Q1 2025 Scotts Miracle-Gro Co Earnings Call

Years at Scotts and a variety of finance leadership roles.

I am grateful to succeed Amy Deluca, who will retire from Scotts Miracle Gro at the end of this month after a 23 year career at the company.

Speaker Change: I've appreciated the opportunity to meet many of you already and I look forward to meeting all of you over the coming months.

Speaking today are chairman and CEO, Jim Hagadorn, and interim Chief Financial Officer, and Chief Accounting Officer, Mark Schauer.

Mark Schauer: Jim will provide a business update followed by Mark with a review of our financial results.

Mark Schauer: Following the webcast President and Chief operating Officer, Nate Baxter, and executive Vice President and Chief of staff, Chris Hagadorn will join Jim and Mark for an audio only Q&A session to <unk>.

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

Mark Schauer: As always today's session will be recorded.

Speaker Change: Speaking today are chairman and CEO, Jim Hagadorn, and interim Chief Financial Officer, and Chief Accounting Officer, Mark Schauer.

Mark Schauer: An archived version will be published on our website at investor that Scotts Dot com for.

Mark Schauer: For further discussion after the call please email or call me directly.

Mark Schauer: Jim will provide a business update followed by Mark with a review of our financial results.

Speaker Change: Now I'm going to turn it over to a special guest that Jim is invited to provide commentary regarding safe Harbor and forward looking statements.

Nate Baxter: Following the webcast President and Chief operating Officer, Nate Baxter, and executive Vice President and Chief of staff, Chris Hagadorn will join Jim and Mark for an audio only Q&A session.

Speaker Change: I'll wrap up what what SMG investor.

Speaker Change: It's me that mouse that was killed in the tomcat commercial awkward.

Nate Baxter: To listen to the Q&A simply remain on this webcast to participate please joined by the audio link shared in our press release.

Speaker Change: Amigo, Jim Hagadorn, the big cheese of Scotts Miracle Gro asked me to be here to help introduce this Q1 fiscal earnings call.

Speaker Change: As always today's session will be recorded.

Speaker Change: An archived version will be published on our website at investor that Scotts Dot com for.

Speaker Change: This whole thing is a little off brand for me, but I am a versatile rodent so today I'm going to be Super professional.

Speaker Change: For further discussion after the call please email or call me directly.

Speaker Change: Now I'm going to turn it over to a special guests that Jim is invited to provide commentary regarding safe Harbor and forward looking statements.

Speaker Change: During today's review of the company will make forward looking statements and discuss certain non G. A a P financial measures. Please be aware that the actual results could differ materially from what is share today. Please refer to the company's Form 10-K filed with the SEC for details of the full range of risk factors that could impact the results.

Speaker Change: All right what up what what S. M G investor.

Speaker Change: It's me that mouse that was killed in the tomcat commercial awkward [laughter] Mi Amigo, Jim Hagadorn, the big cheese of Scotts Miracle Gro asked me to be here to help introduce this Q1 fiscal earnings call.

Speaker Change: I don't know what any of that means so I'm going to turn it over to Jim Yeah. My man this is going to be late.

Speaker Change: This whole thing is a little off brand for me, but I am a versatile rodent so today I'm gonna be Super professional.

Jim Hagadorn: Good morning, I Hope you enjoyed the mouses intro to our call I'll begin with how pleased I am with our first quarter results, we're off to a very good start.

Speaker Change: During today's review of the company will make forward looking statements and discuss certain non G. A a P financial measures. Please be aware that actual results could differ materially from what is sure today. Please refer to the company's Form 10-K filed with the SEC for details of the full range of risk factors that could impact the results.

Speaker Change: We delivered on the metrics that form the foundation of our fiscal 'twenty five plan.

Speaker Change: And we feel very comfortable with our Q2 sales load in as retailers prepare for the lawn and garden season. They are just as bullish if not more on this year's season.

Speaker Change: I don't know what any of that mean, so I'm going to turn it over to Jim Yeah. My man this is going to be in that.

All of this gives us great confidence in our fiscal 'twenty, five EBITDA guidance and our outlook through fiscal 'twenty seven.

Good morning, I Hope you enjoyed the mouses intro to our call I'll begin with how pleased I am with our first quarter results, we're off to a very good start.

Speaker Change: Mark will walk through the financials as I wanted to discuss how we're building the company for the future.

Speaker Change: I've often said we're on a journey.

Speaker Change: And this one began when we emerge from Covid under severe financial constraints and we're forced into crisis management.

Speaker Change: We delivered on the metrics that form the foundation of our fiscal 'twenty five plan.

Speaker Change: And we feel very comfortable with our Q2 sales load in as retailers prepare for the lawn and garden season. They are just as bullish if not more on this year's season.

Speaker Change: We restored the financial stability of the company and we're set for growth and continued progress.

Speaker Change: This journey gave us an opportunity to reflect on the future of Scotts Miracle Gro and what we want our company to be.

Speaker Change: All of this gives us great confidence that our fiscal 'twenty, five EBITDA guidance and our outlook through fiscal 'twenty seven.

Speaker Change: In the Air Force, we'd say change often results from a significant emotional event.

Speaker Change: Mark will walk through the financials as I want to discuss how we're building the company for the future.

Speaker Change: And that's what happened to us.

Speaker Change: We're at an inflection point, where we're making changes to transform our organization let.

Speaker Change: I've often said we're on a journey.

Speaker Change: Let me tell you, where we're going what it means and how we'll get there.

Speaker Change: This one began when we emerge from Covid under severe financial constraints and we're forced into crisis management.

Speaker Change: All of our transformation work starts with our core convictions.

Speaker Change: We restored the financial stability of the company and we are set for growth a continued progress.

Speaker Change: Many years ago, we developed these core convictions that guide, our associates and driving protecting and nurturing our very special and unique consumer business.

Speaker Change: This journey gave us an opportunity to reflect on the future of Scotts Miracle Gro and what we want our company to be.

Speaker Change: Everyone in our company carries the core convictions on their employee badge.

Speaker Change: In the Air Force, we'd say change often results from a significant emotional event.

Speaker Change: And Thats what happened to us.

Speaker Change: But we've fallen into the habit of not paying much attention to them.

Speaker Change: We're at an inflection point, where we're making changes to transform our organization let.

Our future is about bringing them to the forefront again and doubling down on our consumer franchise.

Speaker Change: Let me tell you, where we're going and what it means and how we'll get there.

Speaker Change: We are further evolving into a consumer marketing powerhouse with competitive advantages that exceed what we already have today.

Speaker Change: All of our transformation work starts with our core convictions.

Speaker Change: Many years ago, we develop these core convictions that guide, our associates and driving protecting and nurturing our very special and unique consumer business.

Speaker Change: We're narrowing our focus and optimizing our franchise investing in it.

Speaker Change: This is our mission.

Speaker Change: And we have a new leadership team that's aligned to it and is driving that change.

Speaker Change: Everyone in our company carries the core convictions on their employee badge.

Speaker Change: Accomplishing this mission will have a significant and positive impact on our future financials.

Speaker Change: But we've fallen into the habit of not paying much attention to them.

Speaker Change: It will enable us to consistently do the following four things one deliver.

Speaker Change: Our future is about bringing them to the forefront again and doubling down on our consumer franchise.

Speaker Change: To deliver sustained sales growth of at least 3% annually that is built on higher margin products and innovation across all channels within our consumer business.

We are further evolving into a consumer marketing powerhouse with competitive advantages that exceed what we already have today.

Speaker Change: To be the lowest cost manufacturer of high performance products, giving us flexibility in pricing discussions with retailers and the ability to provide both differentiated and affordable solutions for our consumers.

Speaker Change: We're narrowing our focus and optimizing our franchise investing in it.

Speaker Change: This is our mission.

Speaker Change: And we have a new leadership team that's aligned to it and is driving that change.

Speaker Change: Three drive gross margin up to 35% with mid to high single digit EBITDA percent growth in.

Speaker Change: Accomplishing this mission will have a significant and positive impact on our future financials.

Speaker Change: It will enable us to consistently do the following four things one deliver.

Speaker Change: And four generate strong free cash flow for more shareholder friendly actions.

Speaker Change: To deliver sustained sales growth of at least 3% annually that is built on higher margin products and innovation across all channels within our consumer business.

Speaker Change: These include a long term commitment to significantly reduce our share count and potentially issuing special dividends down the road.

Speaker Change: There is a simple answer to why these things are achievable.

To be the lowest cost manufacturer of high performance products, giving us flexibility in pricing discussions with retailers and the ability to provide both differentiated and affordable solutions for our consumers.

Speaker Change: Our consumer franchise is unmatched in the category with substantial growth potential.

Speaker Change: From a demographic point of view, we have a tailwind.

Speaker Change: Homeownership is as important as ever.

Speaker Change: Three drive gross margin up to 35% with mid to high single digit EBITDA percent growth.

Speaker Change: And there is a shift happening where millennials are becoming the largest group needing and buying homes.

Speaker Change: This younger generation is our emerging consumer.

Speaker Change: Four generate strong free cash flow for more shareholder friendly actions.

Speaker Change: Our advantage over our competitors or our superpowers, our brands supply chain and store sales force our relationship with the largest home and garden retailers in North America, R&D and our ability to generate significant cash flow.

Speaker Change: These include a long term commitment to significantly reduce our share count and potentially issuing special dividends down the road.

Speaker Change: There is a simple answer to why these things are achievable.

Speaker Change: Our consumer franchise is unmatched in the category with substantial growth potential.

Speaker Change: Our marketing is our jet fuel we also have the most engaging creative whether it's the tomcat mouse you just meant to eikon, Martha Stewart or actor Kristofer have you at the center of our campaigns and they bring our brands to life.

Speaker Change: From a demographic point of view, we have a tailwind.

Speaker Change: Homeownership is as important as ever.

Speaker Change: There is a shift happening where millennials are becoming the largest group meeting and buying homes.

Speaker Change: And when we integrate our advertising with our retailer programs, we drive foot traffic and in store consumer activation at unprecedented levels. This stuff works.

Speaker Change: This younger generation is our emerging consumer.

Speaker Change: Our advantage over our competitors or our superpowers, our brands supply chain and store sales force our relationship with the largest home and garden retailers in North America, R&D and our ability to generate significant cash flow.

Speaker Change: We also operate within an environment, where very few retailers play.

Speaker Change: Lawn and garden is absolutely essential to these retailers representing about a fifth of their total sales and roughly 40% of their spring foot traffic.

Speaker Change: Our marketing is our jet fuel we also have the most engaging creative whether it's the tomcat mouse you just met to Eikon, Martha Stewart or actor Kristofer have you at the center of our campaigns and they bring our brands to life.

Speaker Change: Our ability to bring consumers into their stores is critical to their success. They rely on us and we rely on them and we work together to drive consumer takeaway.

Speaker Change: And when we integrate our advertising with our retailer programs, we drive foot traffic and in store consumer activation at unprecedented levels. This stuff works.

Speaker Change: It would be hard for anybody to build a franchise like ours.

Speaker Change: Now let me give you examples of the investments, we're making to strengthen our franchise to gain market share and bring new consumers into our world and deliver growth.

Speaker Change: We also operate within an environment, where very few retailers play.

Speaker Change: This year, we're putting an additional $40 million into our business from brand support to innovation the vast majority of it going to advertising.

Speaker Change: Lawn and garden is absolutely essential to these retailers representing about a fifth of their total sales and roughly 40% of their spring foot traffic.

Speaker Change: Our ability to bring consumers into their stores is critical to their success.

Speaker Change: We're expanding our demographic reach to a broader consumer base.

Speaker Change: This includes the Hispanic population, which is a growing influence in lawn and garden will launch bilingual advertising on digital media and mainstream Spanish television in conjunction with our traditional campaigns.

Speaker Change: They rely on us and we rely on them and we work together to drive consumer takeaway.

Speaker Change: It would be hard for anybody to build a franchise like ours.

Speaker Change: Now let me give you examples of the investments, we're making to strengthen our franchise to gain market share and bring new consumers into our world and deliver growth.

Speaker Change: At the same time, we're spending more in consumer activation programs run by our retailers.

Speaker Change: These programs represent a sizable annual investment in excess of 10% of our net sales.

Speaker Change: This year, we're putting an additional $40 million into our business from brand support to innovation, the vast majority of that going to advertising.

Speaker Change: When you combine these retailer programs with what we're investing in our own advertising and brand support that total investment near 20% of sales.

Speaker Change: We're expanding our demographic reach to a broader consumer base.

Speaker Change: This includes the Hispanic population, which is a growing influence in lawn and garden will launch bilingual advertising on digital media and mainstream Spanish television in conjunction with our traditional campaigns.

Speaker Change: This might sound like a lot and it is and.

Speaker Change: And we're going to continue to spend even more here and over the years going forward let.

Speaker Change: Let me tell you why.

Speaker Change: In exchange for our investments retailers give us more listings share of shelf and off shelf displays.

Speaker Change: At the same time, we're spending more in consumer activation programs run by our retailers there.

Speaker Change: For every dollar we give them to promote our products they spend even more in activation and promotion of our brands.

These programs represent a sizable annual investment in excess of 10% of our net sales.

Speaker Change: The impact of our integrated efforts are evident in the nearly 10% Pos lift we had last year.

Speaker Change: When you combine these retailer programs with what we're investing in our own advertising and brand support that total investment near 20% of sales.

Speaker Change: We outperformed the category by three times, even more if you include live goods.

Speaker Change: This might sound like a lot and it is.

Speaker Change: We will see growth again in these areas this year it.

Speaker Change: And we're going to continue to spend even more here and over the years going forward let.

Speaker Change: It started in Q1 with double digit Pos increases in material share gains.

Speaker Change: Let me tell you why.

Speaker Change: In exchange for our investments retailers give us more listings share of shelf and off shelf displays.

Speaker Change: You May wonder how we can afford all this and to make our numbers. This is where transformation comes in and it begins with being the lowest cost high performance manufacturer.

Speaker Change: For every dollar we give them to promote our products they spend even more in activation and promotion of our brands.

Speaker Change: This will require us to take out cost and drive more efficiencies.

Speaker Change: At a time when pricing is hard to get and rightly. So given today's state of the consumer our ability to reduce our cost structure and realized operational savings is more important than ever.

Speaker Change: The impact of our integrated efforts are evident in the nearly 10% Pos lift we had last year.

Speaker Change: We outperformed the category by three times, even more if you include live goods.

Speaker Change: We are being relentless in scrutinizing, our organization with an eye towards optimization and savings.

Speaker Change: We will see growth again in these areas this year.

Speaker Change: Starting with Q1 with double digit Pos increases in material share gains.

Speaker Change: We're experienced at this our multiyear project springboard initiatives yielded $400 million in annual savings of which we put $100 million back into the business for growth in.

Speaker Change: You May wonder, how we can afford all of us and to make our numbers. This is where transformation comes in and it begins with being the lowest cost high performance manufacturer.

Speaker Change: In fiscal 'twenty, five will take at least $75 million out of our supply chain, that's half of the $150 million in supply chain costs that we've targeted by fiscal 'twenty seven.

Speaker Change: This will require us to take out cost and drive more efficiencies.

Speaker Change: At a time when pricing, it's hard to get and rightly. So given today's state of the consumer our ability to reduce our cost structure and realized operational savings is more important than ever.

Speaker Change: I'll ask Nate to get another $30 million in savings and other aspects of our company by eliminating anything that doesn't add value.

Speaker Change: We're being relentless and scrutinizing, our organization with an eye towards optimization and savings.

Speaker Change: Cross functional work streams are examining processes for streamlining and simplification.

Speaker Change: We're experienced at this our multi year project springboard initiatives yielded $400 million in annual savings of which we put $100 million back into the business for growth.

Speaker Change: I want to stress that we will balance cost out with key infrastructure investments in things like technology and automation.

Speaker Change: To this end, our capex will increase by $25 million to $100 million this year.

Speaker Change: In fiscal 'twenty, five will take at least $75 million out of our supply chain, that's half of the $150 million in supply chain costs that we've targeted by fiscal 'twenty seven.

Speaker Change: We're also building innovation Roadmaps that are five to 10 years out.

Speaker Change: Nate and his team are challenging the status quo to simplify and modernize the portfolio with a priority focus on higher margin products.

Speaker Change: I'll ask Nate to get another $30 million in savings and other aspects of our company by eliminating anything that doesn't add value.

The Scotts fertilizer business as an example, it's a high margin business and we're the market leader, but our unit volume in that other category have declined for more than a decade.

Speaker Change: Cross functional work streams are examining processes for streamlining and simplification I want to stress that we will balance cost out with key infrastructure investments in things like technology and automation.

Speaker Change: Some of this is our doing.

Speaker Change: We know our pricing has got out of whack and we've complicated things by getting away from the annual multi step solutions.

To this end, our capex will increase by $25 million to $100 million this year.

Speaker Change: We and our retail partners heavy it up in the spring with big events on single bag solutions. This year, we're shifting back to educating consumers on the value of fertilizing multiple times a year.

Speaker Change: We're also building innovation Roadmaps that are five to 10 years out.

Nate Baxter: Nate and his team are challenging the status quo to simplify and modernize the portfolio with a priority focus on higher margin products.

Speaker Change: Climate change is also making spring weather more volatile, which impacts our lawn fertilizer business more than any other.

Nate Baxter: The Scotts fertilizer business as an example, it's a high margin business and we're the market leader, but our unit volume and that of the category have declined for more than a decade.

Speaker Change: So we will spread our long spend throughout the year and put more into the fall when the weather window is more favorable and open.

From a product perspective, nate's team supported by our strategy group is developing a strategy for longer term success among.

Nate Baxter: Some of this is arguing.

Nate Baxter: We know our pricing has got out of whack and we've complicated things by getting away from annual multi step solutions.

Speaker Change: Among the things, we're exploring a new formulations natural fertilizers and liquids.

Nate Baxter: We and our retail partners heavy it up in the spring with big events on single bag solutions. This year, we're shifting back to educating consumers on the value of fertilizing multiple times a year.

Speaker Change: When we think about growth, we're more committed than ever to channel expansion.

Speaker Change: A whole group of consumers buys only online and a lot of them are new to our category.

Nate Baxter: Climate change is also making spring weather more volatile, which impacts our lawn fertilizer business more than any other.

Speaker Change: We have a team dedicated to maximizing our Pos this year on all retailer E com sites were.

