The Scotts Miracle-Gro (NYSE:SMG) Q1 2026 Earnings call January 28, 2026 09:00 AM ET Speaker1Good morning. Welcome to Scotts Miracle-Gro's first quarter 2026 earnings webcast. I'm Brad Chelton, Head of Investor Relations. Speaking today are Chairman and CEO, Jim Hagedorn, President and Chief Operating Officer, Nate Baxter, and Chief Financial Officer and Chief Accounting Officer, Mark Scheurer. Jim will provide a strategic overview, Nate will provide a business update, and Mark will follow with a review of ...

Financial Data and Key Metrics Changes - For Q2 fiscal 2026, net sales decreased to $769.5 million from $954.7 million, a decline of 19.4% [17] - Total shell egg sales fell to $649.6 million from $903.9 million, down 28.1%, with selling prices down 26.5% and sales volumes down 2.2% [17] - Gross profit was $207.4 million, down 41.8% from $356 million, primarily due to lower shell egg selling prices [18] - Net income attributable to Cal-Maine Foods was $102.8 million, down 53.1% from $219.1 million, with diluted earnings per share at $2.13, down 52.3% [18] - For the first half of fiscal 2026, net sales were $1.7 billion, down 2.8% from the previous year [22] Business Line Data and Key Metrics Changes - Shell egg sales represented 84.4% of total net sales in Q2, down from 94.7% [3] - Specialty eggs accounted for 44% of total shell egg sales, up from 31.7% [4] - Prepared food sales surged to $71.7 million from $10.4 million, an increase of 586.4% [17] - In the first half, specialty egg sales rose to $569.2 million, up 4.7% with 3.8% higher sales volumes [23] Market Data and Key Metrics Changes - Breeder flocks grew by 12.7%, total chicks hatched rose by 65.1%, and the average number of layer hens expanded by 2.6% [17] - The company is experiencing a shift in sales mix towards specialty and prepared foods, which is expected to enhance earnings predictability [3][4] Company Strategy and Development Direction - The company is evolving into a more resilient, strategically diversified portfolio, focusing on specialty eggs and prepared foods [7][10] - Investments include a $15 million project to expand prepared foods capabilities, expected to add $17 million in annual production by mid-fiscal 2027 [8] - The company aims to maintain a strong balance sheet and pursue disciplined capital allocation for growth [21] Management's Comments on Operating Environment and Future Outlook - Management believes the company is well-positioned to navigate through market cycles, emphasizing the importance of reliability in supply [12][14] - The company anticipates continued growth in specialty eggs and prepared foods, with a target of 30% growth in prepared foods over the next 18-24 months [31][46] - Management acknowledges ongoing supply challenges related to avian influenza and emphasizes the need for operational execution [11][12] Other Important Information - The company maintains a virtually debt-free status with cash and temporary cash investments of $1.1 billion [19] - A cash dividend of approximately $0.72 per share is planned for Q2 fiscal 2026 [20] Q&A Session Summary Question: How does Cal-Maine plan to weather down markets without generating losses? - Management highlighted the strength of their balance sheet and diversification into specialty eggs and prepared foods, which are expected to perform well in lower market conditions [31][34] Question: What is the expected gross margin for prepared foods moving forward? - Management indicated a target of a 19% EBITDA margin for prepared foods, despite some short-term slippage due to ongoing adjustments [39] Question: How does the company view M&A opportunities in the current market? - Management believes that the attractiveness of prepared foods remains stable, and they will continue to evaluate acquisitions in a disciplined manner [41] Question: What is the expected cadence of specialty egg capacity growth? - Management anticipates specialty eggs could exceed 50% of total shell egg net sales in the long term, supported by recent acquisitions [46] Question: How should SG&A expenses be expected to trend for the rest of the year? - Management noted that SG&A expenses may remain elevated due to increased professional fees and promotional activities as specialty volumes grow [72]

