Good morning, welcome to the RPM International's fiscal 2023 second quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Matt Schlarb, Senior Director of Investor Relations. Please go ahead. Thank you, Cole, and welcome to RPM International's conference call for the fiscal 2023 second quarter. Today's call is being recorded. Joining today's call are Frank Sullivan, RPM's Chairman and CEO, Rusty Gordon, Vice President and Chief Financial Officer, and Michael Laroche, Vice President, Controller, and Chief Accounting Officer. This call is also being webcast and can be accessed live or replayed on the RPM website at www.rpminc.com. Comments made on this call may include forward-looking statements based on current expectations that involve risks and uncertainties, which could cause actual results to be materially different. For more information on these risks and uncertainties, please visit RPM's reports filed with the SEC. During this conference call, references may be made to non-GAAP financial measures. To assist you in understanding these non-GAAP terms, RPM has posted reconciliations to the most directly comparable GAAP financial measures on the RPM website. Also, please note that our comments will be on an as-adjusted basis, and all comparisons are to the second quarter of fiscal 2022, unless otherwise indicated. We have provided a supplemental slide presentation to support our comments on this call. It can be accessed in the Presentations and Webcast section of the RPM website at www.rpminc.com. At this time, I would like to turn the call over to Frank. Thanks, Matt. I'll begin today's call by sharing commentary on our consolidated performance for the second quarter. Mike will provide details on our financial results, and then I'll turn the call back over to Matt to provide some business updates. Finally, Rusty Gordon will conclude our prepared remarks with our outlook for Q3. After our prepared remarks, we'll be pleased to answer your questions. In the second quarter, we continued to build on recent momentum to deliver both record second quarter sales and adjusted EBIT. This represents the tenth consecutive quarter of record revenue and four consecutive quarters of record adjusted EBIT, an impressive accomplishment in today's uncertain economic and volatile climate. An important factor in achieving these results is our MAP 2025 operating improvement program. Across RPM, associates have embraced MAP 2025 principles of collaboration and efficiency to successfully implement initiatives and help drive top and bottom-line growth and performance. MAP 2025, which officially began at the beginning of this fiscal year, is off to a strong start, and we are on track to meet or exceed our first-year EBIT target improvement of $120 million from MAP initiatives. This hard work was evident in our second quarter results, where we achieved strong revenue growth as well as significant adjusted EBIT margin improvement. Importantly, we achieved these positive results despite meaningful macroeconomic headwinds, including intensifying weakness in Europe, FX headwinds, and a slowdown in some of our end markets. Turning to the next slide, revenue growth was broad-based, with all four of our segments achieving record second quarter sales. This was accomplished primarily through the implementation of pricing increases in response to continued inflation. We also generated volume growth in several of our businesses that benefited from continued reshoring and infrastructure spending, as well as from improved material availability. Importantly, we not only generated strong sales growth, but also expanded margins to achieve record second quarter adjusted EBIT on a consolidated basis at three of our four segments. This was driven by the successful execution of margin enhancement initiatives across the organization. The one outlier segment that did not achieve record second quarter adjusted EBIT was the Construction Products Group, which was most acutely impacted by macro and economic headwinds because of its relatively outsized exposure to Europe and to new residential home construction in North America. Looking at sales by geography on the next slide, Europe is clearly the laggard among the regions we serve, with sales down nearly 12% for RPM and unit volume down even at a greater rate. This was driven by weak macroeconomic conditions, including persistently high inflation. FX weighed heavily on our results in Europe. FX translation also negatively impacted our sales in emerging markets, though we still achieved healthy growth in these regions thanks to the hard work of our associates to align our businesses and products with growing end markets and to successfully increase prices in response to cost inflation. Demand in North America remained strong through the second quarter, with growth in all of our segments. Growth in the region was fueled by price increases in response to continued inflation and strength in our businesses that serve customers who are reshoring manufacturing to the U.S. and that serve infrastructure-related activities. Better material availability also contributed to organic growth in a number of our businesses in the quarter. I'll now turn the call over to Mike Laroche to discuss our consolidated and segment financial results in more detail. Thanks, Frank. Sales increased 13.4%, excluding FX, which was a 4.1% headwind. The result was a 9.3% increase in reported sales to a second quarter record of $1.79 billion, compared to $1.64 billion in the prior year period. Organic sales growth was 12.4% or $204.1 million, and acquisitions contributed 1% to sales or $15.7 million. As mentioned, FX decreased sales by 4.1% or $67.6 million. Our consolidated adjusted EBIT increased 36.4% to a second quarter record of $214.7 million compared to $157.3 million reported in the prior year period. Second quarter adjusted EBIT margins expanded 240 basis points compared to the prior year period. We achieved this expansion despite significant foreign currency translation headwinds and continued cost inflation. Adjusted diluted earnings per share were a second quarter record at $1.10, representing an increase of 39.2% compared to the $0.79 in the prior year period. Turning to the next slide, our Construction Products Group generated second quarter record net sales of $634.1 million, an increase of 3.2% compared to the prior year period. Organic sales growth was 6.9%, with acquisitions contributed 1.5%, and foreign currency translation reducing sales by 5.2%. Sales growth was driven by restoration systems for commercial roofing, facades, and parking structures. Admixtures and repair products for concrete continued to gain share during the quarter. Price management in response to continued cost inflation also contributed to CPG's revenue growth. Partially offsetting this growth, demand was weak in Europe and in new residential home