GFF - Earnings call transcript Q4 2021

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Operator

Greetings. Welcome to the Griffon Corporation Annual and Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Brian Harris, Chief Financial Officer of Griffon Corporation. Thank you.

begin. may You

Brian Harris

Good is Hillary. Officer. With on me Thank Kramer, morning, our call Ron Executive Chairman the you, everyone. and Chief

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

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

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

turn Now over call I'll Ron. to the

Ron Kramer

was everyone. year good XXXX Griffon. and a Thanks, record morning, for

operating driven and the We our and in continue robust businesses, and with lifestyle, reflecting the in garden highly a time spent internationally, portfolio in for outdoors. house significant around a renewed see product dynamic market including Griffon XXXX strong the challenging to more and a US effectively and lawn, momentum, navigating leading by housing while and a entered the demand environment. a appreciation

of record of inclusive per of Telephonics, billion, EBITDA $X.X of economy, global and million escalated, entire the creating then to adjusted Despite in course in see for across emerged adjusted economy $X.XX and healthy the the generated continue we record the year, we challenges increasing During second half. earnings global revenue record demand challenges and but the supply particularly us headwinds of share. these segment XXXX, $XXX

for see backlog, unprecedented also continued levels businesses well of Our into XXXX. momentum bodes continued which to

of able growth ourselves taken actions Our company being record realize a increased strengthen of benefits profitability. strategic to and year position for our to future we've the the direct result the this is performance and

performance, with ongoing and the have along us our of of impacted infrastructure commercial the difficult better, strategic strength activity. made labor, our market of disrupted homeowner strategic year, and the COVID Pennsylvania operations. in critical Particularly CornellCookson and record it investments but by be chain and on facility we and at this continue operating of ability into in supply to to repositioning our market levels meet environment. increasingly not second flow global domestically demand acquisitions, our initiative, our AMES to an have disruptions, Notwithstanding it's and affected half capitalize consistent Top, steady is portfolio internationally, Our both the door Mountain over. position the we a housing put in transportation

strategic secure we with areas achievement business. achieve growth. competitive impressive and the inefficiencies. electronics business increasing our exploration of product challenges is taken market also long realize company the In both significant needed the can our We've the we in competitiveness. product begun our Our broadly stronger vendor customers we replenish and challenges the affected more restock their be to and across base strategic terrific Telephonics levels and of landscape. evaluating year our meet enhancing focus with as desperate looking these to given a to a history the including where Telephonics, defense same to sale of inventory This continue as September, to announced goal value of on value are opportunities for supplier opportunities believe a to we and by and resources shareholders alternatives, the continued these well actions have for the demand this their across their shelves presents

that we active optimistic opportunities about are will we immediately and to continue of front, acquisition pipeline finding an accretive. extremely businesses acquisition the On be have value-enhancing high-quality and

give and gains be activity, markets, Revenue international year largely and and store were the these of widely and driven disruptions for disruptions, results by Domestically, EBITDA Products, increased the in AMES appears the disruptions. favorable segments. other continue Professional shutdowns catching adjusted volume detail and have demand X% with some around pandemic volume after XX%. increased and benefited more exchange. our reported mix and and foreign US the price, supply increased business. up consumer AMES consumer Despite chain upon. commented Consumer healthy. by performance that the increase volumes due revenue to in to to lower to demand from been transportation earlier year-over-year Starting shift Let's The labor,

profitability, of in of on the costs, continued terms headwinds continue have be margins. to with coupled up US, with costs and rapidly rising input increased In lag material catching price been

expect We parity our of reach the second of to at end XXXX. and price quarter cost

at to finally EBITDA for successful by price revenue, interruptions of increased through with sectional cross benefited signed as commercial prices for the evidenced to cost increased Turning record volume. increase respectively. of demand. saw continued throughout XX% the the strong selling The of well and steel, Products, by rising We as did customer and channels. products in year. and both bright Clopay's an the Building shortages backlog. by steel saw levels continue developed across business supply unprecedented offerings doors benefited performance product Clopay future heightened which the CornellCookson, & labor, and Clopay strength business increased from bill significant EBITDA, commercial rapidly Home and price favorable our of and particular, lag, XX% and by offset mix rolling revenue in raw products, increased revenue create from with products materials broad And as residential challenges of partially new infrastructure in core well interest Commercial in and looks for chemicals,

