Financial Performance & Strategic Focus - ScottsMiracle-Gro's FY24 net sales reached $3.6 billion, with approximately 85% originating from the U.S[6] - The company's FY24 adjusted EBITDA was $510.1 million, and free cash flow was $583.5 million[6] - ScottsMiracle-Gro reaffirms FY25 adjusted EBITDA guidance of $570 million to $590 million, representing a ~12% to ~16% year-over-year increase[53] - The company expects FY25 adjusted EPS to be at least $3.50, an +89% increase[55] - ScottsMiracle-Gro is targeting a leverage ratio in the low 4's by the end of FY25 and below 3.5x by the end of FY27[59, 67] Industry Position & Capabilities - The Consumer DIY Lawn & Garden industry is estimated to be ~$11 billion in 2024[21] - ScottsMiracle-Gro's U.S Consumer net sales have grown at an average of ~5% CAGR since FY17[46, 47] - Approximately ~15% of ScottsMiracle-Gro's annual sales are generated from innovation launched in the trailing 3 years[32] - The company's supply chain team is expected to deliver $75 million of cost savings in FY25, with another $75 million targeted for FY26 & FY27[36]

Core Viewpoint - The Scotts Miracle-Gro Company reaffirms its fiscal year 2025 guidance, indicating confidence in its performance during the peak lawn and garden season and projecting significant growth in earnings and reduced interest expenses [1][4][5]. Financial Performance - The company reported year-to-date increases in point-of-sale (POS) units and dollars, consistent with trends from the first half of the fiscal year [2]. - Interest expense is projected to be approximately $30 million lower than the previous year, an improvement from earlier estimates of a $15 million to $20 million decrease [3]. - The diluted share count is expected to increase by approximately 1 million, down from a previous estimate of 2 million [3]. - Non-GAAP adjusted earnings per diluted share are projected to be at least $3.50, representing a 53% increase compared to the prior year [3]. Strategic Outlook - The company aims to improve shareholder returns and achieve multi-year objectives, with a focus on delivering adjusted EBITDA and free cash flow targets [4]. - The goal is to exit 2025 with a significantly improved debt position, targeting a leverage ratio below 3.5 by the end of fiscal 2027 [4]. Market Position - Scotts Miracle-Gro is the world's largest marketer of branded consumer products for lawn and garden care, with approximately $3.6 billion in sales [6]. - The company's brands, including Scotts®, Miracle-Gro®, and Ortho®, are market leaders in their respective categories [6].

Core Insights - Scotts Miracle-Gro (SMG) shares have increased by approximately 14.2% since the last earnings report, outperforming the S&P 500 [1] - There is speculation on whether this positive trend will continue or if a pullback is imminent [1] Estimates Movement - Estimates for Scotts Miracle-Gro have trended upward over the past month [2] VGM Scores - Scotts Miracle-Gro has a strong Growth Score of A, a Momentum Score of B, and a Value Score of B, resulting in an aggregate VGM Score of A [3] Outlook - The upward trend in estimates is promising, and Scotts holds a Zacks Rank 3 (Hold), indicating an expectation of in-line returns in the coming months [4]

Core Insights - Scotts Miracle-Gro Company will participate in the William Blair 45th Annual Growth Stock Conference on June 5, 2025, in Chicago [1][2] - The company is a leader in branded consumer lawn and garden products, with approximately $3.6 billion in sales [3] Company Overview - Scotts Miracle-Gro is the world's largest marketer of branded consumer products for lawn and garden care, with well-known brands such as Scotts®, Miracle-Gro®, and Ortho® [3] - The company's subsidiary, The Hawthorne Gardening Company, specializes in indoor and hydroponic growing products [3]

Core Points - The second phase of the GreenCare for Communities initiative is underway at Barrios Unidos Park, focusing on enhancing green spaces and recreational opportunities in a heat-stressed neighborhood of Phoenix [1][2] - The total project value for both phases is $150,000, supported by donations from green industry professionals and volunteers [5] - The initiative aims to sequester over 250,000 pounds of carbon and produce more than 381,000 yards of clean air annually, equivalent to removing emissions from about 32 cars [6] Project Details - The first phase, completed in fall 2024, included planting 50 mature shade trees and expanding the irrigation system [3] - The second phase, starting May 14, 2025, involves revitalizing the softball field and adding 80 native plants to enhance the park's aesthetics [4] - The project is a collaboration between Project EverGreen, ScottsMiracle-Gro, the city of Phoenix, and the Arizona Sports Field Management Association [2] Organizational Background - Project EverGreen is a national nonprofit focused on restoring and maintaining green spaces, particularly in underserved communities [8] - Since 2008, Project EverGreen has restored over 200 million square feet of green space, benefiting more than 5.4 million people [8] - ScottsMiracle-Gro, with approximately $3.6 billion in sales, is the largest marketer of branded consumer products for lawn and garden care [9]

