PresentationJoseph AltobelloRaymond James & Associates, Inc., Research Division Good afternoon, everybody, and thank you for joining us. I'm Joe Altobello, leisure analyst here at Raymond James. And I'm very pleased to have with me today senior management from The Scotts Miracle-Gro, including President and COO, Nate Baxter; and CFO, Mark Scheiwer. Welcome, gentlemen. I'm sure most people in this room are at least somewhat familiar with Scotts as the company is the leader in the consumer lawn and garden spa ...

Summary of Scotts Miracle-Gro Conference Call (December 09, 2025) Company Overview - **Company**: Scotts Miracle-Gro (NYSE: SMG) - **Industry**: Consumer Lawn and Garden Products, Hydroponics Key Points U.S. Consumer Business Performance - The U.S. consumer business experienced a cumulative sales growth of approximately 6%-7% over fiscal years 2024 and 2025, translating to an annual growth rate of about 3%-3.5% [2][4] - Recent volatility in sales is attributed to post-COVID adjustments, inventory management, and a shift in sales phasing from 60% in the first half to 55% in the past year [3][4] - Retailer inventories are reported to be healthy, supporting future growth initiatives [4] Future Growth Projections - The company anticipates annual sales growth of at least 3% moving forward, with historical growth rates averaging between 3% to 5% over a decade [5][6] - Innovation, e-commerce expansion, and strategic pricing are identified as key growth drivers [6][17] E-commerce and Market Trends - E-commerce sales currently account for about 10% of total POS sales, up from less than 2% five years ago, with expectations for continued double-digit growth [34] - The company is focusing on expanding its presence in the e-commerce space, particularly through partnerships with major retailers [20][34] Product Strategy and Market Share - The company gained four points of market share in fiscal year 2024 and netted one point in the following year, indicating resilience against private label competition [31][32] - The strategy includes moving away from low-margin commodity products towards branded offerings, with expectations for mid-single-digit growth in branded products [9][32] Gross Margin Recovery - Gross margins fell from mid-30s to below 24% due to COVID-related buildouts and increased fixed costs, but are projected to recover to 31% by the end of 2025, with a goal of reaching mid-30s in the future [44][48] - Key drivers for margin recovery include pricing strategies, cost savings initiatives, and investments in automation and technology [49][50] Consumer Engagement and Education - The company aims to increase household penetration in lawn care, currently at about 11%, by focusing on education and frequency of product use [26][27] - There is a strategic shift towards promoting multi-step lawn care programs to enhance consumer engagement [28][30] Innovation and M&A Strategy - The innovation pipeline is expected to contribute significantly to future growth, with plans for small tuck-in acquisitions to enhance product offerings [17][18] - The company is exploring opportunities in adjacent categories, particularly in pest control and gardening, to expand its market presence [22][23] Demographic Focus - A dedicated team is being formed to engage with the Hispanic demographic, recognizing its growing importance in the consumer base [21][22] Conclusion - Scotts Miracle-Gro is positioning itself for consistent growth through strategic innovation, e-commerce expansion, and a focus on branded products while navigating the challenges of post-COVID market dynamics and improving gross margins [10][50]

Core Insights - Scotts Miracle-Gro Company is a leading marketer of branded consumer lawn and garden products in North America, with approximately $3.4 billion in sales [3] Group 1: Company Announcement - Nate Baxter, president and chief operating officer, and Mark Scheiwer, chief financial officer and chief accounting officer, will participate in a fireside chat at the Raymond James 2025 TMT & Consumer Conference on December 9, 2025, at 2:20 p.m. ET [1] - Investors can listen to a live webcast of the presentation and fireside chat from the Company's investor relations website, with an archive available for at least 90 days [2] Group 2: Company Overview - Scotts Miracle-Gro's brands, including Scotts®, Miracle-Gro®, Ortho®, and Tomcat®, are among the most recognized and market-leading in their categories within the lawn and garden industry [3]