September sale. operation a Telephonics. Turning on our the which working the a results. and the our for to reported alternatives strategic We exploration Lazard, banker, business announced is now alternatives, are as treating discontinued of in business XXth, these actively includes on

of second end our the by fiscal quarter conclude XXXX. March to process this expect ending We

as in contribution certain reduced by the to was awards the we decreased was EBITDA the Telephonics revenue delayed Excluding systems, last as SEG quarter XXXX, of systems performance surveillance affected programs Revenue XXXX likewise offset due radar which reduced in by decreased volume expenses EBITDA by resulting November. favorable year-over-year as in well partially growth in in volume and the of operating first cost by the efficiency taken and XX% impacted program well deliveries. by lower as divested actions business, XX%. from by decreased

improvement, XXXX. We as including company sales enters fiscal strong and expect margin increased the profit,

balance Turning dividend to our and sheet.

with include our the This Telephonics which We while us enhancing target $X.XX does stated and substantial strength our in immediately balance investments existing performance reduced benefit which provides to strategic businesses. record accretive EBITDA, leverage flexibility share, per shareholders. acquisitions, Our marks to strategic to paid well this of the below XXst sheet dividend from times our process. is increased our the consecutive times debt to and not to year dividend value net pursue quarterly X.X X.X making

Our practices. dividend variety has since their out governance was annual year, we to our each grown subjects, rate on views dividend institutional Separately, at compound reach a growth our including started. shareholders of XX% program to discuss

of and we've relevant Over five diversity our approximately to adding directors, half Board. our expertise refreshed the years, independent past

continuing are we we As process. this evolve,

shareholders for Our Board annual Certificate Incorporation of our has to to adopted our submission meeting. at XXXX amendments our two

transition will after period first effective. amendment The three the the amendment a declassify year Board becomes over

meeting shareholders. the of percentage amendments effective become annual of power voting necessary approval of to meeting. will a at second call reduce These The our our will the shareholders special XXXX upon

directors corporate be maximizing Our XXXX to that enhancements value. will long objective Board our further will XX% of with our a commitment of by practices women to diversify shareholder governance term to independent also of align persons These refinements further interest those contributing has and undertaken our color. with an or our shareholders and

to turn Brian? financial QX's over it Brian results. details for Let more now me regarding

Brian Harris

Thank to profit quarter. was basis. EBITDA year you, million, quarter prior Ron. Gross increasing XX.X%. our by X% points continuing on basis XX to related $XXX adjusted quarter $XX Segment increasing the a a compared by on to GAAP start for million, Revenue increased X% basis performance I'll million. $XXX the X% with margin to increased fourth consolidated highlighting

related XX.X%. year were selling, general was $XXX million million in $XXX to quarter expenses increasing prior compared Excluding with the decreasing gross $XXX margin X% charges, quarter. gross Fourth year quarter prior the and administrative compared XX GAAP to points restructuring profit million, to basis

million of related restructuring charges, and Fourth transportation $X.XX compared to income, the and increased Excluding XX% dollars or million $X.XX which Telephonics, selling, distribution, GAAP of revenue year the compared general million $XXX or prior or $XX were XX% in or primarily period by was share prior $XXX administrative with per million per expenses to costs. the incentive driven share. $XX quarter includes year quarter net