Nate Baxter: So we will spread our lawn spend throughout the year and put more into the fall when the weather window is more favorable and open.

Speaker Change: We're underpenetrated here and we aim to turbocharge Pos at retail our dot com channel in parallel the consumer team is re imagining our consumer facing digital assets with the launch of our refreshed Scotts Miracle Gro brand website by year end.

Nate Baxter: From a product perspective, nate's team supported by our strategy group is developing a strategy for longer term success.

Nate Baxter: Among the things, we're exploring a new formulations natural fertilizers and liquids.

Speaker Change: It will position us as a house of brands with direct to consumer functionality.

Nate Baxter: When we think about growth, we're more committed than ever to channel expansion.

Speaker Change: Direct to consumer is our chance to expand our subscription and our loyalty programs with this reinvigorated focus on our business, we're getting back to basics and that raises the question what about our cannabis investments.

Nate Baxter: A whole group of consumers buys only online and a lot of them are new to our category.

Nate Baxter: We have a team dedicated to maximizing our Pos this year on all retailer E com sites were.

Speaker Change: We believe that moving Hawthorne out of Scotts Miracle Gro is better for everyone for our shareholders. This would eliminate the volatility of the cannabis sector and generate a significant uplift in gross margin.

Nate Baxter: We're underpenetrated here and we aim to turbocharge Pos at retail our dot Com channel in.

Nate Baxter: In parallel the consumer team is re imagining our consumer facing digital assets with the launch of our refreshed Scotts Miracle Gro brand website by year end.

Speaker Change: We and our banks they could would make it more clear what our equity represents and could expand our price to earnings multiple.

Nate Baxter: It will position us as a house of brands with direct to consumer functionality.

Speaker Change: Moving Hawthorne gardening, and with dedicated marijuana business would bring tax benefits and credit capacity to that company. It would also allow the plant touching business to work alongside Hawthorne's World Class management team with formal relationships the Scotts Miracle Gro.

Nate Baxter: Direct to consumer is our chance to expand our subscription and our loyalty programs with this reinvigorated focus on our business, we're getting back to basics and that raises the question what about our cannabis investments.

Nate Baxter: We believe that moving Hawthorne out of Scotts Miracle Gro is better for everyone for our shareholders. This would eliminate the volatility of the cannabis sector and generate a significant uplift in gross margin.

Speaker Change: I know you've heard us talk about the separation before and you may recall that we moved off of it last year, because we couldnt find a suitable partner.

Speaker Change: The difference today is there are more promising opportunities.

Speaker Change: Hawthorne's now in a position of strength after the hard work to return it to profitability.

Nate Baxter: We and our banks think it would make it more clear what our equity represents and could expand our price to earnings multiple.

Speaker Change: The timing is right and we believe we can make the ship while still meeting our 2025 guidance.

Nate Baxter: Moving Hawthorne gardening into a dedicated marijuana business would bring tax benefits and credit capacity to that company.

Speaker Change: I wanted to talk about another aspect of transformation, we've completely remade the management team and its led to new approaches and ideas.

Nate Baxter: It would also allow the plant touching business to work alongside Hawthorne's World Class management team with formal relationships the Scotts Miracle Gro.

Speaker Change: Showers than most recent addition, and his integration has been seamless.

Nate Baxter: I know you've heard us talk about the separation before and you may recall that we moved off of it last year, because we couldnt find a suitable partner.

Speaker Change: He's taken a collaborative approach to working with Nate Chris and the rest of the team.

Speaker Change: And just this week, we are poised to continue with a refresh of our board of directors.

Nate Baxter: The difference today is there are more promising opportunities.

Nate Baxter: Hawthorne's now in a position of strength after the hard work to return it to profitability.

Speaker Change: Tom Kelly, a longtime director has announced that he will retire from our board effective January 31.

Nate Baxter: The timing is right and we believe we can make the shift while still meeting our 2025 guidance.

Speaker Change: Tom has done great work for almost 20 years and he'll certainly be missed I want to thank him for his service.

Nate Baxter: I want to talk about another aspect of transformation, we've completely remade the management team and its led to new approaches and ideas.

Speaker Change: Later this week I plan to nominate Nick Mirror readers, Chief client officer at vein or media as Toms replacement.

Shai worse than most recent addition, and his integration has been seamless.

Speaker Change: Nick has extensive consumer brand and digital marketing experience.

Nate Baxter: He's taking a collaborative approach to working with Nate Chris and the rest of the team.

Speaker Change: Nick's appointment would continue our efforts to bring new skills and perspectives to the board along with more diversity in terms of age ethnicity, gender and sexual orientation.

Nate Baxter: And just this week, we're poised to continue with a refresh of our board of directors.

Nate Baxter: Tom Kelly, a longtime director has announced that he will retire from our board effective January 31.

Speaker Change: In the past three years, we've added five board members with expertise in leveraged finance fast moving consumer goods retail market, leading brands growth strategies General management and C suite level leadership.

Nate Baxter: Tom has done great work for almost 20 years and he'll certainly be missed I want to thank him for his service.

Nate Baxter: Later this week I plan to nominate Nick Mirror, Rita's, Chief client officer at Dana Media as Toms replacement.

Speaker Change: These changes reflect where we're headed giving us the skill sets the line with the strategy that I described today.

Nate Baxter: Nick has extensive consumer brand and digital marketing experience.

Speaker Change: Good things are happening at SMG, we're driving growth and margin recovery, we continue to improve our financials.

Nate Baxter: Nick's appointment would continue our efforts to bring new skills and perspectives to the board along with more diversity in terms of age ethnicity, gender or sexual orientation.

Speaker Change: We are strengthening and the most powerful franchise in lawn and garden.

Speaker Change: <unk> is an iconic American company with a rich history of market, leading brands spanning nearly 160 years.

Nate Baxter: In the past three years, we've added five board members with expertise in leveraged finance fast moving consumer goods retail market, leading brands growth strategies General management and C suite level leadership.

Speaker Change: We built this category that has extraordinary financial upside and we're continuing to redefine it.

Speaker Change: For our shareholders this translates into greater value creation and sustainable growth.

Nate Baxter: These changes reflect where we are headed giving us the skill sets the line with the strategy that I described today.

Speaker Change: My management team and I are completely committed to this.

Speaker Change: I want to thank our retail partners are banks, my leadership team and our associates for their commitment most.

Nate Baxter: Good things are happening at SMG, we're driving growth and margin recovery, we continue to improve our financials.

Speaker Change: Most of all I appreciate our shareholders for sticking with us and supporting US as we take our business to the next level.

Nate Baxter: We're strengthening the most powerful franchise in lawn and garden.

Nate Baxter: Scott is an iconic American company with a rich history of market, leading brands spanning nearly 160 years.

Mark Schauer: Now I'll turn it over to Mark.

Mark Schauer: Thank you, Jim and Hello, everyone before I get into the first quarter financials, I'll add to Jim's comments about the transition and how well it's going.

Nate Baxter: We built this category that has extraordinary financial upside and we're continuing to redefine it.

Nate Baxter: For our shareholders this translates into greater value creation and sustainable growth.

Mark Schauer: Throughout my 13 year career with Scotts Miracle Gro I've worked in many facets of finance for strong relationships with our external partners and collaborated with the executive team and business leads.

Nate Baxter: My management team and I are completely committed to this.

Nate Baxter: I want to thank our retail partners are banks, my leadership team and our associates for their commitment most.

Nate Baxter: Most of all I appreciate our shareholders for sticking with us and supporting US as we take our business to the next level.

Mark Schauer: I'm, a believer in being open and transparent and I look forward to developing relationships with the investor community.

Mark Schauer: Now I'll turn it over to Mark.

Mark Schauer: I've built on this approach in my early tenure and look forward to helping the team make progress towards our fiscal 'twenty five and three year growth plans.

Mark Schauer: Thank you, Jim and Hello, everyone before I get into the first quarter financials, I'll add to Jim's comments about the transition and how well it's going.

Mark Schauer: My passion for growing this business and driving value is rooted in my own lawn and gardening experiences.

Speaker Change: Throughout my 13 year career with Scotts Miracle Gro I've worked in many facets of finance for strong relationships with our external partners and collaborated with the executive team and business leads.

Mark Schauer: I'm, an avid consumer and I can personally attest that Scotts Miracle Gro has the best brands in the business.

Mark Schauer: Shifting to the quarter, we are off to a great start.

Mark Schauer: I am pleased that the strong first quarter results are well ahead of expectations.

Mark Schauer: Believer in being open and transparent.

Mark Schauer: While we're optimistic for the year, we are maintaining our guidance, especially since the first quarter represents less than 10% of our total Pos.

Speaker Change: And I look forward to developing relationships with the investor community.

Speaker Change: I built on this approach in my early tenure and look forward to helping the team make progress towards our fiscal 'twenty five and three year growth plan.

Mark Schauer: Our second and third quarters will be the biggest contributors to our full year performance.

Speaker Change: My passion for growing this business and driving value is rooted in my own lawn and gardening experiences.

Mark Schauer: So you can expect us to revisit guidance later in the fiscal year as we usually do once the season is in full swing.

Speaker Change: I'm, an avid consumer and I can personally attest that Scotts Miracle Gro has the best brands in the business.

Mark Schauer: What we know from our first quarter performance is that we have positive momentum and our retail partners are highly engaged we.

Speaker Change: Shifting to the quarter, we are off to a great start.

Speaker Change: I am pleased that the strong first quarter results are well ahead of expectations.

Mark Schauer: We are positioned to drive consumer takeaway with the right strategies and investments.

Speaker Change: While we are optimistic for the year, we are maintaining our guidance, especially since the first quarter represents less than 10% of our total Pos.

Mark Schauer: In addition, our first quarter results reflect the hard work by our supply chain team in order to achieve our full year target of $75 million of cost savings.

Speaker Change: Our second and third quarters will be the biggest contributors to our full year performance.

Mark Schauer: As a reminder is a part of our $150 million three year target that Jim outlined earlier.

Speaker Change: So you can expect us to revisit guidance later in the fiscal year as we usually do once the season is in full swing.

Mark Schauer: Now, let's take a look at the top line during the first quarter sales on a companywide basis were $417 million.

Speaker Change: What we know from our first quarter performance is that we have positive momentum and our retail partners are highly engaged we are positioned to drive consumer takeaway with the right strategies and investments.

Mark Schauer: From $410 million.

Mark Schauer: U S consumer volume gains increased 11% to $341 million from $307 million offsetting planned softness in Hawthorne.

Speaker Change: In addition, our first quarter results reflect the hard work by our supply chain team in order to achieve our full year target of $75 million of cost savings.

Mark Schauer: This included the strength of higher consumer engagement in the fall and earlier retailer load in for the spring season.

Speaker Change: Which as a reminder is a part of our $150 million three year target that Jim outlined earlier.

We expect retailer load in to be the strongest in Q1 and Q2.

Speaker Change: Now, let's take a look at the top line during the first quarter sales on a company wide basis were $417 million.

Mark Schauer: Which typically account for little more than half of our expected full year net sales.

Mark Schauer: Replenishment orders in Q3, and Q4 will be dependent upon the level of consumer sell through during the peak spring and summer selling season.

Speaker Change: Up from $410 million U.

Speaker Change: U S consumer volume gains increased 11% to $341 million from $307 million.

Mark Schauer: As previously shared for the full year, we expect low single digit core growth in U S consumer sales.

Speaker Change: Offsetting planned softness in Hawthorne.

Speaker Change: This included the strength of higher consumer engagement in the fall and earlier retailer load in for the spring season.

Mark Schauer: Which excludes the impact of non repeating fiscal 'twenty four sales for Aero garden, and bulk seed and fertilizer raw materials.

Speaker Change: We expect retailer load in to be the strongest in Q1 and Q2.

Mark Schauer: POS is another healthy story with an increase of 12% in dollars and 13% in units.

Speaker Change: Which typically account for little more than half of our expected full year net sales.

Mark Schauer: Consumer takeaway was driven by our fall advertising and promotional investment along with more positive macroeconomic factors.

Speaker Change: Replenishment orders in Q3, and Q4 will be dependent upon the level of consumer sell through during the peak spring and summer selling season.

Mark Schauer: Hawthorne sales declined 35% to $52 million compared to $80 million last year.

Speaker Change: As previously shared for the full year, we expect low single digit core growth in U S consumer sales.

Mark Schauer: Significant decline was expected because of the strategic shift Hawthorne made in April of 24 to exit low margin third party distribution and focus on its more profitable proprietary brands.

Speaker Change: Which excludes the impact of non repeating fiscal 'twenty four sales for Aero garden, and bulk seed and fertilizer raw materials.

Speaker Change: POS is another healthy story with an increase of 12% in dollars and 13% in units.

Mark Schauer: For the full year, we expect mid single digit decline in Hawthorne sales.

Mark Schauer: While hawthorne's topline was down as profitability improved significantly in the quarter and we continue to expect that Hawthorne will contribute approximately $20 million of EBITDA for the full year.

Speaker Change: Consumer takeaway was driven by our fall advertising and promotional investment along with more positive macroeconomic factors.

Speaker Change: Hawthorne sales declined 35% to $52 million compared to $80 million last year.

Mark Schauer: Add it all up and from a full year total company perspective, we expect our full year net sales to be around flat to prior year.

Speaker Change: Significant decline was expected because of the strategic shift Hawthorne made in April of 24 to exit low margin third party distribution and focus on its more profitable proprietary brands.

Mark Schauer: Now moving to gross margin, we achieved over 750 basis points of improvement in both GAAP and non-GAAP adjusted gross margin rates.

Speaker Change: For the full year, we expect mid single digit decline in Hawthorne sales.

Mark Schauer: The GAAP rate was 22, 7% versus 15, 2% in prior year.

Speaker Change: While hawthorne's top line was down as profitability improved significantly in the quarter and we continue to expect the Hawthorne will contribute approximately $20 million of EBITDA for the full year.

Mark Schauer: And the non-GAAP adjusted gross margin rate was 24% versus 13, 7%.

Mark Schauer: The primary drivers included lower material costs favorable fixed cost leverage improved product and segment mix.

Speaker Change: Add it all up and from a full year total company perspective, we expect our full year net sales to be around flat to prior year.

Mark Schauer: And lower distribution costs from our prior year warehouse closures.

Speaker Change: Now moving to gross margin, we achieved over 750 basis points of improvement in both GAAP and non-GAAP adjusted gross margin rates.

Mark Schauer: As I mentioned earlier, we expect the $75 million of supply chain savings to contribute to our near 30% gross margin rate target for the full year.

Speaker Change: The GAAP rate was 22, 7% versus 15, 2% in prior year.

In terms of timing about two thirds of the fiscal 'twenty five gross margin rate improvement will come in the first half of the year due to favorable material costs and the benefit of last year's warehouse and other facility closures.

Speaker Change: And the non-GAAP adjusted gross margin rate was 24% versus 13, 7%.

Speaker Change: The primary drivers included lower material costs favorable fixed cost leverage improved product and segment mix.

Mark Schauer: The remainder will mainly come in Q4, as we lap one time inventory write offs taken in the fiscal fourth quarter of last year.

Speaker Change: And lower distribution costs from our prior year warehouse closures.

Mark Schauer: Total commodity needs for fiscal 'twenty, five or approximately 60% locked as of the end of the quarter.

As I mentioned earlier, we expect the $75 million of supply chain savings to contribute to our near 30% gross margin rate target for the full year.

Mark Schauer: So we have high visibility on input costs through the remainder of the year.

Speaker Change: In terms of timing about two thirds of the fiscal 'twenty five gross margin rate improvement will come in the first half of the year due to favorable material costs and the benefit of last year's warehouse and other facility closures.

Mark Schauer: All in we are tracking well to our full year, 30% gross margin rate target.

Mark Schauer: Moving down the P&L SG&A was $125 million, an increase of 9% from $115 million a year ago.

Speaker Change: The remainder will mainly come in Q4, as we lap one time inventory write offs taken in the fiscal fourth quarter of last year.

Mark Schauer: The increase was mainly driven by our planned investments in our media technology and people.

Speaker Change: Total commodity needs for fiscal 'twenty, five or approximately 60% locked as of the end of the quarter.

Mark Schauer: As previously shared our yearend SG&A target includes $40 million of additional investments in our business that Jim talked about.

Speaker Change: So we have high visibility on input costs through the remainder of the year.

Mark Schauer: Along with higher performance based incentives these investments will drive our current year SG&A to approximately 17% of net sales versus 16% last year.

Speaker Change: All in we are tracking well to our full year, 30% gross margin rate target.

Speaker Change: Moving down the P&L SG&A was $125 million, an increase of 9% from $115 million a year ago.

Mark Schauer: Adjusted EBITDA improved by nearly $30 million for.

For the quarter. It was income of $3 8 million versus a loss of $25 8 million last year.

Speaker Change: The increase was mainly driven by our planned investments in our media technology and people.

Mark Schauer: This reflects our Q1 gross margin recovery, coupled with strong fall Pos results and higher retailer shipments ahead of spring.

Speaker Change: As previously shared our yearend SG&A target includes $40 million of additional investments in our business that Jim talked about.

Mark Schauer: Below the line interest expense was down 21% to $34 million on lower debt balances and more favorable interest rates.

Speaker Change: Along with higher performance based incentives these investments will drive our current year SG&A to approximately 17% of net sales versus 16% last year.

Mark Schauer: We continue to use strong cash flow generation and working capital management to further reduce debt.

Speaker Change: Adjusted EBITDA improved by nearly $30 million for.

Mark Schauer: We now expect interest expense for the full year to be lower by 15 million to $20 million versus prior year.

Speaker Change: For the quarter. It was income of $3 8 million versus a loss of $25 8 million last year.

Mark Schauer: For Q1, the non-GAAP adjusted tax rate was 31, 4% due to the impact of the seasonal pre tax quarterly loss and the timing of discrete items.

Speaker Change: This reflects our Q1 gross margin recovery, coupled with strong fall Pos results and higher retailer shipments ahead of spring.

Speaker Change: Below the line interest expense was down 21% to $34 million on lower debt balances and more favorable interest rates.

Mark Schauer: For the full year the non-GAAP adjusted tax rate is still expected to be in a range of 27% to 29%.

Speaker Change: We continue to use strong cash flow generation and working capital management to further reduce debt.

Mark Schauer: Also because Q1 is typically a last quarter given the seasonal nature of our business. The company is required to use the basic share count to calculate EPS.

