Griffon Corporation Aktie

Good day, and welcome to the Griffon Corporation Fiscal Third Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please note this event is being recorded.

I would now like to turn the conference over to Brian Harris, CFO. Please go ahead.

Thank you. Good morning, and welcome to Griffon Corporation's Third Quarter Fiscal 2026 Earnings Call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer.

Our press release was issued earlier this morning and is available on our website at www.griffon.com. Today's call is being recorded, and the replay instructions are included in our earnings release. Our comments will include forward-looking statements about Griffon's performance. These statements are subject to risks and uncertainties that can change as the world changes. Please see the cautionary statements in today's press release and in our SEC filings. Finally, some of today's remarks will adjust for items that affect comparability between periods. These items are explained in our non-GAAP reconciliations included in our press release.

With that, I'll turn the call over to Ron.

Thanks, Brian. Good morning, everyone, and thanks for joining us. Griffon has executed particularly well this quarter, which is reflected in today's solid operational and financial results. In the quarter, revenue increased organically by 7% and EBITDA by 2%, while generating strong year-to-date free cash flow of $194 million. Given our performance for the first 9 months of the fiscal year, we're maintaining our revenue and EBITDA guidance for the year of $1.8 billion and $458 million, respectively. Our team's performance remains outstanding, showing resiliency, managing through dynamic global economic conditions, including soft U.S. housing and commercial construction markets.

Regarding our strategic actions, earlier this week, we were very pleased to announce the closing of the joint venture for our Australasia business. At closing, we received $181 million in cash, a $49 million note receivable and a 49% equity interest. The closing of the Australasia transaction concludes a series of strategic actions that have transformed Griffon into a pure-play building products company. From these transactions, we received a total of $281 million in cash, $210 million in 10% PIK notes while retaining minority interest with a book value of $139 million and an opportunity for further value creation.

Turning to capital allocation. During the third quarter, we repurchased $53 million of our stock or 626,000 shares at an average price of $85 per share. At June 30, $194 million remained under the repurchase authorization. We continue to believe our stock is a compelling value. Since April 2023 and through June, we've repurchased $664 million of stock or 12.1 million shares at an average price of $54.86. These repurchases have reduced Griffon's outstanding shares by 21% relative to the total shares outstanding at the end of the second quarter of fiscal 2023.

Subsequent to the June quarter, we repaid the remaining Term Loan B balance of $285 million using a combination of proceeds from our strategic actions and our revolver. Also yesterday, the Griffon Board authorized a regular quarterly dividend of $0.22 per share payable on September 16 to shareholders of record on August 31, marking the 60th consecutive quarterly dividend to shareholders. Our dividend has grown at an annualized compounded rate of 19% since we initiated dividends in 2012. These actions reflect the strength of our business, the successful execution of our strategic initiatives and our continued confidence in our strategic plan and outlook.

I'll turn it over to Brian for more details on the financial results.

Thank you, Ron. Third quarter revenue of $481 million represents an increase of 7% compared to the prior year quarter, benefiting from favorable price and mix of 6% and increased volume of 1%. Third quarter adjusted EBITDA of $125 million increased 2% compared to the prior year quarter, benefiting from the increased revenue, partially offset by increased material and SG&A costs. EBITDA margin was 25.9%. Gross profit for the quarter was $226 million with a 47% gross margin compared to $219 million in the prior year quarter with gross profit margin of 48.7%. Third quarter adjusted selling, general and administrative expenses were $111 million or 23% of revenue compared to the prior year of $106 million or 23.7% of revenue.

Third quarter GAAP income from continuing operations was $66 million or $1.47 per share compared to a loss from continuing operations of $109 million in the prior year quarter or $2.40 per share, primarily due to prior year third quarter goodwill and intangible impairment charges. Excluding items that affect comparability from both periods, current quarter adjusted net income from continuing operations was $68 million or $1.51 per share compared to the prior year of $64 million or $1.39 per share. Year-to-date, free cash flow from continuing operations was $194 million compared to $202 million in the prior year. Year-to-date, net capital expenditures were $24 million compared to $32 million in the prior year.

We expect free cash flow continuing operations for the full fiscal year will be in excess of income from continuing operations. Regarding our balance sheet and liquidity, as of June 30, 2026, we had net debt of $1.2 billion and net debt-to-EBITDA leverage of 2.2x as calculated based on our debt covenants compared to 2.5x leverage at the end of last year's third quarter. During the first 9 months of the fiscal year, we returned $135 million to shareholders through dividends and stock buybacks, while reducing leverage from 2.4x in September 2025 to 2.2x at the end of June. All leverage amounts exclude receivable -- notes receivable from the transaction.

Pro forma for the closing of the Australia transaction on July 31, our net leverage is approximately 2.0x. With the strategic initiatives substantially complete and the Term Loan B paid off, our new net debt-to-EBITDA leverage target range is 1.5x to 2.5x. Regarding our expectations for the year, we are maintaining our fiscal 2026 revenue and EBITDA guidance based on the results we have seen year-to-date. We continue to expect revenue of $1.8 billion for fiscal 2026 on a continuing operations basis and adjusted EBITDA of $458 million, which excludes certain charges that affect comparability. We continue to expect free cash flow from continuing operations to exceed net income from continuing operations.

We also continue to expect capital expenditures to be $50 million, depreciation to be $27 million and amortization to be $15 million. Fiscal year 2026 interest expense is now expected to be $80 million, reflecting a $13 million reduction from prior guidance, resulting from debt paydown and the benefit of interest income from the transaction PIK note receivables. Normalized tax rate is expected to be 28%.

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

Thanks, Brian. Our fiscal 2026 remains on track with our guidance. Our teams are executing well as evidenced by our solid operating performance this quarter and year-to-date. We remain confident in our financial outlook. We're optimistic that residential and commercial markets will return to growth and expect to realize substantial operating leverage as activity improves. With respect to capital allocation, we are committed to using our strong operating performance and free cash flow to drive a capital allocation strategy that delivers long-term value for our shareholders. This includes supporting our quarterly dividend, opportunistically repurchasing shares and reducing debt.

As always, I'd like to recognize the outstanding efforts of the teams across our business. It's their dedication and performance that drive our success. We're grateful for all of their contributions.

Operator, we'll take any questions.

[Operator Instructions]

The first question is from Tim Wojs with Baird.

Maybe just on the first one -- first question I had. I think in the overhead door business, one of your competitors is going through some consolidation efforts, and our understanding is they've had some issues manufacturing and shipping. Is that anything that -- I guess, is that something that you're seeing in the marketplace? And is that an opportunity for you from a share perspective?

We remain more than capable to fulfill demand that is out there. We continue to perform well in the market and trust our dealers, our customers to -- and sell our products well and continue to benefit from that.

And we're always looking to increase market share.

Okay. And then I guess on the business, I mean, 6% price/mix. It sounds like volume is up a little bit. Just any additional color on just how kind of the individual pieces performed, whether it's kind of replacement in residential or the commercial market, just what performed better versus the overall average?

Sure. So door volume for the quarter was down slightly, driven by residential, and this was more than offset by the fan volume, leaving our commercial volume flat.

The next question is from Bob Labick with CJS Securities.

It's Lee Jagoda for Bob this morning. Just starting on the residential side, what are some of the growth drivers within your control to drive potentially some top line while we wait for housing starts and the macro?

Yes. We continue to execute on innovation coming out with new products that have had good take in the market. Our designs over the last decade have brought our company and the entire door industry up to scale, and we continue to perform on that basis. And we are ready for any turn in volume that comes with a better housing market.

And I'd also add that Clopay is best-in-class both in terms of product, service and national footprint. And part of the dichotomy in the economy is the premium market continues to do well. And we are very focused on the repair and remodel side of the premium, better, best category, and that continues to do well in an otherwise sluggish U.S. housing market. We continue to believe that there's upside in both transaction volume and ultimately, new home construction that we'll be a beneficiary of, but it's a small part of our overall picture today.

And then on the commercial side, can you speak to how the commercial replacement cycle is similar or different to the residential side and where we stand in that cycle today?

Generally, the replacement cycle on the commercial side is shorter. So we deem it as approximately 7 years depending on the product and location it's installed. New construction is relatively low compared to prior years, but we have a large install base. And when new construction is lower, generally replacement and refurbishment of existing facilities is higher.

The next question is from Collin Verron with Deutsche Bank.

