H.B. Fuller Company (FUL) Q4 2023 earnings summary

Executive summary

• Q4 adjusted EBITDA rose 22% YoY to $173M; adjusted EPS increased 27% to $1.32, and adjusted EBITDA margin reached a record 19.1%.

• FY23 adjusted EBITDA margin set a record at 16.5%; operating cash flow rose 48% YoY to $378M.

• Pricing, raw-material cost actions, restructuring and cost reductions supported margin expansion; customer destocking was viewed as largely behind the business.

• FY24 priorities include high-return growth opportunities, innovation, manufacturing efficiencies and acquisition synergies.

Financial highlights

• Q4 net revenue was $903M, down 5.8% YoY; on a comparable 13-week basis it rose 1.2%, while organic revenue declined 3.5%.

• Q4 adjusted gross margin was 31.3%, up 510 bps YoY and 130 bps sequentially; adjusted SG&A was effectively flat YoY.

• Q4 net income was $45M and adjusted net income was $74M; reported diluted EPS was $0.80 versus adjusted diluted EPS of $1.32.

• FY revenue was $3.51B, down 6.4%; organic revenue fell 5.5%, with volume down 8.4% and pricing up 2.9%.

• FY adjusted EBITDA was $581M, up 10%; adjusted diluted EPS was $3.87.

Outlook and guidance

• FY24 net revenue is expected to rise 3%–6% and organic revenue 1%–3%; volume is expected up low-to-mid single digits, with pricing down low single digits.

• FY24 adjusted EBITDA guidance is $610M–$640M, up 5%–10%; volume growth, restructuring savings and acquisitions are expected to more than offset inflation and rebuilding variable compensation.

• FY24 adjusted EPS is expected at $4.15–$4.45, up 7%–15%; net interest expense is $115M–$125M, core tax rate 27%–28% and diluted share count ~57M.

• FY24 operating cash flow is expected at $300M–$350M, weighted to 2H; D&A is ~ $170M and capex ~ $140M. Q1 net revenue is expected up low single digits and adjusted EBITDA at $115M–$125M.

• Long-term target is adjusted EBITDA margin above 20% within 3–5 years; FY24 outlook anticipates positive organic growth and further margin expansion.