Company Performance - Scotts Miracle-Gro reported quarterly earnings of $2.59 per share, exceeding the Zacks Consensus Estimate of $2.19 per share, and up from $2.31 per share a year ago, representing an earnings surprise of +18.26% [1] - The company posted revenues of $1.19 billion for the quarter ended June 2025, which missed the Zacks Consensus Estimate by 3.48%, and is slightly down from $1.2 billion in the same quarter last year [2] - Over the last four quarters, Scotts has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Outlook - The immediate price movement of Scotts' stock will largely depend on management's commentary during the earnings call and the sustainability of earnings expectations [3][4] - Scotts shares have increased by approximately 2.3% since the beginning of the year, compared to an 8.3% gain in the S&P 500 [3] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is -$1.79 on revenues of $391.92 million, while for the current fiscal year, it is $3.52 on revenues of $3.47 billion [7] - The estimate revisions trend for Scotts was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Agriculture - Operations industry, to which Scotts belongs, is currently ranked in the bottom 13% of over 250 Zacks industries, suggesting potential challenges ahead [8] - The performance of Scotts' stock may also be influenced by the overall outlook for the industry, as historical data shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

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 Insights - The Scotts Miracle-Gro Company reported significant improvements in financial metrics for the third quarter of fiscal 2025, indicating progress towards achieving full-year guidance [2][4][8] Financial Performance - U.S. Consumer sales increased by 1% to $1.03 billion compared to $1.02 billion in the same period last year [4] - Total company sales decreased by 1% to $1.19 billion from $1.20 billion year-over-year [4] - GAAP net income for the quarter was $149.1 million, or $2.54 per diluted share, compared to $132.1 million, or $2.28 per diluted share, in the same quarter last year [6][18] - Non-GAAP adjusted net income was $151.5 million, or $2.59 per diluted share, compared to $133.8 million, or $2.31 per diluted share, for the same period last year [6][18] - Non-GAAP adjusted EBITDA for the quarter was $256.1 million, an increase from $236.8 million a year ago [7] Margin and Cost Improvements - GAAP gross margin rate was 31.8%, and non-GAAP adjusted gross margin rate was 32.1%, both showing improvements of 230 and 290 basis points over the prior year, respectively [8] - The improvements in gross margin were attributed to a better product mix and lower costs in materials, manufacturing, and distribution [5] Segment Performance - U.S. Consumer segment net sales grew by 1% year-over-year, while the Hawthorne segment saw a significant decline of 54% [19] - The Other segment, which includes the Canadian business, reported an 8% increase in net sales [19] - Total segment profit (non-GAAP) increased by 12% to $252.3 million compared to $225.8 million in the prior year [21] Outlook - The company reaffirms its full-year non-GAAP fiscal 2025 guidance, expecting continued growth in U.S. Consumer net sales and improved profitability [8][9] - The company anticipates a low single-digit growth in U.S. Consumer net sales for the full year, with adjusted EBITDA projected between $570 million to $590 million [9]

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].

Core Insights - The Scotts Miracle-Gro Company (SMG) has reaffirmed its fiscal 2025 guidance, indicating strong performance during the peak lawn and garden season with consistent year-over-year growth in consumer point-of-sale (POS) units and dollars [1][8] Financial Performance - The company expects a decline in interest expense by approximately $30 million compared to the previous year, an increase from the earlier forecast of $15-$20 million [2] - SMG has revised its projected increase in share count to about 1 million, down from the prior estimate of 2 million [2] - Adjusted earnings per share are anticipated to be at least $3.50, representing a 53% increase over the previous year [2] - The company projects adjusted EBITDA to range between $570 million and $590 million, with an expected adjusted gross margin of around 30% [4][8] - SMG aims to generate approximately $250 million in free cash flow for the fiscal year [4][8] Market Position - During the peak season, SMG has achieved favorable results, reflecting a resilient consumer base and effective marketing efforts, reinforcing confidence in meeting full-year outlooks [3] - The company is on track to improve its debt profile, aiming for a leverage goal of below 3.5 by the end of fiscal 2027 [3] Stock Performance - SMG's shares have decreased by 4.7% over the past year, contrasting with a 0.8% growth in its industry [5]