construction, both areas where CPG has a higher exposure than the RPM average. Demand in these two areas was particularly weak at the end of the second quarter. These headwinds, along with the negative impact from FX, unfavorable mix, and reduced fixed cost leverage at plants, including the Corsicana, Texas facility that was acquired in fiscal 2022 second quarter, resulted in adjusted EBIT declining 12% to $80.4 million. As a reminder, unadjusted EBIT declined 40% in the quarter versus the prior year period that was primarily due to a $41.9 million gain from the sale of real estate assets in Q2 2022 that did not recur this quarter. This gain was excluded from adjusted EBIT in Q2 2022. As you can see on the next slide, the Performance Coatings Group achieved record fiscal second quarter net sales with revenue of $335.2 million, an increase of 10.8% compared to the second quarter of fiscal 2022. Organic sales increased 15.4%, acquisitions added 0.6%, Foreign currency translation was a 5.2% headwind. Flooring systems, protective coatings, and FRP grating all generated double-digit revenue growth. Manufacturing customers fueled the increase, including demand from those who are reshoring their production to the U.S., such as pharmaceuticals, food and beverage, EV manufacturing, and electronics companies. Good demand in energy markets and price increases in response to continued inflation also contributed to the growth. Adjusted EBIT increased 16.6% to a second quarter record of $46.2 million. The growth was driven by positive volumes and price increases. Partially offsetting these positive factors, foreign exchange translation was a headwind to adjusted EBIT. Turning to the next slide, the Specialty Products Group reported record second quarter sales of $212.1 million, an increase of 9.5% compared to the prior year period. Organic sales increased 11.5%, acquisitions added 0.9%, and foreign currency translation was a headwind of 2.9%. Second quarter sales were led by strength in the food coating and additives business as a result of strategically refocusing sales management and selling efforts. In the disaster restoration business, the response to Hurricane Ian contributed to strong sales growth, and its ability to quickly meet increasing demand was aided by prior operational improvement investments. Price increases in response to continued inflation also contributed to the sales growth. SPG generated record second quarter adjusted EBIT of $30 million, or an increase of 43.2% compared to adjusted EBIT of $20.9 million in the prior year period. The increase was driven by strong sales growth and benefits from MAP 2025 initiatives. Moving to the following slide, the Consumer Group grew sales 15.3% to $610.4 million, which is a record for the second quarter. Organic sales increased 17.5%, acquisitions contributed 0.4%, and foreign currency translation was a headwind of 2.6%. The Consumer Group's sales growth was driven by price increases to catch up with continued cost inflation and strong sales growth in North America. Adjusted EBIT increased 180.3% in the fiscal 2023 second quarter to $94.2 million, which was a second quarter record. Successful implementation of MAP 2025 initiatives, many of which were enabled by improved material supply as well as strong sales growth, were key drivers to the increase in profitability. As a reminder, the Consumer Group experienced extraordinarily low profitability in Q2 2022 as a result of an explosion at an alkyd resin supplier's plant that caused severe supply disruptions and from high material cost inflation that was not offset by commensurate price increases. This contributed to the strong second quarter of 2023 year-over-year growth. I'd like to turn the call over to Matt to discuss capital allocation. Thanks, Mike. During the second quarter of fiscal 2023, we paid cash dividends of $54.2 million, or $1.68 per share on an annualized basis. On a per share basis, this represents an increase of 5% compared to fiscal 2022 and is the 49th consecutive year we have raised our dividend. Over the course of these 49 years, our strategically balanced business model has given us the ability to continually generate steadily improving cash flows and return over $3.1 billion to shareholders via dividends during this period. With regard to investments in working capital, for several quarters, we have talked about increases in working capital driven by higher raw material inventories that were designed to improve supply chain resiliency. As material availability has significantly improved, we have began normalizing our purchases of raw materials in Q2 2023. We expect these actions to contribute to improved working capital levels in Q3 2023. On the topic of M&A, we have completed six acquisitions so far in fiscal year 2023. These have been small deals and we have remained disciplined as multiples for many potential targets have been elevated above historical levels. With the recent rise in interest rates and changes in economic forecasts, multiples appear to be normalizing and we have a strong pipeline of potential acquisition targets. We expect to continue to be active in M&A and have the financial flexibility to do so. We'll retain our disciplined approach to valuations with a sharp focus on value creation. Looking ahead, while long-term visibility remains limited, we expect economic headwinds to persist in the fiscal third quarter of 2023. Although we are not immune to economic challenges, the balanced portfolio of businesses I just referred to has historically helped us navigate economic slowdowns. Our varied businesses tend to perform differently throughout the economic cycle, which helps reduce the volatility of our results and insulate us from downturns. Several of our businesses are positioned to continue to benefit from positive reshoring and infrastructure spending trends, which we expect to continue in the future. We have also positioned our businesses to primarily focus on maintenance and restoration markets, which tend to be less economically sensitive than new construction or OEM demand. As you can see from slide 12, approximately 2/3 of our revenue is generated by demand for maintenance and restoration products and services. The reason maintenance and restoration demand tends to outperform new construction during times of economic slowdowns is demonstrated by the example on slide 13. When compared to buying or building new, our products offer a compelling value proposition during periods when budgets are in sharper focus. This is true not only for consumers, but also commercial and industrial customers as well. As an example, within our Consumer Group, Rust-Oleum offers a suite of complementary and easy-to-use products that homeowners can utilize to renovate their bathrooms at a fraction of the cost of a typical bathroom remodel. Rust-Oleum also offers products to renovate other areas of the