Core Insights - Scotts Miracle-Gro (NYSE: SMG) has underperformed in the past year, with a loss of approximately 13% in its stock value due to a focus on debt reduction and inventory normalization [1] Company Performance - The company is currently prioritizing debt reduction and normalizing inventory levels, which has impacted its stock performance negatively [1] Market Context - The broader market context includes a trend of companies making contrarian bets based on macro views and turnaround stories to achieve favorable risk/reward profiles [1]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for Q3 and nine months ended June 28, 2025, including operations, comprehensive income, cash flows, balance sheets, and detailed notes [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales slightly decreased in Q3 2025 and for the nine-month period, while net income increased significantly for both periods Condensed Consolidated Statements of Operations | Financial Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Nine Months Ended June 28, 2025 | Nine Months Ended June 29, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $1,188.0 M | $1,202.2 M | $3,025.8 M | $3,138.0 M | | **Gross margin** | $378.0 M | $354.1 M | $1,020.7 M | $880.0 M | | **Income from operations** | $215.0 M | $200.1 M | $508.7 M | $424.9 M | | **Net income** | $149.1 M | $132.1 M | $297.1 M | $209.1 M | | **Diluted net income per common share** | $2.54 | $2.28 | $5.07 | $3.64 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Comprehensive income increased for both the three and nine months ended June 28, 2025, reflecting net income adjusted for other comprehensive items Condensed Consolidated Statements of Comprehensive Income (Loss) | Metric | Three Months Ended June 28, 2025 | Nine Months Ended June 28, 2025 | | :--- | :--- | :--- | | **Net income** | $149.1 M | $297.1 M | | **Total other comprehensive income (loss)** | $1.2 M | $(0.2) M | | **Comprehensive income** | $150.3 M | $296.9 M | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased for the nine months ended June 28, 2025, leading to a net decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (Nine Months Ended) | June 28, 2025 | June 29, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $197.2 M | $549.0 M | | **Net cash used in investing activities** | $(60.0) M | $(80.0) M | | **Net cash used in financing activities** | $(158.2) M | $(221.1) M | | **Net increase (decrease) in cash** | $(20.5) M | $248.0 M | | **Cash and cash equivalents at end of period** | $51.1 M | $279.9 M | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 28, 2025, total assets were $3,090.6 million, with a total equity deficit of $170.9 million, reflecting changes in receivables and debt Condensed Consolidated Balance Sheets | Balance Sheet Item | June 28, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Total current assets** | $1,283.3 M | $980.4 M | | **Total assets** | $3,090.6 M | $2,871.9 M | | **Total current liabilities** | $798.6 M | $750.3 M | | **Long-term debt** | $2,136.2 M | $2,174.2 M | | **Total liabilities** | $3,261.5 M | $3,262.5 M | | **Total equity (deficit)** | $(170.9) M | $(390.6) M | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, including the consolidation of THC, accounts receivable sales, debt covenant compliance, and segment performance - The company sold its subsidiary The Hawthorne Collective, Inc. ("THC") but determined it is the primary beneficiary of the acquiring entity (BDH), a variable interest entity, and therefore continues to consolidate it[24](index=24&type=chunk) - Under its Master Receivables Purchase Agreement, the company sold **$1,708.9 million** of accounts receivable during the nine months ended June 28, 2025. Net receivables derecognized from the balance sheet were **$418.8 million** as of that date[27](index=27&type=chunk) Debt Covenant Compliance | Debt Covenant | Requirement | Actual as of June 28, 2025 | | :--- | :--- | :--- | | **Maximum Leverage Ratio** | ≤ 5.00 | 4.15 | | **Minimum Fixed Charge Coverage Ratio** | ≥ 1.00 | 1.47 | Segment Net Sales (Nine Months Ended June 28, 2025) | Segment | Amount | | :--- | :--- | | **U.S. Consumer** | $2,682.6 M | | **Hawthorne** | $115.9 M | | **Other** | $227.3 M | | **Consolidated** | $3,025.8 M | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28MD%26A%29) Management discusses a 3.6% net sales decrease, primarily from the Hawthorne segment, offset by improved gross margin and strong debt covenant compliance [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Net sales decreased 3.6% for the nine months