Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $961 million, a decline of 4% compared to the previous year [17] - Gross profit increased by 5% to $332 million, with gross margin expanding by 280 basis points to 34.6% [17] - Non-GAAP net income totaled $98 million, an increase of 11%, while GAAP earnings per share rose by 28% to $1.52 [20] - Non-GAAP EPS increased by 18% to $1.56, marking record results for the third quarter [20] Business Line Data and Key Metrics Changes Pet Segment - Net sales for the Pet segment were $493 million, down 3%, primarily due to exiting lower-margin durable products [21] - Consumables now represent 82% of total pet sales, up from 79% a year ago, indicating a shift towards higher-margin products [22] - Non-GAAP operating income for the Pet segment was $78 million, down 6%, with non-GAAP operating margin contracting by 60 basis points to 15.8% [23] Garden Segment - Net sales for the Garden segment were $468 million, representing a 4% decline, driven by the exit of two product lines and adverse weather conditions [24] - Non-GAAP operating income for Garden rose to $85 million, an increase of $12 million, with non-GAAP operating margin expanding by 310 basis points to 18.2% [25] Market Data and Key Metrics Changes - E-commerce accounted for 27% of total Pet sales, consistent with the prior quarter but slightly below the same period last year [23] - The Garden and e-commerce channel achieved double-digit growth, particularly in wild bird and grass seed categories [25] Company Strategy and Development Direction - The company is focused on operational optimization, including consolidating distribution centers and enhancing e-commerce capabilities [9][10] - The "central to home" strategy aims to blend startup agility with large enterprise scale, fostering innovation and market share growth [13][14] - M&A is viewed as a strategic lever to complement internal innovation, with plans to accelerate efforts in 2026 as market conditions improve [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year outlook despite macroeconomic uncertainties and anticipated increased consumer value consciousness [12] - The company expects tariff-related inflationary pressures to intensify, particularly in the Pet segment, but reaffirms non-GAAP EPS guidance of approximately $2.6 for the fiscal year [13][28] Other Important Information - The company streamlined operations by consolidating 20 outdated locations and creating five efficient direct-to-consumer hubs [10] - Cash provided by operations was $265 million for the quarter, with a reduction in inventory of $67 million [26] - The company repurchased approximately 1.7 million shares, totaling $55 million, with $46 million remaining under the share repurchase program [27] Q&A Session Summary Question: How should investors think about the opportunity to keep improving margins? - Management highlighted ongoing efforts in cost and simplicity, with a focus on portfolio optimization and innovation to enhance margins [30][34] Question: What are the implications of tariffs on margins? - The company expects most tariff impacts to surface in Q4, with pricing actions being considered to mitigate cost increases [38][40] Question: Can you elaborate on Pet trends as the year ends? - Management noted a challenged consumer environment but indicated stabilization in pet ownership and live animal business, with consumables remaining flat and durables declining [44][46] Question: What categories drove EPS upside in Garden? - Strong performance was noted in wild bird food, fertilizer, and grass seed categories, despite challenging weather conditions [49][50] Question: How much longer will SKU rationalization impact top line growth? - Management indicated uncertainty regarding the duration of SKU rationalization impacts, with more clarity expected in future guidance [83][84] Question: What is the long-term growth rate expectation for pet consumables? - Management believes the pet consumables category can grow low to mid-single digits in the long term, supported by stabilizing pet ownership [110]

Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $961 million, a decline of 4% year-over-year [16] - Gross profit increased by 5% to $332 million, with gross margin expanding by 280 basis points to 34.6% [16] - Non-GAAP operating income rose by 9% to $139 million, with non-GAAP operating margin expanding by 170 basis points to 14.5% [18] - GAAP earnings per share increased by 28% to $1.52, while non-GAAP EPS rose by 18% to $1.56 [20] - Adjusted EBITDA was $167 million, an increase of $11 million year-over-year [21] Business Line Data and Key Metrics Changes Pet Segment - Net sales for the Pet segment totaled $493 million, down 3% [21] - Consumables now represent 82% of total pet sales, up from 79% a year ago [22] - Non-GAAP operating income for the Pet segment was $78 million, down 6% compared to the previous year [23] - E-commerce accounted for 27% of total Pet sales, consistent with the prior quarter [23] Garden Segment - Net sales for the Garden segment were $468 million, representing a 4% decline [24] - Non-GAAP operating income for Garden rose to $85 million, up $12 million year-over-year [25] - Adjusted EBITDA for the Garden segment was $96 million, an improvement of $11 million year-over-year [26] Market Data and Key Metrics Changes - The company faced top-line pressure from the loss of two product lines in the garden distribution business and soft demand in pet durables [6][11] - Despite challenges, the company maintained market share and gained in key consumer categories such as dog chews and flea and tick products [22] - E-commerce channels for both segments showed double-digit growth, particularly in the Garden segment [25] Company Strategy and Development Direction - The company is focused on operational optimization, including consolidating distribution centers and streamlining operations [7][10] - The "central to home" strategy aims to blend agility with scale, empowering teams to innovate and grow market share [12] - The company plans to accelerate M&A efforts in 2026, viewing it as a strategic lever for long-term shareholder value [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year outlook despite macroeconomic uncertainties and pressures on consumer confidence [11] - The company anticipates increased consumer value consciousness and heightened promotional activity across retail channels [11] - Management noted that tariff-related inflationary pressures are expected to intensify, particularly in the Pet segment [12] Other Important Information - The company completed the sale of its U.K. operations and transitioned to a direct export model for certain products [8] - Cash provided by operations was $265 million for the quarter, with a focus on working capital management [26] - The company repurchased approximately 1.7 million shares for $55 million during the quarter [27] Q&A Session Summary Question: How should investors think about the opportunity to keep improving margins? - Management highlighted ongoing efforts in cost and simplicity, with a focus on portfolio optimization and innovation to enhance margins [30][32] Question: What are the implications of tariffs on margins? - Management expects most tariff impacts to surface in Q4, with pricing actions being considered to mitigate cost increases [39][41] Question: Can you elaborate on Pet trends as the year ends? - Management noted a challenged consumer environment but indicated stabilization in pet ownership and live animal business [46][48] Question: What was the impact of exited product lines on sales? - Management acknowledged significant impacts from assortment rationalization, particularly in the Pet segment [57][60] Question: What will it take for the Garden segment to return to consistent growth? - Management indicated that favorable weather conditions are crucial for growth, alongside strong consumer engagement [88][90]