Q1 2025 Spectrum Brands Holdings Inc Earnings Call
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Yeah.
Good day, and thank you for standing by.
Welcome to the first quarter 2025 spectrum Brands Holdings, Inc Earnings Conference call.
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Speaker Change: I would now like to hand, the conference over to your speaker today.
Joanne Chalmette: Joanne Chalmette.
Speaker Change: SVP corporate tax and Treasury. Please go ahead.
Speaker Change: Thank you Daniel welcome to Spectrum Brands Holdings, Q1, 2025 earnings conference call and webcast.
Speaker Change: <unk> senior Vice President of tax and Treasury and I will moderate today's call.
Speaker Change: You follow our comments, we have placed a slide presentation on the event calendar page in the Investor Relations section of our website at Www Dot spectrum brands Dotcom.
Speaker Change: Document will remain there following our call.
Speaker Change: Starting with slide two of the presentation our call will be.
David Maura: Led by David Maura, our chairman and executive Chief Executive Officer and Jeff.
Jeff Smeltzer: Smeltzer, our chief Financial Officer.
David Maura: After opening remarks, we will conduct the Q&A.
David Maura: Turning to slides three and four are.
David Maura: Our comments today include forward looking statements, which are based upon management's current expectations projections and assumptions and are by nature uncertain.
David Maura: Actual results may differ materially.
David Maura: Due to that risk spectrum brands encourages you to review the risk factors and cautionary statements outlined in our press release dated February six 2025.
David Maura: Our most recent SEC filings.
David Maura: Spectrum brands Holdings', most recent annual report on Form 10-K, and quarterly reports on Form 10-Q.
David Maura: We assume no obligation to update any forward looking statements.
David Maura: Also please note that we will discuss certain non-GAAP financial measures in this call.
David Maura: Reconciliations on a GAAP basis for these measures are included in today's press release, and 8-K filing which are both available on our website in the Investor Relations section.
Speaker Change: Now I'll turn the call over to David Maura David Thank.
David Maura: Thank you Joanne and good morning, everybody welcome to our first quarter earnings update.
Speaker Change: Thank you all for joining us today.
Speaker Change: I'm going to start the call and update on our operating performance and our strategic initiatives Jeremy.
Speaker Change: Jeremy will then provide you all with a more detailed financial operation operational update including a discussion on our specific business unit results.
Speaker Change: During our last call just to remind everybody I talked about how fiscal 'twenty four.
Speaker Change: It's a year, where we delivered on our promises restored operating momentum to our business.
Speaker Change: We set the standards of excellence and we laid the foundation for a much more successful future.
Speaker Change: <unk> 24 was a transformative year for us.
Speaker Change: Celebrated our investments into brand focused.
Speaker Change: Top line driving initiatives.
Speaker Change: Our capabilities and commercial operations innovation marketing and advertising.
Speaker Change: We have materially strengthened our working capital management.
And we've maintained.
Speaker Change: And what we believe is the strongest balance sheet in our peer group.
Speaker Change: Returning significant capital to our shareholders through share repurchases and increased dividends.
Speaker Change: We've worked to gain back and maintain our investors' trust.
Speaker Change: I am happy to report that our momentum is continuing into fiscal 'twenty five.
Work, we've done to build operational excellence within our organization is paying off.
Speaker Change: Like you now have you guys turn to slide six and our financial performance.
Speaker Change: We're pleased with the start to the year and we're pleased with our first quarter results.
Speaker Change: Sales increased one 3% excluding unfavorable FX, our organic net sales were up one 9%.
Speaker Change: Vestments, we made in fiscal 'twenty four to upgrade our commercial operations and accelerate our topline growth are paying off.
Speaker Change: You will recall from last quarter's call.
Speaker Change: Also this quarter, we're going to be negatively impacted by approximately $10 million of global pet care sales, there were accelerated or pulse pulled forward into last quarter.
Speaker Change: In advance of the go live we did on our new ask for an update which was completed on October <unk> of 2024.
Speaker Change: Home and Garden business has had a terrific start to this year and while this is the slowest quarter of the year for that division the home and garden team saw the opportunity to capitalize on warm fall season in many regions of the U S and we partner with our retail customers to create another demand micro season called the <unk>.
Speaker Change: Cool.
Speaker Change: The holiday season generally came in as we expected for our home and personal care business competitive pressures in the small kitchen appliance category remained high but overall demand was generally stable and the consumer trend of increasing online purchases continued our investments in E. Commerce helped drive another quarter of outside.
Speaker Change: E Commerce growth for H B C business.
Speaker Change: Our adjusted EBITDA in the first quarter of $77 $8 million.
Speaker Change: An increase of 16 and a half million dollars over last year or 26, 9% growth over last year's first quarter results. If you exclude our investment income.
Speaker Change: Gross margins grew 140 basis points over the first quarter of fiscal 'twenty four.
Speaker Change: Our businesses were diligent and delivering cost improvements and operational efficiencies offset headwinds from ocean freight.
Speaker Change: Tariff driven inflation from last year's exploration of tariff exemptions.
Speaker Change: Staying lean is imperative to sustain the operating improvements we have achieved our teams approach each day with a lean mindset continuously looking for opportunity to reduce and take out cost we are focusing our spend towards top line driven investments and this quarter, we increased brand focused investments by over eight.
Speaker Change: Compared to the same period last year.
Speaker Change: Our strong balance sheet continues to be one of the competitive advantages, we enjoy and we're leaning into that to drive our top line, we closed the quarter with net leverage under one one turns.
Speaker Change: We're leveraging the balance sheet to support all facets of our operation and to spur growth.
Speaker Change: We can now turn to slide seven let's discuss our strategic priorities for their for the current fiscal year.
Speaker Change: We continue to invest in the brands to drive long term growth and that's really priority one.
Speaker Change: Last year, we began reinvigorating the focus on making smart ROI positive investments in advertising marketing and R&D.
Speaker Change: This quarter each of our businesses increased or investments compared to the first quarter of fiscal 'twenty four.
Speaker Change: We're seeing significant returns on investments made towards e-commerce leadership and capabilities and we expect our spend this year will be more consistently spread throughout the year in terms of phasing.
Speaker Change: That will put pressure on comparable in the first half of this year.
Speaker Change: We're strategically investing in inventory to support sales growth and particularly our e-commerce expansion.
