Earnings call transcript: Griffon Q3 2025 sees revenue miss and stock drop

Griffon Corporation reported its third-quarter 2025 financial results, revealing a slight miss on revenue expectations, which led to a significant decline in its stock price. The company posted earnings per share (EPS) of $1.50, meeting analyst forecasts, but reported revenue of $614 million, falling short of the anticipated $651.91 million. This revenue miss, coupled with broader market challenges, contributed to an 11.09% drop in Griffon’s stock, closing at $82.34. According to InvestingPro data, the stock’s technical indicators suggest it’s in overbought territory, though analyst price targets range from $90 to $115, indicating potential upside.

Key Takeaways

• Griffon’s Q3 revenue fell 5% year-over-year, missing forecasts by 5.87%.
• EPS matched expectations at $1.50.
• Stock price dropped by 11.09% following the earnings release.
• The company recorded a $244 million pretax charge for goodwill impairment.
• Griffon reaffirmed its EBITDA guidance but lowered full-year revenue expectations.

Company Performance

Griffon Corporation’s third-quarter performance highlighted a challenging market environment, with revenue declining 5% compared to the same period last year. Despite this, the company managed to increase its adjusted EBITDA by 5%, demonstrating operational efficiencies. The Home and Building Products segment showed resilience with a 2% revenue increase, while the Consumer and Professional Products segment faced headwinds due to tariffs and weak consumer demand. InvestingPro analysis shows the company maintains strong financial health with a "GREAT" overall score of 3.08, supported by liquid assets exceeding short-term obligations and 15 consecutive years of dividend payments.

Financial Highlights

• Revenue: $614 million, a 5% decrease year-over-year.
• Earnings per share: $1.50, consistent with analyst forecasts.
• Adjusted EBITDA: $148 million, a 5% increase.
• EBITDA Margin: 24.1%, up 240 basis points.
• Gross Profit: $265 million, stable compared to the prior year.

Earnings vs. Forecast

Griffon’s EPS of $1.50 met the forecast, but the revenue of $614 million missed expectations by $37.28 million, or 5.87%. This revenue shortfall marks a deviation from Griffon’s historical trend of meeting or exceeding revenue targets, highlighting the impact of external market pressures.

Market Reaction

Following the earnings announcement, Griffon’s stock dropped by 11.09%, closing at $82.34. This decline positions the stock closer to its 52-week low of $55.01, reflecting investor concerns over the company’s revenue miss and broader market challenges. The stock’s movement contrasts with broader market trends, where similar companies have shown more resilience.

Outlook & Guidance

Griffon revised its full-year revenue expectation to $2.5 billion, down from $2.6 billion, while reaffirming its EBITDA guidance of $575-600 million. The company anticipates generating over $1 billion in free cash flow over the next two fiscal years, underscoring its focus on operational efficiency. Trading at a P/E ratio of 16.25 and showing strong YTD returns of 16.13%, the company presents an interesting value proposition. For deeper insights into Griffon’s valuation and growth potential, check out the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.

Executive Commentary

CEO Ron Kramer emphasized Griffon’s commitment to its global sourcing model and long-term margin targets, stating, "We have the best brands, and we’re committed to our global sourcing asset-light model." He also highlighted the company’s expectation of generating significant free cash flow, reinforcing confidence in Griffon’s strategic approach.

Risks and Challenges

• Tariffs and geopolitical tensions affecting supply chains.
• Weak consumer demand impacting sales in key segments.
• Potential market saturation in the home and building products sector.
• Macroeconomic pressures, including inflation and interest rate fluctuations.
• Challenges in maintaining competitive pricing amid rising costs.

Q&A

During the earnings call, analysts questioned Griffon’s strategy in the Consumer and Professional Products segment, given the ongoing tariff challenges and consumer weakness. Executives reaffirmed their commitment to the global sourcing initiative and expressed confidence in the long-term potential of their brands, despite current market headwinds.

Full transcript - Griffon Corp (GFF) Q3 2025:

Conference Operator: Greetings, and welcome to Griffin Corporation’s Fiscal Third Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. The question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Griffin Corporation’s CFO, Brian Harris.

Please go ahead, sir.