I just wanted to dive a little bit further into the price/mix in the quarter. It was very strong at 6% again. I mean, can you just break out the benefit between price versus mix and sort of how you're thinking about those components going forward? I know mix can be a little bit volatile quarter-to-quarter.

Yes. So for the quarter, price and mix were approximately equal. And looking forward, we had a price increase during the quarter. So that will continue to effectuate as we get through backlog. Mix is hard to predict. But as we continue to bring new products to market, we continue to expect good mix.

Great. That's helpful. And then just on the cost side, any help in thinking about the magnitude of COGS inflation that you guys are seeing in your expectations as you look out into the September quarter and maybe the beginning parts of fiscal year '27?

Sure. So obviously, all our expectations are in our guidance. We had the price increase, as I just mentioned, that was to offset increases in raw material, labor, energy, distribution and logistics costs. And we expect that, that price increase and our margin -- the pricing increase will keep our margins at 25% plus.

The next question is from Trey Grooms with Stephens.

Congrats on the nice results. Yes, so I wanted to kind of follow up with the price cost question. And you've got the price increase in place. Raw materials, there has been some fluctuation. I know there's typically a lag there. I think we have a decent idea of how you're thinking about 4Q. But all else equal, now that we have these things in place, as we look into next year, do you expect to see maybe a little more catch-up as we get into the fiscal 1Q or 2Q? Or do you feel like most of that kind of price cost catch-up is going to occur in 4Q?

So most of that should occur in 4Q, but of course, you're lapping as the year goes into next year. We feel like we've put an appropriate price increase based on the inflationary costs, and we'll provide further guidance in November.

Okay. Fair enough. Just trying to get an idea for the trajectory there as maybe we look a little bit further out, but that's fair enough. So maybe thinking about this a little bit longer term. Now as a pure-play building products company, I know there's going to be leverage in the business as we kind of look forward over the longer term. And as we get into a position where demand begins to improve, how are you thinking about these businesses over the longer term, kind of the incremental margin as we are looking at the business as it stands today, pure-play building products. Within those 2, how do you think about the longer-term kind of incremental margin opportunities as demand improves because -- you guys are putting up good results in a market that's operationally demanding -- the demand is relatively challenged.

Look, I think you have to look at where we've come from, the evolution of the business and Clopay is now both residential, commercial and the drivers of both of those engines are going to be better in a better economy and a better housing market. Our results are both excellent given the circumstances and the environment that we've been operating in. And what you should take away is that our balance sheet is positioned for us to continue to grow the business. We have modest leverage on the company today, and we have significant operating leverage in the businesses. So with any incremental growth in volume, you should expect us to have significantly higher free cash flow. And that is exactly the way we've positioned the company for the long run.

The next question is from Sam Darkatsh with Raymond James.

Yes, 2 questions. The first one is, how did the quarter progress as we moved from April into June? And then specifically, how does July look versus the trajectory of the rest of the quarter?

Sure. So generally, as we move out of the winter season through the spring and into the summer, the months progress and continue to get better in our normal seasonality, and that's exactly what we saw. And we expect our fourth quarter to be our high point as it normally is, and Q1 generally is similar to Q4.

And trends in July continue.

Good to hear. And then my follow-up question, given the smaller operating footprint post AMES, any thoughts in terms of the corporate overhead on a go-forward basis?

Sure. So we regularly review all our costs, and we'll continue to do so. Our guidance assumes EBITDA margin of 25% plus, and that includes all costs.

The next question is from Julio Romero with Sidoti & Company.

Congrats on the execution and being a pure-play building products company. And a lot of good questions this morning. I wanted to dive into more along Trey's line of questioning on the pure-play story going forward and then your product positioning, particularly on the commercial side. You have best-in-class garage doors and part of that is the innovation that you have in your doors. Can you maybe discuss how your doors can play a part in some of the emerging secular growth end markets that are out there, data centers, semiconductor, pharma over the medium to longer term?

Sure. So our products do play in all those spaces and data centers, it's both entry and fire protection inside the facility. Our doors are used as partitions. In pharmacy and other tight places, our doors are used for security. We have actually very high-end secure doors that can even be used in embassies and places like that, and we continue to innovate and we'll continue to have product launches that meet the needs of both commercial and residential needs.

And to meet that demand, we've been building up an architectural sales force, getting significantly more inquiries. And it's our belief that over time, our commercial business is going to grow in addition to the recovery in the U.S. housing market on the residential side. So the commercial, everything you've identified are avenues of growth for us on the commercial side of the business.

That's great color, Ron. And do you get specced into those projects? And if so, how far out does your visibility extend?

Longer lead time. And as I said, we're seeing a meaningful increase in the number of inquiries, which will lead to bids. So it's a longer process, but we're very confident about what the future of that business is going to look like.

The next question is from Jeffrey Stevenson with Loop Capital.

You reported a nice step-up in sequential EBITDA margin during the quarter. And was this driven by the sequential volume improvement you saw? Was that the primary driver? Did you see incremental price realization as well from the spring Clopay price increases?

Yes, it was definitely more from volume and mix. Price, we look at it as offsetting cost. And generally, our Q3 does see better volume compared to our Q2, as Q2 is our lowest volume quarter in the winter.

Great. And then congrats on the close of the Australian JV. And you have large cash proceeds from both that and the North America joint venture as well. And just wonder, should we expect a balanced mix of share repurchases and debt paydown in line with your kind of historical capital strategy?

So from a free cash flow standpoint, we have a balanced approach between return of capital to shareholders and debt reduction. The money from the transactions was used to pay off our TLB. So that specifically was used for debt reduction.

This concludes the question-and-answer session. I would like to turn the conference back over to Ron Kramer, CEO, for any closing remarks.

We're encouraged by the outlook for our business and the momentum we've been building through our transformation. We've accomplished a lot, and we're positioned for continued growth and long-term value for our shareholders. Looking forward to talking to you again in November. Thanks.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Greetings, and welcome to the Griffon Corporation Fiscal Second Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Brian Harris, CFO. Please go ahead, sir.

Thank you. Good morning, and welcome to Griffon Corporation's Second Quarter Fiscal 2026 Earnings Call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer. A press release was issued earlier this morning and is available on our website at www.griffon.com.

Today's call is being recorded, and the replay instructions are included in our earnings release. Our comments will include forward-looking statements about Griffon's performance. These statements are subject to risks and uncertainties that can change as the world changes. Please see the cautionary statements in today's press release and in our SEC filings.

Finally, some of today's remarks will adjust for items that affect comparability between periods. These items are explained in our non-GAAP reconciliations included in our press release. With that, I'll turn the call over to Ron.

Thanks, Brian. Good morning, everyone. Thanks for joining us. On February 5, we announced a series of strategic actions to focus Griffon into a pure-play North American building products company. These actions included the formation of a joint venture involving our AMES North America businesses and the strategic review of our AMES Australia and AMES United Kingdom businesses. As a result of these actions, starting with our second quarter earnings release today, our continuing operations from financial performance is presented as a single segment.

The Global AMES businesses are now reported as discontinued operations. We're very pleased with our financial results at the halfway point of our fiscal year. Our team's performance has been solid, showing resiliency managing through uncertain global economic conditions. We continue to perform well in soft U.S. housing and commercial construction markets.

I'm proud to report Clopay continues to assert its position as the leading garage door provider with best-in-class product innovation. This year, Clopay was recognized for the second year in a row as one of the best in show for its pioneering innovation at the International Builders Show. As a reminder, last year, Clopay was recognized as the best of IBS across the entire building products industry for its groundbreaking VertiStack Avante garage door, an innovative system that replaces traditional overhead tracks with a compact vertical stacking design, resulting in a cleaner aesthetic and open ceiling space.

This year, Clopay won a best of IBS award in the window and door category for its Avante door with C-Power enabled click-to-conceal panels. The patented C-Power technology delivers electrical power directly to the garage door panels, opening up a new world of potential for these doors. The first products to use C-Power is Clopay's click-to-conceal panels, which allows the door to instantly transition its windows from clear to opaque. This is an ideal solution for homeowners who use their garage as flexible living space or design forward commercial spaces like restaurants and automotive showrooms, offering daylight and outdoor views when desired and privacy and security when needed.

We're excited about the bright future we see for powering the garage door panels and the C-Power product. We congratulate our Clopay team for this remarkable achievement of receiving prestigious recognition from the international builder products industry for 2 years in a row. Even beyond VertiStack and C-Power, we have a deep pipeline of future product innovations to maintain our position as a leader of mission-critical door solutions.