Speaker Change: While we make these investments we're looking across all facets of our working capital for opportunities to maintain our best in class working capital management capabilities, which we've recently put in place. We believe there are opportunities actually to deliver even more working capital improvements as we move forward during this fiscal year.
Speaker Change: Our investments in innovation are actually expanding our core categories and we're driving sales into new adjacencies as we speak.
Speaker Change: In global Pet care, we are expanding our good 'n' fun brand into good and tasty for cat treats and toppers, adding a brand alongside our <unk> brand in the growing <unk> category.
Speaker Change: We will watch health and wellness products under our good boy brand and later this year, we will be entering the dog food category in North America with a complete nutrition product line.
Speaker Change: We are investing in our operations to improve our cost quality and safety.
Speaker Change: Pleased with the operational teams they are delivering productivity savings in our factories, our distribution centers and throughout our sourcing operations.
Speaker Change: Our operations and commercial teams are activating plans right now to minimize and mitigate the impact of the recently announced U S tariffs.
Speaker Change: While we purchased very few goods from Canada, or Mexico, or HBC business, and GPC businesses, both source material levels of product from China.
Speaker Change: Many of those products are already subject to tariff regime from ranging from the high single digits up to 25%.
Speaker Change: The incremental 10% tariff on Chinese sourced products will impact our cash flows almost immediately but given our inventory turns the effect on our P&L won't be seen until the third quarter.
Speaker Change: With all of that said, we do expect to mitigate the vast majority of any currently announced tariffs impacts in the year.
Speaker Change: The business that will be most impacted by the recently announced tariffs as our <unk> business.
Speaker Change: 40% of Hbc's global purchases come into the United States and nearly all of those are currently Chinese sourced last year, we began implementing a plan to move production for U S bound products out of China.
Speaker Change: Moving production for our appliances is not a quick process because we want to ensure we are very high quality product that's the top priority.
Speaker Change: However, we have recently accelerated these plans and by the end of this fiscal year, we anticipate that approximately 35% to 40% of all our U S bound appliance product will be sourced outside of China and.
Speaker Change: And we will continue to look at opportunities to accelerate and migrate our purchases out of China and in the meantime, intend to minimize the impact of incremental tariffs through both supplier concessions.
Speaker Change: And pricing and cost improvements.
Speaker Change: If we can turn to the strategic transaction for HBC.
Speaker Change: While we're still engaged with several potential buyers on the M&A side clearly the changing landscape for U S. Tariffs has created some uncertainty and thats slowed down the dual track process, we undertook last summer.
Speaker Change: We are pleased that the business continues to perform well, although the timeframe for a separation has taken longer due to these geopolitical factors that are simply outside of our control.
Speaker Change: We will continue to seek opportunities to maximize value with our HVAC business and we will provide updates on our earnings call or sooner. If there is news to share.
Speaker Change: If I can now direct everyone's attention to slide eight.
Speaker Change: And I'll give you a little bit of an update on capital structure and recent share repurchase activity et cetera.
Speaker Change: During the first quarter, we repurchased approximately 800000 shares.
Speaker Change: And in December we put another $150 million can be five one plan in place that allows us to continue buying shares during otherwise restricted periods.
Speaker Change: Year to date through today's call, we have repurchased approximately $2 1 million shares for about $183 million in <unk>.
Speaker Change: Total.
Speaker Change: And quite frankly since the close of the <unk> transaction, we've returned over $1 $2 billion to shareholders through our various share repurchase programs, we've really materially reduced our share count in fact, we've driven our share count down by 36, 6% to be exact.
Speaker Change: We're going to continue to reward our shareholders and we've recently increased our dividend payout.
Speaker Change: We have approximately $220 million right now remaining on the share repurchase authorization that we recently updated with our board of directors.
Speaker Change: In terms of balance sheet strength.
Speaker Change: Our net leverage is still well below our long term target, which is a range of 2.0 turns to two and a half turns.
Speaker Change: We currently have ample capacity to both fund the investments in our company.
Speaker Change: And continue to return a material amount of capital to our shareholders.
Speaker Change: As we keep our internal momentum going and we keep delivering our commitments and we keep shrinking our share count we do believe that eventually our share price will react positively.
Speaker Change: If we can now turn it over to page nine.
Speaker Change: After a good first quarter start we are currently reiterating our expectations for our full year sales adjusted EBITDA and free cash flow.
Speaker Change: Investments in innovation and brand building that we've made since the start of fiscal 'twenty four are helping us to grow our topline organically, we generally see healthy retail inventory levels in our categories. We had a very good holiday season for HBC and we're off to a terrific start in our home and garden business and we're introducing a lot of.
Speaker Change: A new innovation and our global <unk> group.
Speaker Change: Now before I turn the call over to Jeremy.
Speaker Change: Do you want to take a minute to thank each and every one of our global employees, who are continuing to help us drive momentum and they are going to help us thrive in fiscal 'twenty five now I will turn the call to Jeremy and he'll give you a lot more information on the financials and a lot of additional business unit color and insights so over to you Jeremy.
Jeremy: Thanks, David and good morning, everyone, Let's turn to slide 11, and a review of Q1 results from continuing operations I'll start with net sales, which increased one 2%.
Jeremy: Excluding the impact of $5 1 million of unfavorable foreign exchange.
Jeremy: Organic net sales increased one 9% primarily due to an acceleration of inventory builds at certain retailers and an extended fall season, and our home and garden business as well as continued growth in e-commerce with our home and personal care business.
Jeremy: This was partially offset by our previously communicated strategic pull forward of orders into Q4 of last year in GPC and preparation for the S. Four Hana ERP implementation.
Jeremy: Gross profit increased $12 9 million and gross margins of 36, 8% increased 140 basis points, largely driven by impacts from cost improvement actions operational efficiencies and favorable transaction FX.
Jeremy: Partially offset by ocean freight inflation and higher tariffs from the exploration of exemptions on certain product lines from last year.
Jeremy: Operating expenses of $213 $1 million decreased 3% due to the absence of a trade name impairment compared to last year and cost reduction actions, partially offset by increased investment spend in advertising and marketing as we continue to invest behind our brands.
Jeremy: Operating income of $44 $7 million improved by $19 $7 million driven by the gross margin improvement and lower operating expenses I mentioned.
Jeremy: GAAP net income and diluted earnings per share both increased primarily driven by the higher operating income lower interest expense and lower share count.
Jeremy: Partially offset by lower investment income.
Jeremy: <unk> EBITDA was $77 $8 million.