ended June 28, 2025, but gross margin rate improved significantly, leading to higher net income Contribution to Change in Net Sales | Contribution to Change in Net Sales | Three Months Ended June 28, 2025 | Nine Months Ended June 28, 2025 | | :--- | :--- | :--- | | **Volume and mix** | (0.9)% | (2.8)% | | **Pricing** | (0.2)% | (0.6)% | | **Foreign exchange rates** | (0.1)% | (0.2)% | | **Total Change in net sales** | **(1.2)%** | **(3.6)%** | Contribution to Change in Gross Margin Rate | Contribution to Change in Gross Margin Rate | Three Months Ended June 28, 2025 | Nine Months Ended June 28, 2025 | | :--- | :--- | :--- | | **Volume, mix and other** | 2.5% | 2.9% | | **Material costs** | 0.9% | 1.8% | | **Pricing** | (0.2)% | (0.5)% | | **Impairment, restructuring and other** | (0.6)% | 1.6% | | **Total Change in gross margin rate** | **2.3%** | **5.7%** | - Interest expense for the nine months ended June 28, 2025, decreased by **18.8%** to **$102.0 million**, driven by lower average borrowings of **$341.7 million** and a **50 basis point** decrease in the weighted average interest rate[132](index=132&type=chunk) [Segment Results](index=35&type=section&id=Segment%20Results) U.S. Consumer sales slightly declined but profit rose, Hawthorne sales sharply decreased but became profitable, and Other segment sales and profit increased Segment Performance | Segment | Net Sales (9M 2025) | % Change YoY | Segment Profit (9M 2025) | Segment Profit (9M 2024) | | :--- | :--- | :--- | :--- | :--- | | **U.S. Consumer** | $2,682.6 M | (0.8)% | $638.1 M | $580.5 M | | **Hawthorne** | $115.9 M | (45.9)% | $0.7 M | $(9.2) M | | **Other** | $227.3 M | 3.4% | $22.7 M | $13.0 M | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow decreased significantly, but the company maintained strong compliance with all debt covenants and substantial borrowing availability - Net cash provided by operating activities decreased from **$549.0 million** to **$197.2 million** for the nine months ended June 28, 2025, compared to the prior year[147](index=147&type=chunk)[148](index=148&type=chunk) - As of June 28, 2025, the company was in compliance with all debt covenants and expects to remain so. The leverage ratio was **4.15** against a maximum of **5.00**, and the fixed charge coverage ratio was **1.47** against a minimum of **1.00**[159](index=159&type=chunk)[160](index=160&type=chunk) - The company had **$1,166.9 million** of borrowing availability under its Sixth A&R Credit Agreement as of June 28, 2025[158](index=158&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in the company's quantitative and qualitative market risk disclosures during Q3 fiscal 2025 - There were no material changes to the company's market risk disclosures from the 2024 Annual Report[187](index=187&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of June 28, 2025[189](index=189&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the fiscal quarter[190](index=190&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) No material developments occurred in previously disclosed legal proceedings, and other claims are not expected to have a material adverse effect - There have been no material developments to the pending legal proceedings previously disclosed in the 2024 Annual Report[191](index=191&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) The company's risk factors have not materially changed from those described in its 2024 Annual Report on Form 10-K - The company's risk factors have not materially changed from those described in the 2024 Annual Report[193](index=193&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Dividend payments are limited by the credit agreement, and the company has no active share repurchase program, with minor share purchases by a trustee - The company's credit agreement limits regularly scheduled cash dividends to holders of its Common Shares to an aggregate amount not to exceed **$225.0 million** per fiscal year[198](index=198&type=chunk) - The company does not have an active share repurchase program. A total of **4,449 shares** were purchased during the quarter by a trustee for an executive retirement plan[199](index=199&type=chunk)[201](index=201&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[202](index=202&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement during the quarter[204](index=204&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section indexes exhibits filed with Form 10-Q, including officer certifications, subsidiary lists, and XBRL data files - The report includes a list of exhibits filed, such as certifications, lists of subsidiaries, and XBRL data files[205](index=205&type=chunk)[208](index=208&type=chunk)

