Q3 2024 Griffon Corp Earnings Call
Ladies and gentlemen, good morning and welcome to the Griffon Corporation Fiscal Third Quarter 2024 Earnings Conference Call.
Operator: At this time, all participants are in a listen-only mode.
Operator: A brief question-and-answer session will follow the formal presentation.
Speaker Change: At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad.
Operator: If anyone should require operator assistance during the conference, please press star and zero on the telephone keypad. As a reminder, this conference is being recorded.
Operator: If anyone should require operator assistance during the conference, please press star and zero on the telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Harris, Chief Financial Officer. Please go ahead.
Operator: It is now my pleasure to introduce your host, Brian Harris, Chief Financial Officer. Please go ahead, sir.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Brian Harris, Chief Financial Officer.
Brian Harris: Thank you. Good morning.
Brian Harris: It's my pleasure to welcome everyone to Griffon Corporations. Excuse me. Good morning.
Speaker Change: Please go ahead, sir.
Brian Harris: Thank you. Good morning. It's my pleasure to welcome everyone to Griffon Corporation's
Brian Harris: Good morning. Welcome to Griffon Corporation's third quarter 2024 earnings call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer. Our press release was issued earlier this morning and is available on our website at www.griffin.com. Today's call is being recorded, and the replay instructions are included in our... Finally, from today's remarks, we'll 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 will turn the call over to Ron.
Brian Harris: Welcome to Griffon Corporation Third Quarter, 2024 earnings call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer. I press release this year earlier this morning and is available on our website at www.griffon.com.
Speaker Change: Excuse me.
Speaker Change: Good morning. Welcome to Griffon Corporation's third quarter 2024 earnings call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer. Our press release was issued earlier this morning and is available on our website at www.griffin.com.
Brian Harris: Today's call is being recorded, and the replay instructions are included in our earnings release. Our comments will be including forward booking 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 filings. Finally, from today's remarks, we will adjust for items that affect comparability between periods. These items are explained in our non-GAAP recommendations, including in our press release.
Speaker Change: Today's call is being recorded and the replay instructions are included in our image release.
Speaker Change: Finally, from today's remarks, we 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 will turn the call over to Ron.
Ron Kramer: With that, I will turn the call over to Ron. The morning, everyone, and thanks for joining us. Our third quarter results were highlighted by strong operating performance from both of our segments, with home and building products generating EBITDA margin of 30.1 percent and consumer and professional products improving its EBITDA margin by 230 basis points to 8.8 percent. With third quarter performance in line with our expectations and both segments performing well as we approach the end of fiscal 2024, we are reiterating our previously provided segment adjusted EBITDA guidance of 555 million for the full year. Three cash flow in the quarter was also strong at 120 million and continues to support our capital allocation strategy.
Ronald Kramer: Good morning, everyone, and thanks for joining us. Our third quarter results were highlighted by strong operating performance from both of our segments, with home and building products generating an EBITDA margin of 30.1%, and consumer and professional products improving their EBITDA margin by 230 basis points to 8.8%. With third-quarter performance in line with our expectations and both segments performing well as we approach the end of fiscal 2024, we are reiterating our previously provided segment adjusted EBITDA guidance of $555 million for the full year. Free cash flow in the quarter was also strong at $120 million and continues to support our capital allocation strategy.
Ron Kramer: Our third quarter results were highlighted by strong operating performance from both of our segments, with home and building products generating EBITDA margin of 30.1%.
Ron Kramer: and Consumer and Professional Products improving its EBITDA margin by 230 basis points to 8.8%.
Ron Kramer: During the quarter, we paid down 80 million in debt, repurchased 19 million in stock, and paid a $7 million regular quarterly dividend. Yesterday, our board authorized a regular quarterly dividend of 15 cents per share, payable on September 19th to shareholders of record. On August 28th, marking the 52nd consecutive quarterly dividend to shareholders. Our dividend has grown at an annualized compounded rate of 18 percent since we initiated dividends in 2012. Looking at our share buyback program since April 2023 and through June of this year, we've repurchased $7.9 million shares at an average price of $45.38 a share for a total of $357 million.
