• Net Sales (Q4 2024): $1.1 billion, a 5% decrease versus Q4 2023.
• Organic Sales (Q4 2024): Down 1% when adjusted for impacts from China and one-time disruptions.
• EPS (Q4 2024): $0.98, up 3% versus Q4 2023.
• Operating Margin (Q4 2024): 16.4%, a 60-basis-point improvement over Q4 2023.
• Net Sales (Full Year 2024): $4.6 billion, flat versus 2023.
• Organic Sales (Full Year 2024): $4.4 billion, down 5% or down 2% excluding China and one-time disruptions.
• Operating Margin (Full Year 2024): Increased 90 basis points versus 2023.
• Free Cash Flow (2024): Approximately $475 million with a cash conversion of more than 100% of net income.
• EPS (Full Year 2024): $4.12, up 5% over 2023.
• Digital Sales (2024): $214 million with significant growth in the Flo business.
• Water Innovation Sales (Q4 2024): $645 million, down 3%.
• Water Innovation Operating Margin (Q4 2024): 23.7%.
• Outdoors Sales (Q4 2024): $303 million, down 2%.
• Outdoors Operating Margin (Q4 2024): 18.2%, an increase of 430 basis points.
• Security Sales (Q4 2024): $157 million, down 17% or down 10% when adjusting for the software outage.
• Security Operating Margin (Q4 2024): 9.3%.
• Share Repurchase Authorization: New $1 billion share repurchase authorization announced.

• Warning! GuruFocus has detected 9 Warning Signs with LGF.B.

Release Date: February 06, 2025

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

Positive Points

• Fortune Brands Innovations Inc (NYSE:FBIN) achieved impressive free cash flow of approximately $475 million in 2024, with a cash conversion of more than 100% of net income.
• The company made significant progress in its digital business, with digital sales reaching $214 million and a strong point-of-sale trajectory heading into 2025.
• FBIN's operating margins improved by 90 basis points for the full year 2024, reflecting strategic alignment and focus on profitable parts of the business.
• The company announced a new $1 billion share repurchase authorization, demonstrating confidence in its cash generation and commitment to long-term shareholder value.
• FBIN was named to the Wall Street Journal's Top 250 Best Managed Companies list of 2024, highlighting its growing prominence as a digital brand and innovative portfolio.

Negative Points

• Fourth quarter 2024 net sales decreased by 5% compared to the same period in 2023, impacted by a third-party software outage, hurricanes, and continued softness in China.
• Organic sales for the full year 2024 were down 5%, or down 2% when excluding China and one-time disruptions.
• The security segment faced challenges with a 17% decline in fourth quarter sales, exacerbated by a software outage and customer destocking.
• China's market remained a headwind, with sales declining 30% in the fourth quarter and 31% for the full year.
• The company anticipates a dynamic and uncertain macroenvironment in 2025, with potential impacts from interest rate volatility and geopolitical uncertainties.

Q & A Highlights

Q: Given the environment we're entering in 2025, how should we think about the initiatives and actions taken over the last 12 months? A: Nicholas Fink, CEO: In 2024, we focused on building digital assets and aligning our organization. We saw growth in key areas like water and future core products like Flo, which grew over 100% in the quarter. We expect these efforts to drive growth in 2025, despite challenges like China and commoditized business exits. We anticipate outperforming the market based on these initiatives.

Q: Can you provide more details on the connected products and the expected growth contribution in 2025? A: David Barry, CFO: We expect connected products to contribute 150 basis points to growth in 2025, with a strong ramp in the second half. Our focus is on executing sales activation and conversion, particularly in water and security segments. We see strong POS growth and are working on expanding partnerships and product offerings.

Q: How are you addressing the potential impact of tariffs, particularly with China and Mexico? A: Nicholas Fink, CEO: We've built a strong supply chain agility to manage tariffs, allowing us to move products quickly. We have a robust North American manufacturing base, which is a competitive advantage. David Barry, CFO: The 10% China tariff impact is included in our guidance, and we have strategies to mitigate potential impacts from Mexico and Canada through pricing and supply chain actions.

Q: Can you elaborate on the gross margin improvements in 2024 and their sustainability? A: David Barry, CFO: Gross margin improvements were driven by continuous improvement initiatives, product mix benefits, and operational efficiencies. We believe these improvements are sustainable and expect further gross margin expansion in 2025, despite some quarterly variability due to inventory costs.

Q: What are your plans for share repurchases in 2025 given the new authorization? A: David Barry, CFO: Our guidance includes repurchases to offset dilution. We plan to be aggressive in buying back shares when there are dislocations in our share price, supported by strong cash generation and working capital initiatives. We aim to maintain our leverage target while enhancing shareholder value.

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