Core Insights - Scotts Miracle-Gro Company (SMG) reported a third-quarter fiscal 2025 profit of $149.1 million or $2.54 per share, an increase from $132.1 million or $2.28 per share in the same quarter last year [1] - Adjusted earnings were $2.59 per share, up from $2.31 a year ago, surpassing the Zacks Consensus Estimate of $2.19 [1] - Net sales decreased by approximately 1.2% year over year to $1,188 million, missing the consensus mark of $1,230.9 million [1] Segment Performance - In the U.S. Consumer division, net sales increased by 1% year over year to $1,030.2 million, although it fell short of the estimate of $1,071.4 million; the segment's profit rose by 12% to $235.5 million [2] - The Hawthorne segment experienced a significant decline, with net sales plummeting 54% year over year to $31.2 million, missing the estimate of $56.5 million [2] - The other segment saw an 8% increase in net sales year over year to $126.6 million, exceeding the estimate of $100.2 million, and reported a profit of $16.8 million, up 44% year over year [3] Financial Position - At the end of the quarter, the company had cash and cash equivalents of $51.1 million, down from $279.9 million a year ago; long-term debt was $2,136.2 million, a decrease of approximately 12.3% year over year [4] Future Outlook - The company reaffirmed its full-year adjusted fiscal 2025 outlook, projecting low single-digit growth in U.S. Consumer net sales, excluding non-recurring sales from AeroGarden and bulk raw materials; adjusted gross margin is expected to be around 30% [5] - Adjusted EBITDA is anticipated to be between $570 million and $590 million, with adjusted earnings per share projected to be at least $3.50 and free cash flow estimated at approximately $250 million [5] Stock Performance - Shares of Scotts Miracle-Gro have declined by 10.5% over the past year, contrasting with a 10.2% rise in the industry [6]

Core Insights - The Scotts Miracle-Gro Company announced changes to its Board of Directors, with retired Lt. General John R. Vines retiring and former General Scott Miller appointed to the open seat [1][2][3] Board Changes - John R. Vines retired after over 12 years on the Board, maintaining an advisory role as Board member emeritus [2] - Scott Miller, a retired U.S. Army General with extensive military leadership experience, has been appointed to the Board [3][4] Leadership and Experience - Miller has commanded at all military levels and has a distinguished record, including leadership in complex geopolitical regions and significant combat experience [3][4] - The Board aims to enhance its skills and perspectives, with Miller being the sixth new member since 2022 [4] Company Overview - Scotts Miracle-Gro is the world's largest marketer of branded consumer lawn and garden products, with approximately $3.6 billion in sales [5]

Financial Data and Key Metrics Changes - Year-to-date EBITDA increased by 9%, and EPS rose by 24% [11][58] - Gross margin improved to above 30%, with a GAAP gross margin rate of 33.7% compared to 28% in the prior year [57][60] - Total company net sales for the third quarter were $1.19 billion, down 1% year-over-year, while year-to-date total net sales were $3.03 billion, a decline of 3.6% [50][62] Business Line Data and Key Metrics Changes - U.S. Consumer net sales for the quarter were $1.03 billion, a 1% increase year-over-year, and year-to-date sales were $2.68 billion, down 1% [45][46] - POS units across categories were up 8% year-to-date, with notable increases in soils (+12%), mulch (+8%), and grass seed (+16%) [11][52] - The branded lawn fertilizers saw a 1% increase in POS units year-to-date, reversing a multi-year downward trend [52] Market Data and Key Metrics Changes - The lawn and garden market grew approximately 5% year-to-date, with the company gaining 2% market share [80] - E-commerce sales increased by 54% in online POS unit sales, reflecting a strong push to engage consumers through digital channels [24][51] Company Strategy and Development Direction - The company is focusing on internal initiatives to improve cost structure and efficiency while also shifting towards outward-facing initiatives to enhance consumer engagement [7][9] - Plans include expanding marketing efforts to younger consumers through digital platforms and influencers, as well as enhancing the R&D pipeline with more natural and organic solutions [21][25] - The company aims for sustained U.S. Consumer sales growth averaging 3% annually, with a gross margin