house, including kitchens, garages, and furniture. With that, I'd like to turn the call over to Rusty to cover our guidance and outlook. Thanks, Matt. As Matt mentioned, we expect the headwinds that we have recently experienced to continue in the third quarter of fiscal 2023. These include slowing overall economic activity, rising interest rates, reducing construction activity, and negatively impacting existing home sales, which have declined for 10 consecutive months. The bullwhip effect has some customers temporarily moderating purchases to normalize inventory levels as material availability has improved. A strong US dollar compared to the third quarter of fiscal 2022, and lastly, continued year-over-year cost inflation. Through a combination of these headwinds, results in November and December have been meaningfully below the prior months in fiscal year 2023. At this point, it is too early to determine how much of the recent slowdown is due to weakening economic conditions versus the short-term impact of inventory normalization. Customer feedback on the reduced demand has been mixed, as has recent economic data. Taking all these factors into account, we anticipate third quarter fiscal 2023 consolidated sales will increase in the low single-digit to mid single-digit% range compared to the prior year record results. By segment, we expect PCG to be the leader, with sales up in the high single-digit% to low double-digit% range compared to the prior year record results. The strength is being driven by growth in businesses serving manufacturers who are reshoring their production to the U.S., including strength in energy-related markets. Additionally, PCG is expected to benefit from CS168 initiatives, which are a part of our MAP 2025 commercial excellence program. Consumer sales are expected to increase in the mid-single digit range compared to prior year record results, led by pricing increases in response to year-over-year inflation. Additionally, now that our material availability has increased, we have begun implementing new marketing and advertising initiatives, which we expect to benefit growth in the coming quarters. Partially offsetting this growth, we expect that the low levels of housing turnover will have a negative impact on consumer volumes. SPG sales are expected to be flat to prior year record results. Here, strength in food coatings and additives and disaster restoration equipment in response to recent winter storms is expected to be offset by volume declines at businesses serving OEM customers, which are more economically sensitive. As an example, some OEM customers have extended shutdowns of their facilities above and beyond the usual holiday timeframe for the first time in several years. We anticipate that CPG sales will decline in the low single-digit to mid-single-digit range compared to the prior year record period, as it continues to be weighed down by a weak European economy and softening construction activity. With the softening macro environment, we are reducing production at some of our plants to be better balanced with expected demand. As a result, we expect to reduce inventories, which have been temporarily elevated to navigate supply chain challenges and positively impact our cash flows. We also expect that these actions will lead to lower fixed cost absorption and be a headwind to earnings. Taking all this into account, we anticipate that third quarter fiscal 2023 adjusted EBIT will be in the range of $75 million-$85 million, compared to the prior year record amount of $80.6 million. Included in this guidance are the expectations for year-over-year headwinds from FX and cost inflation. This concludes our prepared comments. We will now be pleased to answer your questions. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we'll pause momentarily for the first question. Our first question today will come from John McNulty with BMO Capital Markets. Please go ahead. Good morning, John. Good morning, Frank. Thanks for taking my question. I guess the first one would just be on the raw material environment. It looks like a lot of base chemicals, coatings raw materials, construction raw materials have started to slide. I guess, can you speak to what you're seeing in the raws that you're buying today, and how much they may be coming off? I guess tied to that, is it fair to assume that you don't have that in the 3Q guide just because of your FIFO accounting, and it probably doesn't impact you yet. You probably get the benefit more in the May quarter. I guess, how should we be thinking about that? I think that's correct. In the second quarter, year-over-year, inflation was up about 17%. It was down sequentially in the quarter about 3%. We are experiencing better recovery on the spot market, as you're suggesting today. Because of FIFO accounting, that's not gonna show up until the end of the fourth quarter or into the first quarter of next year. I can give you a couple data points. Again, we're seeing sequential improvements, but there's still some significant areas of inflation year-over-year. Metal packaging is up 59% in the quarter. Alkyd resins were up 30% in the quarter versus the prior year. But we are in the marketplace starting to see sequential improvements. Got it. Got it. Fair enough. I guess on the destocking side, can you help us to think about? It sounds like there's a little bit of confusion out there, and even your customers aren't necessarily sure how much of it's destocking versus actual demand. I guess, can you give us a little bit more color as to which channels may be seeing kind of the heaviest level of destocking and the negative impact of that, and where things may be, you know, are kind of running more hand to mouth and more kind of in line with demand? I guess, how should we be thinking about that? Sure. It's a great question. Historically, when we would talk about destocking or any of our peer competitors or companies that deal in consumer markets, it tended to be understood as a reference to inventory adjustments by major retailers, big box consumers, discount. In this case, it's really inventory adjustments across the whole supply chain. With many of our customers in industrial markets, we are in a similar fashion. Supply chains were so broken, you saw people buying what they could get. While our inventory is higher than it should be, in the quarter, we've seen a meaningful improvement from higher than usual raw materials to finished goods, which is the proper step. Of a cash conversion cycle. Across our customer base, you're seeing people take actions to readjust inventory levels from kind of the extraordinary actions people had to take over the last one and a half or two years in light of supply chain disruptions. Specifically in the third quarter, Rusty referenced the Specialty Products Group, and we've seen for the first time, for the last couple of years, some of