Jeremy: A decrease of seven 7% or $6 5 million driven by investment income of $23 million in the prior year and increased brand focused investments, partially offset by higher volume and improved gross margins excluding.
Jeremy: Excluding prior year investment income adjusted EBITDA was up $16 $5 million.
Jeremy: Adjusted diluted EPS increased by 39 to $1 <unk> per share driven by lower interest expense and a reduction in shares outstanding partially offset by lower adjusted EBITDA.
Jeremy: Turning to slide 12, Q1 interest expense from continuing operations was $6 $2 million decreased $13 million due to our lower outstanding debt balance.
Jeremy: Cash taxes during the quarter of $8 million increased $4 6 million from the prior year.
Jeremy: Yeah.
Jeremy: Depreciation and amortization of $24 $5 million decreased $1 million from last year and separately share based compensation increased $800000 to $4 7 million.
Jeremy: From $3 9 million in the prior year.
Jeremy: Capital expenditures were $5 9 million in Q1, $2 5 million lower than last year.
Jeremy: Cash.
Jeremy: <unk> towards strategic transactions restructuring related projects and other unusual nonrecurring adjustments were $8 8 million versus $16 $3 million last year.
Jeremy: Moving to the balance sheet, we had a quarter end cash balance of approximately $180 million and about $491 million available on our $500 million cash flow revolver.
Jeremy: Total debt outstanding was approximately $575 million.
Jeremy: Listing of $496 million of senior unsecured notes and $79 million of finance leases.
Jeremy: We ended the quarter with just over $395 million of net debt.
Jeremy: Now, let's get into the review of each business unit to provide details on the underlying performance drivers of our operational results.
Jeremy: We will start with global pet care, which is on slide 13.
Jeremy: Reported net sales decreased six 1% and excluding favorable foreign currency impacts organic sales decreased six 4%.
Jeremy: Sales declined in both the companion animal and Aquatics category.
Jeremy: Primarily driven by last quarter's pull forward of approximately $10 million of sales prior to GPC North Americas October 3rd go live on our new ERP system.
Jeremy: The implementation went well and we are pleased to say our operations are running smoothly.
Jeremy: As anticipated this put pressure on our first quarter sales.
Jeremy: To add some perspective on the impact it's had on our quarterly results. If we look at the four month period from September through December of 2024.
Jeremy: Which would eliminate those timing differences result, resulting from the pull forward.
Jeremy: <unk> reported net sales grew one 8%.
Jeremy: TPC EMEA, which was not impacted by the S. 400 go lives grew sales in the mid single digits.
Jeremy: We are seeing solid sales growth for good boy brand as we expand distribution throughout continental Europe.
Jeremy: And introduced new products that are being well received by consumers.
Jeremy: The chews and treats business also had several successful holiday campaigns at EMEA.
Jeremy: Dog and cat food ecommerce sales had a strong growth quarter as well.
Jeremy: Sales in North America declined low double digits impacted primarily by the sales pull forward into the fourth quarter.
Jeremy: Yes.
Jeremy: North.
Speaker Change: Erica is companion animal sales were also adversely impacted by consumer trade down.
Speaker Change: Many of our North American brands like <unk> Fund Nature's Miracle in <unk>, our premium brands and we see consumers looking for lower cost options, including.
Speaker Change: Including choosing smaller pack sizes <unk> private label.
Speaker Change: To combat this pressure and continue to build our brands. We are investing in value focused innovation brand building and promotional programming to strategically differentiate our products and win with consumers.
Speaker Change: Soft consumer demand in Aquatics continued to impact our sales this quarter.
Speaker Change: The products category has been especially impacted by low foot traffic.
Speaker Change: <unk>.
Speaker Change: E Commerce sales were in the mid 20% of Gpt's global sales and were relatively flat to last year.
Speaker Change: One of our large e-commerce customers experienced capacity issues.
Speaker Change: Excuse me.
Speaker Change: At its fulfillment centers attributable in part to <unk>.
Speaker Change: High levels of inventory on hand during the holiday season, which impacted their repurchase levels in the quarter.
Speaker Change: We did see strong Pos for our products at this retailer and expect those capacity challenges to stabilize in the second half of the year.
Speaker Change: Our strategic investments in GPC brand focused innovation marketing and advertising continued to fuel a robust pipeline and position us well for future topline growth.
In North America, our recently launched <unk> Fund National AD campaign is running during both live sports and on network television driving significant brand awareness and expanding our distribution channels.
Speaker Change: We plan to further expand the campaign in the near term such as through our partnership with good morning America.
Speaker Change: Live customer segment with an in studio adult competition, where these good and fun pups will compete in the low six obstacle course with the winter taking home a year's worth of good fund dog treats.
Speaker Change: We are also launching dream bone collagen and high protein dog treats this spring.
Speaker Change: These products cater to the growing demand for nutritious health focused products and we already have listings at one of our largest retail customers.
Speaker Change: We are also excited to launch nutritional dog food in North America later this year.
Speaker Change: And Aquatics, we secured a new aquarium kept program with a major retailer that will begin shipping later this fiscal year.
Speaker Change: These all in one aquarium options target consumers new to the hobby, helping drive household penetration and long term category engagements.
Speaker Change: We will manufacture the tanks and assemble the kits at our noblesville.
Speaker Change: Indiana facility.
Speaker Change: Adjusted EBITDA for GPC decreased by $1 2 million to $51 $5 million.
Speaker Change: Primarily driven by lower sales volume and inflationary pressures in ocean freight.
Speaker Change: Offset by operational productivity improvements and other favorable variances.
Speaker Change: GPT also increased its brand building investments this quarter continuing to invest behind strategies to drive sales growth for the business.
Speaker Change: For fiscal 'twenty, five we expect GPC sales will be relatively flat to last year.
Speaker Change: With approximately a third of Gtt's business in Europe, we expect FX headwinds to negatively impact our reported net sales growth levels.
Speaker Change: We expect cautious consumer behavior and given the premium placement of many of our brands. We anticipate continued pressure in North America from consumer trade down.
Speaker Change: We remain cautious about our products, where demand continues to be soft and has not yet returned to pre pandemic levels.
Speaker Change: Moving now to home and garden, which is on slide 14.
Speaker Change: Net sales increased 27, 9% in the first quarter.
Speaker Change: Driven primarily by the timing of seasonal inventory build by certain retailers.
