Griffon's JV Unlocks Value — But Why Not Sell Hunter Now?

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $649 million, increased 3% in comparison to the prior year quarter
• EPS: $1.45 per share (adjusted), compared to $1.39 per share in the prior year
• Gross Margin: 41.1%, compared to $264 million in the prior year quarter (implied)

Guidance:

• Full year fiscal 2026 revenue from continuing operations expected to be $1.8 billion.
• Adjusted EBITDA expected to be $520 million, excluding unallocated costs of $62 million.
• Free cash flow from continuing operations expected to exceed net income.
• Capital expenditures expected to be $50 million.
• Depreciation expected to be $27 million and amortization $15 million.
• Interest expense expected to be $93 million.
• Normalized tax rate expected to be 28%.

Business Commentary:

Strategic Joint Venture and Business Transformation:

• Griffon Corporation announced a joint venture combining AMES North America with ONCAP's global hand tool businesses. This venture is expected to generate immediate shareholder value and additional liquidity.
• Griffon is transforming into a pure-play building products company by reviewing strategic alternatives for AMES Australia and the UK, and combining Hunter Fan with its Home and Building Products segment.
• The strategic actions aim to streamline the company's portfolio and unlock value, with the joint venture marking a significant step in enhancing shareholder value.

Financial Performance and Outlook:

• Griffon reported first quarter revenue of $649 million, a 3% increase year-on-year, with adjusted EBITDA margin at 22.3%.
• The Home and Building Products segment saw a 3% revenue increase, driven by strong price and mix, although residential volumes were reduced.
• Griffon's updated outlook for fiscal 2026 includes revenue from continuing operations of $1.8 billion and adjusted EBITDA of $520 million, reflecting confidence in its strategic plan and market recovery expectations.

Capital Allocation and Shareholder Returns:

• Griffon repurchased $18 million worth of stock in Q1, with $280 million remaining under the repurchase authorization, and has repurchased a total of $578 million since April 2023.
• The company announced a regular quarterly dividend of $0.22 per share, marking the 58th consecutive quarterly dividend.
• These actions reflect Griffon's strength and resiliency, as well as its continued confidence in its strategic plan and outlook for shareholder returns.

Consumer and Professional Products Segment:

• The Consumer and Professional Products segment reported a 2% revenue increase, with EBITDA up 19% to $22 million, driven by favorable price and mix and increased volumes in Australia and Canada.
• Despite weak consumer demand in the U.S., the segment's profitability improved, highlighting the positive impact of strategic pricing and geographic diversification.

Sentiment Analysis:

Overall Tone: Positive

• "We are pleased with our first quarter results... We're off to a good start and are on track to meet our updated financial targets for the year." "This is an exciting time for Griffon... Our strategic actions taken together will streamline the company's portfolio and enhance shareholder value." "2026 is off to a good start with strong free cash flow and continued solid operating performance."

Q&A:

• Question from Timothy Wojs (Robert W. Baird & Co. Incorporated): 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?
  Response: Management believes the stock is undervalued and the strategic combination of AMES with ONCAP's global tool brands creates value, unlocks shareholder value, and positions the company for a better valuation.

• Question from Timothy Wojs (Robert W. Baird & Co. Incorporated): 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.
  Response: The second lien debt has a 10% PIK rate. The JV is a private company with debt and amortization, so Griffon's minority interest net income will not be material.

• Question from Lee Jagoda (CJS Securities, Inc.): 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?
  Response: Combined entity EBITDA is not disclosed but is slightly smaller than Griffon's.

• Question from Lee Jagoda (CJS Securities, Inc.): 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?
  Response: Hunter Fan had $211 million of revenue in fiscal '25. The HBP segment margin is expected to remain a 30% plus business, with guidance around 29%.

• Question from Collin Verron (Deutsche Bank AG): 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.
  Response: The $100 million cash proceeds imply roughly a 4x EV/EBITDA multiple. The JV is expected to close by end of June. Timing for Australia and U.K. actions will be updated later.

• Question from Trey Grooms (Stephens Inc.): 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.
  Response: Management is optimistic about housing recovery, sees strength in premium repair/remodel, and expects HBP performance to improve with housing market recovery and infrastructure spending supporting commercial growth.

• Question from Sam Darkatsh (Raymond James & Associates, Inc.): 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?
  Response: A JV unlocks value now and in the future via a minority stake. Hunter has stronger strategic alignment and upside with HBP; selling it now in weak consumer environment would be poor timing. Management intends to run and build the company, not a full strategic review.

• Question from Julio Romero (Sidoti & Company, LLC): 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?
  Response: Examples include commercial projects involving large warehouses and a residential garage fan product. Cross-selling opportunities exist due to complementary customer bases and projects.

• Question from Collin Verron (Deutsche Bank AG): 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?
  Response: HBP guidance unchanged; mix strength from price increases is sustainable. Margin pressure from volume reduction in residential and flat commercial. Guidance change only relates to strategic actions; legacy HBP guidance remains.

Contradiction Point 1

Outlook for Consumer Demand and HBP Volume

Contradiction on the near-term volume outlook for the premium residential segment.

What is the demand outlook for the remaining HBP business in calendar 2026 across residential remodel and commercial? - Trey Grooms (Stephens Inc.)

2026Q1: The macro environment for housing has improved... While Q1 saw a decline in residential volume, price/mix performance demonstrates strength in the premium repair and remodel segment. - Ronald Kramer(CEO)

Is the guidance weighted more toward the back half of the year? - Collin Verron (Deutsche Bank AG)

2025Q4: Expect a slight 1-2% decrease in the first half and a pickup in the second half. - Brian Harris(CFO)

Contradiction Point 2

Status of Retailer Inventory Levels and Restocking Expectations

Contradiction on whether retailer inventory destocking is complete and if restocking is expected in FY26.

What is the demand outlook for the remaining HBP business through 2026, across residential remodel and commercial? - Trey Grooms (Stephens Inc.)

2026Q1: The macro environment for housing has improved... While Q1 saw a decline in residential volume, price/mix performance demonstrates strength... The company is optimistic about a future housing market recovery. - Ronald Kramer(CEO)

What's the status of retailer inventories in your category, and do you expect sell-in and sell-through to be roughly at parity in '26? - Sam Darkatsh (Raymond James & Associates, Inc.)

2025Q4: Weak consumer has left retailers with higher inventory; no immediate restocking expected. FY26 is expected to look similar to FY25 with no immediate relief. - Ronald Kramer(CEO)

Contradiction Point 3

Drivers of Margin Performance and Price/Mix Sustainability

Contradiction on the primary driver of margin improvement and the sustainability of price/mix benefits.

How sustainable is the price/mix benefit, and was the legacy HBP guidance adjusted? - Collin Verron (Deutsche Bank AG) - Follow-up

2026Q1: The outlook for HBP remains unchanged. Residential volume pressure persists in the lower end of the market, while the premium segment is buoyant. - Brian Harris(CFO)

What were the drivers of the sequential EBITDA margin decline in HBP, and how do you plan to offset these headwinds in FY26? - Collin Verron (Deutsche Bank AG)

2025Q4: For FY26, favorable price/mix is expected for the full year, with commercial volume flat and lower residential volume. - Brian Harris(CFO)

Contradiction Point 4

Home & Building Products (HBP) Segment Margin Outlook

Contradiction on the achievability and stability of high EBITDA margins.

What was Hunter Fan's revenue contribution and how should we assess margins in the combined HBP segment post-acquisition? - Lee Jagoda (CJS Securities, Inc.)

2026Q1: The margin for the combined HBP segment is expected to remain strong, consistent with the guidance of roughly 29% and 'ultimately... a 30% plus business going forward.'' - Brian Harris(CFO)

Given the revised revenue guidance, how confident are you in the drivers of the full year EBITDA guidance? - Alex Hantman (Sidoti & Company)

2025Q3: HBP margins are ahead of the original guide (now expecting 31%+ vs. prior >30%). Weak demand in CPP is negatively impacting margins and results. - Brian Harris(CFO)

Contradiction Point 5

Consumer Products (CPP) Segment Long-Term Margin Target

Contradiction on whether the long-term margin target is achievable without demand recovery.

Why was the deal structured as a joint venture instead of an outright sale, why was Hunter Fan excluded from the JV, and why were only the European and Australian businesses reviewed instead of conducting a full strategic review? - Sam Darkatsh (Raymond James & Associates, Inc.)

2026Q1: The long-term target for CPP margins is 15%. - Ronald Kramer(CEO)

Can margins expand beyond current 9% and expected 8% levels without demand improvement, and how much of the global supply chain initiatives are already reflected in margins versus remaining potential, considering inventory changes? - Unknown Analyst (Audio Gap)

2025Q3: to achieve the 15% long-term margin target for CPP, a recovery in consumer demand is necessary. - Brian Harris(CFO)