Okay. Let's go to strategic actions. We continue to expect to close our joint venture with ONCAP, which will include our AMES U.S. and Canadian businesses by the end of June 2026. Griffon will receive $100 million of cash proceeds when the joint venture formation is completed as well as $161 million second lien paid-in-kind notes from the joint venture. Griffon will also own 43% and will have representation on the joint venture's Board of Directors.

The strategic process for AMES Australia is active and ongoing, and we'll update you when we have more to report. With respect to the AMES United Kingdom business, after careful consideration of our available options, we've made the difficult decision to exit the business because of persistent economic challenges. We expect all of these strategic actions to be completed by the end of the calendar year.

Let's go to capital allocation. During the second quarter, we repurchased $33 million of stock or 422,000 shares at an average of $78.03 per share. At March 31, $247 million remained under the repurchase authorization. We continue to believe that our stock is a compelling value. Since April 2023 and through March, we've repurchased $611 million worth of stock, 11.5 million shares at an average price of $53.21. These repurchases have reduced Griffon's outstanding by 20% relative to the total shares outstanding at the end of the second quarter of fiscal '23.

Also yesterday, the Griffon's Board authorized a regularly quarterly dividend of $0.22 per share payable on June 17 to shareholders of record on May 29, marking the 59th consecutive quarterly dividend to shareholders. Our dividend has grown at an annualized compounded rate of more than 19% since we initiated dividends in 2012. These actions reflect the strength and resiliency of our business as well as our continued confidence in our strategic plan and outlook.

I'll turn it over to Brian for a bit more financial detail.

Thank you, Ron. I want to reiterate these financial results reflect Griffon's reporting structure as a single segment. All results are presented on a continuing operations basis with prior periods restated on the same basis. More details are provided in our earnings release and will be provided in Griffon's 10-Q filing.

Second quarter revenue of $422 million reflected our typical seasonally low volume. Year-over-year revenue decreased 1% with a 6% reduction in volume driven by residential being partially offset by a 5% improvement in price and mix. Second quarter adjusted EBITDA of $98 million decreased 4% year-over-year, driven by the decreased revenue, the unfavorable impact of decreased volume and overhead absorption and increased material costs, including steel.

EBITDA margin was 23.2%, a decrease of 60 basis points from the prior year quarter. Gross profit for the quarter was $192 million with a 45.5% gross margin compared to $198 million in the prior year quarter with gross profit margin of 46.5%. Second quarter selling, general and administrative expenses were $105 million or 24.8% of revenue compared to prior year of $107 million or 25% of revenue.

Second quarter GAAP income from continuing operations was $47 million or $1.03 per share compared to $50 million in the prior year quarter or $1.06 per share. Excluding items that affect comparability from both periods, current quarter adjusted net income from continuing operations was $48 million or $1.05 per share compared to the prior year of $49 million or $1.05 per share. Year-to-date free cash flow from continuing operations was $101 million compared to $114 million in the prior year. Year-to-date net capital expenditures were $18 million compared to $26 million in the prior year. We expect free cash flow from continuing operations for the full fiscal year to be in excess of income from continuing operations.

Regarding our balance sheet and liquidity, as of March 31, 2026, we had net debt of $1.3 billion and net debt-to-EBITDA leverage of 2.4x as calculated based on our debt covenants. This compares to 2.6x leverage at the end of last year's second quarter. Our net debt and leverage are in line with our year-end September 2025, even after returning $72 million to shareholders through dividends and stock buybacks during the first half of the fiscal year.

Regarding our expectations for the year, we are maintaining our fiscal 2026 guidance based on the results we have seen through the first half while presenting it to reflect our new reporting structure. We continue to expect revenue of $1.8 billion for fiscal 2026 on a continuing operations basis and adjusted EBITDA of $458 million, which excludes certain charges that affect comparability.

We continue to expect free cash flow from continuing operations to exceed income from continuing operations. We also expect capital expenditures to be $50 million, depreciation to be $27 million and amortization to be $15 million. Fiscal year 2026 interest expense is expected to be $93 million, excluding any interest income that may be recognized this year from our anticipated AMES joint venture. Normalized tax rate should be 28%.

I'd like to reiterate that our guidance, as stated, is unchanged from expectations for the former Home & Building Products segment, Hunter Fan and unallocated costs that we originally outlined in November and again in February. Now I'll turn the call back over to Ron.

Thanks, Brian. Our fiscal 2026 remains on track with our guidance. Our teams are executing well as evidenced by our solid operating performance this quarter and year-to-date. We remain confident in our financial outlook. We're optimistic that the residential and commercial markets will return to growth and expect to realize substantial operating leverage as activity improves.

With respect to capital allocations, we're committed to using our strong operating performance and free cash flow to drive a capital allocation strategy that delivers long-term value for our shareholders. This includes supporting our quarterly dividend, opportunistically repurchasing shares and reducing debt.

In closing, I'd like to express my sincere appreciation for our Griffon employees who've continued to drive the success of our business. We're grateful for their contributions. Operator, we're ready for questions.

[Operator Instructions] And our first question will come from Trey Grooms with Stephens.

Ron and Brian, this is Ethan on for Trey. As we think about your fiscal second half, you reiterated the full year guide, but any changes to the underlying assumptions around the end markets? I think that the prior guide had contemplated flat volume in commercial and residential maybe understandably a bit softer. So any changes to those assumptions, particularly how those flow through in the second half? And also, we know that the HBP pricing laps in the fiscal second half. So just any more color on top line cadence would be great.

Sure. We expect the second half quarters to be similar to what we've seen over the last several quarters. As you mentioned, residential volume will continue to be soft. Commercial roughly flat, and we'll see benefits from price and mix. I will point out that Clopay had price increases recently issued, mid-single digit that were effective at the end of March. So we have another price increase that has started. And overall, we expect second half to look similar to the second half last year.

And the only thing I'd add to that is I'll remind everyone that the second half is our strongest free cash flow part of our cycle.

Got it. And picking up on that free cash flow point, in the past, you've guided to $1 billion in cumulative free cash flow in the period was fiscal '25 to fiscal '27. But obviously, the business looks a bit different now, but the cash generation remains really strong. So 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.

Sure. So the cash flow of our businesses was and is primarily generated by the Clopay business, and we still have the Hunter business, and we'll get the cash flow from that as well. It will be slightly less than historical as we've taken out the AMES tools businesses, but those were not significant cash generators.

And there's a balance sheet impact from all of the discontinued operations, strategic planning that we're doing that will continue to delever.

And our next question will come from Bob Labick with CJS Securities.

Congrats on the strong operations and on the awards of HBP you talked about earlier. Yes. So I wanted to kind of stick with the innovation pipeline, and thanks for the info on VertiStack. And is it C-Power as well. Can you talk about the -- your innovation pipeline and what's helping you drive growth kind of beyond the market? Because obviously, we're in a lull in the market a little bit, but how does this innovation compare to your past innovation cycles? And how should this help you outpace the market in terms of growth?

So I'd just say that the fundamentals of our business have not changed. And our execution of the plan that we've laid out over the last several years continues. Clopay is the leading brand with the best dealer network and the best big box distribution. It's a business that has evolved that is both residential and commercial, that has very low exposure to new home construction.

We long term, would love to see the housing markets recover and see new home construction expand. But the core of our business on the residential side has been repair and remodel, and that continues to be the driving force behind Clopay's profitability. The commercial business that we bought 7 years ago, integrated into our business and have come to position to be a leading commercial rolling steel security products and in the future, mission-critical infrastructure solution provider is in development.

This is an excellent business with very low CapEx, 2% CapEx that has growth ahead of it in both the residential market, the commercial market, and we just are going to continue to execute that plan. The result of that is the housing markets, while they have not gotten better, they continue to be a repair and remodel driven for us.

Got it. Okay. Great. And then regarding steel, you mentioned it briefly in the prepared remarks. Steel prices have obviously crept up a little bit. It's in the middle of a long multiyear range still. But could you just remind us kind of inventory that turns the impact of steel and your ability to price and just the timing and the lag if there is still one and how that tends to work?

There generally is a 4- or 5-month lag of purchase to actual realization of the cost.

We'll hear next from Collin Verron with 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. So 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 couple of years?

Sure. So for the quarter, we saw the benefit being more price than mix. And going forward, and I point back to Ron's comments from a few moments ago, we continue to innovate those products that we come out are generally higher-end new technology products that generally will provide better revenue and mix metrics.