Ronald Kramer: During the quarter, we paid down $80 million in debt, repurchased $19 million in stock, and paid a $7 million regular quarterly dividend. Yesterday, our board authorized a regular quarterly dividend of $0.15 per share, payable on September 19th to shareholders of record on August 28th, marking the 52nd consecutive quarterly dividend to shareholders. Our dividend has grown at an annualized compounded rate of 18% since we initiated dividends in 2012. These repurchases have reduced Griffon's outstanding shares by 13.7% relative to the total shares outstanding at the end of the second quarter of fiscal 2023.
Ron Kramer: These repurchases have reduced Griffin's outstanding shares by 13.7 percent relative to the total shares outstanding at the end of the second quarter of fiscal 2023. These actions underscore our commitment to capital allocation strategy that delivers value to our shareholders. We continue to believe that our stock is a compelling value.
Ronald Kramer: These actions underscore our commitment to a capital allocation strategy that delivers value to our shareholders. We continue to believe that our stock is a compelling value. I'll turn it over to Brian for a little more financial detail. Brian? Thank you, Ron.
Brian Harris: EBITDA margin before unallocated was 21.7%. Third quarter gap selling general and administrative expenses were $160 million compared to $172 million in the prior year. Corporate and unallocated expenses excluding depreciation in the quarter were $15 million compared to $14 million in the prior year quarter, with the increase primarily due to increased ESOP expense driven by the rise in Griffon stock price. Net capital expenditures were $2.3 million in the third quarter compared to $8.3 million in the prior year.
Brian Harris: I'll turn it over to Brian for a little more financial detail. The margin before unallocated was 21.7%. Gross profit on a gap basis for the quarter was 249 million compared to 275 million in the prior year quarter. Excluding items that affect comparability from the current and prior period, gross profit was 265 million in the current quarter compared to 276 million in the prior year. Normalized gross profit increased year-over-year margin by 50 basis points to 40.9%. Third quarter gap selling general and administrative expenses were 160 million compared to 172 million in the prior year. Excluding adjusting items from both periods, SDNA expenses were 155 million or 23.9% of revenue compared to the prior year of also 155 million or 22.7% of revenue.
Speaker Change: Third quarter revenue of $648 million decreased by 5% and adjusted EBITDA before unallocated amount of $141 million decreased by 8% both in comparison to the prior year quarter. EBITDA margin before unallocated was 21.7%.
Speaker Change: Gross profit on a gap basis for the quarter was $249 million compared to $275 million in the prior year quarter.
Speaker Change: Third quarter gap, selling, general and administrative expenses were $160 million compared to $172 million in the prior year.
Brian Harris: Third quarter gap net income was 41 million, or 84 cents per share, compared to 49 million in the prior year quarter, or 90 cents per share. Excluding items that affect comparability from both periods, current quarter adjusted net income was $61 million or $1.21. $1.24 per share compared to the prior year of 70 million, or $1.29 per share. Corporate unallocated expenses excluding depreciation in the quarter were 15 million compared to 14 million in the prior year quarter, with the increase primarily due to increased e-soft expense driven by the rise in Griffin stock price. Net capital expenditures were 2.3 million in the third quarter compared to 8.3 million in the prior year quarter.
Speaker Change: Excluding items that affect comparability from both periods, current quarter adjusted net income was $61 million or $1.24 per share compared to the prior year of $70 million or $1.29 per share.
Brian Harris: Depreciation and arbitration total 15.2 million for the third quarter compared to 15.7 million in the prior year. Regarding our segment performance, home and building products revenue declined 2% due to unfavorable product mix, with increased residential volume being offset by decreased commercial volume. HPP adjusted the EBITDA of 119 million decreased 12% from the prior year driven by reduced revenue was noted above, and increased steel, labor, and distribution cost. EBITDA margin for the quarter was 30.1%. Consumer professional products revenue of 254 million decreased 10% from the prior year quarter, primarily due to reduced consumer demand in North America, partially offset by increased volume in Australia.
Brian Harris: The depreciation and amortization totaled $15.2 million for the third quarter compared to $15.7 million in the prior year. Regarding our segment performance, home and building products revenue declined 2% due to unfavorable product conditions, with increased residential volume being offset by decreased commercial. HBP's adjusted EBITDA of $119 million decreased 12% from the prior year, driven by reduced revenue, as noted above, and increased steel, labor, and distribution. Consumer professional products revenue of $254 million decreased 10% from the prior year quarter, primarily due to reduced consumer demand in North America, partially offset by increased volume in Australia.
