Griffon Q1 2025 Earnings Report

Griffon EPS Results

• Actual EPS: $1.39
• Consensus EPS: $1.28
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: N/A

Griffon Revenue Results

• Actual Revenue: $632.37 million
• Expected Revenue: $637.58 million
• Beat/Miss: Missed by -$5.21 million
• YoY Revenue Growth: N/A

Griffon Announcement Details

• Quarter: Q1 2025
• Date: 2/5/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, February 5, 2025
• Conference Call Time: 8:30AM ET

Griffon (NYSE:GFF) (NYSE:GFF) is a diversified holding company that manufactures and distributes products for residential, commercial and industrial markets. Its operations are organized primarily around home and building products, as well as consumer and professional products, with sales in North America and international markets.

Through its building-products businesses, Griffon offers garage doors, rolling steel doors, security grilles, shutters and related access products. Its brands include Clopay, Cornell and Cookson, which serve residential, commercial and industrial customers through dealers, distributors, contractors and other channels.

Griffon’s consumer and professional products operations include garden and landscaping tools, outdoor equipment and ceiling fans. The company’s portfolio has included well-known brands such as AMES, True Temper, Garant, Razor-Back and Hunter Fan Company. Griffon is headquartered in New York and is led by Ronald J. Kramer, who serves as chairman and chief executive officer.

Griffon Q1 2025 Earnings Call Transcript

Key Takeaways

• Free cash flow of $143 million in Q1, reinforcing strong liquidity and supporting strategic investments.
• Adjusted EBITDA rose 11% YoY to $145 million while revenue dipped 2% to $632 million, driving a 270 basis point improvement in margins.
• CPP segment revenue declined 4% due to softer demand outside Australia, but EBITDA increased by $13 million to $18 million via global sourcing and Australia growth.
• Returned capital with $42 million in Q1 share repurchases (total $468 million since April 2023) and declared a $0.18 quarterly dividend, the 54th consecutive payout.
• Maintained FY25 guidance for $2.6 billion revenue and $575–600 million segment EBITDA, expecting HPP and CPP revenues to align with 2024 levels.

Presentation

[Operator]

Greetings and welcome to the Griffon Corporation Fiscal First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Harris, Chief Financial Officer. Thank you. You may begin.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

Thank you. Good morning and welcome to Griffon's First Quarter Fiscal 2025 earnings call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer. A press release was issued earlier this morning and is available on our website at www.griffon.com. Today's call is being recorded, and the replay instructions are included in our earnings release. Our comments will include forward-looking statements about Griffon's performance. These statements are subject to risks and uncertainties that can change as the world changes. Please see the cautionary statements in today's press release and in our SEC filing. Finally, some of today's remarks will adjust for items that affect comparability between periods. These items are explained in our non-GAAP reconciliations included in our press release. With that, I'll turn the call over to Ron.

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Thanks, Brian. Good morning, everyone, and thanks for joining us. Fiscal 2025 is off to a strong start. In Q1, we delivered robust free cash flow of $143 million, maintained solid operating performance at Home and Building Products, and saw continued profitability improvements at Consumer and Professional Products. With this momentum, we are on track to achieve our financial targets for the year. For the quarter, HBP revenue was consistent with the prior year, and EBITDA increased by 2%. Revenue benefited from increased residential volume, which was offset by reduced commercial volume. EBITDA benefited from reduced material costs, partially offset by increased labor and distribution costs. In CPP, first quarter revenue decreased 4%, primarily due to decreased volume, as all of the CPP home markets, except for Australia, continued to see reduced consumer demand.

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Australia benefited from increased product offerings sold through the retail channel, and revenue contributed by the Pope acquisition. CPP EBITDA in the first quarter increased by $13 million to $18 million. This increase in profitability reflects the positive effects of the global sourcing expansion initiative and increased volume in Australia. Turning to capital allocation, during the first quarter, we repurchased $42 million of our stock, 610,000 shares at an average price of $69.40 per share. At December 31, $390 million remains under our repurchase authorization. Since April 2023 and through December, we have repurchased $468 million of our stock, 9.5 million shares at an average price of $49.09. These repurchases have reduced Griffon's outstanding shares by 16.7% relative to the total shares outstanding at the end of the second quarter of fiscal 2023.

