Griffon - Q1 2026
February 5, 2026
Transcript
Operator (participant)
Greetings, and welcome to the Griffon Corporation Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Brian Harris, CFO. Please go ahead, sir.
Brian Harris (CFO)
Thank you. Good morning, and welcome to Griffon Corporation's first quarter fiscal 2026 earnings call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer. Our press release was issued earlier this morning and is available on our website at www.griffon.com. Today's call is being recorded, and the replay instructions are included in our earnings release. Our comments will include forward-looking statements about Griffon'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 adjust for items that affect comparability between periods. These items are explained in our non-GAAP reconciliations included in our press release. With that, I'll turn the call over to Ron.
Ron Kramer (Chairman and CEO)
Thanks, Brian. Good morning, everyone, and thanks for joining us today. Earlier this morning, we announced exciting news regarding the creation of a joint venture, including AMES North America and Venanpri Tools, along with other strategic actions related to Griffon. Allow me first to summarize our results for the quarter, then I'll comment further about the strategic actions that are underway. We are pleased with our first quarter results, highlighted by free cash flow of $99 million, continued solid operating performance at Home and Building Products, and improved profitability at Consumer and Professional Products. We're off to a good start and are on track to meet our updated financial targets for the year. For the quarter, Home and Building Products, HBP, revenue increased 3% compared to the prior year, and EBITDA margin was 30.1%.
Revenue benefited 7% from strong price and mix across both residential and commercial products, which was partially offset by reduced residential volumes. Consumer and Professional Products, or CPP, first quarter revenue increased 2%, driven by price and mix, with increased volume in Australia and Canada, offset by reduced volume in the U.S. as consumer demand remained soft. CPP EBITDA in the quarter increased by 19% to $22 million, driven by the increase in revenue. We're pleased to continue to see year-over-year improvement in CPP EBITDA, despite persistently weak demand in the U.S. Turning to capital allocation. During the first quarter, we repurchased $18 million of our stock, or 247,000 shares, at an average of $73.21 per share. At December 31, $280 million remained under the repurchase authorization.
Since April 2023 and through December, we've repurchased $578 million of stock, or 11.1 million shares, at an average price of $52.27 per share. These repurchases have reduced Griffon's outstanding shares by 19.3% relative to total shares outstanding at the end of the second quarter of fiscal 2023. Also yesterday, the Griffon board authorized a regular quarterly dividend of $0.22 per share, payable on March 18th to shareholders of record on February 27, which marks the 58th consecutive quarterly dividend to shareholders. Our dividend has grown at an annualized compounded rate of 19% 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. Let me comment on our strategic actions.
Earlier this morning, we announced the formation of a joint venture with ONCAP, the middle-market private equity platform of Onex Corporation, which will create a leading global provider of hand tools, home organizational solutions, and lawn and garden products for professionals and consumers. The joint venture will combine Griffon's AMES businesses in the United States and Canada with ONCAP's global portfolio of hand tool businesses, including Corona in the United States, Burgon & Ball in the United Kingdom, and Bellota Hand Tools operating in Europe and Central and South America. Through this transaction, we're creating a global leader in professional and consumer hand tools, home organizational solutions, and lawn and garden products with sufficient scale and scope to compete in the global marketplace. The joint venture is comprised of leading professional and consumer brands, including AMES, Bellota, Burgon & Ball, ClosetMaid, Corona, Garant, Razor-Back, and True Temper.
ONCAP and Griffon both recognize the benefits created by merging leading diversified professional tool brands with global reach. We're very excited about this business combination and the prospects for the joint venture. We see significant opportunities to streamline operations across the businesses and capture the benefits of economies of scale. For Griffon, the formation of the joint venture will generate immediate shareholder value and additional liquidity, as well as provide a path for realizing more value in the longer term through the second lien debt from the joint venture and our significant equity interest.... We're looking forward to working with ONCAP to make this joint venture a success.
