Earnings call transcript: Griffon Corporation Q2 2025 beats EPS forecasts

Griffon Corporation reported its financial results for the second quarter of 2025, surpassing EPS expectations but missing revenue forecasts. The company posted an actual EPS of $1.23 against a forecast of $1.11, marking a positive surprise. However, revenue came in at $612 million, falling short of the $620.4 million forecast. Following the report, Griffon’s stock increased by 0.35% in pre-market trading, reflecting investor optimism despite the revenue miss. InvestingPro data shows the company maintains a "GREAT" financial health score of 3.05, supported by strong profitability metrics and consistent dividend payments for 15 consecutive years.

Key Takeaways

• Griffon Corporation’s EPS exceeded expectations by 10.8%.
• Revenue fell short of forecasts, declining 9% year-over-year.
• The stock rose 0.35% in pre-market trading after the earnings announcement.
• The company maintained its full-year guidance despite revenue challenges.
• Griffon continues to innovate with new product launches and operational efficiencies.

Company Performance

Griffon Corporation experienced a mixed second quarter in 2025, with earnings per share outperforming expectations while revenue saw a year-over-year decline. The company is navigating a challenging market environment, marked by a shortfall in residential construction and high interest rates. Despite these hurdles, Griffon remains a leader in the garage door market and is actively pursuing supply chain diversification to mitigate tariff impacts.

Financial Highlights

• Revenue: $612 million, a 9% decrease year-over-year
• Earnings per share: $1.23, exceeding the forecast of $1.11
• Adjusted EBITDA: $133 million, an 11% decline year-over-year
• EBITDA margin: 21.8%, down by 40 basis points
• Net Income: $57 million or $1.21 per share

- Free Cash Flow: $3 million, compared to $21 million in the previous year

According to InvestingPro analysis, Griffon’s management has been actively buying back shares, demonstrating confidence in the company’s future. The platform reveals 8 additional key insights about GFF’s performance and prospects, available exclusively to subscribers. Discover comprehensive analysis and Fair Value estimates for over 1,400 US stocks with InvestingPro’s detailed research reports.

Earnings vs. Forecast

Griffon Corporation’s EPS of $1.23 beat the forecasted $1.11 by 10.8%, showcasing robust earnings performance. However, revenue fell short of the $620.4 million forecast, registering at $612 million. This revenue miss represents a 1.4% shortfall from expectations, highlighting the challenges Griffon faces in the current economic climate.

Market Reaction

Following the earnings release, Griffon Corporation’s stock price increased by 0.35% in pre-market trading. The company’s stock is currently trading at $67.9, within its 52-week range of $55.01 to $86.73. With a P/E ratio of 16.04 and strong return metrics, including a 10.11% return on assets, InvestingPro analysis suggests the stock is currently undervalued. The modest stock price increase suggests that investors are encouraged by the EPS beat but remain cautious due to the revenue miss.

Outlook & Guidance

Griffon Corporation is maintaining its full-year 2025 guidance, projecting revenue of $2.6 billion and segment adjusted EBITDA between $575 million and $600 million. The company’s strong financial position is evidenced by a healthy current ratio of 2.51 and an impressive Altman Z-Score of 4.89, indicating robust financial stability. Analysts maintain a bullish outlook, with price targets ranging from $88 to $115 per share. The company is optimistic about its ability to navigate supply chain challenges and diversify away from China, particularly for its Consumer and Professional Products segment.

Executive Commentary

CEO Ron Kramer emphasized the strength of Griffon’s Home and Building Products division, which maintained a greater than 30% EBITDA margin. He highlighted the company’s innovative product launches, such as the Clopay VertiStack Avanti garage door, and its strategic move towards an asset-light business model to reduce operating costs.

Risks and Challenges

• Supply chain disruptions and tariff impacts, particularly on products sourced from China.
• Continued high interest rates affecting the housing market.
• Revenue exposure to Chinese tariffs, with $325 million at risk.
• Seasonal declines in residential construction volume.
• Dependence on successful supply chain diversification.