Financial Performance - Net sales for the three months ended March 29, 2025, were $1,421.0 million, a decrease of 6.8% from $1,525.4 million for the same period in 2024[120] - Net sales for the six months ended March 29, 2025, were $1,837.8 million, a decrease of 5.1% from $1,935.8 million for the same period in 2024[120] - Net income for the three months ended March 29, 2025, was $217.5 million, or 15.3% of net sales, compared to $157.5 million or 10.3% for the same period in 2024[117] - Net income for the six months ended March 29, 2025, was $148.0 million, an increase of 92.2% from $77.0 million for the same period in 2024[140] - The company reported a net income of $151.9 million for the six months ended March 29, 2025, a significant recovery from a net loss of $16.1 million for the year ended September 30, 2024[184] Profitability Metrics - Gross margin for the three months ended March 29, 2025, was $547.9 million, representing 38.6% of net sales, compared to $463.7 million or 30.4% for the same period in 2024[117] - Income from operations for the three months ended March 29, 2025, was $344.7 million, or 24.3% of net sales, compared to $272.1 million or 17.8% for the same period in 2024[117] - Gross margin rate increased to 38.6% for the three months ended March 29, 2025, compared to 30.4% for the same period in 2024, and to 35.0% for the six months ended March 29, 2025, compared to 27.2% in 2024[124] - Total Segment Profit (Non-GAAP) for the six months ended March 29, 2025, was $409.1 million, an increase of 14.1% from $358.5 million for the same period in 2024[145] Sales Performance by Segment - The Hawthorne segment experienced decreased sales volume due to an oversupply of cannabis, impacting future performance expectations[115] - U.S. Consumer segment net sales decreased by 4.9% to $1,311.5 million in Q2 2025 from $1,379.8 million in Q2 2024, and by 2.0% to $1,652.4 million for the first six months of fiscal 2025 from $1,686.5 million in the prior year[146] - Hawthorne segment net sales fell by 50.8% to $32.7 million in Q2 2025 from $66.4 million in Q2 2024, and by 42.2% to $84.7 million for the first six months of fiscal 2025 from $146.6 million in the prior year[147] - Other segment net sales decreased by 3.0% to $76.8 million in Q2 2025 from $79.2 million in Q2 2024, and by 1.9% to $100.7 million for the first six months of fiscal 2025 from $102.7 million in the prior year[149] Expenses and Costs - Cost of sales for the three months ended March 29, 2025, was $865.8 million, a decrease from $986.8 million for the same period in 2024[121] - Selling, general and administrative expenses for the three months ended March 29, 2025, were $188.3 million, representing 13.3% of net sales, compared to $178.7 million or 11.7% for the same period in 2024[117] - SG&A expenses increased by $9.6 million, or 5.4%, for the three months ended March 29, 2025, and by $19.6 million, or 6.7%, for the six months ended March 29, 2025, compared to the same periods in 2024[128] - Share-based compensation expense decreased by $4.7 million, or 25.8%, for the three months ended March 29, 2025, primarily due to lower long-term incentive compensation expense[127] Debt and Financing - The company had net borrowings under credit facilities of $321.2 million during the six months ended March 29, 2025, compared to $205.0 million in the prior year[155] - The Master Receivables Purchase Agreement allows the company to sell up to $750.0 million of outstanding customer accounts receivable, with proceeds from sales totaling $1,022.2 million for the six months ended March 29, 2025[156] - The company has a total borrowing capacity of $2,500 million under the Sixth A&R Credit Agreement, which includes a revolving credit facility of $1,500 million and a term loan of $1,000 million[159] - The interest coverage ratio was 4.17 for the twelve months ended March 29, 2025, exceeding the minimum required ratio of 2.00[172] Macroeconomic Factors - The company continues to monitor macroeconomic conditions, including elevated interest rates and inflationary pressures, which may impact operational performance[116] Legal and Compliance - The company is involved in various judicial and administrative proceedings, which may materially affect future operating results[185] - The company believes it is in substantial compliance with environmental protection laws, although potential financial impacts from legal actions remain uncertain[186] - The company is in compliance with all applicable covenants in the agreements governing its debt as of March 29, 2025[165] Cash Flow and Assets - Cash used in operating activities totaled $257.2 million for the six months ended March 29, 2025, compared to $39.0 million for the same period in 2024[153] - Cash provided by financing activities was $237.9 million for the six months ended March 29, 2025, an increase from $142.8 million for the same period in 2024[155] - As of March 29, 2025, cash and cash equivalents totaled $16.9 million, with $9.4 million held by controlled foreign corporations[158] - Current assets increased to $1,524.1 million as of March 29, 2025, compared to $838.4 million as of September 30, 2024[183] - Non-current liabilities increased to $2,774.2 million as of March 29, 2025, from $2,471.6 million as of September 30, 2024[183] Interest and Taxation - Interest expense decreased to $36.6 million for the three months ended March 29, 2025, a 17.0% decrease from $44.1 million in 2024, and to $70.3 million for the six months ended March 29, 2025, a 19.0% decrease from $86.8 million in 2024[136] - The effective tax rate for the six months ended March 29, 2025, was 27.8%, compared to 27.1% for the same period in 2024[137] Accounting and Market Risks - Critical accounting estimates related to revenue recognition and promotional allowances have not changed materially from the previous annual report[189] - Market risks have not changed materially from those disclosed in the 2024 Annual Report[190]

