Fortune Brands Innovations, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Q3 2026 total net sales were $1,113.7 million, a 3.1% decrease year-over-year; sales excluding China decreased 2.4%.
• Q3 2026 GAAP operating income was $60.4 million, a 52.0% decrease year-over-year; operating margin was 5.4%.
• Q3 2026 GAAP diluted EPS was $0.42, a 28.8% decrease year-over-year, inclusive of a $0.47 asset impairment charge.
• Q3 2026 non-GAAP operating income before charges/gains was $155.5 million, a 24.6% decrease year-over-year; non-GAAP operating margin was 14.0%.
• Q3 2026 non-GAAP diluted EPS before charges/gains was $1.14, a 4.6% increase year-over-year, inclusive of a $0.28 net tax benefit and $0.14 net tariff refunds.
• Q3 2026 operating cash flow was $347.0 million; free cash flow was $331.1 million.
• The Company repurchased $40 million of its shares in the quarter.
• As of Q3 2026, net debt was $2.1 billion; net debt to EBITDA before charges/gains was 2.5x.
• Liquidity was approximately $1.3 billion, including $231 million in cash and $1.1 billion available under the revolving credit facility.
• For the 39 weeks ended September 26, 2026, GAAP net sales were $3,278.9 million (down 3.2%); GAAP operating income was $111.7 million (down 71.7%); GAAP diluted EPS was $0.43 (down 76.4%).
• For the 39 weeks ended September 26, 2026, non-GAAP operating income before charges/gains was $503.5 million (down 6.9%); non-GAAP diluted EPS before charges/gains was $3.01 (up 9.5%).

Guidance and Future Outlook:

• Full-year 2026 net sales guidance updated to $4,205 million to $4,275 million.
• Full-year 2026 non-GAAP EPS before charges/gains guidance updated to $3.20 to $3.30.
• Q4 2026 net sales expected to be $925 million to $995 million; Q4 2026 non-GAAP EPS before charges/gains expected to be $0.19 to $0.29.
• Full-year 2026 operating cash flow guidance is $480 million to $500 million; free cash flow guidance is $380 million to $410 million.
• The Company expects single-family new construction to be down mid to high single digits for the year, with R&R down low single digits.
• The Company anticipates incrementally lower revenue in Q4 driven by portfolio optimization actions, softening in single-family new construction, and channel inventory reduction.
• The Company expects to achieve $70 million of annualized SG&A savings by Q1 2027.
• An additional non-cash impairment charge for the Fiberon asset group is estimated at $175 million to $205 million.

Business Segments and Product Lines:

• Water Innovations: Q3 2026 net sales were $584.5 million (down 5.5%); GAAP operating margin was 2.3% (down 2,130 bps); non-GAAP operating margin before charges/gains was 17.6% (down 680 bps). Sales excluding China decreased 4.3%.
• Outdoors: Q3 2026 net sales were $347.4 million (up 0.8%); GAAP operating margin was 15.1% (up 1,660 bps); non-GAAP operating margin before charges/gains was 15.3% (down 20 bps). Sales excluding Fiberon increased 3.4%.
• Security: Q3 2026 net sales were $181.8 million (down 2.4%); GAAP operating margin was 21.1% (up 620 bps); non-GAAP operating margin before charges/gains was 21.3% (up 350 bps).
• The Company entered into a purchase agreement to sell Fiberon.
• The Company is exiting its commercial operations in China, expected to be completed by Q3 2027.
• The Company is rationalizing the EMEA operating footprint of a business in the Water segment, expected to be completed by Q4 2027.
• These portfolio optimization actions involve businesses generating an annualized operating loss of approximately $50 million to $55 million on revenue of $320 million to $330 million.

Market and Competitive Landscape:

• Customers are signaling greater caution, leading the Company to take a more conservative approach to channel inventory.
• The Company cites execution as its biggest challenge and is taking aggressive steps to drive improvement.
• Service levels improved 10 percentage points in Q3, with fill rates in the high-90% range entering Q4.
• The Company realigned its organization around customer-focused segments, expecting over 80% of its salaried workforce to directly support a specific business by year-end, up from roughly 40% at the start of the year.

Risks and Challenges:

• The Company faces risks related to the North American and Chinese home improvement, repair, and remodel, and new home construction activity levels.
• Risks include downward changes in the general economy, unfavorable interest rates, and the competitive nature of consumer and trade brand businesses.
• Risks associated with recent leadership changes and the ability to execute on strategic plans are noted.
• Global risks include trade-related tariffs, commodity and energy price volatility, supply chain disruptions, and cybersecurity incidents.
• Risks include potential impairments in goodwill or intangible assets, defined benefit-related costs, and climate change impacts.
• The Company notes the inability to provide a full reconciliation of forward-looking non-GAAP EPS to GAAP due to the high variability and low visibility of future gains, losses, and restructuring charges.

Management Commentary and Tone:

• CEO Jesse Singh stated the Company is in the early stages of a multi-year turnaround plan to "get Back to Business" and acknowledged results were not where they need to be.
• CFO Pete Clifford stated the updated guidance positions the Company to enter 2027 on stronger footing despite near-term weighing actions.
• Management expressed confidence that their actions will build a stronger, simpler, and more customer-focused company delivering consistent growth, margin expansion, and shareholder value.
• The Company implemented leadership changes, including new CFO, CIO, and Chief Legal Officer, and new leaders within each business.

Other Key Points:

• On October 15, 2026, the Company entered into a definitive agreement to sell its Fiberon composite decking business to a subsidiary of Inteplast Group Corporation for $160 million.
• On September 25, 2026, the Board approved a plan to exit the Moen commercial business serving domestic markets in Asia, incurring a discrete tax charge of $9.2 million ($0.08 per share).
• The Company recorded asset impairment charges of $73.8 million in Q3 2026, including $69.5 million related to EMEA rationalization and $4.3 million related to Fiberon.
• The Company recorded a net gain of $4.7 million related to a manufacturing facility fire in the Outdoors segment in Q3 2026.
• The Company incurred $0.5 million in charges for governance advisory services and leadership transitions in Q3 2026.
• Net tariff refunds contributed $0.14 to Q3 2026 non-GAAP EPS.
• The Company expects to use the Q3 net tax benefit to fund additional portfolio and alignment actions in Q4.