target of 35% or higher [38][63] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving EBITDA guidance and reaffirmed expectations for top and bottom line metrics despite weather challenges [10][11] - The company is optimistic about the lawn and garden category's growth and the strength of its consumer business, emphasizing the importance of partnerships with retailers [35][94] - Management highlighted the positive impact of recent tax policy changes on future cash tax benefits, allowing for further investment in the business [60] Other Important Information - The company is in the process of divesting its Hawthorne business, which has shown three consecutive quarters of profitability [36][49] - The company plans to take pricing in the upcoming fiscal year to support margin recovery and innovation investments [39][63] Q&A Session Summary Question: Pricing and price mix performance in '25 and strategy for '26 - Management indicated a pricing increase of just under 1.5% in '25, with plans to pursue further pricing adjustments in '26 while maintaining activation spending with retail partners [77][78] Question: Category growth at retail in '25 and comparison to company performance - The lawn and garden market has grown about 5% year-to-date, with the company gaining approximately 2% market share [80] Question: Performance of customers who engaged in traffic-driving strategies - Management noted that retailers who actively participated in promotional programs saw better performance, and future spending will focus on those retailers [84][86] Question: Visibility into achieving mid-30s gross margin over the next few years - Management outlined a phased approach to improving gross margin, targeting a 1% benefit from supply chain savings and another 1% from net pricing adjustments [90][91]

Financial Data and Key Metrics Changes - Year-to-date EBITDA increased by 9%, and EPS rose by 24% [9][53] - Gross margin is above 30%, with a GAAP gross margin rate of 31.8% compared to 29.5% in the prior year [52][50] - Total company net sales for the third quarter were $1,190 million, down 1% from $1,200 million a year ago [46] Business Line Data and Key Metrics Changes - POS units across categories are up 8% year-to-date, with branded lawn fertilizers POS units up 1% [9][48] - Soils POS units increased by 12%, mulch by 8%, and grass seed by 16% year-to-date [9][48] - Hawthorne net sales were $31 million for the quarter, down from $68 million in the prior year [45] Market Data and Key Metrics Changes - U.S. Consumer net sales for the quarter were $1,030 million, an increase of 1% year-over-year [41] - The lawn and garden market has grown about 5% year-to-date, with the company gaining about 2% market share [74][75] - E-commerce sales increased by 54% in online POS unit sales [22] Company Strategy and Development Direction - The company is focusing on internal initiatives to improve cost structure and efficiency while also shifting to outward-facing initiatives to enhance consumer engagement [6][7] - Plans to invest in technology, AI, and automation to drive operational efficiencies [57][16] - The transformation initiative aims to create a world-class consumer goods company and expand marketing efforts to younger consumers [17][21] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed EBITDA guidance and expects to deliver on top and bottom line metrics [8] - The company is optimistic about the lawn and garden category's growth and its ability to capture market share [62][88] - Management highlighted the importance of partnerships with retailers and the positive outlook for the lawn and garden market [32][66] Other Important Information - The company plans to take pricing in the next fiscal year to help drive margins [36] - The transformation of the lawns business is underway, focusing on a revamped product line and new media strategies [26][29] - The company is committed to sustainability and meeting consumer demands for organic and natural products [23][19] Q&A Session Summary Question: What is the pricing strategy for '26? - The company took a pricing increase of just under 1.5% in '25 and plans to pursue pricing in '26, considering commodity costs [71][72] Question: What is the category growth at retail in '25? - The lawn and garden market has grown about 5% year-to-date, with the company gaining about 2% of that share [74][75] Question: How are retailers responding to the activation strategy? - Retailers that engaged with the company's activation strategy saw relative outperformance, and the company plans to continue investing in those partnerships [79][80] Question: What is the visibility into achieving mid-30s gross margin? - The company expects to achieve mid-30s gross margin through supply chain savings and net pricing strategies over the next few years [85][86]