That's helpful. And 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? Or is it pretty consistent across the sort of different price points in terms of demand strength?

Sure. Clopay is a better, best solution. So we address the higher end of repair and remodel. And while there's no question that there is weakness in the consumer, particularly at the lower end, our business and our ability to sell through both big boxes and the dealer network continues to meet our expectations.

We'll hear next from Tim Wojs with Baird.

Maybe just kind of first question, Ron, now that you've kind of -- we're kind of 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 between buybacks and potentially acquisitions? Or is there no real change in your eyes at all?

Well, I'd say look at what we've done. We bought back 20% of our outstanding. Our cash flow is substantial over the last several years, and our expectations is for it to continue to build. We have a combination of businesses that we've streamlined and brought into focus that is going to give us a strong cash flow position to make choices about share repurchases deleveraging. I will say M&A is not on the table because our view is the cheapest and best acquisition we can make is in the market on a daily basis.

Okay. Okay. That's really helpful. And then I guess just on the retail portion within the business. I know parts of that, specifically the fan business have 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?

It's at the moment stable. We have seen, as you said, softness over the last several years now with the consumer being weak. But at the moment, it's stable and the business is in very good shape and ready for when the consumer returns.

[Operator Instructions] We'll go next to Julio Romero with Sidoti & Company.

This is Justin on for Julio. Maybe 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?

Yes. So we have been and will now with those businesses working closer together, continue to realize the benefits of leveraging on the commercial side, the Hunter Commercial fan -- and that we share projects and put fans into each other -- sorry, put fans into the Clopay side of the business.

There has been a project where we have created a garage type fan that has gotten very good reception from our dealer network, and it's in early stages, but we're looking forward to that continuing. Early days, and we have expectation that we're going to be able to build both the residential and commercial.

Very helpful. And then 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?

We will have $161 million of PIK notes with a 10% interest rate.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Ron Kramer for closing comments.

Thank you for joining us today. We're excited about the road ahead, confident in our strategy and committed to continuing to deliver superior returns for our shareholders. We look forward to updating you in August.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Griffon Corporation Fiscal First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Mr. Brian Harris, CFO. Please go ahead, sir.

Thank you. Good morning, and welcome to Griffon Corporation's first quarter fiscal 2026 earnings call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer.

Our press release was issued earlier this morning and is available on our website at www.griffon.com. Today's call is being recorded, and the replay instructions are included in our earnings release.

Our comments will include forward-looking statements about Griffon's performance. These statements are subject to risks and uncertainties that can change as the world changes. Please see the cautionary statements in today's press release and in our SEC filings. Finally, some of today's remarks will adjust for items that affect comparability between periods. These items are explained in our non-GAAP reconciliations included in our press release.

With that, I'll turn the call over to Ron.

Thanks, Brian. Good morning, everyone, and thanks for joining us today. Earlier this morning, we announced exciting news regarding the creation of a joint venture, including AMES North America and Venanpri Tools, along with other strategic actions related to Griffon. Allow me first to summarize our results for the quarter, then I'll comment further about the strategic actions that are underway.

We are pleased with our first quarter results, highlighted by free cash flow of $99 million, continued solid operating performance at Home and Building Products and improved profitability at Consumer and Professional Products. We're off to a good start and are on track to meet our updated financial targets for the year. For the quarter, Home and Building Products, HBP, revenue increased 3% compared to the prior year, and EBITDA margin was 30.1%. Revenue benefited 7% from strong price and mix across both residential and commercial products, which was partially offset by reduced residential volumes.

Consumer and Professional Products, or CPP, first quarter revenue increased 2%, driven by price and mix with increased volume in Australia and Canada, offset by reduced volume in the U.S. as consumer demand remains soft. CPP EBITDA in the quarter increased by 19% to $22 million, driven by the increase in revenue. We're pleased to continue to see year-over-year improvement in CPP EBITDA despite persistently weak demand in the U.S.

Turning to capital allocation. During the first quarter, we repurchased $18 million of our stock or 247,000 shares at an average of $73.21 per share. At December 31, $280 million remained under the repurchase authorization. Since April 2023 and through December, we've repurchased $578 million of stock or 11.1 million shares at an average price of $52.27 per share. These repurchases have reduced Griffon's outstanding shares by 19.3% relative to total shares outstanding at the end of the second quarter of fiscal 2023.

Also yesterday, the Griffon Board authorized a regular quarterly dividend of $0.22 per share payable on March 18 to shareholders of record on February 27th, which marks the 58th consecutive quarterly dividend to shareholders. Our dividend has grown at an annualized compounded rate of 19% since we initiated dividends in 2012. These actions reflect the strength and resiliency of our businesses as well as our continued confidence in our strategic plan and outlook.

Let me comment on our strategic actions. Earlier this morning, we announced the formation of a joint venture with ONCAP, the middle market private equity platform of ONEX Corporation, which will create a leading global provider of hand tools, home organizational solutions and lawn and garden products for professionals and consumers. The joint venture will combine Griffon's AMES businesses in the United States and Canada with ONCAP's global portfolio of hand tool businesses, including Corona in the United States, Burgon & Ball in the United Kingdom and Bellota hand tools operating in Europe and Central and South America. Through this transaction, we are creating a global leader in professional and consumer hand tools, home organizational solutions and lawn and garden products with sufficient scale and scope to compete in the global marketplace.

The joint venture is comprised of leading professional and consumer brands, including AMES, Bellota, Burgon & Ball, ClosetMaid, Corona, Garant, Razor-Back and True Temper. ONCAP and Griffon both recognize the benefits created by merging leading diversified professional tool brands with global reach. We are very excited about this business combination and the prospects for the joint venture. We see significant opportunities to streamline operations across the businesses and capture the benefits of economies of scale. For Griffon, the formation of the joint venture will generate immediate shareholder value and additional liquidity as well as provide a path for realizing more value in the longer term through the second lien debt from the joint venture and our significant equity interest. We're looking forward to working with ONCAP to make this joint venture a success.

In addition to the joint venture, we also announced three other strategic actions that, once completed, will transform Griffon into a pure-play building products company, positioning us as the leading provider in North America of residential and commercial garage doors, rolling steel doors and grill products as well as a leading brand of residential and commercial ceiling fans. So our actions, a comprehensive review of strategic alternatives for AMES Australia, a review of strategic alternatives for the AMES United Kingdom and the combination of Hunter Fan with our Home and Building Products segment.

To offer a bit more detail, our AMES Australia business has grown from a small operation that was part of our original AMES acquisition into a category leader in Australia. This business is led by an exceptional team with a demonstrated track record of growing both organically and through acquisition, while consistently generating solid operating performance. We're confident there are a number of strategic alternatives available for AMES Australia that will position the business for continued growth, while providing value to Griffon shareholders. We'll report back regarding our progress.

Finally, we're combining Hunter Fan with our Home and Building Products segment. Both Clopay and Hunter maintain exceptional positions with industry-leading brands and best-in-class technology and innovation. We see many opportunities for the two businesses to leverage their complementary sales channels across residential and commercial building products. The two teams already know each other well, have collaborated over the past three years and are excited about bringing them together.

I'll turn it over to Brian for a bit more detail on the financials, and he'll provide additional detail regarding the strategic actions.

Thank you, Ron. First quarter revenue of $649 million increased 3% in comparison to the prior year quarter and adjusted EBITDA before unallocated amount of $145 million was in line with the prior year. EBITDA margin before unallocated amounts was 22.3%. Gross profit on a GAAP basis for the quarter was $267 million compared to $264 million in the prior year quarter. Gross margin was 41.1%. First quarter GAAP selling, general and administrative expenses were $153 million compared to the prior year of $152 million. Excluding adjusting items from the prior period, SG&A expenses were $153 million or 23.6% of revenue compared to the prior year of $151 million or 23.8% of revenue.

First quarter GAAP net income was $64 million or $1.41 per share compared to $71 million in the prior year quarter or $1.49 per share. Excluding items that affect comparability from both periods, current quarter adjusted net income was $66 million or $1.45 per share compared to the prior year of $66 million or $1.39 per share. Corporate and unallocated expenses, excluding depreciation in the quarter were $15 million compared with $14 million in the prior year. During the quarter, we had capital expenditures of $8 million compared with the prior year gross capital expenditures of $17 million and de minimis prior year net capital expenditures as proceeds from asset sales offset the capital investment made in that quarter.

