- Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the Q4 and Full-Year 2022 Spectrum Brands Holdings’ Earnings Conference Call. I would now like to turn the call over to Faisal Qadir.

You may begin.

Faisal Qadir

Thank you. Good morning, and welcome to Spectrum Brands Holdings’ Q4 and Full-Year 2022 Earnings Conference Call and Webcast. Vice will Strategic moderate Qadir, Reporting, and Faisal I and today's am President Finance of Enterprise I call. Investor Calendar To we've help in Event www.spectrumbrands.com. placed comments, of the page a slide website you presentation on follow at Relations section our our the The our there following remain document will call. Slide X presentation. the with Starting of

led David will our Smeltser, After remarks, we Chairman Financial call Chief Chief Executive Our Officer. by will and the Q&A. conduct be Jeremy Maura, Officer; and closing

and Turning X. to X Slides

please are which uncertain. based management's comments and our and differ dated today review statements, Our factors cautionary and SEC Spectrum obligation nature recent forward-looking measures projections most the certain expectations, by materially. risk, and release assumptions call. most November to statements X-K Actual assume a upon both XX, annual in any Brands and forward-looking encourages that include report Investor the XX-Q. Form basis Reconciliations on We website our Also, Spectrum we filings Holdings' release current Relations may you outlined press which XXXX Form Brands today's section. risk available on press recent included Due in are filing, XX-K to these are in for to results our this update reports GAAP financial in measures quarterly note will no are on and and statement. on non-GAAP discuss

press Spectrum it SEC. on you the encourage and reports is Brand’s reading we to issued Finally, release with with today remarks listen filed our once our alongside X-K to XX-K Form annual in today

David. the Now, call I'll turn to over

David Maura

Europe, We cost retailers price freight ordering had demand amounts rates. inflation as from headwinds inventory sell-through historically high and high including input time margin this headwinds anticipated planned to offset pressures. we anticipated of during ocean increases went high with quarter chains as for inventory the reducing they chain as late but confidence. causing on macroeconomic distribution the detention impacted quarter and second costs and port in demand during retail to the during on slowdowns change in third the high inventory consumer U.S. changed and Then consumer Russia started demurrage, the and high to costs globe supply the also with Unfortunately, throughput, outlook quarter environment financial operating our to are with negatively we increasing attention detailed becoming in discussion Jeremy faced our softened the more very additional strategic as of us direction. high We call. business based abundant We provide I capital, operational company's then for turn demand going and products. dynamic If by going your 'XX update discussion the our call a a consumer off operating going today with economic everybody. rates morning, in, more COVID-XX to around and with Good fiscal low talk is I'm a about to and environment Hey. factors as kick growth favorable planned could driven Thanks, X. Faisal. you thank on I'm Slide joining fiscal for conference specific our confidence fourth ‘XX to conditions, results. interest today a unemployment our strong unit Ukraine costs, focused supply and inefficient the entered high retailers demand Subsequently, war these for year low spurred consumer around for year home, and and on spike. and the system such levels. We

translation the the fourth in our started to U.S. on results. unfavorable leading strengthen fourth dollar to Finally, quarter quarter, impact

more In macroeconomic these of multiple environment our offset year has who for all, based EMEA to rounds a implemented as transaction businesses, response, goods in of dollars. the the All of headwind developed majority challenging some source Asia progressed. in significant their pricing become from In addition, cost U.S. we pressures. the

the fundamentals, previous Slide of focused to headcount. debt in reduction. unit cost company reduction company operating decisively on initiated strategy and reacted difficult the began declining that free fundamentally, economic a the prepare flow from have running immediately reductions cash to initiative during cost you More now quarter including We late also in pivoted I and term. a quickly in the more investments for out turn we generation volume leaner company and we is short the the outlook the to could expansion actions X. year We increased a to and

modestly fourth for quarter period. Here EBITDA economic normalize The to impacting our just is results. the levels categories. net results is demand challenging in pre-pandemic hard both sales Consumer mentioned performance we our our have to an good clearly the compared quarter as overview environment our year continuing declined of and I and prior to

retail decline, EBITDA sales Our dollar their inventory, by maintaining focus the are replenishment also on chain due which costs distribution further translational contributing U.S. be our pressured related is The is detention reported to decrease and demurrage which impact out cost into lower strong to of causing supply orders. FX. high inefficiencies. to to translating and is partners taking the is volume The lower