our OEM customers did not take their usual shutdowns during the Christmas to New Year's timeframe. In this case, they have, and some are extending it into January. Part of this is inventory level adjustments as opposed to necessarily recessionary moves. There's some volatility there that's gonna play out with more certainty in the next couple of months. Got it. Maybe if I can squeeze in one last one just on MAP 25. Can you just give us an update where you are? I think you were at about a $30 million run rate in the prior quarter. Can you help us to understand where you're at? It sounds like you may have some upside to the $120 million target for this year. You know, I will hit that $120 million target this year. One of the things that people have to adjust relative to original expectations in Q3 is most of the MAP 25 programs are focused at the gross profit level. It's greater efficiencies. It's establishing greater levels of capacity through greater efficiencies. It's a much more deliberate data usage on managing cost price mix, and it's having a good effect. The reason that's relevant to Q3 is it doesn't flow through your P&L until you sell something. Given the seasonal low of our third quarter revenues, the impact in Q3 of MAP 25 will be less than what you saw in Q1 and Q2. You'll see a disproportionately larger impact of MAP 25 in Q4 because of our higher sales. Got it. Thanks very much for the color. Appreciate it, Frank. Sure. Yeah. Just to qualify that further, I think that's an important thing to note that the MAP 25 benefits will because of where we're targeting them be driven proportionally by our revenue basis as opposed to taking our communications about, for instance, $120 million and dividing it by 12 or dividing it by 4. It won't play out that way. Our next question will come from Frank Mitsch with Fermium Research. Please go ahead. Morning, Frank. Good morning, Frank, and happy New Year to you and everybody there. The comment was made that November and December saw a significant slowdown. I was wondering if you could kind of quantify maybe on a percentage basis or a dollar basis or what have you know, the negative year-over-year impacts that you've seen particularly in December. As part of that, be curious as to what you're what's being embedded in terms of recovery in January and February in the $75 million-$85 million operating income. Sure. I'll try and address it in two ways. Number one, the biggest negative impact in Q2 and at the end of Q2 and going into Q3 is regional, and it's Europe. Europe was down 11% in revenues. If you assume price in there, you can make some assumptions that Europe was down even greater on unit volume. While we don't disclose EBIT by region, EBIT in the European market was off by more than 50% year-over-year. We have out of a $1 billion base of business, roughly half of that is in our Construction Products Group. That gives you a sense of the greatest challenge that we're facing, which is regional. We also saw a slowdown in residential, which today with Nudura and a few other product lines out of a $2.7 billion Construction Products Group. We have about a $200 million exposure to residential new construction and including some of our consumer businesses. I'd say our total exposure to residential new construction in North America is about $300 million. The last comment I'll make again, which makes the performance at the end of Q2 and the beginning of Q3 difficult is, you know, we had a weather event not dissimilar to a year ago that impacted the entire United States. So that slowed down results for us as we start off this third quarter. It'll be interesting to see how much of some of the weakness relative to what we originally thought in Q3 is circumstantial relative to inventory adjustments and weather events versus recessionary. Gotcha. That's very helpful. Interestingly, you know, a lot of discussion regarding destock among the customer base, et cetera, yet, you know, your inventory levels continue to tick higher. I'm wondering how we should be thinking about that. As we sit here today, our inventory levels are being adjusted appropriately. you know, we had more normal cash flow in the quarter, and I think you'll should expect to see better cash generation out of us in the coming quarters. Relative to focus on inventory adjustments, it's happening across the whole supply base and our customer base, and not just... Again, I wanna make sure that people don't equate destocking to consumer big customers. This is basically the supply chain across almost every business or industry that we serve, adjusting back to normal levels of inventory. So that is circumstantial, and that's playing out as we speak, 'cause we're not the only company who's got higher levels of inventory in relationship to trying to adjust to the supply chain challenges for the last 2 years. understood. Thanks so much, Mike. Our next question will come from Josh Spector with UBS. Please go ahead. Morning. Yeah. Hi. Hey, good morning. Just curious, your comment on pricing. One, I apologize if I missed it, but can you comment on what pricing was in the quarter? Specifically for Construction, if you're having weaker demand, I mean, given how that business is more project-based pricing, is that having any impact on your ability to get further pricing? Or are you having to give some of that up given some of the destocking? You know, we have not provided price detail by segment. On a consolidated basis, price was in the 15%-16% range on average across RPM in the second quarter. Unit volume was up in some of our businesses, down in the CPG, and particularly in Europe. On a total basis unit volume in the quarter was down about 3%. We have held on to our pricing pretty much everywhere. You know, as the supply chains adjust, typically in the past there are very few areas where we would have to give back price. Some of it is in more commodity spaces. One example is in silicones in the Construction Products Group. There have been extraordinary spikes in silicone costs over the last year and a half. That was a real problem for us in cost-price mix. There are significant declines in silicone prices. You're likely to see some price adjustments in more commodity areas like that. Other than that, historically, we have tended to hold onto our price across RPM. We intend to do that through this cycle as well. Okay, thanks. I was just wondering if you could comment on Consumer in terms of what you're seeing. I mean, you've had strong volumes in your first quarter on some restocking and supply availability improvement. I think some of your competitors have noted some destocking in that chain. Are you now seeing more of that? I mean, my assumption is you're kind of assuming negative volumes in Consumer, at least for next quarter. Just curious what the driver is among that. Sure. I think that's correct. There has been some