: This concludes our prepared comments, we will now be pleased to answer your questions.

None: Ladies and gentlemen at this time, we'll begin the question and answer session to ask a question you May Press Star and then one on a touchtone telephone if you are using a speakerphone. Please pick up your handset before pressing the keys to ensure the best sound quality.

None: Okay.

None: You too.

None: At this time, we will pause momentarily to assemble the roster.

Russell L. Gordon: Thanks, Matt. Our fourth quarter and full year outlooks are on slide 13. On a consolidated level, fourth quarter sales are expected to be approximately flat compared to a record prior year period. CPG is expected to lead growth with sales up low to mid-single digits, driven by demand for its solutions serving infrastructure and institutional projects and its focus on restoration and maintenance. After multiple years of achieving record sales, PCG sales are expected to be approximately flat in the fourth quarter.

None: And our first question today comes from Josh Spector from UBS. Please go ahead with your question.

Morning, Josh.

Hi, good morning, it's like a spotlight on suggestion day.

Joshua David Spector: Sort of just start with consumer if I could sorry.

Joshua David Spector: I just wanted to get your view here on sort of weather.

Joshua David Spector: Thank now to sort of sell in was very connected with the takeaway at the retail stores I mean, you called out the takeaway there was wage and assuming things go up more than six now.

Joshua David Spector: Can you kind of see the outlook, Eric the retail level over the next couple of quarters and when should we expect a return to volume growth.

Russell L. Gordon: This is primarily due to the timing of project completions, including some that were pulled forward into the third quarter. Additionally, PCG's results will be impacted by a previously announced business divestiture. SPG sales are expected to decline in the mid-single-digit percentage range as the disaster restoration business remains challenged while specialty OEM markets stabilize, albeit at low levels.

Joshua David Spector: Sure.

Eric: So we expect a continuation in Q4 of <unk>.

Eric: What you have seen in Q3 and for most of fiscal 'twenty four.

Eric: With continuing relative strength in construction products and performance coatings and some challenges.

Eric: In the consumer segment and specialty products group, particularly your relationship in the consumer segment to a very strong fourth quarter last year I would expect we're going to start to see an improvement.

Russell L. Gordon: In consumer, market share gains are expected to be more than offset by continued softness in DIY demand, resulting in sales declining in the mid-single-digit range. However, with these continued share gains, we believe we are poised to achieve accelerated growth when existing home sales and DIY markets ultimately recover. Consolidated fourth quarter adjusted EBIT is expected to increase in the high single-digit percentage range compared to a record prior year period, driven by MAP 2025 benefits, which are being partially offset by underabsorption from lower volume. Finally, our full year guidance is at the bottom of slide 13.

Eric: And consumer takeaway and a return of volume as we get into fiscal 'twenty five.

None: Great. Thanks, and then just on the continued strength on the CPG.

None: So I mean, you guys basically pay your volume expectations for about four quarters in a row.

Just thought they're kind of broader macro indicators pointing to slowing.

None: <unk> was kind of more in line.

None: Could you, maybe just kind of give us your thoughts there and sort of split out the benefits that you're seeing between.

None: Infrastructure ratio warring versus the base correct.

Operator: We anticipate that full fiscal year sales growth will be near the midpoint of our previous guidance of up low single digits, and adjusted EBIT growth will be near the midpoint of our previous guidance of up low double digits to mid teens. This concludes our prepared comments. We will now be pleased to answer your questions. Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press STAR and then one on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality.

Should we see a reconnection with.

None: Macro indicators at some point or how do you see that kind of playing out thanks.

Sure So we see momentum.

None: Continuing for both our performance coatings group and our construction products group into Q4 as well as into fiscal 'twenty five.

None: It's worth noting that the construction products group performance.

None: Despite.

None: A lot of weakness.

None: In the core.

None: On commercial or commercial.

Construction products market.

None: Certainly been relatively weak we picked that up in infrastructure as well as a lot of the projects that we referenced.

None: And then as we.

None: Look going forward.

None: We're well positioned.

Operator: If you have any questions, you may press star and two. This time we'll pause momentarily to assemble the roster. And our first question today comes from Joshua Spector from UBS. Please go ahead with your question. Good morning, guys. Good morning, it's Lucas Bowman. I'm here for Josh today.

Our backlogs are in good shape.

And quite candidly globally and this is broadly speaking.

None: We're not through a fraction of the trillions of dollars.

None: Of government stimulus, mostly in the United States, but in other parts of the world.

None: Helping to drive this and so whether it's the onshoring.

None: <unk>.

None: Friends shoring in Europe, and in North America.

Operator: Just wanted to start with the consumer, if we could. So I just wanted to get your view, current view on sort of whether you think now the sort of sell-in has reconnected with the takeaway at the retail stores. I mean, you called out that the takeaway there was weak.

None: We're pretty well positioned to continue.

None: To win more than our fair share of those projects.

None: And we see that continuing for the coming quarters.

None: Alright. Thank you thank.

None: Thank you.

None: Our next question comes from Frank Mitsch from.

Frank Joseph Mitsch: Permian Research. Please go ahead with your question.

Frank Joseph Mitsch: Good morning, Hey, good morning, Frank hopefully your someplace nice today.

Frank C. Sullivan: And assuming things have sort of got more in sync now, how do you kind of see the outlook there at the retail level over the next couple of quarters? And when should we expect to return to volume growth? Sure.

And any hint.

Frank Joseph Mitsch: Okay. Good good Hey, let me follow up on that last comment you said that the backlogs are looking pretty good.

Frank Joseph Mitsch: Was that a construction products.

None: Specific comment and is there any way that you can kind of size order of magnitude relative to where you are historically on the fourth of April.

Frank C. Sullivan: So we expect a continuation in Q4 of what you have seen in Q3, and for most of fiscal 24. This is a presentation on the continuing relative strength in construction products and performance coatings and some challenges in the consumer segment and especially products, [inaudible] Great, thanks. And then just on the continued strength on the CPG side. So I mean, you guys basically beat your volume expectations for about four quarters in a row, despite the kind of broader macro indicators pointing to slowing. 3Q was kind of more in line.

None: Sure.

None: I wouldn't.

None: Comment on that any particular with.

None: The particular specificity, but our backlogs are good in construction products.

None: Our performance coatings group continues to see good momentum.

None: We will have a little bit of a weaker fourth quarter as we projected partly because of project.

None: <unk> I think it's worth looking at the second half. If you include the guidance that we provided here.

None: For all of our P. M second half of 'twenty for the third quarter, we just reported and the guidance that we reaffirmed relative to our full year would suggest sales growth on a consolidated basis, it flat or plus 1%.

Frank C. Sullivan: Could you maybe just kind of give us your thoughts there and sort of split out the benefits that you're seeing between, you know, the infrastructure reshoring versus the base growth? And I mean, could we see a reconnection with those macro indicators at some point? Or how do you see that kind of playing out?

And adjusted EBIT growth in the 13% to 14% range and I mentioned that because we had some acceleration or completion of projects at the end of Q3 that otherwise would have fallen into Q4 and.

Frank C. Sullivan: So we see momentum continuing for both our Performance Codings Group and our Construction Products Group in Q4 as well as into Fiscal 25. It's worth noting that the Construction Products Group performance has been, despite a lot of weakness in the non-commercial core commercial construction products market, certainly relatively weak. We picked that up in infrastructure as well as a lot of the projects that we referenced. And then, as we look going forward. We're well positioned, our backlogs are in good shape, and, quite candidly, globally. We're not through a fraction of the trillions of dollars of government stimulus, mostly in the United States, but in other parts of the world.

None: In construction products and performance coatings.

None: But the backlog in both is really strong.

None: It's an odd start for us and everybody to Q4 because of the way holidays fell there were three less shipping days in March and there are three more shipping days in April. So we're also having some.

None: Aye.

None: Comparisons to prior years on a monthly basis, but in general both of those segments are really good shape and the dynamics that have led to record sales growth positive unit volume growth and margin expansion.

None: Like they're continuing.

None: That's that's very helpful.

None: And then if I could follow up on the consumer side I believe the last Oh. The last time, we spoke you know.

Frank C. Sullivan: They're helping to... whether it's the onshore and or Friends Shoring in Europe and in North America. We're pretty well positioned to continue to win more than our fair share of those projects, and we see that. All right, thank you.

None: The interplay between price and raws was looking to turn positive in consumer.

None: Can you just offer some comments as to how that stands and maybe a comment in general on raws I know that.

None: The expectation was that we would see a peak raw material deflation in the second half of 'twenty four.

Frank C. Sullivan: Our next question comes from Frank Mitsch from Research. Please go ahead with your question. Hey, good morning, Frank. Hopefully, you're someplace nice today.

None: That still is that still your your assumptions.

None: It is still our assumption and that's what we're experiencing.

None: Back in particular with our consumer group, we're starting to see some raw material upticks in a few select areas asset tons up significantly.

Frank C. Sullivan: Any hints? Okay, good, good. Hey, let me follow up on that last comment. You said that the backlogs are looking pretty good. Was that a construction products specific comment? And is there any way that you can kind of order of magnitude relative to where you are historically on the 4th of April?

None: Kind of an outlier.

None: Propellant up a little bit plastic cartridges are up and so we're seeing some return of inflation or pricing in a in a few categories that particularly impacted our consumer group.

Frank C. Sullivan: Sure, I wouldn't comment on that or give any particular specificity, but our backlogs are good for construction products. Our performance coding group continues to see good momentum. We will have a little bit of a weaker fourth quarter, as we projected, partly because of the project. I think it's worth looking at the second half, if you include the guidance that we've provided here for all of RPM, the second half of 24, the third quarter we just reported, and the guidance that we reaffirmed relative to our full year would suggest sales growth on a consolidated basis at flat or plus 1% and adjusted EBIT Q3 that otherwise would have fallen into Q4 in construction products and performance coding, but the backlog in both is really strong. It's an odd start for us and everybody else to Q4 because of the way holidays fell. There were three fewer shipping days in March, and there are three more shipping days in April.

None: But overall, we are at the point at which I think the commodity cycle recovery is what we're experiencing we will see a little bit of that in Q4.

None: And then I think time will tell.

As we look out into our new fiscal year.

None: Understood. Thank you so much.

Our next question comes from Mike Harrison from Seaport Research Partners. Please go ahead with your question.

Michael Joseph Harrison: Good morning, Mike.