Some benefits pressures of we quarter. headcount of that previous these during initiated are actions, including elimination cost offset reduction the the by

increased new directly dollar, Although foreign impact. regions various inflation the offsets pricing product headwinds we largely which exchange in from now experienced U.S. quarter, the the our faced transactional costs in through we stronger

In on and now Jeremy' during could results, X. to impact turn performance If section. the unfavorable Slide overview more fourth business will reported we detail have you the cover I addition financial translation in to quarter

was actions multiple challenging these were All to variety macroeconomic the cost worse inflation with our of get experienced a reduction mitigating we demand reductions overview our initiated the May, the faced that headwinds. earlier, we took however, in for very some as proactive as rounds EBITA were have We back as measures the and related action business. further progressed. headwinds continued Unfortunately, from quick we the reduction including year softening of results, to of offset headwinds. a Here, fiscal as of various actions pricing the counter year inventory this headcount 'XX mentioned We we retailer and actions. decline I a

globe implementing increases also now help around pressure the the additional price are currency offset further We movement. from to

to attention we in started fiscal a The 'XX actually measures as fiscal us your to good have position Slide that in implement Turning 'XX. put enter X. we

We liquidity; three, re-energizing will efficiencies are with limiting streamlining operational those two, are pro strategy the forma. continue transforming first with one. business are we one, with measures Home balance our employee higher we the four core deleveraging are sheet, and pillars: and pureplay & Pet growth and strengthening Starting margins refocus global base; and Garden protecting finally, and and increasing organizational and our everywhere risk; a company into fourth, we we structure the around our our faster

operating in painful new of eliminating of costs and business streamlining certain taken continued swift roles perspective Along the involving every with including our bringing eye structure. with the reductions talent These decisions, towards and the business we have reductions, reduce by leadership positions an best-in-class action in have in the in with segment We these operating difficult our reductions C-suite. fresh future to reductions required invest operational by to some experience.

us to supply from chain, welcome For global our joined Gabriel, of Head has who David example, Decker. new Stanley I'm Black and thrilled

Henkel joins our worked Garden such Andrade-Marin, and our and Javier a As has Home well business, Head background of companies who new & Reckitt P&G, with with consumer very us as Benckiser. marketing strong

accelerate our product to really to by initiatives. business the on includes to SKUs are our on opportunities is and all business Second, simplifying we costs model us fewer, reducing This new focus exiting our This focus profitability units. approach better unprofitable bigger, rationalizing portfolio. allowing across

out as simplification will We for we opportunities year. continue cost the to look fiscal through move and process

Thirdly, and a of higher focus on as interest we demand will growth working maintain our capital sheet and rates. our balance prepare we low reducing for period strengthening

we fourth additional more working improving plan $XXX million process. cash. We support reduction towards quarter, inventory world will capital Gabriel on turned performance And by fiscal will as class have our driving during during a evidenced to our goal truly David the an which including million HHI. leading by over corner of in by plus reduce capital working S&OP further inventory company our efficiency $XXX our this further and generating the be year. our

move we to the credit our proactive increases close amendment a our our given longer the to originally sale, an time in net executed banks temporarily relationship that with anticipated addition, facility along HHI have In leverage than tests. ratio

DOJ a are Lastly, strategic become transformation we Garden the pure lawsuit. Pet remain HHI expect global win and to we and committed company to we Home & play the end, transaction to dedicated our to to that closing and

and to shareholders. have close transaction HHI allow June our -- expect no us substantially reduce to of XXXX. now return than to later we capital close this We now The will our debt transaction,

global a in re-rating Home Pet valuation publicly looking to business confident are of higher investors We Garden are shares. margin, the play, allocate faster a to growing, that pure & traded resulting capital of significant our equity and

I'd of you like give If an fiscal for you move to Slide to overview our 'XX. outlook XX,

Our in line digits. our fiscal that the will framework low-single we the execute top priorities earnings high level on we strategic 'XX to to continue expect is grow and

low-double We expect to digits. EBITDA adjusted grow in the

cost a nearly freight net past years. with certain the levels we've to continue two environment over costs the not the decline input significant to expect We remain in experience offsets including seen challenging inflation, rates. some to we ocean expect from Overall, with as increase as labor to but the

additional quarter, inflation specifically in in We the ongoing from Ukraine are from war also offset our implementing European and U.S. actions the additional to first in markets dollar. pricing strengthening the

during pricing We in fully expect results this the reflected be our quarter. to additional second

cost and as benefit get half remain increases we in therefore perspective a price first of margin the will this challenging levels higher Europe. our The inventory full sell down year of remaining from

on us the half and the sheet, of impact of approximately In we enter down generating the are income half sheet Specifically, excess negative strengthening to predominantly cash through on million debt. 'XX. behind balance balance fiscal our we as current will our $XX input be that this fiscal we in statement 'XX, our committed of first our our opening quarter. pay will the Based 'XX, to costs, to in earnings roll variances fiscal capitalized second first have

reduction from from down cash proceeds the to and debt and utilize will leverage. the transaction reduce We pay HHI operations, inventory