Company Overview - Scotts Miracle-Gro (SMG) shares increased by 10.9% to close at $65.01, with notable trading volume exceeding typical levels [1] - The stock has gained 8.9% over the past four weeks, reflecting positive market sentiment [1] Performance and Guidance - The share price rally was driven by the company's reaffirmation of its fiscal 2025 guidance and strong performance during the peak lawn and garden season [2] - Robust consumer demand and strong point-of-sale (POS) trends have reinforced investor confidence in the company's growth trajectory [2] Earnings Expectations - Scotts is expected to report quarterly earnings of $2.17 per share, representing a year-over-year decline of 6.1% [3] - Revenue is anticipated to be $1.23 billion, reflecting a 2.7% increase from the same quarter last year [3] - The consensus EPS estimate has been revised marginally higher over the last 30 days, indicating a positive trend that typically correlates with price appreciation [4] Industry Context - Scotts operates within the Zacks Agriculture - Operations industry, where another company, Archer Daniels Midland (ADM), experienced a 0.6% decline in its stock price [4] - ADM's consensus EPS estimate has decreased by 6.9% over the past month, indicating challenges within the industry [5]

Core Viewpoint - Scotts Miracle-Gro shares experienced an 11% increase after the company reaffirmed its optimistic guidance for fiscal 2025, contrasting with a generally bearish market day where the S&P 500 fell by 0.5% [1] Group 1: Financial Guidance - The company expects U.S. consumer net sales to grow at a low-single-digit percentage rate compared to fiscal 2024, with non-GAAP adjusted EBITDA projected between $570 million and $590 million [2] - Analysts predict a single-digit percentage decline in revenue for fiscal 2025, estimating revenue at $3.44 billion, which is over 3% lower than the previous year's results [4] Group 2: Market Context - The current period is significant for Scotts as it coincides with the growing season, a time when both individual and institutional growers engage in extensive planting [5] - The CEO highlighted the positive outcomes driven by consumer health and effective marketing investments during this peak lawn and garden season [5] Group 3: Investment Appeal - While the management's commitment to revenue growth projections is noted, the company is characterized as a slow-growing, mature business that offers an attractive dividend yield of 4.1%, positioning it as an income stock [6]

Summary of Scotts Miracle-Gro (SMG) FY Conference Call Company Overview - Scotts Miracle-Gro is the leading provider of branded do-it-yourself lawn and garden products in the US, covering a wide range of categories from lawns to gardens [2][3] Core Insights and Arguments - The company has undergone significant transformation aimed at sustainable sales growth, gross margin expansion, and strengthening its balance sheet [3] - Scotts Miracle-Gro has a wide moat due to its strong brands, R&D capabilities, and unique go-to-market model [3] - The company aims to evolve into a lifestyle brand, providing comprehensive solutions for consumers' gardening needs [6] - There is a strong focus on organic growth within existing categories, with a total addressable market (TAM) of approximately $11 billion, of which the company currently captures about $3.5 billion [10] - The company is shifting consumer behavior from "do it for me" to "do it yourself" (DIY), emphasizing the importance of education in product usage [14] - A new digital interface is set to launch, focusing on consumer education and engagement through AI tools [15][17] - The company is targeting younger generations, particularly millennials and Gen Z, who are increasingly interested in gardening and home improvement [18] Financial Performance and Guidance - The company reaffirmed its sales guidance for low single-digit growth, with a long-term target of 3% annual sales growth [41][44] - Gross margin is expected to be around 30%, with a significant recovery from previous lows during the pandemic [47][50] - The company aims to achieve $75 million in supply chain cost savings this year, contributing to gross margin improvement [54] - EBITDA is projected to be between $570 million and $590 million, indicating a return to pre-COVID levels [53] Innovation and Product Development - Scotts Miracle-Gro is focusing on expanding its organic product line and enhancing its indoor gardening offerings [19][30] - The company has launched new products, including Miracle-Gro Organics, which has been well-received in the market [44] - There is a commitment to sustainability, with plans to reduce reliance on synthetic chemicals and improve packaging [27][29] Supply Chain and E-commerce Strategy - The company has invested heavily in supply chain automation, which has improved efficiency and cost management [31][33] - E-commerce sales have increased from 8% to nearly 10% of total revenues, with a significant rise in direct-to-consumer shipments [35][36] - The company is rationalizing its product offerings to better align with e-commerce and retail needs [34] Consumer Sentiment and Market Position - Despite economic challenges, the company reports that its consumer base remains healthy, with high incomes and low debt levels [21] - The company has not seen significant negative impacts from consumer sentiment fluctuations, maintaining stable sales performance [23] Long-term Vision - Scotts Miracle-Gro is focused on delivering sustainable net sales growth through innovation and high-margin products [61] - The company aims to return to consistent dividend payments and share buybacks once leverage ratios improve [65] This summary encapsulates the key points discussed during the Scotts Miracle-Gro FY Conference Call, highlighting the company's strategic direction, financial outlook, and market positioning.