Michael Joseph Harrison: Hi, good morning, Congrats on the strong cash flow in particular.

Michael Joseph Harrison: Was wondering if you give a little more detail on what's going on with the margin performance in the specialty segment.

Michael Joseph Harrison: The revenue there was pretty similar to last quarter.

Michael Joseph Harrison: But the adjusted EBITDA It looks like it was close to $5 million lower compared to last quarter.

Michael Joseph Harrison: Sequential basis, there, what's driving that and if you can provide any help on how we should think about specialty margins going forward.

Russell L. Gordon: I will let rusty Gordon handle that question about.

Russell L. Gordon: Both the specialty products group performance in the quarter and year to date and kind of where we see it going.

Russell L. Gordon: Yeah in terms of especially performance in the quarter.

Frank C. Sullivan: So we're also having some odd problems. But in general, both of those segments are in really good shape and the dynamics that have led to record sales growth, positive unit volume growth, and margin expansion feel like. That's very helpful.

Russell L. Gordon: You know we.

Russell L. Gordon: Really did not have any disaster restoration business to speak of Mike.

Russell L. Gordon: During the quarter no weather events really drove sales so as a result.

Russell L. Gordon: We really suffered from under absorption we continue year over year to have an unfavorable comparison.

Frank C. Sullivan: And then if I could follow up on the consumer side, I believe the last time we spoke, you know, the interplay between price and ROAS was looking to turn positive in the consumer. If you could just offer some comments as to how that stands and maybe a comment in general on ROAS. I know that the expectation was that we would see peak raw material deflation in the second half of 2024. You know, is that still your assumption?

Russell L. Gordon: We did in the second quarter, we divested our furniture warranty business.

Russell L. Gordon: And then in general OEM volumes look soft.

Russell L. Gordon: Not not as bad as it's been it's getting a little bit better. So we do have some reason to hope.

Russell L. Gordon: That will improve.

None: And then I would add to that Mike that the.

None: The impact of weather related events last year was very significant in Q3, we don't have exactly that same challenge comparatively in Q4.

None: And the Guardian, a warranty business, which was really not core to us. It was an insurance business and had nothing to do with products with a very high margin business and that was sold last year in the third quarter and so again, we will not be seeing the negative.

Frank C. Sullivan: It is still our assumption, and that's what we're experiencing. In fact, in particular with our consumer group, we're starting to see some raw material upticks in a few select areas, acetones up significantly. That's kind of an outlier. Propellants are up a little bit. Plastic cartridges are up, and so we're seeing some return of inflation or pricing in a few categories that particularly impact our consumer group. But overall, we are at the point where I think the commodity cycle recovery is what we're experiencing. (inaudible) Okay. Thank you so much.

None: Comparison of that when we get into the fourth quarter as well so.

None: Michael Roche commented, we're starting to see.

None: And the core OE.

None: OEM coatings categories things flattening out.

None: We won't have the same big challenging comparisons of the Guardian divestiture.

None: The significant weather related events.

None: Brands that have impacted Q3.

None: Alright, Julian Thank you for that and then I was hoping that maybe you could provide some initial comments says we're starting to turn our attention to fiscal 'twenty five think.

Frank C. Sullivan: Our next question comes from Mike Harrison from Seaport Research Partners. Please go ahead with your question. Hi, good morning.

Frank C. Sullivan: Congratulations on the strong cash flow in particular. I was wondering if you could give a little more detail on what's going on with the margin performance in the specialty segment. The revenue there was pretty similar to last quarter, but the adjusted EBIT looks like it was close to $5 million lower compared to last quarter on a sequential basis there.

Julian: Think about earnings growth consensus is looking for EBITDA.

None: To be up by kind of a high single digit number compared to fiscal 'twenty four.

None: Is that a reasonable starting point for now and maybe talk a little bit about some of the puts and takes.

Russell L. Gordon: What's driving that, and if you can provide any help on how we should think about specialty margins going forward. I will let Rusty Gordon handle that question about both the Specialty Products Group performance in the quarter and year-to-date and kind of where we see it going. Yeah, in terms of specialty performance in the quarter, you know, we really did not have any disaster restoration business to speak of, Mike, during the quarter. No weather events really drove sales, so as a result, we really suffered from under-absorption.

Julian: We're thinking about earnings growth next year. Thank you sure.

None: Other than re emphasizing some comments that we've already made which I'll do it in a minute.

None: We're not really prepared to provide guidance for fiscal 'twenty five with any detail. We will do that when we report fourth quarter results in July and then we'll provide some more detail for how we see fiscal 'twenty five shaking out.

None: The comments that we have made are we're gonna be rounding easier comparisons as we just talked about in our specialty products group.

Russell L. Gordon: We continue year over year to have an unfavorable comparison, like we did in the second quarter when we divested our furniture warranty business, and then, in general, OEM volumes look soft, not as bad as they've been. It's getting a little bit better, so we do have some reason to hope that they'll improve. And then I would add to that, Mike, that the impact of weather-related events last year was very significant in Q3. We don't have exactly that same challenge comparatively in Q4.

None: I think at some point as we get into fiscal 'twenty, five we're going to see.

None: Both easier comparisons and some market share related wins, some positive unit volume growth coming back to our consumer segment and we see continued good momentum.

None: The economic and end market and infrastructure.

None: Dynamics that we've been talking about for construction products.

None: In performance coatings so.

None: We are planning on our 10th consecutive quarter of record sales and earnings in Q4.

None: And I.

None: I think we've gotten some good dynamics as we go into fiscal 'twenty five, but we'll provide more details on a consolidated basis and broadly by segment.

Russell L. Gordon: And the Guardian warranty business, which was really not core to us, it was an insurance business and had nothing to do with products, was a very high-margin business. And that was sold last year in the third quarter. And so again, we will not be seeing the negative comparison of that when we get into the fourth quarter as well.

None: When we report Q4 in July.

None: Sounds good thanks very much.

None: Our next question comes from John Roberts from Mizuho. Please go ahead with your question.

John Ezekiel E. Roberts: Good morning, John Thank you.

John Ezekiel E. Roberts: Alright, Thank you tell us if RPM would be interested in ppg's, north American architectural paint business or any thoughts around that.

Russell L. Gordon: So, as Michael Laroche commented, we're starting to see in the core. OEM codings, categories, things flattening out, and we won't have the same challenging comparisons of the Guardian divestment for the Significant Weather-Related. All right. Thank you for that.

John Ezekiel E. Roberts: We generally don't comment about our acquisition activity.

None: Until things are done.

None: Certainly M&A is picking up and it was publicly announced.

None: That the I believe it's about $1 $8 billion in revenue PPG architectural and North American architectural coatings business.

Is going to be sold divested.

None: Or realigned.

Frank C. Sullivan: And then I was hoping that maybe you could provide some initial comments as we're starting to turn our attention to Fiscal 25 and think about earnings growth. Consensus is looking for EBITDA to be up by kind of a high single-digit number compared to fiscal 24. Is that a reasonable starting point for now? And maybe we can talk a little bit about some of the puts and takes as we think about earnings growth next year. Thank you.

And so.

I think like anybody in the paint and coatings interest.

None: Industry, we have.

Some interesting pieces and parts.

None: And we certainly intend to be part of any process and take a look at that.

None: And.

None: That's more of the specifics and we generally would provide but it's relatively unique that a divestiture process like this would be announced publicly and it has been.

None: So we'll take a look at it.

None: Yeah final year of map 25 begins in a few weeks.

Frank C. Sullivan: Sure. Other than re-emphasizing some comments that we've already made, which I'll do in a minute, we're not really prepared to provide guidance for Fiscal 25 in any detail. We will do that when we report fourth-quarter results in July. And we'll provide some more detail on how we see fiscal 25 shaking out. The comments that we have made are we're going to be rounding easier comparisons, as we talked about in our special products group. I think at some point, as we get into Fiscal 25, we're going to... For more information, visit www.

There'll be a map 2028 program is that the right cadence to think about or do you think RPM will pivot to a different approach or strategy beyond that 0.5.

None: That's a great question and.

None: I think we're highly focused on achieving our map 2025.

None: Targets.

None: If you look at our performance through nine months I'm really proud of the incredible work of the RPM associates around the globe.

You can see our map 25 initiatives, having tremendous impact.

None: We are improving working capital we are improving margins.

Frank C. Sullivan: FEMA.gov: Market share related wins, some positive unit volume growth coming back to our consumer sector, and we see continued good momentum in the economic, market, and infrastructure dynamics that we've been talking about.

None: We are focused on driving a more favorable mix.

And whether it's our operating improvement initiatives in our plants.

Whether it is taking some of the <unk> 168 disciplines into the commercial area. We're having a lot of success you can see it clearly in our cash flow, which is meaningfully higher record levels and so the things that we can control are working really well one thing that we've talked about.

Frank C. Sullivan: So we are planning on our 10th consecutive quarter of record sales and earnings in Q4, and... We've got some good dynamics as we go on. But we'll provide more details on a consolidated basis in broad... Sounds good. Thanks very much.

None: It makes sense when you look at the areas that we're focused on and map 25 when.

None: When we have.

None: A return to unit volume growth in specialty products and consumer you'll see even better results out of those businesses much like the real strong leverage we generated in Q3 with performance coatings.

John Ezekiel E. Roberts: Our next question questioner is John Roberts from Mizuho. Please go ahead with your question. Good morning, John. Thank you. Good morning.

Frank C. Sullivan: Frank, can you tell us if RPM would be interested in PPG's North American architectural paint business or any thoughts around that? We generally don't comment about our acquisition activity until things are done. Certainly, M&A is picking up, and it was publicly announced. I believe it's about $1.8 billion in revenue. PPG Architectural, a North American architectural coatings business, is going to be sold, divested, or realigned, and so. Like anybody in the patent and codex industry, we have... 2012 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services, And we certainly intend to be... part of any process.

Construction products, both of whom had positive unit volume growth in the quarter and it was headed for out throughout the year. So we're pretty excited about that there will be a new program.

None: And it'll be something that we will be talking about publicly.

None: Your next spring or next summer exactly what we call it.

None: I Couldnt tell you yet.

None: The map initiatives.

None: We have a lot of legs, particularly on the commercial side and the data side and there will be a new program and we will provide details I would say roughly a year from now but in the interim we're gonna be focused on hitting the 42% gross margin goal and a 16% EBIT margin goal that we set out a few years ago.