destocking. I think that's stabilized. Consumer takeaway has still been very volatile from one week to the next. It could be down in units 10% or up 2 or 3, depending on the retailer. We have lost over the last year about $40 million in market share. I believe that that market share adjustment is over. That's been in some categories of spray paint and wood stains and finishes in a big box account. Our Consumer Group's pretty excited about the spring, and we're gonna be initiating advertising and promotional initiatives in the spring much larger than we have over the last couple of years. It's a combination of some new product introductions, some new market share opportunities, and finally a supply chain such that we can deliver at the high fill rate levels that historically we've been able to deliver at. We've done a lot of work both through MAP 25 and then specifically on the operations side at Rust-Oleum around some supply challenges and manufacturing efficiencies. Those have been addressed, and we'll be in a really strong position to be able to meet demand and also to drive demand in the spring selling season. That's one area of strength for us as we look into the finish of fiscal 23. Got it. Thank you. Thank you. Our next question will come from John Roberts with Credit Suisse. Please go ahead. Thank you. It sounds like M&A discussions are picking up. Can you provide some color on whether it's in the weak areas like Europe or Construction Products, or is it broad-based across your businesses? It's kind of broad-based across our businesses. We have done 6 transactions this year, all very small product lines. They've been some nice additions to Construction Products. Through some of the big Construction Product mergers, we were able to pick up pieces of cement additives, which was a category that Euclid Chemical was not in. We've also invested internally and through some regional acquisitions in panelization for greater energy efficiency and wall construction. Some exciting areas for us. Small acquisitions that with our distribution should be able to double or triple revenues in the coming years. That's pretty much what we've been seeing. As Matt commented on, we've been holding our discipline, and we are seeing valuations coming down. I suspect that we'll continue to see small to medium-sized acquisition activity in the coming quarters. Then how much more price do you need to get to fully get caught up on alkyds, silicones and metal containers? I think we have the price that we need now in the marketplace. I think the final straw of margin recovery is gonna come through holding onto the price that we've got as raw materials cycle back to more normal cost levels. You know, when you look at our Consumer Group, the year-over-year improvement in EBIT is impressive. It has as much to do with how poorly we performed a year ago as it does today. We're still not back to record EBIT levels, but we expect to get there both through some commodity cycle recovery and the benefits of the MAP 2025 program. Thank you. Our next question will come from Aleksey Yefremov with KeyBanc Capital Markets. Please go ahead. Good morning. Thanks, good morning, Frank and everyone. I wanted to ask about the bidding activity that you see mainly in Construction Products and Performance segments, more maybe looking over the next 2, 3 quarters, perhaps outside the residential projects area where you highlighted the weakness. Sure. So the... You know, as, you would guess and you're seeing in the numbers in our results, the, residential piece is, has been weak and Europe has been weak. W e have a very strong backlog in our roofing and waterproofing division going into the spring. And so as we sit here today, looks like, the spring and summer season for that portion of our construction products group, which is its largest and most profitable, will be strong, but we'll see. Again, the volatility that we're seeing in different parts of our business, it's hard to understand, how much of some of the underperformance here that we're expecting in Q3 is inventory destocking across customers and adjustments, and/or weather-related, here as we start the quarter, versus, recessionary. As we sit here today, we have a very strong backlog, and I think there's some comfort in the fact that unlike residential construction or normal commercial construction, there's been a lot of federal money and state and local money that will be going into school construction, into healthcare, and those are two very strong end-use markets for our roofing waterproofing division. Thank you. I understand it's hard to differentiate between, you know, demand weakness and destocking, I mean, customer side, but your intentional reduction of inventory, is it possible to estimate how much that's hurting EBIT in the third quarter? Yeah, it's a good question. It's definitely a drag on EBIT. We have dropped shifts in certain places where we had previously been operating on a three-shift basis. That was not demand driven. That was inventory adjustment driven. When you do that, your overhead absorption takes a hit. That's temporary. You're seeing that in a number of places across RPM. There's a deliberate effort to get inventory levels in a number of our businesses back to a normal pace. That will hurt us in the seasonally low third quarter as these actions again negatively impact overhead absorption. I'd like to think, I don't know how quickly we'll adjust it, but, you know, it will be adjusted through the spring and the summer selling season, which are our strong seasons. Those temporary negative impacts, on gross margin, should pick back up. Okay. Thanks a lot, Frank. Thank you. Our next question will come from Steve Byrne with Bank of America. Please go ahead. Yes, thank you. How much of your MAP 2025 would you say is driven by targets on the manufacturing side versus initiatives on commercial improvement? You know, in the former, do you expect to, you know, get more active in, you know, raw materials manufacturing? In the latter view, is it more driven by cross-selling? It's mostly, Steve, focused on areas that would affect gross profit. It is a continuation of what we call MS168, which is driving lean manufacturing disciplines on a consistent basis across our manufacturing base. We had in our original MAP program done so very effectively, but really in our top 50 plants, and there's another 75 plants out there that are more small to medium-sized that, you know, our ability to get to effectively was interrupted by COVID. That's having an effect. There will be some modest plant consolidation, nothing to the extent of the original MAP program, but some modest plant consolidation. Those are two big areas. The other area is literally being in a position today to use data much more effectively to understand cost price mix better and to be able to drive a more deliberate margin profile that