Fuller(FUL) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Performance Highlights H.B. Fuller reported strong Q2 2025 results, with adjusted EBITDA up 5% to $166 million and adjusted diluted EPS up 5% to $1.18 Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | Change (YoY) | | :--- | :--- | :--- | | Net Revenue ($) | $898 million | -2.1% | | Organic Revenue | - | +0.4% | | Adjusted EBITDA ($) | $166 million | +5% | | Adjusted EBITDA Margin | 18.4% | +130 bps | | Reported EPS (diluted) ($) | $0.76 | -16.5% | | Adjusted EPS (diluted) ($) | $1.18 | +5% | | Net Income ($) | $42 million | -18.4% | | Cash Flow from Operations ($) | $111 million | +$29 million | - The company repurchased approximately one million shares year-to-date, contributing to the increase in EPS[6] - Adjusted gross profit margin increased by 110 basis points year-on-year to 32.2%, driven by cost savings, acquisitions, divestitures, and pricing actions[6][7] CEO Commentary and Strategic Execution CEO Celeste Mastin highlighted strong financial performance driven by disciplined execution and strategic focus on growth and cost management - The company is actively managing costs and leveraging its global sourcing to navigate geopolitical and market uncertainties[11] - Key strategic actions driving performance include an increased focus on pricing, cost savings efforts, and a portfolio shift to higher-growth, higher-margin markets[11] - Despite subdued global economic activity, the company is performing well and has raised its full-year outlook due to strong execution[11] Balance Sheet and Cash Flow Net debt decreased sequentially to $2,016 million, improving the net debt-to-adjusted EBITDA ratio to 3.4x Debt and Leverage Metrics | Metric | End of Q2 2025 | End of Q1 2025 | | :--- | :--- | :--- | | Net Debt ($) | $2,016 million | $2,074 million | | Net Debt-to-Adjusted EBITDA | 3.4x | 3.5x | - Net working capital was relatively flat year-on-year, but increased to 16.6% as a percentage of annualized net revenue, up from 16.2% in the prior year[13][63] - For the six months ended May 31, 2025, net cash provided by operating activities was $57.8 million, a decrease from $129.0 million in the prior-year period, primarily due to changes in working capital[67] Fiscal 2025 Outlook H.B. Fuller has increased its full-year guidance for fiscal 2025, expecting higher adjusted EBITDA and adjusted EPS Updated Fiscal 2025 Guidance | Metric | Updated 2025 Guidance | Previous 2025 Guidance/Expectation | | :--- | :--- | :--- | | Net Revenue Growth | -2% to -3% | Not specified, but organic growth is unchanged | | Organic Revenue Growth | Flat to +2% | Flat to +2% | | Adjusted EBITDA ($) | $615 million to $630 million | Increased (previous not stated) | | Adjusted EBITDA Growth | +4% to +6% YoY | Increased (previous not stated) | | Adjusted EPS (diluted) ($) | $4.10 to $4.30 | Increased (previous not stated) | | Adjusted EPS Growth | +7% to +12% YoY | Increased (previous not stated) | - The company anticipates an adverse impact from foreign exchange on net revenue of 1.0% to 1.5%[16] - For the third quarter of 2025, adjusted EBITDA is expected to be in the range of $165 million to $175 million[16] Segment Performance Engineering Adhesives led Q2 2025 performance with strong revenue growth and significant EBITDA margin expansion Q2 2025 Segment Performance (vs. Q2 2024) | Segment | Net Revenue (Q2'25) ($) | Revenue Growth (YoY) | Adjusted EBITDA (Q2'25) ($) | Adjusted EBITDA Margin (Q2'25) | | :--- | :--- | :--- | :--- | :--- | | Hygiene, Health & Consumable | $397.5 million | +1.1% | $62.0 million | 15.6% | | Engineering Adhesives | $276.4 million | +7.3% | $63.3 million | 22.9% | | Building Adhesive Solutions | $224.2 million | +0.8% | $37.5 million | 16.7% | - Engineering Adhesives' revenue growth was primarily driven by acquisitions (M&A), which contributed 8.4% to its growth[51] - The divestiture of the North America Flooring business, now reported under Corporate Unallocated, resulted in a 100% decline in revenue for that category[51][52] Financial Statements and Reconciliations This section details consolidated financial statements and reconciliations of non-GAAP measures to U.S. GAAP, providing a comprehensive financial overview Consolidated Financial Statements This section presents the company's consolidated income statement, balance sheet, and statement of cash flows for the reported periods Consolidated Income Statement The consolidated income statement details net revenue, gross profit, net income, and diluted EPS for the current and prior periods Consolidated Income Statement Summary (in thousands) | Metric | Three Months Ended May 31, 2025 | Three Months Ended June 1, 2024 | Six Months Ended May 31, 2025 | Six Months Ended June 1, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue ($) | $898,095 | $917,107 | $1,686,758 | $1,727,525 | | Gross Profit ($) | $286,384 | $282,052 | $513,459 | $521,288 | | Net Income Attributable to H.B. Fuller ($) | $41,828 | $51,264 | $55,076 | $82,255 | | Diluted EPS ($) | $0.76 | $0.91 | $0.99 | $1.45 | Consolidated Balance Sheet The consolidated balance sheet provides a snapshot of assets, liabilities, and equity as of May 31, 2025, and November 30, 2024 Balance Sheet Summary (in thousands) | Account | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Total Current Assets ($) | $1,294,575 | $1,299,205 | | Total Assets ($) | $5,132,457 | $4,933,244 | | Total Current Liabilities ($) | $692,127 | $719,290 | | Long-Term Debt ($) | $2,112,428 | $2,010,052 | | Total Liabilities ($) | $3,256,472 | $3,103,396 | | Total Equity ($) | $1,875,985 | $1,829,848 | Consolidated Statement of Cash Flows The consolidated statement of cash flows outlines cash generated from operating, investing, and financing activities for the six-month period Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended May 31, 2025 | Six Months Ended June 1, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities ($) | $57,769 | $128,975 | | Net Cash from Investing Activities ($) | ($151,950) | ($343,774) | | Net Cash from Financing Activities ($) | $12,461 | $160,816 | | Net Change in Cash ($) | ($72,567) | ($64,630) | | Cash at End of Period ($) | $96,785 | $114,823 | Non-GAAP Reconciliations This section provides reconciliations of non-GAAP financial measures, such as adjusted EBITDA and EPS, to their U.S. GAAP equivalents - The company uses non-GAAP measures like adjusted EBITDA and organic revenue to assist in understanding operating performance and comparability with other companies[17] Key Adjustments from Net Income to Adjusted EBITDA (Q2 2025, in thousands) | Description | Amount ($) | | :--- | :--- | | Net Income Attributable to H.B. Fuller | $41,828 | | Acquisition project costs | $3,602 | | Organizational realignment | $6,635 | | Project One (ERP system) | $2,581 | | Interest, Taxes, D&A, and other | $110,514 | | Adjusted EBITDA | $165,660 | - Organizational realignment costs of $6.6 million in Q2 2025 include professional fees for structure changes, employee severance, and facility rationalization costs[27]