In addition to the joint venture, we also announced three other strategic actions that, once completed, will transform Griffon into a pure-play building products company, positioning us as the leading provider in North America of residential and commercial garage doors, rolling steel doors, and grille products, as well as a leading brand of residential and commercial ceiling fans. So our actions, a comprehensive review of strategic alternatives for AMES Australia, a review of strategic alternatives for the AMES United Kingdom, and the combination of Hunter Fan with our Home and Building Products segment. To offer a bit more detail, our AMES Australia business has grown from a small operation that was part of our original AMES acquisition into a category leader in Australia. This business is led by an exceptional team with a demonstrated track record of growing both organically and through acquisition, while consistently generating solid operating performance.
We're confident there are a number of strategic alternatives available for AMES Australia that will position the business for continued growth while providing value to Griffon shareholders. We'll report back regarding our progress. Finally, we're combining Hunter Fan with our Home and Building Products segment. Both Clopay and Hunter maintain exceptional positions with industry-leading brands and best-in-class technology and innovation. We see many opportunities for the two businesses to leverage their complementary sales channels across residential and commercial building products. The two teams already know each other well, have collaborated over the past three years, and are excited about bringing them together. I'll turn it over to Brian for a bit more detail on the financials, and he'll provide additional detail regarding the strategic actions.
Brian Harris (CFO)
Thank you, Ron. First quarter revenue of $649 million increased 3% in comparison to the prior year quarter, and Adjusted EBITDA before unallocated amounts of $145 million was in line with the prior year. EBITDA margin before unallocated amounts was 22.3%. Gross profit on a GAAP basis for the quarter was $267 million, compared to $264 million in the prior year quarter. Gross margin was 41.1%. First quarter GAAP selling general and administrative expenses were $153 million, compared to the prior year of $152 million.
Excluding adjusting items from both the prior period, SG&A expenses were $153 million or 23.6% of revenue, compared to the prior year of $151 million or 22.8% of revenue. First quarter GAAP net income was $64 million or $1.41 per share, compared to $71 million in the prior year quarter or $1.49 per share. Excluding items that affect comparability from both periods, current quarter's adjusted net income was $66 million or $1.45 per share, compared to the prior year of $66 million or $1.39 per share. Corporate and unallocated expenses, excluding depreciation in the quarter, were $15 million, compared with $14 million in the prior year.
During the quarter, we had capital expenditures of $8 million, compared with the prior year gross capital expenditures of $17 million, and de minimis prior year net capital expenditures as proceeds from asset sales offset the capital investment made in that quarter. Regarding our segment performance, as Ron mentioned earlier, revenue for Home and Building Products increased 3% from the prior year quarter, reflecting strong price and mix of 7% for both residential and commercial, which was partially offset by reduced volume of 4%, driven by residential. Home and Building Products Adjusted EBITDA decreased 3% compared to the prior year quarter, resulting in an EBITDA margin of 30.1%. The positive effect of increased revenue in the quarter was more than offset by unfavorable material costs, labor costs, and operating expenses, along with the adverse impact of reduced volume on absorption.
Consumer and Professional Products revenue increased 2% from the prior year quarter to $241 million. Favorable price and mix during the quarter, along with increased volume in Australia and Canada, was partially offset by impacts of reduced volume in the US. CPP Adjusted EBITDA increased 19% from the prior year quarter to $22 million, primarily due to the increase in revenue. Regarding our balance sheet and liquidity, as of December 31, 2025, we had net debt of $1.26 billion and net debt to EBITDA leverage of 2.3 times, as calculated based on our debt covenants, compared to 2.4 times leverage at the end of last year's first quarter and the end of fiscal year 2025. We paid down $60 million of Term Loan B during the quarter.
