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Fortune Brands Innovations, Inc. (FBIN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $1.104B, down 5% year over year; GAAP EPS rose 31% to $0.84, while EPS before charges/gains was $0.98, up 3% YoY .
  • Operating margin expanded 460 bps YoY to 16.1% GAAP; operating margin before charges/gains improved 60 bps to 16.4% .
  • Management authorized a new $1.0B share repurchase program (replacing $409M remaining on prior authorization), signaling confidence in cash generation; Q4 free cash flow was $212M and FY2024 free cash flow was $475M with ~101% cash conversion .
  • 2025 guidance: net sales flat to +3%, operating margin before charges/gains 16.5–17.5%, EPS before charges/gains $4.15–$4.45, free cash flow ~$580–$620M; digital products expected to contribute ~150 bps to full-year sales growth .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion despite softer sales: total GAAP operating margin up 460 bps, and non-GAAP operating margin up 60 bps; Water and Outdoors segment margins improved vs. prior year .
  • Strong cash generation and capital return: Q4 operating cash flow $272M, free cash flow $212M; FY free cash flow $475M; new $1B buyback authorization .
  • Digital acceleration and strategic partnerships: digital sales reached $214M in 2024; Flo retail/e-commerce POS up >100% YoY in Q4; 12 insurance partnerships including Farmers Insurance; “We expect our Flo sales to continue to increase rapidly… path towards $100 million in annualized sales in 2025” (CEO) .

What Went Wrong

  • Security segment disruption: third-party software outage at distribution centers and channel destocking cut Q4 Security sales by ~17% YoY, with operating margin down to 9.3% (vs. 17.2% non-GAAP in Q4 2023); excluding outage, sales down ~10% YoY .
  • China weakness: continued softness pressured Water; China sales declined ~30% in Q4 and ~31% for FY2024, with one more challenging comp expected in Q1 2025 (CFO) .
  • Hurricanes impact: Southeastern U.S. hurricanes, together with China and the software outage, represented ~5% impact to Q4 organic sales (company-wide) .

Financial Results

Consolidated Summary (GAAP and Non-GAAP)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$1.240 $1.155 $1.104
GAAP Operating Margin (%)16.1% 17.8% 16.1%
Operating Margin Before Charges/Gains (%)17.4% 18.7% 16.4%
GAAP EPS ($)$1.06 $1.09 $0.84
EPS Before Charges/Gains ($)$1.16 $1.16 $0.98

Year-over-Year Context (Quarterly)

MetricQ2 2024 YoYQ3 2024 YoYQ4 2024 YoY
Revenue YoY Change (%)+7% -8% -5%
GAAP EPS YoY Change (%)+33% +2% +31%
EPS Before Charges/Gains YoY Change (%)+8% -3% +3%

Segment Breakdown

Segment MetricQ2 2024Q3 2024Q4 2024
Water Net Sales ($MM)$659.6 $635.1 $644.6
Water Op Margin (GAAP)22.9% 23.8% 23.5%
Water Op Margin Before C/G23.3% 24.6% 23.7%
Outdoors Net Sales ($MM)$389.4 $342.7 $303.0
Outdoors Op Margin (GAAP)13.3% 16.9% 17.9%
Outdoors Op Margin Before C/G16.3% 18.0% 18.2%
Security Net Sales ($MM)$191.0 $177.5 $156.5
Security Op Margin (GAAP)18.0% 18.6% 8.9%
Security Op Margin Before C/G18.9% 19.3% 9.3%

KPIs and Balance Sheet

KPIQ4 2024FY 2024
Operating Cash Flow ($MM)$272 $668
Free Cash Flow ($MM)$212 $475
Cash ($MM)$381 $381
Net Debt ($B)$2.3 $2.292
Net Debt/EBITDA (x)2.4x 2.4x
Share Repurchases ($MM)$50 $240
Digital Sales ($MM)—$214
Flo Users (MM)—4.7
Flo New Device Activations (Q4 units)200,000 —
Flo Retail/E-Comm POS (Q4 YoY)>100% —

Note: Non-GAAP EPS and margins exclude restructuring, other items, actuarial impacts, and certain acquisition-related items as reconciled in the 8-K .

