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GC

GRIFFON CORP (GFF)·Q1 2025 Earnings Summary

Executive Summary

  • Solid start to FY25: Q1 revenue of $632.4M (-2% YoY), GAAP EPS $1.49 (+82% YoY), and adjusted EPS $1.39 (+30% YoY), with gross margin expanding to 41.8% (+500 bps YoY) on lower material costs and CPP sourcing benefits .
  • Free cash flow strength ($142.7M) and disciplined capital return (0.6M shares repurchased for $42.3M; 54th consecutive dividend at $0.18) provide support to the equity story and buyback-driven EPS growth .
  • HBP remained resilient with revenue flat and adj. EBITDA up 2%, while CPP delivered a meaningful profitability inflection (adj. EBITDA +$12.7M YoY) despite softer North American demand; Australia and sourcing initiatives were key drivers .
  • FY25 guidance reaffirmed: ~$2.6B revenue; segment adj. EBITDA $575–$600M; free cash flow to exceed net income; HBP EBITDA margin “in excess of 30%” and CPP to continue margin improvement; management confident on tariff mitigation (pricing, supplier negotiations, diversified sourcing) .
  • Near-term catalysts: continued buybacks ($390M remaining authorization as of 12/31), dividend stability, and delivery against unchanged FY25 guidance despite tariff headlines and CPP demand headwinds .

What Went Well and What Went Wrong

  • What Went Well

    • CPP profitability inflection: adj. EBITDA rose to $18.2M from $5.5M YoY, driven by completed global sourcing expansion and Australian growth .
    • Margin expansion: normalized gross margin increased to 41.8% from 38.6% (adj.) in prior year; GAAP gross margin rose to 41.8% from 36.8% YoY .
    • Capital returns and FCF: $142.7M free cash flow; $42.3M of repurchases at $69.40/share; quarterly dividend of $0.18 declared .
    • Management quote: “Fiscal 2025 is off to a strong start… free cash flow of $143 million… on track to meet our financial targets for the year.” — CEO Ronald Kramer .

  • What Went Wrong

    • Top-line softness: total revenue -2% YoY; CPP revenue -4% on weaker North American/UK demand; HBP flat with commercial softness offsetting residential strength .
    • Cost mix: HBP faced higher labor and distribution costs, partially offsetting materials tailwind .
    • Macro/tariffs uncertainty: management flagged tariff policy fluidity; CPP exposure in China (Lawn & Garden, Hunter Fan) bears monitoring despite mitigation plans .

Financial Results

MetricQ1 FY2024Q4 FY2024Q1 FY2025
Revenue ($M)$643.2 $659.7 $632.4
GAAP Diluted EPS$0.82 $1.29 $1.49
Adjusted EPS$1.07 $1.47 $1.39
Adjusted EBITDA ($M)$116.4 $137.5 $131.2
Gross Margin % (GAAP)36.8% 39.9% 41.8%
Free Cash Flow ($M)$132.5 N/A$142.7

Segment performance (revenue and adjusted EBITDA):

SegmentQ1 FY2024 Revenue ($M)Q1 FY2025 Revenue ($M)Q1 FY2024 Adj. EBITDA ($M)Q1 FY2025 Adj. EBITDA ($M)
Home & Building Products (HBP)$395.8 $395.4 $124.7 $127.0
Consumer & Professional Products (CPP)$247.4 $237.0 $5.5 $18.2

Key balance sheet and cash metrics:

KPIQ1 FY2024Q4 FY2024Q1 FY2025
Cash & Equivalents ($M)$110.5 $114.4 $152.0
Total Debt ($B)$1.46 $1.54 $1.49
Net Debt ($B)$1.35 $1.43 $1.34
Net Debt / EBITDA (per covenant)2.5x 2.6x 2.4x
Share RepurchasesN/A$68.4M in Q4’24 $42.3M; 0.6M shares at $69.40 avg
Dividend per Share$0.15 $0.15 $0.18 declared

Estimates vs. actuals:

  • Consensus estimates from S&P Global were unavailable at time of writing due to API rate limits. We are therefore not showing an estimates comparison for Q1 FY2025. We attempted retrieval but were unable to access data due to daily request limit.

Guidance Changes

MetricPeriodPrevious Guidance (Nov 13, 2024)Current Guidance (Feb 5, 2025)Change
RevenueFY2025~$2.6B ~$2.6B (unchanged) Maintained
Segment Adjusted EBITDAFY2025$575–$600M (excludes ~$55M unallocated; ~ $5M strategic review costs) Unchanged Maintained
Free Cash FlowFY2025FCF to exceed net income Unchanged Maintained
HBP EBITDA MarginFY2025In excess of 30% Expect ~30% in FY25 per management Maintained
CPP RevenueFY2025In line with FY2024 In line with FY2024; NA weakness offset by Australia Maintained
HBP RevenueFY2025In line with FY2024 In line with FY2024; resi up, commercial down Maintained
Tax Rate (normalized)FY2025~28% Unchanged context in Q1 (effective 27.3% GAAP; 27.7% adjusted for Q1) Maintained framework
Interest expenseFY2025~$102M No change indicated Maintained
DividendOngoingIncreased to $0.18 in Nov 2024 $0.18 declared Feb 5, 2025 Maintained
Buyback AuthorizationOngoingNew $400M (Nov 2024) $390.3M remaining as of 12/31/24 Active