$X.XX offering was per compared the EPS of or compared share. mind, per from the adjusted approximately per prior comparability Excluding Keep net on GAAP Fourth share. million was quarter August prior adjusted the share equity income $X.XX. was impact $XX per or periods, both from period or $XX operations $X.XX items current $X.XX year income $XX million of affect the continuing year to million $X.XX in that to or $XX million of XXXX share quarter

income of $XX per impact affect million quarter prior the adjusted or share from The was of year Excluding items per current $XX million $X.XX comparability to both $X.XX the $XX net periods, compared the expenses, that the share. excluding offering to quarter approximately in and EPS million adjusted unallocated primarily in August compared XXXX incentive to year prior due costs. quarter, was equity $XX on Corporate were $X.XX. depreciation, million or

was effective million year prior quarter. million million prior $XX.X quarter. prior amortization that to in year. XX.X% excluding in was million to fourth tax totaled Capital comparability, full compared XX.X% $XX items spending the quarter rate, affect $XX.X $XX the to Depreciation in and in the XXXX year Our compared compared the year

liquidity. and balance our Regarding sheet

of leverage a we times fourth of year of debt reduction X.X million X.X $XXX As is from with based our net XXXX, covenants. had quarter. our on prior September debt calculated turn This XX, a of

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

guidance. to for forecast of XXXX, we view the recovery. maintain our initial of standard the that our of our Regarding coming fiscal been the practice with guidance ongoing reflected pandemic economic provide beginning guidance, risks the a provided and and year our the performance has associated that At

unprecedented took guidance at our updating we in initial step well of excess be guidance. continued of However, to midyear, and the performance

are excluding for we what EBITDA of billion segment adjusted providing practice approximately Telephonics, our the to $XXX revenue cost of to unallocated charges AMES to the initiative. million for guidance returning continuing and operating of fiscal contribution are $XX expect 'XX, related expectations onetime On we consider and million $X.X a million for fiscal the reflecting and of both $XX 'XX, be year. standard reasonable to We basis, excluding

the in first guidance, of the as increased price in of In significantly we first phasing we compression terms recover half quarter margin offset costs. particularly the input significant the of to our expect year,

million to quarter, trends expected the and their customers in available are of more digit starting of labor Just gradually we our 'XX. to reach array incorporates customers fourth second the realize base multiple supplier increases availability, and product vendors can supplier quarter resulting are price first seeing guidance customers we shifts space additional expect brands, mix fiscal than expected our Total shelf diversifying price we have supporting transportation expect This shifts of $XX of diversifying and share levels resources we mention our pass margins. the of the are our for suppliers is channels, healthy across 'XX of in the reflecting our Margins amortization. be amortization of and to be own products objectives. to as expected on is and AMES both which where includes base we a capital diversification which strength and initiative. improve chain. half magnitude product a and as 'XX good maintain the volume digit and in our and and the of normalized across through 'XX, is $XX within and expected Further, before. product with and our double This result wider sales focusing increases categories. our increases Depreciation double price competitive find will are our and Likewise, sales million, improvement have improving by to 'XX latter supply to prioritize realize, reliability throughout in achieve margin in market to and $XX $X in to are those million mix along million, and pricing to expenditures secured resources into our fiscal realized part will we

AMES. and We generate excess to making capital cash expect inclusive we income at investment are the free in of other of flow investments net

years, half in half As by we strong significant cash first cash generation. prior cash a in followed of flow expect second with usage similar pattern the

first the in half margin cash timing quarter, of parity in As particularly cost year, levels. first of quarter the expected the price the first reached to half compression a in the second the result our will historical be usage, expected and exceed of

of expense interest 'XX. net expect $XX approximately for We million fiscal

normalized tax rate XX%. be expected Our approximately will

As legislative rates. guidance the earnings tax geographic is impact mix on always any case, may action, matters, new including and reform