Q&A

During the Q&A session, analysts focused on Griffon’s exposure to Chinese tariffs and its supply chain strategy. The company plans to establish alternative supply chains by the end of the calendar year, aiming to mitigate potential risks associated with its current reliance on China for its fans business.

Full transcript - Griffon Corp (GFF) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Griffin Corporation Fiscal Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note, this conference is being recorded.

I will now turn the conference over to your host, Brian Harris, CFO for Griffin Corporation. Thank you. You may begin. Thank you. Good morning, and welcome to Griffin Corporation’s second quarter fiscal twenty twenty five earnings call.

Joining me for this morning’s call is Ron Kramer, Griffin’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 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, 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’ll turn the call over to Rob. Thanks, Brian.

Good morning, everyone, and thanks for joining us. We’re at the halfway point of our fiscal year, and I am pleased to report that both of our segments have performed within our expectations. Our Home and Building Products segment, HPP, has maintained a better than 30% EBITDA margin through the first half, driven by steady residential performance and favorable mix. As we expected, we saw a year over year reduction in revenue in the quarter as our doors business returned to a seasonal cycle that is more aligned with historical pre pandemic norms. HBT continues to assert itself as the leading garage door provider with a differentiated set of innovative product offerings that separate us from the competition.

Clopay was recognized as the best of IBS across the entire building products industry at the February 2025 NAHB International Builders’ Show for its groundbreaking VertiStack Avanti garage door. The VertiStack door utilizes a unique patented design featuring glass panels that stack compactly above the door opening. This design eliminates the need for overhead tracks, creating a sleek aesthetic, which maximizes available space and light. We’ve received strong interest in VertiStack, and we expect this product will revolutionize how doors are incorporated into both commercial and residential projects. This is the first in what we believe is a long pipeline of future innovations that will continue to keep Clopay as the leader in both residential and commercial doors.

Let’s shift to the Consumer and Professional Products segment, CTP. It continued to improve its EBITDA performance on a year over year basis. This is driven in large part by the transition of our U. S. Operations to an asset light business model, which has increased our flexibility and reduced our operating costs through leveraging our global sourcing capabilities.

We also had solid performance in Australia, including from the contribution of the Pope acquisition, which has performed well as a part of our AIMS portfolio. I know that all of you on the call are focused on the potential effects of changes in The U. S. Trade policy, especially given the uncertain economic operating conditions and would like you to know how we see these factors affecting Griffin through the rest of the year. Given that our performance is on track, we’re maintaining our financial guidance for fiscal twenty twenty five.

It’s important to keep in mind that approximately 85% of Griffin’s total segment EBITDA is generated by our home and building products business, HPP manufactures its products domestically and sells over 95% of those products within The United States. Despite HPP’s U. S. Concentration in today’s world, no business is completely insulated from changes in trade policy. However, we’re confident that we are able to manage any increased costs through pricing actions and cost reduction efforts.

CPP currently represents approximately 15% of Griffin’s total segment EBITDA. It’s important to note that only a portion of CPP is impacted by the recent changes in U. S.-China related tariff policies. We have substantial operations outside of The United States in Australia, Canada and The United Kingdom. Even within The U.

S, not all of our products will be materially affected by tariffs because of where those products are sourced. We expect CTP to mitigate the inflationary effects of trade policy and other headwinds during the remainder of the fiscal year through supplier negotiations, cost management, leveraging existing inventory and when necessary taking price actions. Turning now to capital allocation. During the second quarter, we repurchased $31,000,000 of stock or 420,000 shares at an average of $72.64 per share. At March 31, dollars ’3 ’60 million remained under the repurchase authorization.