Brian Harris, CFO, Griffin Corporation: Thank you. Good morning, and welcome to Griffin Corporation’s third quarter fiscal twenty twenty five 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 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 turn the 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 nine months, HBP profitability has exceeded our expectations with an EBITDA margin of 31.4, driven by favorable price and mix.

In the third quarter, our Consumer and Professional Products segment was significantly impacted by weak demand coupled with increased tariffs, disrupting historical customer ordering patterns, particularly at Hunter fans. Notwithstanding the decrease in sales volume, for the first nine months, CPP EBITDA margin has improved two seventy basis points year over year. This profitability improvement reflects the hard work of our Ames U. S. 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 2024. Given our overall year to date performance, we are reaffirming full year EBITDA guidance of $575,000,000 to $600,000,000 while reducing our revenue expectations by $100,000,000 to $2,500,000,000 as a result of the ongoing consumer weakness at CPP. Turning now to capital allocation. During the third quarter, we repurchased $40,000,000 of our stock or 581,000 shares at an average price of $69.28 per share. At June 30, dollars $320,000,000 remained outstanding under the repurchase authorization.

Since April 2023 and through June, we’ve repurchased $538,000,000 of stock or 10,500,000.0 shares at an average price of $51.15 These repurchases have reduced Griffin’s outstanding shares by 18.4% relative to the total shares outstanding at the end of the 2023. Also yesterday, the Griffin Board authorized a regular quarterly dividend of $0.18 per share payable on September 16 to shareholders of record on August 29. This is our fifty sixth consecutive quarterly dividend to shareholders. Our dividend has grown at an annualized 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 $614,000,000 decreased 5% and adjusted EBITDA before unallocated amounts of $148,000,000 increased 5%, both in comparison to the prior year quarter. EBITDA margin before unallocated amounts was 24.1%, an increase of two forty basis points. Gross profit on a GAAP basis for the quarter was $265,000,000 compared to $249,000,000 in the prior year quarter.

Excluding items that affect comparability from prior year period, gross profit of $265,000,000 was consistent with the prior year. Normalized gross margin increased year over year by two thirty basis points to 43.2%. During the third quarter, we recorded a pretax charge of $244,000,000 for impairment on goodwill and investment lives and tangible assets related to the acquisition of Hunter Fan. This charge was caused by ongoing weak consumer demand coupled with the impact of increased tariffs disrupting historical customer ordering pattern. Third quarter GAAP selling, general and administrative expenses were $391,000,000 excluding items that affect comparability from the current and prior year quarters.

SG and A expenses were $147,000,000 or 23.9% of revenue compared to the prior year of $155,000,000 which also reflected 29.9% of revenue. Third quarter GAAP net loss was $120,000,000 or $2.65 per share compared to net income of $41,000,000 in the prior year quarter or $0.84 per share. Excluding items that affect comparability from both periods, current quarter adjusted net income was $69,000,000 or $1.5 per share compared to the prior year of 61,000,000 or $1.24 per share. Corporate and unallocated expenses, excluding depreciation in the quarter, were $13,000,000 compared to $15,000,000 in the prior year quarter. Free cash flow during the quarter was $115,000,000 compared to $120,000,000 in the prior year quarter.

During the quarter, capital expenditures were $9,000,000 compared with $15,000,000 in the prior year quarter. Regarding our segment performance, revenue for homebuilding products of $400,000,000 increased two percent from the prior year, driven by favorable price and mix of 3%, partially offset by decreased volume of 1%. Adjusted EBITDA for HBP of $129,000,000 increased by 9% compared to prior year quarter, driven by increased revenue and reduced material costs, partially offset by increased labor costs. Material and Professional Products revenue of $213,000,000 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 U. S.

Due to increased tariff. CPP benefited from price and mix of 2% and incremental revenue from the Pope acquisition contributed 1%. CPP adjusted EBITDA decreased by 14% from the prior year quarter to $19,000,000 primarily due to the revenue decrease noted above, partially offset by the benefits from The U. S. 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 liquidity, as of 06/30/2025, we had net debt of $1,300,000,000 and net debt to EBITDA leverage of 2.5x as calculated based on our debt covenants compared to 2.7x 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 $145,000,000 to shareholders through dividends and stock buybacks during the first three quarters of the year. Regarding our outlook, we now expect revenue to be $2,500,000,000 versus the prior expectation of $2,600,000,000 The $100,000,000 reduction is attributable 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 EBITDA guidance of $575,000,000 to 600,000,000 with the upper end of the range reflecting potential incremental volume.

