Griffon Corporation (GFF) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed financial performance with significant net loss and weak CPP results, partially offset by strong HBP margins. The Q&A highlights uncertainties in CPP demand recovery and vague management responses. Despite a strong HBP performance, the negative sentiment is driven by weak consumer demand, increased tariffs, and uncertain CPP outlook, leading to a likely negative stock price movement.
Key Financial Performance
Home & Building Products (HBP) EBITDA Margin 31.4%, driven by favorable price and mix.
Consumer and Professional Products (CPP) EBITDA Margin Improved by 270 basis points year-over-year due to the transition to an asset-light business model, increasing flexibility and reducing operating costs.
Third Quarter Revenue $614 million, decreased 5% year-over-year due to weak demand and increased tariffs.
Adjusted EBITDA $148 million, increased 5% year-over-year, with an EBITDA margin of 24.1%, an increase of 240 basis points.
Gross Profit $265 million, consistent with the prior year, with a normalized gross margin increase of 230 basis points to 43.2%.
Net Loss $120 million or $2.65 per share, compared to net income of $41 million or $0.84 per share in the prior year, due to a $244 million pretax charge for impairment on goodwill and intangible assets.
Free Cash Flow $115 million, compared to $120 million in the prior year quarter.
Capital Expenditures $9 million, compared to $15 million in the prior year quarter.
Home and Building Products (HBP) Revenue $400 million, increased 2% year-over-year, driven by favorable price and mix of 3%, partially offset by decreased volume of 1%.
Home and Building Products (HBP) Adjusted EBITDA $129 million, increased 9% year-over-year, driven by increased revenue and reduced material costs, partially offset by increased labor costs.
Consumer Professional Products (CPP) Revenue $213 million, decreased 16% year-over-year, primarily due to decreased volume of 19% from reduced consumer demand and increased tariffs.
Consumer Professional Products (CPP) Adjusted EBITDA $19 million, decreased 14% year-over-year, primarily due to revenue decrease, partially offset by benefits from global sourcing expansion and reduced administrative expenses.
Net Debt $1.3 billion, with a net debt-to-EBITDA leverage of 2.5x, reduced from 2.7x in the prior year.
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Operating Highlights
Home & Building Products (HBP) Segment: Continued strong performance with an EBITDA margin of 31.4% for the first 9 months, driven by favorable price and mix.
Consumer and Professional Products (CPP) Segment: Weak demand and increased tariffs disrupted customer ordering patterns, particularly at Hunter Fan. Despite decreased sales volume, CPP EBITDA margin improved by 270 basis points year-over-year due to operational changes like transitioning to an asset-light business model and leveraging global sourcing capabilities.
Australia Market: Solid performance, supported by the acquisition of Pope in July 2024, contributing to growth in the region.
Manufacturing Operations Transition: Transitioned to an asset-light business model in the AMES U.S. team, increasing flexibility and reducing operating costs.
Global Sourcing Expansion: Leveraged global sourcing capabilities to improve operational efficiencies and margins.
Capital Allocation Strategy: Repurchased $40 million of stock in Q3, reducing outstanding shares by 18.4% since April 2023. Declared a quarterly dividend of $0.18 per share, marking the 56th consecutive quarterly dividend.
Revenue and EBITDA Guidance: Revised revenue expectations to $2.5 billion (down $100 million) due to weak CPP demand but reaffirmed EBITDA guidance of $575 million to $600 million.
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Risk or Challenges
Consumer and Professional Products (CPP) Segment: Weak consumer demand and increased tariffs have disrupted historical customer ordering patterns, particularly affecting Hunter Fan. This has led to a significant revenue decrease and reduced margins in the CPP segment.
Revenue Guidance Reduction: The company reduced its revenue expectations by $100 million to $2.5 billion due to ongoing consumer weakness in the CPP segment.
Goodwill and Intangible Asset Impairment: A pretax charge of $244 million was recorded for impairment on goodwill and indefinite-lived intangible assets related to the acquisition of Hunter Fan, driven by weak consumer demand and tariff impacts.
