GRIFFON CORP Q2 FY2024 earnings call

• First half of fiscal 2024 exceeded expectations with strong operating performance. - Home and Building Products had solid residential volume. - Consumer and Professional Products improved profitability with global sourcing initiative on schedule, ceased operations at 4 US facilities and 4 wood mills, reducing manufacturing footprint by over 1.2 million sq ft. - Repurchased 1.8 million shares totaling $117 million, Board authorized $0.15 per share quarterly dividend. - Raised full-year revenue and segment adjusted EBITDA guidance.

Home and Building Products: Revenue declined 1% due to unfavorable product mix, partially offset by improved volume; adjusted EBITDA $129 million, down 2% due to reduced revenue and increased labor/distribution costs, partially offset by reduced material costs. Consumer and Professional Products: Revenue $281 million, down 11% due to decreased volume in NA and UK, partially offset by increased volume in Australia; adjusted EBITDA $20 million, up 2% due to improved North American production costs, partially offset by unfavorable revenue impact.

• Raised full-year revenue to $2.65 billion from $2.6 billion. - Increased segment adjusted EBITDA to $565 million from prior $555 million. - Corporate costs increased to $59 million due to employee stock ownership plan expenses. - Other guidance unchanged, including amortization, depreciation, interest expense, tax rate, and free cash flow exceeding net income.

• Market conditions and seasonality affecting segment performance. - Inventory normalization in CPP channel taking time. - Potential margin pressure from steel costs in Home and Building Products.

Q: In the HBP business, any changes in thinking about the business and back half guidance?

A: No change, back half expected to be 30% or better.

Q: On demand drivers for HBP, thoughts on residential and commercial?

A: Residential expected to continue strong, commercial moderating but still strong.

Q: On CPP inventory, where is it shaking out?

A: Inventory expected to normalize by end of fiscal year through spring selling season.

Q: On CPP inventory by geography and distribution centers?

A: Inventory positions improving, distribution centers maintaining high service levels.

Q: On capital allocation priorities?

A: Cash flow gives optionality, stock undervalued, M&A pipeline with leverage limit in mind.