As the HHI billion sale. confident will receive that of I mentioned, we $X.X upon we of completion are cash the

inflows not some to in expect that expect by excess receiving, In XXXX. to million have address our unlikely that the either this leverage questions However, fee. cash we've X the been net HHI the just break less of in year, $XXX of does decrease scenario, we the to end to HHI includes or which fiscal of transaction times close, we event the

from insights. Now I on Jeremy now the additional you financials the to turn call hear and more over business you'll Jeremy. unit

Jeremy Smeltser

everyone. morning, Good David. Thanks,

and replenishment certain of costs sales continuing to million orders due volume, impact initiatives, driven and the net continued from the acquisition QX year. excluding lower commodity the of weather to $X.X the to related by $XX short-term Net reduction XX Tristar X.X%. of sales contingent for significantly associated remeasurement the net margins in absorption by $XX million of and Let's sales decreased $XXX.X foreign sales from the on I compared at in million organic higher impact lower Gross XX.X% were of XX% compensation, prior business the cost currency higher results to operations. foreign supplier increased decreased incentive of costs. from million $XX expense by in integration turn Organic freight Slide the cost categories decreased retail a variable review X% the and $XX.X exchange and for decline the Operating acquisition. impacted with points, demand unfavorable by mentioned project of stock consideration a and gross offset XXX driven largely sales, the with quarter. one-time the basis of profit million SG&A decrease softer income fixed increased unfavorable inventory, and million decreased of lower driven spend decreased conditions. unfavorable SG&A inflation XX.X% lower and impact Price

decreased to increased expense. X.X% diluted with GAAP primarily EPS and XX.X% pricing commodity increase volume losses impact tax currency decreased to driven per offsetting Adjusted and interest Adjusted income. sales by Our higher higher income from in unfavorable reduced due net operating and costs, share and income earnings EBITDA margin freight inflation. the pressure positive diluted currency due foreign

incentive-based and million million from from $X.X Turning Cash continuing $X.X the versus $XX.X million was last now $XX.X million compensation share optimization year towards than $X.X than year. payments were $X.X year. lower and increased $X.X transaction of prior of strategic during restructuring, separately, higher quarter million costs million. by decreased were $XX.X and Cash million million QX amortization the million. and operations Depreciation to expense last interest $XX of continuing Slide operations taxes XX.

Moving $X.X on balance and flow cash of $XX $X.X approximately approximately of $X.X sheet. billion million draws balance leases was available revolver. Debt notes, consisting unsecured term billion company of of and and to $XXX its billion the of The outstanding cash million $XXX approximately billion and had other a senior revolver $X finance loans obligations. million

X.X is versus which net at times the $XX.X year. end last expenditures quarter Capital previous with $XX.X quarter. consistent fiscal Additionally, the pro leverage million was the forma 'XX, in of million were

Moving an for of results. year X.X%. to overview XX full operations sales continuing increased Slide Net

essentially Global $XX productivity, Excluding the This aggressive operating profit Pet of half response. category the inventory decreased post-pandemic chain gross poor the was was during and our costs. and of partially driven supply Home The million, XX.X% by category higher of actions organic inflation sales sales sales impact margin decline, basis driven decreased while demand second exchange and sales unfavorable and and currency Adjusted gross softness Home growth of improved of retailers expenses acquisition for inflation business. and increased our during inflation impact, million Gross $XX.X lagged the in impact offset half by performance Care offset by EBITDA first freight pricing year. by favorable by XX.X% flat. impacted decreased pricing currency of to XXX by driven due unfavorable business, foreign points, margins was the were primarily Care in unfavorable and year reduction commodity million the and Garden & weather $XXX by by net Personal impacting &

detail operational Now of of provide into the our each underlying on let's performance the review unit to business drivers get results.

