Financial Data and Key Metrics Changes - Year-to-date EBITDA increased by 9%, and EPS rose by 24% [9][53] - Gross margin is above 30%, with a GAAP gross margin rate of 31.8% compared to 29.5% in the prior year [52][50] - Total company net sales for the third quarter were $1,190 million, down 1% from $1,200 million a year ago [46] Business Line Data and Key Metrics Changes - POS units across categories are up 8% year-to-date, with branded lawn fertilizers POS units up 1% [9][48] - Soils POS units increased by 12%, mulch by 8%, and grass seed by 16% year-to-date [9][48] - Hawthorne net sales were $31 million for the quarter, down from $68 million in the prior year [45] Market Data and Key Metrics Changes - U.S. Consumer net sales for the quarter were $1,030 million, an increase of 1% year-over-year [41] - The lawn and garden market has grown about 5% year-to-date, with the company gaining about 2% market share [74][75] - E-commerce sales increased by 54% in online POS unit sales [22] Company Strategy and Development Direction - The company is focusing on internal initiatives to improve cost structure and efficiency while also shifting to outward-facing initiatives to enhance consumer engagement [6][7] - Plans to invest in technology, AI, and automation to drive operational efficiencies [57][16] - The transformation initiative aims to create a world-class consumer goods company and expand marketing efforts to younger consumers [17][21] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed EBITDA guidance and expects to deliver on top and bottom line metrics [8] - The company is optimistic about the lawn and garden category's growth and its ability to capture market share [62][88] - Management highlighted the importance of partnerships with retailers and the positive outlook for the lawn and garden market [32][66] Other Important Information - The company plans to take pricing in the next fiscal year to help drive margins [36] - The transformation of the lawns business is underway, focusing on a revamped product line and new media strategies [26][29] - The company is committed to sustainability and meeting consumer demands for organic and natural products [23][19] Q&A Session Summary Question: What is the pricing strategy for '26? - The company took a pricing increase of just under 1.5% in '25 and plans to pursue pricing in '26, considering commodity costs [71][72] Question: What is the category growth at retail in '25? - The lawn and garden market has grown about 5% year-to-date, with the company gaining about 2% of that share [74][75] Question: How are retailers responding to the activation strategy? - Retailers that engaged with the company's activation strategy saw relative outperformance, and the company plans to continue investing in those partnerships [79][80] Question: What is the visibility into achieving mid-30s gross margin? - The company expects to achieve mid-30s gross margin through supply chain savings and net pricing strategies over the next few years [85][86]

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]