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

Ron Kramer

as Just challenges, 'XX, we a but of the demand outlook. that chain degree us our trends comment shortages labor high will on of in a continue disruptions, believe gives final inflationary to the remain supply strength and confidence

our business repositioned we operating adjusted X.X and Plastics growth the business to per of XX%, the flow, annual XX% years, have model. These fundamentally over our We free EBITDA acquiring This million leverage Over in cutting to centric generated while the CornellCookson. times. adjusted and in at year half divesting earnings strength increased believe respectively. in period, through actions continue a have fiscal investment company revenue, the cash three and we holding strengthened $XXX XX% our since last and marks third ClosetMaid and compound and of our rate year Griffon share, diversified this

of fundamental this additional We value portfolio. towards another redeploy alternatives announcement shift acquisitions. our strategic Telephonics accretive in realize for marks and will to shareholders Griffon allow capital Our for

will entire businesses, further deliver bolster which exceptional are take their to excited questions. We well diversify new pipeline perseverance opportunities through like excellent us. our of workforce, challenging considering thank these another future. remain that happy we has I'd M&A to exciting our and and shown is We we're to results. the any Our opportunities our about in appreciate global dedication existing importance closing, year. order to and strengthen active work as reviewing substantially In as Operator,

Operator

first Our Instructions] Bob Labick from [Operator is question CJS of Securities.

Lee Jagoda

this Bob for Jagoda morning. Lee actually It's

steady the and So recover assuming year? Are pricing are headwinds with assuming environment starting of you and your increasing pricing from till just here state to that cost headwinds offset we your to or next specifically. increasing the current by guidance continued continued margin equilibrium when get sort guidance you and is midyear

Ron Kramer

before We inflationary clearly the first disruptions half reach the We'll half in that pace do worse Brian, second the more input costs, parity XXXX. second and second year first supply get chain towards quarter, price expect the half see the that? of difficult the quarter. hit as to The than to will the being better to of end you of us we second than back add margins of the year. the we to were want of enjoying quarter,

Brian Harris

that, particular price to expect of start I'd quarter. second will the just first as on working the quarter add in hold we're we to the that year increases in take the pressure

Lee Jagoda

a and transaction, that you'll leads And firepower to deleveraging balance focus, the then to a go process have out sheet on about the low and M&A, leverage Ron, plenty transaction there current areas follow-up, any given of just you as comment your and likelihood purchase a Telephonics thinking appears in the the from find of whether particular you and sizes multiples potential can acquisitions. standpoint? makes market to sense out it

Ron Kramer

we saw We and the what stepped call and down, and really commented in a Delta had that happening away. that what conference in our of was things reflection variant slowed was correctly last

business we've the the We company. see have been that around to this business. both quarter big and businesses, of particularly Clopay in active targets, We the complementary been are than and more the the small, AMES history

sheet it on plus leverage effectively, ability up process. and provides of significance You're outcome the our strategic to proven the telephonic our deploy sheet revolver, that correct and cash expected balance take between our balance

immediately over of $X deploying looking into have will. buying we should We actively accretive you that well power billion obviously, enhancing to transactions. more it have and expect announce, When at are we we value

Operator

Our from Josh is next of Baird. question Chan

Josh Chan

past significant any I way margin of mentioned QX. maybe you limit price/cost But quantify and if with issues you worst of any of at do guidance was deal even surprises? sort kind supply as of in there's that dynamic? to just you're the sort labor I your future guess comments, a wondering point importantly, on this think you the more then impact chain to

Ron Kramer

of the over expect course half starting normal quarter, to into we second year back start quarter. margins year, get the to will the second normal So get fourth more in the will of the and the in and

in chain to the the half supply Our start guidance of ease constraints back will year. that assumes labor the and

The getting there margin. the will they back pressure second Until first to that normal. significant that it And be trend price through. to of the through, start latest still quarter, quarter, on we're are increases set will working starting on

Brian Harris

will have balance digit of we quarter achieve in we in top we'll along significant of housing the drive cost margins trends can throw have and and trends quarter XXXX. It's then entire supply chain the the of calendar our that the on disruptions, improved in 'XX, happening what's side again, pass passed into That's of said the it. existing year, gone you infrastructure on, view along on first upside economy. which input And our end going to companies progressing 'XX. the certain. the And reset think for calendar into of a demand that we year is us is that's there's throughout and those that, be potential inflationary see in not across wave increases price which anything, just year consumer if parity double believe this for the crashing price is second of and this that And costs, immediately, that potential Having us. but people what at the balance structures, fiscal