Regarding our segment performance, as Ron mentioned earlier, revenue for Home and Building Products increased 3% from the prior year quarter, reflecting strong price and mix of 7% for both residential and commercial, which was partially offset by reduced volume of 4% driven by residential. Home and Building Products adjusted EBITDA decreased 3% compared to the prior year quarter, resulting in an EBITDA margin of 30.1%. The positive effect of increased revenue in the quarter was more than offset by unfavorable material costs, labor costs and operating expenses, along with the adverse impact of reduced volume on absorption. Consumer and Professional Products revenue increased 2% from the prior year quarter to $241 million. Favorable price and mix during the quarter, along with increased volume in Australia and Canada was partially offset by the impact of reduced volume in the U.S. CPP adjusted EBITDA increased 19% from the prior year quarter to $22 million, primarily due to the increase in revenue.

Regarding our balance sheet and liquidity, as of December 31, 2025, we had net debt of $1.26 billion and net debt-to-EBITDA leverage of 2.3x as calculated based on our debt covenants compared to 2.4x leverage at the end of last year's first quarter and the end of fiscal year 2025. We paid down $60 million of term loan B during the quarter. Our net debt and leverage decreased from our year ended September 25 and the prior year quarter, even with returning $29 million of capital to shareholders via stock repurchases and dividends during the quarter.

Regarding our strategic actions, under the terms of our master transaction agreement, ONCAP will own 57% of the joint venture, and the joint venture will be operated as an ONCAP portfolio company. Griffon will receive $100 million of cash proceeds at closing, along with $160 million of second lien debt from the joint venture. Griffon will have a 43% ownership stake. As a result of our strategic actions, starting in our second quarter 2026, we will report AMES U.S., Canada, Australia and U.K. as discontinued operations. Hunter Fan's financial results, which historically have been included in CPP segment will be reported as part of the Home and Building Products segment.

The expected fiscal year 2026 EBITDA for discontinued businesses is $60 million, comprised of $25 million for AMES North America, $40 million for Australia and with U.K. operating with negative EBITDA.

In terms of our updated outlook for our continuing operations, we now expect full year fiscal 2026 revenue from continuing operations to be $1.8 billion and adjusted EBITDA to be $520 million, excluding unallocated costs of $62 million. Free cash flow from continuing operations, including capital expenditures of $50 million, is expected to exceed net income. Depreciation will be $27 million and amortization will be $15 million.

Fiscal year 2026 interest expense is expected to be $93 million, and Griffon's normalized tax rate is expected to be 28%. This guidance, as stated, is consistent with our expectations for legacy Home and Building Products and Hunter Fan as we originally outlined in November.

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

Thanks, Brian. From a financial and operational perspective, 2026 is off to a good start with strong free cash flow and continued solid operating performance. Our results continue to reinforce our confidence in our outlook for the year and beyond, especially given our resiliency to what continues to be a mixed and uncertain market backdrop. We remain optimistic about a turnaround in the residential and commercial markets and believe that we will realize substantial leverage as activity improves. Our capital allocation priorities remain unchanged. We'll continue to use the strong operating performance and free cash flow of our businesses to drive a capital allocation strategy that delivers long-term value for our shareholders. This strategy includes continuing to focus our resources on growing organically, while opportunistically repurchasing shares, paying dividends and reducing debt. This is an exciting time for Griffon. Our strategic actions taken together will streamline the company's portfolio and enhance shareholder value. When completed, Griffon will be a premier pure-play North American residential and commercial building products company with a very exciting future.

In closing, I'd like to express my sincere gratitude to our Griffon employees around the world whose dedication and effort have driven our financial success. Our strategic activities have created additional challenges for our global teams. And as usual, they've stepped up to make it happen.

Operator, we're now ready for questions.

[Operator Instructions] And our first question will come from Tim Wojs with Baird.

Congrats on all the announcements. Maybe just to start, bigger picture, Ron, I'm just kind of curious in terms of kind of the timing and the thought process and kind of why now? Maybe some of the alternatives that you were kind of considering in this and kind of how this JV kind of came together?

Well, we have always said that we thought there was a disconnect between the market value of our stock and the intrinsic value of our businesses. We've been looking at two very different segments. Our Home and Building Products business is a 30% EBITDA margin business, and our consumer businesses have been operating at a 9% margin. We see the performance of our businesses as being differentiated and the ability for us to take our consumer businesses and strengthen them by combining it with a leading global provider of tools, brands, giving us the leverage to be able to take the AMES companies and its footprint in North America and Canada and fit it in with the partner who's able to scale that business. So we continue to be a significant investor in the consumer business at 43%. We have a very strong belief that ONCAP and the Venanpri businesses fit hand in glove with the AMES business, and that, we'll be able to continue to create value in that business as a separate investment for Griffon. Now what that does is this is an ability for us to unlock value. And the consumer side of our business, we believe, has been mispriced in our sum of the parts. By doing this, we are putting a spotlight on the value in the AMES, U.S. and Canada. The value of the $40 million EBITDA business that we have in Australia. And Hunter is a synergistic combination with our Home and Building Products business, and we have high expectations that the development of the industrial fan business can grow faster under the Home and Building Products Clopay umbrella. So for us, this is a set of moves that we believe significantly improves our valuation. And that's, again, without any growth coming out of the HBP side of the business as we believe we're getting closer to a recovery in the housing market in the U.S. So we've got a very strong HBP business with growth, and we believe that these actions strengthen the consumer businesses that we own and positions us to unlock meaningful value to our shareholders.

Okay, okay. Great. Yes. No, that's very helpful. And then, Brian, just maybe on like some of the details. So the go-forward financials of this go away, what would you guys kind of expect minority interest contribution to be from an earnings perspective? And then any sense on the rate on the second lien debt because I would assume that's effectively income for you.

Correct. So that second lien debt is at a 10% PIK rate. And as far as our portion, our minority interest of the net income of the JV, I do not expect a significant impact from that as it's a private company with debt on it and amortization. So net income will not be material.

Our next question will come from Bob Labick with CJS Securities.

It's actually Lee Jagoda for Bob. So I guess starting with the JV, can you give us a sense for the EBITDA that's being contributed from ONCAP or maybe the expected fiscal '26 EBITDA for the combined entity?

Yes, the combined entity results are not something we're disclosing at this time, but they are slightly smaller than we are.

Okay. And then on -- as it relates to Hunter, can you kind of give us a sense for the revenue that Hunter was contributing? And then once it gets combined into the HBP segment, how should we think about your margins in that segment relative to the 30% or above that you've been running for the last several years?

Sure. So in fiscal '25, Hunter Fan had $211 million of EBITDA -- sorry, of revenue rather. And as far as margin, you just heard the guidance, which is roughly 29%. But ultimately, this is still a 30% plus business going forward.

And our next question will come from Collin Verron with Deutsche Bank.

Congratulations on all the announcements. I guess just following up on that, any sense of just like maybe the EV to EBITDA multiple that the proceeds and the second lien debt imply for the business? And then any sense on sort of the time line to sort of establish the JV and for the sale or other strategic action for Australia and U.K.

Sure. So as far as a multiple, it's on the cash, just the cash, $100 million of cash, it's roughly a 4x multiple. And of course, larger if you include the second lien debt. As far as timing, we expect the JV to close by the end of June. And timing for the rest of the actions for Australia and U.K., we'll have to keep you posted, and we'll update you as they progress.

Okay. Understood. And then I guess just with proceeds, any sense -- any comments around capital allocation going forward?

Well, I've said it, and I'll continue to underline, we believe that our stock is the best acquisition we can make. Our balance sheet has never been stronger. We finished the quarter at 2.3x. We've got a significant amount of liquidity, and we will have more as a result of these transactions, and you should expect us to continue to be an active buyer of our stock, deleveraging from free cash flow and being an increased dividend payer in the future.

Moving next to Trey Grooms with Stephens Incorporated.

Congrats on the announcements, pretty exciting stuff. So we've talked a lot about the portfolio actions. But shifting gears here just a little bit on to the kind of the HBP business, the remaining business. You mentioned, Ron, I think, twice that '26 is off to a good start. But if you could maybe talk about, volume was down a little bit, which you mentioned lower res, no surprise there. But maybe you could update us on kind of the demand outlook here for the HBP business, kind of the remaining business here as we go into calendar '26, maybe looking across both the res with remodel and then also commercial.

