GFF - Earnings call transcript Q2 2022

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Operator

Greetings and welcome to Griffon Corporation Second Quarter 2022, Earnings Conference Call.

As a reminder our participants are on listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions] I would like to turn the conference over to your host, Brian Harris, Chief Financial Officer Griffon Corporation. Please go ahead.

Brian Harris

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

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

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

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

over I'll Ron. the Now call to turn

Ron Kramer

We Thank EPS adjusted the EBITDA, and morning you good record sales adjusted and had second quarter. in everyone.

mix quarter. sales Building this These from Our and XXth, made and has driven our Hunter almost Fan. during with product pricing significant contribution profitability. the by in We've on progress along pricing and by performance leverage than increased price by and the acquisition more adjusted a XX% EBITDA, Revenue basis. adjusted in increases EPS fixed have doubled, segment cost of realization resulted led actions, home XXXX was is year-over-year January Products in tripled with

regard environment Our labor, continue businesses challenging navigate chain, with to and transportation the economy and global supply a issues inflation. to

about the Term From segment perspective, as finance closed of to or stages fit quarter. the we Hunter for CPP we B balance rest June The after-tax. closing the all them Hunter. Pending early a strategic TTM we Telephonics Loan The week, able the in of to and to sheet. expect Last will performing is expected, sale have favorable outstanding on a sell to Telephonics into There be of business certain thank new with performance. that we're team's to transaction been result, generated as strong of terms. Hunter integrating the And entered We're and our we conditions, into in agreement approvals worked the acquisition $XXX the strategic Fan were of have and regulatory we and definitive demand $XXX facility. announced Hunter enthusiastic pleased continue to close Technologies million by tirelessly efforts. their XXth. for shareholders was results. value employees increase million through manage acquisition this our strengthening obstacles approximately by these Our the for of our We a long-term we

resulted conditions slow selling from offset year-to-date also Volume On mix Consumer have categories, season These the during the parity. Turning our an diversification. and basis, mostly quarter, efforts, on reaching progress start to more price our in spring in improved quarter. declined the from resulted focus weather mix and and in supplier a expected. declines and price attractive strong segments, to for the benefits organic products quarter. customer price coupled products these made during has our with Unfavorable as cost Professional

strategic efficient any efficiencies to of a conclude the $XX measure, a one of these new system the evolving originally initiative, all was a we significant our factors, the this compared and earlier resulted a times original By to distribution center. the existing West and initiative system successful savings rationalizing. which Our manufacturing will commitments just about the process. facility and fact XXXX major along foundation to business procurement business to plan, this for new as of and Digital West the successfully to fulfillment was in originally that expanded progress. capabilities specialized of new East Reno, $XX Keep the initiative we'll untenable And new operations. Coast implemented consolidate for in out to is us reduce these and manufacturing initiative the year in course light a original intelligence our recently solid establish positioning in center Coast an commerce We digital Carlyle, the global establishes volumes making United activities Nevada a footprint with by and on equipment build-out of the to other future. a for of able we than thousand are into in of planning November step steady the business XX, the States of return have million. $XX with into When for million. in actions We intelligence facility step upgraded that centers business East operation. platform. fulfillment fully costs anticipated. implemented for and the Building further of The the $XX distribution and in lead Commerce and the COVID strategic of facility big progressed, the Pennsylvania strategic million increase million and new now the a cost decided in and investment. was in construction fulfillment initial Coast approximately which facilities blueprinted of AMES team new this activities opened competitiveness. $XXX unacceptable Coast consolidated during a half procurement success. distribution AMES made cost September strategy structure which year, At initiated facilities feet the equipment pandemic mind, more the distribution realized, accomplish In is is schedules According original million, remarkable by scope improving current skills AMES has to and and initiative, five is the our their manufacturing of quite its square facilities expectation and We before next the annual we we've implementation consolidated conclusion, XXX anticipate speaks

our Let's shift products home businesses. to and building

strong price parity led successful cost to Continued with the to demand efforts customer the results along the for address quarter. team

business commercial in door our growth of XXXX door residential be continues business improvement. commercial prices anticipation volume and chain of to these were I'll healthy and to as performing home margin the the and The activity, with due favorable and residential see CornellCookson in continued diversified and backlog leading the mix demand ongoing greater as disruptions, and to our particularly be builder Our strong and to repair remodeling shortages door supply offerings products mix pricing than activity. Higher well price volume. to levels. thanks quarter Fast-forward, acquisition significantly expect further historical growth. and you decreased commercial is sustained volume, strengthened and continues that increased and well labor business door remind our we today continues

to go sheet. the balance Let's

excellent flexibility our dividends. to that's acute have cash on opportunities continue shareholders acquisition We through in structure quarterly organic and return capital to and

to times. generation, year deliver at Our with sale with strong X.X Using the than leverage currently flow net three and to times. and operating free expect anticipated from proceeds of cash second end significantly results, the we stands the debt EBITDA half less Telephonics, coupled

our $XXX we million on ample and $XXX Additionally, have in with liquidity credit cash facility. revolving available a million

quarterly shareholders, XXXX. XXth, yesterday to XXXX, has of on to This on annualized Finally, $X.XX per it initiated XXrd an XXth, grown consecutive XXXX. the we a shareholders in Board XX% share May of marks dividend at our compound authorized since dividend June rate which record payable first

