Q3 2025 Griffon Corp Earnings Call
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Greetings and welcome to Griffin corporation's. Fiscal third quarter 2025 earnings conference call. At this time, all participants are in listen-only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference, please press star, then zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to turn the call over to Griffon Corporation. CFO. Ryan Harris, please go ahead sir.
Thank you. Good morning and welcome to Griffin. Corporation's, third quarter, fiscal 2025 earnings call.
Joining me for this morning's call is Ron Kramer Griffin's chairman and chief executive officer.
A 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 earnings release.
Our comments will include forward-looking statements about Griffin'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, some of today's remarks will be adjusted 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 try to call over to Ron.
Thanks Brian. Good morning everyone. And thanks for joining us during the third quarter, our home and Building Products. Segment continued, its strong performance for the first 9 months HBP. Profitability is exceeded. Our expectations with an ebit margin of 31.4% driven by favorable price and mix.
In the third quarter, our consumer and professional product, segment was significantly impacted by weak demand, coupled with increased tariffs disrupting historical customer ordering patterns, particularly at Hunter Fan,
notwithstanding the decrease in sales volume for the first 9 months. Cppp ebita margin has improved 270 basis points year-over-year.
Improvement reflects the hard work of our aims us team who successfully transitioned, our manufacturing operations to an asset light business model. Thus increasing our flexibility and reducing our operating costs through leveraging, our Global sourcing capabilities. We've also seen solid performance from our team in Australia, including the contribution from our acquisition of Pope in July of 2024
Given our overall, year-to-date performance. We're reaffirming full year ebit, dog. Guidance of 575 million to 600 million while reducing our Revenue, Expectations by 100 million to 2, and a half billion. As a result of the ongoing consumer weakness at CPP. Uh, turning now to Capital allocation during the third quarter, we repurchased $40 million of our stock or 581,000 shares at an average price of 69.28 cents per share at June 3033 million remained outstanding under the repurchase. Authorization
Since April 2023 and through June, we've repurchased, 538 million of stock or 10.5 million shares at an average price of $1.15. These were purchases of reduced Griffins outstanding shares by 18.4% relative to the total shares outstanding at the end of the second quarter of fiscal 2023.
Also yesterday, the Griffin board, authorized a regular quarterly dividend of 18 cents, per share payable on September 16th to shareholders of record on August 29th.
This is our 56th consecutive quarterly dividend to shareholders. Our dividend has grown at an annualised compound rate of more than 18% since we initiated dividends in 2012.
These actions, reflect the strength and resiliency of our businesses as well as our continued confidence in our strategic plan and Outlook, I'll turn it over to Brian for more details of the financial results.
Thank you, Ron.
Third quarter, revenue of 64, million decreased 5% and adjusted divida before unallocated amounts of 148 million increased 5% both into harassment to the prior year quarter.
Even on margin before unallocated amounts was 24.1% and increase of 240 basis points.
Million compared to 249 million in the prior year quarter.
Excluding items that affect comparability from the prior year period, gross profit of $265 million was consistent with the prior year.
normalized gross margin increased year over year by 230 basis, points to 43.2%
During the third quarter, we recorded a pre-tax charge of 244 million for impairment on Goodwill and indefinite live in tangible assets related to the acquisition of Hunter Fans.
This charge was caused by ongoing weak. Consumer demand coupled with the impact of increased tariff disrupting historical customer order and patterns.
Third quarter Gap, sewing, General, administrative expenses were 391 million, including items that affect comparability from the current and prior year quarters. Sg&a expense. Expenses were 147 million or 23.9% of Revenue compared to the prior year of 155 million, which also reflected 29.9% of Revenue.
Third quarter Gap. Net loss was 120 million or 2.65 cents per share compared to net income of 41 million in the prior year quarter or 84 cents per share.
Excluding items that affect comparability from both periods, current quarter adjusted. Net income was 69 million or 150 per share, compared to the prior year of 61 million or 1.24 per share.
Corporate and uncal unallocated expenses. Excluding depreciation in the quarter, were 13 million compared to 15 million in the prior year quarter.
Free cash flow during the quarter was 115. Million compared to 120 million in the prior year quarter during the quarter Capital expenditures were 9 million compared with 15 million in the prior year quarter.
Regarding our second performance revenue for Home Building Products of 400 million increased 2% from the prior year, driven by favorable price and mix of 3%, partially offset by decreased volume of 1%.
Adjusted even though for HBP of 129 million increased by 9% compared to the prior year quarter driven by increased revenue and reduced material costs, partially upset by increased labor costs.
The consumer and professional products revenue of 213 million, decreased 16% compared to the prior year quarter primarily. Driven by decreased volume of 19% due to reduced consumer demand across all geographic regions, except Australia and disrupted historical. Customer ordering patterns in the US due to increased tariffs
CPP benefit from price and mix of 2% and incremental revenue from the pope acquisition contributed 1%.
PPP adjusted IBA dose increased by 14% from the prior year quarter to $19 million, primarily due to the revenues. Decreased noted above partially set by the benefits from the US Global Sourcing Expansion initiative, improved margins across all geographic regions, and reduced administrative expenses.