None: Okay. Thank you.

None: Our next question comes from Dave Weiner.

Frank C. Sullivan: And, you know, that's more specifics than we generally would provide, but it's relatively unique that a divestiture process like this would be announced publicly, and it has been. So we'll take a look at, The final year of MAP 2025 begins in a few weeks. Do you think there'll be a MAP 2028 program? Is that the right cadence to think about?

Dave Weiner: From Deutsche Bank. Please go ahead with your question.

Good morning.

Dave Weiner: Hi, Good morning, I guess first thing your project business is in construction and performance coatings can you talk about the competitive dynamic here I think a lot of your peers indicated their interest in further expanding the U S. Construction and manufacturing end markets I guess do you expect any competitive pricing in the next few quarters.

Frank C. Sullivan: Or do you think RPM will pivot to a different approach to strategies beyond MAP 2025? That's a great question, and I think we're highly focused on achieving our MAP 2025. And if you look at our performance through nine months, I'm really proud of the incredible work of the RPM Associates around the globe. You can see our MAP25 initiatives are having tremendous impact. We are improving working capital, and we are improving margins. We are focused on driving a more favorable mix, and whether it's Operation Improvement Initiatives in our plan. Whether it's taking some of the MS 168 disciplines into the commercial area.

Dave Weiner: We could see some negative pricing for your businesses.

Dave Weiner: We are broadly speaking.

Dave Weiner: We've done a really good job of maintaining our pricing there had been a few exceptions.

Dave Weiner: Certain more commodity like silver.

Dave Weiner: Silicone sealant, where the underlying silly.

Dave Weiner: Silicone chemicals have dropped dramatically from their peaks has been one area.

Dave Weiner: In a few areas in our consumer group, where we literally bumped into some price elasticity in our understanding price levels on products that are.

Dave Weiner: Interesting points in terms of continuing to drive consumer takeaway.

Frank C. Sullivan: We're having a lot of success. You can see it clearly in our cash flow, which is at a meaningfully higher, record level. And so the things that we can control are working really well. One thing that we've talked about and that makes sense when you look at the areas that we're focused on in MAP25, when we have a return to unit volume growth, especially products and consumers, you'll see even better results out of those, much like real strong leverage. Generated in Q3 with performance coding.

Dave Weiner: We're not seeing a roughly speaking with the exception of more commodity type chemicals that have pizza dramatically a year ago, a year and a half ago and have come down significantly since.

Dave Weiner: Other than those areas, we're not seeing significant price reductions I will tell you that the you know and you can read this level of inflation has dropped dramatically.

And we are seeing a stabilization of raw materials for the most part.

Dave Weiner: And there are some commodity chemicals that have dropped meaningfully and that's the one area, where we have also dropped some prices while still maintaining pretty good margins.

Frank C. Sullivan: Construction Products, both of whom had positive unit volume growth in the quarter, and it was headed. So we're pretty excited about that. There will be a new program, and it'll be something that we will be talking about publicly, either next spring or next summer. This is exactly what we call it.

Dave Weiner: Inflation is happening in a few categories as I mentioned in conversations about our comments about our consumer group and inflation is continuing.

More moderate pace, but still up.

Dave Weiner: When it comes to salaries benefits hourly wages.

Frank C. Sullivan: I can't tell you yet, but the MAP initiatives have a lot of legs. Please land on the commercial side and the data side. And there will be a new program, and we will provide details. I would say roughly a year.

Dave Weiner: Categories like insurance.

None: Hi, Thanks, and that gets fixed cost absorption.

Frank C. Sullivan: But in the interim, we're going to be focused on hitting the 42% gross margin goal. Thank you. Our next question comes from Dave Huang from Deutsche Bank. Please go ahead with your question. Good morning.

None: I think last year in Q3, you got 20 million headwind I guess.

None: At the company level.

None: Is there additional headwind this quarter and I guess, assuming your quality would be down with inventory right sizing.

Frank C. Sullivan: I was first in your project businesses in construction and performance coding. Can you talk about the competitive dynamic? Here, I think a lot of your peers indicated their interest in further expanding the U.S. construction and manufacturing markets. I guess, do you expect any competitive pricing in the next few quarters, where we could see some negative pricing for your businesses? Broadly speaking, we've done a really good job of maintaining prices. There have been a few exceptions; certain more commodity-like silicone sealants where the underlying silicone chemicals have dropped dramatically from their peaks have been one area.

None: And assuming sales volume to be flat next year, what kind of leverage I guess would you have some fixed costs.

None: In FY 'twenty five persons FY 'twenty four.

None: I'd like to have Rusty Gordon answered the question about absorption and its impact on us now.

Russell L. Gordon: And the inventory reduction programs that we had been pursuing.

Internally pretty aggressively it's impact on results and how he thinks about that rusty.

Russell L. Gordon: Yeah sure.

Russell L. Gordon: We have.

Russell L. Gordon: Again.

Russell L. Gordon: <unk> suffered from.

Russell L. Gordon: Poor absorption, David, especially in our SPG and consumer groups, where volumes are dropping on top of that like Madden mentioned, we dropped our working capital ratio year over year by 580 basis points.

Frank C. Sullivan: There's been a few areas in our consumer group where we literally bumped into some price elasticity in our understanding of price levels on products that... interesting points in terms of continuing to drive consumer takeaway. We're not seeing, roughly speaking, with the exception of more commodity-type chemicals that peaked dramatically a year ago, a year and a half ago, and have come down. Other than those areas, we're not seeing. I will tell you that, you know, and you can read this, the level of inflation has dropped dramatically, and we are seeing a stabilization of raw materials for the most part. And there are some commodity chemicals that have dropped meaningfully, and that's the one area where we have also dropped some prices, still maintaining a pretty good margin. Inflation is happening in a few categories, as I mentioned in comments about our consumer group. However, inflation is continuing at a more moderate pace, but still high when it comes to inflation. Salaries, Benefits, Hourly Wages, and Category. Thanks.

Russell L. Gordon: Much of that through inventory, which you can see on the balance sheet.

Russell L. Gordon: <unk> continues.

And.

Russell L. Gordon: You can really see.

Russell L. Gordon: And our P. C. G in CPG results, where volumes are growing the kind of leverage we get we still gotten great leverage.

Russell L. Gordon: In the consumer segment.

Russell L. Gordon: If you do a lot of their map activity and that'll continue to help RPM through this under absorption issue, but really pronounced you know it.

Russell L. Gordon: SPG and consume.

None: Okay. Thank you.

None: Yeah.

None: Our next question comes from John Mcnulty from BMO Capital markets. Please go ahead with your question.

John Patrick McNulty: Good morning, Good morning, Good morning, Frank Thanks for taking my question. So wanted to dig into consumer a little bit. So it looks like you're on pace for basically a record margin for the year and consumer and that's despite a pretty tough demand environment. So I guess, how should we think about the levers that you can still pull.

Russell L. Gordon: And then I guess on fixed cost absorption, I think last year in Q3 you had 20 million headwinds. I guess at the company level, are there additional headwinds this quarter? And I guess assuming you're close to being down with inventory right-sizing and assuming sales volume will be flat next year, what kind of leverage, I guess, would you have from fixed costs, you know, in FY25 versus FY24? Yeah, I'd like to have Rusty Gordon answer the question about absorption and its impact on us now, and the inventory reduction programs that we have been pursuing internally pretty aggressively, its impact on Yeah, sure.

None: <unk> around some of the map improvements in the efficiencies there as we look kind of going forward over the next 12 months.

None: Or is the next step up in margin really going to be completely dependent on on the volumes picking back up and kind of getting back to more normalized consumer take away how should we think about that.

None: Sure I'll provide some comments and maybe rusty he has a few thoughts as well.

None: First of all I don't believe we're at record.

None: Margins for our consumer group.

Those were achieved during the Covid period.

None: And so even pre Covid I think we've got some ways to go our consumer group was hit the hardest by.

None: Raw material inflation, given some of the metal packaging and some of the chemical raw materials state deal with and <unk>.

Russell L. Gordon: We have, again, suffered from poor absorption, David, especially in our SPG and consumer groups where volumes are dropping. On top of that, like Matt mentioned, we've dropped our working capital ratio year over year by 580 basis points, much of that through inventory, which you can see on the balance sheet. So that continued.

None: That has been a challenge.

None: We are seeing significant leverage we're at the point where.

None: Price and commodity cycle are benefiting us the most although we're starting to see some raw material pickups like acetone that I've mentioned, so that's a head scratcher.

None: Yes.

None: But the leverage and improvements that we've achieved in <unk>.

Russell L. Gordon: And you can really see in our PCG and CPG results, where volumes are growing, the kind of leverage we get. We've still gotten great leverage in the consumer segment due to a lot of their MAP activity, and that will continue to help RPM through this under-absorption issue, but it's really pronounced at SPG. Okay, thank you.

None: Our consumer segment has been significant I mentioned on our prior call that we have uncovered tens of millions of unit.

None: And excess capacity just through efficiency.

We are doing something pretty unique because of the significant improvements in consumer historically on the asset base. We have we would build inventory in February and March for the spring and summer months.

John Patrick McNulty: Our next question comes from John McNulty from BMO Capital Markets. Please go ahead with your question. Good morning, Frank.

None: In fact last year and this year internally, we are continuing to reduce inventory as we've developed a much more efficient operation there.

Frank C. Sullivan: Thanks for taking my question. So, I wanted to dig into consumers a little bit. So, it looks like you're on pace for basically a record margin for the year in consumer, and that's despite a pretty tough demand environment. So, I guess, how should we think about the levers that you can still pull around some of the MAP improvements and the efficiencies there as we look kind of forward over the next 12 months, or is the next step up in margin really going to be completely dependent on the volumes picking back up and kind of How should we think about that? Sure, I'll provide some comments, and maybe Rusty has a few thoughts as well. First of all, I don't believe we're at record margins for our consumer group. Those were achieved during the COVID period, and so even pre-COVID, I think we've got some ways to go.

None: That can meet supply and demand are.

None: Fill rates are back up to the high 90% range and so the improvements. We've made there are really impressive and really dramatic and you sure can't see them.

None: Your unit volume is declining.

None: Low single digits. So when we get back to positive unit volume growth I think you'll see the benefits of the map initiatives that are as meaningful a consumer as they are for instance in construction products and performance coatings.

None: But because so much of the benefits are tied to manufacturing efficiencies. They don't show up until you sell something.