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

Brian Harris

a highlighting $XXX for by to XX.X%. quarter basis. start I'll our consolidated $XXX $XXX on the XX% to quarter. Ron. year comparison a basis and million a more EBITDA million, you, doubled to to million, EBITDA prior on profit in GAAP adjusted performance a margin million than the continuing prior-year in $XXX Thank second by compared with increased the was quarter quarter. Adjusted both Gross Revenue

in right quarter, charges margin gross of over prior-year a up quarter, inventory increasing acquisition as both profit restructuring-related XX% million the the years, XX.X%. with applicable $XXX of from current in was gross Excluding

million were XX.X% compared revenue to were the excluding quarter. the both selling XX.X% $XXX to GAAP a administrative or $XXX $XXX $XXX a from selling Second expenses of in items general periods, quarter compared and prior-year general prior-year, or administrative million expenses million million, in a adjusting

a or $X.XX million GAAP operations continuing $XX quarter from compared $XX was share. income share per to of or $X.XX million Second per year period prior the

share Excluding $XX.X prior million $X.X was $X.XX the XX.X%, million a the was year-to-date to on totaled from Corporate adjusting quarter net in Capital $X.X quarter per compared both adjusted second continuing per for a prior-year. share current the quarter Depreciation effective depreciation expenses prior the in year or normalized million in adjusting compared the amortization year. excluding quarter second items spending in XX%. $XX quarter rate excluding period to million and year. items $XX.X prior in basis. periods, million A tax for unallocated the $XX.X the million were and income $X.XX and or compared million to was to of $XX compared for the $XX.X million the was

for prior year $XX million XX%. performance, segment Regarding XX%. or increased by CPP our revenue over Hunter contributed the Fan

partially both partially favorable materials, over volume prior Hunter revenue volume. to offset by to the commercial to unfavorable labor, due fixed XX% year favorable foreign for million from to partially of increased mixes increased offset demand the the a compared XX% prior XX% impact increased costs and volume U.S. XXX% Adjusted year products, contribution EBITDA EBITDA mix transportation. the commercial primarily HBP leverage, increased price due driven offset by pricing costs favorable X% prior to by for by increased volume cost due revenue offset increased mix, reduced pricing of quarter by Hunter, materials, for Excluding and revenue exchange. by quarter, and unfavorable and transportation. residential due and and decreased and labor, residential XX% of year increased increased unfavorable U.S. $XX and and Adjusted was the over

XXXX. earlier, we're mentioned the of scouring effort Ron and AMES end the concluding strategic fiscal As the at initiatives

$XX system of savings million to part of normal in to included including as automation, global included in $XX information to related investments now expenditures, equipment, fiscal initiative one-time proceeds half facilities realized, approximately total, sale expect in or $XX cost. of in from XX million When million implemented Our and exited $XX revised in the of after million Remaining and in of million. continuing the be business. efficiencies is for of expectations original will of we operations forecast the will expenditures. expectation to deployment be capital expenditures expected investments, Future AMES be capital for course, the those the of charges million the particularly of will compared $XX end fully XXXX, annual million of the compared the original of capital annual are $XX fully net the expenses

pretax capital During current second approximately expenditure $X.X $XXX,XXX supporting of quarter, the the million AMES in in charges restructuring-related initiative. of AMES

our to as contribution We Regarding result our acquisition billion of which the debt to in leverage sheet we debt, we net $X.X a and to quarter results of half along than times from facility expected sale XX, Term net proceeds based the The that January, times. of on Telephonics that times down below with plan and as year Hunter liquidity second X.X the times, our and leverage million related in leverage in use the ratio EBITDA and March X.X debt increased Loan three cash finance B free prior of with X.X our is calculated covenants. $XXX we of of the less balance should XXXX, is the flow closed from generated had of our that million secured to the target pay $XXX and transaction.