Core Insights - The Scotts Miracle-Gro Company (SMG) reported a second-quarter fiscal 2025 profit of $217.5 million or $3.72 per share, a 38% increase from $157.5 million or $2.74 per share in the prior-year quarter [1] - Adjusted earnings were $3.98 per share, surpassing the Zacks Consensus Estimate of $3.95 [1] Financial Performance - Net sales for the fiscal second quarter were $1,421 million, missing the Zacks Consensus Estimate of $1,498.2 million, and reflecting a year-over-year decline of approximately 6.8% [2] - U.S. Consumer division net sales decreased by 5% year over year to $1,311.5 million, falling short of the estimate of $1,373.2 million, while the segment recorded a profit of $392.5 million, up 2% year over year [3] - The Hawthorne segment's net sales plummeted 51% year over year to $32.7 million, missing the estimate of $70.4 million, and reported a loss of $0.9 million, which was an improvement from a loss of $3.4 million in the previous year [4] - The other segment's net sales fell 3% year over year to $76.8 million, exceeding the estimate of $62.3 million, and reported a profit of $9 million, up 41% [4] - At the end of the fiscal second quarter, cash and cash equivalents were $16.9 million, down around 74% year over year, while long-term debt decreased roughly 9.7% to $2,493.2 million [5] Outlook - The company reiterated its guidance for U.S. Consumer segment net sales, adjusted gross margin, adjusted EBITDA, and free cash flow, but has ceased issuing full-year revenue guidance for the Hawthorne segment due to ongoing uncertainty in the cannabis business [6] Stock Performance - SMG's shares have declined by 23.7% over the past year, compared to a 10.1% decline in its industry [7] Zacks Rank - SMG currently holds a Zacks Rank 3 (Hold), with better-ranked stocks in the basic materials space including Hawkins, Inc. (HWKN), SSR Mining Inc. (SSRM), and Coeur Mining (CDE) [8]

Core Insights - Scotts Miracle-Gro reported revenue of $1.42 billion for the quarter ended March 2025, reflecting a 6.8% decline year-over-year and a surprise of -5.15% compared to the Zacks Consensus Estimate of $1.5 billion [1] - The company's EPS for the quarter was $3.98, an increase from $3.69 in the same quarter last year, resulting in an EPS surprise of +0.76% against the consensus estimate of $3.95 [1] Financial Performance - U.S. Consumer Net Sales were reported at $1.31 billion, below the average estimate of $1.37 billion, marking a year-over-year decrease of 5% [4] - Other Net Sales reached $76.80 million, slightly above the average estimate of $76.74 million, with a year-over-year decline of 3% [4] - Hawthorne Net Sales were significantly lower at $32.70 million, compared to the estimated $54.86 million, representing a drastic year-over-year decline of 50.8% [4] Segment Profitability - U.S. Consumer Segment Profit (Non-GAAP) was $392.50 million, slightly above the average estimate of $390.69 million [4] - Hawthorne Segment Profit (Non-GAAP) reported a loss of -$0.90 million, contrasting with the average estimate of a profit of $0.99 million [4] - Other Segment Profit (Non-GAAP) was $9 million, exceeding the average estimate of $2.80 million [4] - Corporate Segment Loss (Non-GAAP) was -$34.80 million, slightly worse than the average estimate of -$33.34 million [4] Stock Performance - Scotts' shares have returned -2.3% over the past month, underperforming the Zacks S&P 500 composite's -0.2% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance in the near term [3]