None: Yeah, that's right Frank a lot of the map savings have been asked and.

None: Under absorption has been pronounced consumers' since volumes have been declining.

Frank: There's at least 200 basis points a quarter I could point to this.

Frank: This year for the impact of under absorption caused not just by lower sales volumes, but the conscious effort to reduce inventory.

Frank C. Sullivan: Our consumer group was hit the hardest by Metal Pack, some of the chemical raw materials they deal with. And that has been a challenge. We are seeing significant leverage. We're at the point where price and the commodity cycle are benefiting us the most. Although, we're starting to see some raw material pickups like acetone that I mentioned, so that's a head scratcher.

Frank: But the underlying performance improvement, particularly in our plants.

Frank: Really remarkable and I think it will show up when we get to a better unit volume.

Frank: <unk>.

None: Got it okay no. Thanks for thanks for the color on that and then I guess, just the second one maybe a little bit farther out, but you're making some some decent investments in trying to drive the Asian business.

Frank C. Sullivan: But the leverage and improvements that we've achieved in our consumer segment have been significant. I mentioned on our prior call that we have uncovered tens of millions of Units and Access Capacity Just Through Efficiency.

None: And you've got some new plants already that are coming on I guess, how are you tackling that in terms of gaining market share and brand awareness.

None: Our first space that you don't have as big of a presence as you do say in the U S or Europe, or even Latin America. So I guess, how should we be thinking about that and how are you. How are you kind of looking at the growth opportunities there.

Frank C. Sullivan: We are doing something pretty unique because of the significant improvements in consumer. Historically, on the asset base we have, we would build inventory in February and March for the spring and summer months. In fact, last year and this year, internally, we're continuing to reduce inventory. We've developed a much more efficient operation that can meet supply and demand. Our fill rates are back up to the high 90% range. So the improvements we've made there are really impressive and really dramatic. And you sure can't see them when your unit volume is declining in the low single digits.

None: Sure I'll make a few comments and then Matt Schlarb, Ken can add to that.

None: As part of our map.

None: 25 initiative and really going back to the original math program.

None: Recognize that our efforts, particularly in the developing world.

None: We're not very effective we had too many small operations did some small acquisitions to have kind of are starting.

Matthew Schlarb: Starting footprint, but because these were small in faraway operations, we didn't pay much attention to them. So we werent, having good traction we.

Matthew Schlarb: We have an exceptional management team in South Africa that because of the unique nature of that market, both South Africa, and Africa became a platform for multiple RPM products.

Frank C. Sullivan: So when we get back to positive unit volume growth, I think you'll see the benefits of the MAP initiatives that are as meaningful to consumers as they are, for instance, in construction products or performance coatings, because so much of the benefits are tied to manufacturing efficiency. They don't show up until you see them.

Matthew Schlarb: And their success led to our decision as part of the map initiatives to put the middle East.

Matthew Schlarb: India and southeast Asia with the Asian markets.

Matthew Schlarb: Underneath that leadership team and really taken RPM platform approach to the developing world and as you can see on slide five.

Russell L. Gordon: Yeah, that's right, Frank. A lot of the MAP savings have been masked, and underabsorption has been pronounced by consumers since volumes have been declining. You know, there are at least 200 basis points a quarter I could point to this year for the impact of underabsorption caused not just by lower sales volumes but the conscious effort to reduce inventory. But the underlying performance improvement, particularly in our plants, is really remarkable, and I think it will show up when we get to a better unit volume. Got it. Okay. No, thanks for the color on that.

Matthew Schlarb: And the Powerpoint slides that we.

Matthew Schlarb: <unk> teamed up with for this for our prepared remarks.

Matthew Schlarb: Really strong sales growth and as you could imagine.

Really impressive earnings growth.

Matthew Schlarb: In these geographies.

And that's all as a result of kind of a restructuring and rethinking of how we could better approach growth in these developing.

Matthew Schlarb: Parts of the World.

Matthew Schlarb: Lastly, I'll I'll tell you with an approach that seems to be working the fact that were relatively small.

Matthew Schlarb: It makes me believe there is a ton of opportunity for continued growth.

Matthew Schlarb: Matt do you want to add anything to that.

Matthew Schlarb: Yeah, I'll just add one thing to John's question about the brand so within PSEG and CPG, our brands are well known globally, particularly amongst multinational corporations, who are making investments in southeast Asia and India.

Russell L. Gordon: And then I guess just the second one, maybe a little bit farther out, but, you know, you're making some decent investments in trying to drive the Asian business, and you've got some new plans already that are coming out. I guess, how are you tackling that in terms of gaining market share and brand awareness for a space that you don't have as big of a presence as you say in the U.S. or Europe or even Latin America? So, I guess what should we be thinking about that? And how are you kind of looking at the growth opportunities there? Sure, I'll make a few comments, and then Matt Schlarb can add to that. As part of our MAP25 initiative and really going back to the original MAP program, we recognize that our efforts, particularly in the developing world, were not very effective.

But theres certainly room to grow those brands so opening as those facilities, they're just allows us to be more responsive to our customers.

Matthew Schlarb: And it also helps with the shipping costs and get them the products that they need because we see investments in that part of the world and particularly in infrastructure and manufacturing Capex continuing.

Yeah, so they'll drive lower cost and highest shirt higher service levels and typically what we've been able to generate from a mostly north American or European manufacturing base.

None: Got it thanks very much for the color.

Thank you.

None: Our next question comes from Mike Sison from Wells Fargo. Please go ahead with your question.

Michael Joseph Sison: Michael Hey, guys nice quarter.

Michael Joseph Sison: Thank you.

Michael Joseph Sison: It seems to me you've done everything within your control to get to the.

Frank C. Sullivan: We had too many small operations. Small acquisitions to have kind of a starting footprint, but because these were small and far away operations, we didn't pay much attention to them, so we weren't having good traffic. We have an exceptional management team in South Africa that, because of the unique nature of that market, South Africa became a platform for multiple RPM projects, and their success led to our decision to participate in the MAP Initiative.

Michael Joseph Sison: 42% gross margin call it 16% EBIT margin goal how much volume do you think you need to get to sort of get there.

And maybe just any thoughts on.

Michael Joseph Sison: What type of recovery, we need to see in existing home sales of DIY to sort of put you on that to get you closer to those calls.

None: Sure I'll make two comments on that.

None: As we approach fiscal 'twenty five.

None: One is we expect to see and we will need a recovery in our specialty products group.

Frank C. Sullivan: We put the Middle East, India, and Southeast Asia for the Asian market underneath that leadership team and really take an RPM platform approach to the developing, and as you can see on slide five in the PowerPoint slides, teamed up with Herbert Martin, really strong sales growth, and, as you can imagine, equally impressive earnings. And that's all as a result of kind of a restructuring and rethinking of how we could better approach growth. Parts of the World.

None: This group, even adjusting out the.

None: The Guardian warranty business was a mid to upper single digit I'm, sorry, mid to upper double digits mid teens to upper teens.

None: EBIT margin business and I would expect us to get back there over time and that recovery has got to happen in fiscal 'twenty five.

None: We will see a return to positive consumer takeaway sometime in fiscal 'twenty five I don't think we have a good sense of when it will provide I think a better view of that when we talk about 25 in July.

Frank C. Sullivan: Lastly, I'll tell you an approach that seems to be working, the fact that we're relatively small makes me believe there's a ton of opportunity. Matt, do you want to add anything to that? I'll just add one thing to John's question about the brand. So within PCG and CPG, our brands are well known globally, particularly among multinational corporations who are making investments in Southeast Asia and India. But there's certainly room to grow those brands, so opening those facilities there just allows us to be more responsive to our customers. And it also helps with shipping costs and getting them the products that they need because we see investments in that part of the world and, particularly, in infrastructure and manufacturing CapEx continuing. Yes, so they don't drive lower costs and higher service levels. And that's typically what we've been able to generate. Got it. Thanks very much for the call.

None: Lastly, as folks have noted.

None: We've been making some significant investments in SG&A for instance around developing this RPM platform approach.

None: For the developed world, which are developing world, which is paying off.

None: And some of our S 168, and <unk> 68.

In case of <unk> 106, eight smart pricing initiatives, we've added people in different categories.

None: Fiscal 'twenty five I think you'll see a.

None: A very deliberate approach to balance sheet SG&A spend and reallocating.

None: SG&A to things that are really growing and addressing some SG&A spend it's been very deliberate over the last two or three years.

None: But if there's areas, where it's not paying off and we will tackle that and.

None: And so those are the elements that I see.

None: We will need for us to hit our map 25 goals.

None: Got it and a quick follow up in consumer group, you mentioned market share gains any particular areas or.

Michael Joseph Sison: Our next question comes from Mike Sison from Wells Fargo. Please go ahead with your question. Thank you, guys.

Customer stats and then yes.

Frank C. Sullivan: Nice quarter. Frank, you know, it seems to me you've done everything within your control to get to the sort of 42% gross margin goal and 16% EBIT margin goal. How much volume do you think you need to get to sort of get there?

None: If things don't recover.

None: Robustly in 'twenty five.

None: Windows market share gains could you still turned the corner and volume growth for consumer group.

None: Matt do you want to talk about some of the market share gains and new product introductions that we've had.

Matthew Schlarb: Sure sure happy to so like Frank already mentioned this in the call, but DAP introduced a new one component.

Frank C. Sullivan: And maybe just say any thoughts on... You know, what type of recovery you need to see in existing home sales or DIY to sort of put you on that, to get you closer to those goals. Sure, I'll make two comments on that as we approach fiscal 25. One is, we expect to see, and we will need recovery in our specialty products group. You know, this group, even adjusting out the Guardian warranty business, was a mid to upper single digit, I'm sorry, a mid to upper double digit, so mid teens to upper teens. I would expect us to get back there over time, and that recovery has got to happen.

Matthew Schlarb: And cabinet installation spray.

Matthew Schlarb: We've had share gains what's actually been pretty broad based we've had several shared gains in automotive retailers. We've had some specialty retailers and looking at product categories. You May remember, we acquired Alley industries, which makes gate or sandpaper, a few years ago and they've had some nice gains in home improvement.

Matthew Schlarb: Over the past several quarters as well so it's a pretty broad based strength in terms of its market share gains, but it was really a trend we've been seeing since we got through the supply chain.

