Griffon Q3 Earnings Call Highlights

Key Points

• Q3 performance improved: Revenue rose 7% year over year to $481 million, while adjusted EBITDA increased 2% to $125 million. Adjusted earnings reached $1.51 per share, up from $1.39, despite weak housing and commercial construction markets.
• Full-year guidance reaffirmed: Griffon maintained its fiscal 2026 targets of $1.8 billion in revenue and $458 million in adjusted EBITDA, while lowering expected interest expense to $80 million following debt repayment.
• Strategic shift and shareholder returns advanced: The Australasia transaction and repayment of the remaining $285 million term loan strengthened the balance sheet, reducing pro forma net leverage to about 2.0 times. Griffon also repurchased $53 million of stock in the quarter and declared a $0.22 quarterly dividend.

Griffon NYSE: GFF reported fiscal third-quarter revenue growth and higher adjusted earnings as the company continued its transformation into a pure-play building products business, while maintaining its full-year outlook amid soft U.S. housing and commercial construction markets.

For the quarter, revenue increased 7% year over year to $481 million, driven by 6% favorable price and mix and a 1% increase in volume. Adjusted EBITDA rose 2% to $125 million, producing an adjusted EBITDA margin of 25.9%.

Chairman and Chief Executive Officer Ron Kramer said the company’s teams had executed well despite “dynamic global economic conditions,” including weakness in housing and commercial construction. Griffon generated $194 million of year-to-date free cash flow from continuing operations through June 30, compared with $202 million in the prior-year period.

Profitability and Full-Year Outlook

Third-quarter gross profit was $226 million, compared with $219 million a year earlier, though gross margin declined to 47.0% from 48.7%. Adjusted selling, general and administrative expense increased to $111 million from $106 million, while declining as a percentage of sales to 23.0% from 23.7%.

GAAP income from continuing operations totaled $66 million, or $1.47 per share, compared with a loss of $109 million, or $2.40 per share, in the prior-year quarter. The prior-year result was primarily affected by goodwill and intangible impairment charges. Adjusted net income from continuing operations rose to $68 million, or $1.51 per share, from $64 million, or $1.39 per share, a year earlier.

Griffon reaffirmed its fiscal 2026 guidance for $1.8 billion in revenue and $458 million in adjusted EBITDA from continuing operations. The company also expects free cash flow from continuing operations to exceed income from continuing operations.

The company continues to project $50 million in capital expenditures, $27 million in depreciation and $15 million in amortization for the fiscal year. It reduced its expected interest expense to $80 million, down $13 million from prior guidance, reflecting debt repayment and interest income from transaction-related payment-in-kind notes receivable. Griffon expects a normalized tax rate of 28%.

Australasia Transaction Completes Strategic Shift

Kramer said Griffon closed its Australasia joint venture earlier in the week. At closing, the company received $181 million in cash, a $49 million note receivable and a 49% equity interest.

The transaction completed a series of strategic actions that Kramer said transformed Griffon into a pure-play building products company. Across the transactions, Griffon received $281 million in cash and $210 million in 10% payment-in-kind notes, while retaining minority interests with a book value of $139 million.

Following the quarter, Griffon repaid the remaining $285 million balance on its term loan B using proceeds from strategic actions and its revolving credit facility. As of June 30, net debt was $1.2 billion and net debt-to-EBITDA leverage was 2.2 times, compared with 2.5 times at the end of the prior-year third quarter. On a pro forma basis for the Australasia transaction’s July 31 closing, net leverage was approximately 2.0 times.

With strategic initiatives substantially complete and the term loan B repaid, the company established a new net debt-to-EBITDA leverage target range of 1.5 times to 2.5 times.

Capital Returns Continue

During the third quarter, Griffon repurchased $53 million of stock, representing 626,000 shares at an average price of $85 per share. The company had $194 million remaining under its repurchase authorization as of June 30.

Since April 2023 through June, Griffon has repurchased $664 million of stock, or 12.1 million shares, at an average price of $54.86 per share. Kramer said those repurchases reduced shares outstanding by 21% relative to the share count at the end of the second quarter of fiscal 2023.

The board also authorized a quarterly dividend of $0.22 per share, payable Sept. 16 to shareholders of record Aug. 31. The payment will mark Griffon’s 60th consecutive quarterly dividend. Kramer said the dividend has increased at a 19% annualized compounded rate since the company began paying dividends in 2012.

Clopay Demand, Pricing and Growth Opportunities

Chief Financial Officer Brian Harris said door volume declined slightly during the quarter, driven by residential demand, while fan volume more than offset that decline and left commercial volume flat. Price and mix each contributed approximately equally to the 6% price-and-mix benefit, he said.

Griffon implemented a price increase during the quarter to offset higher raw material, labor, energy, distribution and logistics costs. Harris said the increase will continue to take effect as the company works through backlog and is expected to support EBITDA margins above 25%.

Kramer said Clopay remains focused on the premium repair-and-remodel market, which he said has continued to perform well even as the broader housing market remains sluggish. The company also sees potential operating leverage if residential construction and broader economic activity improve.

On the commercial side, Harris said the replacement cycle is generally shorter than in residential markets, at roughly seven years depending on the product and installation location. While commercial new construction remains low relative to earlier years, he said a large installed base can support replacement and refurbishment demand.

Management also cited commercial opportunities in data centers, semiconductor facilities, pharmaceutical applications and high-security settings. Kramer said Griffon has been expanding its architectural sales force and is seeing a meaningful rise in inquiries that could lead to bids, though such projects have longer lead times.

About Griffon (NYSE:GFF)

Griffon Corporation NYSE: GFF is a diversified management and holding company whose subsidiaries design, manufacture and market products for residential, commercial and defense applications. Operating through three primary platforms—Home & Building Products, Defense Electronics and Specialty Industrial—Griffon's portfolio spans consumer and industrial brands with a focus on long-lived products and recurring aftermarket opportunities.

In the Home & Building Products segment, Griffon's Clopay Building Products division is a leading North American manufacturer of residential and commercial garage doors, specializing in steel, fiberglass and composite designs as well as decorative carriage-house styles.

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