Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Griffon Corp (NYSE:GFF) delivered robust free cash flow of $143 million in Q1 2025.
• The company maintained solid operating performance in its Home and Building Products (HBP) segment, with EBITDA increasing by 2%.
• Griffon Corp (NYSE:GFF) repurchased $42 million of its stock, reducing outstanding shares by 16.7% since April 2023.
• The company declared a regular quarterly dividend of $0.18 per share, marking the 54th consecutive quarterly dividend.
• Griffon Corp (NYSE:GFF) achieved a normalized gross margin increase of 220 basis points year over year to 41.8%.

Negative Points

• First quarter revenue decreased by 2% compared to the prior year.
• Consumer and Professional Products (CPP) segment revenue decreased by 4% due to reduced consumer demand in North America and the UK.
• Increased labor and distribution costs partially offset the benefits of reduced material costs in the HBP segment.
• The company faces potential challenges from tariffs on imports from China, Mexico, and Canada.
• Griffon Corp (NYSE:GFF) anticipates continued weakness in North American demand for CPP through the first half of 2025.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Sign with BSBR.

Q: Can you provide insights into the geographical mix of imported products for CPP, especially concerning tariffs? A: (CFO) The tariff situation is fluid, but we are comfortable maintaining our 2025 financial guidance. We expect to mitigate tariff effects through pricing, supplier negotiations, and diversifying our supply chain. Significant imports from China relate to our lawn and garden and Hunter Fan businesses.

Q: How are you approaching capital allocation between debt paydown and stock buybacks? A: (CEO) We find our stock opportunistically attractive at current levels and prefer buying stock over paying down debt, although we can manage both.

Q: What are the next steps for CPP margin expansion, and how do you plan to achieve them? A: (CFO) We are transitioning from manufactured to sourced inventory, leveraging our global supply chain. We aim to design and introduce new products, expecting consumer demand to recover, which will aid margin expansion.

Q: Can you discuss the headwinds and tailwinds in the residential and commercial door markets? A: (CFO) We are outperforming the market in residential doors, gaining market share, especially in high-end products. The commercial market has been soft but seems to be bottoming. We expect pent-up housing demand to benefit us as interest rates decrease.

Q: Are tariffs expected to impact CPP, and how are you addressing this in your guidance? A: (CFO) Yes, tariffs are considered in our guidance. We believe our mitigation strategies will keep us within our financial targets for the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.