Q2 2024 Scotts Miracle-Gro Co Earnings Call

Aimee DeLuca: 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.

Aimee DeLuca: 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.

Aimee DeLuca: 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 webcam. If you wish to participate, please join via the audio link shared in our press release. As always, today's session will be recorded. An archived version will be published on our website at investor.scotts.com. For further discussion after the call, you are invited to email or call me directly. With that, let's get started with Jim's Business Update.

Good morning, welcome to Scotts Miracle Gro second quarter, 'twenty 'twenty four earnings webcast I'm, Amy Deluca headed.

Aimee DeLuca: Investor Relations.

Speaker Change: With me. This morning are chairman, President and CEO, Jim Hagadorn, and Chief financial and administrative officer, Matt Garth.

Matthew E. Garth: Jim will provide an overall business update followed by Matt with a review of our financial results.

Aimee DeLuca: During our review, we will make forward looking statements and discuss certain non-GAAP financial measures.

Matthew E. Garth: Please be aware that our actual results could differ materially from what we shared 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.

Nate Baxter: 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 Web site. If you wish to participate, please join via the audio link shared in our press release. As always, today's session will be recorded, and an archived version will be published on our website at investor.scotts.com. For further discussion after the call, you are invited to email or call me directly. With that said, let's get started with Jim's Business Update. Good morning, everyone. I'll start with my high altitude.

Aimee DeLuca: Following the webcast Chief operating officer, Nate Baxter, and Hawthorne Division, President, Chris Hagadorn, well joined Jim and Matt for an audio only Q&A session.

Speaker Change: Listen to the Q&A simply remain on this webcast. If you wish to participate please joined via the audio link shared in our press release.

Speaker Change: As always today's session will be recorded and archived version will be published on our website at investor Dot Scotts Dot com for.

Speaker Change: For further discussion after the call you are invited to email or call me directly with that let's get started with Jim's business update.

James S. Hagedorn: Good morning, everyone. I'll start with my high altitude assessment.

James S. Hagedorn: Good morning, everyone I'll start with my high altitude assessment.

James S. Hagedorn: The state of the company is good. I can't believe we're already halfway through the fiscal year. Everything we've done to get to a better place is happening, just like we projected it would when we laid out our Fiscal 24 Guidelines. We told you we would achieve high single-digit growth in the consumer business and $575 million in adjusted EBITDA this year. And we will do so while generating $1 billion in free cash flow over two years by the close of fiscal 24.

James S. Hagedorn: The state of the Company is good. I can't believe we're already halfway through the year. Everything we've done to get to a better place is happening, just like we projected it would when we laid out our Fiscal 24 guidance. We told you we would achieve high single-digit growth in the consumer business, $575 million in adjusted EBITDA this year, and we would do so while generating $1 billion in free cash flow over two years by the close of fiscal 24. Proving Gross Margin by at least 250 basis points and Finding a Long-Term Solution for Hobbes

James S. Hagedorn: The company is good.

James S. Hagedorn: Can't believe we're already halfway through the fiscal year.

James S. Hagedorn: Everything we've done to get to a better places happening just like we projected it would when we laid out our fiscal 'twenty for guidance.

James S. Hagedorn: We told you we would achieve high single digit growth in the consumer business and.

James S. Hagedorn: And $575 million and adjusted EBITDA This year.

James S. Hagedorn: And we did so while generating $1 billion of free cash flow over two years by the close of fiscal 'twenty four.

James S. Hagedorn: Improving gross margin by at least 250 basis points and finding a long-term solution for Hawthorne. We've made progress on all these fronts. In fact, through the first six months, we've exceeded planned targets on key financial metrics that support our ability to deliver on our guidance. Free cash flow is a fabulous story. It improved over $500 million from the prior year, exceeding our first half target by $200 million. Our debt levels are down by more than $750 million year over year.

James S. Hagedorn: Improving gross margin by at least 250 basis points.

James S. Hagedorn: And finding a long term solution for Hawthorne.

James S. Hagedorn: We've made progress in all areas. In fact, through the first six months, we've exceeded planned targets on key financial metrics that support our ability to deliver on our goals. Free cash flow is fabulous. It improved over $500 million from prior years, surpassing our first half target by 200. Our debt levels are down by more than $750 million year over year.

James S. Hagedorn: We've made progress in all these fronts.

James S. Hagedorn: In fact through the first six months, we've exceeded plan targets on key financial metrics that support our ability to deliver on our guidance free.

James S. Hagedorn: Free cash flow is a fabulous story.

James S. Hagedorn: It improved over $500 million from prior year exceeding our first half target by $200 million.

James S. Hagedorn: Our debt levels are down by more than $750 million year over year.

James S. Hagedorn: The most telling sign we're in a better place is our leverage. For Q2, we finished at 6.95 times EBITDA, well within our covenant max of 7.7 times, and better than Q1. When you consider our leverage limits, Q2 was our tightest quarter. Our banks challenged us to a tougher metric in Q2 to force us to make choices.

James S. Hagedorn: The most telling sign we're in a better place is our leverage. For Q2, we finished at 6.95 times EBITDA, well within our covenant max of 7.7 times EBITDA, and Better Than Q. When you consider our leverage limits, Q2 was our tightest.

James S. Hagedorn: The most telling sign we're in a better places our leverage improvement for Q2, we finished at $6 95 times EBITDA well within our covenant Max of seven seven times better than Q1.

James S. Hagedorn: When you consider our leverage limits Q2 was our tightest quarter, our banks challenged us to a tougher metric in Q2 to force us to make choices.

James S. Hagedorn: Our banks challenged us to a tougher metric in Q2 to force us to make more, Nate and Matt worked together to ensure the operating and finance teams navigated it. I want to thank the banks for their support in a very tough period for us. Leverage Maximums under our bank covenants will come down through 20, and we're highly confident we'll manage within it is expected to be in the fourth by fiscal year end with more improvement in fiscal 25.

James S. Hagedorn: Nate and Matt worked together to ensure the operating and finance teams navigated it comfortably. I want to thank the banks for their support in a very tough period for our company. Leverage maximums under our bank covenants will come down through 24, and we're highly confident we'll manage within that.

James S. Hagedorn: Nate and Matt worked together to ensure the operating and finance teams navigated it comfortably.

James S. Hagedorn: I want to thank the banks for their support in a very tough period for our company.

James S. Hagedorn: Leverage maximums under our bank covenants will come down through 'twenty, four and we're highly confident we'll manage within them.

James S. Hagedorn: We expect to be in the fourth by fiscal year end, with more improvement in fiscal 25. We're also moving in the right direction on gross margins. It was 35.3% in the quarter, 60 basis points better than Q2 of last year. At the end of the year, we expect to be at least 250 basis points improved year over year with more gains than in fiscal 25. Tight expense management remains a priority.

James S. Hagedorn: We expect to be in the fours by fiscal year end with more improvement in fiscal 'twenty five.

James S. Hagedorn: We're also moving in the right direction on gross. It was 35.3% in the quarter, 60 basis points better than Q2 of last year. At the end of the year, we expect to be at least 250 basis points improved year over year with more gains than 25. Tight expense management remains a priority.

James S. Hagedorn: We're also moving in the right direction on gross margin.

James S. Hagedorn: It was 35, 3% in the quarter 60 basis points better than Q2 of last year.

James S. Hagedorn: At the end of the year, we expect to be at least 250 basis points improved year over year with more gains in 'twenty five.

James S. Hagedorn: Tight expense management remains a priority.

James S. Hagedorn: Through the first half, SG&A was at 15.2% of net sales, in line with our guidance and below prior years. Overall, I'm pleased with our performance. It's a testament to the strength of our business, decisive actions, and precise execution. Looking at the consumer business, here are the positives. Net sales picked up in Q2 because we drove a 2% increase over the prior year. However, year-to-date consumer sales were slightly lower than the prior year.

James S. Hagedorn: Through the first half, SG&A was at 15.2% of net sales, in line with our guidance and below the prior year. Overall, I'm pleased with our performance. Testament to the Strength of Our Business, Decisive Actions, and Precise Execution. Looking at the consumer business, here are the positives. Net sales picked up in Q2 because we drove a 2% increase over the prior year. However, year-to-date consumer sales were slightly lower than the prior year.

James S. Hagedorn: Through the first half SG&A was at 15, 2% of net sales in line with our guidance and below prior year.

James S. Hagedorn: Overall, I'm pleased with our performance.

James S. Hagedorn: It's a testament to the strength of our business decisive actions and precise execution.

James S. Hagedorn: Looking at the consumer business here are the positives.

James S. Hagedorn: Net sales picked up in Q2, as we drove a 2% increase over prior year.

James S. Hagedorn: Year to date consumer sales were slightly lower than prior year. This reflects how we are returning towards traditional pre COVID-19 shipping cadence with retailers versus last year's heavy upfront load in.

James S. Hagedorn: This reflects how we are returning to a traditional pre-COVID shipping cadence with retailers versus last year's heavy upfront load in. Meanwhile, retailer inventories are in good shape. POS units through the first half were nearly 15% above prior year and 5% over plan. These increases were due to the new listing and expanded share of Shelf in exchange for investments with retail. The Daylong Savings Promotion in March outperformed last year's campaign. We told you it would contribute to gains, and it did. True March, we had POS lifts across nearly all categories. Gardens was up 18%, Controls was up 12%, and Roundup was up 9%. Long's was essentially flat,

James S. Hagedorn: This reflects how we are returning to a traditional pre-COVID shipping cadence with retailers versus last year's heavy upfront load. Additionally, retailer inventories are in good shape. POS units through the first half were nearly 15% above prior, and 5% over plan. These increases were due to the new listing and expanded share of Shelf, in exchange for investments with... The Daylong Savings Promotion in March outperformed last year. We told you it would contribute to gains, and it did.

James S. Hagedorn: Retailer inventories are in good shape P. O S units through the first half were nearly 15% above prior year and 5% over plan.

James S. Hagedorn: These lifts were due to the new listings and expanded share of shelf in exchange for investments with retailers.

James S. Hagedorn: The Daylon savings promotion in March outperformed last year's campaign.

James S. Hagedorn: We told you these would contribute the gains and they did.

James S. Hagedorn: Through March, we had POS lifts across nearly all categories. Gardens was up 18%. Controls was plus 12%. Roundup plus 9%. Longs was essentially flat. Price adjustments and promotions led to Q2 year-over-year... 15% for bonus. 28% for Hall. Both are early season fertile.

James S. Hagedorn: Through March we had P O S lifts across nearly all categories.

James S. Hagedorn: Garden's was up 18%.

James S. Hagedorn: Controls was plus 12%.

James S. Hagedorn: Price adjustments and promotions led to Q2 year-over-year lifts of 15% for Bonus S and 28% for Hall. Both are early season fertilizers. This year marked the first time in recent years we did awareness-driven advertising around halls. We've created room for the remainder of the year and accomplished it as a smaller, leaner, more cost-efficient company. Think about what we've done.

James S. Hagedorn: Wound up plus 9%.

James S. Hagedorn: <unk> was essentially flat price adjustments and promotions led to a Q2 year over year lives of 15 per cent for bonuses and 28% for halt.

James S. Hagedorn: Both our early season fertilizers.

James S. Hagedorn: This year marked the first time in recent years we did awareness-driven advertising around Hall, created room for the remainder of the year, and accomplished it as a smaller, leaner, more cost-efficient. Think about what we can do. We cut nearly $400 million in annual operating costs and reinvested $100 million of those dollars back into growth drivers like media and innovation, or a higher functioning organization moving with. The management team has everyone moving in the same direction, and our associates have a spring in their step. We're now focused on Q3, and we have laid the groundwork for consumer takeaway in this critical quarter that represents 60% of our POS.

James S. Hagedorn: This year marked the first time in recent years, we did awareness driving advertising around halt.

James S. Hagedorn: We've created room for the remainder of the year and accomplished it is a smaller leaner more cost efficient company.

James S. Hagedorn: We cut nearly $400 million in annual operating expenses and reinvested $100 million of those dollars back into growth drivers like media and innovation, or a higher functioning organization moving with speed. The management team has everyone moving in the same direction, and our associates have a spring in their step. We're now focused on Q3. We've laid the groundwork for consumer takeaway in this critical quarter, which represents 60% of our POS. April started slow but steadily picked up throughout the month.

Speaker Change: Think about what we've done.

Speaker Change: We cut nearly $400 million in annual operating expenses and reinvested $100 million of those dollars back into growth drivers like media and innovation.

Speaker Change: Where our higher function in the organization moving with speed.

Speaker Change: The management team has everyone moving in the same direction and our associates have a spring in their step.

Speaker Change: We're now focused on Q3.

Speaker Change: We've laid the groundwork for consumer takeaway and it's critical quarter that represents 60% of our Pos.

James S. Hagedorn: April started slow but steadily picked up throughout. Sluggishness was due to the late season start in the Northeast and a deliberate move on our part and of our major retailers to push high-volume spring events and promotions later in the month. This enabled everyone to mitigate the risks of unpredictable early season weather. The shift played out as expected.

Speaker Change: April started slow but steadily picked up throughout the month. The sluggishness was due to the late season start in the northeast.

James S. Hagedorn: Sluggishness was due to the late season start in the Northeast and a deliberate move on our part and of our major retailers to push high-volume spring events and promotions later in the month. This enabled everyone to mitigate the risks of unpredictable early season weather. The shift played out as expected. By late April, promotions and retailer events were contributing to POS unit growth. As we look ahead, we have many things going in our favor. For example, despite inflation, consumer sentiment has improved.

Speaker Change: And a deliberate move on our part and of our major retailers to push high volume spring events and promotions later in the month.

Speaker Change: This enabled everyone to mitigate the risks of unpredictable early season weather.

Speaker Change: The shift played out as expected.

James S. Hagedorn: By late April, promotions and retail events were contributing to POS unit growth. As we look ahead, we have many things going in our favor. Despite inflation, consumer sentiment has improved. They are more confident about the economy and are engaging at higher rates in our category.

Speaker Change: By late April promotions in retail our rents were contributing to P. O S unit growth.

Speaker Change: As we look ahead, we have many things going in our favor despite inflation consumer sentiment has improved.

James S. Hagedorn: They are more confident about the economy and are engaging at higher rates in our category, demonstrating the resiliency of our consumer business in uncertain economic times. Consumers care about their lawns and gardens, and we offer a low-cost, do-it-yourself option to improve their yard and their home. Retailers know lawn and garden is critically important to driving their springs. Despite tepid retailer foot traffic through the first half, we've outpaced their declines and helped bring people into their stores.

Speaker Change: They are more confident about the economy and are engaging at higher rates in our category.

James S. Hagedorn: Demonstrating the resiliency of our consumer business in uncertain economic times, Consumers care about their lawns and gardens, and we offer a low-cost, do-it-yourself option to improve their yard and their home. Retailers know lawn and garden is critically important to driving their business. Despite tepid retailer foot traffic through the first half, we've outpaced their decline to help bring people into their stores. We want to thank our retailers for their partnership, and they're awesome. Let me talk about what you'll see in. We will invest 25% more in our brand focused.

Speaker Change: Demonstrating the resiliency of our consumer business in uncertain economic times.

Speaker Change: Consumers care about their lawn and gardens, and we offer a low cost do it yourself option to improve their yard and their home.

Speaker Change: Retailers know lawn and garden is critically important to driving their spring season, despite tepid retail or foot traffic through the first half we've outpaced their declines and help bring people into their stores.

James S. Hagedorn: We want to thank our retailers for their partnership and their awesome support. Let me talk about what you'll see in Q3. We will invest 25% more in our brand-focused advertising. It has to be nearly impossible for people not to have seen our ads this year. We're blanketing television and radio nationally during peak news and high-profile sporting events. We're not chasing the fringe consumer. We're laser targeted on our core consumer, the 30-plus-year-

Speaker Change: We want to thank our retailers for their partnership and their awesome support.

Speaker Change: Let me talk about what Youll see in Q3.

Speaker Change: We will invest 25% more in our brand focused advertising.

James S. Hagedorn: It has to be nearly impossible for people not to have seen our ad; we were blanketing television and radio nationally during peak news and high-profile sporting events. We're not chasing the fringe consumer; we're laser-targeted in our core. The Q3 Blitz started with the April launch of Miracle-Gro Organics with Martha, in the new Dirt Nerd spot. Martha shares how she relies on our products in her own

Speaker Change: It has to be nearly impossible for people not to exceed our adds this year.

Speaker Change: Blanketing television and radio nationally during peak news and high profile sporting events, we're not chasing the fringe consumer.

Speaker Change: Laser targeted in our core consumer the 30 plus year old homeowner. The Q3 Blitz started with the April launch of Miracle Gro organics with Martha Stewart.

James S. Hagedorn: The Q3 Blitz started with the April launch of Miracle-Gro Organics with Martha Stewart in the new Dirt Nerd spots. Martha shares how she relies on our products in her own garden. The PR outreach alone surpassed 1 billion impressions.

Speaker Change: In the new dirt nerd spots Martha shares how she relies on our products in her own gardens.

James S. Hagedorn: PR outreach alone surpassed 1 billion. We're also expanding our Scotts for Scotts campaign with actor Christopher Hagedorn, who has fully embraced the role and established credibility. Creative is strong, and Christopher will lead the launch of a new healthy lawn product. Innovative Summer-Long Fertilizer and Fungicide to Combat Without any advertising support, we're already seeing good POS traction with healthy. At the store level, we've expanded fuel sales manager positions by 10% for in-store activations and collaborated with Bonnie Plan. Driving Attachment with Soils.

Speaker Change: The PR outreach alone surpassed 1 billion impressions.

James S. Hagedorn: We're also expanding our Scotts for Scotts campaign with actor Christopher Higgins, who has fully embraced the role and established credibility with consumers. The creative is strong, and Christopher will lead the launch of a new healthy lawn product, Innovative Summer-Long Fertilizer and Fungicide to Combat Disease.

Speaker Change: We're also expanding our Scott for Scotts campaign with actor Kristofer hip you, who has fully embraced the role and establish credibility with consumers.

Speaker Change: The creative is strong and Christopher will lead the launch of a new healthy lawn product the.

Speaker Change: The innovative summer lawn fertilizer and fungicide to combat disease.

James S. Hagedorn: Without any advertising support, we're already seeing good POS traction with Healthy Lawn. At the store level, we've expanded Field Sales Manager positions by 10% to support in-store activations and collaborate with Bonnie Plants on driving attachment with soils and vegetation. Bonnie sales are up 12% year-over-year through the first half. Spring is in full bloom across the country.

Speaker Change: Without any advertising support we're already seeing good Pos traction with healthy on.

Speaker Change: At the store level, we've expanded fuel sales manager positions by 10% to support in store Activations and collaborate with Bonnie plants on driving attachment with soils and vegetables.

James S. Hagedorn: Bonnie sales are up 12% year over year through the first, Spring is in full bloom across, Retailer programs that are advertising are hitting hard. Weather models look good in May, and we're managing what's within our control. Shifting to Hawthorne.

Speaker Change: Bonnie sales are up 12% year over year through the first half.

Speaker Change: Spring is in full bloom across the country retailer programs that are advertising are hitting hard.

James S. Hagedorn: Retailer programs that are advertising are hitting hard. Weather models look good in May, and we're managing what's within our control. Moving the Hawthorne. There's progress. We continue to remake the business and strengthen its ability to be a profit contributor. I've challenged the team to achieve a $10 million profit run rate. In the past two years, Hawthorne has gone from 15 distribution centers to two and cut over 1,000 jobs, operating today with less than 300 people.

Speaker Change: Whether models look good in May and we're managing what's within our control.

James S. Hagedorn: There's progress. We continue to remake the business and strengthen its ability to be a profit, challenging the team to achieve a $10 million profit run. In the past two years, Hawthorne has gone from 15 distribution centers to two, cut over 1,000 jobs, and is operating today with less than $300,000.

Speaker Change: Shifting to Hawthorne Theres progress.

Speaker Change: We continue to remake the business and strengthen its ability to be a profit contributor.

Speaker Change: I've challenged the team to achieve a $10 million profit run rate.

Speaker Change: In the past two years Hawthorne has gone from 15 distribution centers to two.

Speaker Change: And cut over 1000 jobs operating today with less than 300 people.

James S. Hagedorn: In our latest move to improve its economics, we're completing the full transition to manufacturing and marketing our own brand. To make this happen and enhance our ability to invest in our brands, we've exited third-party distribution businesses where margins were challenged or nonexistent. This was less of a concern when the business was bigger, but we can no longer deploy capital for low-volume, low-margin products, and I doubt competitors such as Hydroform can either.

James S. Hagedorn: In our latest move to improve its economics, we're completing the full transition to manufacturing and marketing our own. To make this happen and enhance our ability to invest in our brands, we've exited third-party distribution, where margins were challenged or non-existent. This was less of a concern when the business was bigger, but we can no longer deploy capital for low-volume, low-margin products, and I doubt competitors such as Hydrofar We're now focusing on Hawthorne's more profitable, exclusive, and owned brands like Govita, Botanicare, General Hydroponics, Psycho, Mother Earth, and Hydro...

Speaker Change: In our latest move to improve its economics were completing the full transition to manufacturing and marketing our own brands.

Speaker Change: To make this happen to enhance our ability to invest in our brands. We've exited third party distribution business, where margins were challenged or nonexistent.

Speaker Change: This was less of a concern when the business was bigger, but we can no longer deploy capital for low volume low margin products.

Speaker Change: And I doubt competitors, such as hydrophone can either.

James S. Hagedorn: We're now focusing on Hawthorne's more profitable, exclusive, and own brands, like Govita, Botanicare, General Hydroponics, Psycho, Mother Earth, and Hydrologic. These are industry leaders, and they stand at 80% of our sales and will increase to 100%. Carrying margins on par with our consumer portfolio. As part of the strategic change, we've partnered with BFG Supply to service our smaller retail customers. We believe DFG can deliver a higher service and that the partnership will lower Hawthorne's cost structure throughout the year.

Speaker Change: We're now focusing on Hawthorne to more profitable exclusive and owned brands like Davita Botanic here General Hydroponics Psycho mother Earth and hydrologic.

James S. Hagedorn: These are industry leaders, and they stand at 80% of our sales and will increase to 100%, carrying margins on par with our consumer portfolio. As part of this strategic change, we've partnered with BFG Supply to service our smaller retail community.

Speaker Change: These are industry leaders and they stand at 80% of our sales and will increase to 100% carrying margins on par with our consumer portfolio.

Speaker Change: As part of the strategic change, we partner with BFG supply to serve as our smaller retail customers.

Speaker Change: We believe <unk> can deliver a higher service level.

James S. Hagedorn: We believe DFG can deliver a higher margin and that partnership will lower Hawthorne's cost structure throughout. We continue to work on the long-term solution for Hawthorne, a valuable, completely legal asset in the cannabis space with tax advantages, the best brands, and industry-leading research and development. At our facilities in Kelowna, British Columbia, Marysville, Ohio, and Jervis, Oregon, we're researching genetics, Competitive Products, Cultivation Practices, Lighting, Yields, and more.

Speaker Change: The partnership will lower hawthorne's cost structure throughout the year.

James S. Hagedorn: We continue to work on the long-term solution for Hawthorne, a valuable, completely legal asset in the cannabis space with tax advantages, the best brands, and industry-leading research and development. At our facilities in Kelowna, British Columbia, Marysville, Ohio, and Jervis, Oregon, we're researching genetics, competitive products, cultivation practices, lighting, yield, and more. And we share this with our customers. As this industry consolidates, which is going to happen, Hawthorne will be an important piece of a much larger puzzle.

Speaker Change: We continue to work on the long term solution for Hawthorne, a valuable completely legal asset in the cannabis space with tax advantages the best brands industry, leading research and development.

Speaker Change: At our facilities and Colonna, British Columbia, Marysville, Ohio, Jervis, Oregon, we're researching genetics competitive products cultivation practices lighting yield and more and we share this with our customers.

James S. Hagedorn: And we share this with our customers. As this industry consolidates, which is going to happen, Hawthorne will be an important piece of a much larger. Let me give you an example. The cannabis market is estimated at $105 billion annually in the United States. The overwhelming majority of it is run by illegal operatives.

Speaker Change: As this industry consolidates, which is going to happen Hawthorne will be an important piece of a much larger puzzle.

James S. Hagedorn: Let me give you a sense of the potential. The cannabis market is estimated to be $105 billion annually in the United States, and the overwhelming majority of it is run by illegal operators. Less than $30 billion comes from the legal sector. This is an outrage.

Speaker Change: Let me give you a sense of the potential.

Speaker Change: The cannabis market is estimated at $105 billion annually in the United States.

Speaker Change: And the overwhelming majority of it is run by illegal operators.

James S. Hagedorn: Less than $30 billion comes from legal marijuana. This is an out. What has happened to this industry falls on the politicians and why. Their continued inaction on legalization and measures to support a major legal industry is a disservice to America.

Speaker Change: Less than 30 billion comes from the legal sector.

James S. Hagedorn: What has happened to this industry falls to the politicians in Washington. Their continued inaction on legalization and measures to support a major legal industry is a disservice to America. The cannabis industry is as large as the auto industry, the Dairy Industry, or the beer industry in the United States. It's five times bigger than the U.S. energy drink market and nine times the size of the U.S. egg industry. It's an economic engine.

Speaker Change: This is an outrage.

Speaker Change: What has happened to this industry falls on our politicians in Washington.

Speaker Change: Their continued inaction on legalization and measures to support a major legal industry is a disservice to Americans.

James S. Hagedorn: The cannabis industry is as large as the auto industry. The Darien, or the beer industry in the United States, five times bigger than the U.S. energy drink market and nine times the size of the U.S. egg. It's an economic engine. On top of this, Americans, Democrats, Republicans, and Independents favor legalization. In red states like ours, nearly 60% of voters approved of recreational cannabis last November. Today, 38 of the 50 states have legalized cannabis, covering three-quarters of the United States population. Yet cultivators and retailers who take the legal route struggle to make money or raise capital, and they face taxes as high as 80% and a lack of access to financial services.

Speaker Change: The cannabis industry is as large as the auto industry, the dairy industry or the beer industry in the United States, It's five times bigger than the U S energy drink market and nine times the size of the U S AG industry, it's an economic engine.

James S. Hagedorn: On top of this, Americans, Democrats, Republicans, and Independents favor legalization. In red states like ours, nearly 60% of voters approved of recreational cannabis last November. Today, 38 of the 50 states have legalized cannabis, covering three-quarters of the United States population. Yet cultivators and retailers who take the legal route struggle to make money or raise capital, and they face taxes as high as 80% and a lack of access to financial services. And consumers who shop at legal stores can be hit with product markups of 50 to 100% due to some state taxes. In what world does this make sense?

Speaker Change: On top of this Americans Democrats Republicans and independents favor legalization.

Speaker Change: And Red States like our Ohio, nearly 60% of voters approved a recreational cannabis last November.

Speaker Change: To date 38 of the 50 states have legalized cannabis covering three quarters of the United States population.

Speaker Change: Yet cultivators and retailers, who take the legal route struggled to make money or raise capital.

Speaker Change: And they faced taxes as high as 80% and a lack of access to financial services.

James S. Hagedorn: And consumers who shop at legal stores can be hit with product markups of 50 to 100% due to some state taxes. In what world does this make sense? The legal market cannot compete against illicit operators who don't honor or follow the same rules, and consumers across the country are the victims. It's time to level the playing field. I'm calling on federal officials to take immediate action on two proposals.

Speaker Change: And consumers, who shop at legal stores can be hit with product markets up 50% to 100% due to some state taxes.

Speaker Change: And what world does this make sense.

James S. Hagedorn: The legal market cannot compete against illicit operators who don't honor or follow the same rules, and consumers across the country are the victims. It's time to level the playing field. I'm calling on federal officials to take immediate action on two proposals. The first is the bipartisan-backed Safer Banking Act in the United States Senate. Senator Schumer needs to bring it to a vote, and Democrats and Republicans who are holding up passage need to vote with the people.

Speaker Change: The legal market cannot compete against illicit operators, who don't honor or follow the same rules.

Speaker Change: And consumers across the country are the victims.

Speaker Change: It's time to level, the playing field I am calling on federal officials to take immediate action on two proposals.

James S. Hagedorn: The second is cannabis rescheduling. Where does it make sense to have marijuana as a schedule one narcotic? The Drug Enforcement Agency is considering legalizing cannabis. This would lessen some penalties for cannabis and ease the tax burden. I call on President Biden to push forward rescheduling, and I call on former President Trump to stand with the majority of Americans supporting cannabis reform. I call on state officials, including New York Governor Hochul, to strictly enforce laws against illegal cannabis operators circumventing safety, preying on kids, and evading tax. Until progress is made on these multiple fronts, legally licensed cannabis companies will continue to scrape by or go under.

James S. Hagedorn: The first is the bipartisan-backed Safer Banking Act in the United States. Senator Schumer needs to bring it to a vote, and Democrats and Republicans who are holding up passage need to vote with the people. The second is cannabis rescheduling. Where does it make sense to have marijuana as a schedule one narcotic?

James S. Hagedorn: Take California, which is owed more than $700 million in state-backed cannabis taxes. Most of that will never be collected because 72% of the companies are out of business. As you can see, I, like many Americans, am tired of waiting on Washington to do the right thing.

Speaker Change: The first is the bipartisan back safer banking act in the United States Senate.

Speaker Change: Senator Schumer needs to bring it to a vote and Democrats and Republicans, who are holding up passage need to vote with the people.

Speaker Change: The second is cannabis rescheduling.

Speaker Change: Where does it make sense to have marijuana schedule one narcotic.

James S. Hagedorn: The Drug Enforcement Agency is considering, and I call on President Biden to push for rescheduling, and I call on former President Trump to stand with the majority of Americans supporting cannabis reform. I call on state officials, including New York Governor Hochul, to strictly enforce laws against illegal cannabis operators circumventing safety, preying on kids, and evading tax. Until progress is made on these multiple fronts, legally licensed cannabis companies will continue to scrape by or go under.

Speaker Change: The drug enforcement agency is considering this.

Speaker Change: This would lessen some penalties for cannabis and ease the tax burden.

Speaker Change: I call on President Biden to push forth rescheduling and I call. It former president Trump to stand with the majority of Americans supporting cannabis reform.

Speaker Change: I call on state officials, including New York Governor Holdco to strictly enforce laws against illegal cannabis operators circumventing safety preying on kids and evading taxes.

Speaker Change: Until progress is made on these multiple fronts legally licensed cannabis companies will continue to scrape by or go under.

James S. Hagedorn: Take California, which is owed more than $700 million in state-backed cannabis. Most of that will never be collected because 72% of the companies are out of business. As you can see, I, like many Americans, am tired of waiting on Washington to do the right thing.

Speaker Change: Take California, which is owed more than $700 million in state backed cannabis taxes.

Speaker Change: Most of that will never be collected because 72% of the companies are out of business.

Speaker Change: As you can see I like many Americans I'm tired of waiting on Washington to do the right thing we need action now.

James S. Hagedorn: We need action now. I also want to provide an update on our 2021 investment in Riv Capital, a New York cultivator and retail operator that is unlocking value in the cannabis space. Riv recently opened a flagship adult-use dispenser in White Plains that is far exceeding our expectations. It's also expanded its Chestertown growing operation and is building a new cultivation facility in Buffalo that will double its footprint.

James S. Hagedorn: We need action now. I also want to provide an update on our 2021 investment in RIVCAP, the New York cultivator and retail operator that is unlocking value. Riv recently opened a flagship adult-use dispenser in White Plains that is far exceeding our expectations. It's also expanded its Chestertown growing operation and is building a new cultivation facility in Buffalo that will double. What's even more exciting is Riz's potential combination with another candidate.

Speaker Change: I also wanted to provide an update on our 2021 investment and risk capital The New York Cultivator and retail operator that is unlocking value in the cannabis space.

Speaker Change: Recently opened a flagship adult use dispensary in white plains that is far exceeding our expectations.

Speaker Change: It has also expanded its chestertown growing operation and is building a new cultivation facility in Buffalo that will double its footprint.

James S. Hagedorn: What's even more exciting is Riz's potential combination with another cannabis company. While I cannot discuss the details, a deal is in the works. When completed, this business combination would be a transformative moment in our long-term investment strategy in this space. It would reflect movement toward what we intended to do, to invest in and help build a multi-state cultivation and retail powerhouse providing the best cannabis brand. The combined entity would have cultivation and dispensary operations in the most populous states with limited licenses for legalized medicinal or adult use.

Speaker Change: What's even more exciting as risk potential combination with another cannabis company.

James S. Hagedorn: While I cannot discuss the details, a deal is in the works. When completed, this business combination would be a transformative moment in our long-term investment strategy. It would reflect movement toward what we intended, to invest in and help build a multistate cultivation and retail powerhouse providing the best can. The combined entity would have cultivation and dispensary operations in the most populous states with limited licenses for legalized medical, adult use, or As part of this transaction, we anticipate the convertible note that we now have with Rib to convert to exchangeable shares in the combined business. I'll wrap it up with this.

Speaker Change: While I cannot discuss the details of deal is in the works.

Speaker Change: When completed this business combination would be a transformative moment in our long term investment strategy in this space.

Speaker Change: It would reflect movement toward what we intended with rib to invest in and help build a multistate cultivation and retail powerhouse, providing the best cannabis brands.

Speaker Change: The combined entity would have cultivation and dispensary operations in the most populous states with limited licenses for legalized medical adult use are both as part of this transaction. We anticipate the convertible note that we now have with rib to convert to exchangeable shares in the combined business.

James S. Hagedorn: As part of this transaction, we anticipate the convertible note that we now have with RIB to convert to exchangeable shares in the combined business. I'll wrap up with this: We've stabilized and improved the financial flexibility of Scotts Miracle-Gro. Our difficult work over the last 18 months will benefit this company for the next 10 years. We're no longer managing through crises.

Speaker Change: I'll wrap up with this.

James S. Hagedorn: We've stabilized and improved the financial flexibility of Scotts. Our difficult work over the last 18 months will benefit this company for the next 10. We're no longer managing through crises. Looking to the future, Chris is leading a very exciting effort to recover our investments in the cannabis space and create long-term... Nate and Matt have been here for a year or more now, and they have a much better handle on where the business should be headed.

Speaker Change: We stabilized and improved the financial flexibility of Scotts Miracle Gro.

Speaker Change: Our difficult work over the last 18 months will benefit this company for the next 10 years.

Speaker Change: We're no longer managing through crisis.

James S. Hagedorn: Looking to the future again, Chris is leading a very exciting effort to recover our investments in the cannabis space and create long-term value. Nate and Matt have been here for a year or more now, and they have a much better handle on where the business should be headed for growth. Matt is developing a long-range financial and strategic plan, and Nate is building a multi-year consumer plan that includes investments in technology, disruptive innovation, and other value drivers.

Speaker Change: Looking at the future again.

Speaker Change: Chris is leading a very exciting effort to recover our investments in the cannabis space and create long term value.

Speaker Change: Nate and Matt had been here for a year or more now and they have a much better handle on where the business should be headed for growth.

James S. Hagedorn: Matt is developing a long-range financial and strategic plan, and Nate is building a multi-year consumer plan that includes investments in technology, disruptive innovation, and other value-derived activities. The Board of Directors has received an early preview of their plans, which will be fully baked by late. We should be ready to share them with you in the fall. I'm excited about their work and their contribution. I want to thank their teams for supporting me. Finally, we're holding an Analyst Day in July at our Marysville plant, where you can get an up-close view of how we're positioning Scotts Miracle-Gro. I look forward to seeing you.

Speaker Change: Matt is developing a long range financial and strategic plan and Natus building, a multi year consumer plan that includes investments in technology disruptive innovation and other value drivers.

James S. Hagedorn: The Board of Directors has received an early preview of their plans, which will be fully baked by late summer. We should be ready to share them with you in the fall. I'm excited about their work and their contribution, and I want to thank their teams for supporting these efforts. Finally, we're holding an Analyst Day in July at our Marysville headquarters, where you can get an up-close view of how we're positioning Scotts Miracle-Gro for the future. I look forward to seeing you then. I'll turn the call over to Matt for finance.

Speaker Change: The board of Directors has received an early preview of their plans, which will be fully baked by late summer, we should be ready to share them with you in the fall.

Speaker Change: I'm excited for their work and their contributions.

Speaker Change: I wanted to thank their teams for supporting these efforts Phi.

Speaker Change: Finally, we're holding an analyst day in July at our Murrysville headquarters, where you can get an up close view of how we are positioning Scotts miracle Gro for the future.

Matthew E. Garth: Thanks. I'll turn the call over to Matt for now. Thanks, Jim. And hello, everyone.

Speaker Change: I look forward to seeing you then thanks.

Speaker Change: I'll turn the call over to Matt for financials.

Matthew E. Garth: Thanks, Jim. And hello, everyone.

Matthew E. Garth: Thanks, Jim and Hello, everyone.

Matthew E. Garth: For those joining us on video, you can see Spring has arrived at Scotts Miracle-Gro headquarters. Hopefully, you are enjoying the early season with great deals on SMG products and the associated mental and physical health benefits of returning to the yard and creating a fantastic lawn and garden. I'm going to begin by reiterating a few points Jim made.

Matthew E. Garth: For those joining us on video, you can see Spring has arrived at Scotts Miracle-Gro Headquarters. Hopefully, you are enjoying the early season with great deals on SMG products and the associated mental and physical health benefits of returning to the yard and creating a fantastic lawn and garden. I'm going to begin by reiterating a few points Jim made. First, we are pleased with the first half performance. Second, our guidance for the full year is unchanged.

Matthew E. Garth: For those joining us on video you can see spring has arrived at Scotts Miracle Gro headquarters.

Matthew E. Garth: Hopefully you're enjoying the early season with great deals on SMT products, and the associated mental and physical health benefits of returning to the yard and creating a fantastic lawn and garden.

Matthew E. Garth: I'm going to begin by reiterating a few points. Jim made first we are pleased with our first half performance second our guidance for the full year is unchanged and third we continue to manage what is in our control to drive consumer engagement and deliver our planned results.

Matthew E. Garth: First, we are pleased with the first half performance. Second, our guidance for the full year is unchanged. Third, we continue to manage what is in our control to drive consumer engagement and deliver our planned results. From a net leverage perspective, we ended the quarter at 6.95 times versus the covenant maximum of 7.75 times and remain on track to achieve net leverage in the fours by fiscal year end, giving us much improved financial flexibility heading into 25 and beyond. U.S. consumer results were strong, with overall unit share through Q2 increasing in line with our plan. We experienced particular strength in growing media on early market home center promotion.

Matthew E. Garth: Third, we continue to manage what is in our control to drive consumer engagement and deliver our planned results. From a net leverage perspective, we ended the quarter at 6.95 times versus the covenant maximum of 7.75, and we remain on track to achieve net leverage in the fours by fiscal year-end, giving us much improved financial flexibility heading into 25 and beyond. U.S. consumer results were strong, with overall unit share through Q2 increasing in line with our plan.

Matthew E. Garth: From a net leverage perspective, we ended the quarter at $6 95 times versus the covenant maximum of 775 times and remain on track to achieve net leverage in the fours by fiscal year end, giving us much improved financial flexibility heading into 'twenty five and beyond.

Matthew E. Garth: U S. Consumer results were strong with overall unit share through Q2, increasing in line with our plan.

Matthew E. Garth: We experienced particular strength and growing media on early market home center and promotions.

Matthew E. Garth: At Hawthorne, we continue to optimize the business to focus on our signature proprietary brand. Our recently announced distribution partnership with BFG is a major milestone along our strategic path. Let's walk through the second quarter in more detail.

Matthew E. Garth: At Hawthorne, we continue to optimize the business to focus on our signature proprietary brand. Our recently announced distribution partnership with BFG is a major milestone along our strategic path. Let's walk through the second quarter in more detail.

Matthew E. Garth: At Hawthorne, we continue to optimize the business to focus on our signature proprietary brands are.

Matthew E. Garth: Our recently announced a distribution partnership with PFG is a major milestone along Hawthorne strategic path.

Matthew E. Garth: Now.

Matthew E. Garth: Let's walk through the second quarter in more detail.

Matthew E. Garth: Listing gains and strong early season engagement and growing media drove U.S. consumer second quarter net sales up 2% over last year to $1.38 billion, tying our second quarter record with 2022, with outstanding retail partnerships and execution by our team. U.S. consumer net sales for the first half were stronger than planned and just 2% lower than last year at $1.69 billion. The first half net sales decline largely reflects our planned shipments phasing, which has returned to a more traditional pre-COVID cadence in alignment with our retail. Seasonal Readiness in Stores: The strong first half shipments and new listings in growing media drove retailer inventory units 3% higher than last year as of the end of March.

Matthew E. Garth: Listing gains and strong early season engagement and growing media drove U.S. consumer second quarter net sales up 2% over last year, to $1.38 billion, tying our second quarter record. 2022, with outstanding retail partnerships and execution by our team. U.S. consumer net sales for the first half were stronger than planned and just 2% lower than the prior year at $1.69 billion.

Matthew E. Garth: Listing gains and strong early season engagement and growing media drove U S. Consumer second quarter net sales up 2% over last year to $138 billion, tying our second quarter record with 2022.

Matthew E. Garth: With outstanding retail partnerships and execution by our teams U S. Consumer net sales for the first half were stronger than planned and in just 2% lower than prior year at $169 billion.

Matthew E. Garth: First Half Net Sales Decline Largely Reflects Our Planned Shipments Phase, which has returned to a more traditional pre-COVID cadence in alignment with our Seasonal Readiness in Stores. Strong first half shipments and new listings and growing media drove retailer inventory units 3% higher than last year as of the end of March, and as Jim discussed. Exited March with Unit POS up mid-teens percentage, along with gaining four points of unit share led by Mulch and Rodentis. Through April, POS units were up high single-digit percentages, with dollar POS up a low single-digit percentage, reflective of price reductions and early season mix favoring growing media.

Matthew E. Garth: The first half net sales declined largely reflects our planned shipments phasing, which has returned to a more traditional pre COVID-19 cadence and alignment with our retailers.

Matthew E. Garth: Seasonal readiness in stores is excellent the <unk>.

Matthew E. Garth: Strong first half shipments and new listings and growing media drove retailer inventory units, 3% higher than last year as of the end of March.

Matthew E. Garth: And as Jim discussed, we exited March with unit POS up mid-teens percentages along with gaining four points of unit share led by mulch and rodenticide. Through April, POS units were up high single-digit percentages, with dollar POS up low single-digits, reflective of price reductions and early season mix favoring growing media. Jim stated that Q3 is a critical quarter as it represents 60% of our season. With the heart of lawn season in front of us, and the majority of our new promos yet to run, our high single-digit net sales guidance for the U.S. consumer businesses remains in sight. At Hawthorne, we are meeting the continued industry challenges head-on by taking aggressive action to modify our go-to-market approach.

Matthew E. Garth: And as Jim discussed, we exited March with unit Pos up mid teens percentages, along with gaining four points of unit share led by mulch and Rodenticides.

Matthew E. Garth: Through April.

Matthew E. Garth: POS units were up high single digit percentages with dollar Pos up low single digits reflective of price reductions and early season mix favoring growing media.

Matthew E. Garth: Jim stated that Q3 is a critical quarter as it represents 60% of our, With the heart of lawn season in front of us and the majority of our new promos yet to run, our high single-digit net sales guidance for the U.S. consumer businesses remains in sight. At Hawthorne, we are meeting the continued industry challenges head on by taking aggressive action to modify our go-to-market approach while moving away from distributed products. Margins will improve with our focus on our proprietary and industry-leading brands, as well as the cost savings from shrinking our distribution network. Hawthorne Q2 net sales of $66 million were 28% lower than the prior year; Unidate Net Sales were $147 million, a decrease of $78 million, or 35% versus the prior year.

Matthew E. Garth: Jim stated that Q3 is a critical quarter as it represents 60% of our season.

Matthew E. Garth: With the heart of lawn season in front of Us and the majority of our new promos yet to run our high single digit net sales guidance for the U S. Consumer business is remains inside.

Matthew E. Garth: At Hawthorne, we're meeting the continued industry challenges head on by taking aggressive action to modify our go to market approach.

Matthew E. Garth: While moving away from distributed products, we'll lower Tall Thorns' top line. However, margins will improve with our focus on our proprietary and industry-leading brands, as well as the cost savings from shrinking our distribution network. Hawthorne Q2 net sales of $66 million were 28% lower than the prior year. Unidate net sales were $147 million, a decrease of $78 million, or 35% versus the prior year. The declines are driven by lower volumes and price reductions.

Matthew E. Garth: While moving away from distributor products will lower telephones topline margins will improve with our focus on our proprietary and industry, leading brands as well as the cost savings from shrinking our distribution network.

Matthew E. Garth: Hawthorne Q2, net sales of $66 million were 28% lower than prior year.

Matthew E. Garth: Year to date net sales were $147 million, a decrease of $78 million or 35% versus prior year.

Matthew E. Garth: Clients are driven by lower volumes and price reductions. Full year, we now expect Hawthorne's net sales to decline 25 to 30 percent year over year based on the discontinuation of the distributed brands and the challenging near-term industry outlook. Hawthorne's segment loss for the quarter was $3 million compared to a $17 million loss a year ago.

Matthew E. Garth: The declines were driven by lower volumes and price reductions.

Matthew E. Garth: For the full year, we now expect Hawthorne's net sales to decline 25-30% year-over-year based on the discontinuation of the distributed brands and the challenging near-term industry outlook. Hawthorne's segment loss for the quarter was $3 million compared to a $17 million loss a year ago. Year-to-date segment loss through March was $13 million, compared to $33 million for the first half of last year. The improvement was driven by favorable product mix and reductions to warehousing costs, headcount, and project spend, partially offset by lower sales volume and pricing reductions.

Matthew E. Garth: For the full year, we now expect hawthorne's net sales to decline, 25% to 30% year over year based on the discontinuation of the distributed brands and the challenging near term industry outlook.

Matthew E. Garth: Hawthorne segment loss for the quarter was $3 million compared to a $17 million loss a year ago.

Matthew E. Garth: Year-to-date segment loss through March was $13 million, compared to $33 million for the first half of last year. The improvement was driven by favorable product mix and reductions to warehousing costs, headcount, and project spend, partially offset by lower sales volume and pricing reductions. Further improvements are expected in the back half, and we are projecting Hawthorne's contribution to total company-adjusted EBITDA to be break-even or better for the full year, inclusive of investments in sales, marketing, and innovation, which will drive profitable growth in fiscal 2025 and beyond.

Matthew E. Garth: Year to date segment loss through March was $13 million compared to $33 million for the first half last year.

Matthew E. Garth: The improvement was driven by favorable product mix and reductions to warehousing costs head count and project spend partially offset by lower sales volume and pricing reductions.

Matthew E. Garth: Further improvements are expected in the back half of the year, and we are projecting Hawthorne's contribution to total company-adjusted EBITDA to be break-even or better for the full year, inclusive of investments in sales, marketing, and innovation, to drive profitable growth in fiscal 2025 and beyond. Total company impairment, restructuring, and other charges for Q2 were $77 million. The charges are mostly from non-cash inventory-related write-downs of $67 million related to the incremental contraction of the Hawthorne Warehouse footprint. On a year-to-date basis, IRO charges were $64 million.

Matthew E. Garth: Further improvements are expected in the back half of the year and we are projecting hawthorne's contribution to total company adjusted EBITDA to be breakeven or better for the full year inclusive of investments in sales marketing and innovation to drive profitable growth in fiscal 2025 and beyond.

Matthew E. Garth: Total company impairment, restructuring, and other charges for Q2 were $77 million. Charges are mostly from non-cash, inventory-related write-downs of $67 million related to the incremental contraction of the Hawthorne Warehouse footprint. On a year-to-date basis, IRO charges were $64 million.

Matthew E. Garth: Total company impairment restructuring and other charges for Q2 were $77 million.

Matthew E. Garth: <unk> are mostly from non cash inventory related write downs of $67 million related to the incremental contraction of the Hawthorne warehouse footprint.

Matthew E. Garth: On a year to date basis, Aro charges were $64 million.

Matthew E. Garth: Note that these charges are excluded from non-GAAP income. Now, let's move to gross margin and cost of goods sold for the total company. The Adjusted Gross Margin Rate improved 60 basis points in the quarter to 35.3% versus 2Q a year ago, driven mainly by Project Springboard-related distribution cost savings. Material cost favorability in the second quarter was more than offset by unfavorable net pricing and higher manufacturing labor costs.

Matthew E. Garth: Note that these charges are excluded from non-GAAP. Now let's move to gross margin and cost of goods sold for the total company. The Adjusted Gross Margin Rate improved 60 basis points in the quarter to 35.3 percent versus 2Q a year ago, driven mainly by Project Springboard-related distribution costs. Material cost favorability in the second quarter was more than offset by unfavorable net pricing and higher manufacturing labor. Through the first half, the adjusted gross margin rate declined approximately 30 basis points with distribution cost savings and favorable segment mix more than offset by negative net pricing and fixed cost dele Material costs were essentially flat year-to-date.

Matthew E. Garth: Note that these charges are excluded from non-GAAP income.

Matthew E. Garth: Now, let's move to gross margin and cost of goods sold for the total company.

Matthew E. Garth: The adjusted gross margin rate improved 60 basis points in the quarter to 35, 3% versus <unk> <unk>, a year ago, driven mainly by project springboard related distribution cost savings.

Matthew E. Garth: Material cost favorability in the second quarter was more than offset by unfavorable net pricing and higher manufacturing labor costs.

Matthew E. Garth: Through the first half, the adjusted gross margin rate declined approximately 30 basis points, with distribution cost savings and favorable segment mix more than offset by negative net pricing and fixed cost deleverage from lower volume. Material costs were essentially flat year to date. With nearly 85% of our commodity inputs now locked, as is typical at this point in the year, we have a reasonable line of sight to our full year cost. Other than rising resin and labor costs, we're seeing favorable trends across our commodity basket heading into the back half of the year. Headwinds from resin prices are expected to continue into fiscal 2025.

Matthew E. Garth: Through the first half the adjusted gross margin rate declined approximately 30 basis points with distribution cost savings and favorable segment mix more than offset by negative net pricing and fixed cost deleverage from lower volumes.

Matthew E. Garth: Material costs were essentially flat year to date.

Matthew E. Garth: With nearly 85% of our commodity inputs now locked, as is typical at this point in the year, we have a reasonable line of sight to our full-year cost. Other than rising resin and labor costs, we're seeing favorable trends across our commodity basket heading into the back half of the year. Headwinds from resin prices are expected to continue into fiscal 2025.

Matthew E. Garth: With nearly 85% of our commodity inputs now locked as is typical at this point in the year, we have reasonable line of sight to our full year costs other than rising RASM and labor costs, we're seeing favorable trends across our commodity basket heading into the back half of the year.

Matthew E. Garth: Headwinds from resin prices are expected to continue into fiscal 2025.

Matthew E. Garth: SG&A ended the first half nearly $22 million favorable to the first half last year. As a percentage of net sales, SG&A improved to 15.2% from 15.3% last year and 16% two years ago. Our savings are inclusive of more than $11 million of reinvestments in media year-to-date and reflect the durability of our Project Springboard savings from headcount reduction. Amortization expense declined by $3 million, or 39% in Q2-24 compared to Q2-23, and by $6 million, or 44% on a year-to-date basis due to the impairment of Hawthorne intangible assets recorded in FY23.

Matthew E. Garth: SG&A ended the first half nearly $22 million favorable to the first half last year. As a percentage of net sales, SG&A improved to 15.2% from 15.3% last year. 16% two years ago. Savings are inclusive of more than $11 million of reinvestments in media year-to-date and reflect the durability of our Project Springboard savings from headcount reduction. Amortization expense declined by $3 million or 39% in Q2-24 compared to Q2-23 and by $6 million or 44% on a year-to-date basis due to the impairment of Hawthorne's intangible assets recorded in fiscal year 23.

Matthew E. Garth: SG&A ended the first half nearly $22 million favorable to the first half last year.

Matthew E. Garth: As a percentage of net sales SG&A improved to 15, 2% from 15, 3% last year and 16% two years ago.

Matthew E. Garth: The savings are inclusive of more than $11 million of Reinvestments and media year to date and reflect the durability of our project springboard savings from head count reduction.

Matthew E. Garth: Amortization expense declined by $3 million or 39% in Q2, 24, compared to Q2, 'twenty, three and by $6 million or 44% on a year to date basis due to the impairment of Hawthorne intangible assets recorded in fiscal year 'twenty three.

Matthew E. Garth: We maintain our goal of annual SG&A between 15% and 16% of net sales going forward and note that fiscal 24 will be at the lower end of the range. Non-GAAP adjusted EBITDA for Q2 was $396 million, compared to the prior year's $405 million. On a year-to-date basis, non-GAAP-adjusted EBITDA was $371 million versus $426 million in the prior year. The year-to-date decline in non-GAAP-adjusted EBITDA was driven by a decline in non-GAAP gross margin dollars, primarily due to declines in volume and price.

Matthew E. Garth: We maintain our goal of annual SG&A between 15 and 16 percent of net sales going forward and note that fiscal 24 will be at the lower end of the range. Non-GAAP-adjusted EBITDA for Q2 was $396 million, compared to the prior year's $405 million.

Matthew E. Garth: We maintain our goal of annual SG&A between 15, and 16% of net sales going forward and note that fiscal 'twenty four will be at the lower end of the range.

Matthew E. Garth: non-GAAP adjusted EBITDA for Q2 was $396 million compared to the prior year's $405 million.

Matthew E. Garth: On a year-to-date basis, non-GAAP-adjusted EBITDA was $371 million versus $426 million in the prior year. The year-to-date decline in non-GAAP-adjusted EBITDA was driven by a decline in non-GAAP gross margin dollars, primarily due to declines in volume and price. Below operating income, our first half results include a $19 million adjusted loss from the Bonny J. V. Primarily Attributable to Increased Consumer Engagement and Improvement in Store, Year-to-date sales through March represent just 20% of Bonnie's projected full year sales. Also note that Bonnie's fiscal year ends July 31st. UterDate's interest expense through March was $4 million lower than through the first half of last year.

Matthew E. Garth: On a year to date basis, non-GAAP, adjusted EBITDA was $371 million versus prior year of $426 million.

Matthew E. Garth: The year to date decline in non-GAAP adjusted EBITDA was driven by the decline in non-GAAP gross margin dollars primarily due.

Matthew E. Garth: Due to declines in volume and price.

Matthew E. Garth: Below operating income, our first half results include a $19 million adjusted loss from the Bonnie JV, equivalent to the adjusted loss from the JV for the same period a year ago. Through March this year, Bonnie sales improved 12% versus last year, primarily attributable to increased consumer engagement and improvement in store execution. However, year-to-date sales through March represent just 20% of Bonnie's projected full year sales.

Matthew E. Garth: Below operating income our first half results include a $19 million adjusted loss from the Bonnie JV equivalent to the adjusted loss from the JV for the same period a year ago through March this year, Bonnie sales improved 12% versus last year, primarily attributable to increased consumer engagement and improvement in.

Matthew E. Garth: Store execution.

Matthew E. Garth: Year to date sales through March represent just 20% of bonnie's projected full year sales.

Matthew E. Garth: Also note that Bonnie's fiscal year ends July 31st. UterDate's interest expense through March was $4 million lower than through the first half of last year. A 5% reduction, driven by significantly lower debt levels, which were partially offset by higher average borrowing rates. As of the end of March, total debt balances were $2.8 billion versus $3.6 billion last year. Utilization of the Accounts Receivable Program contributed $587 million net of discount to the debt pay down.

Matthew E. Garth: Also note that bonnie's fiscal year ends July 31.

Matthew E. Garth: Year to date interest expense through March was $4 million lower than through the first half last year, a 5% reduction driven by significantly lower debt levels, which were partially offset by higher average borrowing rates.

Matthew E. Garth: A 5% reduction driven by significantly lowered debt levels, which were partially offset by higher average barring. As of the end of March, total debt balances were $2.8 billion versus $3.6 billion last year. Utilization of the Accounts Receivable Program contributed $587 million net of discount to the debt pay down. Strong Second Quarter Free Cash Flow Generation Delivered the Balance of the Empire Year-to-date usage of free cash flow improved by over $500 million year-over-year driven by working capital reduction, further inventory improvements, leveraging the AR Sail Facility, and AP Timers. For the full year, interest expense is expected to remain flat as the benefit of lower net debt is offset by higher interest.

Matthew E. Garth: As of the end of March total debt balances were $2 8 billion.

Matthew E. Garth: Versus $3 $6 billion last year.

Matthew E. Garth: Utilization of the accounts receivable program contributed $587 million net of discount to the debt paydown.

Matthew E. Garth: Strong second-quarter free cash flow generation delivered the balance of the improvement. Year-to-date usage of free cash flow improved by over $500 million year-over-year driven by working capital reductions from further inventory improvements leveraging the AR sale facility and AP timing. For the full year, interest expense is expected to remain flat as the benefit of lower net debt is offset by higher interest rates.

Matthew E. Garth: Strong second quarter free cash flow generation delivered the balance of the improvement.

Matthew E. Garth: Year to date usage of free cash flow improved by over $500 million year over year, driven by working capital reductions from further inventory improvements leveraging the AAR sale facility and timing.

Matthew E. Garth: For the full year interest expense is expected to remain flat as the benefit of lower net debt is offset by higher interest rates.

Matthew E. Garth: Interest rates were approximately 80% fixed as of the end of the second quarter under a combination of long-term fixed rate notes and interest rate swap agreements. Discount cost associated with the AR sale facility is included in other income and expense and was $13 million through Q2. Our adjusted tax rate through the second quarter was 28.6% versus 26.4% for the same period last year.

Matthew E. Garth: Interest rates were approximately 80% fixed as of the end of the second quarter under a combination of a long-term fixed rate and an Interest Rate Swap Agreement. Discount cost associated with the AR sale facility is included in other income and expense and was $13 million through Q2. Our adjusted tax rate through the second quarter was 28.6% versus 26.4% for the same period last year. The primary driver of the increase relates to less benefit from stock-based compensation that vested during Q2 and the unfavorable impact of higher non-deductible executive compensation.

Matthew E. Garth: Rates are approximately 80% fixed as of the end of the second quarter under a combination of long term fixed rate notes and interest rate swap agreements.

Matthew E. Garth: Discount cost associated with the AAR sale facility is included in other income and expense and was $13 million through Q2.

Matthew E. Garth: Our adjusted tax rate through the second quarter was 28, 6% versus 26, 4% for the same period last year.

Matthew E. Garth: The primary driver of the increase relates to less benefit from stock-based compensation that vested during Q2 and the unfavorable impact of higher non-deductible executive compensation expense. Share count at the end of the quarter was up by 1.2 million shares versus 2023 due to higher share base payment. ShareCount is tracking to our guidance of an additional 1.5 million shares issued by fiscal year-end. With the first half complete, we are focused on delivering a strong second half performance.

Matthew E. Garth: The primary driver of the increase relates to less benefit from stock based compensation vested during Q2.

Matthew E. Garth: And the unfavorable impact of higher nondeductible executive compensation expense.

Matthew E. Garth: Share count at the end of the quarter was up by 1.2 million shares versus 2023 due to higher share base payment. Share count is tracking to our guidance of an additional 1.5 million shares issued by Fiscal Year-End. With the first half complete, we are focused on delivering a strong second half performance. This year, we're returning to William Blair's 44th Annual Growth Stock Conference in Chicago, where we will share our thoughts on the prospects of SMG and provide an update to our 2024 guidance and outlook that is informed by POS performance in. Lastly, as Jim stated, we will host an Analyst Day on July 16th at our Marysville, Ohio, Headquarters and Research Center Our agenda for the day will include opportunities to meet the new management team and experience our new product innovation firsthand.

Matthew E. Garth: Share count at the end of the quarter was up by one 2 million shares versus 2023 due to higher share based payments.

Matthew E. Garth: Share count is tracking to our guidance of an additional one 5 million shares issued by fiscal year end.

Matthew E. Garth: With the first half complete we are focused on delivering a strong second half performance. This year. We are returning to William Blair's 44th annual growth stock conference in Chicago, where we will share our thoughts on the prospects of SMG and provide an update to our 2020 for guidance and outlook that is informed by Pos perform.

Matthew E. Garth: This year, we are returning to William Blair's 44th Annual Growth Stock Conference in Chicago, where we will share our thoughts on the prospects of SMG and provide an update to our 2024 guidance and outlook that is informed by POS performance in May. Lastly, as Jim stated, we will host an Analyst Day on July 16th at our Marysville, Ohio, headquarters and research center. Our agenda for the day will include opportunities to meet the new management team and experience our new product innovation firsthand.

Matthew E. Garth: And lastly, as Jim stated, we will host an analyst day on July 16th at our Marysville, Ohio Headquarters and Research Center.

Matthew E. Garth: Agenda for the day will include opportunities to meet the new management team and experience of our new product innovation firsthand.

Matthew E. Garth: We look forward to sharing more on our longer-term outlook and strategic objectives as we strengthen financial flexibility and our ability to drive shareholder returns. Details will be provided in an upcoming press release and invitation. Now, we can move on to the Q&A.

Matthew E. Garth: We look forward to sharing more on our longer-term outlook and strategic objectives as we strengthen financial flexibility and our ability to drive shareholder return. Details will be provided in an upcoming press release and invitation. We can now move on to the Q&A. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced.

Matthew E. Garth: We look forward to sharing more on our longer term outlook and strategic objectives, as we strengthened financial flexibility and our ability to drive shareholder returns details will be provided in an upcoming press release and invitation.

Speaker Change: We can now move on to the Q&A.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Also, please note, we're only allowing one question per caller. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jon Andersen, at William & Glare. Your line is now open.

Speaker Change: Thank you at this time, we will conduct a question answer session.

Matthew E. Garth: As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Matthew E. Garth: So please note we're only allowing one question per caller, please standby, while the composite Q&A roster.

Matthew E. Garth: Yes.

Operator: To withdraw your question, please press star 1 again. Also, please note, we're only allowing one question per caller. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jon Andersen. William and Blair, your line is now open. Hey, good morning.

Matthew E. Garth: Our first question comes from the line of Jon Andersen.

Jon Robert Andersen: William Blair. Your line is now open.

Jon Robert Andersen: Thanks, everybody, for the question. My question is about kind of consumer engagement and point of sale. It sounds like April started, you know, perhaps slower than you had hoped, but it picked up as the month progressed.

Jon Robert Andersen: Hey, good morning. Thanks, everybody, for the questions.

Jon Robert Andersen: Hey, good morning, Thanks to everybody for the question.

Jon Robert Andersen: My question is about some kind of consumer engagement and point of sale. It sounds like April started, you know, perhaps slower than you had hoped, but it picked up as the month progressed. But kind of in aggregate, it was diluted to the point of sale year to date. What gives you conviction at this point in time to kind of hold your view for, you know, upper single digit sales growth across the US consumer business?

Jon Robert Andersen: My question is on kind of consumer engagement and point of sale.

Jon Robert Andersen: It sounds like April started.

Jon Robert Andersen: Perhaps slower than you had hoped but it came on as the month progressed.

William Blair: But kind of in aggregate was dilutive to the point of sale year to date, what kind of gives you conviction at this point in time to kind of hold your your view for.

Nate Baxter: But kind of in aggregate, it was diluted to the point of sale year to date. What gives you conviction at this point in time to kind of hold your view for, you know, upper single digit sales growth across the US consumer business? Again, I'm thinking, you know, first half here, the US consumer is kind of down low single digits, which will require, you know, a nice pickup in the second half of the fiscal year.

William Blair: Upper single digit sales growth across the U S consumer business again, I'm thinking Youll first half your U S. Consumer is kind of down low single digits.

Jon Robert Andersen: Again, I'm thinking, you know, first half here, US consumer is kind of down low single digits, which will require, you know, a nice pickup in the second half of the fiscal. So, kind of, if you can talk a little bit about that, whether it's promotional plans or, you know, shipment timing, weather forecast, just your level of visibility and kind of conviction at this point in time. Thanks.

William Blair: Each will require a nice pickup in the second half of the fiscal.

Nate Baxter: So, kind of, if you could talk a little bit about that, whether it's promotional plans or, you know, shipment timing, weather forecast, just your level of visibility and kind of conviction at this point in time. Thanks. Sure, this is Nate.

Speaker Change: So kind of if you could talk a little bit about that whether it's.

Speaker Change: Promotional plans or.

Speaker Change: Yeah.

Jon Robert Andersen: Shipment timing.

Jon Robert Andersen: Weather forecast just just your level of visibility kind of conviction at this point in time. Thanks.

Nate Baxter: Sure. This is Nate.

Nate Baxter: I'll start with this. So you're right, April was a little bit of a story about going in like a lamb and coming out like a lion. But I will note that at the end of April, we had both our biggest POS as well as shipment week on record. Heading into May, that continues to be strong. You're not wrong, we have to look at significant growth. But when we look at our models, we've got most of our promotional work ahead of us.

Jon Robert Andersen: Sure. This is Nate I'll start with there. So youre right April was a little bit of a story of an like Atlanta like aligned but I will note that at the end of April we had both our biggest Pos as well as shipment week on record.

Nate Baxter: I'll start with this. So you're right. April was a little bit of a story of "in like a lamb, out like a lion." But I will note that at the end of April, we had both our biggest POS as well as shipment week on record. Heading into May, that continues to be strong. You're not wrong.

Nate Baxter: Heading into May that continues to be strong youre not wrong, we have to look at significant growth, but when we look at our models we have.

Nate Baxter: We have to look at significant growth. But when we look at our models, we've got most of our promotions ahead of us. We've got strong consumer sentiment, and we've got weather in our favor. So that's pretty much in a nutshell why we're maintaining our cautious approach.

Nate Baxter: We've got strong consumer sentiment, and we have the weather in our favor. So that's pretty much in a nutshell why we're maintaining our caution. You know, I'd start this gym here.

Nate Baxter: Got most of our promos ahead of US we've got strong consumer sentiment and we've got weather in our favor. So that's pretty much in a nutshell why we're maintaining our cautious optimism there.

James S. Hagedorn: You know, I'd start this gym here. For those of us who live in the sort of northeast, you know, let's, let's, I'll just back up to Ohio, Ohio, I would say spring is kind of full on right now. Everything is blooming. It's sort of pretty perfect out here. You know, as someone who lives on the East Coast, I'd say we're probably two weeks behind there. And that minimum is called a quarter of the market.

Jon Robert Andersen: Yes.

Jon Robert Andersen: I start it's Jim here.

James S. Hagedorn: For those of us who live in the sort of northeast, you know, let's, let's go back to Ohio, Ohio. I would say spring is kind of full on right now. Everything is blooming. It's sort of pretty perfect out here.

James S. Hagedorn: For those of US who live in northeast.

Jon Robert Andersen: Northeast.

James S. Hagedorn: I'll just back up to Ohio, Ohio, I would say the spring is kind of full on right now.

Jon Robert Andersen: Everything is blooming, it's sort of pretty perfect out here.

James S. Hagedorn: So the reason, Jon, that I feel comfortable about it is that if you look at the regions, besides the Northeast, and remember, you have an Easter change that kind of affected the early part of April, and Promotions with Retailers, I think, as I said in the scripted part. We pushed those later to sort of avoid the risk, because the concern, and I've talked about this for a couple years, is that, You know, when we try to get out there really early in the month, that's just the risk of bad weather.

James S. Hagedorn: You know, as someone who lives on the East Coast, I'd say we're probably, www.youtube.com.au and Promotions with Retailers, I think, as I said in the scripted part. We push those later to sort of avoid the risk because, you know, the concern that I've talked about this for a couple years is that, You know, when we try to get out there really early in the month, just the risk of bad weather. And you know I think I've said the numbers, you know, like 80% of the time we were in Cold Weather.

Speaker Change: As someone who lives on the East Coast I'd say, we're probably two weeks behind there.

Speaker Change: That minimum is call it a quarter of the market. So the reason John and I feel comfortable about it is if you look at the regions.

Jon Robert Andersen: <unk> the northeast.

Jon Robert Andersen: And remember.

Jon Robert Andersen: Yes, Easter change that kind of affected the early part of April.

Jon Robert Andersen: And promotions with retailers I think as I said in the scripted part.

Jon Robert Andersen: We pushed those late later to sort of avoid the risk because the concern that I've talked about this for a couple of years is that.

Jon Robert Andersen: We tried to get out there and real early in the month.

James S. Hagedorn: And, you know, I think I've said the numbers like, 80% of the time, we were Cold Weather. And when it's cold and wet or snowy, you could have the greatest promotion in the world, but the stores are empty. So you have programs that have pushed back, but I think if you look at the events that were occurring, the rest of the country besides the Northeast, I think basically that's all you saw was the Northeast, behind by about two weeks. But, you know, Josh, what were you saying? So Josh runs sales for

Jon Robert Andersen: It's just the risk of bad weather.

Jon Robert Andersen: I think I've said the numbers like.

Jon Robert Andersen: Like 80% of the time, we were just.

James S. Hagedorn: And when it's cold and wet or snowy, you could have the greatest promotion in the world, but the stores are at a loss. So you have programs that have pushed back, but I think if you look at the events that were occurring, the rest of the country besides the Northeast, I think basically that's all you saw is the North, behind by about two weeks. But, you know, Josh, what were you seeing?

Jon Robert Andersen: Cold weather and when it's cold and wet or Snowy you could have the greatest promotion in the world, but the stores are at R&D. So you have programs that have pushed back but I think if you look at the events that were occurring the rest of the country. Besides the northeast I think basically that's all you saw as the northeast behind.

Josh Meihls: So Josh runs sales. Yeah, I think the commentary is spot on. And I would just reiterate a couple things. The record week, all-time record week of POS units that we had in the last week of April was really driven by the Northeast coming online the last few days of that event. And we're seeing early this week that that continues. So we're seeing that business come to life. That gives us momentum into May.

Jon Robert Andersen: By about two weeks, but.

Jon Robert Andersen: Josh what we've seen so Joshua on sales for US, Yes, I think the commentary spot on and I would just reiterate a couple of things the record week, all time record week Pos units that we had in the last week of April was really driven by the north East coming online in the last few days of that event and we're seeing early this week that continues and we're seeing that busy.

Josh Meihls: Yeah, I think the commentary is spot on, and I would just reiterate a couple things. The record week, all-time record week of POS units that we had in the last week of April was really driven by the Northeast coming online the last few days of that event, and we're seeing early this week that continues, so we're seeing that business come to life. That gives us momentum into May, so when we look at May, we always plan for May to be our biggest gain overall.

Josh Meihls: So when we look at May, we always plan for May to be our biggest gain. Overall, it's where we've got the most incremental promotions. And when you look at the innovation and new listings that we're relying on, Scotts Healthy Lawn, and Miracle-Gro Organic Raised Bed, this is when those start to peak in the month of May.

Josh: This came to light that gives us momentum into may so when we look at May we always plan for may to be our biggest gain overall, it's where we've got the most incremental promotions and when you look at the innovation and new listings that were relying on Scott's healthy lawn Miracle Gro organic raise that this is when those start to peak in the month of May and the last thing.

Josh Meihls: And the last thing I'd say is our retailers remain all in with us. They've been great partners here as they're driving the business. We're making adjustments with them. And I want to thank our field sales team as well, who's in stores every day making adjustments on a local level.

Jon Robert Andersen: I would say is our retailers remain all in with US they've been great partners here as they are driving the business, we're making adjustments with them and I want to thank our field sales team as well he was in stores everyday making adjustments on a local level. So we are very bullish when we look at the months of May and June So John just one other final point here, which is if you look at the.

Josh Meihls: So we are very bullish when we look at the months of May and June. So, John, just one other final point here, which is if you look at the mid-teens performance year-to-date at the end of Q2, that was essentially plus 8% for everything except mulch. So X mulch plus 8%.

Jon Robert Andersen: Mid teens performance year to date at the end of Q2.

Jon Robert Andersen: That was essentially plus 8% everything except malls, so ex mulch plus 8%. We ended April plus 8% ex mulch. So good underlying performance on product lines, and then what Josh Nate spoke to with the momentum we're carrying forward the plans and the activities we have.

Josh Meihls: We ended April plus 8% X mulch. So, good underlying performance on product lines. And then what Josh and Nate spoke about is the momentum we're carrying forward, the plans, and the activities we have in place around the garden season that will hit soils and fertilizers. It's going to be what drives Delta to our full-year target of lifting volumes by 8 to 10% with POS also moving higher than that to adjust for the retailer inventory drawdown that we've been pointing out. Great, thanks so much.

Jon Robert Andersen: Have in place around garden season that will hit soils fertilizers, it's going to be what drives the delta to our full year target of lifting volumes by 8% to 10% with Pos also moving higher than that to adjust for the retailer inventory drawdown that we've been pointing to.

Speaker Change: Great. Thanks, so much.

Speaker Change: Thank you one moment for our next question.

Operator: Thank you. One moment for our next question. Our next question comes from Andrew Carter at Stifle. Hey, thank you. Good morning.

Speaker Change: Our next question comes from Andrew Carter and stifle.

William Andrew Carter: I guess I'll go ahead with one question and ask about Hawthorne and just kind of an update. You did the agreement with BFG. Are you done considering strategic options with Hawthorne? And I noticed you kept two of the distribution facilities, so I assume you're staying there again. Are you done?

William Andrew Carter: Hey, Thank you good morning, I guess I'll go ahead with one question and ask about kind of Hawthorne and just kind of an update you did did your agreement with PFG are you done considering strategic options with Hawthorne I noticed you kept to the distribution facility. So I assume youre staying there again are you done and then the second just to give you an opportunity to <unk>.

Jon Robert Andersen: A little bit about risk capital and what you just mentioned there about being in late stages to merge with another partner does yesterdays announcement kind of change your calculus I would imagine the bids out there would be higher now and the other thing you said you expected to convert the convertible debt.

James S. Hagedorn: And then the second, just to give you an opportunity to talk a little bit about RivCapital and what you just mentioned there about being in the late stages of merging with another partner. Does yesterday's announcement kind of change your calculus? I would imagine the bids out there would be higher now. And the other thing you said, you expected to convert the convertible debt. Are you going to do that at the original strike price or market?

Jon Robert Andersen: Are you going to do that at the original strike price or market and do you have the comfort that you can be an exchangeable share position equity position versus this debt structure.

Jon Robert Andersen: Remaining on the exchanges as well as kind of with your debt partners. Thank you.

James S. Hagedorn: And do you have the comfort that you can be in an exchangeable share position, an equity position versus this debt structure remaining on the exchanges as well as kind of with your debt partners? Thank you. That was one question. Like I've got to remember the shit.

Speaker Change: That was one question.

Speaker Change: Hi, guys remember the shed.

Speaker Change: Look I wanted to start before.

James S. Hagedorn: Um, look, I wanted to start before, Chris and Matt, you know. I'm going to do some of the talking here, but, you know, we recorded that video last. I felt very strongly, I think people are calling my rant at the end of that presentation. I want to thank President Biden for doing what was right. My wife is a Democrat, and she reminds me frequently of, you know, who your friends are.

Speaker Change: Chris and Matt.

Speaker Change: Do some of the talking here, but we recorded that video last week.

Speaker Change: I felt very strongly I think people are calling up my rant.

Speaker Change: At the end of that.

Speaker Change: Presentation.

Speaker Change: I want to.

Speaker Change: Thank president Biden for doing.

Speaker Change: What was right.

James S. Hagedorn: And while I have a hard time sort of being able to pull a lever that says raise my taxes, I do think that this current president has done what he said he was going to do, and I want to thank him. This is, in my opinion, huge for the industry. What this will do is normalize taxes if it happens the way it probably will, we think. This will normalize taxes, and as just a big step forward, we'll put a lot of capital to work. Because, as you know, most of the EBITDA plant-touching money is going to the federal government.

Speaker Change: My wife, who is a Democrat.

Speaker Change: Reminds me frequently of who is your friends and while I have a hard time.

Speaker Change: Sort of.

Speaker Change: Being able to pull a lever or it says raise my taxes.

Speaker Change: <unk>.

Speaker Change: I do think that the.

Speaker Change: <unk>.

Speaker Change: This current president has done what he said he was going to do and I want to thank him. This is my opinion huge for the industry.

Speaker Change: What this will do is normalized taxes, if it happens the way it probably will we think.

Speaker Change: This will normalize taxes and is just a big step forward, we'll put a lot of capital to work because as you know most of the.

Speaker Change: EBITDA of.

Speaker Change: Plant touching people is going to the federal government now that money can be invested in growth. It can be invested in capital improvement, which I think I think you would agree with we believe theres a lot of pent up capital improvement and that if we were to estimate the amount of older non led.

James S. Hagedorn: Now that money can be invested in growth, it can be invested in capital improvement, which I think you would agree with. We believe there's a lot of pent-up capital improvement and that if we were to estimate the amount of older non-LED lights, we'd say it's probably 50%.

Speaker Change: Right.

James S. Hagedorn: So we think there's a lot of opportunity on the hydroponic quote unquote side to benefit us. But I think this is really good for everybody. And a lot of credit, I think this goes to the president for doing what he said. Hey, Andrew. Chris.

Speaker Change: Say, its probably 50% so we think theres a lot of.

Speaker Change: There's a lot of opportunity on the hydroponics quote unquote side too.

Speaker Change: Benefit us, but I think this is really good for everybody.

Speaker Change: A lot of credit I think this year it goes to the president for doing what he said Chris.

Christopher J. Hagedorn: Yeah, so I would echo everything Jim said about regulatory news, obviously, it's what gets attention. Until it's more than a leak, I think it's a little early to get too excited about more concrete movement from the government, but it's obviously a great indicator. Cure Play Cannabis Equities reacted yesterday and today. So we're excited about that. Look, I'm not gonna get into too much detail on the rib stuff.

Christopher J. Hagedorn: Hey, Andrew it's Chris.

Christopher J. Hagedorn: I would I would echo everything Jim said about the the.

Christopher J. Hagedorn: Our regulatory news obviously, it's look it's.

Christopher J. Hagedorn: Until it's more than a leak.

Christopher J. Hagedorn: It's a little early to get too excited.

Christopher J. Hagedorn: Disease more concrete movement from the government, but it's obviously a great indicator and you saw the weighted pure play cannabis equities react yesterday and I'm sure we'll continue to today.

Christopher J. Hagedorn: Just I mean, that is a public company, and I just, I don't..., sort of, in an uncontrolled setting, say more than I ought to. [inaudible] We're really excited about it, and we look forward to being in a position to share more. Going back to the beginning of your questions, as far as looking at strategic options for Hawthorne, I know Matt's got stuff he wants to say on this as well.

Christopher J. Hagedorn: So we're excited about that.

Christopher J. Hagedorn: Look I'm not going to get into too much detail on the rip stuff. Just I mean that is a that has its own independent public company and I, just I don't want to.

Christopher J. Hagedorn: Sort of in an uncontrolled setting saved more than they ought to assai.

Christopher J. Hagedorn: Aside from say, it's something that we're just we're really excited about and we look forward to be in a position to share more.

Christopher J. Hagedorn: Going back to the beginning of your questions.

Christopher J. Hagedorn: As far as.

Christopher J. Hagedorn: Looking at strategic options for Hawthorne, I know mascot stuffing wants to say on this as well I would say number we're not done looking at strategic options they are maintaining.

Christopher J. Hagedorn: I would say, no, we are not done looking at strategic options there. Maintaining, you know, some distribution network for us. There are a couple things.

Christopher J. Hagedorn: Number one, you know, the relationship we have with BFG is in its early days, and we are super excited about it. They've been great partners to this point, and we expect them to continue to be, and we're doing everything we can to be good partners to them. But it's not, we're not handing our entire business over to BFG. We're still maintaining, So we're going to need our own DCs for that

Christopher J. Hagedorn: A.

Mascot: Some distribution network for us it's a couple of things number one.

Christopher J. Hagedorn: The relationship we have BFG. It's in its early days, we are super excited about it they've been great partners to this point, we certainly continue to be and we're doing everything we can be good partners to them, but it's not we're not hanging our entire business over to over to BFG, we're still maintaining a significant amount of customers that will be servicing directly.

Christopher J. Hagedorn: And also, you know, and if you understand this is, there's a little bit of a period here where we just need to make sure that BFG can continue to onboard our customers and service them, not just at the level that we've been servicing them, but, frankly, at a higher service level. And until, BFG has only been taking orders for three business days as of today.

Christopher J. Hagedorn: So we're gonna need our own Dcs for that and also if.

Christopher J. Hagedorn: If you understand this is there's a little bit of a period here, where we just need to make sure that BFG can continue to onboard our customers and service them not just at the level that we've been servicing but frankly at a higher service level and until an MLP. If he's only been taken orders for three business days as of today.

Christopher J. Hagedorn: So up to that, it was onboarding them and getting their DC stopped. So, we're going to go through this. We're going to maintain some DCs here, just so if there's any hiccups, we can step in and make sure our customers are taken care of. But that's something that we anticipate, assuming the onboarding goes as well as we believe it will, that we'll wind that DC network down. Yeah, I would just add on Hawthorne itself. What Chris has been leading, and we've been partnering with him, is a total refit of what the Hawthorne business is and what it means to our customers and their consumers.

Christopher J. Hagedorn: So after that it was it was onboarding them getting your DC stock so.

Christopher J. Hagedorn: We're going to go through this we're going to maintain some dcs here just if there's any hiccups, we can step in and make sure. Our customers are taken care of but thats something that we anticipate assuming you're onboarding goes as well as we believe it will that will wind that that worked down further.

Matthew E. Garth: And that is a reenergized scientific proposition and how we create value, highest quality, lowest cost for our customers. And that has been reminded back to us. It has been proven back to us, and how we've been managing our relationships over this very difficult time period where we've reduced the base of Hawthorne, but we have not reduced the capability. We've kept manufacturing in place.

Speaker Change: Yes, I would just add on Hawthorne itself.

Christopher J. Hagedorn: Chris has been leading.

Christopher J. Hagedorn: We've been partnering with him.

Christopher J. Hagedorn: As a total reset of what the Hawthorne business is and what it means to our customers and their consumers and that is a re <unk>.

Speaker Change: <unk> of the scientific proposition and how we create value highest quality lowest cost for our customers and that has been reminded back to us. It has been proven back to us and how we've been managing our relationships over this very difficult time period, we reached.

Speaker Change: <unk> the base.

Speaker Change: All of them, but we have not reduced the capability we've kept manufacturing in place we've kept our top tier relationships in place, we will be able to manage when demand comes and as Jim said, the environment looks better for that demand on hydroponics.

Matthew E. Garth: We've kept our top tier relationships in place. We will be able to manage when demand comes. And as Jim said, the environment looks better for that demand in hydroponics.

Matthew E. Garth: That is what the work that we've achieved over the last two years has delivered. And it's also delivered a place where we feel profitability is in sight for this year. And I'm not going to tell you what that is.

Speaker Change: That is what the work that we've achieved over the last two years has delivered and it has also delivered a place where we feel profitability is in sight for this year and I am not going to what's that this month. This month right exactly what they want.

Matthew E. Garth: This month. This month, right, exactly. But the month that we just closed out here in April, I mean, it was the first month that we over-delivered our internal forecast. The mix was favorable.

Speaker Change: We just closed out here in April I mean, it was the first month that we've over delivered our internal forecast the mix was favorable to profitability was.

Matthew E. Garth: The profitability was, was profitable. Excellent. Thank you. Great data point there.

Matthew E. Garth: So it's an exciting place for us. Yeah. And that, I mean, there's a great proof point, right?

Speaker Change: With profitable excellent. Thank you great data point, so an exciting place for us.

Speaker Change: I mean, there is a great proof point right.

Matthew E. Garth: And so the path forward for Hawthorne leads through profitability, through profit comes power, that provides optionality. And as we've said to you, we have three things to focus on this year at Scotts Miracle-Gro, which is 575 million of EBITDA, the balance of a billion dollars in free cash flow, and find a strategic solution for Hawthorne. And again, having that profit path gives us optionality on that strategic path forward. The only other piece of your question in 17 parts, Andrew, is how we feel about different vehicles for investment on the leaf-touching side that are consistent with all of the regulations and environments that we exist in. We do have convertible debt that sits out there, but exchangeable shares, by and large, are viewed and treated the same way.

Speaker Change: And so the.

Speaker Change: The path forward for Hawthorne.

Speaker Change: Leads through profitability.

Speaker Change: Through profit comes tower that provides optionality and as we've said to you we have three things to focus on this year at Scotts Miracle Gro, which is 575 of EBITDA the balance of a $1 billion in free cash flow and finding a strategic solution for Hawthorne and again, having that profit path gives us optionality on that strategic path.

Speaker Change: The only other piece of your one question in 17 parts. Andrew is how we feel about different vehicles for investment on leaf touching side that are consistent with all of the regulations in environments that we exist and we do have convertible debt that sits out there <unk>.

Speaker Change: Honorable shares by and large are viewed and treated the same way and so we are comfortable with our position in either convertible debt or exchangeable shares.

Matthew E. Garth: And so we are comfortable with a position in either convertible debt or exchangeable. And maybe Andrew, I'll just throw in that it was a little awkward in that the two companies that we're talking about are public. We will be the biggest investor. You know, there was a question of, because this deal is just about ready but not there yet, should we have communicated with each other, and I gotta say, if I were talking to both boards now, I'd say, "Get up your fucking asses and get moving." I am tired of waiting here.

Speaker Change: And maybe Andrew I'll just throw in.

Speaker Change: It was.

Speaker Change: A little awkward and that.

Speaker Change: The two companies that we're talking about are public.

Speaker Change: We will be the biggest investor.

Speaker Change: And.

Speaker Change: There was a question of.

Speaker Change: Because of this deal is.

Speaker Change: Just about ready, but not there yet.

Speaker Change: Should we should I have.

Speaker Change: Communications and I got to say.

Speaker Change: If I was talking to both boards now I'd say get off your fucking asses and get moving.

James S. Hagedorn: We are really excited about what this can be. I think this rescheduling announcement yesterday is really good news for plant workers. We want to participate. We have a large investment here. We never looked at that as debt.

Speaker Change: <unk>.

Speaker Change: I am tired of waiting here, we are really excited about what this can be I think this rescheduling announcement yesterday is really good news for plant touching people.

Speaker Change: We want to participate we have a large investment here, we never looked at that is that we always looked at that as shares we've been trying to tell that to the rig shareholders, who I think are just constantly looking at.

Speaker Change: The consequences of what could happen with the debt we're trying to stay right here one of the things. We can say today is that we are happy going to exchangeable shares were not looking for this debt to be an overhang.

James S. Hagedorn: We've always looked at that as shares. We've been trying to tell that to the RIV shareholders, who I think are just constantly looking at, you know, the sort of consequences of what could happen with the debt. We're trying to say right here, one of the things we can say today is that we are happy going to exchangeable shares. We're not looking for this debt to be an overhang on the equity of the future company. But please get this thing closed.

Speaker Change: On the equity of the future company, but please get this thing closed.

Operator: Thanks. Thanks. I'll pass it on.

Speaker Change: Thanks, I'll pass it on.

Operator: Thank you. One moment for our next question. Our next question comes from Joe Altobello at Raymond James. Thanks. Hey, guys. Good morning. I have one question, which has only three parts, if that's okay.

Speaker Change: One moment for our next question.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Our next question comes from Joe also below at Raymond James.

Joe: Thanks, Hey, guys. Good morning, I have one question only three parts if that's okay.

Joseph Nicholas Altobello: I guess so. First, you know how much of the single-digit, high single-digit unit PLS you guys have seen through April is from the base business versus additional shelf space and promotion. How do the comparisons look in the second half?

Joe: I guess first how much of the single the high single digit.

Joe: Pos improvement.

Joe: Guys have seen through April is from the base business versus additional shelf space and promotions.

Joe: How do compares look in the second half and is the expectation that that base Pos.

James S. Hagedorn: and is the expectation that base POS in units will still be Okay, I'm going to probably take a little bit of that one. Because I'm not sure how we really know. You know, I think that if you look at what we said was the gain from the programs that we put together, I think we said that was a large part of the game we're going to have. And I think I think that's what we're seeing.

Joe: And units will still be flat this year.

James S. Hagedorn: But I think we're seeing really good performance in basically each category that we're in, even the lawn category. Remember, we That was an area where we really felt like we needed to reset pricing. And so lawn pricing came down really last fall, and Nate and I were with a top to top meeting with one of our major retailers.

Joe: Okay.

Speaker Change: I'm going to probably take a little bit of that one.

Speaker Change: Because I'm not sure how we really know.

Speaker Change: I think that if you look at what we said was the gain from the programs that we've put together I think we said that was a large part of the game, we're going to have and I think I think that's what we're seeing but I think we're seeing really good performance.

Speaker Change: <unk>.

Speaker Change: <unk>.

Speaker Change: Basically each category that we're in.

Speaker Change: Even the lawn category.

Speaker Change: Remember.

Speaker Change: That was an area, where we really felt like we needed to reset pricing.

Speaker Change: So launch pricing.

Speaker Change: Came down.

Speaker Change: Early last fall and we saw Pos.

Speaker Change: POS improvements Nate and I were with a top to top with one of our major retailers.

Speaker Change: And we.

James S. Hagedorn: And, you know, we needed sales in sort of various periods. Just as we looked in the rear view mirror, and we're looking at the sort of JP Morgan lights in our rear mirror. And what was really surprising was when we, and this was the Chief Merchant of one of our top retailers, said, you know, there was a lot of concern over the level of inventory in Q4. And what was really surprising was, and this came from them.

Speaker Change: We.

Speaker Change: We needed sales and sort of various periods.

Speaker Change: As we looked in the rear view mirror and we're looking at the sort of.

Speaker Change: J P Morgan lights in our back mirror.

Speaker Change: And what was really surprising is when we and this was.

Speaker Change: Keith merchant of one of our top retailers said there was a lot of <unk>.

Speaker Change: Concern over the level of inventory in Q4.

Speaker Change: Our Q4.

James S. Hagedorn: So this is Chief Merchant and Chief Executive said what was amazing was how much of that stuff we sold. It sort of turned into a really great promotion. We ended up with pretty good inventory levels. I'm gonna say excellent inventory levels coming out of last year's fall season. So, you know, I'm not sure how to sort of balance what the difference is.

Speaker Change: <unk>.

Speaker Change: And what was really surprising was and this was this came from them.

Keith: So this is chief merchant and Chief Executive said, what was amazing is how much of that stuff. We sold it was so it turned into a really great promotion, we ended with with pretty good inventory levels Im going to say excellent inventory levels coming out of.

Keith: Last year's fall season so.

Keith: I'm not sure how to sort of balance what the differences.

James S. Hagedorn: I think these programs were really important. I think these commitments by both companies, you know, or, you know, either party, the buyer and the sellers, were really important to commit to the category. And so I think this is this, I would not get freaky over this kind of April when, for those people who live in the Northeast, you'll know what I'm talking about. It was just not great weekends; the rest of the country kicks and butts.

Keith: I think these programs were really important I think these commitments by both companies.

Keith: Or.

Keith: Either party of the buyer and the sellers.

Keith: Was.

Keith: It's really important the commitment to the category and so I think that.

Keith: To me.

Keith: This is I would not get freaky over kind of April when for those people who live in the northeast you'll know what I'm talking about it was just not great weakens the rest of the country was.

Keith: Kicking butt and.

James S. Hagedorn: I think when you look at the season when the season was happening, the business was great. And I think that shows just that the consumer is highly engaged. And remember, we said we'd advertise the advertising. I don't know about you guys, but I'm wondering if maybe people are buying when they know I watch TV, because I am just seeing a lot of advertising.

Keith: I think when you look at the season, where the season was happening the business was great and I think that shows just that the consumer is highly engaged and remember we said we're going to advertise the advertising I don't know about you guys.

Keith: Im wondering if maybe people are buying and when they know I watch TV, because I am just seeing a lot of advertising.

Keith: And I saw the first of the.

Keith: Healthy that was yesterday on CNN Primetime evening news.

James S. Hagedorn: And I saw the first of the healthy ones yesterday on CNN, sort of primetime evening news. So I, I don't know how to tell the difference, except to see, I know, listen, Matt wants to talk. Let's go this way. If you recall, we said we were going to do high single digits, right? And that underneath that high single digits was 2% price down, and then essentially a 10% volume lift, which was going to have some price elasticity, call it one to 2%. The rest was split between listings and promos.

Keith: I don't know how to tell the difference except to see.

Keith: Matt wants to talk.

Matthew E. Garth: Through the first half of the year, it is the listings power that Nate and the team have driven. And so we are still yet to see, and what we are expecting in the second half of the year, as we get into garden season, you will see a lot more of that new promo activity reach our PLS numbers. And that's what we're looking forward to in the month of June. I don't know if this is tougher or easier in the first half or in the second half, sorry. We have a good cause.

Keith: Yeah.

Keith: Let's go this way if you recall, we said we were going to do high single digits and that underneath that high single digits was 2% price down and then essentially a 10% volume lift which was going to have some price elasticity call. It 1% to 2% the rest of it split between listings and promos through the first half of the year. It is the live.

Keith: <unk> power that Nate and the team have driven and so we are still yet to see and what we are expecting in the second half of the year as we get into garden season, you will see a lot more of that new promo activity reach our Pos numbers and that's what we're looking forward to in the month of May.

Keith: This compares tougher or easier than the first and the second.

Speaker Change: I'm sorry <unk>.

Speaker Change: Theyre easier we have good comps in the second half yes.

Matthew E. Garth: And we're in a good place with retailer inventories, so we've got all the pieces. Thank you. One moment for our next question. Our next question comes from Peter Grom at UBS. Thank you, operator. Good morning, everyone. Hope you're doing well.

Speaker Change: Got it thank you and we're in a good place with retailer inventories so.

Speaker Change: We've got all the pieces we need.

Speaker Change: Okay. Thanks.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from Peter Grom of UBS.

Peter K. Grom: Thank you operator, good morning, everyone hope you're doing well.

Operator: Jim, I just wanted to follow up on your commentary on the kind of weather, and I just want to get your thoughts on how it's kind of playing out versus... your expectations. You touched on the Northeast or the East Coast being a couple of weeks behind, but other markets very strong. But can you maybe, in aggregate, across what you're seeing in total, compare the weather versus what we've seen over the last couple of years, maybe compare it versus what you would typically see in a normal year?

Peter K. Grom: I just wanted to follow up on your on your commentary.

Peter K. Grom: Whether and I just wanted to get your thoughts on how it's kind of playing out versus.

Peter K. Grom: Your expectations, you touched on the northeast or the east coast being a couple of weeks behind but other markets very strong but can you maybe in aggregate across what you are seeing in total compare weather versus what we've seen over the last couple of years, maybe comparing versus what you would typically see in a normal year and I may be wrong on this but I think the guidance in Wisconsin.

Peter K. Grom: And I may be wrong on this, but I think the guidance was contemplated on no major shifts in weather versus last year, which I don't think was necessarily great. So just trying to understand what we're seeing today and then expect in May, given your weather models, could point to actually some favorability just from a weather perspective. Thanks. Yeah, Peter, this is Nate.

Peter K. Grom: <unk> no major shifts in weather versus last year, which I don't think we've necessarily great. So just trying to understand what we're seeing today in an expected manner. Given your random models could point to actually some favorability just from a weather perspective. Thanks Peter.

Nate Baxter: I'll take that. The weather has played out exactly like we predicted. We've put a lot of effort into working with our partners and our internal modeling team. You know, we had the benefit of El Nino, which helped us in the early season. And now, as everybody knows, we're in the midst of a conversion to La Nina. On average, relative to last year, it's been warmer. And it's been a little bit more wet in certain parts of the country that have suppressed us in the south.

Peter K. Grom: Peter This is Nate I'll take that so the way.

Josh Meihls: Whether it's played out exactly like we predicted we've put a lot of effort into working with our partners and our internal modeling team, we had the benefit of El Nino, which helped us early season.

Nate Baxter: And now as everybody knows we're in the midst of a conversion to linear on average relative to last year, it's been warmer.

Nate Baxter: And it's been a little bit more wet in certain parts of the country that has impressed us in the south.

Josh Meihls: But it's teeing up for a really nice spring the weather now for the next month month, and a half looks extremely positive.

Nate Baxter: But it's teeing up for a really nice spring. The weather now for the next month, month and a half looks extremely positive. So I would say from our perspective, no surprises. It's been a friend of ours, just like our models predicted. And we still see that as a lift in second.

Nate Baxter: So I would say from our perspective no surprises it's been a friend of ours, just like our models predicted and we still see that as a lift in second half.

Operator: Thank you. One moment for our next question. Our next question comes from William Reuter at Bank of America. Hi, I just wanted to follow up on the Project Springboard savings. How much have you achieved so far?

Speaker Change: Thank you one moment for our next question.

Peter K. Grom: Yes.

Peter K. Grom: Okay.

Peter K. Grom: Our next question comes from William Reuter of Bank of America.

Peter K. Grom: Sure.

Peter K. Grom: Hi.

William Michael Reuter: I just wanted to follow up on the project springboard savings.

William Michael Reuter: I think that we have another $100 million that we're achieving this year, or 80% of the $100 million this year, which would mean that there's still another $20 million that should benefit EBITDA next year. Is that the case? Yeah, I think what we laid out for you was that we were achieving 65 million in 24, and we had taken 15 million of that final 100 million in 23. And so that leaves you with about 20 million bucks to get in 25.

William Michael Reuter: Have you achieved.

Matt: This far I think that we have another $100 million. We're achieving this year are 80% of the $100 million. This year, which would mean that theres still another $20 million that should benefit EBITDA next year is that the case, yes.

Speaker Change: Yes, I think what we laid out for you was that we weren't achieving 65 ish.

Josh Meihls: And 24, we had taken.

Speaker Change: $15 million of that final $100 million in 'twenty, three and so that leaves you with about 20 million Bucks to get 25, So youre right, but you are.

William Michael Reuter: So you're right, but you are You're seeing in SG&A, you're seeing it at the gross margin line, our ability to lock in those savings as we move forward. And by the way, and I said in the prepared remarks, I was very happy with SG&A performance on a dollar basis. On a rate basis, it's great too.

Speaker Change: Youre seeing in an SG&A youre seeing it at the gross margin line, our ability to lock in those savings as we move forward.

Jim Hagedorn: And by the way and I said in the prepared remarks.

Josh Meihls: Very happy with SG&A performance on a dollars basis on a on a rate basis, it's great too, but on a dollars basis you have to remember we're down $20 million plus we have $10 million higher marketing spend so we're really down 30 million Bucks thats. The durability of what we've done and that was just with these latest round of <unk>.

Matthew E. Garth: But on a dollar basis, you have to remember, we're down $20 million, plus we have $10 million higher marketing spend. So we're really down $30 million. That's the durability of what we've done. And that was just with these latest rounds of cuts on a year over year comp. So it's hitting the bottom line is what I would tell you. But where else do you want to go with that, Will?

Speaker Change: Cuts on a year over year comp. So it is hitting the bottom line.

Speaker Change: I would tell you, but where else do you want to go with that Rockwell.

William Michael Reuter: Unknown Speaker No, I know, I guess my real question was, what are the savings that are going to be in 2024, which I think the answer is 65 million. And then what is the remainder of next year, which I think the answer is 20. And then of the 65 million that will be achieved, is that going to be evenly achieved throughout the year? Or how much was I think maybe you mentioned you were down 30 million year to date when you talked about the 20 and the 10. Yeah, so you have a lot of those savings that are coming early in the year. They will benefit you in the second half of the year.

Josh Meihls: Oh no.

Rockwell: No I guess my real question was what were the savings that are going to be in 2024, which I think the answer is $65 million.

Speaker Change: And then what's the remainder of next year, which I think the answer is 2000, and then of the $65 million that will be achieved and that you're going to be evenly achieved throughout the year or how much was I think maybe you mentioned that youre down $30 million year to date, when you talked about the 20th Tan.

William Michael Reuter: And so you are seeing some of that in the first half numbers as well. Okay, but it sounds like there's another 35 million to come in the second half of the year. Is that the way to think about it? That's fine.

Speaker Change: Yeah. So.

Josh Meihls: Have a lot of those savings that are coming early in the year.

Josh Meihls: They will benefit you in the second half of the year and so you are seeing some of that in the first half numbers as well.

Speaker Change: Okay, but it sounds like there's another 35 million to come in the second half of the year is that the way to think about it that's fine.

William Michael Reuter: Okay. All right. That's all for me. Thanks. I just said, Frankly, we probably got more than half of it in the first half, and you're going to get run rate some of it in the second half.

Speaker Change: Okay, Alright, Thats all for me thanks.

Josh Meihls: Yes.

Speaker Change: I just had frankly, we probably got more than half of it in the first half youre going to get run rate some of it in the second half, but yes.

James S. Hagedorn: But yeah, I also think that we're not done. You know, I know that. The supply chain reconfiguration within North American business is hugely important to us.

Josh Meihls: I also think that.

Speaker Change: We're not done.

Josh Meihls: I know that.

The supply chain reconfiguration within the North American business is hugely important to us.

James S. Hagedorn: And, you know, Matt and I were passing out sort of kind of our view, and Nate's well aware of this, on kind of what we expect at corporate. We want to spend more money on marketing, by a big margin, on fame and innovation. And so, fund that we're going to continue to pull money out of the business in areas that can fund the things that make us different and drive the business. I think that you'll see pretty significant share gains this year.

Matt and I were passing out sort of kind of our view and Nate is well aware of this.

Josh Meihls: On kind of what we expect to corporate.

Josh Meihls: We want to spend more money in marketing.

Speaker Change: By a big percent.

Josh Meihls: Same in innovation activities.

Josh Meihls: And so to.

Speaker Change: To fund that we're going to continue to pull money out of the business in areas that can fund the things that make us different and drive the business.

Josh Meihls: Think that youll see pretty significant share gains.

James S. Hagedorn: My advice to the team is that we have to actually be a vendor that is a great partner to our retailers and to our consumers, that we are acting as good as the share opportunity that we have, and we can hang on. That's important.

Matt Garth: This year.

Josh Meihls: My advice to the team is that we have reasonable share efficient share or if you want to call. It.

Josh Meihls: Today, we're going to have more share by the time of year is over and we have to actually be a vendor that is a great partner to our retailers and to our consumers.

Josh Meihls: That we are acting as good as the share opportunity that we have and we can hang onto that that's important and I think as we go through this and.

James S. Hagedorn: I think as we go through this and some of the investments we made behind this year and possibly next, with our retailers that have resulted in the kind of program and share gains that we're seeing, those ends. We've got to be a partner that doesn't lose those, you know, when those programs come out. So I think this is one of the things I want the business to prove to Matt, that we can.

Josh Meihls: Some of the investments we made behind this year.

Josh Meihls: Possibly next.

Josh Meihls: With our retailers that have resulted in the kind of program and share gains that we're seeing.

Josh Meihls: As those and.

Speaker Change: We've got to be a partner that doesn't lose those.

Speaker Change: When those programs.

Speaker Change: So I think this is one of the things I want the business to prove the math is that.

James S. Hagedorn: Get our margins up, as a result of what we've done, and the investments we make in the business, will keep that share and not lose it. This is really important to where we're going. Thank you. One moment for our next question. Our last question comes from Thomas Mahoney at Cleveland Research. Hi, it's actually Eric from Cleveland Research.

Josh Meihls: We can.

Josh Meihls: Get our margins up.

Speaker Change: As a result of what we've done and that the investments we make in the business will keep that share and not lose it.

Josh Meihls: This is really important to where we're going.

Speaker Change: Thank you.

Josh Meihls: Yes.

Speaker Change: One moment for our next question.

Josh Meihls: Our last question comes from Tom Mahoney right.

Josh Meihls: Cleveland.

Operator: A lot of numbers, I just want to make sure that I understand what you say. What I heard you say is that April units are up seven to nine and dollars are up one to three. Before I ask my question, am I saying that right? No. What I said was... Okay. Let's go back and build this.

Speaker Change: Sure.

Eric: Hi, its actually Eric.

Speaker Change: <unk> from Cleveland Research.

Josh Meihls: A lot of numbers.

Speaker Change: I just want to make sure that I understand.

Speaker Change: What I heard you say that April units were up 7% and dollars are up 1% to three before I ask my question am I, saying that right.

Josh Meihls: No.

Josh Meihls: What I said was okay.

Eric Bosshard: Right. So you have an 8% Whip because that's kind of the high single digits with price down. And I think actually, Eric, if you go through the documentation that Aimee put on the website, there's a nice little margin bridge in there.

Speaker Change: Let's go back and build US right. So you have.

Josh Meihls: 8%.

Josh Meihls: Lift.

Josh Meihls: Because that's kind of a high single digits with price down.

Josh Meihls: And I think actually Eric if you go through the documentation that Amy put on the website.

Josh Meihls: There is a nice little margin bridge and Theres a nice little.

Matthew E. Garth: There's a nice little walk on revenue that also shows you a little bit of this breakdown. So you as a consumer, and what we were trying to detail was POS, No surprises. Yes, first half in the teens.

Josh Meihls: Work on revenue, but also shows you.

Josh Meihls: A little bit of this breakdown so U S consumer.

Speaker Change: What we were trying to detail was Pos.

Josh Meihls: No surprises.

Josh Meihls: Yes first half in the teens great.

Matthew E. Garth: Great. Much really did well, but the underlying core business is right where we want it to be plus 8%. And that's in line with what we were driving to. That's why Jim talked about references to plans.

Josh Meihls: Really did well, but the underlying core business right, where we want them to be plus 8% and that's in line with what we were driving to that's why Jim talked about references to plan. So are we talked about versus our forecast we are not surprised and as we look forward, we know that there's going to be additional gains coming.

Matthew E. Garth: So we talked about it versus our forecast. We are not surprised. And as we look forward, we know that there's going to be additional gains coming from promotional activities. So getting back to where we need to be on POS from April is in sight. So a very pedantic approach to how we are moderating the year and what our message is, which extends from revenue to cost, to margin, to free cash flow, and to net leverage.

Josh Meihls: Promotional activity.

Josh Meihls: So.

Getting back to where we need to be on Pos.

Josh Meihls: From April is inside.

Josh Meihls: So a very pedantic approach towards how we are moderating the year and what our messages which extends from revenue.

Josh Meihls: Cost.

Josh Meihls: To margin to free cash flow and to net leverage.

Matthew E. Garth: So net leverage while we're on it. I don't really see an issue for the remainder of the year, nor for the remaining period under our credit facility, which runs through 2027. So I think there's good distance. There's flexibility. You heard Jim talk about it. We're not managing in a pressured way.

Josh Meihls: So net leverage.

Speaker Change: We're on it.

Josh Meihls: I don't really see an issue for the remainder of the year nor for the remaining period under our credit facility, which runs through 2027.

Josh Meihls: So I think there's good distance there's flexibility you heard Jim talk about it we're not managing in a pressured way so even if Pos have some variance.

Matthew E. Garth: So even if POS has some variance, we have levers that we will pull, and we will maintain compliance. So feeling really good about how the overall perspective of how the new management team is operating, to ensure that we have commitments that are met today, retailers and us, with our constituents, including shareholders, and then the path forward for what we're laying out for the next decade. Okay, great. So through April, are your POS dollars up one to three? Is that what you said? POS dollars now. Oh, sorry.

Josh Meihls: We have levers that we will pull and we will maintain compliance.

Josh Meihls: So feeling really good about how the overall.

Josh Meihls: Perspective of how the new management team is operating to ensure that we have commitments that are met today retailers and ours with our constituents including shareholders.

Josh Meihls: And then the path forward for what we're laying out for the next decade.

Speaker Change: Okay, great. So through April are your Pos dollars up 1% to three is that what you said.

Josh Meihls: Sure.

Eric Bosshard: P.O.S. dollars through April 1 to 3. Yes. Okay, and so this is what I guess I'm trying to figure out. So that number, which you've targeted up by single digits for the year, is meaningfully behind your units through April. And so what explains the difference between those two?

Josh Meihls: Pos dollars.

Speaker Change: No yeah, Oh, sorry.

Josh Meihls: Through April one to three yes.

Josh Meihls: Okay and so this is what I guess I'm trying to figure out so that that number is what you've targeted up high.

Josh Meihls: High single digits for the year. It is meaningfully behind your units through April.

Eric Bosshard: And then what eliminates that deficit in May and in June? Let me do the math. What you're basically saying is pricing's up through April, you expected it to be down, we expected it to be down, which I don't think that's okay. And then for the remainder of the year, we have room to make up on units. So, pricing's down year to date, and that's in line with what we expect. Units are up year-to-date. That's what we expected. The net dollars are up. Less, and that's what we expect.

Josh Meihls: And so what explains the difference between those two and then what eliminates that.

Josh Meihls: Is it in May and in June basically.

Speaker Change: Can we get your math, what Youre basically saying is.

Josh Meihls: Pricing up through April you expected it to be down we expected it to be down which I don't.

Josh Meihls: I think that's the case.

Josh Meihls: And then.

Josh Meihls: On the remainder of the year, we have room to make up on units. So pricing is down year to date.

Josh Meihls: That's in line with what we expected.

Josh Meihls: Units are up year to date.

Josh Meihls: That's what we expected the net dollars.

Josh Meihls: Our app.

Josh Meihls: Les and Thats, what we expected.

Matthew E. Garth: As we move forward, there are big lifts coming in May. Between April and May, you have 50% of the year. And so in May, the promotional activity that comes around soils, which, by the way, have very attractive margins, almost lawn-like margins, you will see that benefit in the POS numbers, and those are new promotional volumes that we didn't have last year.

Josh Meihls: As we move forward.

Josh Meihls: There are big lift coming in May.

Josh Meihls: April and May you have 50% of the year.

Josh Meihls: And so in may the promotional activity that comes around soils, which by the way have very attractive margins almost more like margins.

Josh Meihls: You will see that benefit in the Pos numbers and those are new promotional volumes that we didn't have last year.

Eric Bosshard: Okay, I'll follow up offline. Thank you. Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you for watching!

Speaker Change: Okay I'll follow up offline. Thank you.

Josh Meihls: Yes.

Speaker Change: Thank you.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Josh Meihls: [music].

Josh Meihls: Okay.

Josh Meihls: [music].

Josh Meihls: Okay.

Josh Meihls: Okay.

Josh Meihls: [music].

Josh Meihls: Okay.

Josh Meihls: Okay.

Josh Meihls: [music].