Our net debt and leverage decreased from our year-ended September 2025 and the prior year quarter, even with returning $29 million of capital to shareholders via stock repurchases and dividends during the quarter. Regarding our strategic actions, under the terms of our master transaction agreement, ONCAP owned 57% of the joint venture, and the joint venture will be operated as an ONCAP portfolio company. Griffon will receive $100 million of cash proceeds at closing, along with $160 million of second lien debt from the joint venture. Griffon will have a 43% ownership stake. As a result of our strategic actions, starting in our second quarter of 2026, we will report in U.S., Canada, Australia, and U.K. as discontinued operations. Hunter Fan's financial results, which historically have been included in CPP segment, will be reported as part of the Home and Building Products segment.
The expected fiscal year 2026 EBITDA for discontinued businesses is $60 million, comprised of $25 million for AMES North America, $40 million for Australia, and with the U.K. operating with negative EBITDA.... In terms of our updated outlook for our continuing operations, we now expect full-year fiscal 2026 revenue from continuing operations to be $1.8 billion, and Adjusted EBITDA to be $520 million, excluding unallocated costs of $62 million. Free cash flow from continuing operations, including capital expenditures of $50 million, is expected to exceed net income. Depreciation will be $27 million, and amortization will be $15 million. Fiscal year 2026 interest expense is expected to be $93 million, and Griffon's normalized tax rate is expected to be 28%. This guidance, as stated, is consistent with our expectations for legacy home building products and Hunter Fan, as we originally outlined in November.
Now I'll turn the call back over to Ron.
Ron Kramer (Chairman and CEO)
Thanks, Brian. From a financial and operational perspective, 2026 is off to a good start, with strong free cash flow and continued solid operating performance. Our results continue to reinforce our confidence in our outlook for the year and beyond, especially given our resiliency to what continues to be a mixed and uncertain market backdrop. We remain optimistic about a turnaround in the residential and commercial markets and believe that we will realize substantial leverage as activity improves. Our capital allocation priorities remain unchanged. We'll continue to use 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 strategy includes continuing to focus our resources on growing organically while opportunistically repurchasing shares, paying dividends, and reducing debt. This is an exciting time for Griffon.
Our strategic actions, taken together, will streamline the company's portfolio and enhance shareholder value. When completed, Griffon will be a premier, pure-play, North American residential and commercial building products company with a very exciting future. In closing, I'd like to express my sincere gratitude to our Griffon employees around the world, whose dedication and effort have driven our financial success. Our strategic activities have created additional challenges for our global teams, and as usual, they've stepped up to make it happen. Operator, we're now ready for questions.
Operator (participant)
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please limit yourself to one question and one follow-up question. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question will come from Tim Wojs with Baird.
Tim Wojs (Senior Research Analyst)
Hey, guys. Good morning. Congrats on all the announcements.
Ron Kramer (Chairman and CEO)
Good morning.
Tim Wojs (Senior Research Analyst)
Good morning. Maybe just, you know, to start, you know, the bigger picture, Ron, I'm just kind of curious in terms of kind of the timing and the thought process and kind of why now? You know, maybe some of the, you know, the alternatives that you were kind of considering, you know, in this and kind of how this, you know, JV kind of came together.
Ron Kramer (Chairman and CEO)
Well, we have always said that we thought there was a disconnect between the market value of our stock and the intrinsic value of our businesses. We've been looking at, you know, two very different segments. Our Home and Building Products business is a 30% EBITDA margin business, and our consumer businesses have been operating at, you know, a 9% margin. We see the, you know, the performance of our businesses as being differentiated and the ability for us to take our consumer businesses and strengthen them by combining it with a leading global provider of tools, brands, giving us the leverage to be able to take the AMES companies and its footprint, North America and Canada, and fit it in with the partner who's able to scale that business.
So we continue to be a significant investor in the consumer business, at 43%. We have, you know, a very strong belief that ONCAP and Venanpri businesses fit hand in glove with the AMES business, and that we'll be able to continue to create value in that business, as a separate investment for Griffon. Now, what that does is, you know, this is an ability for us to unlock value, and, you know, the consumer side of our business, we believe, has been mispriced in our sum of the parts. By doing this, we are putting a spotlight on the value in the AMES, U.S. and Canada, the value of the $40 million EBITDA business that we have in Australia.