Speaker Change: Regarding our segment performance, home and building products revenue declined 2% due to unfavorable product mix.
Speaker Change: with increased residential volume being offset by decreased commercial volume.
Speaker Change: HBP adjusted to EBITDA of $119 million, decreased 12% from the prior year, driven by reduced revenue as noted above, and increased steel, labor, and distribution costs.
Brian Harris: For the current quarter, CPP adjusted the EBITDA of 22 million increased 22% from the prior year quarter, due to improved North American production cost, and decreased discretionary spending, partially offset by the unfavorable impact of the reduced volume noted above. CPP EBITDA margin improved 230 basis points to 8.8% compared to the prior year of third quarter. Our Global Source New Expansion Initiative remains on time and on budget.
Speaker Change: For the current quarter, CPP adjusted EBITDA of $22 million, increased 22% from the prior year quarter due to improved North American production costs and decreased discretionary spending, partially offset by the unfavorable impact of the reduced volume noted above.
Brian Harris: Our Global Sourcing Expansion Initiative remains on time and on budget. Also of note, on July 1st, we completed the acquisition of Pope, an Australian provider of residential watering products from the Toro company. Pope is an extremely well regarded Australian brand with a 100-year history, and we are excited to add Pope to our portfolio of iconic products in the Australian market.
Brian Harris: Also of note, on July 1st, we completed the acquisition of Pope, an Australian provider of residential watering products, from the Toro company. Pope is an extremely well-regarded Australian brand with a 100-year history, and we are excited to add Pope to our portfolio of iconic products in the Australian market. We expect Pope to contribute approximately 25 million in annual sales, James Australia. Regarding our balance sheet and liquidity, as of June 30, 2024, we had net data of 1.37 billion and net debt to EBITDA leverage of 2.7 times calculated based on our debt covenants.
Speaker Change: Also of note, on July 1st we completed the acquisition of Pope, an Australian provider of residential watering products from the Toro company. Pope is an extremely well regarded Australian brand with a hundred-year history and we are excited to add Pope to our portfolio of iconic products.
Brian Harris: We expect Pope to contribute approximately $25 million in annual sales to Ames Australia. Regarding our balance sheet and liquidity, as of June 30, 2024, we had net debt of $1.37 billion and net debt to EBITDA leverage of 2.7 times calculated based on our debt and after our strong performance in the first half. As Ron touched on earlier, given that our third quarter performance was in line with our expectations, we are reiterating our 2024 guidance, including revenue of $2.65 billion and segmented adjusted EBITDA of $555 million, which excludes unallocated costs and certain other charges that affect comparability.
Speaker Change: in the Australian market. We expect Pope to contribute approximately $25 million in annual sales to Ames Australia.
Speaker Change: Regarding our balance sheet and liquidity, as of June 30, 2024, we had net debt of $1.37 billion and net debt to EBITDA leverage of 2.7 times calculated based on our debt covenants.
Brian Harris: Regarding our guidance, I'd like to remind everyone we raised our expectations for fiscal 2024 last quarter and after our strong performance in the first half. As Ron touched on earlier, given that our third quarter performance was in line with our expectations, we are reiterating our 2024 guidance, including revenue of 2.65 billion and segmented just to EBITDA of 555 million, which excludes unallocated costs and certain other charges that affect comparability. Our other expectations for 2024 also remain unchanged, including corporate costs of 59 million and registration of 22 million, depreciation of 41 million, interest expense of 103 million, a normalized tax rate of 28 percent, and free cash flow to feed net income.
Speaker Change: Regarding our guidance, I'd like to remind everyone we raised our expectations for fiscal 2024 last quarter.
Speaker Change: and after a strong performance in the first half.
Speaker Change: As Ron touched on earlier, given that our third quarter performance was in line with our expectations, we are reiterating our 2024 guidance, including revenue of $2.65 billion and segment adjusted EBITDA of $555 million, which excludes unallocated costs and certain other charges that affect comparability.
Brian Harris: Our other expectations for 2024 also remain unchanged, including corporate costs of $59 million, amortization of $22 million, depreciation of $41 million, interest expense of $103 million, a normalized tax rate of 28%, and free cash flow to exceed net income. Now, I'll turn the call back over to Brian. Thank you.