We continue to believe our stock is a compelling value. Since April 2023 and through March, we’ve repurchased $498,000,000 of stock or 9,900,000.0 shares at an average price of $50.9 These repurchases have reduced Griffin’s outstanding shares by 17.4% relative to the total shares outstanding at the end of the second quarter of fiscal twenty twenty three. Yesterday, the Griffin Board authorized a regular quarterly dividend of $0.18 per share payable on June 18 to shareholders of record on May 30, marking the fifty fifth consecutive quarterly dividend to shareholders. Our dividend has grown at an annualized compounded 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.

And I’ll turn it over to Brian to go through some of the financial details. Thank you, Ron. Second quarter revenue of $612,000,000 decreased 9% and adjusted EBITDA before unallocated amounts of $133,000,000 decreased 11%, both in comparison to the prior year quarter. EBITDA margin before unallocated amounts was 21.8%, a decrease of 40 basis points. Gross profit on a GAAP basis for the quarter was $252,000,000 compared to $271,000,000 in the prior year quarter.

Excluding items that affect comparability from the prior year period, gross profit was $252,000,000 in the current quarter compared to $272,000,000 in the prior year. Normalized gross profit increased year over year by 80 basis points to 41.2%. Second quarter GAAP selling, general and administrative expenses were $151,000,000 compared to $157,000,000 for the prior year. Excluding adjusting items from both periods, SG expenses were $150,000,000 or 24.5% of revenue compared to the prior year of $153,000,000 or 22.8% of revenue. Second quarter GAAP net income was $57,000,000 or $1.21 per share compared to $64,000,000 in the prior year quarter of 1.28 per share.

Excluding items that affect comparability from both periods, current quarter adjusted net income was $58,000,000 or $1.23 per share compared to the prior year of $68,000,000 or $1.35 per share. Corporate and unallocated expenses excluding depreciation in the quarter were approximately $15,000,000 consistent with the prior year. Free cash flow during the quarter was $3,000,000 compared to $21,000,000 in the prior year. During the quarter, net capital expenditures were 13,000,000 compared to $18,000,000 for the prior year. Regarding our segment performance, as we expected, revenue for homebuilding projects exhibited a seasonal decline in residential volume in the second quarter, similar to what we typically experienced during our second quarters prior to the pandemic.

Revenue in the quarter of March decreased from the prior year by 6%, driven by a decreased volume of 7%, which was partially offset by 1% improvement from mix. Recall that last year, HCP did not see the same seasonal behavior because of benefits from certain factors, including favorable weather, which resulted in unusually strong activity. Adjusted EBITDA for HCP of $109,000,000 decreased by 15% compared to the prior year quarter. The main drivers were decreased revenue and the related impact of that reduced revenue on overhead absorption. We also incurred increased labor and distribution costs, which were partially offset by reduced material costs.

Consumer professional products revenue decreased 13% from the prior year quarter to $243,000,000 due to decreased volume of 13% driven by reduced consumer demand in North America and United Kingdom, partially offset by increased organic volume in Australia. The Pope acquisition contributed 2% to volumes in Australia. Foreign currency exchange was unfavorable by 2% for the quarter. C2P adjusted EBITDA increased by 18% from the prior year quarter to $24,000,000 primarily due to the positive effects from our global sourcing expansion initiative and increased volume and improved margin in Australia. This was partially offset by the unfavorable impact of reduced North American and U.

K. Volume. Foreign currency and exchange had a 1% unfavorable impact. Regarding our balance sheet and liquidity, as of 03/31/2025, we had net debt of $1,400,000,000 and net debt to EBITDA leverage of 2.6 times as calculated based on our debt covenants compared to 2.8 times leverage at the end of last year’s second quarter. And net debt leverage are in line with our year end September 2024, even after returning $96,000,000 to shareholders through dividends and stock buybacks during the first half of the year.

As Ron mentioned during his comments, we are maintaining our fiscal twenty twenty five guidance of $2,600,000,000 of revenue and $575,000,000 to $600,000,000 of segment adjusted EBITDA, which excludes unallocated costs and certain other charges that affect comparability, Also, free cash flow is taking net income for the year. While the changes in U. S. Trade policy are clearly top of mind for most of us, we expect the impact of tariff increases on Griffin’s EBITDA for the year to be manageable given most of our EBITDA is generated at HBP, which manufactures and sells most of its products in The U. S.