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

billion for we EBITDA guidance. revenue also XXXX. updated adjusted of fiscal of for fiscal contribution Hunter of XXXX. $XXX Fan $X.XX the Regarding our for million only XXXX provided eight guidance additional In That segment reflected of February, and months

be XXXX million $XX update, purchase EBITDA guidance acquisitions, QX fiscal of XXXX. business we the of EBITDA contribution and approximately we million of to $XXX CPP to price effects guidance. revenue are as acquisition-related for approximately continue months the approximately million Telephonics of of Fiscal in million the addition the related Total half, of operations driven -- our million the be offset initiative Telephonics consistent which $X segment. We consideration $XX excludes to Hunter. demand the year in benefit and million $X.XX These HBP excludes contribute on unallocated $XX includes expenses. partially Depreciation $ for current and from million guidance and by of $XXX Hunter hunter the are of of EBITDA million now in Year to expect at first AMES EBITDA divestiture expect continue mix Hunter-related XX for expenses, million, amortization we of and and guidance million $XX contribution to and revenue accounting, which $X expect is our of now segment with Excluding capital million XX fiscal market at The of continued costs and AMES $XX amortization. eight-month is and $XX price and of of result approximately continuing are the the to EBITDA Hunter inclusive of as the which conditions, $XXX depreciation million to well Hunter. in of expenditures in and softer eight amortization of a billion charges The fiscal be $X to the related proxy are second a with initiative, million adjusted million. continued increase related supporting by and and revenue own to AMES XXXX and $X for expected expected the which includes updating costs one-time of related As to basis, out-performance the charges we revenue the half our a in Included

XXXX. million We for expect financing inclusive of for interest the expense, fiscal of Hunter approximately net $XX

is as case, earnings the geographic will Our action, rates. including impact any reform expected including tax Hunter XX% on tax rate approximately guidance mix new and matters always normalized legislative may be continuing operations

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

Ron Kramer

Fan the debt actions already largest value. At to halfway Hunter business build history The highly finance AMES strategic extremely our Griffin the the to initiative Brian. CPP Thanks, have to at team completed Hunter with be to the continues we executing active the with in shareholder the strategic our acquisition point on Griffon's a acquisition attractive accelerated in complementary segment, new security Company, terms, year, teams. despite unprecedented set of our to agreement for focus the we're CPP strengthen In management a of environment, in an a teams definitive strengthen closing, $XXX efforts continue talented to sheet navigate fundamentally as divest allow us successfully challenges our the business, balance and our to will our challenges, direct these result our guidance signed current and the million, resources. raising which of Telephonics

quarter of Operator, our this strength of resilience is of excellence operating take and Our plan, of performance our the businesses, our confirmation we'll strategic management. any questions.

Operator

moment, session. much, before to will sir. question-and-answer time conducting Instructions] pressing key. this Thank the tone For you speaker At line very your One we'll Instructions] we equipment be handset maybe queue. pick questions. using [Operator your participants confirmation our in it while necessary the question indicate A [Operator please, pause star for is up

limit As and to a follow-up. ask reminder, we you that one one question

the from first ahead. line Please a of question with have Labick go We CJS Securities. Bob

Bob Labick

on Congratulations results. morning. Good outstanding

Ron Kramer

morning. Good Bob. Thanks,

Bob Labick

around What of huge such and the kind how is is in head can little because outlook maybe as the And HBP. we commercial is a half -- this. dig guidance and -- drivers with strength start the you're could my a to changed the materially It's this and in well. higher, trying primary the and wrap this still second you all outlook in including there sustainable but on I'm obviously fantastic, increase.

little view, and on a in residential dig just maybe please. So HBP, commercial,

Ron Kramer

Sure.

to with quarter multiple the So quarters price in start replacements reflects continues at very by being lag. The of lead price demand. facilities. commercial after of space Look types I built, cost future will of also those see good this to would increasing saying course cost warehouse that business landscape benefit

back off a put we have we're expanded and that the in in to paid us XXXX, -- definitely have facilities position demand manufacturing that meet Our seeing.

Bob Labick

it. Got

fast from capital strong Great. reducing or are horizon remarkable on cash you repurchase forward Okay. at and how going down you're flow with Is how M&A obviously allocation year deleveraging It's proceeds I And Telephonics, with leverage. the then your consideration? evaluation for and thinking other results, right leverage of now? share times. that's about right the end the debt there the below paying now? Or said obviously the occurring you this three the targeted target favorable the is, given rapid guess Are

Ron Kramer

a of at What's viewed that long-term price of stock clear generation the is the We've were stock this acceleration our looked we us, see for position closed the always take cash value more -lever of far relationship of topical where future our and as business. no -- alternative. as is and cheapest a and value building ourselves at on everything's of flow the the We ourselves at dividends, grow being quarter cash always what acquisitions as growth. there for We'll that look our to part Telephonics M&A look in we the our being company table. de series us is opportunistic. to on optimistic but buybacks, we is is meant and

Bob Labick

thank you. super, Okay,

Operator

you. Thank

next Sidoti. of question ahead. from Please line Romero have from go We Julio the

Julio Romero

Hey, good morning, everyone.

Ron Kramer

Morning Julio.

Brian Harris

Morning.