Frank C. Sullivan: We will see a return to positive consumer take away sometime in fiscal 25. I don't think we have..., and we'll provide a better view of that when we talk about it. Lastly, as folks have noted, we've been making some significant investments in SG&A, for instance, around developing this RPM platform approach for the developing world, which is paying off, and some of our MS-168 and CS-168, in the case of CS-168 Smart Pricing Initiatives, which added people in different categories.

Matthew Schlarb: Challenges several quarters ago.

None: Thank you.

None: Our next question comes from.

None: Alexis lots of law Keybanc capital markets. Please go ahead with your question.

None: Morning.

Alexis: Good morning, everyone, Hey, Frank.

Alexis: Just to come back to consumer I guess, how should we think about potential volume recovery or snapback is that that volumes are down low single digits. So.

Alexis: Get that back and then maybe the market is growing low single, so whenever that comps or is it some bigger number.

None: No I think it's a a a steady return to a.

Frank C. Sullivan: In fiscal 25, I think you'll see a very deliberate approach to balancing SG&A spend and reallocating SG&A to things that are really growing and addressing some SG&A spend that's been very deliberate over the last two or three years. But if there's areas where it's not paying off, then we will... So those are the elements that I see and that we will need for us to hit our roadmap. Got it

None: Normal consumer takeaway combined with some of the.

None: Volume driven by some new product introductions that Matt just talked about we.

None: We don't see any huge snap back per se, but we will be rounding easier comparisons as we get into fiscal 'twenty five when we really started to see.

None: Consumer takeaway I think some of this is a long tail rebalancing.

None: From the boom in Covid.

Matthew Schlarb: And a quick follow-up, in the consumer group, you mentioned market share gains. Any particular areas or, you know, customer sets? And then, you know, if things don't recover robustly in 2025, with those market share gains, could you still turn the corner in volume growth for consumer groups? Matt, do you want to talk about some of the market share gains and new product introductions that we've had? Sure, sure, happy to. As Frank already mentioned on the call, DAP introduced a new one-component wall and cavity foam insulation spray. We've had share gains, and it's actually been pretty broad-based. We've had several share gains at automotive retailers, and we've had some at specialty retailers.

None: And I think some of it is the simple fact that in manufacturing and again, we've talked about this in past quarters, while broadly speaking, perhaps we're avoiding a major recession.

None: The manufacturing sector has gone through a rolling recession anything that touched housing has gone through a rolling recession.

None: And things that are driven by housing turnover have gone through a ruling recession. So we see that in our core specialty products group.

None: Manufacturers wood stains and finishes and coatings that go into kitchen, cabinets, and doors and windows and rvs and all kinds of things that are housing related and you can see.

None: See that in and other companies that manufactured goods that are in there.

None: <unk>.

None: Housing turnover is starting to perk up which is a good thing for both are.

None: Specialty products group and our consumer group because housing turnover tends to drive some of our consumer takeaway and as was noted.

Matthew Schlarb: And looking at product categories, you may remember we acquired Alley Industries, which makes Gator sandpaper, a few years ago. And they've had some nice gains at home improvement retailers over the past several quarters as well. So, it's pretty broad-based strength in terms of these market share gains, but it's really a trend we've been seeing since we got through the supply chain challenges several quarters ago. Thank you.

None: We're just a few months ago broadly word a 30 year low and the United States for housing turnover. So that's been a challenging dynamic.

None: Thank all of those things are moving in the right direction and then you'll start to see what's been consistently over the last fiscal year.

None: Negative consumer takeaway in the low to mid single digits slowly turn into a positive number in terms of unit volume.

Michael J. Laroche: Our next question comes from Alexis Yefremov from KeyBank Capital Markets. Please go ahead with your question. Good morning, good morning, everyone.

None: That would be low single digits.

None: <unk> was higher but there's no big boom that we foresee in terms of some huge snapback in volume.

Frank C. Sullivan: Hi Frank. Just to come back to consumers, I guess, how should we think about potential volume recovery or a snapback? Is it that volumes are down low single digits, so you'll get that back, and then maybe the market is growing low single digits or whenever that comes? Or is it some bigger number?

None: Thanks, Frank and then across your product lines, not just in consumer, but the house flying slide Nomura.

None: Probably more optimism around new residential construction not immediately but later this year or into even next calendar year.

Frank C. Sullivan: No, I think it's a steady return to normal consumer takeaway, combined with some of the volume driven by new product introductions that Matt just talked about. We don't see any huge snap back, per se, but we will be rounding easier comparisons as we get into fiscal 25, when we're really starting to see Consumer Takeaway. I think some of this is a long-tail rebalancing from the boom in COVID. And I think some of it is..., https://www.yifei.com.au, manufacturing. And again, we've talked about this in past quarters, while broadly speaking, perhaps we're avoiding a major recession. The manufacturing sector has gone through a rolling recession.

So in these areas do you see any.

None: More optimism as far as your product takeaway or backlogs or anything like that.

Absolutely we are performing.

None: Performing <unk>.

Really well in our construction products group.

None: New dress, specifically was not immune to the.

Decline in.

None: Residential new construction and the negative impact of interest rates, both on construction and housing turnover. So that product line was hurting last year, we're seeing those products the newer products and projects.

None: Grow.

None: It was principally a residential product when we acquired it five years ago.

None: Our construction products group is now successfully targeting new dura at the broad North American school market and we're having some successes there. So we're expanding what was primarily a residential new construction product line.

Frank C. Sullivan: Anything that touches housing has gone through a rolling recession, and things that are driven by housing turnover have gone through a rolling recession. So we see that in our core specialty products group. See that and other companies that manufacture goods. The housing turnover is starting to pick up, which is a good thing for both our specialty products group and our consumer group. This housing turnover tends to drive some of our consumer takeaway. And as noted... We were just a few months ago. Broadly, we're at a 30-year low in the United States for housing turnover. So that's been a challenge. I think all those things are moving in the right direction, and then you'll start to see what we've been consistent about over the last fiscal year. Negative Consumer Takeaway in the low to mid-single digits slowly turns into a positive number in terms of unit volume.

And just some more commercial markets that we're excited about.

None: Crypto was also relatively unique between new Dura and drive it and the trend go sealants and putting together what they call a one shrimp co package, where they're working with architects and engineers to actually have specified an entire wall system.

And so instead of having different components from different manufacturers that have different warranties are no warranties at all.

None: We can put together a complete.

None: Wall system.

None: And werent the entire wall performance as opposed to individual components. So those are all dynamics that we've been working on and they are making good progress and momentum and.

None: I think with a return of new construction residential eat a return of commercial construction, which has also been down pretty significantly in the last 12 to 15 months.

Frank C. Sullivan: The Ultimate Parody Site-Limited The Ultimate Parody Site-Limited, Thanks, Frank. And then across your product lines, not just in consumer, but to have lines like Nadura, you know, there's probably more optimism around new residential construction, not immediately, but later this year or into even next calendar year. So in these areas, do you see any more optimism as far as, you know, your product takeaway or backlogs or anything like that? Absolutely, we are performing really well in our construction products group. New Jura specifically was not immune to the decline in Residential New Construction and the negative impact of interest rates both on construction and housing turnover.

None: Youll see even better momentum at our construction products group.

None: Great. Thanks, Mark.

None: Our next question comes from Jeff Zekauskas from Jpmorgan. Please go ahead with your question.

Good morning, Jeff Hi, good morning.

None: Home depot is buying Srs.

Jeffrey John Zekauskas: Sort of building products.

Okay.

T in roofing.

Jeffrey John Zekauskas: Is that is that something which is <unk>.

Jeffrey John Zekauskas: Positive for RPM or negative or it really doesn't matter.

I don't think at this stage it matters, we have certainly a good relationship.

Jeffrey John Zekauskas: With home depot, and they are our largest customer and so if there's opportunities for us to explore what that might mean.

Frank C. Sullivan: So that product line was hurt in the last year. But we're seeing those products, the New Door products and projects, grow. It was principally a residential product when we acquired it five years ago, but our Tremco construction products group is now successfully targeting New Dura at the broad North American school market, and we're having success there, so we're expanding, primarily residential new construction products and just some more commercial markets. Tremco is also relatively unique between New Dura and Drive-It.

Jeffrey John Zekauskas: We'd be excited about it.

Jeffrey John Zekauskas: But as I just mentioned relative to the previous question.

Most of our products are specified into schools and universities in the hospitals.

Jeffrey John Zekauskas: And so theyre highly specialized particularly as you as you know in Archstone hard flooring, but in this case <unk> roofing.

Jeffrey John Zekauskas: We do a lot of our own application either outright or is the general manager a.

Frank C. Sullivan: Tremco C1, putting together what they call a one-Tremco package, where they are working with architects and engineers to actually have specified an entire wall. So instead of having different components from different manufacturers that have different warranties or no warranties at all, we can put together a complete law system. So those are all dynamics that we've been working on, and they are making good progress and momentum. I think with a return of new construction residentially, and a return of commercial construction, which has also been down pretty significantly. You'll see even better momentum. Great. Thanks, Frank.

Jeffrey John Zekauskas: General contractor and a major project.

So not a lot of our products and the roofing segment are sold through distribution.

That does not mean that.

Jeffrey John Zekauskas: There's an opportunity in the future that we could explore.

To expand some of our product ranges more broadly into distribution.

Jeffrey John Zekauskas: But at the current time, there's not a real eye.

Jeffrey John Zekauskas: It's not a positive or negative because of the nature of how we go to market.

Jeffrey John Zekauskas: Versus people that have more commodity type products that go to market through distribution today.

None: Okay Alright.

None: In response to an earlier question you said that there were.

None: Parts of the PPG business that might be interesting to our Pam.

Frank C. Sullivan: Our next question comes from Jeff Zekauskas from J.P. Morgan. Please go ahead with your question. Good morning, Jeff.

None: Does that mean that the whole business is not interesting to RPM.

Frank C. Sullivan: Hi. Home Depot is buying SRS, sort of a building product. They have a specialty in roofing. Is that something positive for RPM or negative, or it really doesn't matter?

None: Again, it's an odd circumstance, where we normally wouldn't comment on EM.

None: M&A activity, except for the fact that this is very much in our space and in a very much of a public announcement.

