GFF - Earnings call transcript Q2 2021

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Operator

Greetings. And welcome to Griffon Corporation’s Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. to conference like host, to now Harris. Brian would turn over the your I you. Thank

begin. may You

Brian Harris

Hey, everyone. Executive Good Kramer, Rob. afternoon, our is the Chairman Ron call and Chief Officer. With me on

and Our call details which today. in are be earlier for press issued playback, of release will our is the available recorded being

statements on inherent comments in Griffon’s and of businesses today’s Exchange and Commission the environments past, our As forward-looking in can the about views in our change the various to the release press see world our statements they are operate. uncertainties that changes. Such which Securities and include in risks the will company’s subject performance based as statements cautionary and filings. Please

that our between explained some items are reconciliations These non-GAAP affect comparability press Finally, remarks those today’s of release. in periods. in will included our adjust items for

call Now to I’ll over turn the Ron.

Ron Kramer

everyone. afternoon, Good Thanks.

EBITDA our continued EPS prior and XXXX These strong We’re our revenue increasing off activity. remodel of half were year to fiscal repair and adjusted XX% product consumer by a comprehensive housing first for supported great second by a to driven the quarter the results XXX% and compared in up and with demand quarter. start categories XX%, market up adjusted

cash respectively CPP in our XXX and over profile, strategic of expansion realizing increased which the success coupled points, plan this this margin business early with HBP, year EBITDA both work to Our generation the actions period. and increased optimize our basis is benefits on our remain we are and today. prior XXX Highlighting

and plan on strategic AMES Our on progressing is initiative budget.

data by analytics growth, consolidate of operations, the platform and this for investment create automation, increase previously globally will support announced, XXXX. end AMES e-commerce and new As

in this the expect years ahead. improve margins further We to

so during United pandemic, ease. continue States begin do a As of to into prioritize our employees our we’ll second year we to restrictions global and in as protecting our business managing we move the

work inventory retail end by and to cash demand and Consumer AMES reiterate saw remains completion expectation in month into to Lockheed for fourth this our Earlier was completed reduced the improve divestiture Telephonics the due Professional and of of door segment, to its SEG. will prior We lines. savings Electronics, to realized. supply. consolidate five-year for MHR-XX across XXXX. see quarter. volume from our The commercial as magnitude work programs, initiative In by Products, continued and see awarded strategic healthy fully $XX the the geographies three surveillance be product continue initiative operational of we annual actions Home In of Telephonic’s with Telephonics we for certain maritime benefits when which our of the both the Products helicopters. Navy’s driven segments. year, and are timing for deliveries million to contract our to and profitability on as maritime revenue realize the residential Turning our the outstripping $XXX Building from Martin primarily continue million all we well $XX radars same U.S. schedule multi-mode continue products, reductions decreased communications of performed million to the two, on demand surveillance facilities efficiency to In Defense fiscal demand support and and and

South in Backlog of foreign as countries for as like well Korea continue applications, Greece. and the military We quarter $XXX was times. with trailing products domestic to additional the X.X to opportunities sales see in XX-month Romeo through million our book-to-bill MH-XX

sheet. balance our to Turning

net delevered our the improvement two X.X period. year over quarterly excellent dividends. to flexibility capital We of structure shareholders times to debt-to-EBITDA and organic on to have return in cash to our execute acquisition full and prior We’ve marking continue opportunities turns through

marks facility, credit a and as today, our cash in our distinction year. our Earlier of pipeline excellent President growth revolving and putting opportunities. ample the position share management, to acquisition May past has evolved providing to Board rate fiscal talent. which an an consecutive President dividend This Additionally, Clopay in Lynch, the on Corporation end part we XXXX. with has been per million to through quarterly of over XX% active XXth shareholders of on June XX payable And in $XXX $X.XX at management future the shareholders, we Clopay We of capitalize have regarding million on of served has XX, see the grown focus Clopay our XXXX dividend of liquidity authorized acquisitions initiated and Griffons of past retire on highly a $XXX since Steve company annualized for an driving the XXXX. will of us conglomerate. on strong our from XX, to available decade bench decentralized compound Steve operating XXXX. centralized since at the our years our record holding capitalizing

