Q2 2024 Scotts Miracle-Gro Co Earnings Call Transcript
Key Points
- The Scotts Miracle Gro Co (SMG) reported high single-digit growth in the consumer business and achieved $575 million in adjusted EBITDA as projected.
- Free cash flow improved significantly, exceeding the first half target by $200 million, with a total improvement of over $500 million from the previous year.
- Debt levels were reduced by more than $750 million year-over-year, enhancing the company's financial stability.
- Gross margin improved by 60 basis points in Q2 compared to the previous year, with expectations to improve by at least 250 basis points year-over-year by the end of the fiscal year.
- Net sales in the U.S. consumer segment increased by 2% over the previous year in Q2, driven by strong retail partnerships and effective execution.
- Year-to-date consumer sales were slightly lower than the previous year, reflecting a return to traditional pre-COVID shipping cadence with retailers.
- Hawthorne segment continues to face challenges, with Q2 net sales 28% lower than the previous year and a projected annual decline of 25% to 30% in net sales.
- Despite improvements, the Hawthorne segment reported a Q2 segment loss of $3 million, although this was an improvement from a $17 million loss a year ago.
- The company is still in the process of finding a long-term solution for the Hawthorne division, indicating ongoing strategic challenges.
- While gross margin improved, the adjusted gross margin rate declined approximately 30 basis points through the first half, influenced by negative net pricing and fixed cost deleverage from lower volumes.
Good morning. Welcome to Scotts Miracle-Gro's Second Quarter 2024 Earnings Webcast. I'm Aimee DeLuca, Head of Investor Relations. With me this morning are Chairman, President and CEO, Jim Hagedorn; and Chief Financial and Administrative Officer, Matt Garth. Jim will provide an overall business update followed by Matt with a review of our financial results.
During our review, we will make forward-looking statements and discuss certain non-GAAP financial measures. Please be aware that our actual results could differ materially from what we share today. Please refer to our Form 10-K filed with the SEC for details of the full range of risk factors that could impact our results.
Following the webcast, Chief Operating Officer, Nate Baxter; and Hawthorne Division President, Chris Hagedorn, will join Jim and Matt for an audio-only Q&A session. To listen to the Q&A, simply remain on this webcast. If you wish to participate, please join via the audio link shared in our press release.
As always, today's session will be
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