RPM International Inc. (NYSE:RPM) Q1 2024 Earnings Call Transcript

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Our supply challenges are over. Our fill rates are back to solid numbers. Through the MAP initiative, we have created through efficiencies, 40 million or 50 million units of volume. And so we’re in really good shape today there. And product gains have been with our universal. We’re picking up share in new accounts, and that’s going really well. The Rust-Oleum five-in-one spray is showing some incremental gains, and I’d say incremental. Any positive numbers in the face of slightly negative consumer takeaway look good. We’ve got some new product introductions DAP, a two-component spray foam and one can that’s being introduced really well as well as a textured spray that’s being well-received. So new product introductions are going well, and we actually experienced because of the new product introductions, some positive unit volume growth in the quarter at DAP.

And so that’s kind of the broad overview of what’s happening in Consumer.

John McNulty: Got it. Thanks very much for the color.

Frank Sullivan: Sure. Thanks, John.

Operator: The next question comes from Stephen Byrne of Bank of America Securities. Please go ahead.

Frank Sullivan: Good morning, Steve.

Stephen Byrne: Good morning, Frank. I’ve got a question for you on CPG. Do you have a view as to how much of the revenue in that segment is generated from service versus selling materials? And that could be a complicated question given your – some turnkey projects. But I asked about this service component because it seems as if it’s something that you’re expanding into this Pure Air model seems to be service and your restoration and maintenance on roofing seems to be – you know, there’s a service revenue component. And just wondering if you had an estimate on that. And maybe more importantly, would you see that model potentially expanding into other areas of service such as cleaning or water treatment, something beyond the air quality inside the building?

Frank Sullivan: Sure. So great question. And in general, our Construction Products Group revenues are about 30%, maybe slightly higher 30% service revenues with roughly 70% driven by product sales. It’s a little bit – and there’s a little ambiguity there because in most instances, we’re not selling – in some cases, we sell only repair services or other services, but in many instances, those services go hand in glove with the material sale for a reroofing project, for instance. I would expect that over time to expand. And we talked about Pure Air, that’s a good example. That addresses right at indoor air quality. And it – we have been asked for many, many years as we’re on the roof with our WTI services group and addressing issues on the roof and not just roofing materials, but rooftop safety in terms of the work that Tremco does with fiber grade in terms of railings and walkways.

We’ve been asked for many years, can we address HVAC issues in repair and the answer for too long was no. Two years ago, we acquired Pure Air and there’s a key element of this. It took us a while to fix. And that is a service business, whereby we do an assessment of existing HVAC systems and then have really good capabilities to clean, disinfect, and repair components. And it was a $20 million business when we acquired it. We expect a few tens of millions of dollars of revenue growth this year and the potential for that is meaningfully higher. And so as that rose as a share of our business that will grow, that 30% services business higher. The benefits are basically about one-third cost versus total replacement. The immediate benefits are significant improvement in efficiency of an old system that’s getting worn down because of blades or motors or other things.

And there is a measurable benefit immediately in indoor air quality. And so for the hospitals and school system, customers that our Construction Products Group serve, it’s a really exciting market for us.

Stephen Byrne: And Frank, any thoughts about expanding some of that service to go into other issues such as cleaning services, for example, or water?

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