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Also, yesterday, the Griffon Board authorized a regular quarterly dividend of $0.18 per share, payable on March 18th to shareholders of record on February 25th, marking the 54th consecutive quarterly dividend to our shareholders. Our dividend has grown at an annualized compounded rate of more than 18% since we initiated dividends in 2012. These actions reflect the strength and resiliency of our businesses, as well as continued confidence in our strategic plan and outlook. I'll turn it back to Brian for a few more details on the quarter.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

Thank you, Ron. First quarter revenue of $632 million decreased 2%, and adjusted EBITDA before unallocated amounts of $145 million increased 11%, both in comparison to the prior year quarter. EBITDA margin before unallocated amounts of 23%, an increase of 270 basis points. Gross profit on a GAAP basis for the quarter was $264 million, compared to $237 million in the prior year quarter. Excluding items that affect comparability from the current and prior periods, gross profit was $264 million in the current quarter, compared to $248 million in the prior year. Normalized gross margin increased year over year by 320 basis points to 41.8%. First quarter GAAP selling general administrative expenses were $152 million, consistent with the prior year. Excluding adjusting items from both periods, SG&A expenses were $151 million, or 23.8% of revenue, compared to the prior year of $147 million, or 22.9% of revenue.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

First quarter GAAP net income was $71 million, or $1.49 per share, compared to $42 million in the prior year quarter, or $0.82 per share. Excluding items that affect comparability from both periods, current quarter adjusted net income was $66 million, or $1.39 per share, compared to the prior year of $55 million, or $1.07 per share. Corporate and unallocated expenses, excluding depreciation in the quarter, were $14 million, consistent with the prior year. During the quarter, we realized $17.2 million in proceeds from the sale of real estate as a result of our CPP global sourcing expansion initiative. This offset capital expenditures of $17.5 million, resulting in net capital expenditures of approximately $200,000. Prior year net capital expenditures were $14 million.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

Regarding our segment performance, as Ron mentioned earlier, revenue for Home and Building Products was consistent with the prior year quarter, reflecting increased residential volume offset by reduced commercial volume. Price mix was also in line with the prior year quarter. Adjusted EBITDA increased 2% compared to the prior year quarter, as reduced material costs were offset by increased labor and distribution costs. Consumer and Professional Products revenue decreased 4% from the prior year quarter to $237 million due to decreased volume driven by reduced consumer demand in North America and the United Kingdom, partially offset by organic growth in Australia, and a 4% contribution from the Pope acquisition. CPP adjusted EBITDA increased by $13 million from the prior year quarter to $18 million, primarily due to the positive effects from our now completed global sourcing expansion initiative and the increased volume in Australia.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

Regarding our balance sheet and liquidity, as of December 31, 2024, we had net debt of $1.3 billion. The net debt to EBITDA leverage of 2.4 times was calculated based on our debt governance, compared to 2.5 times leverage at the end of last year's first quarter. Our net debt and leverage decreased from our year-end September 2024, even after returning $51 million to shareholders through dividends and stock buybacks in the quarter. All aspects of our fiscal 2025 guidance provided in November 2024 remain unchanged, including $2.6 billion of revenue and $575 million-$600 million of segment-adjusted EBITDA, which excludes unallocated costs and certain other charges that affect comparability, and free cash flow exceeding net income for the year. We continue to anticipate 2025 HBP and CPP revenue will both be in line with 2024.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

HBP sales are expected to benefit from increased residential volume, which will be offset by reduced demand for commercial projects, and we expect to return to normal seasonal patterns, which includes reduced volume during winter months. CPP sales are expected to reflect continued growth in Australia, but offset by weakness in North America, which is expected to persist through the first half of 2025. Now I'll turn the call back over to Ron.

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Thanks, Brian. Our 2025 is off to an excellent start with strong free cash flow, continued solid operating performance at HBP, and continued improved profitability at CPP. These results reinforce our confidence in our outlook for the year. We'll continue to use the strong operating performance and free cash flow of our businesses to drive a capital allocation strategy that delivers long-term value for our shareholders. This strategy includes investing in our businesses, opportunistically repurchasing shares, and reducing debt. To conclude this, I want to express my sincere gratitude to all of our Griffon employees around the world whose dedication and effort have driven our financial success. I couldn't be prouder of what we've accomplished together, and there's much more ahead. Operator, we'll take any questions.

[Operator]

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up their handset before pressing the star keys. To allow everyone a chance to ask their question, we ask that each person in the queue to only ask one question and one follow-up. Our first question comes from the line of Robert Schultz with Baird. Please proceed with your question.