Speaker Change: We now expect interest expense for the full year to be lower by 15 million to $20 million versus prior year.

Mark Schauer: For the current quarter. This was $57 3 million compared to $56 7 million in prior year.

Speaker Change: For Q1, the non-GAAP adjusted tax rate was 31, 4% due to the impact of the seasonal pre tax quarterly loss and the timing of discrete items.

Mark Schauer: The increase in share count is attributable to share based compensation and is expected to increase to approximately 59 million shares on a diluted basis by fiscal year end.

Speaker Change: For the full year the non-GAAP adjusted tax rate is still expected to be in a range of 27% to 29%.

Mark Schauer: The first quarter GAAP net loss was $69 5 million or $1 21 per share comp.

Speaker Change: Also because Q1 is typically a last quarter given the seasonal nature of our business. The company is required to use the basic share count to calculate EPS.

Mark Schauer: Compared with the prior year loss of $80 5 million or $1 42 per share.

Mark Schauer: non-GAAP adjusted loss, which excludes impairment restructuring and other nonrecurring items improved significantly to $51 million or <unk> 89 per share.

Speaker Change: For the current quarter. This was $57 3 million compared to $56 7 million in prior year.

Speaker Change: The increase in share count is attributable to share based compensation and is expected to increase to approximately 59 million shares on a diluted basis by fiscal year end.

Mark Schauer: Versus a loss of $82 2 million or $1 45 per share a year ago.

Mark Schauer: Now moving onto certain adjustments to our GAAP numbers.

Speaker Change: The first quarter GAAP net loss was $69 5 million or $1 21 per share <unk>.

Mark Schauer: For the quarter, we had $21 7 million in impairment restructuring and other nonrecurring items. This activity included the following.

Speaker Change: Compared with the prior year loss of $80 5 million or $1 42 per share.

Mark Schauer: First employee severance costs, including those related to executive team changes second valuation losses from our fiscal 'twenty, one investment and risk capital and third the final phase of our project springboard cost reductions that began in fiscal 'twenty two.

Speaker Change: non-GAAP adjusted loss, which excludes impairment restructuring and other nonrecurring items improved significantly to $51 million or <unk> 89 per share.

Speaker Change: Versus a loss of $82 2 million or $1 45 per share a year ago.

Mark Schauer: You may recall that our Hawthorne collective subsidiary provided an investment in the form of convertible notes to risk capital, which has legal cannabis operations in the state of New York.

Speaker Change: Now moving onto certain adjustments to our GAAP numbers.

Speaker Change: For the quarter, we had $21 $7 million impairment restructuring and other nonrecurring items. This activity included the following.

Mark Schauer: Late in our first quarter risk capital merged with consortium as a result, we converted those notes to nonvoting exchangeable shares and consortium.

Speaker Change: First employee severance costs, including those related to executive team changes.

Mark Schauer: Going forward. These shares in consortium will be accounted for as an equity method investment.

Speaker Change: Second valuation losses from our fiscal 'twenty, one investment and risk capital.

Speaker Change: And third the final phase of our project springboard cost reductions that began in fiscal 'twenty two.

Mark Schauer: With our proportionate share of consortium net profit or loss being recorded within equity earnings line in our P&L.

Speaker Change: You may recall that our Hawthorne collective subsidiary provided an investment in the form of convertible notes to risk capital, which has legal cannabis operations in the state of New York.

Mark Schauer: We plan to record this activity on a lag starting in our third quarter of this fiscal year.

Mark Schauer: Next I'll move to free cash flow and the balance sheet.

Speaker Change: Late in our first quarter rib capital merged with consortium as a result, we converted those notes to nonvoting exchangeable shares and consortium.

Mark Schauer: We continue to focus on free cash flow to further strengthen our balance sheet and in Q1, our total debt was lower versus prior year by $337 million.

Speaker Change: Going forward these shares and consortium will be accounted for as an equity method investment.

Mark Schauer: Free cash flow usage for the quarter of $475 million reflects our normal seasonal build of working capital.

Speaker Change: Our proportionate share of consortiums net profit or loss being recorded within equity earnings line in our P&L.

Mark Schauer: Our strong financial results along with the cash flow management have helped reduce our leverage ratio another quarter turn.

Speaker Change: We plan to record this activity on a lag starting in our third quarter of this fiscal year.

Mark Schauer: For the first quarter, our leverage ratio was 452 times net debt to adjusted EBITDA. This is well below the covenant maximum of five five times.

Speaker Change: Next I'll move to free cash flow and the balance sheet.

Speaker Change: We continue to focus on free cash flow to further strengthen our balance sheet and in Q1, our total debt was lower versus prior year by $337 million.

Mark Schauer: Note that our covenant maximum will fall throughout the year decreasing to 525 in the second quarter five in the third quarter and $4 75 in the fourth quarter of this fiscal year.

Speaker Change: Free cash flow usage for the quarter of $475 million reflects our normal seasonal build of working capital.

Mark Schauer: Our expected leverage ratio will also continue on a declining path and we have line of sight to achieving leverage in the low fours by fiscal year end.

Speaker Change: Our strong financial results along with the cash flow management have helped reduce our leverage ratio another quarter turn.

Speaker Change: For the first quarter, our leverage ratio was 452 times net debt to adjusted EBITDA. This is well below the covenant maximum of five five times.

Mark Schauer: As I wrap up I want to recap our three big financial objectives. This fiscal year.

Mark Schauer: They include first invest in our brands to maintain and build upon the sales growth in fiscal 'twenty four from additional listings and share gains.

Speaker Change: Note that our covenant maximum will fall throughout the year decreasing to 525 in the second quarter five in the third quarter and $4 75 in the fourth quarter of this fiscal year.

Mark Schauer: Second drive margin recovery through sales growth and supply chain cost savings and.

Mark Schauer: And last strengthen the balance sheet through further debt pay down and our focus on returning to a more flexible capital allocation strategy.

Speaker Change: Our expected leverage ratio will also continue on a declining path and we have line of sight to achieving leverage in the low fours by fiscal year end.

Mark Schauer: We will continue to make substantial progress on each of these in 'twenty five and remain on track to our three year growth plan.

Speaker Change: As I wrap up I want to recap our three big financial objectives. This fiscal year.

Mark Schauer: Lastly, we are tightly managing costs and to Echo Jim's comments, we are strengthening our core consumer franchise and what he calls our superpowers.

Speaker Change: They include first invest in our brands to maintain and build upon the sales growth in fiscal 'twenty four from additional listings and share gains.

Mark Schauer: Most importantly, we are future focused building on greater value and create a more shareholder friendly environment.

Speaker Change: Second drive margin recovery through sales growth and supply chain cost savings and.

Speaker Change: And last strengthen the balance sheet through further debt pay down and our focus on returning to a more flexible capital allocation strategy.

Speaker Change: Thank you and we can now start the Q&A I'll turn it over to the operator.

Speaker Change: Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again.

Speaker Change: We will continue to make substantial progress on each of these in 'twenty five and remain on track to our three year growth plan.

Speaker Change: A time and let everyone participate we ask that you limit yourself to one question and one follow up we will pause for a moment, while we compile the Q&A roster.

Speaker Change: Lastly, we are tightly managing cost and to Echo Jim's comments, we are strengthening our core consumer franchise and what he calls our superpowers.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Most importantly, we are future focused building on greater value and create a more shareholder friendly environment.

Speaker Change: Okay.

Question comes from Chris Carey with Wells Fargo Securities. Your line is open.

Speaker Change: Thank you and we can now start the Q&A I'll turn it over to the operator.

Chris Carey: Hi, good morning, everyone.

Speaker Change: Hey, Chris Good morning.

Speaker Change: There was a comment in the press release about a strong fall season across all categories and some early retailer retailer and load in for the spring season.

Speaker Change: Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again and in the interim.

Speaker Change: A time and let everyone participate we ask that you limit yourself to one question and one follow up we will pause for a moment, while we compile the Q&A roster.

Speaker Change: Do you envision any timing shifts from the March quarter into the December quarter are there any implications for the March quarter number one.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: And then secondly, as we sit here going into February can you maybe expand a bit on early reads that you are seeing in markets.

Speaker Change: Our first question comes from Chris Carey with Wells Fargo Securities. Your line is open.

Chris Carey: Hi, good morning, everyone.

Speaker Change: I suppose there is no markets that are breaking but how you are feeling across the country right now going into spring and maybe just sprinkle and any comments on your exposure to the west coast.

Speaker Change: Chris Good morning.

Speaker Change: There was a comment in the press release about strong fall season across all categories and some early re cater retailer load in for the spring season.

Speaker Change: Los Angeles County, specifically.

Speaker Change: So just a little timing shift on.

Speaker Change: Do you envision any timing shifts from.

Speaker Change: At December versus large quarter lessening some early reads.

Speaker Change: The March quarter into the December quarter are there any implications for the March quarter number one.

Speaker Change: There's a lot of stuff in there dude.

Speaker Change: But let's just start with.

Speaker Change: And then secondly, as we sit here going into February can.

Speaker Change: The fall went really well.

Speaker Change: Can you maybe expand a bit on early reads that you are seeing in markets.

Speaker Change: And actually there is season happening.

Speaker Change: We're having.

Speaker Change: I suppose there is no markets that are breaking but how youre feeling across the country right now going into spring and maybe just sprinkle into any comments on your exposure to the west coast.

Speaker Change: Having a board meeting in Florida.

Speaker Change: After this call we are.

Speaker Change: Headed down there and Thursday, and Friday Board meeting, there, where it's forecasted to be like near 80, I think for I don't know the next five or six days so definitely.

Speaker Change: In Los Angeles County, specifically.

Speaker Change: Just a little timing shift on.

Speaker Change: The country is beginning to come away from our lawn and garden point of view and the numbers continue to look good at the Pos level.

Speaker Change: December versus March quarter, Thats, having some early Q3s.

Speaker Change: There's a lot of stuff in there dude.

Speaker Change: But let's just start with.

Speaker Change: Nate and I were speaking to a senior merchant very senior merchant.

Speaker Change: The fall went really well.

Speaker Change: And actually there is season happening.

Speaker Change: I guess that was last week.

Speaker Change: Sure.

Speaker Change: Having a board meeting in Florida.

Speaker Change: <unk>.

Speaker Change: What we were talking about was <unk>.

Speaker Change: After this call we are.

Speaker Change: Headed down there and Thursday, and Friday Board meeting, there, where it's forecasted to be like in your <unk> I think for I don't know the next five or six days so definitely.

Speaker Change: Partially my comments that I made today and.

Speaker Change: Does that sound right to them, which is.

Speaker Change: Sort of discussions of that program.

Speaker Change: But.

Speaker Change: The country is beginning to come away from our lawn and garden point of view and the numbers continue to look good at the Pos level.

Speaker Change: We got into just how Pos look in their view.

Speaker Change: Of.

Speaker Change: Nathan I, we're speaking to as senior merchant very senior merchant.

Speaker Change: Based on this business that we're seeing in the fall and so far this spring where markets are opening.

Speaker Change: I guess that was last week.

Speaker Change: Did they have data and it sort of portends, then what to look forward four and <unk>.

Speaker Change: <unk>.

Speaker Change: What we were talking about was <unk>.

Speaker Change: Partially in my comments that I made today and.

Speaker Change: They believe that they did and then it will and it wasn't just lawn and garden. It was just generally their sales and that they felt that this was a good indication that the consumer is alive and well and willing to buy a home improvement retailer.

Speaker Change: Does that sound right to them, which is.

Speaker Change: Sort of discussions of that program.

Speaker Change: But.

Speaker Change: We got into just how Pos looks and their view.

Speaker Change: Of.

Speaker Change: Sure.

Speaker Change: So that that felt pretty good to us their biggest concern and this gets to the timing.

Speaker Change: Based on this business that we're seeing in the fall and so far this spring where markets are opening.

Speaker Change: Is.

Speaker Change: Do they have enough inventory deployed at the store level and so what that said to us that there is no sensitivity on load issues.

Speaker Change: Did they have data that sort of portends, then what to look forward four and <unk>.

Speaker Change: They believe that they did and then it will and it wasn't just lawn and garden. It was just generally their sales and that they felt that this was a good indication that the consumer is alive and well and willing to to buy this with a home improvement retailer.

Speaker Change: And there is a view again go back to this based on what they were seeing with their Pos data not just in lawn and garden, but across the chain that the consumer appears to be in a good mood to buy stuff.

Speaker Change: And that historically that is a good sign and so.

Speaker Change: So that that felt pretty good to us their biggest concern and this gets to timing.

Speaker Change: I believe it I wanted to believe it too.

Speaker Change: So I think that's healthy I don't know what I've missed Nate on what else no I'll just I'll.

Speaker Change: As.

Speaker Change: Do they have enough inventory deployed at the store level and so what that said to US is there is no sensitivity on load issues.

Speaker Change: I'll add a little a little more color so coming out of last summer lot of lawn damage in particular and I think the fall pass really showed the consumers were engaged.

Speaker Change: And there is a view again go back to this based on what they were seeing with their Pos data not just in lawn and garden, but across the chain that the consumer appears to be in a good mood to buy stuff.

Speaker Change: We know historically that not all consumers come back and fix in the fall. So I think that gives us a little more confidence in the spring.

Speaker Change: The comment on the West coast really a non factor for us.

Speaker Change: We're obviously deeply concerned about what's happening in those communities, but from a business perspective, not going to be material and of course, our teams will be out there helping folks when the time is right to rebuild I would add likewise.

Speaker Change: And that historically that is a good sign and so.

Speaker Change: I believe it I wanted to believe it too.

Speaker Change: So I think that's healthy I don't know what I've missed Nate on what else no.

Speaker Change: Yes, I'll add a little a little more color so coming out of last summer lot of lawn damage in particular and I think the fall pass really showed the consumers were engaged we know historically that not all consumers come back and fix in the fall. So I think that gives us a little more confidence in the spring.

Speaker Change: Winter weather, we've had especially in the southeast on the East Coast I think the conventional wisdom among our retail partners is that'll be good for lawn and garden will be a lot of necessary repair work in the spring so.

Speaker Change: They're all between what we saw in the fall the load and it's supported by our Q1 numbers from our retail partners.

Speaker Change: To comment on the West coast really a non factor for us.

Speaker Change: We're obviously deeply concerned about what's happening in those communities, but from a business perspective, not going to be material and of course, our teams will be out there helping folks when the time is right to rebuild I would add likewise.

Speaker Change: We feel like we are.

Chris Carey: Established as we can be for a decent spring and we'll see what happens and then Chris just to circle back on kind of phasing of sales.

Chris Carey: Low single digit U S consumer guide that we've given you.

Speaker Change: Winter weather, we've had especially in the southeast on the East Coast I think the conventional wisdom among our retail partners is that'll be good for lawn and garden there'll be a lot of necessary repair work in the spring so.

Chris Carey: It's.

We would expect the first half in the second half.

Chris Carey: Of our fiscal year to be pretty consistent as far as having that similar pattern of sales growth. So there might've been a little bit of earlier load in and maybe some of your models and all of that but I would say that generally that low single digit we should see that the first half of the year and then the second half of the year and as far as traditional sales patterns go.

Speaker Change: Overall between what we saw in the fall.

Speaker Change: The load and it's supported by our Q1 numbers from our retail partners.

Speaker Change: Like where is.

Speaker Change: Established as we can be for a decent spring and we'll see what happens and then Chris just to circle back on kind of phasing of sales.

Chris Carey: We've kind of gotten back to our pre COVID-19 norms of $55 to 45%.

Speaker Change: The low single digit U S consumer guide that we've given you.

Chris Carey: 55% of the first half of the year being a sale.

Speaker Change: We would expect the first half in the second half of our fiscal year to be pretty consistent as far as having that similar pattern of sales growth. So there might have been a little bit of earlier load and then maybe some of your models and all of that.

Chris Carey: Sales and then the $45 in the back half so we've gotten back to a little more normal sales pattern on that front.

Chris Carey: Okay, Great comprehensive my follow up is on Hawthorne Jim.

Chris Carey: The concept of.

Speaker Change: That but I would say that generally that low single digit we should see that the first half of the year and then the second half of the year and as far as traditional sales patterns go we've kind of gotten back to our pre COVID-19 norms of $55 to 45%.

Chris Carey: A strategic alternative for Hawthorne has been contemplated or a long while now.

Chris Carey: And there have been logistical challenges with actually getting something done right and so I guess in a way I think there's always been some desire or increasing desire to do something with the asset over time.

Speaker Change: 55% of the first half of the year being.

Speaker Change: Sales and then the 45 million in the back half so we've gotten back to a little more normal sales pattern on that front.

Chris Carey: And so I guess the question is are you feeling like the logistical side of actually being able to do something with the asset is getting better or are you simply saying you remain committed to.

Speaker Change: Okay, Great comprehensive my follow up is on Hawthorne, Jim I think the concept of.

Speaker Change: Our strategic alternatives for Hawthorne has been contemplated.

Chris Carey: Finding an alternative for this business.

Speaker Change: For a long while now and.

Chris Carey: I'd say both.

Speaker Change: And there have been logistical challenges with actually getting something done right.

So.

Chris Carey: Yeah.

Chris Carey: I think Matt and I.

Speaker Change: So I guess in a way I think there's always been some desire or increasing desire to do something with the asset over time.

Chris Carey: Probably we're not in exactly the same spot if you look back when.

Chris Carey: Matt was here and I think his view is if it's if it's profitable. Some of you guys shared this when you were out at the Investor Day here last summer.

Speaker Change: And so I guess the question is are you feeling like the logistical side of actually being able to do something with the asset is getting better or are you simply saying you remain committed to.

Chris Carey: First of all it's good news that Hawthorne is back in the black.

Chris Carey: And that's.

Speaker Change: <unk>.

Speaker Change: Finding an alternative for this business.

Chris Carey: Decent for the equity just based on your P/e.

Speaker Change: I'd say both.

Chris Carey: That I would say are higher than sort of our business than they are in sort of screwed.

Speaker Change: So.

Speaker Change: Yeah.

Speaker Change: I think Matt and I.

Chris Carey: Screwed up public equities that are out there for for cannabis and therefore, it does add value.

Speaker Change: Probably we're not in exactly the same spot if you look back when Matt was here.

Chris Carey: I got two and so on.

Speaker Change: And I think as you as if it's if it's profitable some of you guys shared this when you were out at the Investor Day here last summer.

Chris Carey: Leading with my Chin a little bit here.

Chris Carey: Because this is probably the last.

Chris Carey: Month and a half.

Speaker Change: First of all it's good news that Hawthorne is back in the black.

Chris Carey: We're basically and.

Chris Carey: We can talk about it during the call, but it's not that the market has been so kind to Hawthorne, it's been very much internal work to cut expenses and do everything they can to get where they get too.

Speaker Change: And Ed.

Speaker Change: Decent for the equity just based on your P/e.

Speaker Change: <unk>.

Speaker Change: I would say are higher than sort of our business and they are in sort of D. C.

Chris Carey: And I think we're confident in the $20 million.

Speaker Change: Screwed up public equities that are out there for for cannabis and therefore, it does add value.

Chris Carey: We have on my.

Chris Carey: Mandates. They are on my board for Hawthorne, It's a bigger number than mark is using.

Speaker Change: I got two and so I'm, leading with my Chin a little bit here.

Speaker Change: Because this is probably the last.

Chris Carey: In our strategic plan numbers, meaning that I think it's going to be hard work for them to get.

Speaker Change: Month and a half.

Speaker Change: We're basically.

Chris Carey: To a number that.

<unk>.

Speaker Change: We can talk about it during the call, but it's not that the market has been so kind to Hawthorne, it's been very much internal work to cut expenses and do everything they can to get where they get to.

Chris Carey: I would find respectful.

Chris Carey: It doesn't mean, it's impossible in there they've done a really really good work, but it means its relatively small beer.

Chris Carey: And.

Speaker Change: And I think we're confident in the $20 million.

Chris Carey: I think if you look and say with all of the sort of downsides of.

Speaker Change: We have on my.

Chris Carey: Good news Bad news and I think hard on.

Speaker Change: Mandates they are on my board.

The shareholders.

Speaker Change: For Hawthorne, it's a bigger number than mark is using.

Chris Carey: Clarity on what our equity represents.

Speaker Change: In our strategic plan numbers, meaning that.

Chris Carey: Ed I was talking to some of our external advisors and I just said the question is.

Speaker Change: I think it's going to be hard work for them to get.

Chris Carey: This could be so much more valuable than a pure part business.

Speaker Change: To a number that.

Speaker Change: I would find respectful.

Chris Carey: And then it could be with US. This is not like we're looking to get rid of it we're looking to sort of focus our investments in.

Speaker Change: It doesn't mean, it's impossible in there they've done really really good work, but it means its relatively small beer.

Speaker Change: And.

Chris Carey: Sort of the best configuration possible for our shareholders.

Speaker Change: I think if you look and say with all of the sort of downsides of.

Chris Carey: And I'm going to say for per Chris' Hulu really one of the things that Chris does here as leads that business for us.

Speaker Change: Good news Bad news and I think hard on.

Chris Carey: <unk>.

Speaker Change: The shareholders.

Chris Carey: Authority matters I think.

Speaker Change: Clarity on what our equity represents.

Chris Carey: In my view.

Chris Carey: And so.

Speaker Change: I was talking to some of our external advisors and I just said the question is.

Chris Carey: Once I made that decision which is.

Speaker Change: This could be so much more valuable than a pure part business.

Chris Carey: And not by myself and one of the things that we did is we sort of finalize the script here.

Speaker Change: Then it could be with US. This is not like we're looking to get rid of it we're looking to sort of focus our investments in.

Chris Carey: I wanted my entire leadership team to say do you guys. All agree because it's not just that I agree in a couple of our advisors do you guys. All agree that this is the right move and they said yes.

Speaker Change: Sort of the best configuration possible for our shareholders.

And I'm going to say for for Chris Hulu really one of the things that Chris does here as leads that business for us.

Chris Carey: And back to now the logistical side.

Chris Carey: The logistical side was never something we Couldnt do I think we just said is it worth the hassle.

Speaker Change: <unk>.

Authority matters I think.

Speaker Change: My view.

Speaker Change: And so.

Chris Carey: The decision to keep it in there and it's positive and if you remember this is legal business is that is that the best thing changing which I think helps with the profitability of the business. It's a different conversation when it's a loss making business and when it is stable.

Speaker Change: Once I made that decision which is.

Speaker Change: And not by myself and one of the things that we did is we sort of finalize the script here.

Speaker Change: I wanted my entire leadership team to say do you guys. All agree because it's not just that I agree in a couple of our advisors do you guys. All agree that this is the right move and they said yes.

Chris Carey: Stable profitable business in which it is.

Chris Carey: Now.

Chris Carey: So.

Chris Carey: I think once we all agreed and I agreed that this was the direction there.

Speaker Change: And back to now the logistical side.

Chris Carey: It was neat asking people to say breakdown and logistical issues.

Speaker Change: The logistical side was never something we Couldnt do I think we just said is it kind of worth the hassle.

Chris Carey: And we're going to talk about this with the board and I think the board is I think.

Speaker Change: The decision to keep it in there and it's positive and is it remember this is legal business is that is that the best thing changing which I think helps with the profitability of the business. It's a different conversation when it's a loss making business than what it is.

Chris Carey: This is going to be the request is the board is going to authorize me.

Chris Carey: Subject to a bunch of things that have to happen working with the banks and stuff like that so that.

Chris Carey: We do need approval from banks on this.

Speaker Change: Stable profitable business in which it is.

Chris Carey: But my view is all of that is going to happen in the next couple of months and will begin as soon as we can so you may start seeing the first steps to this.

Speaker Change: Now.

Speaker Change: So.

Speaker Change: Once we all agreed and I agreed that this was the direction then it was meet asking people to say breakdown and logistical issues.

Chris Carey: Because there's a bunch of different assets, we're talking about.

Chris Carey: Moving them.

Speaker Change: And we're going to talk about this with the board and I think the board is I think.

Chris Carey: Could be as soon as.

Chris Carey: A month or two.

Chris Carey: So I think we're pretty much prime fraction as agreement amongst the leadership team I think we've got to go through the final step with our board to make sure they authorize it.

Speaker Change: This is going to be the request is the board is going to authorize me.

Speaker Change: Subject to a bunch of things that have to happen working with the banks and stuff like that so that.

Speaker Change: And then Mark does his thing with the banks they approve it just from a security point of view securitization point of view.

Speaker Change: We do need approval from banks on this.

Speaker Change: But my view is all of that is going to happen in the next couple of months.

Chris Carey: And then I think youll see us in action, So I think.

Speaker Change: And we will begin as soon as we can so you may start seeing the first steps to this.

Chris Carey: We're we're through both of those things I think we feel like from a decision point of view, we're good and logistical as you called it.

Speaker Change: Because there's a bunch of different assets, we're talking about is moving them.

Chris Carey: Hint of view I think we are.

Speaker Change: It could be as soon as a.

Chris Carey: We are in motion.

Speaker Change: A month or two.

Chris Carey: Okay. Thanks, guys.

Speaker Change: So I think we're pretty much prime fraction as agreement amongst the leadership team I think we've got to go through the final step with our board to make sure they authorize it.

Chris Carey: One moment for our next question.

Chris Carey: Yeah.

Chris Carey: Okay.

Speaker Change: Our next question comes from Bill <unk> with <unk> Securities. Your line is open.

Speaker Change: And then Mark does his thing with the banks they approve it just from a security point of view securitization point of view.

Speaker Change: Thanks, Good morning.

Speaker Change: Hey, Bill good morning.

Speaker Change: Does that the.

Speaker Change: And then I think youll see us in action, So I think.

Speaker Change: Question, I guess, specifically for <unk>, but for the whole management team.

Speaker Change: We're we're through both of those things I think we feel like from a decision point of view, we're good and logistical as you called it.

Speaker Change: Doug.

Speaker Change: Over the 20 years of cover the company about stepping up marketing and advertising and new R&D and stuff like that to grow sales, but I'm just trying to I mean, if I look at your business. There is two ways to grow top line one is.

Speaker Change: Hint of view I think we are.

Speaker Change: We are in motion.

Speaker Change: Okay. Thanks, guys.

Speaker Change: One moment for our next question.

Speaker Change: Yeah.

Speaker Change: Okay.

Expanding the number of regular users.

Speaker Change: Our next question comes from Bill <unk> with <unk> Securities. Your line is open.

Speaker Change: Two would be expanding the basket size or the amount they spend per year and I'm trying to understand is there a quantifiable.

Bill: Thanks, Good morning.

Speaker Change: Opportunity on either in which one has more opportunity and how are you going about kind of expanding it.

Speaker Change: Hey, Bill morning.

Speaker Change: Just had a question I guess, specifically for <unk>, but to the whole.

Speaker Change: Management team.

Doug: Hey, Doug.

Speaker Change: I'm going to jump in and just at the beginning part because.

Speaker Change: Over the 20, some years that cover the company about stepping up marketing and advertising and new R&D and stuff like that to grow sales, but I'm just trying to if I look at your business. There is two ways to grow top line one is.

Speaker Change: Part of this is.

Speaker Change: Revisiting our core convictions and investing in the brand.

Speaker Change: Well I think if we look at sort of market.

Speaker Change: Expanding the number of regular users.

Speaker Change: Last year.

Speaker Change: Two would be expanding the basket size or the amount they spend per year and I'm trying to understand is there a quantifiable.

Speaker Change: <unk>.

Speaker Change: Probably I think 3%.

Speaker Change: I think the numbers are we're sticking through live goods within total market.

Speaker Change: Opportunity on either which one has more opportunity and how are you going about kind of expanding it.

Speaker Change: We grew at about three times that and a lot of that was a lot of share gain in there and so this was.

Speaker Change: I'm going to jump in just at the beginning part because.

Speaker Change: Coming out of a period, where we.

Speaker Change: We kind of wanted to get the program dollars back retailers resisted that we talked about that I think we created probably a lot of confusion on this discussion last year.

Speaker Change: Part of this is revisit.

Speaker Change: Revisiting our core convictions and investing in the brand.

Speaker Change: Bill I think if we look at sort of market.

Speaker Change: In exchange for.

Speaker Change: Leaving that those programs at the levels, they were at and probably actually increasing it a little bit.

Speaker Change: Last year.

Speaker Change: Sure.

Speaker Change: Probably I think 3%.

Speaker Change: We picked up a lot more shelf space and promotional.

Speaker Change: I think the numbers are worse. If you include live goods within total market.

Speaker Change: Percent of promotion that occurred in the departments.

Speaker Change: We grew at about three times that and a lot of that was a lot of share gain in there and so this was.

Speaker Change: And so.

Speaker Change: That was really good for us and we see that occurring.

Speaker Change: Pretty much at the same levels.

Speaker Change: Coming out of a period, where.

Speaker Change: This coming year and sort of Pos units.

Speaker Change: We kind of wanted to get the program dollars back retailers resisted that we talked about that I think we created probably a lot of confusion on this discussion last year.

Now it's a very fair question to say, how long can that keep going how much share is there to take.

Speaker Change: I think Nate has been very much focused on.

Speaker Change: In exchange.

Speaker Change: <unk> four.

Leaving that those programs at the levels, they were at and probably actually increasing it a little bit.

Speaker Change: Where is there additional business, where we are underpenetrated.

Speaker Change: And so when you.

Speaker Change: Want to take that yeah sure. It's a great question and the simple headline is both are important.

Speaker Change: We picked up a lot more shelf space and promotional.

Speaker Change: Percent of promotion that occurred in the departments.

Speaker Change: Let me break it down this way I think as we go into the spring consumers will see our focus from a messaging standpoint is on frequency.

Speaker Change: So.

Speaker Change: That was really good for us and we see that occurring.

Speaker Change: Pretty much at the same levels.

Speaker Change: This coming year and sort of Pos units.

Speaker Change: Look at lawn fertilizer plant food for example.

Speaker Change: Now it's a very fair question to say, how long can they keep going how much share is there to take.

Speaker Change: We know there's opportunity we've gotten off message in terms of our multi step and the need to feed so that'll be a big focus this year, which we think.

Nate Baxter: I think Nate has been very much focused on.

Speaker Change: We can increase that basket size, and we will do some cross brand work as well Jim alluded to our new website, and we're working with retailers on programs where liquid controls for.

Nate Baxter: Where is there additional business, where we are underpenetrated.

Nate Baxter: And so.

Nate Baxter: Take that yeah sure Bill it's a great question and the simple headline is both are important.

Speaker Change: For example, we can figure out a way to attach them to some of our fertilizers, but the user thing is important and Jim referenced it in his opening remarks on needing to engage that next segment, if I take a step way back and just look at household penetration overall for lawn and garden, it's less than 50% and if I look at the trends over the last decade.

Nate Baxter: Let me break it down this way I think as we go into the spring consumers will see our focus from a messaging standpoint is on frequency as we look at lawn fertilizer plant food for example.

Nate Baxter: We know there's opportunity we've gotten off message in terms of our multi step and the need to feed so that'll be a big focus this year, which we think.

The number of users whether they're people stepping out of the category or new homeowners, who just don't have the confidence or engaging in a category. Unfortunately that is horizon I look at that as an opportunity.

Nate Baxter: We can increase that basket size, and we will do some cross brand work as well Jim alluded to our new website, and we're working with retailers on programs, where liquid controls. For example, we can figure out a way to attach them to some of our fertilizers, but the user thing is important and Jim referenced it in his opening remarks on needing to engage that next.

So while we've.

Speaker Change: Gained share in the near term through innovation listings and retailer programs. We've got to do more than that we've got to talk about education, we've got to talk about engagement.

Nate Baxter: Segment, if I take a step way back and just look at household penetration overall for lawn and garden, it's less than 50% and if I look at the trends over the last decade.

Speaker Change: And it's a big force lever.

Speaker Change: Every 1% of household penetration is another $50 million of FERC for Us for example.

Speaker Change: But every additional 10th of a turn of call frequency or the average number of applications.

Nate Baxter: Number of users whether there are people stepping out of the category or new homeowners, who just don't have the confidence are engaging in the category. Unfortunately, that's rising I look at that as an opportunity.

That's almost an equivalent for us so the opportunity just to some they're both there in the near term it is focused on what I'll call.

Nate Baxter: So while we've.

Nate Baxter: <unk> gained share in the near term through innovation listings and retailer programs. We've got to do more than that we've got to talk about education, we've got to talk about engagement.

Speaker Change: <unk> frequency.

Speaker Change: And in the mid to long term, we're absolutely focused on how to engage that consumer that we're not engaged with and I'll add I think there is opportunity for us in the do it for me space and I don't mean from a service standpoint, right now, but I mean is getting consumers who choose to use a professional to choose our products and that's an area that we'll be thinking about in the midterm as well.

Nate Baxter: And it's a big force lever.

Nate Baxter: Every 1% of household penetration is another $50 million in <unk> for Us for example.

Nate Baxter: But every additional 10th of a turn of call frequency or the average number of applications. That's almost an equivalent for us so the opportunity just to some they're both there in the near term it's focused on what I'll call.

Don't think we should not bring up the sort of dot com side I think as we look at the business.

Speaker Change: I think it.

Speaker Change: We got a whole new.

Speaker Change: Crew running our brands.

Speaker Change: Now and they're hungry and enthusiastic and younger.

Nate Baxter: Meeting frequency.

Nate Baxter: And in the mid to long term, we're absolutely focused on how to engage that consumer that we're not engaged with and I'll add I think there is opportunity for us in the do it for me space and I don't mean from a service standpoint, right now what I mean is getting consumers who choose to use a professional to choose our products and that's an area that we'll be thinking about in the midterm as well.

Speaker Change: And I love.

Speaker Change: What theyre doing.

Speaker Change: On the control side I think what's really clear is were very much underpenetrated in these sort of dot coms, whether it's that retailer dotcoms.

Speaker Change: Amazon.

Speaker Change: Marketplace call it.

Speaker Change: And what Youre seeing is.

Nate Baxter: I don't think we should not bring up the sort of dot com side.

Speaker Change: Weirdly competitors actually live there and.

Nate Baxter: As we look at the business.

Nate Baxter: I think it.

Speaker Change: We're very dominant in retail.

Nate Baxter: We got a whole new crew running our brands.

Speaker Change: Less dominant online and that means we have to add some products that are redesign, but it's a lot of it is in the controlled market.

Nate Baxter: Now and they're hungry and enthusiastic and.

Nate Baxter: Younger and I love, what they're doing.

Speaker Change: And I'm talking hundreds of millions of dollars.

Nate Baxter: On the control side I think what's really clear is were very much underpenetrated in these sort of dot coms, whether it's that retailer dotcoms.

Speaker Change: And <unk>.

Speaker Change: So we see competitors in there youre seeing proctor play a little bit with Evo in there.

Nate Baxter: Amazon.

Speaker Change: And Youre talking.

Nate Baxter: Marketplace call it.

Speaker Change: More than $100 million.

Nate Baxter: And what youre seeing as well.

Speaker Change: <unk>.

Speaker Change: Just a couple of times and.

Nate Baxter: Weirdly competitors actually live there and.

Speaker Change: So this is a clearly low hanging fruit for us, but we have to go after it and I think the young crew.

Nate Baxter: We're very dominant in retail where clearly less dominant online and that means we have to have some products that are redesign, but it's a lot of it is in the controls market.

Speaker Change: And the business under need and with needs.

Speaker Change: Enthusiastic support this is a big opportunity in the part that made me nervous about it is when they define the opportunity. He was talking like nearly $1 billion of opportunity and this gets back to your question Bill.

Nate Baxter: And I'm talking hundreds of millions of dollars.

Nate Baxter: And <unk>.

Nate Baxter: So we see competitors in there youre seeing proctor play a little bit was evo in there.

Nate Baxter: And Youre talking.

Nate Baxter: More than 100 million hours.

Speaker Change: And I said dude seriously.

Nate Baxter: Not just a couple of times and.

Speaker Change: Manage that number.

Speaker Change: At a smaller number so that.

Nate Baxter: So this is a clearly low hanging fruit for us, but we have to go after it and I think the young crew.

Speaker Change: You don't get out of balance, where we're trying to make investments and we're chasing something thats a little bit in the ether.

Speaker Change: But theres clearly a lot of upside there. So I think that this retailer dot com thing is a big deal, particularly.

Nate Baxter: And the business under need and with needs.

Nate Baxter: Enthusiastic support this is a big opportunity in the part that made me nervous about it is when they define the opportunity he was talking like nearly $1 billion.

Speaker Change: With.

Speaker Change: Younger people, who are very used to buying online they are not going to.

Speaker Change: Brick and mortar sites as much. This doesn't go against that I know that a lot of our biggest retailers are very active on dot com and enthusiastic about helping them, but but there's a lot of opportunity there and penetration and.

Speaker Change: Of opportunity and this gets back to your question Bill.

Nate Baxter: And I said dude seriously.

Speaker Change: Manage that number.

Speaker Change: At a smaller number so that you don't get out of balance where we're trying to make investments and we're chasing something thats a little bit in the ether.

Speaker Change: Screwed up part for me is.

Speaker Change: We're letting people live under there.

Speaker Change: We need to say that business should be ours.

Speaker Change: But theres clearly a lot of upside there. So I think that this retailer dotcom thing is a big deal, particularly.

Speaker Change: And so we're going to go after it.

Speaker Change: Just real quickly bill on the investment side as they've talked about that to me, it's very much kind of fold into our superpowers I don't foresee this as being a massive amount of long term investment we will continue to invest as part of our longer term plan.

Speaker Change: With.

Speaker Change: Younger people, who are very used to buying online they are not going to.

Speaker Change: Brick and mortar sites as much. This doesn't go against that I know that a lot of our biggest retailers are very active on dot com and enthusiastic about us helping them, but but there's a lot of opportunity there and penetration.

Speaker Change: But.

Speaker Change: Things that need has talked about I mean, we've got incredible supply chain.

Speaker Change: Facilities incredible distribution capabilities, we have we have a lot of that already in stock then it should be pretty good return on our investment will we have to invest sure, but I think it could be easily managed.

Speaker Change: Screwed up part for me.

Speaker Change: We're letting people live under there.

Speaker Change: And we need to say that business should be ours, and so we're going to go after it.

Speaker Change: Just real quickly bill on the investment side as they've talked about that to me, it's very much kind of folds into our superpowers I don't foresee this being a massive amount of long term investment we will continue to invest as part of our longer term plan.

Speaker Change: That's great and then just as a follow up.

Speaker Change: Yes, it's tougher for us sometimes to see.

Speaker Change: The changes in market share or or whatever at the retail level. During the season, we kind of here at the end is there an area.

Speaker Change: <unk>.

Speaker Change: Things that need has talked about I mean, we've got incredible supply chain.

Speaker Change: Law include soils, and mulch, something where youre Super Super excited.

Speaker Change: Facilities incredible distribution capabilities, we have we have a lot of that already in stock that it should be pretty good return on our investment will we have to invest sure, but I think it could be easily managed.

Speaker Change: Cited about hey, we.

Speaker Change: Got we're really geared up we can gain big chunk of the market share and really grow faster or is it really kind of broad brush we've got momentum overall.

Speaker Change: Okay.

Speaker Change: We can both answer it.

Speaker Change: That's great and then just as a follow up.

Speaker Change: It's another one of these I think good question, if you look and say where is the business.

Speaker Change: It's tougher for us sometimes to see that.

Speaker Change: Changes in market share or or whatever at the retail level. During the season. We've got here at the end is there an area.

Speaker Change: It's easy to go where it go with the current.

Speaker Change: Controls and gardens are honking.

Speaker Change: And that's good for us okay.

Speaker Change: Law include is soils, and mulch, something where youre Super Super excited about Hey, we've got we're really geared up we can gain big chunks of market share and really grow faster or is it really kind of broad brush we've got momentum overall.

Speaker Change: That's high margin business.

Speaker Change: It's I would say double digit is what we're seeing and we expect to sort of continue.

Speaker Change: Continue so I think that.

Speaker Change: Okay.

Speaker Change: That's where you're going to see kind of share gains.

Speaker Change: If you don't.

Speaker Change: We can both answer because it's another one of these I think good question. If you look and say where is the business.

Speaker Change: Because.

Speaker Change: We're just in the flow.

Speaker Change: And that's good news for us, we're not losing share on lawns.

Speaker Change: It's easy to go where it go with the current.

Speaker Change: We are.

Speaker Change: Controls and gardens, yes are honking.

Speaker Change: We're in a really really really good place.

Speaker Change: And that's good for us okay.

Speaker Change: Thank that.

Speaker Change: Everybody.

Speaker Change: That's high margin business.

Speaker Change: Is now basically saying we need unit volume back. Okay number you don't see a big decrease in dollar sales and launch mostly because we've been pricing.

Speaker Change: It's it's I would say double digit is what we are seeing and we expect to sort of <unk>.

Speaker Change: Continue so I think that.

Speaker Change: Thats, where youre going to see kind of share gains.

Speaker Change: I think we were saying we've sort of reached the limit of that.

Speaker Change: Because that we're just in the flow.

Speaker Change: Mostly for the consumer.

Speaker Change: But.

Speaker Change: And that's good news for us, we're not losing share on loans I think we are.

Speaker Change: And it's good profitable business for us, but I think this multi step gift bags up.

Speaker Change: We're in a really really really good place.

Speaker Change: We've got a real plan and when you talk this is our legacy business in this.

Speaker Change: I think that.

Speaker Change: Everybody.

Speaker Change: Property in Marysville.

Speaker Change: And to have everybody basically be willing and open minded to sort of critically looking at what's happening in the market.

Speaker Change: As now basically saying, we need unit volume back. Okay. Remember you don't see a big decrease in dollar sales and loans, mostly because we've been pricing.

Speaker Change: And willing to make change.

Speaker Change: I think we were saying we've sort of reached the limit of that.

Speaker Change: The entire team is in a really good place and very open minded to change and I think this is all healthy I wouldnt do not read anything bad here. This is getting.

Speaker Change: Mostly for the consumer.

Speaker Change: But.

Speaker Change: And it's good profitable business for us, but I think this multi step gift bags up.

Speaker Change: Getting people to be kind of critical the lawn business here.

Speaker Change: We've got a real plan and when you talk this is Zoe legacy business in this at this property in Marysville.

Speaker Change: It's like Criticising, Horace Hagedorn or something.

Speaker Change: It's tough to do.

Speaker Change: Get away with it here everybody is open minded and whether it's the brand team supply chain R&D.

Speaker Change: And to have everybody basically be willing and open minded to sort of critically looking at what's happening in the market.

Speaker Change: The leadership team everybody.

Speaker Change: The board everybody is interested in that so that's.

And willing to make change.

Speaker Change: The entire team is in a really good place and very open minded to change and I think this is all healthy I wouldnt do not read anything bad here. This is.

Speaker Change: That's probably the most troubled area, but I would say its unit volume is what I would be looking at on that and I think that would be a good thing for you to look at because it's.

Speaker Change: Getting people to be kind of critical the lawn business here.

Speaker Change: It's one if you said to me the top two or three things Youre working on.

Speaker Change: I know, it's like Criticising, Horace Hagedorn or something.

Speaker Change: I would just say continued recovery margin and investment in our business and launch and getting resolved.

Speaker Change: It's tough to do.

Speaker Change: Can get away with it here everybody is open minded and whether it's the brand team supply chain R&D.

Speaker Change: Getting our Hawthorne assets, all put together in a place that adds the most value.

Speaker Change: The leadership team everybody.

Speaker Change: Thats, what im looking at.

Speaker Change: And the board everybody is interested in that so that's.

Great great. Thanks, so much for the color.

Speaker Change: That's probably the most troubled area, but I would say its unit volume is what I would be looking at on that and I think that would be a good thing for you to look at because it's.

Speaker Change: One of them for our next question.

Speaker Change: Our next question comes from Jon Andersen with William Blair. Your line is open.

Speaker Change: It's one if you said to me the top two or three things Youre working on.

Jon Andersen: Hey, good morning, everybody.

Speaker Change: Good morning Boy Theres, a theres a lot to lot to chew on here I did want to say that I didn't have the mouth Sun.

Speaker Change: I would just say continued recovery margin and investment in our business and lawns and getting resolved.

Jon Andersen: Bingo card this morning.

Speaker Change: Yeah, So you've got a bingo card that's cool.

Speaker Change: Getting our Hawthorne assets, all put together in a place that adds the most value.

Speaker Change: Maybe starting on gross margin I'd love to hear a little bit more about the.

Speaker Change: Thats, what im looking at.

Speaker Change: Great great. Thanks, so much for the color.

Speaker Change: Cadence that youre expecting of gross margin improvement throughout 2025, but also you've kind of established this three year goal of getting back to the mid thirties, and I think maybe Jim you've characterized it is.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Jon Andersen with William Blair. Your line is open.

Jon Andersen: Hey, good morning, everybody.

Speaker Change: Good morning.

Speaker Change: There's a lot to lot to chew on here I did want to say that I didn't have the mouse on my bingo card. This morning.

That last third which would come post 2025, I believe will be the hardest those will be the harder harder yards to get.

Speaker Change: So you've got a bingo card that's cool.

Speaker Change: And any updated thoughts on that.

Speaker Change: Sure.

Speaker Change: 2027 objective and perhaps those harder yards and how youre feeling about getting back to that level.

Speaker Change: Maybe.

Speaker Change: Starting on gross margin I'd love to hear a little bit more about the cadence that youre expecting of gross margin improvement throughout 2025, but also you've kind of established this three year goal of getting back to the mid thirties, and I think maybe Jim you've characterized it is.

Speaker Change: Well, let me just take before Mark stuff starts off.

Speaker Change: As.

Speaker Change: There's been a lot of pressure from my board to have longer strategic plan out view than them through 'twenty seven.

Speaker Change: Resisted pretty hard.

Speaker Change: That last third which would come post 2025, I believe will be the hardest those will be the harder harder yards to get.

Speaker Change: Largely because of exactly what you said.

Speaker Change: I believe that which is that I want to get.

Speaker Change: To kind of our new spot.

Speaker Change: And any updated thoughts on that.

Speaker Change: Before we start sort of.

Speaker Change: That 2027 objective and perhaps those harder yards and how youre feeling about getting back to that level.

Confusing ourselves with a lot of long term objectives.

Speaker Change: Not that they're not important but I think we're not completely done.

Speaker Change: Well, let me just take before Mark stops starts off is.

Speaker Change: Fixing this business and getting it to where.

Speaker Change: There's been a lot of pressure from my board to have us longer strategic plan out view than them through 2007.

Speaker Change: What I talked about.

Speaker Change: I'm not sure that I buy that it's a lot harder because.

Speaker Change: I've resisted pretty hard.

Speaker Change: The team and I want to give credit to our rookie here shower.

Speaker Change: Largely because of exactly what you said I believe that which is that I want to get.

Mark Schauer: Who is doing a absolutely fabulous job.

Speaker Change: To kind of our new spot.

Mark Schauer: And largely he's just working really well with the rest of his finance team and the operating group.

Speaker Change: Before we start sort of <unk>.

Speaker Change: Confusing ourselves with a lot of long term objectives that I think it's not that they're not important but I think we're not completely done.

Mark Schauer: And so I think there is a line of sight to almost everything we're talking about here. So I don't think it's as hard as you think I think it's going to require us to do some more hard things, but I don't think we but believe me when I tell you we have line of sight to the numbers.

Speaker Change: Fixing this business and getting it to where.

Speaker Change: What I talked about.

Speaker Change: I'm not sure that I buy that it's a lot harder because.

Mark Schauer: We are.

Speaker Change: I think the team and I'm going to give credit to our rookie here <unk>.

Mark Schauer: We're obviously pushing to a higher number then.

Mark Schauer: Where you guys are at and I think thats not unusual and that's I think what we should be doing.

Speaker Change: Who's doing a absolutely fabulous job.

Speaker Change: And largely he is just working really well with the rest of his finance team and the operating group.

Mark Schauer: Its harder than you think a little bit largely because incentive kicks in and just makes the <unk>.

Mark Schauer: Order number harder because we the number we tell you has got the incentive already built into it so but people are pretty motivated and theyre chasing it.

Speaker Change: And so I think there is a line of sight to almost everything we're talking about here. So I don't think it's as hard as you think I think it's going to require us to do some more hard things, but I don't think we but believe me when I tell you we have line of sight to the numbers.

Mark Schauer: So I guess, that's really what I would say is not a hard line.

Mark Schauer: A line of sight.

Speaker Change: We are.

Mark Schauer: Everybody is working well together to get there there is a bunch of stuff that has to happen.

Speaker Change: We're obviously pushing to a higher number then.

Mark Schauer: But I think people are working on it and we're trying to spring load that.

Speaker Change: Where you guys are at and I think thats not unusual and Thats I think what we should be doing.

Mark Schauer: Especially the the change.

Speaker Change: Its harder than you think little bit largely because incentive kicks in and just makes.

Mark Schauer: What we call transformation, we're trying to get that done as early as we can just because it's hard on the organization to go through.

Speaker Change: Order number harder because we the number we tell you has got the incentive already built into it so but people are pretty motivated and theyre chasing it.

Mark Schauer: Change, where they don't really know what it means it sounds scary and maybe a little bit. It is but these are choices, we have to make and it's in part to produce the results that.

Speaker Change: So I guess, that's really what I would say is not as a hard line.

Speaker Change: Your line of sight.

Mark Schauer: We all have new one 700 million of EBITDA in 2007.

Speaker Change: Everybody is working well together to get there there is a bunch of stuff that has to happen.

Mark Schauer: Ah.

Speaker Change: But I think people are working on it and we're trying to spring load that.

Mark Schauer: Or at least.

Mark Schauer: <unk>.

Mark Schauer: But it's also to make the kind of investments and run the business that we that we want and that is.

Speaker Change: Especially the the change.

Speaker Change: What we call transformation, we're trying to get that done as early as we can just because it's hard on the organization to go through.

Mark Schauer: My view.

Mark Schauer: Good.

Mark Schauer: We have a unbelievably unique consumer franchise.

Speaker Change: Change, where they don't really know what it means it sounds scary and maybe a little bit. It is but these are choices, we have to make and it's in part to produce the results that.

Mark Schauer: And part of where I've gotten my head too.

Mark Schauer: It works for me put it that way.

Mark Schauer: If you look at the multiples of proper consumer brand companies that are dominant in their space, whether it's procter clorox Colgate.

Speaker Change: We all knew one $700 million of EBITDA and 27.

Speaker Change: Ah.

Speaker Change: Or at least.

Mark Schauer: Church, and Dwight I don't know I could go through a bunch once youre going to see us multiple expansion, that's pretty significant compared to where we are.

Speaker Change: <unk>.

Speaker Change: But it's also to make the kind of investments and run the business that we that we want and that is.

Mark Schauer: Where we are.

Mark Schauer: We're probably lucky it's not worse.

Speaker Change: My view.

Speaker Change: Good.

Mark Schauer: Given.

Speaker Change: We have a unbelievably unique consumer franchise.

Mark Schauer: The journey, we've been on so.

Mark Schauer: We want that and we know we can get that it does mean, we've got to look at ourselves hard and make some tough choices and we're going to but so part of it is about producing our financial result, a part of it is making the investments in the brand. So that this franchise is extremely durable.

Speaker Change: And part of where I've gotten my head too.

Speaker Change: It works for me put it that way.

Speaker Change: If you look at the multiples of proper consumer brand companies that are dominant in their space, whether it's procter clorox Colgate.

John: John just a follow up just.

Speaker Change: Church, and Dwight I don't know I could go through a bunch of what youre going to see us multiple expansion there is pretty significant compared to where we are and where we are.

Jim Hagadorn: Very specific on your two questions phasing and long term so for phasing for this this year on gross margin. So we've talked about $75 million of cost out we very much have line of sight to that and as Jim said the team is pushing to get more in the fiscal year as well, but at the end of the day that.

Speaker Change: We're probably lucky it's not worse.

Speaker Change: Given.

Speaker Change: The journey, we've been on so.

Speaker Change: We want that and we know we can get that it does mean, we have got to look at ourselves hard and make some tough choices and we're going to but so part of it is about producing our financial results for part of it is making the investments in the brand. So that this franchise is extremely durable.

Jim Hagadorn: That in my in my prepared remarks, and all of that it's about two thirds first half of the year that 75 will get.

Jim Hagadorn: Put in for the for the fiscal year and then the other the other.

Speaker Change: John just a follow up just.

Jim Hagadorn: <unk> will go through the back half of the year. So the two thirds. The reason, it's more frontloaded, obviously as commodities.

Very specific on your two questions phasing and long term so for phasing for this this year on gross margin. So we've talked about $75 million of costs out we very much have line of sight to that and as Jim said the team is pushing to get more in the fiscal year as well, but at the end of the day that.

Jim Hagadorn: Inventory we've done.

Jim Hagadorn: A nice job, obviously acquiring inventory at lower prices year over year, we've seen the commodity.

Jim Hagadorn: Deflation and so we're now working through that cheaper inventory to where we're now on a good level playing field for the balance of the year. So year over year, we are still working through some higher higher cost of inventory last year. The first half of the year and so thats why youll see that year over year benefit.

Speaker Change: In my prepared remarks, and all of that it's about two thirds first half of the year that 75 will get.

Speaker Change: Put in for the for the fiscal year and then the other the other.

Speaker Change: <unk> will go through the back half of the year. So the two thirds. The reason, it's more frontloaded, obviously as commodities.

Jim Hagadorn: From the from the lower cost of inventory, so I would foresee additional gross margin improvement in Q2 versus prior year again about two thirds like like I said.

Speaker Change: Inventory we've done.

Speaker Change: A nice job, obviously acquiring inventory at lower prices year over year, we've seen the commodity.

Jim Hagadorn: And then third quarter, probably probably pretty close and then we'll get into Q4.

In Q4 will begin to lap the Eni charges, we took.

Speaker Change: Deflation and so we're now working through that cheaper inventory to where we are now on a good level playing field for the balance of the year. So year over year, we are still working through some higher higher cost of inventory last year. The first half of the year and so thats why youll see that year over year benefit.

Jim Hagadorn: Round $29 million, which will be a year over year comparison benefit.

Jim Hagadorn: So that's kind of how the phasing for this year goes.

Jim Hagadorn: Far as long term.

Jim Hagadorn: I'd just tell you.

Jim Hagadorn: Where we're landing around 30% on a full year. If you look at the core business, it's north of that the lawn and garden business gross margin wise.

Speaker Change: From the from the lower cost of inventory, so I would foresee additional gross margin improvement in Q2 versus prior year again about two thirds like like I said.

Jim Hagadorn: Very healthy.

Jim Hagadorn: We are constantly doing we call. It <unk> savings project activity in review and the team is looking at that on a constant basis, well out into the future and they've already been building plans in place to deliver on the next phase of the $150 million of supply chain savings so that'll be another 75.

Speaker Change: And then third quarter, probably probably pretty close and then we'll get into Q4.

Speaker Change: In Q4 will begin to lap the Eni charges, we took.

Speaker Change: $29 million, which will be a year over year comparison benefit.

Speaker Change: So thats kind of how the phasing for this year goes as far as long term.

Jim Hagadorn: In 2006 and 2007.

Speaker Change: Just tell you.

Jim Hagadorn: And the timing of that we're still finalizing but it would come over those those two years and it is very much can be tied to projects and activities that we're looking at and transformation will be a part of that but the team has it built into their core it's what we've always done.

Speaker Change: Where we're landing around 30% on a full year. If you look at the core business, it's north of that the lawn and garden business gross margin wise.

Speaker Change: Healthy.

Speaker Change: We are constantly doing we call. It <unk> savings project activity in review and the team is looking at that on a constant basis, well out into the future and they've already been building plans in place to deliver on the next phase of the $150 million of supply chain savings so that'll be another 75.

Jim Hagadorn: Pretty pre Covid, we were good at getting those cost out and I think if you go back and look at pre Covid U S consumer type margins.

Jim Hagadorn: We were traditionally in that 35% range. So we feel confident we can get back to those as we rightsize the supply chain infra.

Speaker Change: In 2006 and 2007.

Jim Hagadorn: Infrastructure.

Speaker Change: And the timing of that we're still finalizing but it would come over those those two years and it's very much can be tied to projects and activities that we're looking at and transformation will be a part of that but the team has it built into their core it's what we've always done.

Jim Hagadorn: I would say longer term is pricing part of that it could be.

Jim Hagadorn: Try to be as nimble as possible around that.

Jim Hagadorn: And Thats why transformation as important to us.

Jim Hagadorn: But I think you can see a flattering up and getting their hopefully this.

Speaker Change: Pre pre Covid, we were good at getting those cost out and I think if you go back and look at pre Covid U S consumer type margins.

Jim Hagadorn: I think a 25% of the down payment to how we get to the mid 30% 30% range.

Jon Andersen: And I think the first quarter results kind of show that so hopefully it gives you guys a little bit extra confidence, but Nate do you have anything else not to belabor it but I think a few details Jon So I've got my business units looking at three main things first of all Jim referenced and simplification.

Speaker Change: We were traditionally in that 35% range. So we feel confident we can get back to those as we rightsize the supply chain infra.

Speaker Change: Infrastructure.

Speaker Change: I would say longer term is pricing part of that it could be.

Speaker Change: To try to be as nimble as possible around that.

Speaker Change: I guess, we'll call it a SKU effectiveness project, but basically I think it's been a long time since we've taken a hard look at the margins on a SKU by SKU level and I'm not implying we're going to massively stripped the portfolio down, but I think my my Gms need to know where their margins are.

Speaker Change: And Thats why transformation as important to us.

Speaker Change: But I think you can see a flattering up and getting their hopefully this.

Speaker Change: I think of 'twenty five as a down payment to how we get to the mid 30% 30% range.

Nate Baxter: And I think the first quarter results kind of show that so hopefully it gives you guys a little bit extra confidence, but Nate do you have anything else not to belabor it but I think a few details Jon So I've got my business units looking at three main things first of all Jim referenced and simplification.

Speaker Change: That's the first piece innovation look innovation will drive margin accretion and we've been trying to get that innovation engine turned back on.

Speaker Change: During the pandemic.

Speaker Change: Our challenges afterwards, we were really focused on cost out.

Speaker Change: We've made some nice additions to the team to think out 510 years, and then of course, the supply chain efficiencies and the other comment I want to make is we're not going to do this at the expense of retailer margins, they're our partners and we're going to work with them to make sure the programs we put in place.

Nate Baxter: I guess, we'll call it a SKU effectiveness project, but basically I think it's been a long time since we've taken a hard look at the margins on a SKU by SKU level and I'm not implying we're going to massively stripped the portfolio down, but I think my my Gms need to know where their margins are.

Speaker Change: Drive win win for both of US So it's a tall task.

Speaker Change: I told Jamie asked me can we get to 35 and I don't I don't think I skipped a beat I think we'll get there I don't have every every step of the way mapped out, but directionally I'm pretty confident I mean, I'll just add pricing will be a part of this is not.

Nate Baxter: That's the first piece innovation look innovation will drive margin accretion and we've been trying to get that innovation engine turned back on.

Nate Baxter: During the pandemic.

Nate Baxter: Our challenges afterwards, we were really focused on cost out.

Speaker Change: All of it but pricing will be a part of this and remember Hawthorne out.

Nate Baxter: We've made some nice additions to the team to think out 510 years, and then of course, the supply chain efficiencies and the other comment I want to make is we're not going to do this at the expense of retailer margins, they're our partners and we're going to work with them to make sure that programs we put in place.

Speaker Change: I'm going to say is worth at least 100 basis points.

Speaker Change: Yeah, great. Thanks, Thanks, everyone for the color is really helpful. I'll leave it at that.

Speaker Change: One moment for our next question.

Drive win win for both of US So it's a tall task.

Speaker Change: Yeah.

Eric: Our next question comes from Eric <unk> with Cleveland Research. Your line is open.

Nate Baxter: I told Jamie asked me can we get the 35 and I don't I don't think I skipped a beat I think we'll get there I don't have every every step of the way mapped out, but directionally I'm pretty confident I mean, I'll just add pricing will be a part of this is not.

Speaker Change: Thanks, Good morning.

Speaker Change: Good morning.

Eric: Good morning.

Yes to start.

Speaker Change: Nate or Jim I'm curious strategically as you're thinking about.

Nate Baxter: All of it but pricing will be a part of this and remember Hawthorne out.

Speaker Change: Price and market share in gross margin and connecting those three things.

Nate Baxter: I'm going to say is worth at least 100 basis points.

Speaker Change: You've got commodity savings this year, which is funding some gross margin expansion.

Speaker Change: Yeah, great. Thanks, Thanks, everyone for the call are really helpful. I'll leave it at that.

Speaker Change: Jim You mentioned the consumer that's price sensitive.

Nate Baxter: One moment for our next question.

Speaker Change: And then you also talked about market share progress and so on.

Eric: Our next question comes from Eric <unk> with Cleveland Research. Your line is open.

Speaker Change: I'm curious like do you feel the need as we work through this year or two to be more promotional to spend money to you talked about this innovative multistep program of B.

Speaker Change: Thanks, Good morning.

Speaker Change: Hey, good morning, good morning, Tuesday morning.

Speaker Change: To start.

Speaker Change: Being more aggressive with discounts to drive consumer traffic is that part of it and obviously there is there is some more private label competition out there or do you feel like the investment in the brand and marketing is sufficient that you can power through all of that which is basically what you did last year. How do you think about connecting those those points.

Speaker Change: Nate or Jim I'm curious strategically as you're thinking about.

Speaker Change: Price and market share in gross margin and connecting those three things.

Speaker Change: You've got commodity savings this year, which is funding some gross margin expansion.

Speaker Change: Jim you mentioned that consumer that's price sensitive.

Speaker Change: And then you also talked about market share progress and so.

Speaker Change: Well I think they are all connected but starting to her.

Speaker Change: I'm curious like do you feel the need as we work through this year or two to be more promotional to spend money to you talked about this innovative multi step program.

Speaker Change: <unk>.

Speaker Change: Again this is like my weirdo evolution. So it doesn't mean, it's where everybody else's around the table and there's a lot of people here.

Speaker Change: Be more aggressive with discounts to drive consumer traffic.

Speaker Change: But I would say.

Speaker Change: We looked at I think I think we've talked about it with you guys that we went through our most challenging years.

Speaker Change: Is that part of it and obviously there is there is some more private label competition out there or do you feel like the investment in the brand and marketing is sufficient that you can power through all of that which is basically what you did last year. How do you think about connecting those those points.

Speaker Change: There was a lot of incentive dollars to.

Speaker Change: Make sales happen when we wanted them and needed in the retailers did and they are big boys and girls and it was all voluntary.

Speaker Change: Well I think they are all connected.

But I think what you saw our margin go down and they go up.

Speaker Change: Start there.

Speaker Change: Again this is like my weirdo evolution. So it doesn't mean, it's where everybody else's around the table, there's a lot of people here.

Speaker Change: Now it's over in trouble is over and I want my money back.

Speaker Change: That's kind of where I got to the.

Speaker Change: But I would say.

Speaker Change: The more I looked at it though and the more I've thought about it competitively.

Speaker Change: We looked at I think I think we've talked about it with you guys that.

Speaker Change: And this is one of the reasons I've been chatting with retailers.

Speaker Change: Went through our most challenging years.

Speaker Change: Got it.

Speaker Change: A lot of incentive dollars to.

Speaker Change: At the senior level about it is.

Speaker Change: May sales happen when we wanted them and needed in the retailers did and they are big boys and girls and it was all voluntary.

Speaker Change: What we're seeing is they're working so hard to get consumers into the store.

Speaker Change: That.

Speaker Change: But I think what you saw our margins go down and go up.

Speaker Change: For every program, we put in they're spending more than that.

Speaker Change: Their money.

And now it's over in trouble is over and I want my money back.

Speaker Change: Driving our products and our brands.

Speaker Change: And all of a sudden I started thinking to myself, if we can make our margin goals.

Speaker Change: That's kind of where I got to the.

Speaker Change: The more I've looked at it though and the <unk>.

Speaker Change: And I.

Speaker Change: I don't want that money back.

Speaker Change: More I've thought about it competitively.

Speaker Change: I just wanted to working hard for me.

Speaker Change: And this is one of the reasons I've been chatting with retailers.

Speaker Change: That was part of the discussion which is.

Speaker Change: At the senior level about it is.

Speaker Change: I'm cool with it but.

Speaker Change: Talking to Josh meals I don't know couple of weeks ago. He just said, we got to have very sharp elbows and because those problem programs got to work and they don't know with work and sometimes they do a lot of times they do.

What we're seeing is they're working so hard to get consumers into the store.

Speaker Change: That.

Speaker Change: For every program, we put in they're spending more than that of their money.

Speaker Change: But that was really the discussion in the sort of journey.

Speaker Change: Driving our products and our brands.

Speaker Change: And all of a sudden I started thinking to myself, if we can make our margin goals.

Speaker Change: Regard to what it's exactly what you are asking.

Speaker Change: What im seeing Eric is its very virtuous.

Speaker Change: And I.

Speaker Change: I don't want that money back.

Speaker Change: And that when you look at it that way.

Speaker Change: I just wanted to working hard for me.

Speaker Change: The investments in the brands I'm talking.

Speaker Change: That was part of the discussion which is.

Speaker Change: Our investments.

Speaker Change: I'm cool with this but.

Speaker Change: Add sort of activation at the store level and the money we spend behind it you are talking north north of $700 million.

Speaker Change: Talking to Josh meals I don't know couple of weeks ago. He just said, we got to have very sharp elbows and because those problem programs got to work and they don't always work and sometimes they do a lot of times they do.

Speaker Change: And from a competitive point of view my view is I'm in the building business I want a deep moat and keep people away from what belongs to us okay.

Speaker Change: But that was really the discussion in the sort of journey.

Speaker Change: Regard to what exactly what youre asking.

Speaker Change: Okay.

Speaker Change: We intend to keep it.

Speaker Change: What I am seeing Eric is its very virtuous.

Speaker Change: And it's not like we're seeing crazy stuff, except you do have procter kind of plan around in our space.

Speaker Change: And that when you look at it that way.

Speaker Change: The investments in the brands I'm talking.

Speaker Change: We want to throw a party for them as well, even though it's not really like.

Speaker Change: Our investments.

Speaker Change: They are not really its more C J.

Speaker Change: At sort of activation at the store level and the money we spend behind it you are talking north north of $700 million.

Speaker Change: With the <unk> business that they are sort of playing around but I would say if SC Johnson is listening we could use some money to defend against them, but we're going to put our money.

Speaker Change: And from a competitive point of view my view is I'm in the moat building business I want a deep moat and keep people away from what belongs to us okay.

Speaker Change: Into defense of.

Speaker Change: The controls business not that they are really looking at our stuff.

Speaker Change: We intend to keep it.

Speaker Change: And it's not like we're seeing crazy stuff, except you do have procter kind of plan around in our space.

Speaker Change: But it has got us thinking about how powerful this franchise is and how.

Speaker Change: Important is that we defended and if we can make our gross margin numbers work.

Speaker Change: We want to throw a party for them as well, even though it's not really.

Speaker Change: Like they are not really its more IC jade.

Speaker Change: And keep that money.

Speaker Change: With the zebra business that they are sort of playing around but I would say if SC Johnson is listening we could use some money to defend against them, but we're going to put our money.

Speaker Change: In there I think we continue then have outside share and I think thats kind of how I connect it all up so I don't really viewed as an option I don't think we're done spending.

Speaker Change: Into defense of.

Speaker Change: One.

Speaker Change: If you were looking at my Board right now.

Speaker Change: The controls business not that they are really looking at our stuff.

Speaker Change: Yeah.

Speaker Change: What I have in there is a.

Speaker Change: But it has got us thinking about how powerful this franchise is and how.

Speaker Change: I don't know 25% increase from today.

Speaker Change: Important is that we defended and if we can make our gross margin numbers work.

Speaker Change: In our marketing dollars.

Speaker Change: So this is all.

Speaker Change: And keep that money.

Speaker Change: We're not done with this work.

Speaker Change: This is the work that if I was.

Speaker Change: In there I think we continue then have outsized share and I think thats kind of how I connect it all up so I don't really viewed as an optional and I don't think we're done spending.

We got we leave here and go to a two day board meeting and I think everybody is going to come back and really get into transformation and not only achieving the business on a day to day basis, because we're pretty much in season at this point, but I think completing the planning that's going to be required to get where we want to get too.

Speaker Change: When.

Speaker Change: If you were looking at my Board right now.

Speaker Change: Yeah.

Speaker Change: What I have in there is a.

Speaker Change: Everybody is going to really get into it I think if I tried to task people today for transformation discussions that they know there's a lot of work already happening I think they'd say can we get through the board meeting first.

Speaker Change: I don't know 25% increase from today.

Speaker Change: In our marketing dollars. So this is all.

We're not done with this work.

Speaker Change: And so we're going to do that but they're very much is a correlation between all of this stuff, we're not taking our foot off the gas pedal.

Speaker Change: This is the work that.

Speaker Change: I was.

Speaker Change: We got we leave here and go to a two day board meeting and I think everybody is going to come back and really get into transformation and not only achieving the business on a day to day basis, because we're pretty much in season at this point, but I think completing the planning that's going to be required to get where we want to get too.

Speaker Change: I think we.

Speaker Change: Eric you've been following us long enough you've done this before there was a year would like during the financial crisis that I said I can't really control anything.

Speaker Change: What I can show people is that we can sell more and advertise more now it was pretty devastating to our P&L now at the time.

Speaker Change: Everybody is going to really get into it I think if I tried to test people today for transformation discussions that they know there's a lot of work already happening I think they'd say can we get through the board meeting first.

The incentive was based on two things.

Speaker Change: AD spend our market share and Pos okay. So it didn't even include profitability just because the world Socgen. So I said, we're just going to it while the world Flex us improve that advertising works.

And so we're going to do that but they're very much as a correlation between all of this stuff, we're not taking our foot off the gas pedal.

Speaker Change: We didn't we hadn't figured out how to be able to sustain that level of spend.

Speaker Change: I think.

Speaker Change: Eric you have been following us long enough. We have done this before there was a year would like during the financial crisis that I said I can't really control anything.

Speaker Change: And make the money we needed to make that was kind of what we discovered the new version of that is we're going to make the money we need because we're going to go through this transformation.

Speaker Change: What I can show people is that we can sell more and advertise more now it was pretty devastating to our P&L now at the time.

Speaker Change: And we're going to spend it.

Speaker Change: It's just going to be a little bit different company when we're done.

Speaker Change: The incentive was based on two things.

Speaker Change: And it's going to be highly focused in pretty warlike.

Speaker Change: AD spend our market share and Pos okay. So it didn't even include profitability just because the world soft can so I said, we're just going to and while the world Flex us improve that advertising works.

Speaker Change: I don't know any no.

Speaker Change: Secondarily, when you say promotions, Eric work for Us last year.

Speaker Change: <unk>.

Speaker Change: Leaned into more of this year and I think the art is in sort of working from top of funnel, our media down to consumer conversion at the shelf and making sure along that entire path to purchase we're spending those dollars appropriately. So I would say as we evolve.

Speaker Change: We didn't we hadn't figured out how to be able to sustain that level of spend.

Speaker Change: And make the money we needed to make that was kind of what we discovered the new version of that is we're going to make the money we need because we're going to go through this transformation.

Speaker Change: And we're going to spend it.

Speaker Change: Have a new team here were spending more time thinking about from top to bottom how those dollars work for us.

Speaker Change: It's just going to be a little bit different company when we're done.

Speaker Change: And it's going to be highly focused in pretty war likes I.

Speaker Change: <unk> partners have been have been great and just to touch on the private label.

Speaker Change: I don't know any no.

Speaker Change: Secondary then you say promotions, Eric work for Us last year.

Speaker Change: An important part of the business for our retailers and of course, we support that business for them and a lot of areas.

Speaker Change: We've leaned into more of this year and I think the art is in sort of working from top of funnel, our media down to consumer conversion at the shelf and making sure along that entire path to purchase we're spending those dollars appropriately. So I would say as we evolve.

Speaker Change: Don't see it as a threat I see it as part of a good better best and just taking a step back if I look at private label share since 2019, it's been declining so it's part of the equation here I don't see it as something that's going to derail our focus on growth and margin.

Speaker Change: I have a new team here were spending more time thinking about from top to bottom how those dollars work for us.

Speaker Change: The only other thing Eric I'll circle back on is margin.

Speaker Change: All of what they said drive volume drive fixed cost leverage it just allows us greater flexibility is why youre seeing that we can we can do what we can do on the gross margin line this fiscal year and beyond so I think they all play nicely.

Speaker Change: Our retail partners have been great and just to touch on the private label. It's an important part of the business for our retailers and of course, we support that business for them and a lot of areas.

Speaker Change: I don't see it as a threat I see it as part of a good better best and just taking a step back if I look at private label share since 2019, it's been declining so.

Speaker Change: The finance team here will be focused on making sure we get the proper ROI on that.

Speaker Change: And margin recovery, but balance that with the longer term vision of the company.

Speaker Change: As part of the equation here I don't see it as something that's going to derail our focus on growth and margin.

Speaker Change: Okay, and then a second question if I could I think you talked about.

Speaker Change: The other thing Eric I'll circle back on is margin.

Speaker Change: Your Pos was up nine or 10 last year and up three market.

Speaker Change: All of what they said drives volume drive fixed cost leverage it just allows us greater flexibility thats why youre seeing that we can we can do what we can do on the gross margin line this fiscal year and beyond so I think they all play nicely.

Speaker Change: And you sound more optimistic going into 25, then you did 24 for a whole host of reasons is the reason why both those numbers cant be better in 'twenty five.

Speaker Change: Well.

Speaker Change: First of all.

Speaker Change: Yeah.

Speaker Change: The finance team here will be focused on making sure we get the proper ROI on that end.

Speaker Change: I think every time, we get into our head that we can do better we saw.

Speaker Change: And margin recovery, but balance that with the longer term vision of the company.

Speaker Change: Fucking up to be honest and so.

Speaker Change: I think.

Speaker Change: The biggest risk factor Nate has probably as numbers is <unk>.

Speaker Change: Okay, and then a second question if I could I think you talked about.

Speaker Change: Consumer takeaway here.

Speaker Change: Your Pos was up nine or 10 last year and up three market.

Speaker Change: So it's not a schein number.

And you sound more optimistic going into 25, then you did 24 for a whole host of reasons is the reason why both those numbers cant be better in 'twenty five.

Speaker Change: It might roll up to kind of low single digits.

Speaker Change: Excuse me, but it's it's not shy.

Speaker Change: Do I think.

Speaker Change: We could do better, particularly a good year, which would be nice.

Speaker Change: Well.

Speaker Change: First of all.

Speaker Change: Yes.

Speaker Change: I think the answer is yes, but I think.

Speaker Change: I think every time, we get into our head that we can do better we saw.

Speaker Change: It's a little bit like <unk>, I think there's $1 billion of upside and all these other channels.

Speaker Change: Fucking up to be honest and so.

Speaker Change: I think.

Speaker Change: Including Dot com.

Speaker Change: The biggest risk factor Nate has probably as numbers is.

Speaker Change: We are.

Speaker Change: Deeply in recovery in a good way and I don't want to start chasing.

Speaker Change: Consumer takeaway here.

Speaker Change: So it's not a shy number.

Speaker Change: It might roll up to kind of low single digits.

Speaker Change: Yeah stuff that sounds good.

Speaker Change: Excuse me, but it's it's it's not shy.

Speaker Change: But do I think there could be yes, I think yes, I do I think the last year.

Speaker Change: Do I think.

Speaker Change: We.

We could do better, particularly if we had a good year, which would be nice.

Speaker Change: Why did we pick up so much because we have a lot more shelf space that's fundamentally it.

Speaker Change: I think the answer is yes, but I think.

Speaker Change: And I think we did a really good job on some of our marketing program. The fall was fabulous.

Speaker Change: It's a little bit like made saying I think theres, a $1 billion of upside and all these other channels.

Speaker Change: A lot of reasons right the weather it was great.

Speaker Change: Including Dot com.

Speaker Change: <unk> had been kind of burnt up.

We are.

We had just great programs put together so the consumers were seeing our product.

Speaker Change: Deeply in recovery in a good way and I don't want to start chasing.

Speaker Change: Like a lot of controls stuff happening, including Tomcat. So just.

Stuff that sounds good.

Speaker Change: But do I think there could be yes, I think yes, I do I think the last year's such like.

Speaker Change: It really came together and I think that shows the power of the franchise.

Speaker Change: We just got a string it all together now so do I think.

Speaker Change: We.

Speaker Change: Why did we pick up so much because we have a lot more shelf space that's fundamentally it.

Speaker Change: Do I think there's continued upside I don't know if I need double digit because I think it's crazy to say that even though maybe.

Speaker Change: And I think we did a really good job on some of our marketing program. The fall was fabulous.

If we can just keep this going longer.

Speaker Change: For a lot of reasons right the weather it was great.

Speaker Change: Which I think is the best way for us to look at it I think it's it's really good for the franchise and it keeps people look the problem when we at we say more.

Speaker Change: <unk> had been kind of burnt up.

Speaker Change: We had just great programs put together so the consumers were seeing our product.

Speaker Change: Like a lot of controls stuff happening, including tomcat so it.

Speaker Change: And it's a little bit what we saw this year and it's the criticism a little bit we got from ISS.

Speaker Change: It really came together and I think that shows the power of the franchise.

Speaker Change: Is we had a really great year last year. It just wasn't quite as good in the EBIT line as we thought and I think a little bit.

We just got a string it altogether now so I do I think.

Speaker Change: I think there's continued upside I don't know if I need double digit because I think it's crazy to say that even though maybe.

Speaker Change: We're kind of out of our mind when we sort of said 600 last year was so easy and our incentives were based on efficacy.

Speaker Change: I think if we can just keep this going longer.

Speaker Change: Sure.

Speaker Change: So.

Speaker Change: Which I think is the best way for us to look at it I think it's really good for the franchise and it keeps people look the problem when we at we say more.

Speaker Change: <unk>.

Speaker Change: Where it really screws this update is.

Speaker Change: If is the incentives because of the incentives are pretty levered.

Speaker Change: And so we sort of convince ourselves we can do something and then we have a really good year, but not quite as good as we have and the incentive crashes and then we got to step to the board and say we had a great year do you think we should make an exception and this is a joint effort with our board.

Speaker Change: And it's a little bit what we saw this year and it's the criticism a little bit we got from ISS.

Speaker Change: As we had a really great year last year. It just wasn't quite as good in the EBIT line as we thought and I think a little bit we were kind of out of our mind. When we sort of said 600 last year was so easy and our incentives were based on that what you're saying.

Speaker Change: And we.

Speaker Change: We pay a target after last year, which was a very important recovery year for us It just paid at 100%.

Speaker Change: It would have paid less that was iss's criticism.

Speaker Change: So.

Speaker Change: Where it really screws this update is it.

Speaker Change: And so we have this real deep negative leverage in our incentives that if we over promise ourselves ever.

Speaker Change: Is the incentives because the incentives are pretty levered and so we sort of convinced ourselves. We can do something and then we have a really good year, but not quite as good as we have and the incentive crashes and then we got to step to the board and say we had a great year do you think we should make an exception and this is a joint effort with our board.

Speaker Change: Everybody gets hosed.

Speaker Change: So we got to kind of avoid that so just throw that out for grins.

Speaker Change: That's helpful. Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Okay.

Speaker Change: And we.

Speaker Change: We pay a target after last year, which was a very important recovery year for us It just paid at 100%.

Speaker Change: Our next question comes from William Carter with Stifel. Your line is open.

Speaker Change: Hey, Thank you. Good morning. This is Andrew on for William just wanted to ask first off with the kind of gross margin guidance that you gave for the year just to understand its got the bulk of improvement I think two thirds in the first half then you have the fourth quarter lap, which can you kind of implying.

Speaker Change: It would've paid less that was iss's criticism.

Speaker Change: And so we have this real deep negative leverage in our incentives that if we over promise ourselves ever.

Speaker Change: Everybody gets hosed.

Speaker Change: <unk> is flat and I know you don't want to get into the granularity of it but if I go back to <unk>.

Speaker Change: So we got to kind of avoid that so just throw that out for grins.

Speaker Change: Last year, that's 29, 2%, which was 700 basis points below three years.

Speaker Change: That's helpful. Thank you.

Speaker Change: One moment for our next question.

Speaker Change: For 2019.

Speaker Change: Yeah.

Speaker Change: I'm asking in your plan here is there just is there a lot of flexibility here for the mixed performance, particularly this is a launch quarter and perhaps a more normalized launch year or better performance could be upside of the margin, but just any anything and there are some digging in.

Speaker Change: Our next question comes from William Carter with Stifel. Your line is open.

Speaker Change: Hey, Thank you good morning, it's Andrew on for William just wanted to ask first off with the kind of gross margin guidance that you gave for the year just understand its got the bulk of improvement I think two thirds in the first half then you have the fourth quarter lap, which can you kind of implying.

Speaker Change: Yeah. So we would still expect I think maybe I misspoke, a little bit on saying it was completely flat, but it will be it should be up a little bit and you are right. We should have some flexibility there with our with our product lineup and as we progress into into Q4.

Speaker Change: <unk> is flat and I know you don't want to get into the granularity of it but if I go back to <unk>.

Speaker Change: Of last year, that's 29, 2%, which was 700 basis points below three.

Speaker Change: <unk> 19.

Speaker Change: Perfect second question I guess I would ask is just to step back and level set where kind of cost savings are over the next year.

Speaker Change: I'm asking in your plan here is there just is there a lot of flexibility here for the mixed performance, particularly this is a launch quarter and perhaps a more normalized launch year or better performance could be upside of the margin, but just any anything and there are some digging in.

Speaker Change: 30% gross margins in hand, you want to go towards mid thirties, getting rid of Hawthorne or I'm, sorry, removing hawthorne from the P&L will obviously help from that you've got line of sight to about half of that what you said before and then Theres a hey go get it and I think you also mentioned a challenge of $30 million. This morning.

Speaker Change: Yeah. So we would still expect I think maybe I misspoke, a little bit on saying it was completely flat, but it will be it should be up a little bit and you are right. We should have some flexibility there with our with our product lineup and as we progress into into Q4.

Speaker Change: I assume that's incremental to the $1 50, and then kind of a final question as you've taken kind of all these cost out it's clear you're putting dollars back into advertising, but do you think about the supply chain and the potential stressors on it.

Speaker Change: Perfect second question I guess I would ask is just to step back and level set where kind of cost savings are over the next year.

Speaker Change: 30% gross margins in hand, you want to go towards mid thirties, getting rid of Hawthorne or I'm, sorry, removing hawthorne from the P&L will obviously help from that you've got line of sight to about half of that what you said before.

Speaker Change: Do you see any risk there.

Speaker Change: <unk> not being able to meet the demand and I don't think I hope, we never have a COVID-19 again, but that was a fill rates were below and that really stressed but just anything you can give on kind of driving the comfort that there's not going to be a.

Speaker Change: And then there is a hey go get it and I think you also mentioned the challenge of $30 million. This morning to Nate I assume that's incremental to the 150 and then kind of a final question as you've taken kind of all of these cost out it's clear you're putting dollars back into advertising, but do you think about the supply chain and the potential stressors on it.

Speaker Change: Get to 28, and we need to reinvest. This this this in the supply chain. Thanks.

Speaker Change: Yes, maybe I'll just I'll touch on the supply chain, Andrew Good question and.

Speaker Change: Let me just throw in there Andrew Chris was giving you the finger win.

Speaker Change: Ill hop owners it was in a good natured way.

Speaker Change: Do you see any risk there.

Chris: Thanks, Chris I appreciate that.

Speaker Change: Not being able to meet the demand and I don't think hope will never have a COVID-19 again, but that was a fill rates were below and that really stressed but just anything you can give on kind of driving the comfort that there's not going to be a.

Speaker Change: No listen you.

Speaker Change: You highlight exactly something that we sort of framed as we embarked really starting.

Speaker Change: More than a year ago, and our supply chain transformation, which is built it with the most flexibility possible. So I am not concerned about capacity either in the short term or the mid to long term.

Speaker Change: <unk> 28, and we need to reinvest this this this and this supply chain. Thanks.

Speaker Change: Yes, maybe I'll just I'll touch on the supply chain Andrew Good question.

Speaker Change: Jim talked about the incremental 25 million in Capex, a lot of that is going into technology.

Speaker Change: Let me just throw in there Andrew Chris was giving you the finger win.

Speaker Change: I'll hop off.

Speaker Change: To help us be more efficient and give us the capacity, we need I mean, I'm just proud of the team we're down to like six distribution centers from I think a peak of 2018 or something like that so.

Speaker Change: And a good natured way.

Speaker Change: Thanks, Chris I appreciate that.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Listen you're.

Speaker Change: You highlight exactly something that we sort of framed as we embarked really starting.

Speaker Change: We.

Speaker Change: Are definitely making sure that we are not over cutting when it comes to those optimizations.

Speaker Change: More than a year ago, and our supply chain transformation, which is built it with the most flexibility possible. So I am not concerned about capacity either in the short term or the mid to long term.

Speaker Change: Youll see the investments in fact I'll be talking to at a conference in March just about our manufacturing strategy. So could you just talk maybe just a second about just the crude that's out there.

Speaker Change: Jim talked about the incremental $25 million.

Speaker Change: Yes, we've got.

Speaker Change: Capex a lot of that is going into technology.

Speaker Change: So the great thing about our supply chain is.

Speaker Change: To help us be more efficient and give us the capacity, we need I mean, I'm just proud of the team we're down to like six distribution centers from I think a peak of 2018 or something like that so.

Speaker Change: Led by Dave for a long time, just a lot of inherent knowledge, there, but they've done a great job hiring and we've got some young vps really technology forward.

We our.

Speaker Change: If you were at our conference in July last year, you may have met David Husky, but we've got some really smart people just completely helping us re imagine this.

Speaker Change: <unk> definitely making sure that we are not over cutting when it comes to those optimizations.

Speaker Change: Youll see the investments in fact I'll be talking to at a conference in March just about our manufacturing strategy. So could you just talk maybe just a second about just the crude that's out there.

Speaker Change: Everything from fully automated forklifts.

Speaker Change: Probably the biggest thing we did is this core distribution center, it's a mile down the road from our Marysville manufacturing plant all of our fertilizers distribute out of that and it's picked up by our retailers.

Speaker Change: Yes, we've got.

Speaker Change: So the great thing about our supply chain is.

Speaker Change: Led by Dave for a long time, just a lot of inherent knowledge, there, but Dave has done a great job hiring and we've got some young VP is really technology forward.

Speaker Change: We say, it's a half a million dollars or sorry at like half a million miles of truck driving over a year between distribution centers. So we've got a really good crew, you'll see more coming out of us in supply chain that $3 million, Jim asked for I would say the bulk of it probably comes out of supply chain, but it's.

Speaker Change: If you were at our conference in July last year, you may have met David Husky, but we've got some really smart people just completely helping us re imagine this.

Speaker Change: All going to be based on a foundation of investing in technology, whether it's supply chain field salesforce et cetera.

Speaker Change: Everything from fully automated forklifts.

Speaker Change: Probably the biggest thing we did is this core distribution center, it's a mile down the road from our Marysville manufacturing plant all of our fertilizers distribute out of that and it's picked up by our retailers.

Andrew Chris: I'd also say Andrew that the.

Speaker Change: The entire corporation is going to contribute.

Speaker Change: That's a little bit like let people get back up the board meeting and start.

Speaker Change: We save a half a million dollars or sorry at like a half a million miles of truck driving over a year between distribution centers. So we've got a really good crew youll see more coming out of us in supply chain that $3 million <unk> four.

Speaker Change: Sharpening the pencils, but theres a lot of teams working right now.

Speaker Change: This is.

Speaker Change: A lot of that it's not just Nate Nate has been contributing when you look at the sort of 400 out at 100 back into the business a lot of that has come from the operating side.

Speaker Change: I'd say the bulk of it probably comes out of supply chain, but it's all going to be based on a foundation of investing in technology, whether it's supply chain field salesforce et cetera.

Speaker Change: And <unk>.

Speaker Change: God bless, but thats, where a lot of money gets spent so it's not inappropriate corporate is going to participate here too.

Speaker Change: And we're asking a real big questions about who we want to be and how we add value here. So.

Andrew: I'd also say Andrew that the.

Speaker Change: The entire corporation is going to contribute.

Speaker Change: That's a little bit like let people get back up the board meeting and start.

Speaker Change: Listen.

Mark Schauer: Mark can say because he is the <unk>.

Speaker Change: Carpeting, the pencils, but theres a lot of teams working right now.

Mark Schauer: Most important being counter and sort of keeping score here.

Speaker Change:

Amit: This is amit.

Amit: A lot of that it's not just Nate Nate has been contributing when you look at the sort of 400 out at 100 back into the business a lot of that has come from the operating side.

Mark Schauer: But I don't think that numbers scary at all do you now not at all and I think to your point it will come.

Also at corporate and SG&A and so.

Amit: And God bless, but thats, where a lot of money gets spent so it's not inappropriate corporate is going to participate here too.

Mark Schauer: Some of them might get reinvested as Jim talked about superpowers suddenly dropped to the bottom line I think it just allows us some flexibility as we continue to do our 26 planning, which we already have started and then focused on.

Amit: And we're asking a real big questions about who we want to be in and how we add value here. So.

Mark Schauer: Even while we're in season, so that will all participate in that process, there's plenty plenty of opportunity there.

Amit: Listen.

Mark Schauer: Mark can say because he is the.

Mark Schauer: Most important being counter and sort of keeping score here.

Mark Schauer: I think theres a lot of technology over the past five to seven years that have allowed us to do our job a lot easier.

Speaker Change: But I don't think that numbers scary at all no not at all and I think to your point it will come.

Mark Schauer: And I think get more efficient and I think we've got some some good ideas.

Mark Schauer: At corporate and SG&A and so.

Mark Schauer: Thanks ill pass it on.

Mark Schauer: Some of them might get reinvested as Jim talked about superpowers suddenly dropped to the bottom line I think it just allows us some flexibility as we continue to do our 26 planning, which we already have started and been focused on.

Speaker Change: Yes, one moment for our next question.

Speaker Change: Our next question comes from Jonathan <unk> with Jefferies. Your line is open.

Jonathan: Great. Good morning, Nice results and thanks for taking my questions first one was on innovation in your prepared remarks, you referenced natural fertilizers and liquid as part of the product roadmap ahead. So just curious how you see those contributing to the 3% sales growth over the medium term and.

Mark Schauer: Even while we're in season, so yes will all participate in that process. There is plenty to plenty of opportunity. There I think there's a lot of technology over the past five to seven years that have allowed us to do our jobs a lot easier and I think get more efficient and I think we've got some some good ideas.

Jonathan: How you think about innovation as a contributor to U S. Consumer segment growth ahead relative to history.

Speaker Change: Thanks ill pass it on.

Speaker Change: Yes, one moment for our next question.

Jim Hagadorn: Yes, Jim I'm going to steal the beginning of that its really names.

Speaker Change: Our next question comes from Jonathan <unk> with Jefferies. Your line is open.

Jim Hagadorn: Subject matter, but here's here's what I, what I would tell you.

Jonathan: Great. Good morning, Nice results and thanks for taking my question first one was on innovation in your prepared remarks, you referenced natural fertilizers and liquid as part of the product roadmap ahead. So just curious how you see those contributing to the 3% sales growth over the medium term and.

Speaker Change: This goes back to one of my main priorities, which has seen progress on unit volume and loans.

Speaker Change: Remember, we're not losing share this is a category wide issue.

Speaker Change: <unk>.

Speaker Change: One of the things I think is concerned by younger people on.

Jonathan: How you think about innovation as a contributor to U S. Consumer segment growth ahead relative to history.

Speaker Change: Chemicals used in the yard and so I do think that organics.

Speaker Change: Yes, Jim I'm going to steal the beginning of that its really needs.

Speaker Change: Is one way to avoid people being sensitive.

Speaker Change: Subject matter, but here's what I, what I would tell you.

Speaker Change: So.

Speaker Change: We know how to do this this is not hard.

Speaker Change: So.

Speaker Change: Okay.

Speaker Change: Getting just.

Speaker Change: This goes back to one of my main priorities, which has seen progress on unit volume and loans.

Speaker Change: A lot of times you just.

Speaker Change: You believe in organic you've put it in the field. It just doesn't sell that well consumers, but I think that.

Speaker Change: Remember, we're not losing share this is a category wide issue.

Speaker Change: One of the reasons people don't feed is there concern over chemicals and so we want to have.

Speaker Change: One of the things I think is concerned by younger people on.

Speaker Change: We want to make sure we're looking hard at that and so we're going to do that.

Speaker Change: Chemicals used in the yard and so I do think that organics.

Speaker Change: Nate can speak formulation changes, except I would say.

Speaker Change: Is one way to avoid people being sensitive.

Speaker Change: It's a very tough place to innovate.

Speaker Change: So.

Speaker Change: When you're dealing with controls.

Speaker Change: We know how to do this this is not hard.

There's not that many controls is not a lot of innovation in AG chemicals to be honest.

Speaker Change: Getting just.

Speaker Change: A lot of times you just.

Speaker Change: You believe in organic you've put it in the field. It just doesn't sell that well consumers, but I think that.

Speaker Change: And so you tend to be using the same active and so.

Speaker Change: One of the reasons people don't feed is there concern of our chemicals and so we want to have.

Speaker Change: I'm trying to fuse to everybody here that if this was procter and we were talking tied I think they would assume the cleaning power.

Speaker Change: We want to make sure we're looking hard at that and so we're going to do that.

Speaker Change: Convenience of cleaning for homemakers, all this stuff gets better over time.

Nate Baxter: Nate can speak formulation changes, except I would say.

Speaker Change: What world that we're living in where we're sort of dealing with 30 year old technology and thinking it's OK <unk>.

Nate Baxter: It's a very tough place to innovate.

Nate Baxter: When youre dealing with controls.

Speaker Change: <unk> is trying to push us to because they are looking at total exposure that consumers have over a lifetime.

There's not that many controls theres not a lot of innovation in AG chemicals to be honest.

Speaker Change: Including food aid and their exposure to pesticides are there.

Nate Baxter: And so you tend to be using the same actors and so.

Speaker Change: And so they are inhibiting the ability to put down actives.

Nate Baxter: I'm trying to fuse to everybody here that if this was procter and we're talking tied I think they would assume the cleaning power.

As a way to mitigate lifetime, what they would call risk.

Nate Baxter: Convenience of cleaning for homemakers all of this stuff gets better over time.

Speaker Change: Which means less effectiveness.

Speaker Change: So lack of innovation in the actives.

Nate Baxter: What world that we're living in where we're sort of dealing with 30 year old technology and thinking it's OK <unk>.

Speaker Change: Putting down less than probably is optimal to get the controls youre looking for.

Nate Baxter: <unk> is trying to push us to because theyre looking at total exposure that consumers have over a lifetime.

Speaker Change: And I think that drives a need for real innovation.

Speaker Change: And then I'll get to this other part which is my view of the seasons and that I think and I cannot.

Nate Baxter: Including food, they eat and their exposure to pesticides are there.

Nate Baxter: And so they are inhibiting the ability to put down actives.

Speaker Change: Really good weather people.

Speaker Change: I cannot get a really great answer as to what we're seeing in the spring is related to climate change.

Nate Baxter: As a way to mitigate lifetime, what they would call risk.

Speaker Change: I think it is because we're seeing it over and over again, which is kind of squirrelly behavior in April which is prime for for this and really open falls.

Nate Baxter: Which means less effectiveness.

Nate Baxter: So lack of innovation in the actives.

Nate Baxter: Putting down less than probably is optimal to get the controls youre looking for.

Speaker Change: And we.

Speaker Change: We advertise we stimulate business the retailers like it too because they are in lawn and garden mode, If theyre going to spring.

Nate Baxter: And I think that drives a need for real innovation.

Nate Baxter: And I'll get to this other part which is my view of the seasons and that I think and I cannot.

Speaker Change: But what do I think.

Speaker Change: I think if you talk to a lot of researchers here they put down in the fall and they'll say false desktop defeat.

Nate Baxter: Really good weather people.

Speaker Change: But we're fighting for the spring and were fighting for what I think is.

Nate Baxter: I cannot get a really great answer as to what we're seeing in the spring is related to climate change.

Speaker Change: Reliable weather, meaning.

Nate Baxter: I think it is because we're seeing it over and over again, which is kind of squarely behavior in April which is prime for for this and really open falls.

Speaker Change: Meaning that.

Speaker Change: There is a lot of deviation to the forecast in the spring relative to the fall that's what I can get out of the experts.

Nate Baxter: And we we advertise we stimulate business the retailers like it too because they are in lawn and garden mode, If theyre going to spring.

Speaker Change: So meaning that it's.

Speaker Change: On forecast, whether more frequently in the spring.

Speaker Change: April than there is in fall, particularly more Midwest northeast, Okay. So I'm trying to push to there and there is another thing that they do.

Nate Baxter: But what do I think.

Nate Baxter: I think if you talk to a lot of researchers here they put down in the fall and they will say falls by seven feet.

Speaker Change: If consumers don't apply our products with a wet long there.

Nate Baxter: We're fighting for the spring and were fighting for what I think is.

Speaker Change: We're not going to get that grade control they'll get good control, but not great control and we want grid control.

Nate Baxter: Reliable weather means.

Nate Baxter: Meaning that.

Speaker Change: If you talk to experts here I don't care, if its supply chain people people, who know supply chain people R&D people senior leadership.

Nate Baxter: There is a lot of deviation to the forecast in the spring relative to the fall that's what I can get out of the experts.

Speaker Change: They're applying straight feeds with liquids liquid pesticides, which gives us really good control because it gets right into the leaf you don't have to apply to a wet.

Nate Baxter: So meaning that it's.

Nate Baxter: On forecast whether more frequently in the spring in April than there is in fall, particularly Midwest northeast, Okay. So I'm trying to push to there and there is another thing that they do.

Speaker Change: Product, which we think some people a lot of people don't.

Speaker Change: So thats, how youre hearing kind of innovation.

Nate Baxter: If consumers don't apply our products and with a wet lawn they're.

Speaker Change: Seasonality and promotion throughout the year as opposed to all just in the spring trying to make the fall important organics.

Nate Baxter: They are not going to get that grade control they'll get good control, but not great control and we want great control.

Nate Baxter: If you talk to experts here I don't care, if its supply chain people people, who know supply chain people R&D peoples senior leadership.

Speaker Change: Organics and liquids.

Speaker Change: Because we're trying to sort of get at the things that can cause people to have less great results or make it kind of complicated.

Nate Baxter: They're applying straight feeds with liquids liquid pesticides, which gives us.

Speaker Change: Our deal with bad weather so.

Nate Baxter: Really good control because it gets right into the leaf you don't have to apply to a wet.

Speaker Change: Those are why Youre hearing all things, but when it comes to innovation and we're at nate's going which is ease.

Nate Baxter: Product, which we think some people a lot of people don't.

Speaker Change: Look he's not me.

Speaker Change: It's good.

Nate Baxter: So thats, how youre hearing kind of innovation.

Speaker Change: No. He is he's a very process Guy who has plans for everything and innovation is a planning exercise.

Nate Baxter: Seasonality and promotion throughout the year as opposed to all just in the spring trying to make the following important organics.

Speaker Change: That's a long term investment exercise, yeah, I mean look.

Nate Baxter: Organics and liquids.

Speaker Change: Break it down to sort of how we look at innovation, which is ease of use for the consumer effectiveness value and safety and depending on your consumer those things.

Nate Baxter: Because we're trying to sort of get at the things that can cause people to have less great results or make it kind of complicated.

Nate Baxter: Our deal with bad weather so.

Nate Baxter: Those are why you are hearing all things, but when it comes to innovation and we're at nate's going which is ease.

Speaker Change: The rank order of importance changes.

Speaker Change: But I think Jim talked about it this year, we've got our full miracle Gro organics line coming out that's been a big hit in gardening, and we know that Thats important.

Nate Baxter: Look he's not me.

Nate Baxter: It's good.

Speaker Change: No. He is he's a very process Guy who has plans for everything and innovation is a planning exercise.

Speaker Change: We have some new innovation and lines coming out.

Speaker Change: Have their own Scott sort of our heritage line pesticide herbicide free straight food straight seeds.

Nate Baxter: It's a long term investment exercise yes.

Nate Baxter: Look I'll break it down to sort of how we look at innovation, which is ease of use for the consumer effectiveness value and safety and depending on your consumer those things.

Speaker Change: It's going to be in a curve recyclable bag, so were playing around with the new new form factors.

Speaker Change: Certainly we'd like to see less plastic in the world, but it's got to work.

Speaker Change: We've got an all natural that sort of is going to compete with the P&G offering coming out this summer and here's the thing I want to be able to offer.

Nate Baxter: The rank order of importance changes.

Nate Baxter: I think Jim talked about it this year, we've got our full miracle Gro organics line coming out that's been a big hit in gardening, and we know that Thats important.

Speaker Change: Whatever the consumer wants.

Speaker Change: And if we want to have a consumer that wants to be all natural will have products, but we're also going to have really smart products that are effective and safe to use that contain active ingredients and we will talk a little bit with consumers. This goes to the education piece and I can't stress. It enough. We can invent all the great things we want if we don't talk to the consumer and help them understand how to use these things.

Nate Baxter: We have some new innovation and lines coming out we have their own Scott sort of our heritage line pesticide herbicide free straight food straight seeds.

Nate Baxter: It's going to be in a curve recyclable bag. So were playing around with the new new form factors I mean, certainly we'd like to see less plastic in the world, but it's got to work.

Speaker Change: It'll it'll fail, so thats not going to be a big piece of it and then I'll just end with I think we're the only <unk>.

Nate Baxter: We've got an all natural that sort of is going to compete with the PNG offering coming out this summer and here's the thing I want to be able to offer.

Speaker Change: They're in the category that has the horsepower to engage with some of our active suppliers. Some of the Big AG companies. I mean, we're looking 10 years out we're looking at biologicals, we are engaging in sort of some of the Crystal research. They are doing looking for more natural ways to improve the performance, whether it's controls product with.

Nate Baxter: To whatever the consumer wants and if we want to have a consumer that wants to be all natural will have products, but we're also going to have really smart products that are effective and safe to use that contain active ingredients and we will talk a little bit with consumers. This goes to the education piece and I can't stress. It enough. We can invent all the great things we want if we don't talk to the consumer.

Speaker Change: Its a fertilizer plant food so it will take time to build that but it will absolutely as long as we stick to is it easy to use as an effective does it bring value and is it safe.

Nate Baxter: Help them understand how to use these things it'll it'll it'll fail, so thats going to be a big piece of it and then I'll just end with I think we're the only player in the category that has the horsepower to engage with some of our active suppliers. Some of the Big AG companies. I mean, we are looking 10 years out we're looking at biologicals, where.

Speaker Change: Pretty confident that we'll be leading the pack with innovation with announcing a new partner or an innovation committee.

Speaker Change: So.

Rob Catalina: Rob Catalina.

Speaker Change: Outstanding New Board member he will be taking over for Tom Kelly My team has a lot of respect for him. He is.

Nate Baxter: Engaging in sort of some of the Crystal research. They are doing looking for more natural ways to improve the performance, whether it's controls product, whether it's a fertilizer plant food. So it will take time to build that but it will absolutely as long as we stick to is it easy to use as an effective does it bring value and is it safe.

Speaker Change: Probably given us more insights in the last few months than we've had in a long time just because these are working CEO and he is still out there fighting.

Speaker Change: Fighting the good fight so just a really great add to the board and while I'm deeply sorry to see Tom Kelly go.

Speaker Change: And I think we need to give Tom a lot of credit for this companies.

Nate Baxter: I am pretty confident that we'll be leading the pack with innovation with announcing a new partner on innovation Committee.

Speaker Change: <unk> been over the last couple of decades, we've got an all new team and I'm pretty excited about that.

Nate Baxter: So.

Rob Catalina: Rob Catalina.

Speaker Change: Outstanding New Board member he will be taking over for Tom Kelly My team has a lot of respect for him. He is.

Speaker Change: That's great color and just a quick follow up a lot of references to the opportunity in the dotcom channel with some of your major retail partners.

Speaker Change: Probably given us more insights in the last few months than we've had in a long time just because these are working CEO and he is still out there fighting.

Is there any way to Dimensionalize kind of where you stand today in terms of the penetration and just help clarify that for for <unk>.

Speaker Change: Fighting the good fight so.

A really great add to the board and while I'm deeply sorry to see Tom Kelly go.

Speaker Change: Executing on that opportunity I think it was referenced maybe some.

Speaker Change: Optimization of product sizes to work in that channel, but is there any different al. Thanks. So much yes, I'll, just say broadly and DIY brick and mortar on a unit basis were call it 40% market share across sort of all of our categories.

Speaker Change: And I think we need to give Tom a lot of credit for this companies.

Speaker Change: Ben over the last couple of decades, we've got an all new team and I'm pretty excited about that.

Speaker Change: That's great color and just a quick follow up a lot of references to the opportunity in the dotcom channel with some of your major retail partners.

Speaker Change: We're barely in the double digits when it comes to the E complex, so a tremendous amount of opportunity.

Speaker Change: Is there any way to Dimensionalize kind of where you stand today in terms of penetration and just help clarify that for me.

Speaker Change: Here's the thing.

Speaker Change: I hate to pick on my old company, Intel, but I work for them, a long time ago, and I joined them when I thought they were the most sort of forward looking Tech company in the World I think we all know there are challenges today, one of the things that they tried to do.

Speaker Change: Executing on that opportunity I think it was referenced maybe some.

Speaker Change: Optimization of product sizes to work in that channel, but is there any.

Speaker Change: And I think they've learned from this is they built a perfect formula around building designing manufacturing marketing and selling Cpus and anytime they tried to get to adjacent businesses. They try to impose that same formula on them I think we have to look at it the same way, we built a beautiful franchise around DIY brick and mortar lawn and garden, we're not at all giving up on that.

Speaker Change: Thanks, so much.

Speaker Change: I'll just say broadly.

Speaker Change: Brick and mortar on a unit basis were call it 40% market share across sort of all of our categories.

Speaker Change: We're barely in the double digits when it comes to the E complex, so a tremendous amount of opportunity.

Speaker Change: Here's the thing.

Speaker Change: There is growth, but for us to operate effectively whether its in the E com or omnichannel, where you need smaller lighter packaging youre not going to pick up a gallon of.

Speaker Change: I hate to pick on my old company, Intel, but I work for them, a long time ago, and I joined them when I thought they were the most sort of forward looking Tech company in the World I think we all know there are challenges today, one of the things that they tried to do.

Speaker Change: Roundup or ortho and a grocery store, but you might pick up and easy to use apartment size form factor, we've got to be there and so the team is already working on the other end of it is on the pro side, we need to be able to cost effectively provide product on large scale to engage with.

Speaker Change: And I think they've learned from this is they built a perfect formula around building designing manufacturing marketing and selling Cpus and anytime they tried to get to adjacent businesses. They try to impose that same formula on them I think we have to look at it the same way, we built a beautiful franchise around DIY brick and mortar lawn and garden, we're not at all giving up on that.

Small and medium sized professionals. So yes, we absolutely have to re imagine and my only mandate from my team is that we don't impose sort of the way we do things today on those growth opportunities.

There is growth, but for us to operate effectively whether its in the E com or omnichannel, where you need smaller lighter packaging youre not going to pick up a gallon of.

Speaker Change: Jonathan maybe just to Dimensionalize just to follow up on that Heath talked about around like 10% or so it ranges single digits for some categories slightly above into the into the low double digits above 10% and other categories. So it just depends category to category, but.

Speaker Change: Roundup or ortho and a grocery store, but you might pick up and easy to use apartment size form factor, we've got to be there and so the team is already working on the other end of it is on the pro side, we need to be able to cost effectively provide product on large scale to engage with.

Speaker Change: But to his point a lot of great opportunity.

Speaker Change: That we can do there, especially on the form factor and just different types of offerings and all that good stuff.

Speaker Change: Small and medium sized professionals. So yes, we absolutely have to re imagine and my only mandate from my team is that we don't impose or the way we do things today on those growth opportunities.

Speaker Change: Thank you best of luck.

Speaker Change: Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation you may now disconnect and have a wonderful day.

Speaker Change: Jonathan maybe just to Dimensionalize just to follow up on it he talked about around like 10% or so it ranges single digits for some categories slightly above into the into the low double digits above 10% and other categories. So it just depends category to category, but.

Speaker Change: But to his point a lot of great opportunity.

Speaker Change: That we can do there, especially on the form factor and just different types of offerings and all that good stuff.

Speaker Change: Thank you best of luck.

Speaker Change: Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation you may now disconnect and have a wonderful day.

Speaker Change: Okay.

Speaker Change: Okay.

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