We now expect HCP segment margin in excess of 31% versus prior guidance of in excess of 30%. For CPP, we now expect margin of approximately 8% versus our prior guidance of an excess of 9% due to the reduction in volume impacting revenue and the related effects on overhead absorption. Regarding the remaining elements of our 2025 guidance, we now expect net interest expense to be $95,000,000 versus our prior guidance of $102,000,000 capital expenditures of $60,000,000 versus our prior guidance of $65,000,000 We continue to expect free cash flow to exceed net income, depreciation of $42,000,000 amortization of $22,000,000 and a normalized tax rate of approximately 28%. Now I’ll turn the call back over to Ron. Thanks, Brian.

We’ve continued to generate solid profitability and free cash flow through three quarters despite CPP seeing weak consumer demand and tariff related 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 $145,000,000 to shareholders in the form of dividends and share repurchases while simultaneously reducing debt by $76,000,000 and reducing our overall leverage to 2.5x. As I reiterate that we continue to expect to generate a total of over $1,000,000,000 of free cash flow during this fiscal year and the next two.

We’re encouraged by the strong momentum in 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.

Conference Operator: Thank you, sir. Ladies and gentlemen, at this time, we will be conducting a question and answer session. Please note, participants are asked to limit their questions to one question and one follow-up. The first question we have comes from Bob Labick of CJS Securities. Please go ahead.

Brian Harris, CFO, Griffin Corporation: Hi. It’s actually Lee Jagoda for Bob this morning. Good morning. Good morning. Ron, can you start just on PPP and maybe talk to your pricing strategy there and whether price has gone in for tariffs and how the retailers have reacted?

Yes. I’ll take it. Yes. We have, in certain instances, put through price. However, given the sensitive nature of ongoing customer discussions and our mitigation actions, we’re not in a position to really give much more detail.

Okay. And then obviously, given the guidance, it’s impacting the sell in. Can you talk to the sell through trends that you’re seeing at retail? Yes. Retail continues to see reduced POS.

You know, during this past quarter, certainly in the Northeast, weather was a bit of a factor, the ongoing weak consumer and also people pulling back further from the concerns about tariffs and inflation.

Conference Operator: Thank you, sir. The next question we have comes from Robert Schultz of Baird. Please go ahead.

Brian Harris, CFO, Griffin Corporation: Hey, guys. Thanks for taking the question. Good morning. Just wanted to first ask on HBT. I saw that you called out price mix was positive, and I think you guys have put some price increases there.

But just curious how price realization is tracking relative to your initial expectation. Generally, it’s tracking in line. In that business, when we put price increases through, they are generally taken by the market. Got it. And then on HPC demand, what are you seeing between the different end markets there, just on the residential, commercial and then new construction side?

Sure. New construction is a small part of our business, less than 10% of HBP. And we play mostly in the higher end of the market and in the repair and remodel side. Generally, commercial continues to be soft compared to years past, but our business overall, if you look at it from pre pandemic till now, is up significantly. On the residential side, the high end consumer continues to be active, and our products continue to do well, where the lower end of the new construction side is somewhat weaker.

Conference Operator: Thank you. Next question we have comes from Trey Grooms of Stephens Inc. Please go ahead.

Brian Harris, CFO, Griffin Corporation: Hey. Good morning, everyone. Thanks for taking the So, you know, the CPP business, we were kinda thinking, I guess, as we entered this year anyway, that that maybe we could start to see some pickup at least in consumer and the consumer weakness maybe shifting a little bit towards the back half of this year. Clearly, that’s been extended for everybody for understood reasons. But and I know it’s tough to have any kind of a crystal ball at this point.

But how are you guys thinking about timing of maybe a potential rebound on the CPP side of the business from a just from a demand standpoint? It’s hard to really project when the consumables come back. I would say once tariffs settle into a more known area, which we’re slowly getting more information, but we don’t have complete information yet that the consumer will start to feel more confident and come back to spending again. But to give you an exact time, it’s not realistic for me to do. Yes.