Speaker Change: Our other expectations for 2024 also remain unchanged, including corporate costs of $59 million, amortization of $22 million, depreciation of $41 million, interest expense of $103 million, a normalized tax rate of 28%, and free cash flow to exceed net income. Now I'll turn the call back over to Ron.
Ron Kramer: Now let's run the call back over to Ron.
Ron Kramer: Thank you, Brian. Our year-to-date results have been driven by strong operating performance from both of our segments, despite a challenging macroeconomic backdrop. HPP is sustained 30 percent plus EBITDA margins and is increased residential door volume, which is offset some of the softness we're seeing in the commercial market. At CPP, we are realizing the early benefits from our global sourcing expansion strategy. This is evidenced by CPP's improving margin profile; profitability continues to improve despite a backdrop of persistently weak consumer demand, which has resulted in reduced sales volumes.
Ron Kramer: Thank you, Brian . Our year-to-date results have been driven by strong operating performance from both of our segments despite a challenging macroeconomic backdrop.
Ronald Kramer: HBP has sustained 30% plus EBITDA margins and increased residential door volume, which has offset some of the softness we're seeing in the commercial market. At CPP, we are realizing the early benefits from our global sourcing expansion strategy, as evidenced by CPP's improving margin profile. Profitability continues to improve despite a backdrop of persistently weak consumer demand, which has resulted in reduced sales volume. I want to reiterate that we will continue to use our strong operating performance and free cash flow to drive a capital allocation strategy that's focused on delivering long-term value for our shareholders.
Ron Kramer: At CPP, we are realizing the early benefits from our global sourcing expansion strategy as evidenced by CPP's improving margin profile. Profitability continues to improve despite a backdrop of persistently weak consumer demand, which has resulted in reduced sales volumes.
Ron Kramer: I want to reiterate that we will continue to use our strong operating performance and free cash flow to drive a capital allocation strategy that's focused on delivering long-term value for our shareholders. Before we start taking questions, I also want to acknowledge the effort and commitment our employees and management teams evolve the businesses around the world. Continue to demonstrate it's because of their dedication and effort that Griffin continues to see such strong operating performance.
Ronald Kramer: Before we start taking questions, I also want to acknowledge the effort and commitment our employees and management teams from all the businesses around the world continue to demonstrate. It's because of their dedication and effort that Griffon continues to see such strong operating performance.
Speaker Change: Before we start taking questions, I also want to acknowledge the effort and commitment our employees and management teams of all the businesses around the world continue to demonstrate. It's because of their dedication and effort that Griffin continues to see such strong operating performance.
Operator: Operator, we're ready for questions. Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Operator, we're ready for questions.
Operator: Ladies and gentlemen, we will now be conducting a question and answer session. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Ladies and gentlemen, a reminder, we request you to limit yourself to one question and one follow-up question per participant. Our first question comes from the line of Tim Wojs with Baird. Please go ahead.
Speaker Change: Thank you.
Speaker Change: If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: Ladies and gentlemen, a reminder: we request you to restrict to one question and one follow-up question for participants.
Speaker Change: Ladies and gentlemen, a reminder, we request you to restrict to one question and one follow-up question per participant.
Tim Vodges: Our first question comes from the line of Tim Vodges with Bed. Please go ahead.
Tim Vodges: Hey, everybody. Good morning. Good morning.
Timothy Wojs: Hey everybody, good morning. Maybe just to start off with home and building products, you know, just kind of curious sequentially if you've seen much change in the kind of demand environment. It seems like the residential business kind of continues to be a little bit better. You know, commercial, I think, is still down year over year. Just trying to understand if anything's kind of incrementally getting, you know, better or worse. And then maybe if you could add a little bit of color around what the next headwinds were, that'd be helpful.
Ron Kramer: Maybe just to start off with home and building products, you know, just kind of curious sequentially. If you've seen much change in kind of the demand environment, it seems like the residential business kind of continues to be a little bit better. You know, commercial, I think it's still down. Here we are just trying to understand if anything's kind of incrementally getting, you know, better or worse. And then maybe, if you can add a little bit of color.
Speaker Change: The residential business kind of continues to kind of be a little bit better. You know, commercial, I think, is still down year over year. Just trying to understand if anything's kind of incrementally getting, you know, better or worse. And then maybe if you can add a little bit of color around what the mixed headwinds were, that'd be helpful.
