H.B. Fuller reports third quarter 2024 results

H.B. Fuller Company (NYSE: FUL) today reported financial results for its third quarter that ended August 31, 2024.

Third quarter 2024 noteworthy items

• Net income was $55 million; adjusted EBITDA was $165 million, up 6% year-on-year; adjusted EBITDA margin expanded 70 basis points year-on-year to 18.0%;
• Reported EPS (diluted) was $0.98; adjusted EPS (diluted) was $1.13, up 7% versus the prior year;
• Net revenue was $918 million, up 1.9% year-on-year including organic volume growth of 3.0%;
• Gross profit margin was 30.0%; adjusted gross profit margin was 30.4%, up 40 basis points year-on-year;
• Net working capital, as a percentage of annualized net revenue, decreased 200 basis points year-on-year from 18.1% to 16.1%;
• Repurchased 407,400 shares year-to-date, including 225,000 shares in the quarter;
• Acquired HS Butyl Limited, the UK’s largest manufacturer and distributor of high-quality butyl tapes, expanding H.B. Fuller’s position in the global waterproofing tape market.

Summary of third quarter 2024 results

The company’s net revenue for the third quarter of fiscal 2024 was $918 million, up 1.9% versus the third quarter of fiscal 2023. Organic revenue increased slightly year-on-year, with pricing adjustments reducing organic revenue by 2.6% and volume increasing organic revenue by 3.0%. Foreign currency translation reduced net revenue by 1.5% and acquisitions increased net revenue by 3.0%.

Gross profit in the third quarter of fiscal 2024 was $276 million. Adjusted gross profit was $279 million. Adjusted gross profit margin of 30.4% increased 40 basis points year-on-year. Volume leverage, restructuring savings and the benefit from acquisitions primarily drove the year-on-year increase in adjusted gross profit.

Selling, general and administrative (SG&A) expense was $171 million in the third quarter of fiscal 2024 and adjusted SG&A was $164 million versus $159 million in the third quarter of fiscal 2023. The impact of acquisitions and inflation in wages and services drove most of the year-on-year increase in adjusted SG&A.

Net income attributable to H.B. Fuller for the third quarter of fiscal 2024 was $55 million, or $0.98 per diluted share. Adjusted net income attributable to H.B. Fuller for the third quarter of fiscal 2024 was $64 million. Adjusted EPS was $1.13 per diluted share, up 7% year-on-year.

Adjusted EBITDA in the third quarter of fiscal 2024 was $165 million, up 6% year-on-year, driven principally by volume growth, restructuring savings and benefits from recent acquisitions. Adjusted EBITDA margin increased 70 basis points year-on-year to 18.0%.

H.B. Fuller President and CEO Celeste Mastin said, “In the third quarter, we continued to advance our strategy and expand EBITDA margins through volume growth, restructuring actions and the acquisition of highly profitable, fast-growing businesses. At the same time, we continue to navigate a dynamic macroeconomic environment across our portfolio. Our volume growth during the quarter was impacted by slowing market demand in certain durable goods markets in EA and we are adjusting our full year outlook accordingly. While this quarter’s volume growth was at the low end of our expectations, we have a clear and focused strategy and a highly engaged team that is well equipped to execute and drive business success. We remain on track to deliver upon our long-term EBITDA margin and organic growth targets.”

Balance sheet and working capital

Net debt at the end of the third quarter of fiscal 2024 was $1,890 million, up $100 million year-on-year. The ratio of net debt-to-adjusted EBITDA was 3.1X, consistent with the second quarter. Net working capital in the third quarter of fiscal 2024 decreased $64 million year-on-year. As a percentage of annualized net revenue, net working capital decreased 200 basis points year-on-year to 16.1%.

Fiscal 2024 outlook

As a result of our year-to-date performance and current macroeconomic conditions, we are updating our previously communicated financial guidance for fiscal 2024 as follows:

• Net revenue growth is now expected to be up approximately 2% with organic revenue flat year-on-year;
• Adjusted EBITDA is now expected to be in the range of $610 million to $620 million, equating to year-on-year growth of between 5% and 7%;
• Adjusted EPS (diluted) is now expected be in the range of $4.10 to $4.20, equating to year-on-year growth of between 6% and 9%;
• Operating cash flow is now expected to be between $325 million and $350 million.

Conference call

The Company will hold a conference call on September 26, 2024, at 9:30 a.m. CT (10:30 a.m. ET) to discuss its results. Interested parties may listen to the conference call on a live webcast. The webcast, along with a supplemental presentation, may be accessed from the Company’s website at investors.hbfuller.com . Participants must register prior to accessing the webcast using this link and should do so at least 10 minutes prior to the start of the call to install and test any necessary software and audio connections. A telephone replay of the conference call will be available from 12:30 p.m. CT on September 26, 2024, to 10:59 p.m. CT on October 3, 2024. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-609-800-9909 and enter Conference ID: 6370505.

Regulation G

The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA margin, net debt, net debt-to-adjusted EBITDA, trailing twelve months adjusted EBITDA, net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2024 Outlook, which the Company cannot reconcile to forward-looking GAAP results without unreasonable effort.

About H.B. Fuller

As the largest pureplay adhesives company in the world, H.B. Fuller’s (NYSE: FUL) innovative, functional coatings, adhesives and sealants enhance the quality, safety and performance of products people use every day. Founded in 1887, with 2023 revenue of $3.5 billion, our mission to Connect What Matters is brought to life by more than 7,000 global team members who collaborate with customers across more than 30 market segments in over 140 countries to develop highly specified solutions that enable customers to bring world-changing innovations to their end markets. Learn more at www.hbfuller.com.