Vic Clopay ideal the XXXX. and it company is he in the a And of Clopay after in be is served business, the a Clopay and leadership activities consultant the navigated crisis Steve XXXX. apply customer and of subsequently of with of Vic will logistics, his an including will supply company, role wealth the products, tenure, as Clopay is the building Weldon leader the including his can to across the effective Chief industry of his appointed played has the role. the President retirement. knowledge XXXX Vic to role has sales equipment facilities, today people today, candidate through technologies, instrumental into assume new been Steve Vic Operating integration business retirement, company’s culture. leading the of has where President that through having Cornell making XX-year since we transformed During acquisition, working with chain, continue Steve’s it roles financial which Officer industry operations, Clopay. in the completed and Clopay’s and is veteran

success. to We’re continuing Vic forward looking Clopay’s

of Brian through Let take over the me to turn it who financials. some you will

Brian Harris

highlighting $XX.X comparison in start Ron. consolidated margin quarter a points XX% by to by increased million, $XXX XXX year and the profit Revenue I’ll XX.X%. our increasing prior to both EBITDA second XX% was million increased quarter on $XXX over basis GAAP million, increased performance. XX% quarter. basis to the for year you, Adjusted adjusted EBITDA the Thank Gross to prior quarter.

profit restructuring XX.X% XX.X%. charges, $XXX over Excluding million gross prior with related quarter points increasing gross basis was margin XX year to increasing the

$XXX general, selling, million million, were GAAP compared quarter. the quarter Second in to expenses year prior administrative $XXX

from revenue, or in XX.X% Excluding expenses quarter. administrative periods and or were million prior selling, year to $XXX restructuring related compared of million charges general XX.X% both $XXX the

per prior year income net to $XX million share. the of or $X or per $X.XX share, Second compared million was GAAP period quarter $X.XX

million compared comparability in Excluding affect $XX.X adjusted second year million million Capital that and in XX% quarter. unallocated $XX.X expenses for was period quarter. affect year Depreciation with or in amortization from rate the totaled spending million million it excluding to items both in second was quarter compared million for net all the in quarter, $XX was year $X $XX prior $X.XX year income quarter the to XX.X%. tax quarter per $XX the periods quarter, prior excluding to items the and was second in current compared and prior for year-to-date share, were year or the share. quarter. the from Effective depreciation comparability $XX the million line second that $X.XX Corporate periods, prior per current the

XX% Adjusted CPP impact performance, for our the increased and the Regarding by CPP quarter EBITDA of XX%, excluding segment by XX% decreased while disposition. year QX and and year Defense decreased XX% HBP SEG revenue DE the prior for respectively, respectively, HBP over over Electronics XX% XX%. and increased XX%, or prior

During initiative quarter the quarter. was the capital strategic At $X.X approximately incurred the we executing second our charges supporting expenditure AMES efficiency supporting million in restructuring $X.X pre-tax Telephonics, AMES are initiative, were initiatives. on related million the

consolidation to of consolidation two headcount facilities be this and will Island the three fiscal facility $X total facilities have the The our primarily based capital expect occurring cost company-owned approximately We million, of into expenditures for we of XXXX. will in Long which reduced end the consist by year. complete

liquidity. sheet and balance our Regarding

had X XX, and reduction our and our from fiscal of debt reduction prior of XXXX, X.X our a quarter As $XXX second year debt of times X.X net based turn end. year March on turn covenants. from we a is as calculated leverage million This

uses than offset Griffon more the will first the of of reminder, the by cash a in months As six cash be which year, flow of year. significant fiscal second generation half its the in

credit subject outstanding under facility was Our $X.XX cash million loan covenants. $XXX to and revolving the million and equivalents $XXX Borrowing were billion. debt was certain availability