Ron Kramer: I think the big takeaway is that things are steady. And, you know, the margin story for us is, you know, shown its resiliency. The residential business repair and remodel for us continues to be excellent. The commercial business, you know, is always a lumpy, you know, business. You know, we saw a trend, you know, going from May to June of slowing down back to, you know, things looking better in July. You know, the outlook for the year remains the same, and the outlook for the future of the business remains excellent as I think the housing market recovery is still in front of us.
Ronald Kramer: I think, you know, the big takeaway is things are steady and, you know, the margin story for us has, you know, shown its resiliency. The residential business repair and remodel for us continues to be excellent. The commercial business, you know, is always a lumpy business.
Ronald Kramer: You know, we saw a trend, you know, going from May to June of slowing down back to, you know, things looking better in July. The outlook for the year remains the same, and the outlook for the future of the business remains excellent, as I think the housing market recovery is still in front of us. And as interest rates come down, as new home construction picks up, part of the growth in residential I still think is, you know, ahead of us.
Speaker Change: You know, going from May to June of slowing down, back to, you know, things looking better in July. You know, the outlook for the year remains the same, and the outlook for the future of the business remains excellent, as I think the housing market recovery is still in front of us. And as interest rates come down, as new home construction picks up,
Brian Harris: And as interest rates come down, as new home construction picks up, part of the growth on residential, I still think is, you know, ahead of us, Brian, you want to add to that.
Speaker Change: Part of the growth on residential I still think is, you know, ahead of us.
Ronald Kramer: I think you summarized it well.
Brian Harris: I think you summarized it well.
Speaker Change: Brian , you want to add to that?
Brian Harris: Maybe just the mixed piece, Brian. Yeah, so the mixture seeing is the commercial verse residential mix, with commercial down slightly and residential. Improving. So that's that. I got you. Okay.
Timothy Wojs: Maybe just the mixed piece, Brian?
Brian Harris: I think you summarized it well.
Brian Harris: I noticed you did a little bit more debt reduction this quarter than you've done in the prior few quarters. Any change in the philosophy of buybacks versus debt paydown on a go-forward basis?
Ron Kramer: And then just my follow-up on free cash flow and kind of the capital allocation strategy. You know, I noticed you did a little bit more debt reduction this quarter than what you've done in the prior few quarters. Any change in kind of the philosophy of buybacks versus debt pay down on a go for basis? No, I think we have the flexibility to do both buybacks, debt reduction, and acquisitions are always in our pipeline.
Brian Harris: I got you. Okay. And then just my follow-up on free cash flow and kind of the capital allocation strategy. I noticed you did a little bit more debt reduction this quarter than what you've done in the prior few quarters. Any change in kind of the philosophy of buybacks versus debt paydown on a go-forward basis?
Ron Kramer: And you know, during this quarter, we didn't do any. Okay. Yeah, we had 200 million of buybacks during the year. And then this quarter with cash flow, we just chose to reduce the database.
Brian Harris: Yeah, I was just going to point out that we had 200 million buybacks during the year, and then this quarter, with cash flow, we just chose to reduce debt.
Speaker Change: I just want to point out that we had 200 million of buybacks during the year and then this quarter with cash flow we just chose to reduce that a bit.
Tim Vodges: Thank you.
Bob Labick: Our next question is from the line of Bob Labek with C.J.S. Securities.
Operator: Our next question is from the line of Bob Labick with CJS Securities. Please go ahead.
Bob Labick: Please go ahead.
Bob Labick: Good morning. Thanks for taking our questions.
Robert Labick: Morning, Bob. So I wanted to start with CPP and global sourcing, you know, continued steady progress on margins, you know, sequentially and year over year. So it's, it's
Bob Labick: So I want to start with CPP and the global sourcing, you know, continued steady progress on margins sequentially and year over year. So it's it's working as executed.
Speaker Change: Good morning. Thanks for taking our questions.
Ron Kramer: Any heavy lifting left, or is this more gradual transition over the next few several quarters to get to the full benefits? And any changes in your thoughts on, you know, that end goal of, you know, 15% for them. So, you know, and any. at your time frame. There's no change in our 15% long-term target for the business, and the heavy lifting has been done. We've shot the facilities; we've right-sized the business. This really is a very encouraging for us. We announced this over a year ago. The execution of our team has been excellent. The performance is pointing in the direction that we're going.