Trey, it’s Ron. I’ll just add to it that 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 particularly the Hunter side is at a low point, it will recover. How long it will take to recover, your guess is as good as ours. But these are solid brands and businesses that over time, we expect to generate significantly more revenue and profitability from.

Yes. Fair enough. Fair enough. And on I guess, that point, could you give us an update kind of where we are on the global sourcing initiative as far as timing? Is that still on track with your expectations?

And CPP margin is clearly showing some signs of improvement. But any update on how you’re thinking about the longer term margin targets there and maybe the timing as far as hitting those targets on CPP? Yes. We’re committed to the global sourcing. All of the actions are behind us.

We have optionality on where we’re going to be sourcing from. And long term, our target is 15% margins in that business. Operator?

Conference Operator: Apologize we have from go ahead.

Brian Harris, CFO, Griffin Corporation: On HPP. We just called out the material cost tailwind in the in the press release, I believe. 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 impact of steel here? And then with the updated guide, just how should we think about the long term EBITDA margin in the HBT business? Sure.

From a material standpoint, yeah, we did have a tailwind this quarter compared to last year’s quarter. Right now, 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 three years on average, in each year, though there’s been ups and downs during that time, steel has actually been in a pretty tight band. As far as margins in the business, we have a long term target of better than 30%. We don’t see any change for that in the shorter term.

For the remainder of this year, we see 31% or better. Okay. Understood.

Conference Operator: And I’m

Brian Harris, CFO, Griffin Corporation: just going Imagine what the business would be like when the housing market gets good. Exactly. Okay. And then I guess pivoting to the CPP side. I mean, the demand is obviously environment is obviously weak.

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 initiatives that you’ve taken is 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. But to get to our 15%, we’re gonna need the consumer to come back.

Conference Operator: Thank you. The next question we have comes from Josh Wilson of Raymond James. Please go ahead.

Josh Wilson, Analyst, Raymond James: Good morning. Thanks for taking my questions.

Brian Harris, CFO, Griffin Corporation: Good morning, Josh.

Josh Wilson, Analyst, Raymond James: Just a couple of housekeeping ones for me. And sorry if I missed these earlier, but is your corporate guidance still $55,000,000 for the year in the EBITDA calculation?

Brian Harris, CFO, Griffin Corporation: Yes, it is.

Josh Wilson, Analyst, Raymond James: Okay. And then your inventory days picked up a fair amount year on year. How much of that was related to cost inflation versus buildup from the order patterns being disrupted or other factors?

Brian Harris, CFO, Griffin Corporation: Yeah. Inventory has is a little higher than we would really generally expect as the consumer has slowed down, which, of course, in turn, have our customers ordering less.

Conference Operator: Thank you. Next question we have comes from Julio Romero of Sidoti and Company. Please go ahead.

Brian Harris, CFO, Griffin Corporation: Good morning. This is Alex on for Julio. Thanks for taking questions. Good morning, Alex. First question was, you know, just given the revised revenue guidance, could you talk about your confidence around the drivers of the the full year EBITDA guidance?

Well, performance year to date is gives us the confidence, particularly in the homebuilding 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. Conversely, on the CPP side, the weak demand is affecting our 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 that are kind of at work behind the scenes to to protect margins? Yeah. Well, it’s really an ongoing process. We are regularly investing in automation and efficiency projects. We do have an ongoing project, in particular, on the home building product side that’s going on for about two years now, which involves automation and new equipment preparing us for future demand.

And I’ll just add that Clopay is the leader in the both residential and commercial door business. It’s got innovation and technology in its pipeline and its ability to continue to grow its products, its diversification and expansion of its commercial business is ongoing. And the strength of our dealer network positioning of the brand, we’re nowhere near full peak earnings of that business.

Conference Operator: 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.

Brian Harris, CFO, Griffin Corporation: Thank you. We look forward to working hard and continuing to deliver excellent results, and we’ll speak to you this fall.

Conference Operator: Thank you, sir. Ladies and gentlemen, that then concludes today’s conference. Thank you for joining us. You may now disconnect your lines.

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