$XXX on our EBITDA, second and our outdoor recovery remodel better. of a the approximately focus are update us, we the demand products provide or AMES we one-time macroeconomic contributing for are in see So across know, to call our a $X.X projects revenue healthy that to call of was and our With homeowner once you activity unallocated and housing guidance, initiative of to market during and and consumer charges million earnings a XXXX living portfolio, adjusted guidance year as guidance continue. excluding our quarter The Telephonics strong and constructive year. provided regarding billion continuing environment course behind during generally and on repair do not most November guidance of November typically related

those labor headwinds chain While from some tight a we expected managing cost are the effects. are through inflation, supply and seeing disruptions we market,

$X.X revenue of half QX year original of of expecting and trailing line excluding year unallocated As with XXXX results, our substantial year’s be approximately EBITDA the are performance this substantially we QX $XXX our consideration in produced will with fiscal charges. of first quarter and one-time and guidance in billion to above the and million XX a our comparatives That adjusted months. and to strong prior result outperformance our

the over turn I’ll Ron. to Now back call

Ron Kramer

Thanks, Brian.

environment, our strengthening leading We the driven a repair and portfolio. with second of XXXX product a by fiscal in strong and economy, global coupled half remodel expect continued housing growth industry

and invest existing active ways exploring grow. opportunities are our in further in actively businesses and acquisitions are to diversify evaluating to and We potential

value. on pleased driving with progress we’ve We’re the long-term shareholder made

benefits initiatives. from completing our However, there are still to come strategic significant

dedication, to any perseverance for questions. throughout we’ll Finally, I’d Operator, take challenging their like this thank X,XXX employees exceptional and our period. performance

Operator

[Operator with you. Instructions] Our your line Labick CJS question with proceed of Thank the Bob from question. Please first Securities. comes

Bob Labick

on year. fiscal Thank half afternoon first Good of fantastic the congratulations the and you.

Ron Kramer

Thanks, Bob.

Brian Harris

Thanks, Bob.

Bob Labick

supply anyway I’ll guess, does out in mentioned strong this How obviously, that CPP I question. to play you’re HBP -- you Did margins you get raw pointed my nicely out, crazy, some rhetorical. Very supply correctly, guidance, it think in some you but up chain what that issues and than you should Did are see headwinds, actually and is, these or raising you talk year-over-year. material you situations? I most you think I mitigate hear to how chain a margin to about are there? able little positioned But profile the just out better we bit can guys the and I raw about of material due

Brian Harris

Sure. continue I’ll take efficiencies this with we on vendors. our one. always to A work things, and of couple work as our

In price addition, have on passing through. been we working

of will of and Some work that continues fourth our continue should will have have QX, or that the into full quarter. benefit and into

Bob Labick

Got it.

you’re I in relatively over then, that from still there years? we But still mean, still things? early several margin still CPP you’re those And obviously, as from that should expansion continued is Great. to obviously next on aside expect suggesting in initiative, think the right AMES run I Okay. some room fluctuations short-term but the margins well. is

Brian Harris

Absolutely.

we’re -- that additional continue realize work saw in are and doing. that’s our best of benefits see the we work to continuing We’re that initiative for benefits with started you’ll And to some those we the even already scorecard from we’ve costs really to and the QX. initiative

Our the -- businesses take. margin still was margin up rather or gross across basis still XXX give points our overall

Ron Kramer

to I’ll the happening of control. about We We’ve add are in out try stay Ron. short we that about all on that things run for are. never and that the that. run always focused it’s long Bob, worry just to building things the are that our talked

to the to So somewhat pandemic. able prosper off not demand. way that the manage as before been managing improvement we’ve of a We’ve been margin kicked result through, just but initiative we for COVID through into able our we went was obviously

story we a and the very Lynch you to the improve on have we that in do of of we are if where an ability Steve the and improve what Margin where journey buy the to today is AMES improvement were President both and at Griffon baton. about margins business the of as look margin optimistic We part are what when multiyear Clopay we improvement DNA makes pass core became businesses. to continued

line That of get into We’re margin But we’re will improves. the doing. happen shape. the our do Telephonics going businesses improvement the on what back as to both core continue as work top our business across we to and that see

Operator

Please comes Sidoti question from your & of proceed with Julio Romero Our Company. with the question. line next

Julio Romero

Hey. Good Brian. afternoon, Ron and

Brian Harris

Hi, Julio.