Speaker Change: The first quarter is typically a slowest sales quarter and represents a small portion of the annual consumer activity for this business.
Speaker Change: The quarter is predominantly focused on preparation and staging for the seasonal business, which typically begins later in our second quarter.
Speaker Change: Order trends support our view that retailers are starting to season with normalized inventory levels.
Speaker Change: Sales increased in all categories other than cleaning.
Speaker Change: Sales in controls and repellent increased most substantially with strong demand also aiding growth in household pet sales.
Speaker Change: A relatively warm fall season also extended demand further into the fall.
Speaker Change: At the end of January the Atg business successfully went live on our S. Four Hana ERP.
Speaker Change: While the impact of that go live on quarterly sales was less pronounced than it was with the GPC North American go live.
Speaker Change: $4 million to $5 million of the quarterly sales favorability was attributable to retailers cautiously building inventory to ensure supply during the go live.
Speaker Change: Including quarterly sales comparisons are being affected by the loss of some distribution last year.
Speaker Change: But sales transfer rejuvenate floor care products are gradually improving led by the click and clean market.
Speaker Change: Our <unk> commercial teams partnered with retailers this fall behind the new fall campaign to drive demand during the extended fall season.
Speaker Change: We supported the campaign with brand focused media investments and drove share growth for both the specter side and hotshot brands this quarter.
Speaker Change: Based on the success of the campaign, we anticipate increasing our fall Carl investments this coming fall.
Speaker Change: We are excited about our new products that are being introduced this season, including the spectrum side Wasp and Hornet trap and the hotshot flying insect traps, which are already gaining traction with retailers.
Speaker Change: This will be the second season for our sector side, one shot product line, our longest lasting spectra Si product.
Speaker Change: <unk> exercised one shot had a strong first year and resonated with results focused consumers looking for increased efficacy at a superior value.
Speaker Change: We will have incremental sector side, one shot displays in retailers. This season and will support growth for the product line and the Specter side brand with brand focused investments.
Speaker Change: Adjusted EBITDA was $9 $3 million compared to a loss of $700000 last year.
Speaker Change: The increase in adjusted EBITDA was primarily volume driven aided by cost improvements and favorable trade variances offset by an increase in brand building investments and some inflation.
Speaker Change: For fiscal 'twenty, five we expect low single digit sales growth for <unk>.
Speaker Change: We are planning for weather in 2025 that is generally similar to the 2024 season.
We anticipate that our retail partners will be supportive of the lawn and garden category in their stores with the allocation of off shelf space.
Speaker Change: Certain retailers continue to expect a cooler start to the season.
Speaker Change: Which could impact the timing of orders and reorder patterns.
Speaker Change: We do expect the category to be competitive and we will continue supporting our innovation and brands through brand focused investments throughout the year.
Speaker Change: And finally home and personal care, which is on slide 15.
Speaker Change: Reported net sales increased one 4% and excluding unfavorable foreign exchange organic net sales increased three 1%.
Speaker Change: High single digit organic sales growth in global personal care was offset by low single digit declines in global home appliances.
Speaker Change: Continuing recent quarterly trends Hbc's ecommerce sales growth.
Speaker Change: Significantly outpaced brick and mortar sales this.
Speaker Change: This quarter e-commerce sales accounted for over 30% of HBC quarterly global sales.
Speaker Change: We were overall pleased with the holiday season.
Speaker Change: We generally saw stable consumer demand with highly competitive retail markets.
Speaker Change: North American sales decreased low single digits with growth in personal care offset by sales declines in home appliances.
Speaker Change: Within personal care hair care and grooming sales grew while home appliances saw competitive pressures in toaster ovens and air Fryers. This holiday season.
Speaker Change: Sales in EMEA grew high single digits in both personal care and home appliances.
Speaker Change: EMEA also saw strong ecommerce growth, particularly in hair care beverage in garment care as well as new listings at a number of traditional retailers across the region.
Speaker Change: Latin America posted organic single digit sales growth led by growth in personal care, where we gained new distribution from successful new product launches offset by low single digit declines in home appliances.
Speaker Change: We had a great season online.
Speaker Change: Consumers are increasingly going online for hpt's categories, and we are investing behind that global trend to drive top line sales.
Speaker Change: One standout product for US was the Emerald French door Air Fryer, Toaster oven, where we saw especially strong online sales.
Speaker Change: The Russell Hobbs garment steamer is gaining momentum throughout the UK and Continental Europe.
Speaker Change: And our Remington Baldor continues to get new listings have gained share both online and in traditional retail gaining traction and driving awareness of the Remington brand with consumers.
Speaker Change: We plan to introduce new Remington lines, and multiple north American retailers and internationally during fiscal 'twenty five.
Speaker Change: Building off the successful Remington one launch a year ago.
Speaker Change: We will continue to activate brand focused investments to drive top line sales of our current product portfolio.
Speaker Change: And our new product launches throughout fiscal 'twenty five.
Speaker Change: Adjusted EBITDA was $26 7 million in the quarter flat to last year.
Speaker Change: The adjusted EBITDA margin of seven 7% was also relatively flat to last year.
Speaker Change: Adjusted EBITDA benefited from higher sales volumes and continued cost improvement initiatives.
Speaker Change: Favorable cost variances to last year, and favorable FX offset by inflation and ocean freight.
Speaker Change: Tariffs and increased brand focused investments.
Speaker Change: Looking forward, we expect HTC sales to grow low single digits in fiscal 'twenty five.
Speaker Change: As our most global business, we anticipate significant FX headwinds will negatively impact our reported sales growth levels.
Speaker Change: We see stabilizing consumer demand trends with pockets of softness in certain small kitchen product categories.
Speaker Change: And we expect a continued challenging competitive environment in North America.
Speaker Change: We believe most retailers ended the holiday season with relatively healthy inventory levels.
Speaker Change: I would expect Hbc's growth in e-commerce to outpace growth in brick and mortar channels throughout the year.
Speaker Change: Turning now to slide 16, and our expectations for 2025.
Speaker Change: Consistent with our prior earnings framework, we expect fiscal 'twenty five net sales to grow low single digits driven.
Speaker Change: Driven by our brand building investment strategy fueling top line growth offsetting pressures from current geopolitical and economic conditions, including FX headwinds.
Speaker Change: We.
Speaker Change: To expect adjusted EBITDA to grow mid to high single digits driven.
Speaker Change: Driven primarily by higher sales volumes and cost improvement actions.
