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FH

FULLER H B CO (FUL)·Q3 2025 Earnings Summary

Executive Summary

  • Adjusted EPS was $1.26, up 12% year-on-year; revenue was $892.0M, down 2.8% YoY (up 1.6% YoY excluding flooring divestiture); adjusted EBITDA reached $170.6M with margin expansion to 19.1% (+110 bps YoY) .
  • Versus consensus, FUL delivered a small EPS beat ($1.26 vs $1.237*) and a slight revenue miss ($892.0M vs $893.9M*); adjusted EBITDA exceeded consensus ($170.6M vs $168.3M*)—driven by pricing and raw material cost actions . Values marked * from S&P Global.
  • Guidance tightened: FY25 adjusted EBITDA $615–$625M (from $615–$630M), adjusted EPS $4.10–$4.25 (from $4.10–$4.30); FY25 operating cash flow reduced to $275–$300M; capex cut to ~$140M; core tax rate 26.0–26.5%; net interest $125–$130M .
  • Management tone: constructive on margin trajectory but cautious on volumes (macro, tariffs, solar headwinds); catalysts include continued margin expansion, EA strength (autos/electronics), and portfolio optimization; risks are HHC volume pressure and solar contraction .

What Went Well and What Went Wrong

What Went Well

  • Engineering Adhesives (EA) led growth with organic revenue +2.2% YoY and margin expansion to 23.3% (+190 bps), supported by autos and electronics recovery; electronics returned to globally double-digit organic growth .
  • Margin execution: adjusted gross margin rose to 32.3% (+190 bps YoY) and adjusted EBITDA margin to 19.1% (+110 bps), driven by net pricing and raw material cost actions, M&A/divestiture mix, and cost reductions .
  • Pricing backdrop supportive into Q4; management cited Adhesives and Sealants Council survey showing 84% of peers raising prices, underpinning continued price discipline .

What Went Wrong

  • Top-line: net revenue -2.8% YoY (organic -0.9% with pricing +1.0% offset by volume -1.9%); HHC volumes declined mid-single digits across regions reflecting consumer weakness .
  • Solar remained a significant headwind (oversupply, tariffs/regulatory ambiguity), prompting de-emphasis of lower-margin silicone sealants; revenue headwinds expected to persist while margins improve as mix shifts .
  • Cash flow guide lowered due to temporarily higher inventory to support manufacturing footprint optimization (working capital management); FY25 OCF cut to $275–$300M .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$917.9 $788.7 $898.1 $892.0
Diluted EPS (GAAP) ($)$0.98 $0.24 $0.76 $1.22
Adjusted EPS ($)$1.13 $0.54 $1.18 $1.26
Adjusted EBITDA ($USD Millions)$165.3 $114.4 $165.7 $170.6
Adjusted Gross Margin (%)30.4% 29.6% 32.2% 32.3%
Adjusted EBITDA Margin (%)18.0% 14.5% 18.4% 19.1%

Actual vs Wall Street Consensus – Q3 2025

MetricConsensusActual
EPS ($)1.237*1.26
Revenue ($USD Millions)893.9*892.0
Adjusted EBITDA ($USD Millions)168.3*170.6

Values marked * retrieved from S&P Global.

Segment Breakdown

SegmentQ3 2024 Revenue ($M)Q2 2025 Revenue ($M)Q3 2025 Revenue ($M)Q3 2024 Adj. EBITDA MarginQ2 2025 Adj. EBITDA MarginQ3 2025 Adj. EBITDA Margin
Hygiene, Health & Consumable (HHC)$389.98 $397.48 $386.07 16.4% 15.6% 16.9%
Engineering Adhesives (EA)$260.04 $276.42 $272.30 21.4% 22.9% 23.3%
Building Adhesive Solutions (BAS)$228.41 $224.20 $233.68 17.6% 16.7% 17.7%
Corporate Unallocated$39.50 $43.70 $0.00 13.7% 12.8% NMP

KPIs and Balance Sheet

KPIQ1 2025Q2 2025Q3 2025
Cash Flow from Operations ($M)-$52.9 $111.0 $99.0
Net Working Capital as % of Annualized Revenue17.2% 16.6% 17.0%
Net Debt ($M)$2,074 $2,016 $1,958
Net Debt / Adjusted EBITDA (TTM)3.5x 3.4x 3.3x

