Q1 2025 Griffon Corp Earnings Call
Greetings and welcome to the Griffin Corporation fiscal first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode.
Our comments will include forward looking statements about bookings 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.
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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.
Rob: With that I'll turn the call over to Rob.
Rob: Thanks, Brian Good morning, everyone and thanks for joining us fiscal 'twenty 'twenty five 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 sort of continued profitability improvement that consumer on.
Rob: Professional products with this momentum we are on track to achieve our financial targets for the year.
Rob: For the quarter H B P 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.
Rob: N C. P. P first quarter revenue decreased 4%, primarily due to decreased volume as old as C. P. P home markets, except for Australia continued to see reduced consumer demand Australia benefited from increased product offerings sold through the retail channel and revenue contributed by the Pope acquisition.
Rob: C. P. P. EBITA in the first quarter increased by $13 million to $18 million. This increases and profitability reflects the positive effects of the global sourcing expansion initiative and increased volume in Australia.
Rob: Turning to capital allocation during the first quarter, we repurchased $42 million of our stock 610000 shares at an average price of $69 40 per share at December 31, 390 million remains under our repurchase authorization since April.
Rob: 2023, and through December we have repurchased $468 million of our stock nine 5 million shares at an average price of $49.09.
Rob: Repurchases have reduced Griffin's outstanding shares by 16, 7% relative to the total shares outstanding at the end of the second quarter of fiscal 2023.
Rob: Also yesterday, the Griffin board authorized a regular quarterly dividend of <unk> 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%.
Rob: 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.
Rob: Turn it back to Brian for a few more details on the quarter.
Brian: Thank you Ron.
Brian: First quarter revenue was $632 million decreased 2% and adjusted EBITDA before and Oh, Okay. Good amounts of $145 million increased 11% both in comparison to the prior year quarter.
Brian: EBITA margin before unallocated mountain, 23%, an increase of 270 basis points.
Brian: Profit on a GAAP basis for the quarter was $264 million compared to $237 million in the prior year quarter.
Brian: Excluding items that affect comparability from the current and prior period gross profit was $264 million in the current quarter compared to 248 million in the prior year.
Brian: Normalized gross margin increased year over year by 320 basis points to 41, 8%.
Brian: First quarter GAAP, selling general and administrative expenses were 152 million consistent with the prior year, excluding adjusting items from both periods SG&A expenses by $151 million or 23, 8% of revenue compared to the prior year of $147 million or 22, 9% of revenue.
Brian: First quarter GAAP net income was $71 million for 100 $1.49 per share compared to 42 million in the prior year quarter or 83 cents per share.
Brian: Excluding items that affect comparability from both periods current quarter. Adjusted net income was $66 million or dollar 39 per share compared to the prior year of $55 million or $1 70 per share.
Brian: Corporate and unallocated expenses, excluding depreciation in the quarter were $14 million.
Brian: The prior year.
Brian: During the quarter, we realized $717 2 million in proceeds from the sale of real estate as a result of our C. P. P global sourcing expansion initiative.
Brian: This offset capital expenditures of $17 5 million, resulting in net capital expenditures of approximately $200000.
Brian: Prior year net capital expenditures were $14 million.
Brian: Regarding our segment performance as Ron mentioned earlier revenue from homebuilding products was consistent with the prior year quarter reflected 14 increased residential volume offset by reduced commercial volume.
Brian: Price mix was also in line with the prior year quarter.
Brian: Adjusted EBITDA increased 2% compared to the prior year quarter as reduced material costs were offset by increased labor and distribution costs.
Brian: 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 pulp acquisition.
<unk> adjusted EBITDA increased by $13 million from the prior year quarter to $18 million pardon.
Brian: Primarily due to the positive effects from our now completed global sourcing expansion initiatives and the increased volume in Australia.
Brian: Regarding our balance sheet and liquidity as of December 31, 2024, we had net debt of $1 3 billion and net debt to EBITDA leverage of two four times as calculated based on our debt covenants compared to two five times leverage at the end of last year's first quarter.
Brian: Our net debt and leverage decrease on our year end September 2024, it even after returning $51 million to shareholders through dividends and stock buybacks in the quarter.
Brian: All aspects of our fiscal 2025 guidance provided in November 'twenty 'twenty, four remain unchanged, including $2 6 billion of revenue and 575 million to $600 million of segment, adjusted EBITDA, which excludes unallocated costs and certain other charges that affect comparability and free cash flow.
Brian: Exceeding net income for the year.
Brian: We continue to anticipate 2025, H B P and P. P. P revenue will both be in line with 2024 H.
Brian: <unk> sales are expected to benefit from increased residential volume, which will be offset by reduced demand for commercial projects.
Brian: And we expect to return to normal seasonal patterns, which includes new Jersey volume.
Brian: In winter months.
Brian: <unk> sales are expected to reflect continued growth in Australia.