Speaker Change: working as executed.
Speaker Change: Any heavy lifting left or is this more a gradual transition over the next, you know, few several quarters to get to the full benefits and any changes in your thoughts on, you know, that end goal of, you know, 15% for the, you know, and your time frame?
Speaker Change: There's no change in our 15% long-term target for the business and you know the heavy lifting has been done. We've shut the facilities, we've right-sized the business. This really is you know a very encouraging for us.
Speaker Change: We announced this over a year ago, the execution of our team has been excellent, the performance is pointing in the direction that we're going, the asset light model for the U.S. business
Ron Kramer: The asset, you know, light model for the U.S. business to follow the global sourcing business that we already have in place for both our Australian business and our Hunter business in the U.S. was the right direction for us, the performance, you know, metrics, you know, that we laid out. We're going down the path as we expect it, and, you know, we continue to believe this is a 15% margin business in the future. I would just add to that, you know, right now we're selling inventory that we've manufactured. That will continue into early next year, fiscal 25, and over the course of 25, that shift will occur from manufacturing inventory to source inventory, and our margins will improve with it.
Speaker Change: to follow the global sourcing business that we already have in place.
Speaker Change: for both our Australian business and our hunter business in the U.S.
Ronald Kramer: I would just add to that, right now, we're selling inventory that we've manufactured. That will continue into early next year, fiscal 25, and over the course of 25, that shift will occur from manufactured inventory to sourced inventory, and our margins will improve.
Speaker Change: I'll just add to that, you know, right now we're selling inventory that we've manufactured that will continue into early next year fiscal 25 and over the course of 25 that shift will occur from manufactured inventory to sourced inventory and our margins will improve with it.
Bob Labick: Okay, super.
Ron Kramer: And then on doors, just taking kind of a step back. Obviously, I think you guys, you know, I'd said this, but you've continued to stay above 30% and outperform. There's been a ton of change in the industry since COVID. There was the supply disruption, stay at home, fix up your house, pricing demand, et cetera. But you guys both on the commercial side and on the residential side have been gaining share.
Speaker Change: Okay, super. And then on doors, just taking kind of a step back, obviously I think...
Speaker Change: You guys.
Speaker Change: But you guys, both on the commercial side and on the residential side, have been gaining share. So the question is, talk about how Clopay and Cornell Cookson are differentiated in the industry now, you know, the changes over the past four or five years, and how they're positioned to continue to grow and gain share in this market.
Ron Kramer: So the question is talk about how Cloping Cornell cooks and are differentiated in the industry now, you know, the changes over the past four or five years, and how their position to continue to grow and gain share in this market. Sure. So I'll start with a fact that we have come up with many, many innovative products. Purchasing Cornell cooks in and integrating it with clope is made as much stronger in the commercial market. We continue to have excellent execution in our operations. We have industry leading lead times. We have our own freight to deliver products; for sure, they get to their dealers and our customers safely and in proper form.
Ronald Kramer: Sure. So I'll start with the fact that we have come up with many, many innovative products. Purchasing Cornell-Coxon and integrating it with Clopay has made us much stronger in the commercial market. We continue to have excellent execution in our operations, and we have industry-leading lead times. We have our own freight to deliver products to ensure they get to their dealers and our customers safely and in the proper form. We have an excellent dealer network that is able to carry out installations. And all these things together have put us in a very strong position.
Speaker Change: Purchasing Cornell Cookson and integrating it with Clopay has made us much stronger in the commercial market.
Speaker Change: We have our own freight to deliver products to ensure they get to their dealers and our customers safely and in proper form. We have an excellent dealer network that is able to execute on installations. And all these things together have put us in a very strong position.
Ron Kramer: We have an excellent dealer network that is able to execute on installations. And all these things together have put us in a very strong position.
Sam Cash: Thank you. Our next question is from the line of Sam Cash with Raymond James.
Operator: Our next question is from the line of Sam Darkash with Raymond James. Please go ahead.
Speaker Change: Thank you. Our next question is from the line of Sam Darkash with Raymond James. Please go ahead.
Sam Cash: Please go ahead. Good morning, Ron. Good morning, Brian. How are you?
Sam Cash: Good, thank you. Morning, Sam. Good morning. Doing a couple of questions.