Guidance Changes

FY2025 Guidance (New)

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net salesFY2025—Flat to +3% New
Operating margin before charges/gainsFY2025—16.5% to 17.5% New
EPS before charges/gainsFY2025—$4.15 to $4.45 New
Cash flow from operationsFY2025—~$680M to ~$720M New
Free cash flowFY2025—~$580M to ~$620M New
Cash conversionFY2025—~115% to 125% New
Water net salesFY2025—Flat to +4% New
Water op margin before C/GFY2025—23.5% to 24.5% New
Outdoors net salesFY2025—Flat to +3% New
Outdoors op margin before C/GFY2025—16.0% to 17.0% New
Security net salesFY2025—Flat to +3% New
Security op margin before C/GFY2025—16.0% to 17.0% New
Corporate expenseFY2025—$158M to $160M New
Interest expenseFY2025—$114M to $116M New
Other income/(expense)FY2025—~$6M New
CapexFY2025—$100M to $140M New
Tax rateFY2025—24.0% to 24.5% New
Share countFY2025—124.0M to 124.5M New

FY2024 Guidance Updates (context: change from Q2 to Q3)

MetricPeriodQ2 Update (7/25/24)Q3 Update (11/6/24)Change
Net salesFY20242.5% to 4.5% Flat to +1% Lowered
Organic net salesFY2024-2% to flat -4.5% to -3.5% Lowered
Op margin before C/GFY202417.0% to 17.5% 17.0% to 17.25% Lowered (upper bound)
EPS before C/GFY2024$4.25 to $4.35 $4.17 to $4.23 Lowered
CFOFY2024~ $700M ~ $650M Lowered
FCFFY2024~ $500M ~ $475M Lowered
Water op margin before C/GFY2024~24% ~23.5% Lowered
Outdoors op margin before C/GFY202414.5% to 15.5% 16.0% to 16.5% Raised
Security op margin before C/GFY202415.5% to 16.5% 16.5% to 17.0% Raised
Corporate expenseFY2024$143M to $148M $149M to $151M Raised (expense)
Tax rateFY202423.25% to 23.5% 22.25% to 22.5% Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-3)Current Period (Q4 2024)Trend
Digital products (Flo, Yale, cLOTO)Q2: “key milestones in digital products strategy” ; Q3: continued margin execution with strategic priorities Digital sales $214M FY; Flo POS up >100% in Q4; 12 insurance partnerships; path to ~$100M Flo sales in 2025; digital to add ~150 bps to FY2025 sales (CEO/CFO) Accelerating
Supply chain/tariffsQ2/Q3: broader macro/tariff risks noted in risk language Line of sight to reduce China tariff exposure to <10% of total cost by end of 2025; options to mitigate Mexico/Canada; modest price actions contemplated (CEO/CFO) Proactive mitigation
Macro and R&R/new constructionQ2/Q3: Updated FY outlook; U.S. SFNC growth higher in Q2 update ; hurricanes impact cited in Q3 update 2025 market view: global/U.S. -2% to +1%; U.S. R&R -1% to +2%; SFNC -2% to +2%; seasonal cadence; cautious H1, stronger H2 (CFO) Stabilizing; H2-weighted
ChinaQ2/Q3: organic ex-China metrics highlighted Q4 China sales -30%; FY -31%; expect another tough comp in Q1 2025, then stabilize (CFO) Headwind moderating after Q1
Segment performance (Outdoors vs Decking/Doors)Q2: Security margin recovery; Outdoors mixed (Decking down, Doors up) Q4 Outdoors net sales -2% with margin +430 bps; Doors POS up; Decking down mid-teens FY; LARSON reset rolling to ~1,700 stores by mid-2025 (CEO/CFO) Mix improvement, margin up
Security actionsQ3: Security margins improved YoY Q4 impacted by software outage; plan brand refresh, connected LOTO rollout; leadership changes to drive turnaround (CEO/CFO) Near-term fix, medium-term growth
Capital allocationQ2/Q3: repurchases $55M (Q2), $35M (Q3) New $1B authorization; $75M repurchased in Q1’25; focus on opportunistic buybacks; strong FCF Increased flexibility