Increased Labor Costs: The Home and Building Products (HBP) segment faced increased labor costs, which partially offset the benefits of reduced material costs and increased revenue.
Foreign Currency Impact: The CPP segment experienced a 1% unfavorable impact due to foreign currency fluctuations.
Debt Levels: The company has a net debt of $1.3 billion, with a net debt-to-EBITDA leverage of 2.5x, which could pose financial risks if market conditions worsen.
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Guidance & Outlook
Revenue Expectations: The company has reduced its revenue expectations for fiscal 2025 to $2.5 billion, down from the prior expectation of $2.6 billion, due to ongoing weak consumer demand and increased tariffs disrupting customer ordering patterns, particularly in the Consumer and Professional Products (CPP) segment.
EBITDA Guidance: Griffon reaffirms its full-year adjusted EBITDA guidance of $575 million to $600 million, with the upper end of the range reflecting potential incremental volume.
Segment Margins: The Home & Building Products (HBP) segment margin is now expected to exceed 31%, up from prior guidance of exceeding 30%. The CPP segment margin is now expected to be approximately 8%, down from prior guidance of exceeding 9%, due to reduced volume and its impact on overhead absorption.
Capital Expenditures: Capital expenditures for fiscal 2025 are now expected to be $60 million, reduced from the prior guidance of $65 million.
Net Interest Expense: Net interest expense is now expected to be $95 million, reduced from the prior guidance of $102 million.
Free Cash Flow: The company continues to expect free cash flow to exceed net income for fiscal 2025.
Tax Rate: A normalized tax rate of approximately 28% is expected for fiscal 2025.
Long-Term Free Cash Flow: Griffon expects to generate over $1 billion of free cash flow during fiscal 2025 and the next two fiscal years.
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Shareholder Return Plan
Quarterly Dividend: The Griffon Board authorized a regular quarterly dividend of $0.18 per share payable on September 16 to shareholders of record on August 29.
Dividend Growth: The dividend has grown at an annualized compound rate of more than 18% since its initiation in 2012.
Dividend History: This marks the 56th consecutive quarterly dividend to shareholders.
Share Repurchase in Q3 2025: Repurchased $40 million of stock or 581,000 shares at an average price of $69.28 per share.
Total Share Repurchase Since April 2023: Repurchased $538 million of stock or 10.5 million shares at an average price of $51.15 per share.
Impact of Share Repurchase: Reduced Griffon's outstanding shares by 18.4% relative to the total shares outstanding at the end of the second quarter of fiscal 2023.
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Key Q&A
Q:Can you talk about your pricing strategy for CPP and how retailers have reacted?
A:Yes, we have put through price increases in certain instances. However, due to the sensitive nature of ongoing customer discussions and mitigation actions, we cannot provide more details.
Q:Can you discuss sell-through trends at retail given the guidance?
A:Retail continues to see reduced POS, particularly in the Northeast, due to weather, weak consumer sentiment, and concerns about tariffs and inflation.
Q:How is price realization for HBP tracking relative to initial expectations?
A:Price realization is generally tracking in line, and price increases in this business are generally accepted by the market.
Q:What are you seeing in HBP demand across residential, commercial, and new construction markets?
A:New construction is less than 10% of HBP and is weaker. Commercial demand is soft compared to past years, but overall business is significantly up compared to pre-pandemic levels. High-end residential consumers remain active, while lower-end and new construction are weaker.
Q:What is your outlook on the timing of a potential rebound in CPP demand?
A:It is difficult to project when the consumer will return. Once tariffs stabilize and consumers feel more confident, demand may recover. However, no exact timeline can be provided.
Q:Can you provide an update on the global sourcing initiative and CPP margin targets?
A:The global sourcing initiative is on track, and the company is committed to it. Long-term CPP margin target is 15%, but achieving this requires consumer demand to return.
Q:What drove the material cost tailwind in HBP, and how are steel costs tracking?