Sam Cash: First, as it relates to HPP and your steel-related costs, I'm guessing because of the lag between when what we see in the prevailing markets and when it hits your P&L, I'm guessing the third quarter you just reported had steel headwinds. And then I'm guessing beginning in the fourth quarter and into the first quarter there are steel tailwinds.
Sam Darkash: A couple questions. First, as it relates to HBP and your steel-related costs,
Sam Darkash: Third quarter you just reported had steel headwinds, and then I'm guessing beginning in the fourth quarter and into the first quarter there are steel tailwinds.
Ron Kramer: First off, is that accurate? And secondly, can you quantify or put a little bit of meat on the bone in terms of the impacts of steel, and then I've got to follow up.
Sam Cash: Thanks.
Ron Kramer: I'll start by saying yes, it's entirely accurate. Yeah, as far as the impact, you know, we saw a couple hundred basis points impact from this deal. We knew it was coming and actually discussed it last quarter.
Speaker Change: As far as the impact, we saw a couple hundred basis points impact from this deal. We knew it was coming and actually discussed it last quarter.
Sam Cash: Gotcha.
Ron Kramer: And then my follow-up, you made the pollback position. I know it's relatively small, but but strategic.
Speaker Change: gotcha and then my follow-up you made the Pope acquisition I know it's relatively small but but strategic
Ron Kramer: Run, what was the genesis of how that deal came together? When I'm getting at with the question is, I know you mentioned that you have a pipeline of M&A targets that you continually look at, but what's the likelihood of further M&A over the near to intermediate term versus, let's say, continued share repurchase. Thanks. We are, you know, very attuned to looking for things that are value-enhancing and add to our portfolio. So transactions like Pope are, you know, the kinds of deals that are carve outs. You know, we've got a long history of buying and improving businesses that have come into our broader portfolio in both HPP and in CPP.
Speaker Change: What's the likelihood of further M&A over the near-to-intermediate term versus, let's say, continued share repurchase?
Speaker Change: We are, um...
Speaker Change: very attuned to looking for things that are value-enhancing and add to our portfolio. So, transactions like Pope are, you know, the kinds of deals that
Speaker Change: Our carve-outs, you know, we've got a long history of buying and improving businesses that have come into our broader portfolio in both HBP and in CPP.
Ron Kramer: So things that allow us to expand product and geography and that are financially, you know, a creative toss are things that we want to be doing.
Speaker Change: So things that allow us to expand product and geography and that are financially, you know, accretive to us are things that we want to be doing.
Ron Kramer: Nothing is as cheap as our own stock right now. And we have, you know, to your point about what to expect from us. We like the position of our businesses, the free cash flow getting generated, our ability to both buy back stock and deliver. And with things that are immediately accretive and value enhancing, like Pope, we're not afraid to add to the portfolio. But the cheapest thing we see right now is the price of our own stock.
Speaker Change: Nothing is as cheap as our own stock right now and we, you know, to your point about what to expect from us
Speaker Change: We like the position of our businesses.
Speaker Change: The free cash flow getting generated, our ability to both buy back stock and de-lever, and with things that are immediately accretive and value-enhancing, like POPE.
Julio Romero: Our next question is from the line of Julio Romero with Sedotti and Company. Please go ahead.
Speaker Change: Thank you.
Alex Handman: Good morning. This is Alex Handman on Julio. Thanks for taking questions.
Speaker Change: Good morning. This is Alex Hantman on for Julio. Thanks for taking questions. Good morning, Alex.
Alex Handman: Morning Alex. First question: just following up on HPP.
Ron Kramer: Do you think there was any pull forward from last quarter or deferred deferrals, you know, to the fourth quarter? Nothing that I'm aware of demand on the residential side continues to be very strong. And as we mentioned earlier, there's some softness on the commercial side, but overall the business is in a very good position. Great context.
Speaker Change: Nothing that I'm aware of. Demand on the residential side continues to be very strong and as we mentioned earlier there's some softness on the commercial side but overall the business is in very good position.
Alex Handman: Thank you.
Alex Handman: I did my follow up on CPP.
Brian Harris: Could you provide an update in the inventory destocking across channels and geographies? Sure. So the inventory situation in the UK: we still see high inventory in the channel there. Australia and Canada are reasonably normal. And in the US, there is somewhat higher inventory than usual, but the destocking over the quarter. And we expect it to continue in the fourth quarter, is bringing that level to a more normalized level.