Speaker Change: Offset by Ocean freight inflation and the expiration of certain tariff exclusions on certain product lines within our home and personal care business.
Speaker Change: As David mentioned, we currently expect to mitigate the vast majority of recently announced tariffs and the fiscal year.
Speaker Change: Our earnings framework does not contemplate any additional tariffs beyond those recently announced.
Speaker Change: Turning to slide 17.
Speaker Change: Depreciation and amortization is expected to be between 115 and $125 million.
Speaker Change: Including stock based compensation of approximately 20% to $25 million.
Speaker Change: Cash payments towards restructuring optimization and strategic transaction costs are expected to be between 30% and $40 million.
Speaker Change: Capital expenditures are expected to be between 50, and $60 million and cash taxes are expected to be $40 million to $45 million.
Speaker Change: So in my section I want to Echo David and thank all of our global employees for their hard work so far this year.
Speaker Change: Now back to David.
David Maura: Okay. Thank you very much Jeremy.
Speaker Change: Thanks, everyone for joining us on the call today.
Speaker Change: Let's just take a few minutes and recap the key takeaways youll find those on your slide 19.
Speaker Change: But theres no question about it we're currently operating in a dynamic environment today the.
Speaker Change: The developing tariff landscape, we will certainly have an impact on us in our competitive set.
Speaker Change: But.
Speaker Change: In the meantime, we are implementing contingency plans are moving production out of China. We're redesigning supply chain. We're also working with our suppliers and retailers to cover the recently enacted tariffs.
Speaker Change: We expect consumers to be cautious as they digest, a new international trade environment.
Speaker Change: And the eventual implication on prices and inflation.
So expect FX headwinds FX headwinds to impact reported sales numbers.
Speaker Change: However, we remain focused on what we can control we're investing in innovation and top line driving initiatives. We are expanding the reach of our brands to Adjacencies and we're letting cost as consumers know about the value of our products, we're staying lean and focused and focusing our spend toward growth.
Speaker Change: We're very pleased with the start of the year. The brand focused investments we started to make in 2024 and are continuing to make 25 are driving innovation in our products and consumer demand at shelf and online our investments in E Commerce.
Speaker Change: From leadership to strategy to content to fulfillment are helping us win and what is the fastest growing channel for most of our product portfolio.
Speaker Change: HBC delivered another solid a solid holiday season, and our investment in E. Commerce is one of the reasons, we keep winning there.
Speaker Change: Home and garden had a fantastic quarter.
Speaker Change: While a portion of their sales increase is due to timing because of accelerated purchases prior to the businesses go live on us for Hana, we're looking forward to a good season in home and garden.
Speaker Change: Based on our discussions with our retail partners, we expect retailers to be supportive of the lawn and garden category. This season to help drive foot traffic into their stores.
Speaker Change: While we can't control the weather, we're ready for another season of growth.
Speaker Change: For global Tech here when.
Speaker Change: When we even out the quarterly impact of sales acceleration to last quarter sales also group.
Speaker Change: Our <unk> on a go lives are being successful and we now have global pet care in North America, and our home <unk> Garden business on the new platforms, and where we're focusing now on expanding that ERP system further internationally as the year progresses.
Speaker Change: Overall, we have a ton to be proud of and I'm excited about our continued momentum while the world is currently in a volatile state.
Speaker Change: Ari pleased with our operating performance our inventory levels are healthy and we are maintaining best in class service levels to our customers. We are thrilled to have the lowest levered balance sheet, and our space, allowing us to invest in our operating units and returned significant capital back to our shareholders. We will we continue to believe that our share price is.
Speaker Change: <unk> undervalued as evidenced by recent M&A multiples in the pet space and we are highly optimistic that by continuing to improve our operating performance. We will ultimately succeed in a better multiple.
Joanne Chalmette: Right now I will turn the call back over to Joanne and we're happy to take your questions.
Joanne Chalmette: Thank you David operator, we can go to the question queue.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Okay.
Speaker Change: Our first question comes from Brian Mcnamara with Canaccord Genuity. Your line is open.
Brian McNamara: Hey, good morning, guys. Thanks for taking the questions.
Speaker Change: Understanding you sell very different product lines, a large garden competitors sounded pretty optimistic heading into the spring last week. Another competitor last night was I'll call it cautiously optimistic.
Speaker Change: Obviously, not asking you to predict the weather it sounds like Youre planning on the same weather last year, which is probably a good way to be given the last few years, but our earlier load ins and overall retailer behavior, suggesting they're a bit more committed to the category than they've been in some time.
Speaker Change: No I would say it feels to me that retailers in general are same level.
Speaker Change: Commitment as they were last year to the category I do see some incremental off shelf seasonal space come into our category.
Speaker Change: A couple of years ago, I think where retailers tended to step away or move to some adjacent categories for the spring season, So I do think.
Back to the consumables and controls there is a big focus there I think.
Speaker Change: Retailers load at different times, each year or so.
Speaker Change: We were pleased to see that it helps the factory level load and helped US get ahead of some of the go live activity that we had.
Speaker Change: At the end of January for that business, but overall, we're in a good place I do think that that activity is really a pull forward of loading from Q2 to Q1. So.
Speaker Change: I would expect frankly would come out relatively dollar to dollar.
Speaker Change: In Q2, but.
Speaker Change: But at the same time, we will see how the spring season progresses inventory looks really good across the brick and mortar retail space for our categories and we're excited about the season.
Speaker Change: We're taking a prudent approach to what we're seeing we're expecting for the year.
Speaker Change: And if we have a better weather season that theres a potential for it to move up.
Speaker Change: Got it.
Speaker Change: Go ahead I'm sorry.
Speaker Change: Got it no no I just I just wanted to really call out the team their home and garden for US has been a remarkable turnaround I think the whole industry.
Speaker Change: You kind of had the Covid situation and then you had kind of the overhang of tons of inventory, but I think we're doing a little bit better than competition I mean, I really want to thank the team there led by half year. We're just much sharper on innovation, we're much sharper on the efficacy.
Speaker Change: The product were sharper on marketing.
Speaker Change: I mean look we just we just saw nearly a record quarter right.
Speaker Change: $9 million in EBITDA for Q1 is phenomenal and so look I do think retailers are committed to the category and as I said in my opening remarks.
Speaker Change: They really love the efficacy and the value that we played out it drives a lot of foot traffic. So.
Speaker Change: But.
Speaker Change: Okay.
Speaker Change: I think we are being prudent, but let's hope for some good whether it should be it should be a good year for them in garden were excited about it.
Speaker Change: They have the opportunity to also just say thanks to that home and garden teamed our supply chain teams our finance team.
Speaker Change: We're super excited to go live on their floor at the end of January four months. After we did GBP North America, that's a $600 million business that went live with <unk>.
Speaker Change: No hiccups, we're operating so just a big shout out to our internal teams.
Speaker Change: Great.
Speaker Change: Good luck.
Speaker Change: Good.
Speaker Change: On <unk> I understand it's not a core asset could this kind of delay be almost like a blessing in disguise as it makes sense to maybe hold on to the asset a little while longer while you nurse at back of the house with a large player winning with innovation in this space. There is a reasonable school of thought that with innovation returning to the category overall the higher quality.
Speaker Change: Businesses might fetch a higher higher multiples, particularly after we get some certainty on the policy front.
Speaker Change: Yes listen there's no question I mean last summer, we went and felt things out and we were overwhelmed with the response, we have to be honest, we got super confident we would find a complementary partner merger synergy.
Speaker Change: Global scale type play that we create a lot of value for stakeholders Theres no question that.
Speaker Change: The change in administration.
Speaker Change: Tariffs, but that makes things harder to value create volatility.
Speaker Change: It just slowed things down, but I think if you zoom out again.
Speaker Change: So just thank the team there and Jim right.
Speaker Change: They've done a yeoman's job turning this business around.
Speaker Change: Less than two years ago was a $40 million you would've business returned to $70 million plus our goal is to get that back to 80% at 100, and so yes. We've got some short term headwinds right now is FX and tariffs that are there are unwelcomed.
Speaker Change: But we face into these things, we manage them will mitigate them and I agree with what you are saying.
Speaker Change: There's no question that we can draft off some of this innovation.
Speaker Change: We can be a value price point player.
Speaker Change: And I think look that's how you ultimately create more value right. As you continue to just focus and improve your fundamentals.
Speaker Change: But this industry is absolutely right for consolidation that has to happen it will happen.
Speaker Change: And we just have to listen we've got to keep doing what we're doing is great stewards of the asset and eventually the right. The right situation will come along and it will it will unlock some value, but that's where we're going to steer the boat.
Speaker Change: Thank you. Our next question comes from Ian Zaffino with Oppenheimer. Your line is open.
Speaker Change: Great.
Ian Zaffino: Thanks, Rob Thanks for taking my question and then.
Speaker Change: Yes.
Speaker Change: How are you guys.
Speaker Change: On the pet side.
Speaker Change: Drilling down a little bit on this.
Speaker Change: Two items and.
Speaker Change: The E Commerce business, what is that now growing I know you kind of called it out as flat, but there's one retailer should be kind of back out that one retailer maybe give us an idea of kind.
Speaker Change: Core growth of the online business and GPC and then also are you seeing any signs of a bottoming in aquatics or is this kind of a.
Speaker Change: A long haul sort of wait and see.
Speaker Change: So I'll hit the first piece.
Jeremy: Jeremy as always fill it out and give you more detail look online we continue to win.
Speaker Change: POS has been double digit.
Speaker Change: Growth for that business since we put a new E com team in there and I couldnt be more pleased with Mir and well just again, bringing lots of new content lots of new excitement lots of new digital advertising, so very vibrant there and that continues.
Speaker Change: Very recent today or this week and we continue to grow double digit there in terms of so.
Speaker Change: We did have a big player that had some capacity issues and so our factory shipments did not match the Pos right.
Speaker Change: And then we had a major pull forward of revenue into that September quarter from December, but because we had to tell our customers. We were doing a major S&P upgrade to ask for honor and we didn't want them out of stock and so there's definitely some distortion in the pet business here in Q1, but.
Speaker Change: But fundamentally very vibrant we are tweaking things, we do have some premium product there is pressure on the consumer.
Speaker Change: We want to work with our vendors and our customers and we want to get a higher growth rate for sure.
Speaker Change: We're also we would also tell our investors look we're making top funnel investments those take longer to pay back. They just do but we've built from IC. We've taken a good and fund business from $30 $50 million is now a quarter billion dollar wholesale business. The American consumer doesn't really know that brands like <unk>.
Speaker Change: I'm too we've got to spend money, we've got to get awareness up we've got to build brand equity that has a longer payback.
Speaker Change: We are clearly burdening the earnings of the company with it right now.
Speaker Change: But those are the assets that ultimately get great value you saw just 90 days ago or.
Speaker Change: Company.
Speaker Change: No.
Speaker Change: Trade for 22 times EBITDA now granted that's food focus a little faster growth rate than us.
Speaker Change: But we're pretty convinced if you build.
Speaker Change: <unk> scalable attractive pet assets, they're worth a hell of a lot more than where we trade currently at seven times and we're going to keep banging on that Aquatics is definitely been a little bit of a slower slog.
Speaker Change: But we are the dominant player there it's a great margin business, we're going to continue to do things like Glo fish and try to bring news and excitement to the category.
Speaker Change: We figured out how to make a bigger angel fish light up in a tank and get that as part of the <unk> family, we saw a big lift there.
Speaker Change: We are increasing our tank business to support some of our major brick and retailers, but it's definitely been a more challenged category Jeremy you want to.
Speaker Change: I think it's a bit of a tale of two cities between what we see in Europe, and what we see in North America.
Speaker Change: New entrants to the category, particularly in North America are difficult right now it's relatively <unk>.
Speaker Change: Expensive entry point.
Speaker Change: For this economic <unk>.
Speaker Change: Cycle that we're in.
Speaker Change: Why.
Speaker Change: And in my prepared remarks, some of our new products and new agreements with brick and mortar or some smaller tank entry level to start building that we do see relatively steady demand for all the consumables that good thing, that's where we that's where we make our margin and you can see that where the EBITDA performance is holding up nicely and the other reason that.
Speaker Change: Yes.
Speaker Change: Beyond the installed base in Europe, I think we see a little bit more steady performance in Europe, but theres also a larger pond market deploy outdoor even indoor.
Speaker Change: That's a bigger market in Europe than it is in the U S. A bigger consumer base and that's very steady.
Speaker Change: Particularly on food, but also on water treatment.
Speaker Change: Okay. Thank you everybody just sneak in one more on the M&A front.
Speaker Change: Yes.