Core Viewpoint - UPS has a promising long-term growth strategy but faces questions regarding its near-term capital allocation strategy [1] Group 1: Growth Strategy - Under CEO Carol Tomé, UPS is focusing on targeted end markets and deliveries rather than merely increasing delivery volume [2] - The strategy includes a plan to voluntarily reduce low- or negative-margin Amazon deliveries by 50% from early 2025 to mid-2026 [3] - UPS aims to grow in specific markets such as small and medium-sized businesses (SMBs), healthcare, and business-to-business e-commerce, while investing in technology to enhance productivity [5] Group 2: Financial Performance and Risks - UPS has missed its initial full-year guidance for three consecutive years due to weaker-than-expected U.S. delivery volumes [6] - The company is facing deteriorating trading conditions, with analysts suggesting it may not generate sufficient free cash flow to cover its nearly $5.5 billion dividend payout [7] - The impact of Trump tariffs on SMBs has not fully materialized, potentially affecting UPS's performance [7] Group 3: Market Position - Despite UPS's long-term strategy being sound, there are near-term risks associated with earnings and limited dividend coverage [8] - FedEx has outperformed UPS in stock price performance, indicating competitive pressures in the package delivery market [1]

Core Insights - Baillie Gifford, a prominent mutual fund manager, has filed for its first US exchange-traded funds (ETFs), marking a significant shift in its investment strategy as the industry increasingly favors ETFs over mutual funds [2][4] Group 1: Company Developments - The firm manages $264 billion globally and is launching a suite of five actively managed ETFs that will incorporate assets from existing mutual funds [2] - Jamie McGregor has been hired to lead the ETF initiative, bringing experience from Goldman Sachs' ETF Accelerator program [2] - Baillie Gifford's US assets under management total $116 billion, and the new funds will focus on various strategies including Emerging Markets and International Alpha [5] Group 2: Market Context - The move to ETFs comes at a time when the SEC is set to approve dual-share-class requests, which could enhance the competitive landscape for asset managers [4] - Despite the growing popularity of ETFs, there remains a limited selection for investors seeking active, long-term growth strategies, with only 11 out of 235 international large cap equity ETFs offering such options [3] Group 3: Challenges and Considerations - The firm faces hurdles in rolling out ETF share classes, including the need to improve performance and invest in distribution and marketing to drive sales [5] - New entrants to the ETF market must expand their capabilities, either by hiring staff and investing in technology or collaborating with third-party trusts [6] - The distribution landscape for new ETFs is uncertain, as broker-dealers may be slow to approve them for their platforms [6]

Group 1 - Roku's stock experienced significant fluctuations, soaring during the COVID-19 lockdown, stalling in 2021, and declining over the following years [1][2] - Despite being considered overvalued in 2021, Roku's growth story continues, with the stock currently appearing undervalued [2] - Roku's revenue growth remains strong, with a notable increase in active users from 70 million at the end of 2022 to 90 million by Q4 2024 [4][6] Group 2 - Roku adopted a long-term growth strategy by maintaining steady prices for its services and hardware during inflation, unlike competitors who raised prices [3][4] - The company's financial performance improved significantly post-2023, with free cash flow rising 23% year over year and adjusted EBITDA increasing by 76% in Q2 2025 [5] - The active user count growth and patient pricing strategy are contributing to Roku's expanding long-term business [4][5]

Core Insights - FAVO Capital, Inc. has announced significant changes to its executive leadership team to align with its long-term growth strategy [1][2][5] - Vaughan Korte has transitioned from CFO to COO, while Katy Murless has been appointed as the new CFO, bringing extensive financial and investment experience [2][3][4] Leadership Changes - Vaughan Korte has over 17 years of finance experience, previously overseeing finance operations for adidas across 60 countries [4] - Katy Murless has more than a decade of experience in financial, commercial, and investment management, previously serving as head of U.S. operations at Stewards Investment Capital Limited [3][4] Strategic Focus - The leadership restructuring supports FAVO's dual strategy of expanding its private credit platform for U.S. small businesses and building a portfolio of stabilized, income-producing real estate [5][6] - The company aims to pursue a Nasdaq uplisting, contingent on market conditions and regulatory approval [5] Company Overview - FAVO Capital operates in two segments: financial services and income-producing real estate, having supported over 10,000 businesses through revenue-based funding solutions [6][7] - The company is headquartered in Fort Lauderdale, Florida, with operations in Florida, New York, and the Dominican Republic [7]

