Griffon(US:GFF)2025-05-08 13:32Financial Data and Key Metrics Changes - Second quarter revenue decreased by 9% to $612 million compared to the prior year quarter [15] - Adjusted EBITDA before unallocated amounts decreased by 11% to $133 million, with an EBITDA margin of 21.8%, a decrease of 40 basis points [15] - GAAP net income was $57 million or $1.21 per share, down from $64 million or $1.28 per share in the prior year quarter [16] - Free cash flow during the quarter was $3 million, down from $21 million in the prior year [17] Business Line Data and Key Metrics Changes - Home and Building Products (HBP) revenue decreased by 6%, driven by a 7% decrease in volume, partially offset by a 1% improvement from mix [19] - Adjusted EBITDA for HBP decreased by 15% to $109 million due to decreased revenue and increased labor and distribution costs [19] - Consumer and Professional Products (CPP) revenue decreased by 13% to $243 million, primarily due to decreased consumer demand in North America and the UK, partially offset by increased volume in Australia [20] - CPP adjusted EBITDA increased by 18% to $24 million, driven by global sourcing expansion and improved margins in Australia [20] Market Data and Key Metrics Changes - Approximately 85% of Griffin's total segment EBITDA is generated by HBP, which manufactures and sells over 95% of its products in the U.S. [10] - CPP represents about 15% of total segment EBITDA, with only a portion affected by recent U.S.-China tariff policies [11] Company Strategy and Development Direction - The company is maintaining its fiscal 2025 guidance of $2.6 billion in revenue and $575 million to $600 million in segment adjusted EBITDA [22] - The strategy includes transitioning to an asset-light business model to increase flexibility and reduce operating costs [8] - The company plans to mitigate tariff impacts through supplier negotiations, cost management, and leveraging existing inventory [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to manage increased costs due to tariffs and maintain financial guidance for the year [9][10] - The housing market in the U.S. is expected to recover, with a significant demand for new construction [33] - Management believes that the high-end consumer market remains resilient despite economic uncertainties [70] Other Important Information - The company repurchased $31 million of stock during the second quarter, with a total of $498 million repurchased since April 2023 [12][13] - A quarterly dividend of $0.18 per share was authorized, marking the 55th consecutive quarterly dividend [13] Q&A Session Summary Question: What is the annualized revenue exposed to Chinese tariffs for CPP? - Management confirmed that approximately $325 million of CPP revenue is exposed to Chinese tariffs on an annualized basis [29] Question: Is the long-term 15% adjusted EBITDA margin target still achievable for CPP? - Management affirmed that the target is still on the table, depending on the U.S. economy's future performance [31][34] Question: What is the strategy for mitigating tariffs in different product lines? - Management explained that they have diversified their supply chain and are working on alternatives to mitigate tariff impacts [40][42] Question: How is the demand trend for CPP products by geography? - Demand in North America and the UK remains weak, while Australia shows good demand [65] Question: Will inventory be leveraged to manage through tariffs? - Management confirmed that they will leverage inventory to manage through tariffs for the remainder of the year [68]