Speaker Change: Any need to buy anything here, how are you thinking about kind of and if we do hit an innovation cycle, if youre well positioned or if you need mass anywhere out just sort of a.
Speaker Change: Your current thoughts on M&A. Thanks.
Speaker Change: Give me that again I didn't hear it exactly.
Speaker Change: I'm, just saying what do you need do you need to do M&A. If you do where do you need that you needed. It from maybe help on more innovation or maybe more scale or anything like that or adjacencies, just any kind of discussion or color you can give us on what you're thinking on M&A maybe.
Speaker Change: Just nothing but yes. Thanks.
Speaker Change: Look listen I've looked at tons of transactions in the last nine months.
Speaker Change: Most of these things are at price points.
Speaker Change: Thanks.
Speaker Change: We don't want to deploy capital at the wrong price point, so we passed on tons of deals.
Speaker Change: We continue to buy shares even today the share price is down a little bit as we're doing this call.
Speaker Change: Don't understand it.
Speaker Change: But that's okay.
Speaker Change: People don't want to own the shares were happy to buy them.
Speaker Change: We frankly think that our $1 billion to that franchise is worth a lot more than <unk>.
Speaker Change: We're eventually going to get approved right on that.
Speaker Change: As you can see in our opening remarks, we are launching a number of adjacencies. We are getting into cat treats we're taking that good 'n' fun Halo brand, which we're pretty dominant in dog chews.
Speaker Change: Going into good and tasty.
Speaker Change: Started the business there and we've grown from zero to 10 million Bucks, we gotta get bigger faster.
Speaker Change: We've got <unk> launching over here, we're taking a good boy brand, which has been a homerun for us and the UK.
Speaker Change: And we've taken that into continental Europe, but we're going to launch food actual dog food under that brand here into this summer and fall of this year.
Speaker Change: And frankly, we want to get into the health and wellness business and you can see us launching.
Speaker Change: Collagen and other things into some of our treats and chews and so those are Adjacencies. We're currently building organically, but theres. No question were an under Levered balance sheet, everybody calls the solar stuff and we want to we want to acquire higher growing globally scaled assets in that in those categories.
Speaker Change: Scott Wellness health and wellness and food.
Speaker Change: But we have got to maintain discipline and patience and we believe that is how you win in the M&A game over the long run.
Speaker Change: That helps thank you.
Our next question comes from Olivia Tong with Raymond James Your line is open.
Olivia Tong: Great. Thanks, good morning.
Olivia Tong: Hi, how are you.
Olivia Tong: Thank you Derek.
Olivia Tong: Right.
Speaker Change: It's impressive that you cut your exposure that dramatically by or are planning to cut your exposure back dramatically on tariffs by year end. So if you could talk about the actions in place to do that.
Olivia Tong: Whether pricing is a component of that.
Speaker Change: And also the competitive dynamics.
Speaker Change: In your HTC categories, as well, particularly at the opening price point level.
Speaker Change: And given the efforts that you've made slower youre trying to manufacturing exposure.
Speaker Change: I see.
Speaker Change: And political backdrop.
Speaker Change: How does that impact your commitment to exiting the segment realized. The question. You said earlier you remain committed to doing that participate sense of urgency in doing that.
Speaker Change: Yeah.
Speaker Change: Look I think.
Speaker Change: Big picture, let's just re stage.
Speaker Change: Our home and garden business is largely a north American company, we manufacture we sure.
Speaker Change: We have raw materials with finished goods we do.
Speaker Change: Basically all of that in USA, So theres very little tariff impact to the home and garden business.
Speaker Change: We have been very deliberate over the last 510 years on getting dual source Triple force quadruple forced in pet we still have product come out of China.
Speaker Change: But it's relatively small.
Speaker Change: We are going to.
Speaker Change: We have access to tons of factories tons of vendors both here in the U S and in other parts of the World, where we currently source and we can flex capacity and move that around.
Speaker Change: And we could completely exit China.
Speaker Change: If the environment, so demands that's not going to happen overnight, but if it comes to that.
Speaker Change: We have that flexibility and we can work on that depending on how the numbers fall.
Speaker Change: HBC, that's exposed and we've been over there.
Speaker Change: We've been in a number of different countries with new factories.
Speaker Change: We have capacity coming online we have products launching there now and what we're telling you is we can have 30% to 40% of that business moved out of China by the end of the year.
Speaker Change: And so that's that's kind of our that's kind of how that plays but.
Speaker Change: In the interim.
Speaker Change: <unk>.
Speaker Change: Our problem. We are obviously, we have to take price and we have to work with our suppliers to get lower cost and work both sides and make sure. We stay viable. So we can invest in innovation and continued market and be a valuable player to our competitor to our consumers.
Speaker Change: Okay.
No.
Speaker Change: Sure.
Speaker Change: Oh, yes.
Speaker Change: Got it and then in terms of the mid to high single digit EBITDA target obviously.
Speaker Change: <unk> backdrop.
Speaker Change: That is one factor, perhaps had already assumed some level of increase in providing your initial outlook, but can you just talk about what's embedded in the target at this point.
Speaker Change: And getting to that mid to high single digit.
Speaker Change: Presumably there are some costs associated with moving into.
Speaker Change: Other countries.
Speaker Change: And then as far as potential price increases in the back half of the year.
Speaker Change: If you could just give us a little bit more color there that would be helpful. Thank you.
Speaker Change: Yes, we won't give specifics into specific into line by line, how we plan to offset but as I said overall, we do tend to mitigate it in the year just to put it a little bit of context for everybody listening.
Speaker Change: It's plus or minus $12 million impact to this year as currently announced with current date.
Speaker Change: In place and so as we look at our playbook. Obviously this is not the first time around mitigating tariff. So we look at our playbook, which is working with our suppliers on costs working with our retail.
Speaker Change: Customers on price and also looking at other cost improvement opportunities across the platform, we intend to mitigate that and we'll see how the environment develops as we head into 'twenty six but David already talked about the flexibility that we have and the additional flexibility we're going to create so.
Speaker Change: We feel very confident with the.
Speaker Change: Current announcements.
Speaker Change: Announcements that are out there, but we're going to mitigate.
Speaker Change: Competent way and just get more flexible frankly in our supply chain for whatever comes at us in the future obviously, it's a dynamic environment out there.
Speaker Change: Got it thank you.
Olivia Tong: Thanks Olivia.
Thank you our next question comes from.