For CPP, on an annualized basis, approximately $325,000,000 or about onethree of its revenue is currently affected by China based tariffs and comprised primarily of CPP fans and Long Guard products. For the remainder of the fiscal year, we expect CPP will be able to mitigate the impact of all tariffs through supplier negotiations, cost management, leveraging existing inventory and when necessary taking price action. Now I’ll turn the call back over to Ron. Thanks, Brian. Our fiscal twenty twenty five remains on track with continued solid operating performance at HPP and continued improved profitability at CPP.

As we stated before, most of our EBITDA and free cash flow is generated by Griffin businesses that are either unaffected or only modestly impacted by current tariff policy. For the balance of our business, we expect to be able to mitigate the impact of current tariff policy through supplier negotiations, cost management, leveraging existing inventory and when necessary taking price actions. 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. Finally, I’d like to express my appreciation to our Griffin team around the world, whose dedication and perseverance have driven our operational and financial success.

Their ability to remain focused on executing our strategy while competing in such a dynamic environment is unparalleled. I see opportunity in our future and I’m looking forward to working with our team to build on these accomplishments. Operator, we’re ready for any questions. Thank you. At this time, we will be conducting a question and answer session.

If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press star two. Our first question is from Trey Grooms with Stephens. So just want to make sure I heard the last comment correctly, Ron.

I’ve gotten down here that you mentioned $325,000,000 of CPP revenue is kind of exposed to China or Chinese tariffs. Did I get that number right? Yes. That is correct. Just so we’re clear, that’s an annualized 325,000,000.

Right. Right. Right. Okay. Good.

That’s just from from my lens, that’s a a much smaller number than than I would have expected. So I guess kind of looking and it’s encouraging to have you guys reiterate the guide for the full year clearly shows the confidence there. And despite kind of the challenging operating environment and the tariffs and such. But if we kind of look longer term with that backdrop of further tariff impacts kind of going forward and maybe more of an impact on an annual basis next year, is it still reasonable to think that the longer term kind of 15% adjusted EBITDA margin target is still on the table for CPP? Yes.

There’s no question that it’s on the table. The issue is going to be timing of what happens to The U. S. Economy in the future. But I think you have to separate out that there’s still a very strong U.

S. Economy that is going through a transition period as part of a purposeful negotiation to accomplish two things, increased prosperity and increased security. So let’s remember, we’ve built a business over a very long period of time. Our HBP business, and we really want to come back to this, 85% of our EBITDA comes from a business that’s largely unaffected by tariffs. The housing market in The United States still is many millions short in new construction and that will come in and if the goal of increased prosperity comes as a result of the economic policies that are currently under negotiation.

So our CPP segment, 1,000,000,000 of revenue, our target for that business is to get it to a 15% margin. We went to a global sourcing model. We continue to believe that the asset light business model for The U. S. Gives us flexibility to move manufacturing to wherever the best value proposition for price for our customers.

We have the leading brands. We have design and logistic capability. So yes, 15% for CPP. And we have a gem of a business in HPP that’s a 30% margin that is getting misvalued based on the combination with the consumer products business where people are doubtful of what the impact of tariffs is going to be and what the long term margins for this business is going to be. Our next question comes from Colin Byrne with Deutsche Bank.

I just wanted to dig a little bit more into the tariff impact. I understand you fully expect to mitigate the impact in fiscal year ’twenty five. I guess any help in quantifying what the current incremental tariff cost would look like mitigated just on an annual basis as we move beyond fiscal year ’twenty five? I guess I’m just trying to get a sense of like what this could look like and what kind of cost actions you need to take as we move past some of the inventory that you have prepared inventory you have on your balance sheet? I think it’s really premature to talk about ’26 when we’re still in the middle of ’25.

