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GC

GRIFFON CORP (GFF)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 revenue declined 9% year-over-year to $611.7M; adjusted EPS was $1.23 and adjusted EBITDA was $118.5M, with gross margin up 80 bps to 41.2% versus normalized prior-year levels .
  • Versus Wall Street consensus (S&P Global), EPS beat (+$0.14), EBITDA beat (+$5.5M), while revenue missed (-$6.5M); guidance for FY2025 was reaffirmed at $2.6B revenue and $575–$600M segment adjusted EBITDA, FCF > net income, tax rate ~28% *.
  • HBP remained the profit engine (~85% of segment EBITDA expected for FY25), maintaining a ~30% EBITDA margin; CPP improved EBITDA year-over-year on asset-light sourcing and strong Australia, despite weaker North American/UK demand and tariff uncertainty .
  • Capital allocation remained shareholder-friendly: $30.5M buybacks (0.4M shares at $72.64) and a $0.18 quarterly dividend; leverage at 2.6x net debt/EBITDA with $364.5M revolver availability .
  • Near-term stock narrative: confidence from guidance reiteration and sustained HBP margins vs. caution on CPP demand/macro/tariffs; product innovation (VertiStack Avante award) supports premium positioning and potential share gains .

What Went Well and What Went Wrong

What Went Well

  • HBP sustained strong profitability with ~30% EBITDA margin; management highlighted steady residential performance and favorable mix, reinforcing HBP’s leadership and resilience .
  • CPP EBITDA rose 18% YoY to $23.7M on global sourcing benefits and Australia strength (including Pope), despite volume declines in North America/UK; a positive margin trajectory was reiterated .
  • Product innovation: Clopay’s VertiStack Avante won Best in Show at IBS 2025, with management expecting it to “revolutionize” installations and support future innovation pipeline .
  • Quote: “Home and Building Products maintained a strong 30% EBITDA margin... CPP continued to deliver improving EBITDA margin year-over-year” — Ronald J. Kramer, CEO .
  • Guidance maintained despite tariff uncertainty; management outlined multiple mitigation levers (supplier negotiation, cost management, inventory leverage, pricing) .
  • Shareholder returns persisted via buybacks and dividends; cash generation and balance sheet flexibility preserved (2.6x leverage) .

What Went Wrong

  • Consolidated revenue fell 9% YoY; HBP revenue (-6%) reflected the return to normal seasonality with related overhead absorption impacts and higher labor/distribution costs; CPP revenue fell 13% on reduced consumer demand in North America/UK and FX headwinds .
  • EBITDA declined YoY (adjusted EBITDA -12%); EBITDA margin before unallocated fell sequentially to 21.8% from 23.0% in Q1, as seasonal softness and cost pressures weighed on HBP .
  • CPP faced continued macro weakness in North America/UK; FX was a 2% revenue and 1% EBITDA headwind; tariff exposure in CPP (fans and lawn & garden) remains a focal risk requiring ongoing mitigation .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$660.0 $632.4 $611.7
Diluted EPS (GAAP) ($)$1.29 $1.49 $1.21
Adjusted EPS ($)$1.47 $1.39 $1.23
Adjusted EBITDA ($USD Millions)$138.0 $131.2 $118.5
Gross Margin % (normalized)41.1% 41.8% 41.2%
EBITDA Margin % (before unallocated)20.8% 23.0% 21.8%

Segment Breakdown (YoY comparison)

SegmentQ2 2024Q2 2025
HBP Revenue ($USD Millions)$392.1 $368.2
HBP Adjusted EBITDA ($USD Millions)$128.9 $109.4
CPP Revenue ($USD Millions)$280.8 $243.5
CPP Adjusted EBITDA ($USD Millions)$20.1 $23.7

Notes:

  • HBP revenue -6% YoY on -7% volume, +1% mix; HBP adj EBITDA -15% YoY due to lower revenue/overhead absorption and higher labor/distribution costs, partly offset by material cost reductions .
  • CPP revenue -13% YoY on -13% volume; Pope contributed +2%, FX -2%; CPP adj EBITDA +18% YoY on sourcing benefits and Australia improvement .

KPIs and Balance Sheet (Quarterly)

KPIQ1 2025Q2 2025
Free Cash Flow ($USD Millions)$142.7 $3.0
Cash & Equivalents ($USD Millions)$152.0 $127.8
Net Debt ($USD Millions)$1,337.7 $1,422.8
Net Debt / EBITDA (Leverage) (x)2.4x 2.6x
Revolver Availability ($USD Millions)$427.5 $364.5
Net Capex ($USD Millions)$0.2 $13.4
Share Repurchases (shares / $USD Millions / avg px)0.6M / $42.3 / $69.40 0.4M / $30.5 / $72.64