Financial Performance - Q3 2025 - Net sales reached $1.19 billion, a decrease of 1% compared to Q3 2024[56] - Adjusted gross margin rate improved to 32.1%, an increase of 290 bps from Q3 2024[56] - Adjusted net income was $151.5 million, compared to $133.8 million in Q3 2024[56] - Adjusted diluted EPS was $2.59, compared to $2.31 in Q3 2024[56] - Adjusted EBITDA was $256.1 million, compared to $236.8 million in Q3 2024[56] Segment Performance - U S Consumer net sales increased by 1% in Q3 2025[64] - Hawthorne net sales decreased by 54% in Q3 2025[64] - Other segment net sales increased by 8% in Q3 2025[64] Strategic Focus & Outlook - The company aims for sustainable net sales growth, averaging 3% annually, focused on the consumer lawn & garden business[19] - The company expects approximately $75 million in additional supply chain cost savings over fiscal years 2026 and 2027[45] - The company anticipates approximately $250 million in free cash flow for fiscal year 2025[60] - The company projects an adjusted gross margin rate of approximately 30% for fiscal year 2025, targeting mid-30% by fiscal year 2027[60] - E-commerce penetration of POS dollars is at approximately 10% year-to-date[41]

[Third Quarter 2025 Results Overview](index=1&type=section&id=Third%20Quarter%202025%20Results%20Overview) The company reported its third-quarter fiscal 2025 results, highlighting financial performance, management's strategic commentary, and reaffirmed full-year guidance [Q3 2025 Financial Performance Highlights](index=1&type=section&id=Q3%202025%20Financial%20Performance%20Highlights) Despite a slight 1% sales decrease to $1.19 billion, ScottsMiracle-Gro significantly improved profitability, driven by substantial gross margin expansion Q3 2025 Financial Performance (in millions, except per share data) | Financial Metric | Q3 2025 | Q3 2024 | Change | | :--- | :--- | :--- | :--- | | Total Company Sales | $1,190.0 | $1,200.0 | -1% | | U.S. Consumer Sales | $1,030.0 | $1,020.0 | +1% | | GAAP Net Income | $149.1 | $132.1 | +12.9% | | GAAP Diluted EPS | $2.54 | $2.28 | +11.4% | | Non-GAAP Adj. Net Income | $151.5 | $133.8 | +13.2% | | Non-GAAP Adj. Diluted EPS | $2.59 | $2.31 | +12.1% | | Non-GAAP Adj. EBITDA | $256.1 | $236.8 | +8.2% | Gross Margin Rate Performance | Gross Margin Rate | Q3 2025 | Q3 2024 | Basis Point Change | | :--- | :--- | :--- | :--- | | GAAP | 31.8% | 29.5% | +230 bps | | Non-GAAP Adjusted | 32.1% | 29.2% | +290 bps | - Gross margin improvement was attributed to a **better product mix**, including **fewer low-margin sales** and **more high-margin branded products**, as well as **lower material, manufacturing, and distribution costs**[6](index=6&type=chunk) - Leverage improved significantly, reaching **4.15x**, a reduction of over **1.3x** compared to the same period last year[9](index=9&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management expressed confidence in achieving full-year fiscal 2025 guidance, citing strong consumer and retail partner engagement, while strategically shifting focus to attracting new and younger consumers for future growth - CEO Jim Hagedorn stated the company delivered **significant improvements** in key financial metrics, putting it **on track to meet full-year guidance**[3](index=3&type=chunk) - The company is **transitioning from internal cost-saving and efficiency initiatives to external efforts** aimed at **attracting new and younger consumers**[4](index=4&type=chunk) - CFO Mark Scheiwer noted **strong engagement from retailers and consumers** is expected to continue, bolstering confidence in fiscal 2025 commitments to **improve profitability and strengthen the balance sheet**[4](index=4&type=chunk) [Fiscal 2025 Outlook](index=2&type=section&id=Fiscal%202025%20Outlook) The company reaffirmed its full-year non-GAAP fiscal 2025 guidance, targeting low single-digit U.S. Consumer net sales growth, approximately 30% adjusted gross margin, adjusted EBITDA between $570 million and $590 million, and at least $3.50 in adjusted EPS Fiscal Year 2025 Guidance (in millions, except per share data) | Metric | FY 2025 Guidance | | :--- | :--- | | U.S. Consumer Net Sales Growth | Low single-digit growth (excl. non-repeat sales) | | Non-GAAP Adjusted Gross Margin | ~30% | | Non-GAAP Adjusted EBITDA | $570 - $590 | | Non-GAAP Adjusted EPS | At least $3.50 | | Free Cash Flow | ~$250 | - The