Olivia Tong: Peter Grom with UBS Your line is open.
Thank you operator, good morning, Ed Amara, David how are you.
Olivia Tong: Good thanks.
Olivia Tong: Alright.
I appreciate all the color provided on HCC capital allocation, you've bought back a lot of thoughtful HHS transaction.
Olivia Tong: Alluding to that.
Olivia Tong: A lot on the call today are kind of been in the same spot valuation.
Olivia Tong: Certainly below where you would like right.
Olivia Tong: So I guess, how do you think about that and I guess can you maybe talk about your willingness to maybe lean in to buybacks in a more meaningful way just given where valuation is an especially when youre leveraging as well.
Olivia Tong: Yes look I mean, I think we're in a great spot.
Olivia Tong: <unk>.
Olivia Tong: After this call I'm going to write a really big thank to all our employees.
Olivia Tong: We have really navigated quite a bit in the last three years.
Olivia Tong: Prevailing over to Doj paying down all the debt.
Olivia Tong: And this was kind of my hope that we would end up with a low levered balance sheet and we'd be able to take advantage of opportunities.
Olivia Tong: I didn't think our stock price would be our biggest opportunity, but as long as it stays there will continue to capitalize on it but.
Olivia Tong: Look they think fundamentals always win sometimes you have to keep working the problem longer than you like.
Speaker Change: I mean listen, let's just back up here I think just the last couple of weeks.
Speaker Change: It adds a little bit of all a little bit of uncertainty to the world and so you've got to mitigate you've got to manage and mitigate that.
Speaker Change: But no I think we're in a really fantastic spot and.
Speaker Change: We're going to continue to invest in the business and drive operating performance.
Speaker Change: First quarter EBITDA growth apples to apples 26, 9%, that's not a bad start to the year.
Speaker Change: And.
Speaker Change: We look forward to continuing the progress we're making in this and eventually eventually.
Speaker Change: Eventually.
It won't just be all AI and big cap eventually someone will pay attention to a small cup, it's under Levered and quite frankly, undervalued and we're going to keep building great businesses.
Speaker Change: No that makes sense and then just on.
Speaker Change: The HPE transaction.
Speaker Change: Totally understand tariff uncertainty, but I'd just be curious like Facebook and I guess the extent you can share what do you think.
Speaker Change: The more clarity is it just simply knowing what the tariff situation looks like do you think these partners want to see how the litigation efforts I'm just kind of curious what you think they want more clarity on especially since it seems like we're kind of getting.
Speaker Change: Hopefully, we will be getting some more clarity on what actually happens or plays out in the next couple of months.
Speaker Change: I think if you're trying to price.
Speaker Change: <unk>.
Tax flows in NPV.
Speaker Change: All of this stuff is super recent rate and do we really know is that just an opening salvo did things change I mean listen we're in a very fluid dynamic situation.
Speaker Change: I know for myself and I want to allocate money you want to get as much certainty as you can on the stability of those cash flows and what the what the.
Speaker Change: If youre going to play a game you want to know the rules of the game before you before you sit down at the table and so I just think it's going to take a couple of months to let the dust clear.
Speaker Change: And see what the rules of the road are.
Speaker Change: And then you can have much more fruitful conversations, but I can't control that stuff in.
Speaker Change: We're just going to keep.
Speaker Change: Putting a great product and making sure that we work with our vendors and retailers.
Speaker Change: A great value efficacy message and frankly again I'd point you back to you.
Speaker Change: Just my earlier comments I mean, we've been able to take in appliances for 40 million EBIT of about 70% were hope we're shooting for 80 to 100.
Speaker Change: Those plans are unchanged in the face of all this so very pleased with the team. We've got clearly got some short term headwinds to work through but we're going to face into them and overcome them.
Speaker Change: Thanks, a lot I appreciate it and I think that's it thank.
Speaker Change: Thank you one more in.
Speaker Change: Thank you. Our final question comes from Bob <unk> with CJS Securities. Your line is open.
Speaker Change: Hi, Good morning, it's Pete Lucas for Bob I'll keep it quick just one.
Speaker Change: Lastly, we executed on an increase in sales and marketing as planned which seems to have gone very well.
Speaker Change: Or do you stand now you talk about spreading it more throughout the year and focusing on e-commerce, but overall do you see increase in spending or are you at the desired levels just kind of how are you thinking about it going forward.
Speaker Change: Yes.
Speaker Change: But I would say general and Jeremy can give you the specifics, but I mean last year was pretty lumpy.
Speaker Change: And so what we're trying to telegraph as the spend is going to be more even quarter to quarter to quarter. So that's the big takeaway.
Speaker Change: <unk> was up a lot last year quite frankly, I still want to make sure we get better returns on it and so we are adopting new measurement tools and all the rest of it as I said in the earlier comments a lot of the investments new for us.
We've never been a company that's done a lot of top funnel.
Speaker Change: Awareness advertising and that takes longer to get a payback on.
Speaker Change: But no I mean, we just told you we spent $8 million more in Q1 on marketing and we did a period a year ago. So we're continuing to spend more money.
Speaker Change: But we want to drive brand awareness, we werent brand equity be built and we want to continue to drive customers to.
Speaker Change: Consumers through our customers stores and website.
Speaker Change: Yes, just one thing to add.
Speaker Change: Quickly as it is relatively dynamic I mean, theres, even a couple of things in Q1, where we dial back spending a bit.
Speaker Change: We weren't seeing the level of return that we wanted and so as we sit here today I know it's early in the year I would tell you the full year will probably be up a little bit probably not as much as the 10% to $15 million, we expected when we started the year.
Speaker Change: And in fact, given the $8 million increase in Q1, we'll probably see in.
Speaker Change: Q3, Q4, it wouldn't surprise me to see a quarter, where we actually have a little bit less spending year over year as we even it out as David said, but it has to be dynamic you have to monitor it.
Speaker Change: Every week you have to make sure you're getting the returns.
Speaker Change: And if youre not you either dial it back or you reallocated elsewhere to make sure you get those returns.
Speaker Change: Very helpful. Thanks.
Speaker Change: Thank you very good.
Speaker Change: Thank you and with that we have reached the top of the hour. So we will conclude our conference call. Thank.
Speaker Change: Thank you to David and Jeremy and on behalf of spectrum brands. Thank you for your participation. This morning.
Speaker Change: This concludes today's conference call.
Speaker Change: Thank you for participating you may now disconnect.
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