Guidance Changes

MetricPeriodPrevious Guidance (Nov 2024/Q4’24)Current Guidance (Q2 2025)Change
RevenueFY 2025~$2.6B ~$2.6B Maintained
Segment Adjusted EBITDAFY 2025$575–$600M $575–$600M Maintained
Unallocated CostsFY 2025~$55M Unchanged (implied) Maintained
Strategic Review - RetentionFY 2025~$5M Unchanged (implied) Maintained
Free Cash FlowFY 2025> Net Income > Net Income Maintained
Interest ExpenseFY 2025~$102M Unchanged (implied) Maintained
Normalized Tax RateFY 2025~28% Unchanged (implied) Maintained
HBP EBITDA MixFY 2025n/a~85% of segment EBITDA Disclosure
DividendQuarterly$0.18 (Feb 5) $0.18 (May 8) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs/MacroManaged prior tariff cycles; flexibility via global sourcing; FY25 CPP margins >9%; tax rate ~28% Annualized ~$325M CPP revenue exposed; mitigation via supplier diversification, inventory, pricing; maintain FY25 guide Elevated focus; mitigation plans accelerated
HBP Margins & SeasonalityHBP EBITDA >30%; price/cost stable into FY25; Q2 seasonally lowest ~30% margin maintained; Q2 softness aligned with historical seasonality; stronger 2H expected Stable/high margins; typical seasonal trajectory
CPP Asset-Light & SourcingGlobal sourcing completed; margin trajectory gradual; target 15% over time EBITDA up YoY; supply chain diversification away from China by end of calendar year (fans) and into FY26 (lawn & garden) Execution progressing; margin improvement continuing
Product InnovationInvestment in capacity/technology; premium mix focus VertiStack Avante wins IBS “Best in Show”; expected to revolutionize installations Positive; supports pricing/mix and share
Regional DemandU.S. resi strong; UK showing signs of recovery CPP demand weak in North America/UK; Australia strong incl. Pope Mixed; Australia strength offsets NA/UK weakness
Capital AllocationNew $400M buyback; dividend increase; FCF outlook >$1B over 3 yrs Ongoing buybacks ($31M in Q2), 55th consecutive dividend; leverage steady Continuing shareholder returns

Management Commentary

  • “Home and Building Products maintained a strong 30% EBITDA margin, driven by steady residential performance and favorable mix. Consumer and Professional Products continued to deliver improving EBITDA margin year-over-year” — Ronald J. Kramer .
  • “Approximately 85% of Griffon’s total segment EBITDA is generated by our Home and Building Products business… we are maintaining our financial guidance for fiscal 2025” — Ronald J. Kramer .
  • “CPP will be able to mitigate the impact of all tariffs through supplier negotiations, cost management, leveraging existing inventory and when necessary, taking price action” — Brian Harris .
  • “We continue to believe our stock is a compelling value… [Board] authorized a regular quarterly dividend of $0.18 per share” — Ronald J. Kramer .
  • “VertiStack Avante… Best of IBS ‘Best in Show’… we expect this product will revolutionize how doors are incorporated into projects” — Ronald J. Kramer .

Q&A Highlights

  • Tariff exposure and mitigation: ~$325M annual CPP revenue affected; management emphasized diversified supply chain and timing to mitigate impacts within FY25 and diversify fans by year-end .
  • HBP pricing and seasonality: Mid-single-digit price actions saw good realization; competitors followed; Q2 is typically lowest volume; expecting better volume vs original guide in 2H .
  • Demand by geography: CPP demand weak in North America/UK; Australia strong with Pope acquisition; leveraging inventory to manage tariffs near-term .
  • FCF cadence: Expect FCF > net income and a strong 2H; Q2 FCF $3M vs prior-year $21M; capex net $13M .
  • HBP resilience: High-end consumer remains resilient; garage door ROI supports remodel demand; management sees market share gains continuing .

Estimates Context

MetricConsensus (S&P Global)ActualOutcome
Primary EPS ($)$1.09*$1.23 Beat
Revenue ($USD Millions)$618.2*$611.7 Miss
EBITDA ($USD Millions)$112.7*$117.1*Beat

Notes:

  • Values retrieved from S&P Global*.
  • EPS “actual” reflects adjusted EPS; EBITDA “actual” per S&P differs slightly from company-reported adjusted EBITDA ($118.5M) due to definitional differences *.
  • Estimate count: EPS (6), Revenue (7) for Q2 FY2025*.

Key Takeaways for Investors

  • HBP’s sustained ~30% margins and premium positioning underpin FY25 profitability; seasonal Q2 softness appears transitory with 2H volume expected to improve .
  • CPP margin trajectory continues to improve despite macro softness; accelerated supply chain diversification should limit tariff impact and support longer-term margin targets (15%) .
  • Guidance reaffirmation (revenue $2.6B; segment EBITDA $575–$600M; FCF > net income) is a positive signal amid tariff headlines; narrative likely supports multiple resilience .
  • Capital returns remain robust (buybacks, dividends) with leverage at 2.6x and ample liquidity; continued repurchases could be a support for shares .
  • Product innovation (VertiStack) strengthens HBP’s competitive moat and mix, providing catalysts for premium growth and share gains .
  • Watch near-term: CPP North America/UK demand, tariff policy developments, FX; company plans multiple mitigation levers including pricing and supplier shifts .
  • For trading: EPS/EBITDA beats vs consensus and guidance reiteration are supportive; revenue miss and macro/tariff watch may cap near-term rallies; focus on HBP volume trajectory into Q3/Q4 and tariff mitigation execution in CPP *.