Financial Data and Key Metrics Changes - Consolidated sales increased by 3.5% to a record, driven by acquisitions and engineered solutions for high-performance buildings, but adjusted EBIT declined due to higher SG&A expenses and temporary inefficiencies from plant consolidations [12][13] - Adjusted EPS declined, influenced by lower adjusted EBIT and higher interest expenses from increased debt levels for M&A activities [12][13] Business Line Data and Key Metrics Changes - Construction Products Group sales grew to a record, led by solutions for high-performance buildings, but faced challenges from longer project lead times and weak sales in disaster restoration due to lower storm activity [14] - Performance Coatings Group achieved record sales with broad-based growth, although adjusted EBIT was flat due to growth investments and unfavorable mix [14][15] - Consumer Group sales growth was driven by M&A and pricing to recover inflation, but volumes declined due to soft DIY demand, particularly in November [15] Market Data and Key Metrics Changes - Europe was the fastest-growing region, driven by M&A and foreign exchange, while North America grew approximately 2% due to increased high-performance building solutions offset by soft DIY demand [13] - Emerging markets, particularly Africa and the Middle East, showed growth by serving high-performance building and infrastructure projects [13] Company Strategy and Development Direction - The company is focusing on optimizing SG&A levels in response to soft market conditions while continuing to invest in high-growth opportunities, including high-performance buildings and business intelligence [9][11] - The MAP 3.0 program is being developed to enhance operational efficiency and align spending with market demand [11][31] Management's Comments on Operating Environment and Future Outlook - Management noted that market conditions are expected to remain sluggish, with soft DIY demand and longer lead times for construction projects, but they anticipate outgrowing underlying markets due to targeted growth investments [19][20] - The company expects consolidated sales to increase by mid-single digits in the third quarter, with adjusted EBIT anticipated to grow mid to high single digits [20][21] Other Important Information - The company announced an agreement to acquire Kalzip, a German-based leader in metal-based roofing and facades, expected to close in the fiscal fourth quarter of 2026 [18] - Cash flow from operations increased by $66.3 million compared to the prior year, allowing the company to pay down $127 million in debt and return $169 million to shareholders [17] Q&A Session Summary Question: Performance of the three operating segments - Management indicated that deterioration was observed across all three segments in the latter part of the quarter, with unique monthly performance variations [29] Question: SG&A initiative details - The $100 million SG&A initiative includes approximately $70 million in personnel-related cuts and $30 million in discretionary expense reductions [31] Question: Incremental margins in Q3 and Q4 - Management expects better incremental margins due to easier comps and structural SG&A actions, alongside anticipated improvements in unit volume growth [38] Question: Impact of government shutdown on costs - Transitory costs were attributed to higher conversion costs and inefficiencies from plant consolidations, with a significant impact on margins [47] Question: Pricing realization in Consumer Group - Price contribution was less than 1% in Q2, with challenges in achieving full realization due to weak demand [66] Question: Outlook for organic sales growth - Management expects better organic growth in the second half of the fiscal year, driven by focus growth investments and easier comparisons [99]

Financial Data and Key Metrics Changes - Consolidated sales increased by 3.5% to a record, driven by acquisitions and engineered solutions for high-performance buildings, but adjusted EBIT declined due to higher SG&A expenses and temporary inefficiencies from plant consolidations [12][13] - Adjusted EPS declined, influenced by lower adjusted EBIT and higher interest expenses from increased debt levels for M&A activities [13] Business Line Data and Key Metrics Changes - Construction Products Group sales grew to a record, led by solutions for high-performance buildings, but faced challenges from longer project lead times and weak sales in disaster restoration due to lower storm activity [14] - Performance Coatings Group achieved record sales with broad-based growth, although adjusted EBIT remained flat due to growth investments and unfavorable mix [14][15] - Consumer Group sales growth was driven by M&A and pricing to recover inflation, but volumes declined due to soft DIY demand, particularly in November [15] Market Data and Key Metrics Changes - Europe was the fastest-growing region, driven by M&A and foreign exchange, while North America grew approximately 2% due to high-performance building solutions, offset by soft DIY demand [13] - Emerging markets, particularly Africa and the Middle East, showed growth by serving high-performance building and infrastructure projects [13] Company Strategy and Development Direction - The company is focused on optimizing SG&A levels in response to soft market conditions while continuing to invest in high-growth opportunities, including high-performance buildings and business intelligence [9][11] - The MAP 3.0 program is being developed to enhance operational efficiency and align spending with market demand, with an estimated annual benefit of approximately $100 million once fully implemented [8][9] Management's Comments on Operating Environment and Future Outlook - Management noted that market conditions are expected to remain sluggish, with soft DIY demand and longer lead times for construction projects, but they anticipate outgrowing underlying markets due to targeted growth investments [19][20] - The company expects consolidated sales to increase by mid-single digits in the third quarter, with adjusted EBIT anticipated to grow mid to high single digits [20][21] Other Important Information - Cash flow from operations increased by $66.3 million compared to the prior year, allowing the company to pay down $127 million in debt and return $169 million to shareholders through dividends and share repurchases [17] - The company announced an agreement to acquire Kalzip, a German-based leader in