Let's is mainly Home Tristar. Personal increased Care Slide net due the XX.X% acquisition start & with which XX. of Reported to sales

as driven Excluding kitchen X%. retailer impacts was lower appliances, in net garment in decreased market The category decline price the from post-pandemic posted the consumer decrease win and particularly $XX.X organic care appliances unfavorable were foreign however, continue growth double-digit organic Sales net exchange continues sales helped sales also also lower inventory of reductions. to demand favorable million, were Sales personal and in we care quarter. recovery share. by by

and work inventory, consumer continue it FX, was Latin garment Net targeted. driven a challenged. are region EMEA impacting POS. appliances higher well driven macroeconomic and Although, severely care sales continue The overall personal but perform demand slowdown environment compared registered distribution. demand categories business in inventory than American unfavorable remains impact the but expanded continued The The our coupled competitors. kitchen category consumer as retailers appliances continue to show by growth, to to retailers still remains On most to decline by the double-digit primarily growth, remains down brighter our strength of American challenging, consumers below markets high care FX. North products with higher note, to order with posted and the of our

doubled resulted U.S., in versus us In the XXX more than helping gained on share basis fact, to one point in our market number as care continue our year U.S. garment last a in sales we steamer gain position. the share have to category build share and

PowerXL demurrage by negatively engagement and innovative rate, EBITDA under We from continue Adjusted and impacted drive to products of and unfavorable short and continue $XX Emeril air include to by acquisition, and of such brands. increased flexes range pricing and our the are now a EBITDA actions Hobbs, beyond cost products the in and quarter. to incremental George, grille volume impact and Foreman, new Russell products. products appliances declines. Recent detention XX.X% pricing synergies FX previous growth initiated hair excitement. launch style costs Remington impact fryer Submersible several the new to reduction million at but Lagasse consumer was during offset and also quarter. the due reduced the and of favorable Inflation term examples

in to we also the XXXX, POS our retailer half As to trend reduce and fiscal expect our of to 'XX. us starting more of to 'XX. will look return we help consistent fiscal fiscal a the throughout quarter first This continue forward second inventory to inventory ordering

higher off impacted. from 'XX inventory some the cost sell adversely of first will fiscal our during As the be profitability quarter, we

grow challenging anticipating is we quarter. an accelerated second expect the Although, market in -- end complete innovations quarter, by to of of quarter. The we our better the the enhances drive fiscal and substantially continuing at we profitability Commercially, to are position. end a integration be Tristar first the fewer, will expect business business integration pace current the bigger, our relevant that second focus consumer to

Higher Reported X.X%. animal by aquatics Now by efforts. let's continued Pet the while companion our were sales SKU in is were in rationalization in X.X% move Sales pricing organic sales and to decreased on Global quarter. softness increased helped favorable sales XX. which Slide Care, net offset net also

due consecutive continue With growth. across our of unit pricing geographies, fourth slowing QX this organic a sales quarter, by the during to hobbyist to of strong pandemic. category year, demand more sales we category decline the recorded compare new The growth experienced animal Companion decline last we entered sales category offset as close than consumables to year demand. aquatics the particularly fueled as favorable that show

growth. saw However, within aquatics products consumables year-over-year

pressure the retailers and British by grow are Our FX in adversely the animal pet in new Ukraine. mostly pet to a acquisition higher and assortment small America, specialty channel. wider were levels. rates specialty products sales carry much returning to aquatics Pet impacted other European in adjusting strengthened and FX, impact Adjusted by In North against overall on to inventory, pre-pandemic of of impacted European for the the pound war the sales euro and during sales are higher continued as inflation negatively quarter. the translation the consumers the markets, dollar from despite

decreased X.X during FX. lower initiated reductions particularly were growth inflation. in remain the With team business and their cost in the operating products QX experience new The American that we reductions, due additional from that America within operating the driven X.X% North Latin pricing, fixed we years. impact by ongoing business this EBITDA growth fiscal nutrition-based actions cost in including 'XX. evidenced volume in bullish fundamentals primarily cost strong distribution. now unfavorable to was are to benefited mitigated we decline further North by see levels EBITDA input share levels EBITDA excited of the posted pressure Adjusted offsetting continue implemented the Our as pricing gains new service through QX. benefit volume from largely momentum the reaching American portfolio. have greatly third Overall, is quarter. the in will business to improved positive The in highest of

to Additionally, we year a of have Asia. team around through inspiring trust for critical centered more focused our of completely from execution items, brands. supply leading the recovered on portfolio of of long-term category almost innovative which in chews the strategy, order disruption for after GPC The our drive products and the unique demand is of supply remains delivery our

which remain continued growth historically is about another tremendous of Our the pet bullish with business. reason just business business why a recession-resistant upside we this is potential,

to quarter Fourth category due Finally, XX. reported showing to XX.X% weather sales net unfavorable a repellents Slide decreased sales a let's Home by driven turn conditions. in on Garden, & across decline consistent decline