Frank C. Sullivan: I don't think at this stage it matters; we certainly have a good relationship with Home Depot, and they are our largest customer. And so if there are opportunities for us to explore what that might mean, we'd be excited about it. But as I just mentioned relative to the previous question, most of our products are specified in schools and universities, and so they're highly specialized, particularly as you know in our stone hard flooring, but in this case, Tremco roofing, we do a lot of our own application either outright or as, General Manager. General Contractors. So not a lot of our products in the roofing segment are sold through distribution. That does not mean that...

None: It's our understanding that detailed material will be.

None: Forthcoming.

None: And some weeks or months whenever it comes out.

None: We have a sincere interest in looking at.

None: The entirety of.

None: What might be for sale.

None: But there are certainly a brand's pieces and parts.

None: That we would have a real interesting and could integrate but Jeff I can't answer that question.

None: In any detail because we have yet to see any detail.

None: Okay, great. Thank you so much thank.

None: Thank you.

None: Our next question comes from Steve Byrne from Bank of America. Please go ahead with your question.

Stephen V. Byrne: Let me see.

Stephen V. Byrne: Good morning.

Frank C. Sullivan: There's an opportunity in the future that we could explore to expand some of our product ranges more broadly into distribution. But at the current time, there's not a real... It's not positive or negative because of the nature of how we go to market versus people that have more commodity-type products that go to market. In response to an earlier question, you said that there were parts of the PPG business that might be interesting to RPM. Does that mean that the whole business is not interesting to RPM? Again, it's an odd circumstance where we normally wouldn't comment on M&A activity except for the fact that this is very much in our space and very much of a public announcement. It's our understanding that detailed material will be forthcoming, https://www.yifei.com looking at the entirety of it. But there are certainly brands, pieces, and parts. Jeff, I can't answer that question. ®MD-BO ®MD-BO Thank you so much.

Stephen V. Byrne: Your cost of goods in the quarter looked like they were down six or 7% on an absolute dollar value of your year over year.

Stephen V. Byrne: Can you can you rank the drivers of the decline between lower volumes in consumer specialty.

Stephen V. Byrne: Lower raw material costs.

Stephen V. Byrne: And the third bucket being map 2025, what would you how would you allocate the drivers of the lower Cogs.

None: Sure I'll, let rusty provide some color on that as well.

Russell L. Gordon: Broadly speaking, it's a combination of cost price mix.

Russell L. Gordon: And our map initiatives some of it is.

Function of.

Russell L. Gordon: Our very deliberate efforts of driving and incentivizing sales forces towards a higher margin mix.

Russell L. Gordon: Particularly in CPG.

Russell L. Gordon: And P C G.

Russell L. Gordon: The benefits of our map initiatives on higher unit volume.

Russell L. Gordon: But beyond that I don't know Russ do you have any additional color you'd like.

Russ: Yeah, I would peg it exactly that its a combination of selling price increases.

Frank C. Sullivan: Our next question comes from Steve Byrne from Bank of America. Please go ahead with your question. What is it, Steve?

Russ: Each were modest but.

Russ: Nevertheless, helpful across all segments.

Russell L. Gordon: Good morning. Your cost of goods in the quarter looked like they were down 6% or 7% on an absolute dollar value year-over-year. Can you rank the drivers of that decline between lower volumes in consumer specialty, lower raw material costs, and the third bucket being mapped in 2025? How would you allocate the drivers of the lower cogs?

None: Didn't have.

<unk> plus right up there as the map savings were.

None: Save incrementally this year about 100 million that varies by quarter. We're in.

None: <unk> be a seasonal low quarter in the third.

None: Quarter this year, but.

None: That was very impactful too.

None: And as Rusty mentioned earlier.

None: A meaningful amount.

Russell L. Gordon: Sure, I'll let Rusty provide some... I think broadly speaking, it's a combination of the Cost-Price Mix and our MAP initiatives, some of it is... a function of, very deliberate efforts to drive and incentivizing sales forces towards a higher margin mix. PCG, the benefits of our MAP initiatives on higher units. Beyond that, I don't know, Russ. Do you have any additional color you'd like?

None: Tens of millions of dollars.

None: Yeah.

None: Of our map savings had been undercut or masked by the under absorption.

None: Particularly consumer and a number of our specialty products group companies.

And frankly I have a structural question for you you look at.

None: Consumer pardon.

Russell L. Gordon: Yeah, I would peg it at exactly that. It's a combination of selling price increases, you know, which were modest, but nevertheless helpful across all segments. We did have deflation, plus right up there is the MAP savings. We're going to save incrementally this year about $100 million, but that varies by quarter.

None: Pardon me construction products and performance coatings.

None: There is so much overlap between those segments.

None: And the products.

None: The end markets that they sell into.

None: These new plants, you're building in Malaysia, and India will cover both.

Russell L. Gordon: We're in an obvious seasonal low quarter in the third quarter this year, but that was very impactful, too. Yeah, and as Rushdie mentioned earlier, a meaningful amount, tens of millions of dollars, of our map shaving, undercutting, or mating. And Frank, I have a structural question for you. When you look at consumer, pardon me, construction products, and performance coatings, there's so much overlap between those segments in the products, the end markets that they sell into. These new plants you're building in Malaysia and India, we'll cover both. You have some businesses that can switch from one to the other. A broad question for you, and that is, could you drive more cost synergies and maybe cross selling? By combining those segments,

None: We have some businesses from switched from one to the other a broad question for you and that is could you drive more cost synergies and maybe cross selling.

None: By combining those segments.

None: Sure I appreciate the question.

None: First of all throughout our history on a very thoughtful long term strategic perspective, you know RPM has.

None: And willing to adjust our structure.

None: If you go back 24 years ago.

None: We moved from really a true holding company with 40 or 50 independent business units.

None: <unk> six group structure.

None: That served RPM and our customers and shareholders well for about 15 years.

As we initiated the map 2020 program in 2018, we reorganized into four groups.

Frank C. Sullivan: Sure, I appreciate the question. First of all, throughout our history, on a very thoughtful, long-term strategic perspective, you know, RPM has been willing to adjust our structure. If you go back 24 years ago, we moved from really being a true holding company with 40 or 50 independent businesses into a six-group structure that served RPM and our customers and shareholders well for about 15 years. As we initiated the MAP 2020 program in 2018, we reorganized into four groups.

None: That reorganization has really driven meaningful.

None: Synergy and cooperation amongst our businesses.

Even across the four groups and their various business units.

None: To a greater extent than what existed in our cinch group structure.

None: So I think we're very committed to our current four group structure.

None: Certainly through the map 2025 period.

None: And as I answered an earlier question I think we will look this time next year long term to think all right. What's the next.

Frank C. Sullivan: That reorganization has really driven meaningful... synergy and cooperation amongst our businesses. Even across the four groups and their various business units, to a greater extent than before... So I think we're very committed to our current four-group structure, certainly through the MAP-20-25 period, and as I answered an earlier question, I think we will look The Ultimate Parody Site-Limited, an Initiative for RPM, whether it's a year from now or 10 years from now. The idea that we would look at our structure and do something different.

None: Initiative for RPM.

None: And whether it's a year from now or 10 years from now.

None: The idea that we would.

None: Looking at our structure and do something different it made sense is certainly something that's that.

None: We've proven in the past, we're willing to do and we certainly would do in the future when it's appropriate.

None: Specific to the construction products group and the.

None: Performance coatings group.

None: I think there are some significant differences between the end use markets of the.

Performance coatings group, which tend to be heavy.

Frank C. Sullivan: .....

Frank C. Sullivan: Performance Coding School. I think there are some significant differences between the End-Use Markets of Performance Coding Group, which tend to... Heavy Industry and More Infrastructure Related, and New Hong Kong. The overlap today is pretty much in the infrastructure area, and certainly, we have good levels of cooperation. It's also been enhanced by... beginning to play. But at this stage, we don't have any plans to change that structure. If it made sense, as we have done in the past, we would do it anyway.

None: Heavy industry and more infrastructure related and the construction products group tends to be more construction markets.

None: And.

None: New home construction commercial construction the overlap today is pretty much in the infrastructure area.

None: And certainly we have good levels of cooperation.

None: It's also been enhanced by a trillion plus of.

None: Federal stimulus.

None: Just beginning to play out and so we'll see that.

None: Should that continue.

None: But at this stage, we don't have any plan to change that structure. If it made sense as we've done in the past we would do it again in the future.

Frank C. Sullivan: Okay, thank you. I would add one more thing to that, which is that as long as these two segments, with really good leaders and leadership, continue to pile out positive unit volume, year-over-year and quarter-over-quarter, we would be very hesitant to adjust something that's working.

None: Okay. Thank you.

I would add one more thing to that which is as long as these two segments with really good leaders of leadership.

None: Turning on to pile up positive Union unit volume, despite some choppy economics.

None: And generate margin expansion and solid EBIT growth year over year and quarter over quarter.

None: We would be very hesitant to adjust something thats working exceedingly well.

None: There is good momentum in both.

Frank C. Sullivan: Thank you. Our next question comes from Kevin McCarthy from Vertical Research Partners. Please go ahead with your question. Good morning, Kevin. Good morning.

None: Thank you.

None: Our next question comes from Kevin Mccarthy from vertical Research partners. Please go ahead with your question.

Kevin William McCarthy: Good morning, Kevin Good morning.

Kevin William McCarthy: Good morning, Frank. Question for you on cash flow and specifically working capital. I think a couple of quarters ago, you had the potential to reduce your ratio of trade working capital to sales by maybe 300 basis points or so, and as of this morning, it looks like you're running 580 basis points down. So really nice progress there.

Kevin William McCarthy: Good morning, Frank.

Kevin William McCarthy: Question for you on cash flow and specifically working capital I think a couple of quarters ago.

Kevin William McCarthy: You had signaled potential to reduce your ratio of trade working capital to sales by maybe 300 basis points or so and as of this morning. It looks like you're running a 580 basis points down. So so really nice progress there I guess my question would be if you look out over the next six months.

Russell L. Gordon: I guess my question would be, if you look out over the next six to 12 months, is there additional opportunity to extract cash from working capital, or have you just about right-sized? Yeah, I'll let Rusty add some commentary to that as well, but our MAP initiatives on the MS-168 side in particular are continuing. That's a never-ending effort of continuous improvement. And I think one of the more significant benefits of our MAP initiatives beyond the metric, www.rpm.org. And it's really in two areas.

Kevin William McCarthy: 12 months is there additional opportunity to extract cash from working capital or have you just about right sized.

Kevin William McCarthy: Inventory in the other line items at this point.