Ron Kramer

the good in was point you about last once One, of add, was Clopay or get actually, if just to difficult XX%. margins. QX, very businesses of XX% back comps we out year normalized point had and power look AMES more to prior we out addition, the QX earnings and difficult sort affairs. back year QX, our would I in to the of state

Josh Chan

of in you there's going my kind diversify and guess about shifts follow-up, like of you terms customer well. meaningful I shifts some seems as some they talked also It diversify on. as purchases maybe

some kind more challenges and where that? So to maybe are the these? relative for opportunities you And of could color on provide of you

Ron Kramer

business. are, all to AMES their options other who applied business, So This between mostly customers inventory, we on protect our are other is will these suppliers. for looking customers looking long our opportunity fill to bit has for to said, a actually will puts both are help focus strong our been our for as an customers us for This over have the customers our of brands CPP our and opportunity term. takes And and shelves. and desperate are some an margins that as our as us

shifts just down historically seen this ship. and We've unusual. another that ups and customers trend not between trend another is this of or So of is type

Brian Harris

ultimately, to a deliver product in best branded we price invest or continue And the proposition and and brand we'll best the our value products point the better at consumer. and deliver believe matter for

Operator

Julio Our Company. next is question from of Sidoti & Romero

Julio Romero

might some the you side see transportation say CPP So would did relief on you bottlenecks costs then you to may worse secondly, progress getting throughout or the the see you transportation And maybe progressed? to transportation on be front? transportation you quarter, that expect when segment, as as the alleviation or any

Ron Kramer

fiscal second the So 'XX. to really of relief half see we're expecting in

think general economy peaked. have overall we'll just in transportation. that's disruptions, see difficult Hopefully, continued saw they disruptions labor see We it chain supply it. but not I the will

those will of year first we'll ourselves expect We year. take the said, setting to the the increases half go start quarter, we least up first price expect through and the But continue be to at quarter having alleviate. again, out hold we second through the as to of them in half some that for second when, our of disruptions

Julio Romero

guess, about opportunities. regards AMES and stays I to circling back same, to for the And at to home sheet my of assuming potential appreciate I your Could you commentary offense around Lee's deployment prepared speak markets I current you the your businesses the regards to portfolio the question geographic looking HBP. and all earlier about environment play guess current in your commentary complementary the strategy? for to at your to And follow-up, to footprint other creating the allow dynamic balance in

Ron Kramer

deploy sheet we enhancing have We a that the engaged Telephonics result be that complementary, have as and accretive. the strength strategic balance are process value actively to in looking will of to immediately we and

Operator

question is Bergner next of Gabelli Our Justin from Funds.

Justin Bergner

to suppliers, an question to the customers tight supply. in of diversify about My environment first I relates comment guess, looking

the anecdotal that call? more is seeing what maybe to ground, sort in term? that that that or a about speak thinking prompting of longer just on something XXXX you guidance little implicit that that's today's is at something just on Sort you are And to more bit of of you're all your is

Ron Kramer

reflects Our that guidance dynamic. absolutely

clarify, seeking Our [adjustment] an customers, to I are as said before, they just for inventory.

will distribution our that's We ability leverage US ability, to competitive put better have focus products mix, brands, on margin highly it. can the the manufacturing and our I that and choose best we our

Brian Harris

for have opportunities to margins. desperation goal align that mix leads happen. better our shelves, allow filling businesses to see a to in to to that we is And The of this us

Justin Bergner

follow-up And question then guidance. on my was

the guide sort assume for is quantify continuing in revenue ops. and positive just reiterate Does all, implicit And $X.X positive CapEx can of number. you the billion you volume for guide? sort volume then sort range what if of of First of could that that