metal-based roofing, expected to close in the fiscal fourth quarter of 2026 [18] Q&A Session Summary Question: Performance of operating segments - Management indicated that deterioration in performance was observed across all three segments as the quarter progressed, with initial growth in September followed by declines in October and November [29] Question: SG&A initiative details - The $100 million SG&A initiative includes approximately $70 million in personnel-related cuts and $30 million in discretionary expense reductions, with a focus on reallocating spending to growth areas [31][32] Question: Incremental margins outlook - Management expects improved incremental margins due to easier comparisons and structural SG&A actions, alongside anticipated unit volume growth [38] Question: Impact of government shutdown - The government shutdown significantly impacted absorption and conversion costs, with an estimated loss of almost a percentage point in margin due to higher conversion costs [47] Question: Pricing realization in Consumer Group - Price contribution was less than 1% in Q2, with challenges in achieving full realization due to weak demand and price elasticity issues [66] Question: Software system implementation impact - The implementation of new software systems caused temporary sales delays, but these issues have been resolved, and sales are expected to normalize [73] Question: Future expectations for The Pink Stuff business - The Pink Stuff acquisition is on track for base case expectations, with the reversal of the earnout due to not meeting aggressive sales targets [61]

Financial Data and Key Metrics Changes - Consolidated sales increased by 3.5% to a record, driven by acquisitions and engineered solutions for high-performance buildings, but offset by continued DIY softness and longer construction project lead times [10] - Adjusted EBIT declined as top-line growth and MAP 2025 benefits were more than offset by higher SG&A expenses from growth initiatives, M&A deal costs, healthcare, and temporary inefficiencies from plant and warehouse facility consolidations [10] - Adjusted EPS declined due to lower adjusted EBIT and higher interest expense resulting from increased debt levels to finance M&A activity [10] Business Line Data and Key Metrics Changes - Construction Products Group sales grew to a record, led by solutions for high-performance buildings, but project lead times lengthened due to the government shutdown [11] - Performance Coatings Group achieved record sales with broad-based growth across businesses, although adjusted EBIT was approximately flat due to growth investments and unfavorable mix [12] - Consumer Group sales growth was driven by M&A and pricing to recover inflation, but volumes declined due to soft DIY demand, particularly in November [12] Market Data and Key Metrics Changes - Europe was the fastest-growing region, driven by M&A and foreign exchange, while North America grew approximately 2% [10] - Emerging markets, particularly Africa and the Middle East, showed growth by serving high-performance building and infrastructure projects [10] Company Strategy and Development Direction - The company is focused on optimizing SG&A levels in response to soft market conditions while continuing to support high-growth opportunities [9] - Investments are being made in high-performance buildings, business intelligence, and innovation, with a goal of enhancing product offerings and market reach [8] - The company is pursuing acquisitions to expand its system offerings, such as the recent agreement to acquire Kalzip, a German-based leader in metal-based roofing [16][19] Management's Comments on Operating Environment and Future Outlook - Management noted that market conditions are expected to remain sluggish, with soft DIY demand and longer lead times for construction projects, but they remain optimistic about outgrowing underlying markets due to targeted growth investments [17] - The company anticipates consolidated sales to increase by mid-single digits in the upcoming quarter, with adjusted EBIT expected to grow mid to high single digits [17][19] - Management expressed uncertainty about the timing of construction pipeline conversions to actual activity, influenced by government shutdowns and market volatility [17][19] Other Important Information - Cash flow from operations increased by $66.3 million compared to the prior year, attributed to improved working capital efficiency [15] - The company has a strong liquidity position of $1.1 billion, allowing for flexibility in capital allocation decisions [15] - The company reversed a $12.7 million liability associated with an earnout for the acquisition of Star Brands Group, reflecting a more conservative sales forecast [12][13] Q&A Session Summary Question: Performance of operating segments - Management indicated that deterioration in performance was observed across all three segments, particularly in construction and consumer, as the quarter progressed [28] Question: SG&A initiative details - The $100 million SG&A initiative includes approximately $70 million in personnel-related cuts and $30 million in discretionary expense reductions [30] Question: Incremental margins outlook - Management expects better incremental margins due to easier comps and structural SG&A actions, along with anticipated improvement in unit volume growth [36] Question: Impact of government shutdown on sales - Management noted that the government shutdown significantly impacted absorption and conversion costs, leading to a loss of nearly a percentage point in margin [45] Question: Pricing realization in Consumer Group - Price contribution was less than 1% in Q2, with expectations for similar performance in Q3 due to price elasticity issues [64] Question: Software system implementation impact - The implementation of new systems in the consumer segment was temporary, and management confirmed that operations are now fully running [70]

Key Takeaways RPM's adjusted EPS estimate for Q2 edged lower recently, while net sales are still expected to rise YoY.RPM expects Q2 sales growth across CPG, PCG and Consumer, supported by demand trends and recent acquisitions.RPM expects MAP 2025 initiatives to support margins, contributing to year-over-year growth in adjusted EBIT.RPM International Inc. ((RPM) is slated to report its second-quarter fiscal 2026 results on Jan. 8, before the opening bell.In the last reported quarter, RPM’s adjusted earnings ...

Financial Data and Key Metrics Changes - Consolidated sales increased by 7.4% to a record level, with a balance between organic and M&A growth [11] - Adjusted EBIT increased by 2.9% to a record, driven by volume growth and MAP 2025 initiatives, despite headwinds from higher raw material costs [11] - First quarter adjusted EPS reached a record $1.88, influenced by adjusted EBIT improvement, partially offset by increased interest expense from acquisition financing [11] Business Line Data and Key Metrics Changes - Construction Products Group sales increased to a record, driven by systems and turnkey roofing solutions, although offset by softness in Europe and disaster restoration business [12][13] - Performance Coatings Group achieved record sales with broad-based strength in turnkey flooring and protective coatings, with adjusted EBIT also reaching a record [14] - Consumer Group sales increased to a record due to successful integration of acquisitions, although DIY demand remained soft [14] Market Data and Key Metrics Changes - Growth was led by Europe, benefiting from acquisitions and favorable effects, while North America grew by 5.9% [12] - Emerging markets showed mixed performance, with strength in Africa and the Middle East driven by infrastructure projects [12] Company Strategy and Development Direction - The company is focused on a pivot to growth, investing in sales associates and support staff, while competitors are cutting costs [9][10] - Strategic M&A activities are being rebuilt, with a focus on core and adjacent markets [16] - The company is expanding its presence in new retail channels, including grocery and dollar stores, to capture additional market share [80] Management's Comments on Operating Environment and Future Outlook - Management expects another quarter of record sales and adjusted EBIT, driven by systems and turnkey solutions and a focus on repair and maintenance [19][20] - The company anticipates continued challenges from economic uncertainty and inflation, but remains optimistic about growth investments [21][22] - Management highlighted the importance of maintaining benefit programs and investing in growth despite a challenging environment [10][16] Other Important Information - The company returned $82 million to shareholders through dividends and share repurchases during the first quarter [16] - Inventory increases were driven by strategic purchases to mitigate future tariffs and ensure high service levels during plant consolidations [17] Q&A Session Summary Question: Outlook for the year and impact of investments - Management indicated that investments for growth are delivering higher organic growth levels than the market, with deliberate spending on new hires and advertising [25][26] Question: Industry demand for the Consumer Group - Management believes the Consumer Group is outperforming the broader industry, with new product introductions helping to gain market share [29][30] Question: Details on increased marketing spend - The increase in marketing spend is primarily in advertising, focusing on social media and e-commerce, particularly in the cleaners category [34][35] Question: Impact of manufacturing inefficiencies - Management noted about $10 million of unfavorable conversion costs due to plant consolidations, which are expected to continue into the second quarter [37] Question: Backlog and growth in Construction Products and Performance Coatings - Management highlighted strong backlogs in reroofing and institutional projects, with aggressive expansion in sales forces contributing to growth [44][48] Question: Changes in guidance and challenges - Management cited challenging dynamics in gross profit margins and unexpected healthcare cost increases as reasons for adjusting guidance to the lower end of the range [55][56] Question: Pricing strategies in response to tariffs - Management acknowledged the difficulty in raising prices earlier due to the unpredictable nature of tariffs, but expects to implement higher prices in the upcoming quarters [59][60] Question: Working capital management and inventory purchases - Management indicated strategic inventory purchases were made to mitigate tariff impacts and ensure service levels during transitions [66] Question: Future growth expectations - Management does not view the current year as normal due to ongoing uncertainties, but anticipates that in a more stable environment, revenue growth should lead to higher earnings growth [108]