[Robert Schultz, Vice President and Senior Compliance Officer at Baird]

Hey, good morning, guys. Thanks for taking the question. So within CPP, you guys have switched to a sourcing strategy in the tools and storage businesses. Any way to help us understand the geographical mix of the imported products now, like any key regions or countries or any other color you could give there?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Sure. So your question is obviously touching upon tariffs. So let me start with the tariff situation is extremely fluid. With that said, given the proposed tariffs on Mexico, Canada, and China, we're comfortable with maintaining our 2025 financial guidance. Similar to tariffs in 2018, we expect to mitigate the effects of changing tariff policy through a combination of price, supplier negotiations, and further diversifying our global supply chain. As we exit our fiscal 2025, we expect our tariff mitigation measures to be implemented and in effect, allowing Griffon to maintain its long-term EBITDA margin target. And to your question specifically, yes, we do have significant amounts coming from China related to Lawn and Garden and Hunter Fan businesses. Those are the only significant areas where tariffs could have an impact.

[Robert Schultz, Vice President and Senior Compliance Officer at Baird]

Got it. And then just an update on capital allocation. At today's level, kind of how are you thinking about debt pay down versus buybacks?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

We continue to believe our stock is opportunistically attractive, and at these levels, we'd rather buy stock than pay down debt. But we can do both.

[Operator]

Thank you. Our next question comes from the line of Bob Labick with CJS Securities. Please proceed with your question.

[Bob Labick, President at CJS Securities]

Good morning. Congratulations on continued strong performance.

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Thanks, Bob. Thanks for joining.

[Bob Labick, President at CJS Securities]

Yeah. So speaking of, obviously, you've made great progress in CPP, and you just talked a little bit about the tariff situation, but you've talked about getting margins up over the next few years substantially from here as well. So maybe talk a little bit about the next key steps and what the process is from here going forward on CPP margin expansion. And I'll stop right there, please.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

Sure. So through this year, we'll be transitioning from manufactured inventory to sourced inventory as we go through the year. We did build up inventory last year in anticipation of this transition. And as we go forward, we'll continue to leverage the global supply chain. Our initial move was to go with suppliers that we were already using for Australia and the U.K., and somewhat for the U.S. and Canada. And step two, as we've always planned, is to then look across the globe for the best sourcing opportunities. We will continue to design and bring new products to, in particular, into the U.S., of course, across the world as well. And we expect over time, the consumer will come back from the levels that it's at, the low levels of purchasing that are currently happening.

[Bob Labick, President at CJS Securities]

Okay. Great. Thanks. And then you also mentioned on HBP residential up, commercial down, and kind of in volumes there. Talk about the headwinds and tailwinds in general to the commercial and resi door markets and your performance versus the overall market.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

Sure. On the residential side, we believe we're outperforming the market and gaining market share. We play mostly on the high-end residential door, and that part of the market continues to be strong. On the commercial side, over the last almost two years now, the ABIs and the Dodge Momentum indexes have been soft. It feels like they're starting to bottom, but in the meantime, that affects our commercial volume as it would anybody else. And we continue to believe that there is a pent-up demand for housing. And as interest rates ultimately get lower and consumer demand gets higher, we're going to see the benefit of growth in unit volumes and expect HBP to be able to continue its margin at 30% for this year.

[Brian G. Harris, SVP and CFO at Griffon Corporation]

We have an excellent business that has still got some upside for an expansion in the U.S. economy and particularly the U.S. housing market.

[Operator]

Thank you. Our next question comes from the line of Trey Grooms with Stephens Inc. Please proceed with your question.

[Trey Grooms, Equity Research Analyst at Stephens Inc.]

Hey, good morning, Ron and Brian, and congrats on the good results.

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Thanks and good morning.

[Trey Grooms, Equity Research Analyst at Stephens Inc.]

So, I just want to be clear on something from an earlier question and Brian, your response to that. So, is it fair to say now that you're assuming that tariffs will be kind of coming into play through the year on CPP and that you will be able to kind of you'll be navigating that? And as a result, you're reiterating the guide. So, in effect, this navigation of the tariffs and the lack of impact is basically you're baking it into the guide. Did I hear that right?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Yes, you heard that correct. We believe that the timing in the year and the mitigation strategies will keep us within our guidance.

[Trey Grooms, Equity Research Analyst at Stephens Inc.]