Management Commentary

  • “We made significant progress in 2024 against our key digital, brand and organizational priorities… The Company again delivered margin expansion while continuing to invest in our key priorities.” – CEO Nicholas Fink .
  • “We expect 2025 to be another breakout year for our connected products, particularly our Flo devices.” – CEO Nicholas Fink .
  • “For the fourth quarter… adjusted for [China, software outage, hurricanes], organic sales were down 1%… Operating margins for the quarter were 16.4%, a 60 basis point improvement.” – CEO Nicholas Fink .
  • “We expect 2025 free cash flow conversion of around 115% to 125% of net income… free cash flow of around $580 million to $620 million, including capex of around $100 million to $140 million.” – CFO David Barry .
  • “We have significantly increased our flexibility and reduced our tariff exposure from China… reduce this exposure to less than 10% of total cost by the end of 2025.” – CEO Nicholas Fink .

Q&A Highlights

  • Growth cadence and margin phasing: H1 sales ~49%, H2 ~51%; Q1 sales down ~4% (incl. China headwind ~200 bps); H1 operating margin ~14.5–15%, Q1 ~12–13% due to cost absorption timing; H2 margin ~20% (CFO) .
  • Connected products growth blocks: ~150 bps full-year sales uplift (H1 ~100 bps; H2 ~200+ bps), strong POS ramp already in Q1; Yale partnerships to reaccelerate through mid-year (CFO) .
  • Tariff exposure framework: China 10% tariff fully embedded in guidance; EPS range covers potential Mexico/Canada impacts; modest price actions and supply chain levers poised if needed (CFO) .
  • Gross margin sustainability: benefits from plant closure (Security), aligned supply chain, sourcing, and mix; expect full-year gross margin expansion in 2025 despite quarterly lumpiness from inventory cost roll-off (CFO) .
  • Capex trajectory: FY2025 capex $100–$140M (~2–3% of sales) vs. higher recent years after capacity build; comfortable funding growth while leveraging new capacity (CEO/CFO) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue could not be retrieved at this time due to an S&P Global daily request limit. As a result, explicit “vs. estimates” comparisons are not provided in this recap. If needed, re-run estimates once access is restored to quantify beats/misses.

Key Takeaways for Investors

  • Resilient profitability amid macro and one-time headwinds: GAAP operating margin +460 bps YoY; non-GAAP operating margin +60 bps, with Water/Outdoors margin strength offsetting Security disruption .
  • Cash generation supports capital deployment: FY2024 free cash flow $475M and new $1B buyback authorization provide downside protection and flexibility for opportunistic repurchases .
  • Connected products as a growth engine: Flo momentum (users 4.7M; Q4 activations 200k; POS >100% YoY) and insurance partnerships underpin FY2025 digital growth contribution (~150 bps) and path to ~$100M Flo sales in 2025 .
  • China and Security represent near-term headwinds but are being actively addressed: China declines expected to normalize post Q1; Security recovery plan underway with brand refresh and connected LOTO rollout .
  • 2025 setup: conservative market outlook (global/U.S. -2% to +1%) with normal seasonal cadence and H2 margin inflection (~20%) as absorption dynamics and digital mix improve (CFO) .
  • Segment mix favoring margin: Outdoors margin expansion continues; Water stable-to-improving margins; execution on premium/luxury (House of Rohl/Emtek) and channel resets (LARSON) supports mix .
  • Watch catalysts: execution on digital subscription model, incremental insurance mandates, share buyback pacing, and stabilization in Security operations as drivers of narrative and stock reaction .