Financial Data and Key Metrics Changes - Total revenues increased by 6.8% year over year, reaching $67 million, primarily driven by rental income from new leases and inflationary adjustments [17] - Adjusted net operating income rose by 7.2% to €61.8 million, with an adjusted NOI margin of 94.5% [18] - Adjusted EBITDA increased by 9% year over year to €55 million, with a margin expansion of 137 basis points to 84.1% [18] - Pre-tax income decreased to $54.5 million compared to $131.8 million in 2024, mainly due to lower gains on valuation of investment properties [19] - Funds from operations (FFO), excluding current tax, increased by 12.9% year over year to $43.1 million [19] - Cash and cash equivalents stood at $65.2 million, with total debt increasing to $900 million [20] Business Line Data and Key Metrics Changes - New leasing activity totaled 1.8 million square feet, including 411,000 square feet in new contracts, reflecting a sequential increase from the first quarter [9] - Strong retention rates of 84% were reported, with rent increases of 20% to 30% in some cases [10] - The tracking 12-month spread reached 13.7%, indicating a significant increase in the mark-to-market portfolio strategy [10] Market Data and Key Metrics Changes - The portfolio ended the quarter with a stabilized occupancy of 95.5%, with rents indexed to inflation [8] - The company noted an uptick in vacancy in markets such as Tijuana and Juarez, but rents have maintained or increased in some cases [23] - The company has approximately 2 million square feet in lease-up stage across different regions [25] Company Strategy and Development Direction - The company is focused on extracting value from core operations and managing assets with discipline, emphasizing tenant retention and strategic positioning [12] - The strategy includes completing existing projects and strategically expanding the land bank in line with Route 2030 [11] - The company aims to reinforce its foundation to scale confidently when the environment normalizes, with a focus on energy infrastructure planning and streamlining permitting [12] Management's Comments on Operating Environment and Future Outlook - Management views the current slowdown in leasing as a temporary deceleration rather than a structural change, with companies exercising caution rather than canceling plans [14] - The company expects recent deliveries of income-producing properties to contribute to revenues in the second half of 2025 [15] - Management remains optimistic about the long-term growth potential in Mexico, particularly in light of industrial realignment [16] Other Important Information - The company acquired 128.4 acres in Guadalajara and finalized a 20.2-acre acquisition in Monterrey, enhancing its strategic footprint [20] - The company paid a cash dividend of $0.38 per ordinary share for the second quarter [21] Q&A Session Summary Question: Development pipeline progress ahead of USMCA review - Management noted an uptick in vacancy in some markets but expressed confidence in rent stability and pent-up demand as negotiations progress [23][24] Question: Leasing activity in Monterrey - Management highlighted strong net absorption in Monterrey and expressed confidence in leasing up new properties due to their prime locations [30][31] Question: Yield on cost for projects under construction - Management confirmed attractive yield on costs above 10% and noted stable construction costs with minor adjustments [39] Question: Land acquisitions and leverage by year-end - Management indicated a healthy leverage position and confidence in sustaining land acquisition strategies without compromising financial ratios [48] Question: Increase in leasing activity pipelines - Management observed increased visits to industrial parks and anticipated more leasing activity in the second half of the year [52] Question: Leasing spreads and development starts - Management expects continued strong leasing spreads and will be cautious with new development starts until existing properties are leased up [58][63] Question: Land bank and shovel-ready status - Management confirmed that recent land acquisitions are mostly shovel-ready, with some permits already in place [68][72] Question: Dynamics in absorption, vacancy, and rents - Management reported stable to positive rent growth in Tijuana and Ciudad Juarez, with expectations for increased leasing activity in the second half [80][81] Question: Renewals and market gaps - Management indicated approximately 3% of GLA expiring this year, with expectations for high renewal rates and rent increases [85][86] Question: Regional footprint and market priorities - Management emphasized the priority of leasing up vacant space in key markets like Monterrey and Ciudad Juarez before new developments [93]