Financial Data and Key Metrics Changes - Consolidated sales increased by 7.4% to a record level, with both organic and M&A growth contributing [11] - Adjusted EBIT increased by 2.9% to a record, driven by volume growth and MAP 2025 initiatives, despite headwinds from higher raw material costs [11] - First quarter adjusted EPS reached a record $1.88, influenced by adjusted EBIT improvement, partially offset by increased interest expense due to higher debt levels from acquisition financing [11] Business Line Data and Key Metrics Changes - Construction Products Group sales reached a record, driven by systems and turnkey roofing solutions, although there was softness in Europe and disaster restoration business [12][14] - Performance Coatings Group achieved record sales with broad-based strength in turnkey flooring and protective coatings, supported by acquisitions [14] - Consumer Group sales increased to a record due to successful integration of The Pink Stuff and Ready Seal acquisitions, despite soft DIY demand [14] Market Data and Key Metrics Changes - Growth was led by Europe, benefiting from acquisitions and favorable effects, while North America grew by 5.9% [12] - Emerging markets showed mixed performance, with strength in Africa and the Middle East driven by infrastructure projects [12] Company Strategy and Development Direction - The company is focused on a pivot to growth, emphasizing strategic acquisitions, new product introductions, and efficiency initiatives [6][8] - Investments in sales associates and support staff are being made, contrasting with competitors who are cutting costs [9][10] - The company is expanding its presence in adjacent markets, particularly in cleaning products and consumer categories [30][102] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing economic uncertainty and challenges in the construction market, but expressed confidence in achieving record sales and EBIT in the upcoming quarter [19][20] - The company anticipates continued growth in sales and adjusted EBIT, driven by acquisitions and a focus on repair and maintenance [21] - Management highlighted the importance of maintaining growth investments despite rising healthcare costs and inflationary pressures [26][56] Other Important Information - The company returned $82 million to shareholders through dividends and share repurchases during the first quarter [16] - Inventory increases were strategic to mitigate future tariff impacts and ensure high service levels during plant consolidations [17] Q&A Session Summary Question: Outlook for the year and impact of investments - Management indicated that investments are delivering higher organic growth levels than the market, with deliberate spending on new hires and advertising contributing to growth [25][26] Question: Industry demand for the Consumer Group - Management believes the Consumer Group is outperforming the broader industry, with new product introductions helping to gain market share [29] Question: Details on increased marketing spend - The increase in marketing spend is primarily in advertising, focusing on social media and e-commerce, particularly in the cleaners category [34] Question: Impact of manufacturing inefficiencies - Management noted about $10 million of unfavorable conversion costs due to plant consolidations, which are expected to continue into the second quarter [37] Question: Organic growth drivers in Construction and Performance Coatings - Management highlighted strong backlogs in reroofing projects and aggressive sales force expansion as key drivers of growth in these segments [44][49] Question: Changes in full-year guidance - Management cited challenging gross profit margins and unexpected healthcare cost increases as reasons for adjusting guidance to the lower end of the range [55][56] Question: Pricing strategy in response to tariffs - Management acknowledged the difficulty in timing price increases due to fluctuating tariff impacts, with expectations for higher prices in the upcoming quarter [59][60] Question: Working capital management and inventory strategy - Management explained strategic inventory purchases to prepare for tariff impacts and ensure product availability during transitions [66] Question: Future growth expectations and market conditions - Management expressed optimism for improved market conditions in the coming year, anticipating better dynamics in the housing market [87]

Financial Data and Key Metrics Changes - Consolidated sales increased by 7.4% to a record level, with a balance between organic and M&A growth [10] - Adjusted EBIT increased by 2.9% to a record, driven by volume growth and MAP 2025 initiatives, despite headwinds from higher raw material costs [10] - First quarter adjusted EPS reached a record $1.88, influenced by adjusted EBIT improvement, partially offset by increased interest expense from higher debt levels [10] Business Line Data and Key Metrics Changes - Construction Products Group sales reached a record, driven by systems and turnkey roofing solutions, although there was softness in Europe and disaster restoration business [11] - Performance Coatings Group achieved record sales with broad-based strength in turnkey flooring and protective coatings, with acquisitions contributing to the sales increase [12] - Consumer Group sales increased to a record due to successful integration of The Pink Stuff and ReadySeal acquisitions, despite soft DIY demand [12] Market Data and Key Metrics Changes - Growth was led by Europe, benefiting from acquisitions and favorable effects, while North America grew by 5.9% driven by systems and turnkey solutions [11] - Emerging markets showed mixed performance, with strength in