Yes. I'll start by saying that the macro environment for housing, the political support for housing is clearly better than we went into this fiscal year. So our performance in the fourth -- in the first quarter with a decline in residential improvements in the commercial. But on price and mix is -- shows you the story that there is still a very good part of the repair and remodel in the premium side of the market, which is where we are positioned. And Clopay and our management team has done an extraordinary job of both bringing in new products, using technology with our dealer network. And that was before we went into '26 and the winds of an improving housing market started. So we're very optimistic about that the recovery in housing is still ahead of us. Our performance is as good as it's been, is going to get better in terms of both units and in volume as the housing markets recover in the United States. Interest rates will come down. Mortgage markets are going to have to get repaired for new home construction and for volume of activity. But all of those things are going to help -- what's already a very efficient, highly profitable Clopay to become bigger. And the commercial side of our business, which is the result of an acquisition of CornellCookson that we made 7 years ago is proving to be the balance to that business. We're hoping over the next few years that our commercial business is as big as our residential business. And with the infrastructure spending that's going on, we continue to believe that Clopay is an excellent business that has growth in front of it.

Okay. That's all super helpful. And then you mentioned you mentioned price mix, very good in the quarter. I know you guys implemented a price increase in '25. Maybe if you could kind of -- is that, I guess, still kind of the flow-through there of the price increase plus some benefits from mix? Is that the right way to think about that?

Yes, that is correct.

And we'll go next to Sam Darkatsh with Raymond James.

So most of my questions have been asked and answered. I just got two or three quickies. So why a JV and not an outright sale would be the first question. Second question, I know you're mentioning that Hunter has some connectivity with HBP, but I don't know if it's immediately intuitive externally for us. So if you could be more specific in terms of why you did not include Hunter in the JV contribution. And then finally, you mentioned, Ron, that you're putting a spotlight on the HBP under evaluation. Why not do a strategic review then on the whole shoot and match as opposed to just looking at the European and Aussie businesses at this point?

Sure. So I'll start off. The structure of a joint venture for Griffon, it enables us to unlock substantial value now and additional value in the future as we still have a minority interest in it. The current market for consumer companies is not a very good one. And this allows us to accomplish bringing two companies together, increase the economies of scale and get future benefit, still get future benefit for our shareholders as the JV progresses. As far as Hunter, we see stronger strategic alignment and upside potential with HBP, and we believe the combination of that business is the best way to maximize shareholder value. It has -- this is an iconic consumer brand, has a great management team. It's highly recognized, has an asset-light model. And even though the past few years have seen weak consumer, it still has double-digit EBITDA. But there's a lot of upside to that business. And again, in a weak consumer environment to sell it now would seem poor timing.

And as far as your comment about the whole shooting match, we like our company, and we believe that we're going to stay and run this and build it for the foreseeable future.

Moving on to Julio Romero with Sidoti & Company.

Congratulations on the exciting announcements. I wanted to also ask about the RemainCo going forward. And I know you talked a little bit about Hunter and HBP combined. But I believe in the prepared, you mentioned that they've worked together in the past. Can you maybe cite an example or two of Hunter and HBP working together? And then also speak to any potential cross-selling opportunities or any opportunities as a combined go-to-market entity?

Sure. So I'll start on the commercial side of the business. Of course, with our rolling steel and commercial sectional products, we are often dealing with large warehouses and entities and industrial type facilities that have large commercial fans that Hunter sells and so -- and vice versa. So Hunter knows about other projects, it shared with the Clopay legacy HBP side of the business and vice versa. And on the residential side, actually, Hunter came out with a pretty clever product that allows fans to be installed in the garage and deals with where outlets may be in the garage. So those are just two early examples.

Okay. Perfect. And then as we think about the RemainCo, you've always historically been a very strong free cash flow generator. How should we think about the cash conversion cycle of RemainCo relative to the historical portfolio? And should we expect your business to flow cash at a faster or slower rate going forward?

Yes. So overall, we'll still be a very highly cash flow generative company. The cash flow, if you're looking at it over the course of the year, the first half will be more positive than in the past under the new construct, but still a little weaker than the second half.

And we'll take a follow-up from Collin Verron with Deutsche Bank.

I just wanted to touch on the HBP business a little bit more. I know you called out mix being a good guide. I was just curious how sustainable you think that is going forward, just given the trend in commercial and residential. And then maybe just talk about the margin pressure a little bit, like the order of magnitude of inflation in material costs versus labor costs just so we can get a sense of how that's tracking? And then my last question is just on the legacy HBP guidance. Was there any change to that, or was the guidance change only related to the announced strategic actions?

Sure. The guidance change is only related to -- yes, the legacy guidance we gave is still the guidance included in what we said today for HBP. There's a lot of questions there. So as far as outlook for HBP, really, our guidance stays the same. We continue to see pressure on residential volume, mostly driven by the lower end of the market, where the high end of the residential market continues to be buoyant and strong. For commercial, it's -- we said we would have flat volume this year. We still expect that to be the case already -- that is what we saw in the first quarter already. What was the last question? I'm sorry, Collin, repeat it. I seem to have lost him.

If there are more questions. Operator?

This now concludes our question-and-answer session. I would like to turn the floor back over to Ron Kramer for closing comments.

We're very proud of the track record that this management team has created over a long period of time. And with the actions that we've taken today, we look forward to continuing to deliver superior shareholder value in the future. So thank you, all, and we'll be speaking to you soon.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Griffon Corporation Fiscal Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host, Mr. Brian Harris, Chief Financial Officer. Thank you. You may begin.

Thank you, Melissa. Good morning, and welcome to Griffon Corporation's fourth quarter fiscal 2025 earnings call. Joining me for this morning's call is Ron Kramer, Griffon's Chairman and Chief Executive Officer.

Our press release was issued earlier this morning and is available on our website at www.griffon.com. Today's call is being recorded, and the replay instructions are included in our earnings release. Our comments will include forward-looking statements about Griffon's performance. These statements are subject to risks and uncertainties that can change as the world changes. Please see the cautionary statements in today's press release and in our SEC filings.

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

With that, I'll turn the call over to Ron.

Thanks, Brian. Good morning, everyone, and thank you for joining us. We're very pleased with our results for the fourth quarter and fiscal year, particularly in light of the challenging macroeconomic environment. The continued strong performance from our Home & Building Products, or HBP segment, combined with the meaningful profitability improvements in our Consumer and Professional Products segment, CPP, underscores the strength of our portfolio and the operational discipline. It was a very good year. For the year, HBP revenue of $1.6 billion was consistent with the prior year and profitability was strong with an EBITDA margin of 31.2%. The continued investments in innovation and productivity at HBP, it resulted in notable recognition from our peers and customers. At the International Builders Show earlier this year, Clopay won the Best in Show award for its groundbreaking [ Virtusa Avante Garage Store ] [ Virtusa ] stack revolutionizes how doors are incorporated into commercial and residential projects, thanks to its unique patented design, which features glass panels that stack compactly above the door opening, eliminating the need for overhead tracks. This is the first of what we expect to be many new product innovations in the coming years.

In addition, earlier this month, Clopay received a 2025 Partner of the Year Award from the Home Depot in the millwork category. Clopay was recognized for its commitment to delivering high-quality products, innovative solutions, exceptional value and outstanding service to Home Depot customers. We're honored to receive this award, which recognizes our successful 40-year partnership.

Turning to Consumer and Professional Products segment. CPP's results for the year continue to reflect challenging market conditions with revenues decreasing 10% to $936 million. Revenues declined year-over-year due to persistently weak consumer demand in North America in the United Kingdom, along with disrupted U.S. customer ordering patterns due to increased tariffs. This volume reduction was partially offset by increased organic volume in Australia and the contribution from the Pulp acquisition there. For the second year in a row, profitability improved significantly at CPP with segment EBITDA increasing 18% and EBITDA margin increasing over 200 basis points despite the lower sales volume in North America and in the U.K. This profit improvement was principally driven by the benefits of our global sourcing expansion, which transitioned most of our U.S. manufacturing to an asset-light business model, leveraging our global supply chain.

Turning to our capital allocation. In fiscal 2025, we continue to take significant actions to deliver shareholder value through stock buybacks and cash dividends, while also paying down debt and maintaining a strong balance sheet. During the year, we repurchased 1.9 million shares at an average price of $70.99. Since April 2023 and through September 30, 2025, our share repurchases totaled 10.8 million shares of common stock or 18.9% of the April of 2023 outstanding shares for a total of $560 million or an average of $51.79 per share.