Retailer season dollar top outpaced helped experienced household for last to category, to also these inventory, year, were repellents centers, quarter. compared throughout To home cleaning quarter foot POS end to were from versus out by season. out slower a in category. utilized behind the competitor POS with and Retailers insecticides last declined cleaning products. in pest and challenge of was drive due fourth inventory high out category impacted while pressures, highly traffic paced where we POS conditions saw sales into the of lower which year coming Controls Sales clear the Despite stock Although, was for of we slightly overall QX the control adversely the our growth dry products. were the household POS in category, this tactics help hot conversion targeted help third customers sales. across products.

killer million new bring in the news, weed in and now Flip Go the product in Bug households bedbugs & new for and in to millennial season system grass sales, with varieties their $XX Stop, ended categories. continuing over available respective delivery As

by Spectracide up our Wirecutter system. our fact, XX% In up introduction home from year ant, personal like, line was of which repellents And and a & of since recognition delivery QX, Flip reviews, control News. This the York versus insect driven record had awards received Cutter's Hot Shot in XX% Times The roach spider Go year. is and several New last Yahoo sources, Forbes season, Health business

of our quarter. raw and and DEET-based absorption best Cutter the dry by lower Forbes Times overall aerosol to the higher the driven Wirecutter best impacts. The York material at Backwoods quarter. by the New XX% One Adjusted continues recognized cost covers inflation but pricing repellant repellent was volumes Health. from related costs in EBITDA fixed to was decreased business and in EBITDA now decrease freight see The product from items

Although, EBITDA we and during volume quarter, restructuring are seeing previous the operational benefits of outpacing the initiated fixed actions these savings. reduction is decline cost cost from

increases to seasonality in to our We and level simplify not in are business weather these growth with of pleased the be categories cleaning we growth year, confident out overall. must categories, We our further price long-term also need business further the the the H&G last strategy more are this resilient while the of limited in remain cycles. we throughout of a our fiscal 'XX. business performance the initiating Clearly,

it. strategy have are execute be and our in We leadership that confident brought successful we to new will that the

meaningful run while the identified profitability. in took addition, more the we In actions the further business we to and business efficiently in quarter, cost have third opportunities improve

a also better process robust more the to impact on are manage and seasonality S&OP manufacturing developing its our footprint. We

more customers our categories consumable and to as and become the years purchases. relevant We velocity coming focused pest capturing stay high continue gains on retail meaningful cleaning XXXX for distribution control repeat both to are in these

Slide to move XXXX. now our and for Let's expectations XX

of as well reduce is Adjusted benefits foreign upon actions. exchange continues expect XXXX are we mentioned, demand low-double actions to expected the despite offset continue to expected digits annualization and David From As impact negative headwinds, rates. in to settle EBITDA phasing which half a digit reported be inventory with to actions some current levels. low-single the additional price grow planned inflation challenging, based growth further we and post-pandemic current by net lower pricing first have quarter a their cost the retailers a expect perspective, the first productivity level increases at and to reduction specifically as as and of sales our

First inventory. current quarter profitability as of is through cost impacted negatively sell higher we also some our

to and XX. strategic be compensation expected to $XXX Turning $XX $XXX be $XXX gain to substantially million, expected to the optimization $XXX is million NOLs Depreciation stock-based expect amortization all Slide year and usable payments restructuring, with of $XX Capital $XX million and expense million between and and $XX million. are items. offset to be on of million. and between are million. approximately them be to $X $XXX federal but Full Cash million to expected sale between including towards approximately of $XX use including HHI. expected interest million million ended approximately the $XX and between transaction is million million million, non-cash the of costs expenditures to We year of $XXX

a transaction EPS, for are $XX $XX XX% strong place taxpayer their million once to end in expected U.S. economic adjusted the we rate including are actions I between million use to have I'm we navigate that employees the a taxes of closes. Cash of section, and to times state We my be be HHI global efforts To these thank tax right projecting challenging want during taxes. these confident to and headwinds. for all our and