Julio Romero

Products to wanted your ask segment. I So and Building about Home

times dynamic segment there few turn know quarters. I at value you I and lower So be just wondering that inventory you market, inventory the margin or think cost in annually about over you X Just if Would a then maybe to the position and fiscal next next on in there out play segment? that the moderate should the speak in heading benefit in margin year? how to you have near-term margins could into that

Brian Harris

offset QX that and into beyond. quarter QX increase we price lag into of see -- the pressure of the and as the we work price continue play could general the we’ll and third in get the come Well, once for some increases see of and to timing

Julio Romero

Okay. Got it.

it So, feel your potential confident so that they then be increases pass they’re moderation, and -- ability then about or? while near-term price would should to lagging

Brian Harris

Exactly.

Julio Romero

Okay.

Brian Harris

And…

Julio Romero

And -- okay.

Brian Harris

really… That will

Julio Romero

Go ahead.

Brian Harris

out That’s this the end to fiscal going really year. play back toward more of

with that but clearly So, take this the to increase a our moment for guidance confidence we year. chose to level

Julio Romero

Absolutely. you just segment? your if reminder could that correct it, is, just Typically, as my I within on that follow segment. that understand in a seasonality up us is is the And I this quarter, weakest guess give

Ron Kramer

strongest the year. Sure. we expect strong pandemic though, -- things during strong we the CPP, the different to Generally been and demand the has QX have it for QX of quarters the and through of remain balance been and honestly

Operator

of Baird. proceed with Please line Josh question. comes Chan next Our your with from the question

Josh Chan

afternoon, Congrats and on Brian. Good strong quarter. a Ron

Brian Harris

you? are How Josh. Thanks,

Ron Kramer

Thank you.

Josh Chan

Thanks. appreciate the performance. Good. about expected I comments the

when shows that’s first kind the mitigating. strong you HBP of mean think my that businesses, execution, about the good kind talked materials? business. thinking difference in are continued question on any the the I of CPP terms headwinds and on and same that guess, materials about in of of confidence that the so sort cadence offsets offsetting see. how in to raw is you But I dynamics the price raw I you’re

Brian Harris

It’s Yeah. similar.

overall fourth that just we’ll working we So in in be good we’re have the expect that But year. second had third comps year so our benefit you year the matter. to it we’ll very there’ll the last in still quarter. the that of of full very quarter price lag, into I increases also in QX be the remind and QX strong last done a and on weather and guidance for QX says line half will

Josh Chan

That’s right.

I Okay. And that’s happened then QX, has to from my think second has but I question that is on your stepped before, which internal typical. guess, inventory, QX up not

So in higher kind of inventory a that drove particular that there? anything

Brian Harris

some am U.K. aware are to things. China There out costs a well been was as as and China U.S. material are is are for commodity and are our impact because from you There FX the backed There’s also I higher couple for Australia inventory. as that us well, getting there have locations of Yeah. and some product of international pulling and in get you get the things in advance sure from our ordering ports One up. lags in most -- place of are

we’re we’re So to which amended so that, are our making of we accustomed. and customers supply and ahead sure to continue they they

Operator

question proceed next Company. question. Please Bergner Gabelli your comes with Our with from Justin &

Justin Bergner

Ron. Good afternoon, Brian. Good afternoon,

Ron Kramer

Hi Justin.

Brian Harris

Hi Justin.

Justin Bergner

up question. pick to I just here. on questions Few guess the last

importing on the versus of from how you remind what China? materials your for centric And you are primary what So in products manufacturing of internal, U.S. that me sort are sorry… or sort rely you’re just CPP

Brian Harris

Sure.

So…

Justin Bergner

it? for imports external …

Brian Harris

Sure.