we want relative to really not having that data all the way down to a salesperson level such that we can really be deliberate and effective there. Those are the primary areas that will affect principally gross profit margin. Can I ask about? Yeah. The last piece of that we talked about is, we do expect, somewhere between $100 million-$200 million of gross margin recovery from commodity cycle improvement as well, which is consistent with the margin recovery that we've had in past commodity cycles and in reference to a response to an earlier question. I ask about the cross-selling because one of the takeaways for us from the events you had in Cleveland with Construction Products was an apparent awareness that cross-selling was an opportunity there. Just would like to hear your view on that, Frank. Is this an area that you think that RPM has some significant opportunity to cross-sell between businesses and perhaps regionally? Do you have aspirations for sales ex North America to meaningfully increase above the 20% level that it's at now? Absolutely. As you saw in the investor day presentation, over the last 4 years, our internal cross-selling efforts have increased from $60 million annually to $180 million. Certainly the opportunity for that to double in the coming years exists. One example is because of the success we've had with Arnette Polymers, which is a pre-polymer and raw material resin division of Stonhard, and then the Corsicana plant, which while it's part of our Construction Products Group today, is principally serving Consumer and Rust-Oleum. We are utilizing the leadership there to create a resin center of excellence in Europe to create the same type of stability and certainty in supply, competitive advantage in raw materials and cross-selling. That's gonna play out over the next 12 or 18 months. That's one of many concrete examples of trying to continue to accelerate what's been a pretty good story in terms of intercompany supply and/or cross-selling revenue benefits. Thank you. Our next question will come from Ghansham Panjabi with Robert W. Baird. Please go ahead. Good morning. Hey, guys. Good morning and happy New Year as well. Thanks. I guess, Frank, on the inventory adjustment dynamic, as you kind of think about it, do you see this as sort of a multi-quarter phenomenon or one that's gonna, you know, disproportionately impact one of your smaller quarters, which is 3Q, and then things sort of normalize from there? Just related to that, you know, just given all the complexity in the current operating environment, is there any historical parallels that you can think of that are sort of equivalent to what you're seeing at this point? Sure. Thank you. It'll have a disproportionate negative impact on Q3, and that's certainly part of our guidance, as you're trying to ramp down production, in this case, in a few specific areas to address inventory imbalances as opposed to the, you know, absolute demand. I had commented earlier about the overhead absorption hit. It will be less in Q4 and into Q1. I think it'll take another six or nine months for us to get inventory back to where we want. It's just a slow and steady progression. You're already seeing this. You know, our inventory levels quarter-over-quarter on a relative days basis haven't improved much, but there's been a significant shift from what was a higher than usual carrying of raw material inventory into finished goods, which is obviously the cash conversion cycle that we'd like to see. We got to sell it and turn it into cash. I've never seen. You know, we've talked about destocking in the past when some of our big consumer customers would work to get to the next level of inventory stock efficiency, and that certainly happened to us and others. People have talked about its impact circumstantially when it's happened. In my career, I've never seen the supply chain disruptions and then re-related inventory imbalances. For instance, you know, there was demand we couldn't meet in some of our consumer businesses over the last year because of these things. We would have certain customers order in excess of more than what they probably needed because they wanted to get what they, what, you know, what they could sell. We had customers in our Construction Products Group over the last year doing the same thing. You just had odd circumstances across multiple businesses and channels and industries in terms of order flows caused by this supply chain disruption. With a settling down of supply chains, which I think we're back to normal, now you're seeing people try and modulate back into a normal inventory level and a refocus on working capital position back to something that's more normal and more stable and more predictable. I know there's a lot going on. For my second question, you know, in terms of your comments related to the weakening, in volumes late in the quarter, which specific businesses and end markets were the most impacted? I know you called out new construction, but just more color on that. Sure. You know, as we think about Q3 and going into the spring, you know, we saw solid performance from our Consumer Group and we would expect to see that continue. We saw really solid performance in our Performance Coatings Group given their infrastructure function and focus and heavy industry focus and some of the onshoring and infrastructure dollars out there, we expect that to continue. The weakness was really in the Construction Products Group particularly as we start Q3. I can't tell you sitting here whether it's a sustained weakness that's continuing that's more recession-like or whether some of it was a result of the winter storm that impacted all of North America. We saw weakness in the OEM portion of our Specialty Products Group. Our Specialty Products Group's about $800 million. About half of that is OEM coatings, powder coatings, liquid metal, wood stains and finishes. Again, some of that could be circumstantial. Over the last couple of years, the normal between Christmas and New Year shutdowns that some of our cabinet maker customers, door customers, RV customers had traditionally, they did not have. Well, they had those again this year, and some of that's extending into January. How much of that is in anticipation of continuing recessionary pressure as opposed to some of these inventory adjustments we won't know for another month or two. Thanks so much, Frank. Thank you. Our next question will come from Jeffrey Zekauskas with JP Morgan. Please go ahead. Thanks very much. Morning. Hi, good morning. Your corporate costs are annualizing at, you know, $132 million versus something like a little less than $100 last year. Even in 2021, maybe your corporate costs were $113. What's going on there? Is this a large one-time increase for this year or is it something more permanent? Why are corporate costs up so much? Jeff, this is Rusty here. Corporate costs