A:The material cost tailwind was driven by stable steel pricing. Over the last three years, steel prices have been in a tight band. Long-term EBITDA margin target for HBP is over 30%, with 31% or better expected for the remainder of the year.
Q:Can CPP margins expand from current levels without demand improvement?
A:There are still benefits to be gained from diversifying the supply chain, but achieving the 15% margin target requires consumer demand to return.
Q:Is corporate guidance still $55 million for the year in the EBITDA calculation?
A:Yes, corporate guidance remains $55 million for the year.
Q:Why have inventory days increased year-on-year?
A:Inventory days have increased due to cost inflation and slower consumer demand, which has led to reduced customer orders.
Q:What gives you confidence in achieving full-year EBITDA guidance despite revised revenue guidance?
A:Confidence comes from strong performance in the Home Building Products segment, which is exceeding margin expectations. However, weak demand in CPP is affecting margins and results.
Q:Are there any new cost optimization or automation initiatives underway to protect margins?
A:Yes, there are ongoing automation and efficiency projects, particularly in the Home Building Products segment, which have been in progress for about two years.
Q:Review of Unclear Management Responses
A:Management avoided giving direct answers or lacked clarity on the following questions: 1. Pricing strategy for CPP and retailer reactions: The response was vague due to the sensitive nature of discussions. 2. Timing of CPP demand rebound: No specific timeline was provided, and the response was speculative. 3. CPP margin expansion without demand improvement: The response indicated dependency on consumer demand without providing concrete details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AMES asset
Alex Hantman
Associates Inc
Australia customer
Baird Co
Building Products
CEO Alex
CFO Ronald
CFO sir
CPP decrease
CPP price
Consumer Professional
Fan
Griffon
Home Building
Inc Research
Pope
Products segment
Professional Products
Research Division
acquisition
customer pattern
demand tariff
expectation
leverage end
margin excess
month
price mix
profitability
quarter
reduction
region
stock share
tariff customer
volume HBP
GFF Transcript
Griffon Corporation (GFF) Q4 2025 Earnings Call Transcript
Unknown11-19
The earnings call presents mixed signals: reduced revenue expectations and lower CPP margins are negative, but reaffirmed EBITDA guidance and strategic cost management are positives. The Q&A section highlights weak demand and inventory challenges, partially offset by pricing strategies and global supply chain adjustments. The company's dividend increase and deleveraging strategy are positive, but the impact of tariffs and weak consumer demand remain concerns. Overall, the market reaction is likely to be neutral, with no significant catalysts for strong movement.
Griffon Corporation (GFF) Q3 2025 Earnings Call Transcript
Unknown8-6
The earnings call reveals mixed financial performance with significant net loss and weak CPP results, partially offset by strong HBP margins. The Q&A highlights uncertainties in CPP demand recovery and vague management responses. Despite a strong HBP performance, the negative sentiment is driven by weak consumer demand, increased tariffs, and uncertain CPP outlook, leading to a likely negative stock price movement.
Earnings call transcript: Griffon Q1 2025 beats EPS estimates, stock rises
Unknown2-5
The earnings call reflects a mixed sentiment with positive aspects like increased EBITDA, strong share repurchase activity, and consistent dividends. However, there are concerns over declining revenues in key segments, vague responses in the Q&A, and a neutral revenue guidance for 2025. The market cap suggests moderate stock reaction, and the sentiment is balanced by the strategic initiatives and financial health, resulting in a neutral stock price prediction.
Griffon Corporation (GFF) Q4 2024 Earnings Call Transcript
Positive11-13
The earnings call summary shows a solid financial performance with a significant increase in EBITDA and net income, a strong shareholder return plan with increased dividends and share repurchases, and optimistic guidance for free cash flow. Although there are concerns about commercial demand and potential tariffs, the company's ability to manage costs and focus on organic growth is reassuring. The market cap suggests moderate sensitivity, leading to a positive prediction of 2% to 8% stock price increase over the next two weeks.
GFF Slides
GFF Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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