Julio Romero

they're but strong they're terms time. Obviously, you're rates you was seeing by of demand HBP about performance, how very current on and could interest what on this little maybe at a bit about any talk if talk demand CPP, having product effect -- in line maybe if and

Ron Kramer

Sure.

was in to the there. the in something bit, season what more And seeing is definitely demand, that's feel this demand weather the happen a but a look and that's -- the temporary. season, we a we the will East with or are little do off the slow of softness forward North year start I We softened seasonal the to -- spring particularly year that balance

historically be housing. continues still are higher a significant low. though to rates interest There's still rates, of interest strong. Housing as shortage far As demand

very that strong. outlook outlook the essential been add of longer-term future is built our strategy around that I'd and still And the to leading brands or has the products. So, business

the remains business, to our So at what's impact that long-term in to happen going around us in grow built of but This is seen the in with the demand, long-term if housing ability unclear housing look policy, constructive drop-off drivers. that economy monetary that you demand of the our no is is we for cycle U.S. shortage the with reflection, a we're we've business house interest believe to continue been and improving. as rates, and have from things go a around that housing CPP market the both

and We continue has both Hunter the long-term, change into that been our positioning the go there like leading that of that that long-term optimistic into and brand that particular, sell. have business view of about looks no and go to these in are, CPP the the in again, segment. we're products be very essential view near-term always product commercial in every home, we use what

Julio Romero

the helpful. labor follow-up back then, very reduced curious resi supply more the chain inquiries channel be business, would that on and if you. despite a side, for HBP the see if guess issues, did potential I to volume, in from volume increased my construction Thank Griffin? Okay, seeing to the just supply I'm but chain, opportunity residential due some new And commercial you're you

Brian Harris

a Yes, certainly always serve they as know of as we the side don't housing space go, certainly certainly well know a repairing actually market ultimately our end smaller HBP are model, new business. positive do we we but construction new the particularly the buy residential the business. Sure. Though from we construction don't dealers is strong for overall for opportunity up, where where builders. an They doors and is primarily the doors and from

Operator

of Instructions] Gabelli from [Operator go question please Thank ahead. Bergner with have line you. the Funds, Justin We next

Justin Bergner

morning, Good Ron. morning, Good Brian.

Ron Kramer

morning. Good

Brian Harris

Morning Justin.

Justin Bergner

make outlook. correctly. guess numbers just good I a the I couple on want Congratulations I to to heard sure start, and of improved quarter

after-tax million? So about electronics the that's defense sale, $XXX proceeds

Brian Harris

That's correct.

Justin Bergner

adjusted guide eight And the is there's new Hunter? a million months Okay. segment then of million and the EBITDA $XX $XXX from contribution

Brian Harris

The $XX is included million in $XXX the million.

Justin Bergner

Okay. it. Got

at $XXX I you quarter, that a million. over the $XXX think I three a new next sort of step-down levels? million onto little quarters this the substantive price the quarter XXX a segment million a this demand short-term Should just in of So cost function as the and and from demand call million million, dynamics -- out at representative did quarters inventory EBITDA $XXX implied respect each of in about adjusted accounting or guide, to EBITDA first to remaining the $XXX of to of the getting $XXX now at the the few your $XXX puts sorted is segment million XXX guess questions. the current driven, more is With

Brian Harris

Sure.

So more taken we've the AMES posture of business. the year on second conservative business, HBP half on for demand the on the a

continued the of EBITDA looking margin like the expect We with first year. and revenue good half

Justin Bergner

it. Got

representative So as look at go-forward. than the the quarter the first half for rather margins second

Brian Harris

Margins. Yeah.

Justin Bergner

you that quarters you terms just one point, a the the catching side. of have and in point that given does view? demand. And last Okay. At out? deliver next look to HBP the volume few a the how on effectively both or Obviously priced of question of this view on price demand, fully strong cost couple are unable a of Do a backlog from point quarters to residential demand up there

Brian Harris

do Sure. there that is level. that and expect into in mostly of it make we right significant progress against year, Yes, but have priced we some in through is the price as is we Price next fiscal year lag -- the go backlog XXXX. this at to balance backlog

Justin Bergner

Got it.

filling for you're for backlog, pretty material, pricing you price get the only to a year quarters? So guess next is of the new going the next margin to It's couple and HBP be in I that new? when visible that fiscal

Brian Harris

it You're correctly. thinking about

Justin Bergner

Great thank you.

Operator

have turn Thank to the and reached remarks call you.Ladies the to we to back end the question-and-answer like CEO you, Kramer, Ron over of for sir. and I'd closing session, gentlemen,

Ron Kramer

expect to to work we to we're Thank shareholder and do better all doing at value. build continue to and continue hard We're very well you.

Operator

conference. concludes Thank you. today's This

at this participation. Thank your time. you disconnect You may for lines your

Griffon (GFF) 28 Apr 222022 Q2 Earnings call transcript