company **reaffirmed the full-year non-GAAP fiscal 2025 guidance** previously provided in early June[10](index=10&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the company's condensed consolidated statements of operations, segment results, and balance sheets for the reported periods [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q3 2025, net sales decreased 1% to $1.19 billion, while income from operations grew 7% to $215.0 million and net income increased 13% to $149.1 million, reflecting improved profitability for both the quarter and the nine-month period Condensed Consolidated Statements of Operations (Three Months Ended June 28, 2025 and June 29, 2024) (in millions, except per share data) | (In millions, except per share data) | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $1,188.0 | $1,202.2 | (1)% | | Gross margin | $378.0 | $354.1 | 7% | | Income from operations | $215.0 | $200.1 | 7% | | Net income | $149.1 | $132.1 | 13% | | Diluted net income per common share | $2.54 | $2.28 | 11% | Condensed Consolidated Statements of Operations (Nine Months Ended June 28, 2025 and June 29, 2024) (in millions, except per share data) | (In millions, except per share data) | Nine Months Ended June 28, 2025 | Nine Months Ended June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $3,025.8 | $3,138.0 | (4)% | | Gross margin | $1,020.7 | $880.0 | 16% | | Income from operations | $508.7 | $424.9 | 20% | | Net income | $297.1 | $209.1 | 42% | | Diluted net income per common share | $5.07 | $3.64 | 39% | [Segment Results](index=5&type=section&id=Segment%20Results) In Q3 2025, U.S. Consumer sales grew 1% to $1.03 billion with a 12% profit increase, while Hawthorne sales sharply declined 54% to $31.2 million with zero profit, and the 'Other' segment saw strong 8% sales growth and 44% profit rise Net Sales by Segment (in millions) | Net Sales (in millions) | Q3 2025 | Q3 2024 | % Change | | :--- | :--- | :--- | :--- | | U.S. Consumer | $1,030.2 | $1,017.5 | 1% | | Hawthorne | $31.2 | $67.7 | (54)% | | Other | $126.6 | $117.0 | 8% | | **Consolidated** | **$1,188.0** | **$1,202.2** | **(1)%** | Segment Profit (Non-GAAP, in millions) | Segment Profit (Non-GAAP, in millions) | Q3 2025 | Q3 2024 | % Change | | :--- | :--- | :--- | :--- | | U.S. Consumer | $235.5 | $210.3 | 12% | | Hawthorne | $— | $3.8 | (100)% | | Other | $16.8 | $11.7 | 44% | | **Total Segment Profit** | **$252.3** | **$225.8** | **12%** | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 28, 2025, total assets decreased to $3.09 billion from $3.49 billion, total liabilities reduced to $3.26 billion from $3.64 billion, with cash and equivalents decreasing to $51.1 million and long-term debt to $2.14 billion Condensed Consolidated Balance Sheets (in millions) | (In millions) | June 28, 2025 | June 29, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $51.1 | $279.9 | | Inventories | $544.3 | $606.8 | | Total current assets | $1,283.3 | $1,538.4 | | Total assets | $3,090.6 | $3,489.3 | | **Liabilities and Equity** | | | | Total current liabilities | $798.6 | $854.4 | | Long-term debt | $2,136.2 | $2,436.4 | | Total liabilities | $3,261.5 | $3,635.5 | | Equity (deficit) | $(170.9) | $(146.2) | [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations of GAAP to non-GAAP financial measures and explains the rationale for their use in performance evaluation and financial planning [Reconciliation of Non-GAAP Measures](index=7&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) The report details reconciliations of GAAP to non-GAAP financial measures, showing Q3 2025 adjusted net income at $151.5 million and adjusted EBITDA at $256.1 million after specific adjustments Q3 2025 Reconciliation of GAAP to Non-GAAP Measures (in millions, except per share data) | Q3 2025 Reconciliation (In millions) | As Reported (GAAP) | Adjustments | Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Gross margin | $378.0 | $(3.7) | $381.7 | | Income from operations | $215.0 | $(6.1) | $221.2 | | Net income | $149.1 | $(2.5) | $151.5 | | Diluted EPS | $2.54 | $(0.04) | $2.59 | Adjusted EBITDA Calculation (in millions) | Adjusted EBITDA Calculation (In millions) | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Net income (GAAP) | $149.1 | $132.1 | | Plus: Income tax, Interest, D&A, etc. | $107.0 | $86.2 | | **Adjusted EBITDA (Non-GAAP)** | **$256.1** | **$236.8** | [Explanation of Non-GAAP Measures](index=9&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Management utilizes non-GAAP financial measures, excluding non-ordinary items like impairments and restructuring