None: Yeah, I'll I'll, let rusty had some commentary to that as well but.

None: Our map initiatives on the M. S 168 side in particular.

Russell L. Gordon: Our continuing that's you know that's a never ending effort of continuous improvement and I think one of the I hope people appreciate.

Russell L. Gordon: One of the more significant benefits of our map initiatives.

Russell L. Gordon: Beyond the metrics that we've been proved in the cash flow numbers in the margins is the cultural change at RPM.

Russell L. Gordon: And it's really in two areas, there's a level of of.

Frank C. Sullivan: There's a level of... I think cooperation and communication across our groups and businesses that didn't exist before, and there is a mindset of lean manufacturing and continuous improvement. It may be new to the world, but it's new to RPM, it's really taking hold, and that's a cultural change that's paid off. I'm specific about the cash flow and working capital metrics. I'll let Russell.

Russell L. Gordon: I think cooperation and communication across our groups and businesses that didn't exist before and.

Russell L. Gordon: There is a mindset of a lean manufacturing continuous improvement approach that as I had mentioned earlier.

Russell L. Gordon: Maybe new.

Russell L. Gordon: To the world, but it's new to RPM, it's really taking hold and that's a cultural change that has paid huge dividends for us.

Russell L. Gordon: Specific to the cash flow and working capital metrics I'll, let rusty add his thoughts.

Russell L. Gordon: Yeah, I would say that when it comes to inventory, that was clearly our biggest opportunity to get better when we compared RPM to peers. And, Kevin, I would say that we're good at some of our businesses. But I'd still say more than half our businesses, have plenty of room to improve in sales and operational planning so that we only make the stock that's needed by our customers and not much more. Okay, thank you for that.

Russell L. Gordon: Yeah, I would say that when it comes to inventory that was clearly our biggest opportunity to get better when we compare to rpm's peers.

Russell L. Gordon: Yeah, Kevin I would say that we're good at.

Some of our businesses, but I'd still say more than half of our businesses have plenty of room to improve in sales and operational planning so that.

Russell L. Gordon: We only make the stock that's needed by our customers and not much more.

None: Okay. Thank you for that and then secondly, I want to come back to specialty products. If you look at the Big picture do you think that the fiscal third quarter margin levels that you just posted are likely to be a durable trough level and then related to that.

Russell L. Gordon: And then secondly, I want to come back to specialty products. If you look at the big picture, do you think that the fiscal third quarter margin levels that you just posted are likely to be a durable trough level? And then related to that, I was a little surprised at the fourth quarter sales guide and specialty products, just given how much easier your comparison is versus the fourth quarter of last year. I heard your comments on the lack of disaster restoration businesses.

None: That was a little surprised at the fourth quarter sales guide and specialty products, just given how much easier. Your comparison is versus the fourth quarter of last year.

None: I heard your comments on lack of disaster restoration business is there anything else going on there.

Kevin William McCarthy: Is there anything else going on there, perhaps on a sequential basis that would cause your sales to be running down mid-singles into the end of the fiscal year? So about half of our specialty products group is our OEM coatings and Industrial Codings, which I was tied to...

None: Perhaps on a sequential basis that would.

None: Cause your your sales to be running down mid singles into the end of the fiscal year.

None: So about half of our specialty products group is our OEM coatings and <unk>.

None: The.

None: Industrial coatings.

None: OEM piece of our businesses.

None: Highly tied to.

Frank C. Sullivan: Indirect. New Home Construction also has a significant share in RV, in the RV market, which boomed during COVID. And because of that, it's been very, very, So those dynamics are all. I believe that Q3 is the low point of performance for... you will be seeing sequentially, Quote, as we get into Q4. Perfect. Thank you very much.

None: Indirectly, but to new home construction also a significant share in RV in the RV market, which room during COVID-19 and because of that it's been very very shocked.

And so those dynamics are also impacting.

Our specialty products group.

None: I believe that Q3 is the low point of performance for our specialty products group and you will be seeing sequential improvement.

None: Both as we get into Q4 and as we get into fiscal 'twenty five.

None: Perfect. Thank you very much.

None: Thank you.

Ghansham Panjabi: And our next question comes from Ghansham Panjabi from Baird; please go ahead with your question. Morning, Ghansham. Good morning, Frank. Hello, everyone.

None: And our next question comes from Ghansham Panjabi from Baird. Please go ahead with your question.

Ghansham Panjabi: Good morning Ghansham.

Ghansham Panjabi: Good morning, Frank Hello, everyone.

Ghansham Panjabi: Frankly, as we kind of think about fiscal year 'twenty for you know, obviously construction and performance had outstanding volume yours at least so far and then price cost was obviously, a big driver of margin expansion as well.

Frank C. Sullivan: You know, Frank, as we kind of think about fiscal year 24, you know, I've, so far. You know, price cost was obviously a big driver of margin expansion as well. You know, just based on your comments that some of the commodity input costs seem to have inflected a little bit, certainly in the consumer, and then, of course, oil prices are up, Is it fair to assume that margin expansion in 2025 will be led by productivity, better fixed costs, operating leverage, and some sort of a reversion back to the consumer? Also, how should we think about construction and performance for fiscal year 2025 in turn You know, difficult comparisons and so on.

Ghansham Panjabi: Just based on your comments that some of the commodity input costs seem to inflect a little bit certainly in consumer and then of course the oil is up a bit is it fair to assume that margin expansion and 25 will be led by <unk>.

Ghansham Panjabi: Productivity, and just better fixed cost and operating leverage.

Ghansham Panjabi: And just some sort of a reversion back in consumer and then also how should we think about construction and performance for fiscal year 'twenty five in terms of.

Ghansham Panjabi: Comparisons and so on a year over year basis.

Ghansham Panjabi: Sure.

None: I guess I'll refer back to some earlier comments.

Frank C. Sullivan: Sure. I guess I'll refer back to some earlier comments and your... The C-Margin expansion is expected to be more driven by the leverage of unit volume growth to our bottom line gained over the last three or four years by positive unit volume. We certainly will see that in consumer in fiscal 25, and I think we'll have a better sense of when that might be. Good momentum in construction products, good momentum in our performance coding group, which we don't see changing, and Recovery and Specialty Products. So those are the things that will do it, but your presumption, your question is absolutely correct.

None: And your your.

None: Presumptions correct.

None: We expect to see margin expansion.

None: B, it's going to be more driven by the leverage of unit volume growth to our bottom line and the map efficiencies that we've gained over the last three or four years.

None: Certainly over the last year and a half so.

None: We see margin expansion.

None: But it will be driven.

None: We will need to be driven.

None: By positive unit volume growth and.

None: We're pretty certain we'll see that in consumer in fiscal 'twenty five.

None: But better sense of when that might be when we report.

None: Our fourth quarter results and really talk in more detail about 25.

None: Good momentum in construction products good momentum in.

None: And our performance coatings group, which we don't see changing.

None:

None: And recovery in specialty products. So those are the things that we'll do it but your presumption of your question is absolutely correct youre going to see margin expansion were driven by the benefits of.

Frank C. Sullivan: You're gonna see margin, which was driven by the benefit of our MAP initiatives on higher volume and on any cost price impact. And you know, as we highlighted even in this quarter, I think we're at the third quarter, kind of the peak of the benefits from commodity cycle prices on a year over year price on a consolidated basis, obviously sequentially down. That's going to be the good work that we've been doing. Leverage. Thanks for that, Frank.

None: Of our map initiatives on higher volume levels than on any cost price mix.

None: The impact in <unk>.

None: As we highlighted even in this quarter I think we're at the.

None: The third quarter and kind of the peak of the benefits from commodity cycle price on a year over year price on a consolidated basis was up 1%, which is obviously sequentially down from over the last.

Four or five quarters so.

None: It's going to be the good work that we've been done.

Bridging on higher unit volumes.

Okay. Thanks for that Frank and then for the second question you know in terms of the emerging markets, which were pretty solid throughout.

Frank C. Sullivan: And then for the second question, you know, in terms of the emerging markets, which were pretty solid throughout, what do you attribute that to? Comparisons are a little bit easier in some cases.

What do you attribute that towards I mean, I know comparisons are a little bit easier in some cases, but.

Frank: It is just fundamental improvement and you also mentioned some changes you made in terms of how you approach those markets internally as well.

Frank C. Sullivan: Fundamental Improvement: Leadership matters everywhere, and we've got really good leaders now and in our developing regions, throughout South Africa, the Middle East, and Asia Pacific. It's taken us a while to really focus on a strategy that is leverageable and sustainable, and we have. So we're pretty excited about it. Our acquisition approach was not working for a decade plus in acquiring small businesses and not giving them the resources or paying enough attention to them.

Frank: Leadership matters everywhere and we've got really good leaders now.

Frank: In our developing regions.

Frank: Wow.

Frank: South Africa Middle East.

Frank: Asia Pacific.

Frank: It's taken us awhile to really focus on a strategy that is leverages bull and sustainable and we have one and so we're pretty excited about it our acquisition.

Frank: Our approach.

Frank: Was not working.

Frank: For a decade, plus and acquiring small businesses and not giving them the resources are paying enough attention to them.

Frank C. Sullivan: So the performance you're seeing here is principally organic. It's a better structure, better leadership, and a better focus. It will continue to be organic, as you see from our first ever meaningful manufacturing, Greenfield Manufacturing Investment, in these regions, and we'll fill up those plants pretty quickly. And so that strategy's gonna continue for the next couple of years. And as we begin to get critical mass, we'll get back to the point where we can acquire a business but integrate it and make it part of this strategy as opposed to having a small business that's far away and not paid much attention to. So it's an area that we're pretty excited about and was a key element of our MAP initiatives in terms of how we would be organizing. Our next question comes from Arun. This is Arun Viswanathan from RBC Capital Markets. Please go ahead with your question. Good morning, everyone. Good morning, Frank. Thanks for taking my question. I hope you're well.

Frank: So the performance you are seeing here is principally organic it's a better structure better leadership and a better focus it will continue to be organic as you see from our first ever meaningful manufacturing Greenfield manufacturing investments in these regions and we will fill up those plants pretty quickly.

Frank: And so that strategy is going to continue for the next couple of years and as we begin to get critical mass.

Frank: We'll get back to the point, where we can acquire a business, but integrate it and make it part of this strategy as opposed to have a small business, it's far away and not paid much attention to so it's an area that we're pretty excited about and was a key element of our map initiatives in terms of how we would be organized to be success.