Brian: But offset by weakness in North America, which is expected to persist through the first half of 2025.
Mike: Now I'll turn the call back over to Mike.
Thanks, Brian our 2025 is off to an excellent start with strong free cash flow continued solid operating performance at HB P and continued improved profitability at C. P. P. These.
These results reinforce our confidence in our outlook for the year will continue to use the strong operating performance and free cash flow of our businesses that drive our capital allocation strategy that delivers long term value for our shareholders. This strategy includes investing in our businesses Opportunistically repurchase.
Mike: <unk> shares and reducing debt.
Mike: To conclude I want to express my sincere gratitude to all of our Griffin employees around the world, whose dedication and effort have driven our financial success I couldnt be prouder of what we've accomplished together and there is much more ahead, operator, we'll take any questions.
Speaker Change: 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.
Mike: A confirmation tone will indicate your line is in the question queue you may.
Mike: Any price starts to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys to that or if you want a chance to ask your questions. We ask that each person in the queue to only ask one question and one follow up.
Speaker Change: Our first question comes from the line of Robert <unk> with Baird.
Mike: Baird. Please proceed with your question.
Speaker Change: Hey, good morning, guys. Thanks for taking the question.
Speaker Change: So within CPP, you guys had switched to a sourcing strategy and the two open storage businesses any way to help us understand the geographical mix of the imported product now like in your key regions or countries or any other color you could give there.
Speaker Change: Sure.
Speaker Change: Sure.
Question is obviously, you're touching upon tariffs so let.
Speaker Change: Let me start with the tariff situation is extremely fluid.
Speaker Change: With that said given the proposed tariffs on Mexico, Canada and China.
Speaker Change: We're comfortable with maintaining our 2025 financial guidance.
Speaker Change: Similar to tariffs in 2018, we expect to mitigate the effects of changing entire policy through a combination of price supplier negotiations and further diversifying our global supply chain.
Speaker Change: As we exit our fiscal 2025, we expect our tariff mitigation measures to be implemented and then effect, allowing griffins maintained its long term EBITDA margin target.
Speaker Change: And to your question.
Speaker Change: Specifically, yes, we do have significant amounts coming from China related to our lawn and garden and Hunter fan businesses.
Speaker Change: Those are the only significant areas where tariffs could have.
Speaker Change:
Matt: And then Matt.
Matt: Got it.
Matt: And then just an update on capital allocation at today's level kind of how are you thinking about debt paydown versus buybacks. We continue to believe our stock is opportunistically attractive and at these levels, we would rather buy stock and pay down debt, but we can do both.
Matt: Okay.
Matt: Thank you.
Speaker Change: Our next question comes from the line of Bob <unk> with CJS Securities. Please proceed with your question.
Bob: Good morning, Congratulations on continued strong performance. Thanks, Bob Thanks, Good morning.
Bob: Yeah. So I'm speaking of obviously made great progress in C. P. P and you just talk a little bit about the tariff situation, but they're you know 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 you know what what the process is from here going forward on C. P. P.
Bob: Margin expansion and cost operate that please.
Bob: Sure.
Bob: So through this year will be transitioning from manufactured inventory to source the inventory as we go through the year, we did build up inventory last year in anticipation of this transition.
Bob: 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.
Bob: And step two is we've always planned as to then look across the globe for the best sourcing opportunities.
Bob: We will continue to do.
Bob: Design and bring new products to it.
Bob: In particular into the U S of course across the world as well.
Bob: 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: Okay, Great. Thanks, and then you also mentioned.
Bob: On H B P. Yes.
Bob: Residential <unk> commercial down kind of in volumes, there talk about the headwinds and tailwind in general so the commercial and resi door markets and in your performance versus the overall market.
Bob: 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.
Bob: On the commercial side over the last almost two years now.
Bob: And the Dodge momentum index has had been soft.
Bob: It feels like they're starting to bottom, but in the meantime that affects our commercial volume as it would anybody else.
Bob: 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 that benefit.
Bob: Growth in unit volumes and expect <unk> to be able to continue its margin.
30% for this year. So we have an excellent business that is still got some upside.
Bob: For an expansion in the U S economy, and particularly the U S housing market.
Bob: Thank you our.
Trey Grooms: Our next question comes from the line of Trey Grooms with Stephens Inc. Please proceed with your question.
Speaker Change: Hey, good morning, Brian and Brian and congrats on the good results.
Trey Grooms: Thanks, and good morning.
Trey Grooms: So.
Speaker Change: I just want to be clear on something from a from an earlier question and Brian Your response to that.
Speaker Change: Is it.
Speaker Change: Fair to say now that.
Speaker Change: You're assuming that tariffs will be kind of coming into play through the year on.
CPP in that you will be able to kind of.
Speaker Change: Youll be navigating that.