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2024, Q4 FY2024)Current Period (Q1 FY2025)Trend
CPP global sourcing/asset-lightStrategy underway; improved costs; completion by end CY2024; margin target 15% Completed; CPP adj. EBITDA inflects; path to 12% L&G / 20% Hunter; transitioning inventory to sourced Positive execution; margin ramp
HBP residential vs. commercialHBP strong EBITDA; resi improving, commercial softer Resi volume up, commercial down; market share gains at high-end; pricing/cost in line with 2024 Stable resi strength; commercial softness persists
Tariffs/supply chainTariff risk cited as a factor in outlook Tariffs “fluid”; mitigation via price, supplier negotiations, diversified sourcing; guide reiterated Managed risk; guidance intact
Capital allocationStrong FCF; buybacks and dividend increase; new $400M authorization $42M buybacks in Q1; $0.18 dividend; intent to remain opportunistic on repurchases Shareholder returns continue
Regional trendsAustralia growth supporting CPP; North America demand soft Australia growth continues; NA/UK demand weak; Pope acquisition contributes Mixed geography; Australia offset

Management Commentary

  • “Fiscal 2025 is off to a strong start… free cash flow of $143 million… we are on track to achieve our financial targets for the year.” — Ronald J. Kramer, CEO .
  • “All aspects of our fiscal 2025 guidance provided in November 2024 remain unchanged, including $2.6 billion of revenue and $575 million to $600 million of segment adjusted EBITDA…” — Brian G. Harris, CFO .
  • On tariffs: “We expect to mitigate the effects… through a combination of price, supplier negotiations and further diversifying our global supply chain… allowing Griffon to maintain its long-term EBITDA margin target.” — Ronald J. Kramer .
  • On HBP: “We believe we’re outperforming the market and gaining market share… we think the commercial business has growth [as the economy recovers].” — Brian G. Harris and Ronald J. Kramer .
  • On CPP margin path: “Step 2… look across the globe for the best sourcing opportunities… we expect, over time, the consumer will come back.” — Brian G. Harris .

Q&A Highlights

  • Tariffs and guidance: Management confirmed tariff impact is contemplated and mitigation measures support reiterated FY25 guidance .
  • CPP margin roadmap: Transition from manufactured to sourced inventory underway; longer-term target implies ~12% margins in Lawn & Garden and ~20% in Hunter Fan, blended ~15% CPP .
  • HBP dynamics: Gaining share in high-end residential; commercial demand tied to ABI/Dodge indices that appear to be bottoming; pricing/cost expected roughly in line with 2024 .
  • Capital returns pacing: $42M repurchased in Q1; management intends to be opportunistic buyers contingent on valuation and FCF .

Estimates Context

  • We attempted to retrieve S&P Global consensus (Primary EPS Consensus Mean, Revenue Consensus Mean, and # of estimates) for Q1 FY2025 but data were unavailable due to API daily request limits at the time of analysis. As a result, comparisons versus Wall Street consensus are not shown.
  • Implication: Absent published consensus, we focus on sequential and YoY trajectories and guidance adherence.

Key Takeaways for Investors

  • HBP remains the cornerstone (stable revenue, strong margins), and management expects >30% EBITDA margin in FY25; commercial recovery is an upside lever as macro improves .
  • CPP’s profitability inflection from sourcing is tangible and leveraging Australia; North American demand remains a headwind, but execution supports ongoing margin improvement .
  • Margin quality improved materially (gross margin +500 bps YoY) on input tailwinds and mix; watch labor/distribution costs and price-cost balance into spring/summer .
  • Robust cash generation plus active buybacks and dividend underpin EPS growth and provide downside support; $390M buyback capacity at 12/31/24 remains a catalyst .
  • FY25 guidance reiterated despite tariff uncertainty, with credible mitigation levers; monitor policy developments and CPP import exposure (China for L&G and Hunter Fan) .
  • Balance sheet steady (2.4x covenant leverage) with liquidity to fund capital returns and investments; leverage trends supportive of continued buybacks .
  • Near-term setup: Seasonal softness normalizes in HBP Q2; execution on CPP sourcing and tariff mitigation, plus continued capital returns, are the narrative drivers into the next print .

Citations:

  • Q1 FY2025 8-K press release and financials:
  • Q1 FY2025 earnings call transcript:
  • Q4 FY2024 press release (for prior-quarter comps and FY25 guidance baseline):
  • Q3 FY2024 press release (trend context):
  • Q1 FY2025 dividend press release: