- U.S. Consumer fiscal 2024 sales up 6 percent in line with guidance; POS units up 9 percent year-over-year
- Full-year GAAP gross margin rate of 23.9 percent; Non-GAAP adjusted gross margin rate up 340 basis points excluding one-time charges of 80 basis points
- Full-year GAAP loss per share of $0.61; Non-GAAP adjusted EPS of $2.29 including one-time charges of $0.35 per share
- Company exceeds free cash flow target of $1 billion over two years through fiscal 2024; Net leverage at 4.86x
- Non-GAAP adjusted EBITDA of $510 million at high end of guidance range when excluding $29 million of one-time charges
"Our performance in fiscal 2024 serves as a testament to our financial turnaround,” said Jim Hagedorn, chairman, CEO and president of ScottsMiracle-Gro. "We delivered upon or exceeded the goals we set this year and returned to managing the business with an eye toward future growth and value creation.
"We've established a foundation for our three-year growth plan that is grounded in my mid-term priorities, and we expect to make substantial progress against these priorities in 2025. It's important to recognize that throughout our recovery journey, we have upheld our commitment to shareholders while investing in the core strengths of our business to enhance our ability to deliver improved returns.”
Financial Results
Fourth Quarter Details
For the quarter ended September 30, 2024, total Company net sales were $414.7 million, an increase of 11 percent compared to $374.5 million a year ago. U.S. Consumer net sales increased 54 percent to $309.7 million from $201.0 million in the same period last year. U.S. Consumer segment favorability in the fourth quarter was mainly driven by normalization of shipment timing versus the same period last year.
Hawthorne segment sales decreased 46 percent, to $80.5 million, compared to $149.7 million in the fourth quarter last year, mainly driven by Hawthorne's exit from distribution of third-party brands and a decline in sales from its professional horticultural lighting business.
GAAP and non-GAAP adjusted gross margin rates for the quarter were negative 7.1 percent and negative 3.1 percent, respectively. These compare to negative 15.2 percent and negative 8.8 percent, respectively, in the prior year with the year-over-year improvements mainly driven by fixed-cost leverage from higher sales volume. These improvements were partially offset by incremental charges of $29 million, worth 690 bps to the quarter non-GAAP rate, driven by excess and obsolete inventory write-offs associated with the previously announced wind-down of the AeroGarden indoor growing unit business.
Equity in loss of unconsolidated affiliates, which represents the Company's share of the results of its live goods joint venture, Bonnie Plants, LLC, includes a non-cash, pre-tax impairment charge of $51.5 million recorded during the fourth quarter.
For the fourth quarter, the Company reported GAAP net loss of $244.0 million, or $4.29 per share, compared with the prior year's fourth quarter loss of $468.4 million, or $8.33 per share. In addition to the live goods joint venture impairment, these results include pre-tax charges of $85.5 million, comprising $64.6 million of non-cash impairments of convertible debt investments related to RIV Capital, and restructuring and other charges of $20.9 million reflecting continued Project Springboard actions.
Non-GAAP adjusted net loss for the quarter, which excludes impairment, restructuring and other non-recurring items, was a loss of $131.5 million, or $2.31 per share, compared to a loss of $155.4 million, or $2.77 per share, for the same period last year.
Full Fiscal Year Details
For the fiscal year ended September 30, 2024, total Company net sales were roughly flat compared to prior year at $3.6 billion. U.S. Consumer segment sales increased 6 percent, to $3.0 billion, driven by incremental shelf space, new listings and promotions mainly in the gardens and controls businesses. Sales for the Hawthorne segment decreased 37 percent, to $294.7 million, primarily driven by the discontinuation of its third-party distribution business.
The company-wide gross margin rate was 23.9 percent on a GAAP basis and 26.3 percent on a non-GAAP adjusted basis compared with rates of 18.5 percent and 23.7 percent, respectively, a year ago. Improvements were primarily driven by annualization of distribution network savings, favorable segment mix and material cost deflation partially offset by negative pricing. These improvements were partially offset by the $29 million of incremental charges driven by the AeroGarden wind-down, worth 80 bps to the full year non-GAAP rate.
SG&A of $559.0 million was 15.7 percent of net sales, a 9-percent decrease from fiscal 2022 reflecting the Company's previously announced cost-reduction efforts. Compared to prior year, SG&A is up 1 percent primarily on incremental media investments of $18 million in the U.S. Consumer segment partially offset by a reduction in amortization expense.
Other operating expense was $19.9 million primarily due to the discount cost on sales of accounts receivable under the Company's accounts receivable sale agreement. Costs associated with previous accounts receivable financing facilities were included as a component of interest expense below operating income.
Interest expense decreased $19.3 million, to $158.8 million, for the year primarily due to a lower debt balance. The non-GAAP adjusted effective tax rate for the full year decreased to 28.5 percent from 36.6 percent last year. The prior-year rate was unfavorably impacted by the establishment of valuation allowances against certain deferred tax assets and lower pre-tax income.
GAAP net loss was $34.9 million, or $0.61 per share, compared with a loss of $380.1 million, or $6.79 per share, in the prior year. Non-GAAP adjusted earnings, which exclude impairment, restructuring and other non-recurring items, were $132.0 million, or $2.29 per diluted share, compared with $68.1 million, or $1.21 per diluted share, last year.
Non-GAAP adjusted EBITDA was $510.1 million for fiscal 2024 including one-time charges of $29 million related to the AeroGarden write-down and other items, compared to $446.9 million last year. The Company's debt-to-EBITDA (leverage) ratio at the end of the year was 4.86 times and well below the fourth-quarter covenant maximum of 6.0 times. For leverage calculation purposes, $34 million of inventory write-downs and other items primarily related to the AeroGarden wind-down are excluded from EBITDA.
Free cash flow for fiscal 2024 was $583.5 million, compared to $438.2 million a year ago with improvements mainly driven by sales of accounts receivable and further reductions to inventory levels during the year. As of year-end, the Company achieved its stated goal of driving inventories to a sustainable level for the near-term below $600 million.
"Fiscal 2024 was a strong transition year for the Company in which we continued to transform the business while achieving meaningful top- and bottom-line growth in our core business,” said Matt Garth, chief financial officer and chief administrative officer. "We made strategic investments in marketing and innovation to drive sales and support the long-term health of our brands powered by additional efficiency gains across our organization.
"These investments, along with the difficult choices we made to discontinue underperforming business lines in fiscal 2024, position us to make positive strides towards our three-year financial targets shared at our July investor day. In fiscal 2025, we will achieve additional gross margin recovery, make incremental investments in our brands of at least $40 million and deliver meaningful adjusted EBITDA growth.”
Fiscal 2025 Outlook
The Company will outline its expectations for fiscal 2025 during today's call.
Conference Call and Webcast Scheduled for 9 a.m. ET Today, November 6
The Company will discuss results during a video presentation via webcast today at 9 a.m. ET. To watch the Company presentation and listen to the question-and-answer session, please register in advance at this webcast link. For those planning to participate in the question-and-answer session that follows the video presentation, please register for the webcast to view the presentation in addition to registering in advance via this audio link to receive call-in details and a unique PIN. A replay of the conference call will also be available on the Company's investor website where an archive of the press release and any accompanying information will remain available for at least a 12-month period.
Net Sales Details
| Fiscal Fourth Quarter (July - September 2024) | ||||||||||
| Net Sales Drivers (1) | Volume & Mix | Foreign Exchange | Price | Other(2) | Net Sales | |||||
| U.S. Consumer | 53 | % | - | % | 1 | % | - | % | 54 | % |
| Hawthorne | (47 | )% | - | % | 1 | % | - | % | (46 | )% |
| Other | 7 | % | (1 | )% | (3 | )% | - | % | 3 | % |
| Total SMG | 10 | % | - | % | 1 | % | - | % | 11 | % |
| Fiscal 2024 (October 2023 - September 2024) | |||||
| Net Sales Drivers (1) | Volume & Mix | Foreign Exchange | Price | Other(2) | Net Sales |
| U.S. Consumer | 7% | -% | (1)% | -% | 6% |
| Hawthorne | (37)% | -% | -% | -% | (37)% |
| Other | 3% | -% | (1)% | -% | 2% |
| Total SMG | 1% | -% | (1)% | -% | -% |
(2) Other includes the impact of acquisitions and divestitures and rounding impacts necessary to reconcile to net sales
About ScottsMiracle-Gro
With approximately $3.6 billion in sales, the Company is the world's largest marketer of branded consumer products for lawn and garden care. The Company's brands are among the most recognized in the industry. The Company's Scotts®, Miracle-Gro®, and Ortho® brands are market-leading in their categories. The Company's wholly-owned subsidiary, The Hawthorne Gardening Company, is a leading provider of nutrients, lighting, and other materials used in the indoor and hydroponic growing segment. For additional information, visit us at www.scottsmiraclegro.com.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release, other than statements of historical fact, which address activities, events and developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, information regarding the future economic performance and financial condition of the Company, the plans and objectives of the Company's management, and the Company's assumptions regarding such performance and plans are "forward-looking statements” within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. These forward-looking statements generally can be identified as statements that include phrases such as "guidance,” "outlook,” "projected,” "believe,” "target,” "predict,” "estimate,” "forecast,” "strategy,” "may,” "goal,” "expect,” "anticipate,” "intend,” "plan,” "foresee,” "likely,” "will,” "should” or other similar words or phrases. Actual results could differ materially from the forward-looking information in this release due to a variety of factors, including, but not limited to:
- An economic downturn and economic uncertainty may adversely affect demand for the Company's products;
- The Company's operations, financial condition or reputation may be impaired if its information or operational technology systems fail to perform adequately or if it is the subject of a data breach or cyber-attack;
- The highly competitive nature of the Company's markets could adversely affect it ability to maintain or grow revenues;
- In the event of a disaster, the Company's disaster recovery and business continuity plans may fail, which could adversely interrupt its operations;
- Climate change and unfavorable weather conditions could adversely impact financial results;
- The Company may not successfully develop new product lines and products or improve existing product lines and products;
- The Company's indebtedness could limit its flexibility and adversely affect its financial condition;
- If the Company underestimates or overestimates demand for its products and does not maintain appropriate inventory levels, its net sales and/or working capital could be negatively impacted;
- Disruptions in availability or increases in the prices of raw materials, fuel or transportation costs could adversely affect the Company's results of operations;
- A significant interruption in the operation of the Company's or its suppliers' facilities could impact the Company's capacity to produce products and service its customers, which could adversely affect the Company's revenues and earnings;
- Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution and other harmful consequences that may adversely impact the Company's business and results of operations;
- Compliance with environmental and other public health regulations or changes in such regulations or regulatory enforcement priorities could increase the Company's cost of doing business or limit its ability to market all of its products;
- Because of the concentration of the Company's sales to a small number of retail customers, the loss of one or more of, or significant reduction in orders from, its top customers, or a material reduction in the inventory of the Company's products that they carry, could adversely affect the Company's financial results;
- If the perception of the Company's brands or organizational reputation are damaged, its consumers, distributors and retailers may react negatively, which could materially and adversely affect the Company's business, financial condition and results of operations; and
- Hagedorn Partnership, L.P. beneficially owns approximately 24% of the Company's common shares and can significantly influence decisions that require the approval of shareholders.
For investor inquiries:
Aimee DeLuca
Sr. Vice President, Investor Relations
aimee.deluca@scotts.com
(937) 578-5621
For media inquiries:
Tom Matthews
Chief Communications Officer
tom.matthews@scotts.com
(937) 644-7044
| THE SCOTTS MIRACLE-GRO COMPANY Condensed Consolidated Statements of Operations (In millions, except per share data) (Unaudited) | |||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||
| Footnotes | September 30, 2024 | September 30, 2023 | % Change | September 30, 2024 | September 30, 2023 | % Change | |||||||||||||||||||
| Net sales | $ | 414.7 | $ | 374.5 | 11 | % | $ | 3,552.7 | $ | 3,551.3 | - | % | |||||||||||||
| Cost of sales | 427.5 | 407.5 | 2,618.7 | 2,708.3 | |||||||||||||||||||||
| Cost of sales-impairment, restructuring and other | 16.8 | 23.9 | 83.5 | 185.7 | |||||||||||||||||||||
| Gross margin | (29.6 | ) | (56.9 | ) | 48 | % | 850.5 | 657.3 | 29 | % | |||||||||||||||
| % of sales | (7.1)% | (15.2)% | 23.9 | % | 18.5 | % | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||
| Selling, general and administrative | 117.6 | 108.0 | 9 | % | 559.0 | 551.3 | 1 | % | |||||||||||||||||
| Impairment, restructuring and other | 68.7 | 248.5 | 62.8 | 280.5 | |||||||||||||||||||||
| Other (income) expense, net | 0.1 | 2.7 | 19.9 | (0.1 | ) | ||||||||||||||||||||
| Income (loss) from operations | (216.0 | ) | (416.1 | ) | 48 | % | 208.8 | (174.4 | ) | 220 | % | ||||||||||||||
| % of sales | (52.1)% | (111.1)% | 5.9 | % | (4.9)% | ||||||||||||||||||||
| Equity in loss of unconsolidated affiliates | 61.6 | 104.6 | 68.1 | 101.1 | |||||||||||||||||||||
| Interest expense | 33.1 | 40.0 | 158.8 | 178.1 | |||||||||||||||||||||
| Other non-operating (income) expense, net | 1.4 | - | 5.5 | (0.3 | ) | ||||||||||||||||||||
| Loss before income taxes | (312.1 | ) | (560.7 | ) | 44 | % | (23.6 | ) | (453.3 | ) | 95 | % | |||||||||||||
| Income tax expense (benefit) | (68.1 | ) | (92.3 | ) | 11.3 | (73.2 | ) | ||||||||||||||||||
| Net loss | $ | (244.0 | ) | $ | (468.4 | ) | 48 | % | $ | (34.9 | ) | $ | (380.1 | ) | 91 | % | |||||||||
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