Speaker Change: As a result, youre reiterating the guide so in effect.
Speaker Change: Navigation of the tariffs and the lack of impact.
Speaker Change: Youre baking it into the guide did I hear that right.
Speaker Change: Yes, you heard that correct, we believe that the timing in the year and the mitigation strategies will keep us within our guidance.
Speaker Change: Perfect.
Speaker Change: Thank you for that and I think that's an important.
Speaker Change: Point here, you know I mean, theres a lot of.
Speaker Change: A lot of puts and takes around going around right now and a lot of noise around the tariffs.
Speaker Change: Definitely a question I know you guys have been getting in and we've been getting in as well. So thank you for clearing that up.
Speaker Change:
Speaker Change: And then on let's.
Speaker Change: Let's see H B P.
Speaker Change: Margins.
Speaker Change: So you know.
Speaker Change: The margins there continue to be very strong demand on the residential side remains good.
Speaker Change: As you mentioned, you're primarily play in the higher end is is it fair to say that.
Speaker Change: Hi am continues to outperform entry level products.
Speaker Change: Entry level is not really your bread and butter, but just wondering how that is comparing to entry level and then.
Speaker Change: What's your kind of still expecting on the.
Speaker Change: The pricing front across the you know.
Speaker Change: H B P portfolio. Here are you are you still expecting kind of a price cost to be similar in <unk> and 'twenty four or excuse me this year versus 24.
Let me start by just saying we view co pay in the market views co pay as the leading brand in.
Speaker Change: The garage door category residential category repair and remodel continues to be strong.
Speaker Change: And we continue to be the leader in this space, which is why we think we're gaining market share.
Yeah, I'll, just add to that as far as the pricing would you expect.
Speaker Change: Price to be in line and cost to be in line with 2024, and if there's any impact on input costs for any reason.
Speaker Change: Those will be mitigated likely via price.
Speaker Change: We continue to believe the commercial side of the business. The Cornell Cookson is going to grow as the U S economy recovers and you correctly.
Speaker Change: Point out that there is a swirl over tariffs.
Speaker Change: The intent is ultimately a stronger and better U S economy, and if that plays out will benefit on both the residential side and on the commercial side.
Speaker Change: Well, we continue to see the residential side of our business doing well and we continue to believe that the commercial business has growth.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Sam <unk> with Raymond James. Please proceed with your question.
Speaker Change: Good morning, Ron Good morning, Brian how are you.
Speaker Change: Well thank you.
Speaker Change: Two quick questions if I could.
Speaker Change: I didn't hear if you mentioned it I missed it I apologize, but I didn't hear what repo might've been in January.
Speaker Change: And then related to that and I have a follow up but related to that should we anticipate that kind of 40 to $50 million to $60 million a quarter pace to be <unk>.
Speaker Change: Or to what you were expecting throughout the year.
Speaker Change: We purchased $42 million for the quarter, ending December 31, and you'll have to wait to get the.
Speaker Change: Second quarter repurchase when we report in May and.
Speaker Change: You should expect that we're going to continue to generate substantial free cash flow and depending on the price of the stock.
Speaker Change: We'll continue to be a buyer at these levels expect us to continue to be a buyer.
Speaker Change: And my second question.
Speaker Change: <unk>.
Speaker Change: Getting back to C. P. P is the entirety of the spring product at this point already landed.
Speaker Change: Or are you still waiting for additional product, therefore would be subject to tariffs.
Speaker Change: <unk> portion of the spring product pipeline.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of.
Romero: Oh, you're Romero with Sidoti <unk> Company. Please proceed with your question.
Speaker Change: Thanks, Hey, good morning, Brian.
First question here on CPP.
Speaker Change: Really strong CPG margins on lower volume can you expand on what Youre seeing in North America by channels of 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 margin to look like when demand does recover in North America.
Speaker Change: Sure. So it's really across all our product lines, we're seeing the consumer.
Speaker Change: The weak and not spending what we've seen in the past.
Speaker Change: And as far as going forward, it's really our 15% margins across CPP globally, which has a balance of 12% for the lawn and garden.
Speaker Change: Business across the globe and 20% for.
Speaker Change: Hunter fan.
Speaker Change: Excellent and then for my follow up you were able to sell some some real estate related to see could be here in the quarter to $217 million.
Speaker Change: How much more runway is there for additional proceeds.
Speaker Change: From real estate and equipment sales in your view.
Speaker Change: 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.
Speaker Change: Thank you.
Speaker Change: <unk> reached the end of the question and answer session and I will now turn the call back over to CEO, Ron Kramer for closing remarks.
Speaker Change: We continue to be excited about where our company is headed and we're going to execute our business plan and continue to deliver outstanding performance and we look forward to speaking to you in may.
Speaker Change: Thank you and ladies and gentlemen. This concludes today's conference may disconnect. Your lines at this time. Thank you for your participation.
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