Core Insights - Scott's Miracle Grow is focusing on balancing innovation with sustainability while modernizing its legacy brands to attract younger consumers, particularly millennials and Gen Z [1][2][3] - The company reported a loss in its latest earnings, but positive EBIT and a significant margin recovery of almost 500 basis points over the past year, indicating operational improvements [1][2] - The decision to exit the cannabis business through its Hawthorne subsidiary is driven by a challenging market environment, with plans to find a partner outside the company [3][4] Financial Performance - The company experienced a loss in Q4, which is typical due to its seasonal business model, with profits primarily generated in fiscal Q2 and Q3 [1][2] - Free cash flow for the most recent period was just under $275 million, with a focus on deleveraging and reducing historical debt levels [13][15] - The company aims for $150 million in supply chain cost savings over three years, with a significant portion driven by technology improvements in demand planning and forecasting [4][5] Consumer Engagement and Target Demographics - The company is targeting two main demographics: older consumers (baby boomers and Gen X) focused on traditional lawn aesthetics, and younger consumers (millennials and Gen Z) who prioritize health, wellness, and creating engaging outdoor spaces [2][3] - Younger consumers are increasingly interested in indoor gardening and sustainable practices, leading the company to adapt its messaging and marketing strategies to resonate with this audience [2][3][4] - The company recognizes the need for authenticity in its branding and is shifting its marketing efforts towards digital platforms to better engage younger consumers [2][3] Product Development and Sustainability - Scott's Miracle Grow is committed to increasing the proportion of natural and organic products, with a goal of having at least 25% of its point-of-sale offerings be natural or organic within the next three to four years [3][4] - The company is exploring partnerships and research into biological solutions to reduce reliance on synthetic chemicals, aiming for a more sustainable product line [3][4] - Modernization efforts include updating packaging aesthetics to appeal to younger consumers and developing products tailored to regional needs, particularly in areas with different climate challenges [3][4][12] Strategic Focus and Future Plans - The company is prioritizing its core lawn and garden business while considering small tuck-in acquisitions to enhance its brand portfolio [15][16] - There is an emphasis on improving e-commerce presence, with plans to launch a new website that is more engaging and educational for consumers [3][4] - The management is open to exploring larger transformational opportunities in the lawn and garden sector, while maintaining a cautious approach to capital allocation [20][21]

Company Overview - Scotts Miracle-Gro is the leading marketer of branded consumer lawn and garden products in North America, with key brands including Scotts, Miracle-Gro, Ortho, and Tomcat[13]. - The company reported research and development spending of $34.8 million in fiscal 2025, slightly down from $35.7 million in fiscal 2023[30]. - More than 75% of annual net sales for the North America consumer lawn and garden business occur in the second and third fiscal quarters combined[24]. - The Home Depot and Lowe's are the two largest customers, each representing more than 10% of reported consolidated net sales[25]. - There were no material acquisitions or divestitures during fiscal 2025 or fiscal 2024[18]. - The company has an exclusive marketing agreement with Monsanto for certain consumer Roundup branded products in the U.S.[30]. - The company maintains a competitive edge through a robust portfolio of trademarks, patents, and trade secrets[23]. - The company utilizes third parties to manage key distribution centers strategically located across the U.S. and Canada[20]. Financial Performance and Risks - The company is subject to market risks due to fluctuating prices of raw materials, including urea and other fertilizer inputs[22]. - A change in the variable interest rate of 100 basis points for a full twelve-month period would impact interest expense by $5.3, assuming average unhedged variable interest rate borrowing levels of $525.0 during fiscal 2025[359]. - The company is exposed to market risks from fluctuations in foreign currency exchange rates and prices of raw materials such as urea and natural gas[361]. - The company has a total long-term fixed rate debt of $1,600.0 million with an average interest rate of 4.4%[360]. - Variable rate debt amounts to $625.0 million, with an average interest rate of 7.5%[360]. - The average interest rate for fixed rate debt in 2025 is projected to be 5.3%[360]. - The company has a total long-term variable rate debt of $500.0 million with an average interest rate of 6.0%[360]. - The company’s total long-term debt, including fixed and variable rates, is $2,225.0 million[360]. - Interest rate derivatives, specifically interest rate swaps, resulted in a total loss of $4.4 million with an average rate of 3.9%[362]. - Interest rate swaps have shown a consistent loss across multiple periods, indicating potential volatility in interest expenses[362]. - The company is actively managing market risks through derivative instruments as outlined in their financial statements[361]. Environmental and Social Responsibility - As of September 30, 2025, the company accrued $3.1 million for environmental matters, with expenses of $0.5 million, $0.1 million, and $0.4 million for fiscal 2025, 2024, and 2023 respectively[39]. - The company’s Environmental Health and Safety system incorporates developed industry guidelines to address associate health and safety[55]. - The company’s ESG Steering Committee meets quarterly to review progress and set new program goals related to sustainability[58]. - The company published its annual Corporate Responsibility Report in fiscal 2025, prepared in reference to the Global Reporting Initiative Standards[60]. - The company’s extended producer responsibility programs include targets for post-consumer recycling usage and compostable packaging[35]. Workforce and Employee Benefits - The company employed approximately 5,200 associates as of September 30, 2025, with a peak workforce of about 6,900 during fiscal 2025[42]. - The company offers a 7.5% match on 401(k) contributions and allows associates to purchase common shares at a 15% discount through its stock purchase plan[54]. Regulatory Matters - The company is subject to various regulatory proceedings, none of which are expected to be material to its business[39].

