RPM International Inc. (RPM) Cash Flow Statement

The wide fluctuation in OCF/NI, from 2.83 to 0.66, suggests that reported net income does not consistently translate into cash, with working capital changes being the primary driver. In 2025Q4, a negative working capital change of -$92.0M compressed cash conversion, while in 2024Q3 a positive $73.4M change boosted it. This pattern implies that investors should focus on the underlying accruals rather than quarterly net income alone, as the company's cash generation appears lumpy and dependent on the timing of collections and payments.

The FCF margin trajectory shows a clear seasonal pattern, with strong Q2 and Q1 quarters offset by weaker Q3 and Q4, but the 2026Q4 margin of 8.0% is a significant improvement over the prior year's 3.8%. This rebound appears driven by stronger operating cash flow of $242.0M versus $149.2M a year ago, while capex remained relatively stable. The improvement suggests that the company's cash generation is recovering, though the absolute FCF of $178.2M is still below the peak of $296.4M in 2026Q2, indicating that the trajectory is not yet fully robust.

RPM's capex-to-revenue ratio has ranged from 2.6% to 3.9%, with the latest quarter at 2.9%, suggesting that the company does not require heavy reinvestment to maintain its operations. This low capital intensity, combined with depreciation and amortization of roughly $50M per quarter, implies that maintenance capex is likely a small portion of total capex, leaving room for growth investments. The stability of this ratio suggests that the company's asset base is mature and that cash flows are not being consumed by expansionary spending, which supports the sustainability of dividends and acquisitions.

The large quarterly swings in working capital, ranging from positive $149.8M to negative $92.0M, suggest that RPM's cash conversion cycle is not stable and may be influenced by project timing and seasonal demand. The positive changes in Q2 of both 2025 and 2026 likely reflect strong collections and efficient inventory management, while the negative changes in Q4 and Q3 indicate build-ups in receivables or inventory. This volatility implies that the company's cash flow is not purely driven by earnings but also by operational efficiency, and investors should monitor working capital trends for signs of deteriorating collection or inventory management.

RPM's capital deployment shows a consistent commitment to dividends, with quarterly payments around $65M, which is well covered by operating cash flow. Acquisitions are more variable, with a notable $468.4M outflow in 2025Q4, suggesting that the company is actively pursuing its buy-and-build strategy. Buybacks are modest, averaging around $20M per quarter, indicating that management prefers to use cash for dividends and acquisitions rather than share repurchases. This allocation suggests a focus on long-term growth through M&A while maintaining a shareholder return program, though the large acquisition outlay in 2025Q4 may have strained cash balances temporarily.

The cumulative operating cash flow of $2.02B versus net income of $1.59B over the ten-quarter period suggests that RPM's earnings quality is high, with cash conversion exceeding 100%. This divergence is likely due to non-cash charges like depreciation and amortization, which totaled approximately $494M over the period, and favorable working capital changes in some quarters. The fact that operating cash flow consistently exceeds net income in most quarters indicates that the company is not relying on aggressive accruals to boost earnings, which is a positive signal for investors.