Brian Harris

to $XX to $XX million the off. relates So AMES initiative, the was CapEx of that which tick million, just

expecting volume, the and Regarding backlog, We're Home be should with baked positive. and large guidance. what’s that's our positive into volume actually well, side to our overall -- volume Product on be Building

of expect volume second the but improving be the half be overall to year. over we course side, expect the chain On to we the the year CPP the supply with of particularly down constraints, in

be However, and up will revenue higher our price guidance. therefore, overall

Operator

of Our Stephens. question Grooms Trey is from next

Noah Merkousko

This is actually Noah on Merkousko Grooms. for Trey

those about I been bit very and think mean impressive, little EBITDA those to longer outpacing I about and how long the term guidance to I you've your continue you're talk So there. thinking a HBP look wanted term. margins

frame what's 'XX’s segment. us that what help of kind into just up for that looks like and baked guidance So maybe

Ron Kramer

from and I'll the future remind integration revenue. extraordinarily think both with of $X broken the and bright, remodel you, we're residential, industrial and business. first an that And side the we The of us commercial the year this continue to rebuild efficient business are commercial shape repair be the pace a we than business, CornellCookson the as America, market in competitively. largest door commercial the the even extraordinarily of largest billion of residential the on good is residential our and is to is the faster manufacturer. growth likely business now for opportunities Clopay company is in we've the It

Steel term long term, of best us. disruption issues on ongoing, prices pieces. Short are days story. ahead margin bottleneck Our same component transportation up, are

second our year year. for we they to increasing, year The of the and best half. we volume lower point, of consistent days get So see we ability pace But longer continue your visibility margins backlog importantly, there, levels were to targets for Clopay of on on that be margin term, unprecedented than to ahead But see the for be 'XX. most the the us. us of expect execute the this how to first in business gives what the we half

Noah Merkousko

on follow-up. And a then just

how business. a that I'm about on how impact XXXX. frame think until you're kind you infrastructure I bill that's you that impact up not be going the thinking having of positive demand? to HBP assuming but probably potentially might mentioned can

Ron Kramer

we The said XX gotten rounds, was we've a beneficiary infrastructure when shovel on architectural years years, for And on institutional the got our the since designer years the bill for to Eisenhower be XX your side, the the bill is politics, separate government States over that the administration. making the phrase think in passed that's to a United the of going is impact facilities. and We you this both ago, the that, largest we've next XX business. commercial a shovels. from side CornellCookson the AMES are ready specifically question

to and plan. which rolling underlying all federal will spending improving federal products, a and for building that comes door from there you're robust rails grade of a steel bridges municipal number you're roads commercial and security of us and state when So be opportunities more infrastructure, sell

that we and once conversation, in conversation five exactly So in it feel 'XX. kicks won't a kick a it that’s that’s year until not next 'XX

Operator

[Operator Instructions] from of Our James. Sam is Darkatsh Raymond next question

Sam Darkatsh

Most housekeeping and my of a just of items. answered, been asked couple questions have clarifying

could get leakage sense a a it's be business. cost since is tax possible what Can you? might of on a we you basis the transaction so for of what us Telephonics, Just of legacy remind the business

Ron Kramer

expect not but I So the significant we of what significant is publicly would basis I don't leakage. believe we don't cost said leakage. expect just tax amount tax

Sam Darkatsh

that, And then the acquisitions not from repo synergy that we second use share the question, accretive the would proceeds that Ron, share be? for post contemplating liquidity existing only but Can more infer to repurchase. decision to acquisitions opposed than as you're would be

Ron Kramer

authorization. $XX complement significantly We're things didn't can very buy a stock that million busy any acquisition. grow focused this unused our have business, We still on We quarter. the

the So won't stock buy future. I out won't rule in we that

Operator

I Ron end remarks. the of to over back reached call have for turn And We will session. the the Kramer closing question-and-answer now

Ron Kramer

an We we had hard and all. excellent work to make it at think be. Thank 'XX everything we're you year can

much. Thanks Our very very future is bright.

Operator

This today's conference. concludes

you You may disconnect time. your lines a great your at this for participation, day. Thank have and

Griffon (GFF) 16 Nov 212021 Q4 Earnings call transcript