are up primarily from two categories. It's pension and insurance. In terms of pension, our assets have been hit in the pension plan, and that leads to higher non-service related pension costs, as well as the fact we've had pay and wage inflation higher than our actuarial assumptions. Also, in terms of insurance, as you know, there have been several property events and insurance costs are up as a result. The other thing I would add to that, as a result of our MAP to Growth program, as well as MAP 2025, our corporate staff has increased by about 30%. Now, it starts on a relatively low basis of, let's say, 90 people, and I'd say we're up to about 125, 130. That's in areas of IT, which we are driving center-led in a number of areas. It's in a team of continuous improvement and engineering professionals that number about 12, and it's a team of corporate staff, procurement people of about 8, none of which existed on the corporate payroll three or four years ago. Your SG&A expense, I think, adjusted, was up a little bit more than 10% this quarter versus a 9% increase in sales. It sounds like volumes are not as strong as you expected. Is there anything you're going to do to reduce your SG&A levels and, you know, get them below your rate of sales growth? Sure. We look at SG&A levels across all our businesses on a regular basis. Some of the SG&A increases are along the lines of what Rusty talked about in terms of wage increases. It's been a challenging, not for everybody, a challenging employment environment. Inflation is not only raw material. In fact, raw material inflation is stabilizing and coming down, but wage inflation is here, and it's here to stay. That's part of it. The other issue is a return to. I don't know that we'll ever get back to pre-COVID levels of travel and entertainment, but we're certainly getting back to more ordinary levels of investment in those categories than what we experienced during the COVID period because they were damn near zero. That includes in-person sales meetings, you know, traveling to customers and getting our people on sites and in front of customers more aggressively than we did, let's say, 12 or 18 months ago. Okay. Thanks so much. Our next question will come from Kevin McCarthy with Vertical Research Partners. Please go ahead. Yes, good morning. Frank, just to extend the discussion on the monthly cadence and the concept of destocking, have you seen any customers, you know, following, you know, the closure of the calendar year-end books that have, you know, become more liberal in their orders, more willing to, you know, resume a more normal cadence of purchasing? If so, where might you be seeing that? It didn't sound as though that's very prevalent from your remarks. Yeah, I think that our third quarter is probably the wrong period of time, especially this quarter, to be able to answer that question. You know, Europe is the biggest driver of the deteriorating performance. If, if you follow my comments, the world's not ending for RPM by any way, shape, or form. I talked about in Q2, regionally, Europe was down 11%, and given price increases, you can assume that unit volume was down more and that EBIT was off 50% in Europe. Gives you a sense of the strength of RPM everywhere else. We are seeing the weakness that we talked about. Kevin, it's too soon for us to be able to say how much of it was weather related, how much of it is inventory driven shutdowns and OEM customers, versus how much of it is full on recession. I don't think we can answer that question today with any certainty. If you wanna ask it on our April call, I think we'd be in a much better position to have some clarity around that question. Okay, fair enough. I just had, maybe a couple of quick housekeeping ones. First, did you give a MAP savings number for the quarter? Or if not, would you comment on that? Second, I wanted to ask about, some verbiage in your press release. I think it mentioned, some unfavorable mix and fixed cost leverage at Corsicana, in particular. Just wondering if you could elaborate on those dynamics. Sure. The fixed cost leverage, both at Corsicana, which is serving consumer and some of our construction products businesses, also Carboline in terms of alkyd resins. It's not just Corsicana, it's knocking off some weekend activity in plants or knocking off a ship to try and make inventory adjustments, basically to slow down production so that we can get our inventory back in line. The overhead absorption hit as a result of that is gonna negatively impact Q3. I don't recall the other. Just MAP savings in the quarter. Oh, MAP savings. Yeah, I think we've come to the conclusion of not providing MAP savings every quarter. Our target is $120 million for fiscal 2023, which we're comfortable in hitting. I think we've disclosed, Rusty or Matt, what have we disclosed year to date prior to the first quarter? It was 30. $30 million. Yeah, $30 million in the first quarter. I think you can extrapolate that across the quarter, particularly as it relates to understanding since most of this is being driven at the gross profit level, it will. That $120 million will flow around that basis in proportion to our revenue growth by quarter. Got it. Okay. Thank you so much, Frank. Thank you. Our next question will come from Michael Sison with Wells Fargo. Please go ahead. Hey, guys. Happy New Year. Yeah, just one question, Frank. If you think about the current environment and, you know, you have a lot of EBIT growth anchored with the MAP program going forward, if it sort of stays this way for a while, is it challenging to grow EBIT even with the MAP program? Maybe another way to look at it is what do you think needs to happen in the external environment to get back to the growth that you were showing prior to the third quarter? A couple of things. I think we need to be effective in the sales and marketing and promotion activities that we expect to generate consumer, and we're excited about that in the spring. You'll see some new product rollouts and again, a higher level of advertising and promotion because we have gotten ourselves back to the point of being able to supply on a very high-level, efficient basis. I think we have a number of growth initiatives around Nudura. That's just, you know, that's a business that grew from $40 million to $100 million. It's a big, it's got a disproportionate amount of that work in residential. We have a lot of work to do to get that specified into commercial markets, particularly schools and other areas, and we're working on that. The, you know, the economic circumstances are not gonna change that focus. So we have a number of exciting areas for us that we're gonna continue to invest in, notwithstanding what's going on with the economy. Broadly speaking, Mike, you know, we gotta see the Fed quit raising interest rates, and we've gotta see some stability in housing and things like