Alex Handman: Thank you.
Justin Bergner: Ladies and gentlemen, a reminder: if you wish to ask a question, please press star and one. Our next question is from the line of Justin Bergner with Gabelli Fanz. Please go ahead.
Speaker Change: Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and 1.
Samuel Darkatsh: Good morning, Ron. Good morning, Brian. How are you?
Justin Bergner: Good morning, Ron. Good morning, Brian. Good morning. Good morning, Justin.
Ronald Kramer: Thank you, morning, Sam. Good morning. Doing well.
Samuel Darkatsh: A couple questions. First, as it relates to HBP and your steel-related costs, the third quarter you just reported had steel headwinds, and then I'm guessing beginning in the fourth quarter and into the first quarter, there are steel tailwinds. First off, is that accurate? And secondly, can you quantify or put a little bit of meat on the bone in terms of the impacts of steel? And then I've got a follow-
Speaker Change: Good morning, Ron. Good morning, Brian .
Ronald Kramer: I'll start by saying yes, that's entirely accurate, right?
Ronald Kramer: We are, you know, very attuned to looking for things that are value-enhancing and add to our portfolio. So transactions like Pope are, you know, the kinds of deals that are carve-outs. You know, we've got a long history of buying and improving businesses that have come into our broader portfolio in both HBP and in CPP. So things that allow us to expand product and geography and that are financially, you know, accretive to us are things that we wanna be doing. Nothing is as cheap as our own stock right now, and we have, you know, taken your point about what to expect from us.
Justin Bergner: Two questions, with respect to Nick, are you seeing any Nick's headbands within residential customers trading down more in the portfolio? On balance, no, but between dealers, the dealer channel continues to be a good mix and we see a slight buy down in the retail channel.
Operator: Our next question is from the line of Julio Romero with Sidoti and Company. Please go ahead.
Alex Hantman: Good morning, this is Alex Hantman on for Julio. Thanks for taking questions.
Ronald Kramer: Nothing that I'm aware of. Demand on the residential side continues to be very strong, and as we mentioned earlier, there's some softness on the commercial side, but overall, the business is in very good shape.
Operator: Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and 1.
Justin Bergner: Good morning, Ron. Good morning, Brian. Good morning.
Operator: Morning. Morning, Justin.
Justin Bergner: Two questions. With respect to MIX, are you seeing any MIX headwinds within residential customers trading down more in the portfolio?
Ronald Kramer: On balance, no, but between dealers, the dealer channel continues to be a good mix, and we see a slight buy-down in retail.
Speaker Change: On balance, no, but between dealers, the dealer channel continues to be a good mix, and we see slight buy-down in the retail channel.
Ron Kramer: Got it, and then with respect to CPP, you mentioned that the results were in line with your expectations.
Ron Kramer: Is that whole truth for the sales and CPP because it seemed like they were fairly light, and then that lightness, how much of that is in demand versus further destocking any sense? On balance, our overall revenue met our expectations. CPP was a little lighter than we originally expected, as the consumer continues to be weak, and it's really a combination of that inventory and the consumer that's causing that weakness. Thank you.
Speaker Change: You mentioned that the results were in line with your expectations. Does that hold true for the sales and CPP because it seemed like they were fairly light? And then that lightness, how much of that is in demand versus further destocking? Any sense?
Ronald Kramer: On balance, our overall revenue met our expectations. CPP was a little lighter than we originally expected, as the consumer continues to be weak. And it's really a combination of that inventory and the consumer that's causing it.
Speaker Change: On balance, our overall revenue met our expectations. CPP was a little lighter than we originally expected as the consumer continues to be weak. And it's really a combination of that inventory and the consumer that's causing that weakness.
Operator: Ladies and gentlemen, this concludes our question-and-answer session.
Speaker Change: Thank you.
Ron Kramer: I would now hand the conference over to Ron Kramer, CEO, for closing comments. We're very pleased with the quarter, our performance here to date and our outlook for the future. Thank you, and we look forward to speaking to you in November. Thank you.
Justin Bergner: Thank you.
Operator: Thank you. The conference of Griffon Corporation has now concluded. Thank you for your participation. You may now disconnect your lines. The Ultimate Parody Site!
Operator: The conference of Griffin Corporation has now concluded. Thank you for your participation.
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