Hunter is a synergistic combination with our Home and Building Products business, and we have high expectations that the development of the industrial fan business can grow faster under the Home and Building Products Clopay umbrella. So for us, this is a set of moves that we believe significantly improves our valuation. And that's, again, without you know any growth coming out of the HBP side of the business, as we believe we're getting closer to a recovery in the housing market, excuse me, in the U.S. So we've got a very strong HBP business with growth, and we believe that these actions strengthen the consumer businesses that we own and positions us to unlock meaningful value to our shareholders.
Tim Wojs (Senior Research Analyst)
Okay. Okay, great. Yeah, no, that's very helpful. Thank you. And then, Brian, just maybe on, like, some of the details. So the go-forward financials of the disco go away, what would you guys kind of expect the minority interest, you know, contribution to be from an earnings perspective? And then any sense on the rate on the second lien debt, 'cause I would assume that's effectively income for you?
Brian Harris (CFO)
Correct. So that second lien debt is at a 10% PIK rate. And as far as our portion, our minority interest of the net income of the JV, I do not expect a significant impact from that as, you know, it's a private company with debt on it and amortization, so net income will not be material.
Operator (participant)
Our next question will come from Bob Labick with CJS Securities.
Lee Jagoda (Senior Managing Director)
Hi, good morning. It's actually Lee Jagoda for Bob.
Brian Harris (CFO)
Morning, Lee.
Lee Jagoda (Senior Managing Director)
Morning. So I guess starting with the JV, can you give us a sense for the EBITDA that's being contributed from ONCAP or maybe the expected fiscal 2026 EBITDA for the combined entity?
Brian Harris (CFO)
Yeah, the combined entity results are not something we're disclosing at this time, but they are slightly smaller than we are.
Lee Jagoda (Senior Managing Director)
Okay. And then on, you know, as it relates to Hunter, can you kind of give us a sense for the revenue that Hunter was contributing? And then once it gets combined into the HBP segment, how should we think about your margins in that segment relative to the, you know, 30% or above that you've been running for the last several years?
Brian Harris (CFO)
Sure. So in fiscal 2025, Hunter Fan had $211 million of EBITDA, sorry, of revenue rather. And as far as margin, you know, you just heard the guidance, which is roughly 29%, but ultimately this is still a 30%+ business going forward.
Operator (participant)
Our next question will come from Collin Verron with Deutsche Bank.
Collin Verron (Stock Analyst)
Good morning. Thank you for taking my questions and congratulations on all the announcements.
Brian Harris (CFO)
Thanks, Collin.
Collin Verron (Stock Analyst)
I guess just— No problem. Just following up on that, any sense of just like maybe the EV to EBITDA multiple that the proceeds and the second lien debt imply for the business? And then any sense on sort of the timeline to sort of establish the JV and for the sale or other strategic action for Australia and U.K.?
Brian Harris (CFO)
Sure. So as far as a multiple, it's on a cash, just a cash $100 million of cash, it's roughly a 4x multiple. And of course, larger, if you include the second lien debt. As far as timing, you know, we expect the JV to close by the end of June. And timing for the rest of the actions for Australia and U.K., you know, we'll have to keep you posted, and we'll update you as they progress.
Collin Verron (Stock Analyst)
Okay, understood. And then I guess just with the proceeds, any sense, any comments around capital allocations, going forward?
Ron Kramer (Chairman and CEO)
Well, I've said it and I'll continue to you know underline, we believe that our stock is the best acquisition we can make. Our balance sheet has never been stronger. You know, we finished the quarter at 2.3 times. We've got a significant amount of liquidity, and we will have more as a result of these transactions, and you should expect us to continue to be an active buyer of our stock, deleveraging from free cash flow and being an increased dividend payer in the future.