Core Points - Starting in 2026, the Columbus Crew's stadium will be named ScottsMiracle-Gro Field, marking an expansion of the partnership between the Crew and ScottsMiracle-Gro Company, which has lasted over 15 years [1][2][3] Group 1: Partnership Details - The multi-year agreement includes stadium naming rights and aims to enhance community initiatives, particularly focusing on youth soccer and outdoor activities [3][7] - ScottsMiracle-Gro has been the Official Lawn Care & Gardening Partner for the Crew, providing products for maintaining the natural grass playing surfaces and supporting community programs [3][11] Group 2: Stadium and Events - The Crew's downtown stadium, opened in 2021, has hosted a record streak of 35 MLS regular season matches with capacity crowds from 2023 to 2025 [4] - The stadium will also host major soccer events, including the 2024 MLS All-Star Game and multiple U.S. Men's National Team matches, alongside private events throughout the year [5] Group 3: Community Engagement - The partnership will include the "Soccer in Schools" program, which aims to inspire youth participation in soccer and promote healthy habits [8] - The program provides educational resources to local school districts and aligns with physical education standards [8]

Core Insights - Scotts Miracle-Gro Company (SMG) reported a fourth-quarter fiscal 2025 loss of $151.8 million or $2.63 per share, an improvement from a loss of $244 million or $4.29 per share in the same quarter last year [1] - Adjusted loss was $1.96 per share, narrower than $2.31 a year ago, but wider than the Zacks Consensus Estimate of a loss of $1.88 [1] Financial Performance - Net sales decreased approximately 6.6% year over year to $387.4 million, missing the consensus mark of $398.6 million [2] - In the U.S. Consumer division, net sales increased by 0.5% year over year to $311.2 million, but fell short of the estimate of $360 million, with a segment loss of $65.5 million, up 21% year over year [3] - The Hawthorne segment saw net sales plummet 38% year over year to $49.9 million, although this figure exceeded the estimate of $27 million [3] - The other segment's net sales rose 7% year over year to $26.3 million, surpassing the estimate of $5.3 million, with a loss of $9.8 million, down 20% year over year [4] Balance Sheet - At the end of the quarter, the company had cash and cash equivalents of $36.6 million, down from $71.6 million a year ago, while long-term debt was $2,049.2 million, a decrease of approximately 5.7% year over year [5] Outlook - For fiscal 2026, the company projects low single-digit growth in U.S. Consumer net sales, with an adjusted gross margin expected to be at least 32% [6] - Adjusted EBITDA is anticipated to grow in the mid-single digits, with adjusted earnings per share projected between $4.15 and $4.35, and free cash flow estimated at approximately $275 million [6] Stock Performance - Shares of Scotts Miracle-Gro have declined by 19% over the past year, compared to a 5.4% decline in the industry [7]