The bottom line to this is very clear that we’re not going to sit still as a result of tariffs and not mitigate whatever increase is going to happen in pricing. And we have multiple levers of management to be able to deal with whatever the impact of the final tariff policy turns out to be. So speculating about what 26% is going to look like is really not appropriate. Understood. And I guess just maybe digging into the strategy here and how it might differ between the fan business and maybe the long handled tool business, just given sort of the supply chain current supply chain.

Any color to just what the any differences in the strategy for mitigating tariffs would be? Sure. So we began our supply chain for The U. S. Expansion in this global supply chain approximately two years ago and completed at the end of last fiscal year.

That was mostly focused on the lawn and garden tool business. With that complete, we are now sort of in the second phase where we are now leveraging the full global supply chain where we originally went to the suppliers we already knew. We expect to have that mitigated by the end of the fiscal year. So as we enter next fiscal year, we will have a diversified supply chain away from China from a tariff standpoint, sorry, mitigate the tariff. On the fan business, we knew since we bought that business, we’ve always been looking for or considering alternatives to where we supply because the majority of that is supply from China.

And we expect to have alternate supply in place by the end of the calendar year, really accelerating plans as we began several years ago. Thank you for your question. Our next question comes from Bob Leithick with CJS Securities. Hey. It’s Lee Jagoda for Bob this morning.

Hi, Lee. Good morning. Good morning. So starting with the CPP business, Ron, can you just talk about your market position in your various product lines in that segment and your ability to use price as a lever? And then just as a follow-up, are there products in that portfolio that can benefit from price increases on a trade down?

Yes. So as far as price, we and our retail partners are sensitive to the impact of price on the consumer. We do play generally in the high end of tools, but still the consumers and professionals are sensitive. So we are working on plans to mitigate significant tariff related price increases by pivoting our supply chain away from China, as I mentioned, negotiating with our existing non China suppliers, other cost actions that will allow us to continue to provide our customers with high quality affordable branded products. With that in mind, the current environment actually presents an opportunity for us to work with our customers to help them transition through this uncertain tariff environment because of our ability to transition our supply chain to lower cost.

And then just on the fans business specifically, I know you’re saying you’re you plan to diversify some of that supply out of China. I To this point, I I I’m assuming most of the mass market fans are made in China and then shipped to The US. So are are you aware of if there’s any other competitors trying or looking to do the same thing that you are? Yeah. I’m not very directly aware, but I assume they are.

But to your point, it’s not just concentrated. From our understanding of this industry, all of the fans that are sold in The United States are being sourced out of the same area in China. And our diversification is with our existing supply partner who’s working to move factories outside for competitive and for cost reasons prior to tariffs. So our ability to navigate the global supply chain is part of the asset light model and it’s part of the underlying confidence in the long term 15% target for the business. We are already at or above that level in the fan business.

We have a very profitable business in Australia and Canada. The quarter of our historical margin problem was in The U. S, which is why we went to an asset light model years ago and when you’re starting to enjoy the benefit of it. We’ll navigate through this. And that’s just one more challenge in a business that we have been repositioning as we’ve now gone through financial crisis to pandemic to now tariff negotiation.

It’s just part of the course of running the company and positioning it for future growth. Our next question is from Tim Wojs with with Baird. Hey, guys. Good good morning. Thanks for all the details.

Good morning. May maybe just on on HPT. I think the business I I think I think Cloquet, maybe as well as the industry, had put through some price in in March and April. I think it was something like a mid single digit type of price increase. When you see those I think it’s and it’s also been kind of the first one we’ve seen in a couple of years.

When we think about that type of of price increase, what what would you guys normally see as, like, an effective realization within that business? Yeah. We generally see good realization on our price increases. You know, we have a position in the market where we provide not only products, but a complete package of service to our customers and generally realize good activity from the price increases. Okay.