Also this morning, we announced that the Griffon Board authorized a regular quarterly dividend of $0.22 per share payable on December 16th to shareholders of record on November 28th, marking the 57th consecutive quarterly dividend to our shareholders. This dividend represents a 22% increase over the prior quarter dividend and since we began paying dividends in 2012, reflects growth at an annualized compound rate of 19%. Utilizing our $323 million of fiscal 2025 free cash flow, Griffon returned a total of $174 million to shareholders through dividends and share repurchases and reduced debt by $116 million, while also reducing our leverage to 2.4x from 2.6x, while making substantial investments in all of our businesses. These actions reflect the ongoing strength of our business as well as our confidence in our strategic plan and bright outlook.

I'll now turn it back to Brian for a little more information on the financials and provide details about our 2026 guidance. Brian?

Thank you, Ron. I'll start with our fourth quarter performance and then review our guidance for fiscal 2026. Fourth quarter revenue of $662 million and adjusted EBITDA of $138 million were both consistent with the prior year. Segment adjusted EBITDA and EBITDA margin for the quarter was $154 million and 23.2%, respectively, both consistent with the prior year. Gross profit on GAAP basis for the quarter was $276 million compared to $263 million in the prior year quarter. Excluding items that affect comparability from the prior period, gross profit of $276 million in the current quarter compared to $271 million in the prior year. Normalized gross margin increased by 60 basis points to 41.7%. Fourth quarter GAAP selling, general and administrative expenses were $157 million compared to $152 million in the prior year. Excluding items -- adjusting items from both periods, SG&A expenses were $155 million or 23.4% of revenue compared to prior year of $149 million or 22.6% of revenue. Fourth quarter GAAP net income was $44 million or $0.95 per share compared to the prior year of $62 million or $1.29 per share, excluding all items that affect comparability from both periods. Current quarter adjusted net income was $71 million or $1.54 per share compared to the prior year of $71 million or $1.47 per share.

Corporate and unallocated expenses, excluding depreciation, were $16 million in the quarter, consistent with the prior year. Net capital expenditures were $12 million in the fourth quarter compared to $20 million in the prior year quarter.

Depreciation and amortization totaled $15.9 million for the fourth quarter compared to $15.6 million in the prior year. Regarding our segment performance, revenue for homebuilding product increased 3% over the prior year quarter, driven by a 3% of favorable price and mix. Volume overall was consistent with the prior year with increased commercial volume offset by decreased residential volume. Adjusted EBITDA was consistent with the prior year quarter, with the benefit of increased revenue in the quarter being offset by increased material, labor and administrative costs.

Consumer and Professional Products revenue decreased 4% from the prior year quarter, driven by decreased volume of 8%, which was partially offset by a benefit from price and mix of 4%. Decreased volume resulted from reduced consumer demand in the U.S. and the U.K. and disrupted U.S. historical customer order patterns due to increased tariffs. This decrease was partially offset by increased organic volume in Australia and Canada.

CPP adjusted EBITDA of $24 million decreased 1% from the prior year period, primarily due to the decreased volume, which was offset from the benefits of our global sourcing initiative in the U.S. and reduced administrative expenses. Foreign currency was unfavorable by 1%. Regarding our balance sheet and liquidity, as of September 30, 2025, we had net debt of $1.3 billion and net debt-to-EBITDA leverage of 2.4x as calculated based on our debt covenants.

During the year, we generated $323 million of free cash flow and paid down $116 million of debt, which contributes to reducing leverage [indiscernible] return compared to the prior year ending September 24.

In terms of share repurchases. For the full year, we bought 1.9 million shares of common stock for a total of $135 million or $70.99 per share, and we have $298 million remaining on our share repurchase authorization as of September 30.

Regarding our 2026 guidance. We expect Griffon fiscal year 2026 revenue to be consistent with 2025 at $2.5 billion and adjusted EBITDA in the range of $580 million to $600 million, excluding unallocated costs of $58 million.

From a segment perspective, we anticipate 2026 HBP and CPP revenue will both be in line with 2025. EBITDA margin at HBP is expected to be -- continue to be in excess of 30% and CPP margin is expected to be approximately 10%. Free cash flow for 2026, including capital expenditures of $60 million is expected to exceed net income with depreciation of $42 million and amortization of $24 million.

Fiscal year 2026 interest expense is expected to be $93 million, and Griffon's normalized tax rate is expected to be 28%.

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

Thanks, Brian. Our team's performance was outstanding in 2025, especially given the challenging macroeconomic environment. HBP continued its strong all-around performance being recognized as an innovation leader of all of building products. and by our largest customer for superior service in solid financial rule. CPP continues to realize the benefits of their successful transition to an asset-light globally sourced operating model for the U.S. market, which has allowed them to focus resources on new product innovation, market capture while realizing the benefits of improving profit margin. Fundamentally, we are well positioned as we enter fiscal 2026 and are confident in our ability to continue to generate strong financial performance. We are bullish about the long-term outlook related to repair and remodel activity commercial and industrial construction project activity and the recovery of the residential housing market. We expect to leverage improving market conditions and a pipeline of product innovations to increase our long-term volume and profit margin. In terms of capital allocation, we'll continue to use our strong operating performance and free cash flow to drive the strategy that delivers long-term value for our shareholders. Last year, we said we expect it to generate over $1 billion of free cash flow during the next 3 years, and we intended to use this cash to execute our ongoing share repurchase program, pay down debt and make high-return investments in our businesses.

During 2025, we generated $323 million of free cash flow, putting us on track for $1 million 3-year target. This strategy underscores the confidence Griffon's Board and management has in our outlook and strategic plan.

Before we turn to questions, I want to acknowledge the employees and management teams of our businesses. It's their dedication effort that enables Griffon to deliver consistently strong operating results.

Operator, we're now ready for questions.

[Operator Instructions] Our first question comes from the line of Collin Verron with Deutsche Bank.

I just wanted to start off on the HBP margin performance in the quarter. Can you just talk about the drivers of the sequential EBITDA margin decline? And how you sort of anticipate offsetting these incremental headwinds as you move into fiscal year '26, just giving you the robust guy here for 30% plus being maintained?

Yes. I wouldn't view the quarter-on-quarter as any headwind. We have a mix in proven from time to time. That was just the mix that happened at the quarter. Generally, in the quarter, we saw favorable price and mix. Volume was relatively flat with commercial being slightly up. And residential being slightly down and going into the next year. We expect a similar trend that we saw in '25 with favorable price/mix in residential and commercial for the full year. commercial volume for the year likely will be resected to be flat and lower residential volume.

And Collin, it's Ron, good morning. I'll simply say that as we're halfway through our first quarter, our trends continue to be on track.

Okay. That's really helpful color. And I guess on the shape of the year, does the guide have any greater weighting toward the back half, just more so than normal just given the near-term softness in the consumer confidence and affordability, or are you anticipating things to be pretty steady. It sounds like it could be just given your comments just there around that things are on track already through the first part of the quarter here.

Yes. So I would expect a slight 1% or 2% decrease in the first half of the year and the opposite pickup in the second half of the year.

Which is our normal seasonality.

Our next question comes from the line of Tim Wojs with Baird.

Maybe just on CPP. I guess what was better versus your expectations in the quarter? I think the implied guidance from last quarter suggested kind of weaker sequential EBITDA, and you actually saw it up. So what was the biggest variance specifically in the CPP business versus your expectations?

Yes, we did see favorable pricing mix for the quarter and a little bit better volume than we originally anticipated.

Okay, okay. And then can you just give us an update on kind of where you stand on just kind of tariffs and some of the sourcing chases that you're making? And if you look at 2026, I mean we've got I think, $5 million to $10 million of implied EBITDA growth and kind of flat sales in CPP. So just what are the kind of specific drivers to that EBITDA growth on flat sales and just kind of absorbing the tariffs and things like that.

Sure. So for tariffs, the current tariff policy is reflected in our guidance, and we expect to be able to continue mitigating tariff impacts or the other changes in cost inputs by leveraging the global supply chain, continuing cost management, supply negotiations and price as we have before. And our asset-light model enables us to leverage the global supply chain to continue to produce high-quality products with good value. So -- sorry, I forgot the back part of your question.

Just if you look -- I mean you're kind of absorbing tariffs, but you're still able to kind of grow EBITDA. So I'm just kind of curious what the bridge is there. Is it just based pricing is completely offsetting tariffs in 2026, and you're getting the benefits of sourcing, or is there just anything else there?

Yes, I'm sorry. Thanks for orienting me. Yes, it is the continuing use and leveraging of our global supply chain will help us with 100 basis point improvement in margin year-over-year. And everything else you said is correct. We'll continue to be able to use that to manage tariff costs and other [indiscernible].

And as the consumer starts to normalize at some point, volume has leveraged and our long-term target for this business remains 15%. That's not a '26 conversation, but we're on our way towards a 10% margin in that business in '26 and the long-term target when the consumer ultimately recovers. And the one other point that I want to emphasize again how tariffs is 85% of our business has nothing to do with tariffs.

Our next question comes from the line of Bob Labick with CJS Securities.

Congrats another strong quarter and year.

Thank you.

Thank you.

So I want to start on doors. So kind of given the just overall macro environment, commodity prices, consumer weakness, et cetera. And the fact that a lot of your competitors are either private or much smaller entities and bigger entities, it's hard to see. Have there been any competitive changes or outlook changes in either commercial or residential? And how do you feel these markets should play out over the next 3 to 5 years?

I'll start by saying a year ago, we thought that this year would play out with a recovery in the housing market and a significant increase in new home construction, which is a very small percentage of our both HBP business and overall Griffon. The reality is, is that our performance has been in spite of a weak consumer, a difficult housing market. Interest rates have been stubbornly high inflation that is still causing an affordability problem. So the crosscurrents of the macro environment make our performance in the business that much more exceptional. So why did that happen? I think the underlying strength, there's pockets of strength in the U.S. economy. And where we play within the housing market and particularly in the garage door competitive category, we're the premium, better best. We have the most diversified channels to the market, to both big-box retailers, Home Depot and Menards and 2,500 dealers and the largest commercial dealer business. So it's not any one thing, it's the evolution of the business over what's been a 15-year pivot from being entirely new home construction oriented to today within HBP, new home construction is less than 10% of our business. So there's been nothing that we have seen of pricing but discipline among the peer group. We consider ourselves the industry leader and we conduct ourselves that way. We have new products. We have innovations that our competition simply can't match, in a recovering housing market, which we still see ahead of us in the future, whether that's in '26 or beyond, we're nowhere near the peak earnings for our HBP business. Our margin improvement story has been both expanded and driven over a number of different categories. The commercial business has helped grow the margins on our residential business. So sitting here today, we see a very balanced, a very strong business that continues to gain market share. And at the same time, we see a housing market that when it recovers, will get unit growth.

Okay. Great. And then just switching over to CPP. Obviously, kind of a fluid dynamic in pricing. You've, I think, passed through your pricing, retailers kind of have or haven't yet and then some consumers are reacting to that. Where do you see as it relates to your CPP products in the U.S., the pricing, the consumer acceptance? And how should we think about that for next year?

I'm going to start by saying brands matter and quality matters. We have the best brands and the highest quality products serving particularly the pro channel and the ability for us to compete in the consumer channel. So our business within CPP is multiple products from shovels to wheel barrels to storage and organization to ceiling fans through Hunter. Consumer has been weak. Our expectation is, is that there's no immediate recovery, '26 is going to look a lot like '25. And with that, inventory levels, destocking has already happened. So any incremental improvement will give us volume and our ability to maintain margins with the global sourcing initiative that we started 3 years ago has served us well into these turbulent consumer environment. But ultimately, we believe brands matter and our logistical capability to be able to be a large-scale supplier to where volume in these products is what gives us an edge.

Our next question comes from the line of Sam Darkatsh with Raymond James.

Two questions. One is the follow-up on what you were just mentioning about CPP, Ron. Obviously, been a lot of retailer inventory drawdowns this year. What's the status of the retailer inventories in your category? And what I guess I'm getting at is, do you expect sell-in and sell-through to be roughly at parity in '26? Do you think that the retailers need to add some inventory, whereby perhaps there may be some reloading in '26? What are your thoughts in terms of the purchasing patterns that are expected in CPP in '26? And then I've got a follow-up.

I would say that the weak consumer has left people with more inventory. So I don't see any immediate repurchasing. Look, we have navigated through a very difficult 2025 in the consumer space. We've said and we expect '26 is going to look a lot like '25. There's no immediate relief. I believe interest rates will come down in '26. I believe that, that could lead to an incremental better spring season, but a lot's going to happen before we get there. The tariff uncertainty is going to be affected by wherever the Supreme Court comes out in January. So we're prepared for more of the same. And if things improve, you'll see the reorder and restocking going into the second half of the year.

Got you. And my second question, the -- you're raising the dividend and at the same time, share repurchase sequentially stepped lower. I'm trying to determine what the Board is signaling regarding both business prospects and the equity value given what could be perceived as conflicting messages there. How would you reconcile the 2 items?

Yes. I would say just the opposite. There's nothing conflicting. We can do all 3 and intend to continue. Buying back shares, we bought back $560 million worth of stock over the last few years. That's nearly 19% of the outstanding. We're going to continue to buy our stock. We consider deleveraging is valuable as buying back stock, and we've done that. We're down to 2.4x leverage. We have significant free cash flow in the next few years, as we've laid out. Our ability to buy back our shares, delever the balance sheet and increase our dividend is, for us, the trifecta that we want to keep playing.

[Operator Instructions] Our next question comes from the line of Julio Romero with Sidoti & Company.

Very nice sequential performance here, particularly with CPP on the margin front. Can you maybe level set for us how the different product lines between fans and tools are doing? And then secondly, you mentioned just a question or 2 ago with regards to inventory levels at some of your customers might still be a little bit not in a rush to buy immediately, but maybe help us think about what you're hearing from them with regards to how normal of a loading season to expect for fans and tools specifically?

Sure. So across our businesses, Australia continues to perform well and has seen good volume increases and also the benefits from the pulp acquisition. U.K. and Canada are performing more or less in line with where they were in the prior year. And in the U.S., our tools business has seen benefits from the supply chain initiative, continuing to see the benefits from the supply chain initiative. And the Hunter Fan business has been hurt by decreased demand and hurt by customer ordering patterns related to tariffs. So their volume has been down in the quarter. As far as inventory levels at our customers, it varies by product, of course, and varies by customer. But generally, we lead consumer to be really the driver here. And then our guidance, of course, we're expecting a normalized weather spring where last year it was a bit of a wet spring. So we don't expect any really different patterns of ordering certainly in the initial stages of the year. And then hopefully, we'll see better POS in the back stages with normalized weather.

Very helpful. And then that weak consumer point kind of segues into my second question here. And it also goes into, Ron, your comment earlier about leverage in the CPP business model. When the consumer ultimately recovers and given the changes you've made with regards to your sourcing strategy and improving profitability on an underlying basis, you're putting up 10% margins now on weak consumer demand. How much headroom is there for margins may potentially above that 15% long-term target once the consumer ultimately normalizes, whether it be 2, 3, 4 years out, however you want to frame it?

We're very comfortable with our 15% target. And let's get there before we talk about what got us there. Look, increased economic activity, GDP growth will flow through to our CPP business. The tariff chaos that we've dealt with is going to get clearer as we get into calendar year '26. We feel like we're very well positioned. We're doing well in a very difficult consumer environment, getting to our 15% target in a better consumer environment is our goal.

Our next question comes from the line of Jeffrey Stevenson with Loop Capital Markets.

Have you seen any slowdown in mid- to high-end residential garage doors during the back half of your fiscal year, that market remain largely resilient despite the ongoing macro uncertainties we've seen.

Yes. On the high end of the range, we're seeing consistent volume. It's the low end that we're seeing.

Okay. Got it. That's helpful. And then previously, you estimated roughly 1/3 of your annualized CPP revenues would be impacted by China-based tariffs. And at a high level, is that still a good way to think about your exposure to China and the segment. And have you made any adjustments to your sourcing strategy, particularly in lawn and garden or your Residential Fan business during the back half of the year?

Yes. We have, over the last several months, establish alternate suppliers outside of China for our products. Currently, with the current tariff policy, we see China still being a substantial part of our sourcing. However, it's really our global supply chain and our ability to move things and leverage that supply chain need be, and we do have alternative suppliers now in place, and we could exercise those as needed.

Ladies and gentlemen, this concludes our question-and-answer session. I'll now turn the floor back to Mr. Kramer for any final comments.

Thank you. We're very proud of what we've accomplished. We're very well positioned, and we're hard at work to unlock value every day. Look forward to speaking to you after our first quarter.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.