Frank: Oh.

None: Thank you so much.

None: Thank you.

None: Our next question comes from Arun.

Arun: This win often from RBC capital markets. Please go ahead with your question good.

Arun: Good morning Arun.

Arun: Good morning, Frank Thanks for taking my question I hope you're well.

Arun Shankar Viswanathan: So, yeah, just, you know, congrats on the strong progress. If we look at Fiscal 24, it looks like, you know, Construction Products Group and Performance Codings drove a large part of the gains this year with consumer kind of offsetting specialty. And then if I look into kind of Fiscal 25, I wanted to get your thoughts on, you know, maybe how those segments would play out. It does appear that maybe we're seeing a little bit of slowing momentum in Construction Products and Performance Codings, or at least some catch up there, but that could be offset by the consumer coming back, and maybe specialty as well. Is that how you're thinking about it? And I guess if that is the case, is it mainly map gains that would be kind of driving those dynamics?

So yeah, just you know.

Congrats on the strong progress if we look at our fiscal 'twenty four it looks like.

Speaker Change: Construction products group and performance coatings, you know drove a large part of our part of the gains this year, what with consumer kind of offsetting specialty and then I'll.

Speaker Change: Looking to kind of fiscal 'twenty five wanted to get your thoughts on.

Speaker Change: Maybe how those segments would play out.

Speaker Change: It does appear that you know, maybe we're seeing a little bit of.

Speaker Change: Slowing momentum in construction products and performance coatings or at least some catch up there, but that could be offset by a consumer coming back and maybe specialty as well is that how you're thinking about it and I guess if that is the case.

Speaker Change: Is it mainly map gains that would be kind of driving those dynamics or how did you kind of think about.

Frank C. Sullivan: Or how do you kind of think about how your earnings growth is shaping up as you look out in the next couple of quarters? Sure. The fourth-quarter guidance that we provided related to construction products and performance coatings is as much about the timing of the completion of some major projects.

Speaker Change: How your earnings growth is shaping up as you look out in the next couple of quarters.

Speaker Change: Sure.

Speaker Change: The fourth quarter guidance that we provided related to construction products and performance coatings is as much about the timing of the completion of some major projects.

Speaker Change: And we will provide this detail in July but when you look at the second half of fiscal 'twenty four on a consolidated basis I mentioned this earlier.

Frank C. Sullivan: And we'll provide this detail in July, but when you look at the second half of Fiscal 24 on a consolidated basis, I mentioned this earlier, fiscal fourth quarter. You know, when we look back at the second half of the performance coding screws and construction products, you're going to see just really solid. Good unit volume growth and good performance are being masked a little bit by these project completions in Q3, which will inhibit a little bit of our growth in Q4. We don't see any slowdown in the solid performance and momentum of those two segments as we go. And, as I mentioned earlier, I think we've hit bottom on our specialty products group. We will start to round easier comps along with a real focus in our consumer group. New Product Introduction and Operations allow us to serve customers at a very high level. I think we will see good trends as we go into fiscal 25, but the impact will be more. ®MD-BO ®MD-BO will be coming to an end.

Speaker Change: You'll see sales on a consolidated basis flat to up 1%.

Speaker Change: EBITDA, let's say, 13% to 14% that's based upon the results we reported today and the guidance that we provided for fiscal fourth quarter here in 'twenty four.

Speaker Change: When we look back at the second half of the performance coatings group.

Speaker Change: And construction products group, you're going to see just really solid.

Speaker Change: Good unit volume growth and good performance is being masked a little bit by these project completions at the end of Q3, which will inhibit a little bit of our growth in Q4, we don't see any slowdown in the solid performance and momentum of those two segments as we go into the summer.

Speaker Change: Yes.

Speaker Change: And as I mentioned earlier I think we've hit bottom on our specialty products group.

Speaker Change: And we.

Speaker Change: We will start to round easier comps along with a real focus in our consumer group.

Speaker Change: On.

Speaker Change: New product introductions, and operating efficiencies that will allow us to serve customers at a very high level. So.

Speaker Change: I think we see good trends as we go into fiscal 'twenty five.

Speaker Change: But the impact will.

Speaker Change: It will be more as a result of map initiatives because the.

Speaker Change: Deflation element and the pricing elements will.

Speaker Change: We will be coming to an end as we get through the fourth quarter and get into the summer months.

Arun Shankar Viswanathan: Great, thanks for that. That's very helpful. And then, yeah, if I could just ask another question on capital allocation. You guys have done a great job of, you know, bringing your leverage down, and, you know, obviously, that has accreted to the equity side. At this point, you know, and in the past, you've often kind of favored smaller bolt-on deals. So is there an opportunity now to pursue something larger, you know, given the changes in the organization and the ability to integrate, you know, maybe some larger properties? And if so, would you be open to taking on some extra leverage to do so?

None: Great. Thanks for that and that's that's helpful. And then if I could just ask another question I guess on <unk>.

None: Capital allocation.

None: You know you guys have done a great job of.

None: Now, bringing your leverage down and and you know obviously that has accreted to the equity side.

None: At this point.

None: And in the past, you've often kind of favored smaller bolt on deals so.

None: Is there an opportunity now to pursue something larger up given the changes in the organization and the ability to integrate them you know maybe some some larger properties.

None: And if so would you be open to taking on some extra leverage to do that.

Frank C. Sullivan: Thanks. Sure. Yeah, I appreciate the question. We will continue and actually have a decent pipeline of small to medium-sized acquisitions that we will integrate and add to the strategies of our different companies and segments. So that I would expect to continue. Particularly in our consumer group and our construction products group, where we are more integrated than other parts of RPM, I think we are in a position to take on larger acquisitions and really drive synergies that are required to be competitive from a price perspective in those. And we have, throughout my 30 plus career at RPM, been very... I think we've got tons of leverage.

Sure Yeah I. Appreciate the question, we will continue and actually have a decent pipeline of small to medium sized acquisitions that we will integrate.

None: And add to the strategies of our different companies in segments. So that I would expect to continue.

None: Particularly in our consumer group and our construction products group.

None: Where we are more integrated than other parts of our P. M. I think we are in a position to take on larger acquisitions and and really drive synergies.

None: That are required to be competitive from a price perspective in those.

None: And we have throughout my 30 plus career at RPM.

None: Been very.

None:

None: Fine with using our balance sheet.

None: And so I think we got tons of leverage we've got a stronger cash flow than we've ever had and.

Frank C. Sullivan: We've got a stronger cash flow than we've ever had. We would be willing to use our balance sheet right up to maintaining our investment grade rating. So there is plenty of room for growth, cash flow, and that. The Ultimate Parody Site-Limited, find them at a price.

None: We would be willing to use our balance sheet.

None: Right up to maintaining our investment grade rating and so there is plenty of room.

None: <unk> cash flow and debt capacity to do larger transactions if we can.

None: Find them at a price that works for us.

Frank C. Sullivan: Great, thanks a lot. And once again, if you would like to ask a question, please press star and 1. To withdraw your question, you may press star and 2.

None: Great. Thanks, a lot.

None: Thank you.

None: And once again, if you would like to ask a question. Please press star and one to withdraw your question you May press Star and two.

None: Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead with your question.

Vincent Stephen Andrews: Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead with your question. Morning, Vincent. Hey, this is Steve Haynes on behalf of Vincent.

None: Events.

None: Hey, this is Steve Haynes on for Vincent Thanks for taking my question.

Steven Kyle Haynes: Thanks for taking my question. I just wanted to come back to a comment you made on SG&A earlier. I think in your map targets, you're kind of looking for 26% of sales for SG&A. And right now, when you kind of adjust for all the one-time costs, I think you're running like 200 basis points or so above that.

Steven Kyle Haynes: I just wanted to come back to a comment you made on SG&A.

Steven Kyle Haynes: Earlier I think in your in your map targets, you're kind of looking for.

Steven Kyle Haynes: 26% of sales for for SG&A and right now when you kind of adjust for all.

Steven Kyle Haynes: All the onetime costs I think you're running like 200.

Steven Kyle Haynes: Basis points or so above that.

You're also doing better on gross margin, but I just wanted to ask, within the broader framework of the MAP program, is 26% still kind of the right way to be thinking about your SG&A spend? Yes, it is. Okay, I'll pass it on. Thanks. And ladies and gentlemen, that will conclude today's question and answer session. I'd like to turn the floor back over to Frank Sullivan for any closing remarks. Thank you, Jamie. And thank you to everybody for your participation on our investor call today. Through the first nine months of the year, we demonstrated our ability to expand margins and increase cash flow despite some economic challenges, particularly for our consumer and specialty products group. We look forward to building momentum in those two segments and continuing the good momentum in our construction products group and performance coding as we enter our fourth quarter in the summer months of our new fiscal year.

Steven Kyle Haynes: Also doing better on gross margin, but.

Steven Kyle Haynes: Just wanted to I, just like within the broader framework of the map program is 26% still kind of the right way to be thinking about your your SG&A spend.

Yes. It is.

Steven Kyle Haynes: Okay.

None: I'll pass it on thanks.

None: Thank you.

None: And ladies and gentlemen that will conclude today's question and answer session I'd like to turn the floor back over to Frank Sullivan for any closing remarks.

Frank C. Sullivan: Thank you Jamie and thank you to everybody for your participation on our investor call today.

Frank C. Sullivan: For the first nine months of the year, we demonstrated our ability to expand margins and increase cash flow. Despite some economic challenges, particularly for our consumer and specialty products group. We look forward to building momentum in those two segments and continuing the good momentum in our construction products group and performance coatings group.

Frank C. Sullivan: As we enter our fourth quarter in the summer months of our new fiscal year.

In July, we'll provide the details of our FY 2024 fourth quarter, which we expect to be our 10th consecutive quarter of record sales and earnings performance, and we will provide comments on our outlook for fiscal 2024. Thanks again for participating in our call, and have a great day. Ladies and gentlemen, that does conclude today's conference call. We do thank you for joining us. You may now disconnect your lines.

Frank C. Sullivan: In July we will provide the details of our FY 2020 for fourth quarter, which we expect to be our 10th consecutive quarter of record sales and earnings performance and to providing comments on our outlook for our fiscal 2025. Thanks again for participating in our call and have a great day.

None: Ladies and gentlemen that does conclude today's conference call. We do thank you for joining you may now disconnect your lines.

None: Oh.