costs, for performance evaluation, financial planning, and incentive compensation, believing they offer a clearer view of underlying business trends, while forward-looking reconciliation is not provided due to unreasonable efforts - Management uses non-GAAP measures to **evaluate performance**, for **financial and operational planning**, and to **determine incentive compensation**[33](index=33&type=chunk) - Non-GAAP measures exclude items such as **impairments**, **restructuring and employee severance costs**, and **costs related to refinancing** to provide a supplemental comparison of operating results[37](index=37&type=chunk) - The company **does not provide a reconciliation of forward-looking non-GAAP measures to GAAP measures**, citing the **unreasonable efforts exception under Regulation S-K**[45](index=45&type=chunk) [Other Information](index=2&type=section&id=Other%20Information) This section provides an overview of ScottsMiracle-Gro's business and includes cautionary notes regarding forward-looking statements and associated risk factors [About ScottsMiracle-Gro](index=2&type=section&id=About%20ScottsMiracle-Gro) ScottsMiracle-Gro is the world's largest marketer of branded consumer lawn and garden products with approximately $3.6 billion in sales, including key brands like Scotts®, Miracle-Gro®, and Ortho®, and operates in the indoor/hydroponic segment through Hawthorne Gardening Company - The company is the **world's largest marketer** of branded consumer products for lawn and garden care, with approximately **$3.6 billion** in sales[11](index=11&type=chunk) - Key market-leading brands include **Scotts®**, **Miracle-Gro®**, and **Ortho®**[11](index=11&type=chunk) - The **Hawthorne Gardening Company** subsidiary is a **leading provider of materials for the indoor and hydroponic growing segment**[11](index=11&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=2&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements subject to risks including economic downturns, cybersecurity, competition, weather, supply chain disruptions, and sales concentration, with Hagedorn Partnership, L.P. holding significant influence due to its 23% common share ownership - Identified risks include **economic downturns**, **IT system failures or cyber-attacks**, **market competition**, **climate change**, and **supply chain disruptions**[14](index=14&type=chunk) - The company's **sales are concentrated with a small number of retail customers**, posing a **risk if a top customer is lost or reduces orders**[14](index=14&type=chunk) - Hagedorn Partnership, L.P. beneficially owns approximately **23%** of the Company's common shares and can **significantly influence shareholder decisions**[14](index=14&type=chunk)

Core Viewpoint - Scotts Miracle-Gro (SMG) is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ending June 2025, with the actual results being crucial for its near-term stock price [1][2]. Earnings Expectations - The upcoming earnings report is expected to show quarterly earnings of $2.19 per share, reflecting a year-over-year decrease of 5.2%, while revenues are projected to be $1.23 billion, an increase of 2.4% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has been revised 0.32% higher in the last 30 days, indicating a slight positive reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate for Scotts is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -5.81%, indicating a bearish outlook from analysts [12]. Historical Performance - In the last reported quarter, Scotts was expected to post earnings of $3.95 per share but exceeded expectations with actual earnings of $3.98, resulting in a surprise of +0.76%. Over the last four quarters, the company has beaten consensus EPS estimates three times [13][14]. Investment Considerations - Despite the potential for an earnings beat, other factors may influence stock movement, and Scotts does not currently appear to be a compelling earnings-beat candidate [15][17].

Core Viewpoint - Scotts Miracle-Gro Company will release its third quarter financial results on July 30, 2025, and will host a video presentation followed by a Q&A session [1][2]. Company Overview - Scotts Miracle-Gro is the world's largest marketer of branded consumer lawn and garden products, with approximately $3.6 billion in sales [3]. - The company's leading brands include Scotts®, Miracle-Gro®, and Ortho®, which are recognized market leaders in their respective categories [3]. - The Hawthorne Gardening Company, a wholly-owned subsidiary, specializes in nutrients, lighting, and materials for indoor and hydroponic growing [3].