Operator (participant)
Moving next to Trey Grooms with Stephens Incorporated.
Trey Grooms (Analyst)
Hey, good morning, everyone.
Ron Kramer (Chairman and CEO)
Morning, morning.
Trey Grooms (Analyst)
Congrats on... Yeah, congrats on the announcements. Pretty exciting stuff.
Ron Kramer (Chairman and CEO)
Thank you.
Trey Grooms (Analyst)
So you know, we've talked a lot about the portfolio actions, but shifting gears here just a little bit, onto the kind of the HBP business, you know, the remaining business. You mentioned, Ron, I think twice, that 2026 is off to a good start. But if you could maybe talk about, you know, volume was down a little bit, which you mentioned lower res, no surprise there. But you know, if maybe you could update us on kind of the demand outlook here for the HBP business, the kind of the remaining business, here as we go into calendar 2026, maybe looking across, you know, both the res, you know, with remodel and then also commercial.
Ron Kramer (Chairman and CEO)
Yeah. I'll start by saying that, you know, the macro environment for housing, the political support for housing is clearly better than we went into this fiscal year. So our performance in the fourth—in the first quarter, with, you know, a decline in residential, you know, improvements in the commercial... But on price and mix, you know, it shows you the story that, you know, there is still a very good part of the repair and remodel in the premium side of the market, which is where we are positioned. And, you know, Clopay and, you know, our management team has done an extraordinary job of both bringing in new products, using technology with our dealer network.
That was before we went into 2026 and the winds of, you know, an improving housing market started. So we're very optimistic about that the recovery in housing is still ahead of us. Our performance is, as good as it's been, gonna get better in terms of both units and in volume. As the housing markets recover in the United States, interest rates will come down. You know, mortgage markets are going to, you know, have to get repaired for new home construction and for volume of activity. But all of those things, you know, are going to help the, what's already a very efficient, you know, highly profitable, Clopay to become bigger.
You know, the commercial side of our business, which, you know, is the result of an acquisition of CornellCookson that we made seven years ago, is proving to be the, you know, balance to that business. You know, we're hoping over the next, you know, few years that our commercial business is as big as our residential business. With the infrastructure spending that's going on, we continue to believe that Clopay is an excellent business that has growth in front of it.
Trey Grooms (Analyst)
Okay. That's all super helpful. Thank you for that. And then, you mentioned the price mix, excuse me. You mentioned price mix. Very good in the quarter. I know you guys implemented a price increase in 2025. Maybe if you could kind of... Is that still kind of the flow-through there of the price increase, plus some benefits from mix? Is that the right way to think about that?
Ron Kramer (Chairman and CEO)
Yes, that is correct.
Operator (participant)
We'll go next to Sam Darkatsh with Raymond James.
Sam Darkatsh (Analyst)
Yeah. Hi, good morning. Thanks for fitting me in. Good morning, Ron. Good morning, Brian.
Ron Kramer (Chairman and CEO)
Good morning, Sam.
Sam Darkatsh (Analyst)
So most of my questions have been asked and answered. I just got two or three quickies. So why a JV and not an outright sale? Would be the first question. Second question, I know you're mentioning that Hunter has some connectivity with HBP, but I don't know if it's immediately intuitive externally for us. So if you could be more specific in terms of why you did not include Hunter in the JV contribution. And then finally, you know, you mentioned, Ron, that you're putting a spotlight on the HBP under valuation. Why not do a strategic review then on the whole shooting match as opposed to just looking at the European and Aussie businesses at this point? And then I'll...
Thank you for addressing those three.
Ron Kramer (Chairman and CEO)
Sure. So I'll start off. The structure of a joint venture for Griffon, it enables us to unlock substantial value now and additional value in the future, as we still have a minority interest in it. You know, the current market for consumer companies is not a very good one, and this allows us to accomplish bringing two companies together, increase the economies of scale, and get future benefit. You know, still get future benefit for our shareholders, as the JV progresses. As far as Hunter, you know, we see stronger strategic alignment and upside potential with HBP, and we believe the combination of that business is the best way to maximize shareholder value. You know, it has. It's an iconic consumer brand, it has a great management team.