Foreign currency had a 1% unfavorable impact.
Regarding our balance sheet and the liquidity as of June 30th 2025. We had net debt of 1.3 billion and net debt to Hebrew dial, leverage of 2.5 times as calculated based on our debt Covenants.
Compared to 2.7 times leverage at the end of last year's, third quarter.
Our, net debt, and leverage are less than our year. End September 2024 even after returning, 145 million to shareholders, to dividends and stock BuyBacks. During the first 3 quarters of the year.
Regarding our Outlook. We now expect Revenue to be 2.5 billion versus the prior expectation of 2.6 billion.
The 100 million reductions is attributed to both to our CPP segment which reflects ongoing weak consumer demand coupled with the impact of increased. Tariffs. Disrupting historical customer ordering patterns in particular for Hunter.
We are reaffirming segment adjusted Eva, dog. Guidance of 575 million to 600 million with the upper end of the range reflecting potential in creme bundle volume.
We now, expect HBP segment margin in excess of 31% versus prior guidance of an excess in 30%.
To proceed PP. We now, expect margin of approximately 8% versus our prior guidance of an excess of 9%, due to the reduction in volume, impacting Revenue in the related effect, on overhead absorption.
The remaining elements of our 2025 guidance. We now expect that interest expense to be 95 million versus our prior guidance of 102 million, Capital expenditures are expenditures of 60 million, versus our prior guidance of 65 million.
We continue to expect free cash flow to exceed net income, depreciation of 42 million, amortization of 23 million and a normalized tax rate of approximately.
Disruptions and customer buying patterns.
With respect to our Capital allocation, we remain committed to using 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 portion of our strategy includes investing in our businesses, opportunistically repurchasing shares and reducing debt.
So far this year, we've returned $145 million to shareholders in the form of dividends and share repurchases, while simultaneously reducing debt by $76 million and lowering our overall leverage to 2.5 times.
as I reiterate uh that we continue to expect uh to generate a total of over 1 billion dollars of free cash flow during this fiscal year and the next 2
encouraged by the strong momentum and key growth areas and remain optimistic about the opportunities. That lie ahead, we view our stock as a compelling value
Finally, I'd like to express my appreciation to our Griffin team around the world who've been able to remain focused on executing our strategy, while competing in this challenging and dynamic environment.
Operator. We're now ready for questions?
Thank you. So
Ladies and gentlemen, at this time, we will be conducting a question and answer session.
If you would like to ask a question, please press star. Then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
you may press star and then 2, if you would like to remove yourself,
Please note, participants are asked to limit their questions to 1 question and 1 follow-up.
First question we have comes from Bob labucq of CGS Securities. Please go ahead.
Hi, it's actually Luigi go for Bob this morning. Um,
Good, good morning. Um, Ron can you start just on CPP and maybe talk to your pricing strategy there? Um, and whether you know, price has gone in for tariffs and how the retailers are reactive.
Yeah, I I'll take it. Um,
Yeah, we have uh, in certain instances put through price, uh, however, given the sensitive nature of ongoing customer discussions and our mitigation actions, uh, we're not in a position to really give much more detail.
Okay. And then um obviously you know, given the guidance, um you know it's impacting the sell in, can you talk to the sell through trends that you're seeing at retail?
yeah, retail can uh continues to see uh, reduced p uh,
You know, during this past quarter or certainly in the Northeast weather was a bit of a factor, uh, the ongoing weak consumer and also people pulling back further from a concerns about tariffs and inflation.
Thank you. So the next question we have comes from Robert Schultz of bed. Please go ahead.
Hey guys, thanks for taking the question. Um just wanted to first ask on HBP, um I saw that you called out price mixed with positive and I think you guys have put some price increases there, but just curious how price realization is tracking relative to your initial expectations.
Uh, generally it's tracking in line, uh, in that business. When we put price increases through, they are generally taken by the market.
Got it and then on HPP demand. Um what are you seeing between the different end markets there? Just on the residential commercial and then you construction side?
Sure. Uh, new construction is a small part of our business uh, less than 10% of hvp. Um, and we play mostly in the higher end uh, of the market and in the repair in our uh, remodel side. Uh, generally commercial continues to be soft compared to years past but uh, our business overall, if you look at it from pre-pandemic till now is of significantly.
On the residential side, uh, the high-end consumer continues to be active and our products continue to do well, where, you know, the lower end and the new construction side is somewhat weaker.
Thank you.
Next question, we have from Trade Grooms of Stevens Inc. Please go ahead.
Hey, good morning everyone. Thanks for taking the questions.
uh, so, um
Clearly. That's that's been extended for for everybody for understood reasons. But you know, and I know it's tough to have any kind of a, a crystal ball at this point. But how are you guys thinking about, you know, timing of maybe a potential rebound on the on the CPP side of the business from a just from a demand standpoint.
And the consumer will come back. Uh,
We I would say once tariffs settle into uh more known area which we're slowly getting more information but we don't have complete information yet. That's a consumer will start to feel more confident and uh
Come back to.
