Griffon Corp's 2026 Earnings Call: Free Cash Flow Timing, Capital Allocation Priorities Clash

Date of Call: May 7, 2026

Financials Results

Revenue: $422 million, decreased 1% YOY
EPS: GAAP income from continuing operations of $1.03 per share, compared to $1.06 prior year; adjusted net income from continuing operations of $1.05 per share, compared to $1.05 prior year
Gross Margin: 45.5%, compared to 46.5% in the prior year quarter
Operating Margin: EBITDA margin of 23.2%, a decrease of 60 basis points from the prior year quarter

Revenue for fiscal 2026 expected to be $1.8 billion on a continuing operations basis.
Adjusted EBITDA for fiscal 2026 expected to be $458 million.
Free cash flow from continuing operations expected to exceed income from continuing operations for the full fiscal year.
CapEx expected to be $50 million; depreciation $27 million; amortization $15 million.
Interest expense expected to be $93 million, excluding any interest income from the anticipated AMES joint venture.
Normalized tax rate expected to be 28%.

Strategic Restructuring and Segmentation:

Griffon Corporation has restructured its reporting structure to a single segment, focusing on continuing operations, with global AMES businesses now reported as discontinued operations.
This strategic shift was initiated to focus Griffon into a pure-play North American building products company.

Revenue and EBITDA Performance:

Second quarter revenue was $422 million, reflecting a 1% year-over-year decrease, with a 6% reduction in volume but a 5% improvement in price and mix.
Adjusted EBITDA was $98 million, down 4% year-over-year, impacted by decreased revenue, unfavorable volume impacts on overhead absorption, and increased material costs, including steel.

Capital Allocation and Shareholder Returns:

Griffon repurchased $33 million worth of stock in the second quarter, with $247 million remaining under the repurchase authorization.
The company has repurchased $611 million worth of stock since April 2023, reducing outstanding shares by 20%.

Dividend and Interest Expense Guidance:

Griffon's board authorized a quarterly dividend of $0.22 per share, marking the 59th consecutive quarterly dividend.
Fiscal 2026 interest expense is expected to be $93 million, excluding any interest income from the anticipated AMES joint venture.

Overall Tone: Positive

Management expressed being "very pleased with our financial results," noted "solid operating performance," and stated they "remain confident in our financial outlook." They highlighted innovation awards, strong cash flow, and a "bright future" through strategic actions and product developments like C-Power technology.

Question from Ethan (Stephens): As we think about your fiscal second half, you reiterated the full year guide, any changes to the underlying assumptions around the end markets? Also we know that the HBP pricing lapse in the fiscal second half. Just any more color on top line cadence would be great.
Response: Second half quarters expected to be similar to recent quarters: residential volume soft, commercial flat, with benefits from price and mix; Clopay had recent mid-single-digit price increases.

Question from Ethan (Stephens): You know, in the past, you’ve guided to, you know, $1 billion in cumulative free cash flow. The period was fiscal 2025 to fiscal 2027. Obviously the business looks a bit different now. The cash generation remains really strong. Just any more detail on sort of the pro forma cash generation profile of the current business, maybe relative to any prior targets you had provided would be very helpful.
Response: Cash flow is primarily generated by the Clopay business; slightly less than historical due to discontinued AMES tools businesses, but balance sheet de-leveraging from strategic actions will continue.

Question from Bob Labick (CJS Securities): Can you talk about the, your innovation pipeline and what’s helping you drive growth kind of beyond the market? How does this innovation compare to the past, to your innovation cycles? How should this help you know, outpace the market in terms of growth?
Response: Fundamentals unchanged; Clopay remains a leading brand with strong distribution and low new construction exposure; innovation continues to drive growth in repair & remodel and commercial markets.

Question from Bob Labick (CJS Securities): Regarding steel, you mentioned it briefly in the prepared remarks. It’s, you know, steel prices have obviously crept up a little bit. It’s in the middle of a long multi-year range still. Could you just remind us kind of inventory turns, the impact of steel and your ability to price and just the timing and the lag, if there is still one, and you know how that tends to work?
Response: There generally is a four or five-month lag of purchase to actual realization of steel cost.

Question from Collin Verron (Deutsche Bank): Price mix continues to be very favorable. I guess I just want to dive into maybe parsing out the difference between price and mix, and I think that there is a lot of room for mix. I guess I was just curious as to sort of your long-term expectations on driving mix improvement and how meaningful of a lever that could be for you guys, call it the next 2 years.
Response: Going forward, innovation typically provides higher-end new technology products that generally improve revenue and mix metrics.

Question from Collin Verron (Deutsche Bank): I guess just from a homeowner perspective, I guess or an end user perspective, have you seen a bifurcation or continued bifurcation in sort of high end versus low end that’s supporting this? Is it pretty consistent across the sort of different price points in terms of demand strength?
Response: Clopay addresses the higher end of repair and remodel; despite consumer weakness at lower end, business meets expectations via big box and dealer network.

Question from Timothy Wojs (Baird): Now that you’ve kind of, you know, we’re kind of, you know, focusing on kind of the HBP business on a go-forward basis, is there any sort of change to how you think about allocating kind of capital going forward, you know, between buybacks and, you know, potentially acquisitions? Or is there no real change in your eyes at all?
Response: M&A is not on the table; cheapest and best acquisition is the market on a daily basis; capital allocation focused on share repurchases and de-leveraging given strong cash flow.

Question from Timothy Wojs (Baird): Then, I guess just on the retail portion, you know, within the, you know, within the business, I know parts of that, you know, specifically the fan business has been challenged over the last 18 months. Have you seen any sort of improvement in that business on a sequential basis, or is it still pretty tough?
Response: Hunter Fan business is at the moment stable; ready for when the consumer returns.

Question from Justin (Sidoti & Company): Starting on HBP integration. Can you share where you’re seeing early wins on the Hunter and Clopay collaboration? Is it through distribution, dealer relationships or even on the product and innovation side?
Response: Collaboration includes sharing commercial fans and developing new products like a garage type fan; early days but expectations are positive.

Question from Justin (Sidoti & Company): Turning to the joint venture, your $93 million interest expense guidance excludes interest income from the anticipated joint venture. Can you help us size that income stream?
Response: Will have $161 million of PIK notes with a 10% interest rate.