Griffon(US:GFF)2021-01-28 20:05Financial Data and Key Metrics Changes - The company reported a revenue increase of 11% to $609 million, adjusted EBITDA up 35% to $75 million, and adjusted EPS up 56% compared to the prior-year quarter [6][17] - Normalized gross profit for the quarter was $177 million, increasing 16% over the prior year, with gross margin expanding by 120 basis points to 29% [17] - First quarter GAAP net income was $29.5 million or $0.55 per share compared to $10.6 million or $0.24 per share in the prior-year period [17][18] Business Segment Data and Key Metrics Changes - Revenue for Consumer and Professional Products (CPP), Home and Building Products (HBP), and Defense Electronics (DE) increased by 21%, 4%, and 3% respectively [20] - Adjusted EBITDA for CPP, HBP, and DE also increased, with increases of 49%, 19%, and 25% respectively [20] - The AMES strategic initiative is expected to result in annual cash savings of $30 million to $35 million and equivalent inventory reductions when fully implemented [12][20] Market Data and Key Metrics Changes - Strong demand was noted across all consumer product categories, supported by a robust housing market and healthy repair and remodel activity [6][12] - Telephonics reported strong order demand with a book-to-bill ratio of almost 1.3 times, and backlog increased to $389 million [14] Company Strategy and Development Direction - The company is focused on portfolio repositioning, strategic initiatives, and operational improvements to enhance free cash flow generation and margin expansion [7][27] - The AMES strategic initiative aims to consolidate operations, increase automation, and support e-commerce growth, with completion expected by the end of 2023 [8][12] - The company executed two strategic portfolio actions: divesting the non-core Systems Engineering Group and acquiring Quatro Design in Australia to diversify operations [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong start to fiscal '21 and highlighted the importance of health and safety measures during the COVID-19 pandemic [11][27] - The company believes that the diversity of its businesses and focus on essential products create a platform for growth and sustainable competitive advantages [27] - Management anticipates continued strong demand driven by household formations and infrastructure spending as the economy recovers [66] Other Important Information - The company authorized an $0.08 per share dividend, marking the 38th consecutive quarterly dividend with an annualized compound growth rate of 17% since 2012 [15] - The company reported net leverage of 3.1 times EBITDA, down from 4.8 times at the end of the first quarter in fiscal 2020 [8][23] Q&A Session Summary Question: Margin expansion in CPP and HBP - Management noted that margin improvement has been a steady process over the years, driven by continuous improvement initiatives and integration of significant acquisitions [32] Question: Drivers behind strong bookings in Telephonics - A healthy pipeline and strong bookings were reported, with expectations of exiting the year at an annualized 10% margin [33] Question: Future margin potential in HBP - Management indicated robust demand and ongoing investments to support growth, with expectations of continued margin improvement [36] Question: Quatro Design acquisition and Australian market - The acquisition diversifies customer base and is expected to align with existing margin profiles [40] Question: Sell-through rates and retail inventory - Strong sell-through rates were reported, with inventory levels in the retail channel being relatively low [43] Question: Impact of steel price inflation - Management acknowledged a lag in passing through higher steel prices but expressed confidence in managing input costs [46][47] Question: Other inflationary pressures - Labor and freight costs were identified as ongoing challenges, with input costs across the board increasing [68]