Perfect. Thank you for that. And I think that's an important point here. I mean, there's a lot of puts and takes going around right now and a lot of noise around the tariffs. And it's definitely a question I know you guys have been getting and we've been getting as well. So thank you for clearing that up. And then on, let's see, HBP margins. So the margins there continue to be very strong. Demand on the residential side remains good. As you mentioned, you primarily play in the higher end. Is it fair to say that high-end continues to outperform entry-level products? I know entry-level is not really your bread and butter, but just wondering how that is comparing to entry-level. And then what you're kind of still expecting on the pricing front across the HBP portfolio here?

[Trey Grooms, Equity Research Analyst at Stephens Inc.]

Are you still expecting kind of a price cost to be similar in 2024, excuse me, this year versus 2024?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Let me start by just saying we view Clopay, and the market views Clopay as the leading brand in the garage door category, residential category. Repair and remodel continues to be strong, and we continue to be the leader in the space, which is why we think we're gaining market share. Yeah. And I'll just add to that as far as the pricing. We do expect price to be in line and costs to be in line with 2024. And if there's any impacts on input costs for any reason, those will be mitigated likely via price. We continue to believe the commercial side of the business, the CornellCookson, is going to grow as the U.S. economy recovers. And you correctly point out that there is a swirl over tariffs, but the intent is ultimately a stronger and better U.S. economy.

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

And if that plays out, we'll benefit on both the residential side and on the commercial side. But we continue to see the residential side of our business doing well, and we continue to believe that the commercial business has growth.

[Operator]

Thank you. Our next question comes from the line of Sam Darkatsh with Raymond James. Please proceed with your question.

[Sam Darkatsh, Managing Director at Raymond James Financial Inc]

Good morning, Ron. Good morning, Brian. How are you?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Good morning. Well, thank you.

[Sam Darkatsh, Managing Director at Raymond James Financial Inc]

Two quick questions if I could. I didn't hear if you mentioned it, I missed it. I apologize, but I didn't hear what repo might have been in January, and then related to that, and I have a follow-up, but related to that, should we anticipate that kind of $40 million, $50 million, $60 million a quarter pace to be similar to what you're expecting throughout the year?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

We purchased $42 million for the quarter ending December 31, 2023, and you'll have to wait to get the second quarter repurchase when we report in May, and you should expect that we're going to continue to generate substantial free cash flow, and depending on the price of the stock, we'll continue to be a buyer. At these levels, expect us to continue to be a buyer.

[Sam Darkatsh, Managing Director at Raymond James Financial Inc]

My second question, getting back to CPP, is the entirety of the spring product at this point already landed, or are you still waiting for additional product therefore would be subjected to tariffs?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

A significant portion of the spring product has landed.

[Operator]

Thank you. Our next question comes from the line of Julio Romero with Sidoti & Company. Please proceed with your question.

[Julio Romero, Equity Research Analyst at Sidoti & Company LLC]

Thanks. Hey, good morning, Ron and Brian. First question here on CPP, really strong CPP margins on lower volume. Can you expand on what you're seeing in North America by channels or product lines? Any notable changes to call out, especially as the global sourcing strategy is kind of fully up and running here? And then secondly, what can CPP margins look like when demand does recover in North America?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Sure. So it's really across all our product lines. We're seeing the consumer be weak and not spending what we've seen in the past. And as far as going forward, it's really our 15% margins across CPP globally, which is a balance of 12% for the Lawn and Garden business across the globe and 20% for Hunter Fan business.

[Julio Romero, Equity Research Analyst at Sidoti & Company LLC]

Excellent. And then for my follow-up, you were able to sell some real estate related to CPP here in the quarter to the tune of $17 million. Just how much more runway is there for additional proceeds from real estate and equipment sales in your view?

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

Sure. So we have about $5 million of held-for-sale assets on our balance sheet. So we expect at least $5 million over time.

[Operator]

Thank you. We have reached the end of the question and answer session, and I'll now turn the call back over to CEO Ron Kramer for closing remarks.

[Ronald J. Kramer, Chairman and CEO at Griffon Corporation]

We continue to be excited about where our company is headed. We're going to execute our business plan and continue to deliver outstanding performance, and we look forward to speaking to you in May.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Brian G. Harris, SVP and CFO
• Ronald J. Kramer, Chairman and CEO

Analysts

• Bob Labick, President at CJS Securities
• Robert Schultz, Vice President and Senior Compliance Officer at Baird
• Julio Romero, Equity Research Analyst at Sidoti & Company LLC
• Trey Grooms, Equity Research Analyst at Stephens Inc.
• Sam Darkatsh, Managing Director at Raymond James Financial Inc