It's highly recognized, you know, has an asset-light model, and even though the past few years has seen a weak consumer, it still has double-digit EBITDA. But there's a lot of upside to that business, and again, in a weak consumer environment, to sell it now would seem poor timing. As far as your comment about the whole shooting match, we like our company, and we believe that we're going to stay and run this and build it for the foreseeable future.
Operator (participant)
Moving on to Julio Romero with Sidoti & Company.
Julio Romero (Analyst)
Thanks. Hey, good morning, and congratulations on the exciting announcements.
Ron Kramer (Chairman and CEO)
Thank you. Morning.
Julio Romero (Analyst)
I wanted to also ask about the RemainCo going forward. And I know you talked a little bit about, you know, Hunter and HBP combined, but I believe in the prepared, you mentioned that they've worked together in the past. Can you maybe cite an example or two of Hunter and HBP working together? And then also speak to, you know, any potential, you know, cross-selling opportunities or, you know, any opportunities as a combined go-to-market entity?
Brian Harris (CFO)
Sure. So I'll start on the commercial side of the business. You know, of course, with our rolling steel and commercial sectional products, we are often dealing with large warehouses and entities and industrial-type facilities that have large commercial fans that Hunter sells, and so and vice versa. So if Hunter is knows about other projects, it's shared with the Clopay legacy HBP side of the business, and vice versa. And on the residential side, actually, Hunter came out with a pretty clever product that allows fans to be installed in the garage and deals with where outlets may be in the garage. So those are just two early examples.
Julio Romero (Analyst)
Okay, perfect. And then, you know, as we think about the RemainCo, you know, you've always historically been a very strong free cash flow generator. How should we think about the cash conversion cycle of RemainCo relative to the historical portfolio? And should we expect your business to flow cash, you know, at a faster or slower rate going forward?
Brian Harris (CFO)
Yeah. So overall, we'll still be a very highly cash flow generative company. The cash flow, if you're looking at it over the course of the year, the first half will be more positive than in the past under the new construct, but still a little weaker than the second half.
Operator (participant)
We'll take a follow-up from Collin Verron with Deutsche Bank.
Collin Verron (Stock Analyst)
Great, thank you. Thank you for taking my follow-up question. I just wanted to touch on the HBP business a little bit more. I know you called out mix being a good guy. I was just curious how sustainable you think that is going forward, just given the trends in commercial and residential, and then maybe just talk about the margin pressure a little bit, like the order of magnitude of inflation and material costs versus labor costs, just so we can get a sense of how that's tracking. And then my last question is just on the legacy HBP guidance. Was there any change to that, or was the guidance change only related to the announced strategic actions? Thank you for taking my follow-ups.
Brian Harris (CFO)
Sure. The guidance change is only related to the legacy, the guidance we gave is still the guidance, including what we said today for HBP. There was a lot of questions there. So as far as outlook for HBP, you know, really our guidance stays the same. We continue to see pressure on residential volume, mostly driven by the lower end of the market, where the high end of the residential market continues to be buoyant and strong. For commercial, you know, we said we'd have flat volume this year. We still expect that to be the case. You know, already off, that's what we saw in the first quarter already. What was the last question? I'm sorry, Collin, repeat it. I seem to have lost them.
If there are no more questions, Operator?
Operator (participant)
Thank you. This now concludes our question and answer session. I would like to turn the floor back over to Ron Kramer for closing comments.
Ron Kramer (Chairman and CEO)
We're very proud of the track record that this management team has created over a long period of time, and with the actions that we've taken today, we look forward to continuing to deliver superior shareholder value in the future. So thank you all, and we'll be speaking to you soon.
Operator (participant)
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.