Core Insights - Scotts Miracle-Gro is a prominent player in the lawn and garden industry, known for its consumer and professional products, facing competition from companies like Bayer and Syngenta [1] Financial Performance - Stifel Nicolaus has set a price target of $70 for Scotts Miracle-Gro, indicating a potential upside of approximately 25% from its current trading price of $56.02 [2][6] - The stock has recently increased by $1.56, or 2.86%, reflecting positive investor sentiment [2] Strategic Initiatives - The company is implementing a turnaround strategy focused on reducing debt and enhancing free cash flow, which is essential after a challenging year [3][6] - E-commerce sales in the consumer business have risen by 23%, indicating growing momentum [3] - Retailer destocking is nearly complete, which is expected to positively impact performance in 2026 [3] Operational Developments - The Hawthorne unit, which previously faced challenges, is no longer consuming cash, marking a significant improvement for the company [4] - The dividend is now secure and fully covered by free cash flow, providing reassurance to investors regarding financial stability [4][6] Market Metrics - Scotts Miracle-Gro has a market capitalization of approximately $3.23 billion, with a trading volume of 1,445,083 shares [5] - The stock has experienced volatility, trading between $52.75 and $56.51 on the current day, with a yearly high of $83.55 and a low of $45.61 [5]

Shares of Scotts Miracle-Gro ( SMG ) have been a poor performer over the past year, losing about 40% of their value. Past missteps, including a foray into cannabis, left it with too much debt and too little cash flow, forcingOver fifteen years of experience making contrarian bets based on my macro view and stock-specific turnaround stories to garner outsized returns with a favorable risk/reward profile. If you want me to cover a specific stock or have a question for an article, just let me know!Analyst’s Di ...

Financial Data and Key Metrics Changes - Fiscal 2025 results showed strong sales growth in the U.S. Consumer business, with net sales reaching $2,990 million, a 1% increase from the previous year when excluding nonrecurring sales [38][39] - Gross margin improved significantly, with a non-GAAP adjusted gross margin rate of 31.2%, up from 26.3% in the prior year, exceeding the target of 30% [49][48] - Free cash flow for the year was $274 million, exceeding expectations and contributing to a reduction in leverage ratio to 4.1x from 4.86x in fiscal 2024 [52][54] Business Line Data and Key Metrics Changes - U.S. Consumer net sales for Q4 were $311.2 million, a 3% increase driven by strong demand for lawn products and Roundup [37] - E-commerce POS units increased by 51%, with e-commerce sales doubling at the largest retailer, contributing to a 10% share of overall POS [46][18] - The Hawthorne segment saw a significant decline in net sales, down 44% to $165.8 million, as the company focused on profitability improvements and divestiture strategies [46][31] Market Data and Key Metrics Changes - The overall category market share in units grew by 1%, with minimal competitive pressure from private label products, which represent less than 10% of the total category [45][27] - Point of sale (POS) units increased by 8.5% in fiscal 2025, building on nearly 9% growth from the previous year, indicating strong consumer engagement [29][42] Company Strategy and Development Direction - The company aims for U.S. Consumer net sales growth averaging at least 3% annually, with a focus on branded products and a shift away from low-margin commodities [8][13] - A multi-year share buyback program is planned for fiscal 2026, reflecting the company's commitment to shareholder-friendly actions [7][34] - The strategy includes significant investments in e-commerce, innovation, and marketing, particularly in the organic and natural solutions segment [20][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute its strategic plans, emphasizing the importance of branded products in driving growth [34][58] - The company is optimistic about fiscal 2026, expecting low single-digit growth in U.S. Consumer net sales and continued improvements in gross margin [55][54] - The management highlighted the resilience of the lawn and garden category, which is expected to grow despite economic challenges [27][26] Other Important Information - The company is undergoing SKU rationalization to streamline its portfolio and improve cost efficiencies [30][80] - A new incentive plan for associates will focus on metrics related to branded sales growth and gross margin, differing from previous plans based on EBITDA [16][16] Q&A Session Summary Question: How does the lawn strategy fit into the branded focus? - Management noted that the lawn strategy aims to increase consumer frequency and engagement, with new products designed to be effective and affordable [70][75] Question: Did the focus on branded solutions impact overall performance? - Management indicated that there was no significant pressure from private labels, and the shift towards branded products is expected to yield better margins and consumer engagement [84][90] Question: What are the expectations for advertising spend in FY 2026? - The company aims to increase advertising spend to around 8% of revenue in the long term, with a targeted spend of approximately $152 million for FY 2026 [96][101]