Financial Performance - Q2 2025 - Net sales decreased by 7% to $1.42 billion compared to Q2 2024[38] - Adjusted gross margin rate increased by 380 bps to 39.1%[38] - SG&A expenses increased by 5% to $188.3 million[38] - Adjusted net income increased to $232.2 million from $211.9 million[38] - Adjusted diluted EPS increased to $3.98 from $3.69[38] - Adjusted EBITDA increased to $402.8 million from $396.3 million[38] Strategic Focus & Outlook - The company is targeting mid-30s percent gross margin rate by the end of fiscal year 2027[25,42] - The company expects approximately $30 million of incremental cost savings[25] - The company anticipates $250 million expected free cash flow[42] - The company projects leverage below 3.5x adjusted EBITDA by the end of fiscal year 2027[25,42]

Financial Data and Key Metrics Changes - The company reaffirmed its full year EBITDA guidance of $570 million to $590 million despite a challenging macro environment [8][40] - Total company net sales for the quarter were $1.42 billion, down 7% from $1.53 billion a year ago [41] - U.S. Consumer net sales decreased 5% to $1.31 billion, reflecting a slower start to the lawn and garden season [41][44] - Year-to-date total net sales were $1.84 billion, down 5% from $1.94 billion a year ago [43] - Adjusted EBITDA improved from $396 million to $403 million in the second quarter [51] Business Line Data and Key Metrics Changes - The Garden business saw a 16% increase in POS units, while the Mulch business increased by 46% [13] - Hawthorne net sales declined 51% from $66 million to $33 million due to market softness and strategic exit from third-party distribution [43] - POS units exceeded prior year by 12.1%, driven by strong performance in mulch, soils, fertilizer, grass seed, and controls [45] Market Data and Key Metrics Changes - The company reported that 75% of consumers perceive lawn and garden care as essential, with 25% planning to shift to DIY this year [26] - Retailers are heavily promoting the company's products, which has positively impacted market share [22][65] Company Strategy and Development Direction - The company is focusing on a transformation strategy aimed at cost savings and productivity improvements, targeting $150 million in supply chain cost outs by fiscal 2027 [28][30] - The divestiture of the Hawthorne business is intended to improve gross margin and reduce volatility [28][33] - The company plans to roll out changes in product packaging and formulations to better meet consumer needs [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the consumer base, noting that the core consumer remains relatively healthy [10][25] - The company anticipates strong retailer replenishment in Q3 as weather conditions improve [42] - Management highlighted the importance of promotions and brand support in driving consumer engagement [23][24] Other Important Information - The company achieved a nearly 500 basis point recovery in gross margin and a $36 million EBITDA increase year-to-date [12][51] - The GAAP gross margin rate was 38.6% for the second quarter, compared to 30.4% in the prior year [49] Q&A Session Summary Question: Can you explain the difference between the 12% growth in units and the low single-digit growth in dollars? - Management indicated that the difference is largely due to a mix of product types and heavy retailer promotions driving unit sales [59][67] Question: What is the impact of consumers trading down to DIY? - Management views this as a potential opportunity rather than a negative, as many consumers take pride in DIY gardening [74][76] Question: What is the pricing gap between the company's products and private label? - Management noted that the pricing gap remains within the historical range of 20% to 30%, but promotional activities have helped close this gap [80][86] Question: Is there a risk of pantry loading among consumers? - Management expressed confidence that pantry loading is not a significant concern, as they are attracting new consumers to the category [89][94] Question: What is the outlook for Hawthorne's EBITDA guidance? - Management confirmed that while Hawthorne's revenue guidance has been withdrawn, the overall EBITDA guidance for the company remains unchanged [95][98]