Africa and the Middle East driven by infrastructure projects [11] Company Strategy and Development Direction - The company is focused on a pivot to growth, investing in sales associates and support staff, while competitors are cutting costs [8][9] - Strategic M&A activities are being rebuilt, with a focus on core and adjacent markets, as evidenced by the acquisition of ReadySeal [15] - The company is implementing pricing actions to recover from inflation impacts, particularly in metal packaging and niche products [18] Management's Comments on Operating Environment and Future Outlook - Management expects another quarter of record sales and adjusted EBIT, driven by systems and turnkey solutions and a focus on repair and maintenance [18] - The company anticipates continued economic uncertainty, which may affect growth dynamics throughout the fiscal year [19] - Management highlighted the importance of maintaining growth investments despite challenging market conditions [19] Other Important Information - The company returned $82 million to shareholders through dividends and share repurchases during the first quarter [15] - Inventory increases were driven by strategic purchases to mitigate future tariff impacts [16] Q&A Session Summary Question: Outlook for the year and impact of investments - Management indicated that investments for growth are delivering higher organic growth levels than the market, with deliberate spending on new hires and advertising [22][23] Question: Industry demand for the Consumer Group - Management believes the Consumer Group is outperforming the broader industry, with new product introductions helping to gain market share [25] Question: Increased marketing spend in the Consumer Group - The increase in marketing spend is focused on social media and e-commerce, particularly in the cleaners category [28] Question: Impact of manufacturing inefficiencies - Management noted about $10 million of unfavorable conversion costs due to plant consolidations, which are expected to continue into the second quarter [31] Question: Organic growth in Construction Products Group and Performance Coatings Group - Management highlighted strong backlogs in roofing and aggressive sales force expansion as key drivers of growth in these segments [36] Question: Changes in guidance and profitability headwinds - Management cited challenging dynamics in gross profit margins and unexpected healthcare cost increases as reasons for adjusting guidance to the lower end [44] Question: Tariff impacts and mitigation strategies - Management discussed efforts to mitigate tariff impacts through production shifts and pricing agreements, with about half of the $90 million impact being offset [85] Question: M&A appetite and focus areas - Management expressed a strong appetite for M&A, particularly in Performance Coatings Group and Construction Products Group, while remaining open to opportunities in consumer and cleaning sectors [87]

Core Viewpoint - RPM International Inc. is expected to report its first-quarter fiscal 2026 results on October 1, with adjusted EPS estimated at $1.87, reflecting a 1.6% year-over-year growth, and net sales projected to rise 3.8% to $2.04 billion [1][3][9] Financial Performance - In the last reported quarter, RPM's adjusted EPS and net sales exceeded the Zacks Consensus Estimate by 7.5% and 3.2%, respectively, with year-over-year growth of 10.3% and 3.7% [1][2] - The company has topped analysts' expectations in three of the last four quarters, with an average negative surprise of 4.4% in the remaining quarter [2] Sales and Growth Drivers - RPM's net sales are expected to grow year over year due to contributions from all reportable segments: Construction Products Group (CPG), Performance Coatings Group (PCG), and Consumer Group [4] - The growth is driven by increased sales of systems and turnkey solutions for high-performance buildings, as well as maintenance and repair products [4] - Acquisitions of The Pink Stuff and Ready Seal are anticipated to contribute positively, despite challenges from reduced DIY sales and soft demand in specialty OEM markets [5] Segment Performance - The CPG segment, contributing 38.9% to the previous quarter's net sales, is expected to see a growth of 3.1% year over year to $818.8 million [6] - The Consumer Group and PCG segments are projected to grow by 5.2% and 2.5% year over year, respectively [6] Cost Management and Margins - RPM's bottom line is expected to benefit from MAP 2025 initiatives, leading to savings in procurement, manufacturing, and commercial excellence [8] - Adjusted EBIT is projected to increase by 4.5% year over year to $343 million, supported by lower advertising, insurance, and bonus expenses [9][10] Earnings Estimates - The Zacks Consensus Estimate for RPM's adjusted EPS has decreased slightly from $1.88 to $1.87 over the past 30 days, indicating a 1.6% growth from the previous year's figure of $1.84 [3] - The company expects selling, general, and administrative expenses as a percentage of net sales to decline by 10 basis points year over year to 26.6% [10]