Spending uh again. Uh, but yeah to give you an exact time is is not realistic for me to do.
Yeah, good Trey. It's Ron. I'll just add to it that um, you know, we have the best Brands and we're committed to our Global sourcing asset light model which we think gives us flexibility. So we have a business that um, you know, particularly uh, the hunter side is um, you know, and at a low Point uh it will recover how long it'll take to recover. Uh, you know, your guess is as good as ours. Um but you know these are solid Brands and businesses. That over time we expect to generate significantly more revenue and profitability from
Yep. Fair enough, fair enough. And and on, uh, I guess on that point, um,
You know, could you give us an update kind of where we are on the global sourcing initiative? As far as timing you know is is that still on track with your expectations and you know CPP margins clearly showing some signs of improvement but any update on how you're thinking about the the longer term margin targets there and and maybe the timing as far as uh hitting those Targets on CPP. Yeah, we're committed to the, you know, the global sourcing all of the actions that are behind us. Uh, we have, you know, optionality on where we're going to be sourcing from and long-term our Target is 15% margins. In that business.
Operator.
question we have from of
Go ahead.
On HBP, if you call that, that material cost Tailwind in the in the parts, at least I believe. So can you just talk about what drove, that sort of how those costs are tracking to the fiscal fourth quarter? And maybe give a little bit of extra color on the impacts of Steel here and then with the updated guide, just how should we think about the long term EV down margin in the the HBP business?
Uh, sure, I'm from Material, uh, standpoint. Yeah, we did have a toe wins, uh, this quarter compared to last year's quarter.
Right now, uh, you know, steel We Believe from here forward will be roughly stable from a pricing standpoint. And if you look at steel over the last 3 years on average, in each year, though there's been ups and downs during that time. Uh, steel is actually been in a pretty tight band
Uh, as far as margins in the business. Uh, you know, we have a long-term Target of better than 30%. We don't see any change for that. Uh, in the shorter term for the remainder of this year, we see 31% or better.
Okay, I just imagine what the business will be like when the housing market gets good.
Exactly. Okay. Um, and then I guess pivoting to the CPP side, I mean, the demand obviously environments obviously weak, um, but I think it would be helpful just to understand like if margins can expand from the 9% levels you just reported and maybe the 8%, You're Expecting for the full year. If you don't see improvements in the demand backdrop, I guess, I'm just trying to get a sense of how much of the global supply chain, uh, initiatives that you've taken as already in margins versus, how much more is to come, just given sort of changes in inventory and and things like that.
yeah, there's still benefits to be had as we diversify the supply chain itself, uh, but it's
To get to our 15%, we're going to need the consumer to come back.
Thank you. The next question we have comes from Josh Wilson of Raymond James, please go ahead.
Morning, Josh.
Uh, just a couple housekeeping ones for me. Uh, and sorry if I missed these earlier but uh is your corporate guidance, still 55 million for the year in the ibida calculation. Yes, it is.
Okay. And then your inventory DayZ picked up, a fair amount year on year. How much of that was related to cost inflation versus build up from the order patterns being disrupted or other factors?
Yeah, inventory has is a little higher than we would really generally expect. Um,
As a consumer, has slowed down which of course in in turn has our customers ordering less.
Thank you. Next question we have comes from Julio Romero of Seín Company. Please go ahead.
Good morning. This is Alex on for Julio. Thanks for taking questions.
Alex.
Uh, first question was, you know, just given the revised Revenue guidance, could you talk about your confidence around the drivers of the uh the full year a bit Doug items?
Uh, well performance year to date is uh, gives us the confidence particularly in the Home, Building Product segment, which continues to perform well, our margin in that business is ahead of our original guide of 30% or better, we now see 31% or better for the year and that's a significant pickup.
Um, conversely on the CPP side, you know, the weak demand is affecting our uh, margin as well as our expected results.
Thank you and as a follow-up to that, you know, are there any new cost optimization or automation initiatives underway? You know that are are kind of at work behind the scenes to to protect margins.
Yeah, well, it's really an ongoing process. We are regularly. Uh,
Investing in Automation and efficiency projects. Uh, we do have an ongoing project in particular in the Home Building Product side. That's been going on for about 2 years now, which involves, uh,
Automation and new equipment, uh, preparing us for future demand.
And I'll just add that, you know, Clopay is, you know, the leader, uh, in the both residential and Commercial, um, you know, Door business it. It's got, uh, Innovation and technology in its Pipeline and its ability to continue to grow its products. It's um, uh, diversification, uh, and expansion of its Commercial Business is ongoing and the strength of our dealer network, uh, for positioning of the brand. Um, we're we're nowhere near, uh, full Peak earnings of that business.
Thank you. So
Ladies and gentlemen, we have reached the end of our question and answer session, and I would now like to turn the call back over to Ron Kramer for any closing remarks. Please go ahead.
Thank you. We look forward to working hard and continuing to deliver excellent results and we'll speak to you this fall.
Thank you. So ladies and gentlemen, that then concludes today's conference
Thank you for joining us. You may now disconnect your lines.