And and did you see your competitors do do the same thing? Yes. We did. Okay. And then I I guess just secondly on HPT, you know, we we did see kind of that return to seasonality, you know, that you kind of, you know, spoke about in the fiscal second quarter.

Can you just remind us what the seasonality should now kind of look like in the back half of the year as we kind of think about revenue and EBITDA? Can we kind of get back to growth EBITDA margin expansion really in the back half in HVP? Sure. So in general, Q4 and Q1 are our strongest quarters on the residential side of the business. Q2 is generally the seasonal lowest quarter.

And from Q1 to Q2, you would see a 10% to 15% reduction in volume. And then Q3 starts to trend upward from Q2. So where we sit now, we’re expecting, even compared to our original guidance, better volume than we originally anticipated. And that likely will offset what could be some pressure from the continued slow U. S.

Consumer from the CPP side of the business. Thank you. Our next question is from Julio Romero with Sidoti and Company. Julio? Good morning.

This is Justin on for Julio. Oh, good morning. Maybe starting on free maybe starting on free cash flow, how do you expect the cadence of free cash flow to progress over the remaining quarters of the year? And secondly, is the full year free cash flow outlook primarily a function of net income growth? Yes.

We do generally expect free cash flow to be greater than net income. We’ve had a good start to the year on free cash flow, and we expect the second half as usual to be good free cash flow generating period. Great. Thanks. And then can you provide more detail on CPP demand trend by geography, specifically what you’re seeing in North America, The UK and Australia?

Sure. North America, we’re seeing continued weakness from the consumer and in demand for our CPP products generally. UK is similar, continued weak demand. And in Australia, demand has been good, both on an organic basis, and we’re seeing good take on the Pope acquisition product. Our next question is from Jeff Stevenson with Loop Capital Markets.

Were you able to build inventories ahead of deliberation day for products such as fans, wheelbarrows and shovels produced in China? And then correct me if I’m wrong, but last time we had Chinese tariffs, residential fans were exempted. Has there been any movement on potential exemptions from the administration in areas such as fans that are predominantly manufactured in China? Sure. Yes.

So we will be leveraging inventory to help us manage through tariffs through the balance of this year. And as we mentioned, we expect to have the lawn and garden supply chain substantially diversified as we enter fiscal ’twenty six and stands as by the end of the calendar year. From an exemption standpoint, we certainly will make our case, but we have not heard any exemption details to date. Great. And then on residential garage stores, obviously, you guys focus primarily on the mid and higher end market, which has remained strong.

That said, is there any concern that appears resolved in softening consumer sentiment? There could be some deceleration in the higher end market. Or do you believe that market is going to remain resilient throughout this period of uncertainty? Yes. So from what we see through March and really through April, demand has remained healthy, and we expect it to be ahead of last year’s second half.

The high end consumers remain resilient, and we have continued to bring products to the marketplace that consumers have wanted. And from a you know, people are staying in their homes, and they’re doing projects in their homes. And from a renovation standpoint, a garage door is relatively inexpensive and has a great ROI, give or take, 200% return. Every dollar in you get $2 out from value of your home. And that volume we expect to see that volume continue.

And I’ll just add that we continue to believe that Clopay is the market leader that we’re gaining market share and that’s a result of both the strength of our product offering, their ability to deliver on a timely basis, the quality of the product that we manufacture and the service that we are able to provide. And the housing markets in The United States are still waiting for lower interest rates to increase volume and volume of transactions will create incremental activity for repair and remodel. And the new home construction that will happen at some point in this next cycle is going to benefit us. And we’re positioned to continue to innovate and bring new products and to go and to compete for business. And Clopay has been an extraordinary success story over a long period of time, and we think it’s positioned for even further growth in the future.

Ladies and gentlemen, we have reached the end of the question and answer session. And I would like to turn the call back to Ron Kramer for closing remarks. We’re working hard to deliver continued results, and see you in August. Bye bye. Thank you.

This concludes today’s conference. You may now disconnect your lines.

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