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2025)Current Guidance (Q3 2025)Change
Net Revenue YoYFY2025Down 2% to 3% Down 2% to 3% Maintained
Organic Revenue YoYFY2025Flat to up 2% Flat to up 1% Lowered
FX Impact to RevenueFY2025-1.0% to -1.5% ~-1.0% Tightened
Adjusted EBITDA ($M)FY2025$615–$630 $615–$625 Tightened lower end
Adjusted EPS (Diluted) ($)FY2025$4.10–$4.30 $4.10–$4.25 Tightened lower end
Operating Cash Flow ($M)FY2025$300–$325 $275–$300 Lowered
Capital Expenditures ($M)FY2025N/A~$140 Initiated (reduced vs prior internal plan)
Net Interest Expense ($M)FY2025N/A$125–$130 Initiated
Adjusted Tax Rate (%)FY2025N/A26.0%–26.5% Initiated
DividendQ4 CY2025N/A$0.235/share payable Oct 30, 2025 Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Pricing and Raw Material ActionsPricing discipline; raw materials up YoY pressured margins Identified ~$55M price/cost tailwinds to achieve EBITDA guide; early progress ~$15M realized YTD; ~$15M expected in Q4, remainder into early FY26 due to higher inventory cadence Improving but slower cadence
EA – Autos/ElectronicsEA revenue +4.7% YoY; margin improvement vs pcp EA margins 22.9%; segments mixed, electronics lull EA organic +2.2%; electronics returned to double-digit growth; margin 23.3% Improving
HHC VolumesHHC steady revenue; margin down vs pcp HHC margin 15.6%; price positive, volume soft HHC organic -3.1%; mid-single-digit volume declines across regions Deteriorating
Solar ExposureNot highlightedSolar headwind emerging Solar significant headwind; de-emphasizing silicone sealants; mix to higher-margin tech Strategically refocused; top-line headwind
BAS and Interest RatesBAS stable margins BAS margin 16.7%; construction slowdown noted BAS margin 17.7%; lower rates benefit with 15–18 month lag; woodworking/furniture to benefit Gradual improvement expected
Working Capital & Cash FlowOCF weighted to 2H; net debt rose on M&A Net debt/EBITDA 3.4x; working capital 16.6% OCF guidance lowered due to inventory held for footprint optimization Temporary pressure
Data Center AdhesivesNot highlightedStrategic focus; high-margin roofing exposure Data center solutions growing ~40% with runway ~30%; <5% of total revenue but rising High-growth niche
Macro/TariffsCautious outlook; geopolitical volatility Performing better than underlying markets; subdued macro Widespread slowing; tariffs and trade tension; supportive pricing environment Challenging macro; pricing tailwind

Management Commentary

  • “We delivered a strong quarter, evidenced by continued margin expansion and double-digit EPS growth despite the challenging operating environment.”
  • “Our continued operational discipline, strong execution, and ongoing portfolio shift keep us on track to achieve our greater than 20% EBITDA margin target.”
  • “We remain cautious and have tightened our guidance range for the year to reflect a globally subdued economic backdrop…looking forward, we expect volume growth to remain elusive.”
  • CFO on leverage: “Net debt-to-adjusted EBITDA decreased from 3.4x…to 3.3x…Solid cash flow from operations and growth in adjusted EBITDA drove the sequential decrease.”

Q&A Highlights

  • Cash flow guidance: Lowered due to temporary inventory build to support manufacturing footprint optimization; inventory expected to normalize later .
  • EA performance: Electronics returned to globally double-digit organic growth; U.S. EA moved from negative mid-single-digit in Q2 to positive mid-single-digit in Q3 on share gains and execution .
  • HHC volumes: Mid-single-digit declines across Americas, Europe, Asia reflecting a weaker consumer; pricing remained strong .
  • Solar strategy: De-emphasizing lower-margin silicone sealant product line (particularly China); expect continued top-line headwind but EBITDA/margin improvement from mix shift .
  • Price/cost actions cadence: ~$15M realized YTD; ~$15M expected Q4; remaining benefits slip into FY26 due to inventory timing; footprint optimization savings pulled forward to offset cadence .
  • BAS and rates: Lower interest rates help with a 15–18 month lag; near-term benefits include mobility/household formation; woodworking/furniture may benefit .
  • Data centers: High-margin opportunity largely in roofing; <5–10% of revenue for roofing with data center solutions less than half of that, growing quickly .

Estimates Context

  • Q3 2025 EPS beat: $1.26 actual vs $1.237* consensus .
  • Q3 2025 revenue slight miss: $892.0M actual vs $893.9M* consensus .
  • Q3 2025 adjusted EBITDA beat: $170.6M actual vs $168.3M* consensus .
  • Estimate dispersion: 5 EPS estimates and 6 revenue estimates for Q3; forward quarters have fewer estimates (Q4 EPS: 3; revenue: 5) (*) Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin story intact and strengthening: adjusted gross margin and EBITDA margin expanded materially despite volume softness; continued price/cost actions and portfolio mix are the drivers .
  • EA is the growth engine near-term: autos and electronics momentum offset solar; expect EA to sustain above-market growth on share gains and new products .
  • HHC volumes are the main risk: consumer-linked segments remain weak; watch for macro stabilization or rate-driven demand tailwinds to improve volume leverage .
  • Cash flow caution short-term: FY25 OCF lowered due to inventory builds for footprint optimization; normalization expected afterward—monitor working capital trends .
  • Guidance narrowed but not cut on EBITDA/EPS midpoints: tightening reflects macro prudence; delivery depends on price/cost realization and operational savings cadence .
  • Balance sheet improving: leverage down to 3.3x, net debt reduced sequentially; supports continued capital allocation flexibility (including dividend continuity) .
  • Tactical positioning: data center adhesives and medical adhesives offer high-margin growth vectors; BAS set to benefit as rates decline with a lag .

S&P Global disclaimer: Any values marked with an asterisk (*) were retrieved from S&P Global.