that. Those are the macro issues that are not only affecting us, but I think they're affecting everybody. That's, I guess that's the best, you know, answer I would have. We, you know, to an earlier question, we manage our SG&A unit by unit. We'll continue to do that where appropriate. We are not in a position where we see any need to come out with any broad-based expense reduction program. We're still focused on executing our MAP program and selectively investing aggressively in a number of growth initiatives. Got it. Thank you. Thank you. Our next question will come from Vincent Andrews with Morgan Stanley. Please go ahead. Good morning. Thanks. Good morning. Just two quick ones for me. Frank, I just wanted to clarify, the $40 million of market share in spray paint and wood stains, did you gain that or did you lose that? I just didn't follow. We lost it. We have lost that over the last 12 months, and I think that's in relationship to, wasn't unique to us, but, you know, the challenges that we faced, in meeting demand, because of supply disruptions. So that was a, between, spray paint, where we've had, a BEHR gain, a modest amount of, spray paint in, Home Depot, and also some wood stains and finishes, about $30 million-$40 million of market share loss. I believe that's over. Okay. Thank you. Then on... Russell, you mentioned increasing marketing and ad spend, and I just wanted to clarify whether that was a actual increase versus, say, 2019 levels or whether it's a just sort of normalization because you took it down when you didn't have sufficient raw materials to actually make the product, why would you advertise? Can you just clarify what's going on there? Yeah. This is Frank. It's a little bit of both. You know, it'll be up year-over-year just 'cause we didn't spend a lot in the face of the supply chain challenges. We're working to get back to normal levels pretty quickly, and we've got some exciting new product introductions that we'll talk about in the spring. You know, we have some exciting new products. We have some new market share opportunities, and we have our operations in a position to lean in hard to support all of that. We're gonna get back to a advertising and promotion level that's more consistent with the past and that will be necessary to support that growth. Okay. Is there any quantification of that just in terms of, as I assume that will fall into SG&A as well? Is that already in the, in the line items? That will fall into SG&A, and we'll be in a better position to provide details on that in April. Okay. Very good. Thanks so much, guys. Thank you. Once again, if you would like to ask a question, please press star then 1. Our next question will come from Arun Viswanathan with RBC Capital Markets. Please go ahead. Morning, Arun. Great. Good morning, Frank. Happy New Year. Thanks for taking my question. You know, a lot of my questions have been answered, but I think maybe I'll try this as a slightly different way. It sounded like the Construction Products sales cadence really slowed down in November, December. It sounded like, you know, I don't know if that was surprising. Would you say that we're still in early innings of this slowdown? You noted that maybe it'll take six to nine months for your inventory to be worked off. Is that kinda how you feel about the demand trends as well? Maybe you can just comment on if that's the case for some of your other businesses as well. Thanks. Sure. At some point, we're gonna be rounding easier comps in Europe because Europe, we've been talking about since last spring, has been deteriorating. We're not in early innings there at all. We're in the teeth of a pretty good recession and demand destruction. I think, boy, six months from now, nine months from now, you know, at the very least we'll be stabilizing and moving in the right direction there. Part of that is geopolitical circumstantial in terms of, you know, the Russian war in Ukraine, in terms of energy markets in Europe and those things. The one area, it's about $300 million, about $200 million in construction products and $100 million in consumer, is our exposure to residential new construction. I wouldn't say it surprised us, but that has slowed down significantly and a profitable business there. I think you need to see stabilization of what the Fed's doing on interest rates before you're gonna see stabilization both in the new home construction space and better housing turnover, which also drives a nice chunk of our consumer business in terms of remodeling. If I could just follow up on price cost? Given some of these, you know, potentially sluggish demand trends and destocking that's going on, do you expect to give back some of the price initiatives that you've achieved in a little bit more rapid fashion? How do you kind of plan to maintain the margin trajectory and recovery that you kind of had hoped for and experienced, you know, through the last couple years? Is it? Are there other measures other than pricing that like mix or anything else that we should think about? Or, yeah, how do you plan to keep some of that margin recovery? Sure. In the past, cycles, we've been able to maintain the vast majority of the price increases that we've initiated, and we would expect to do exactly the same thing here. You know, if you look at our performance in past commodity cycles, on the down cycle, we should pick up $100 million-$200 million of margin benefit. We are working hard to do that, and we intend to do it. As I said, you know, even Consumer with the very strong recovery they're showing there, and certainly some of that is price driven. While the year-over-year performance is really strong, we're not yet back at record margins, and we intend to get there through a combination of maintaining price where it's appropriate and the benefits of the MAP 25 program. Thanks. This will conclude our question and answer session. I'd like to turn the conference back over to Frank Sullivan for any closing remarks. Thank you, Cole. Thanks to all of you for your participation in our investor call today. We're pleased with our second quarter results, which reflect the resiliency of our balanced business model and the extraordinary efforts of our associates around the globe. We're carefully monitoring early signs of economic slowing, but are confident in our ability to manage effectively through the entire business cycle. We look forward to providing you with details of our results in April. We'll have a much better sense of where we're headed in terms of what seems to be an exciting opportunity for continuing growth in our Consumer Group and Performance Coatings Group, and hopefully, some improving performance out of Construction Products and Specialty Products as well. Thanks again for your time on today's call and best wishes for a happy, healthy, and successful new year. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.