America America. So we in of North what CPP XX% North make in we sell

and small about XX%, that of that’s is talk planters. imports, lot components, a pots and components the either when So some other I

was what is the in other from other of part places. speaking from U.K. also The also and get of products and Australia I China particular

Ron Kramer

this But and is the in is core sold XX% North American of the company, America. said, America in as Brian manufacturing manufactured North about that’s

Justin Bergner

Got it.

mentioned issues, you Products, And if of demand on mean, supply, sort competitors? some share to that that a opportunity could by give are Sort imports challenged I elaborate given your of and Building ability Home over -- just taking of to that that you to in an meet is exceeding chain are greater any there a supply make demand to which being you there point bit? note maybe take of

Brian Harris

and actually us what about We’re some is are trends have is in backlog the there robust build commercial that gives we for suggesting see a we and consumer we that backlog that that are this and have that that business are demand the comment such played happier country, able experiencing to confidence demand against we we across it. couldn’t the strong -- playing be of pressures about steel, wood, out and is inflationary out obvious very but labor and have freight, tight balanced we that’s a

Ron Kramer

Yeah. their the from and everything And components U.S. sourced is steel of all of majority HBP,

Operator

with Our your next the comes proceed of question line [Operator with Instructions] Truist from Hughes Keith question. Please Securities.

Keith Hughes

Thank you. in if next growth your difficult CPP, for just just retrenchment guidance at tough for pull was the A it next coming it strong quarter, in sales here, in that look on of looking we business comps always really going the quarters, comps several of to start the but and April, you against pace or the several question is them sales quarters? the maybe not to another none through in those

Ron Kramer

you we’re to seeing what I asking up demand-wise. said, you are just broken strong. little continues a Demand was be It but believe what

Brian Harris

third us along Board. expect able those into those hit Across equally in quarter. the pass saying we’re in be And to more we fourth to pressures that quarter of for the to some the trends what pricing is and

Ron Kramer

Yeah.

Keith Hughes

Okay.

Ron Kramer

weather, last just good very affecting very a note. year particularly reminder results And as as with excellent a year our last QX Hello? was strong CPP’s

Operator

with from comes Trey of Grooms line Our Stephens. the next question

Trey Grooms

congrats first give strong have a I Brian, Hey. Good my afternoon, and half. you Ron on also to and

Brian Harris

Trey. Thanks,

Trey Grooms

in the So I have thinking kind I the think I to the quarter? the around win here, and about there? fourth through most we the Also, continue of kind been I timing business, contract DE, to quarter if and But guess quarter, of pretty this expect be over of issue it of flows when new well questions beaten we’re should costs in it. should to gears about fiscal think, timing get Defense death the third Electronics the cadence we switching how thinking

Brian Harris

from is coming of recover and materials of There strange its we business. half In lumpy a things business expecting bit half. it’s contracts just some first back are and doing there, in general, coming certain delays door. nothing Sure. in timing fine, out to second our the our getting But -- nature in the by nature a just by is

Ron Kramer

about have We we’ve stands company the about building products, the next get continue year. foreign is optimistic doing consolidation positioning, that Telephonics surveillance, incumbent military to of through sales and it The of this in about been garner This with we tomorrow. very are is position into This remain predictable again product some where Telephonic’s ability just building the future. the confidence facility reconnaissance. its But category, trying plant as timing. will on the intelligence, that we grow core show its in year to less and into through for some to

Trey Grooms

kind of rebound and kind Would the the the of being of lumpy for the in And also historical kind Got back type modeling margins half back back do here to topline timing to with you expect issues. just kind of purposes, of these comes it. kind expectations? then as of kind

Brian Harris

Yeah.

Ron Kramer

into would of expect to year. We end margins improve the Yeah. the the

Trey Grooms

guys. it me. for Thanks, That’s Perfect.

Brian Harris

Thank you.

Ron Kramer

Thank you.

Operator

session. the to At back to comments. closing for of We turn reached question-and-answer this the end over Kramer have like call I’d Ron time, the

Ron Kramer

working healthy, talking Stay all hard us. you look August. joining Bye-bye. and in you Thank to to stay everyone. forward safe, be for We’ll

Operator

This concludes today’s conference.

time lines disconnect at for we your participation. may your and thank You you this

Griffon (GFF) 2 May 212021 Q2 Earnings call transcript