Scotts Miracle-Gro(SMG) - 2025 Q4 - Annual Results

Financial Performance - U.S. Consumer net sales for fiscal 2025 were $2.99 billion, in line with guidance[6] - GAAP gross margin rate improved by 670 basis points to 30.6%, while non-GAAP adjusted gross margin improved by 490 basis points to 31.2%[6] - GAAP earnings per share increased by $3.08 to $2.47, and non-GAAP adjusted earnings per share rose by $1.45 to $3.74[6] - Non-GAAP adjusted EBITDA for fiscal 2025 was $581 million, an increase of $71 million compared to the prior year[6] - Free cash flow reached $274 million, exceeding expectations, with net leverage improving to 4.10x, a reduction of 0.76x year-over-year[6] - Fiscal 2026 guidance includes non-GAAP adjusted earnings per share projected between $4.15 and $4.35[6] - The company expects non-GAAP adjusted gross margin to be at least 32% in fiscal 2026[6] - The company reported a net income of $145.2 million for fiscal 2025, a significant improvement from a net loss of $34.9 million in the previous year[13] - The company anticipates continued solid financial performance in fiscal 2026, reflecting its growth strategy[3] - For the twelve months ended September 30, 2025, the company reported a net income of $145.2 million, compared to a net loss of $34.9 million for the same period in 2024, representing a significant turnaround[24] - Adjusted EBITDA for the twelve months ended September 30, 2025, was $581.1 million, an increase from $510.1 million in 2024, reflecting a growth of approximately 13.9%[24] - Income from operations for the twelve months ended September 30, 2025, was $358.6 million, compared to $208.8 million in 2024, marking an increase of 71.8%[24] - Diluted net income per common share for the twelve months ended September 30, 2025, was $2.47, a significant increase from a loss of $0.61 per share in 2024[24] Sales and Segment Performance - For the three months ended September 30, 2025, consolidated net sales decreased by 7% to $387.4 million compared to $414.7 million in the same period of 2024[15] - The U.S. Consumer segment reported net sales of $311.2 million, a slight increase of 0.5% from $309.7 million in the prior year[15] - The Hawthorne segment experienced a significant decline in net sales, down 38% to $49.9 million from $80.5 million year-over-year[15] - Segment Profit (Loss) for the U.S. Consumer improved by 21% to a loss of $65.5 million compared to a loss of $82.5 million in the previous year[15] Operational Efficiency and Cost Management - The company is strategically implementing AI and robotic automation to enhance operational efficiencies and cost savings[3] - The gross margin as a percentage of sales improved to 30.6% in 2025 from 23.9% in 2024, indicating enhanced operational efficiency[24] - The company incurred impairment, restructuring, and other charges totaling $83.8 million for the twelve months ended September 30, 2025, compared to $146.3 million in 2024, showing a reduction of 42.6%[24] - The company’s interest expense decreased to $128.8 million in 2025 from $158.8 million in 2024, representing a reduction of approximately 18.9%[24] Cash Flow and Assets - The company generated $371.3 million in net cash from operating activities, down from $667.5 million in the previous year[20] - Free cash flow for the twelve months ended September 30, 2025, was $273.9 million, down from $583.5 million in 2024, highlighting a decrease of approximately 53%[28] - Total assets decreased to $2,742.0 million as of September 30, 2025, down from $2,871.9 million in 2024[17] - Total liabilities decreased to $3,099.5 million from $3,262.5 million year-over-year[17] Tax and Impairment Charges - The company’s income tax expense for the twelve months ended September 30, 2025, was $76.5 million, compared to $11.3 million in 2024, indicating a substantial increase in tax obligations[24] - During the three months ended September 30, 2024, the Company incurred costs of $16.8 million related to restructuring initiatives[43] - For the twelve months ended September 30, 2024, the Company incurred total restructuring costs of $83.5 million[43] - The Company recognized a non-cash, pre-tax impairment charge of $64.6 million related to convertible debt investments during the three and twelve months ended September 30, 2024[43] - Pre-tax impairment charges of $51.5 million and $61.9 million were recorded for the investment in Bonnie Plants, LLC during the three and twelve months ended September 30, 2024, respectively[43] - A valuation allowance against certain deferred tax assets resulted in an additional tax expense of $15.6 million during the three and twelve months ended September 30, 2024[43] - The Company recorded a gain of $12.1 million associated with a payment received from a dispute resolution during the twelve months ended September 30, 2024[43]