Now back David. to over

David Maura

Hey. the these just are couple I'd take And a And to Thanks, Jeremy, for minutes us covered thanks to takeaways. of recap on found XX. lot. We've and a everybody like today. Slide key joining

our consumer line us, First saw inventory from top half quarter we in pressure of the conclude of fiscal which year. second where 'XX challenging short-term results dynamics, sales financial fourth actions, the all, very drove customer changing pressure a significant for

slow started sales declines as reductions. our in took inventory times the company to outpaced compounded proactively we actions by the consumer were for as prepare demand leaner short demand the retailer down, the swift but However, cost to run, decline actions

in therefore strategy focused these the We fundamentals, leaner much running dynamics pivoting company reduction. difficult and expansion cash are to free expect increased investments and some that's debt we flow a continue of operating to generation and fiscal 'XX on from

company structure pillars; Second, first, operating the organizational shifted we business and have built four the employee a streamlining we re-energizing the our leaner towards key strategy are base. of around

operational and Second, risk. increasing we efficiencies are limiting

Third, pro we and and are Home higher liquidity we Fourth, and deleveraging our growth protecting business strengthening and pure sheet transforming our are & a faster with pet balance into Garden position. company forma. play, our margins

we macroeconomic continue all although, up Third, actions expect success. difficult ourselves right to taken a 'XX, we the environment have to in for fiscal set

we're flow generate than I'm 'XX. through the reduce working and operating cash well net EBITDA earlier, significant no by optimistic also free low-single Despite and later fiscal our our positioned June win digit operational execute about generating believe our shareholders. improved short-term we sales that strategic the referenced low-double collect to As growth fiscal will $X.X transaction billion Last, on our expect execute DOJ the close value and significant in goals of HHI I and performance lawsuit cash. I are deliver cash to we future company, and targeting XXXX expect we and digit capital growth to for 'XX of to management. on leverage the by we and challenges, confident and flows goals our remain

to looking about updating excited guys I'm subsequent in and quarters. forward you I'm fiscal very 'XX, For reasons, these

for everyone and to past company time. do all our long-term for difficult am Spectrum support. questions. times of success. Brands' call you thank I you've to Before going help ensure I all up made your employees over thank close of been our your to to for continued of all the sacrifices I to we've Faisal successfully now diligently I the the through thank set for want navigate call, our the very employees through our this working couple who have sacrifices grateful company I'm to years. I turn back

Faisal Qadir

Michelle, can David. queue, the now question we you, please. go Thank to

Operator

comes [Operator Instructions] Labick from first Bob Our Securities. CJS with question

open. is line Your

Bob Labick

Good our Thanks for questions. morning. taking

David Maura

Bob. Hey,

Bob Labick

Hey.

more a issues one like, all one, through? But we to in second it should implied that, inventory So and half it return restocking from first have the and more to then confirm sounds roughly? thought, does a impact just that. take long to that there's that. work still and of that's obviously, a then I issue Was half, question around How normal

David Maura

weeks up I'll of to moving this Bob, feeling six sit to got this bulk here Look, fiscal -- it. I I the because take today, inventory. this left I'm weeks left got QX, I six as high-cost good and

So of because get look I from when had to that view attributed life inventory continue stuff the that to of onetime as of items and was capitalized in acquired. kind and $X,XXX to gone it I kind my freight has at $XX,XXX kind

in to And company so of our being fixed is structure we've take lower just going And been much deliberate the running believe business pretty very starting inventory. frankly, kind cost what a on down, the the kind aggressive I cost yeah, get liquidating of for recession. May really then, of the high-cost into

got positive that that you And made $XXX to quarter with that it's quarter. progress suppress going the That in good really our can talking EBITDA so to call. progress this on we We're make in of me that. not just the out fourth production. conference a September, quarter. going hope completed We on more we inventory is that actually see just I million

But the to the cost balance think that's already going that subdued we've sheet. kind make, end. decision personal are high right is, we earnings My I pain that, the be to take as line. inventory liquidate front perspective the on of pivoted Our

produce And to going a right want the but year pivot going we've to that direction. that we're manage horrible. get us use already, to of kind to down. fill don't pivot QX the until you going it. so -- a inventories take is yes, while that think this is really sheet going to to further think We be it's the on. actually impact it you negative earnings understand it's P&L And and cash phasing Jeremy, because But going earnings -- to we're We on pivoted up usually the will QX. the believe is can get to cash, in want we that we while we December of have in going balance EBITDA

Jeremy Smeltser

with Bob, of add, my Garden add, With a -- of relates issue three inventory I different Care, place. an getting perhaps was Home specialty. mean three just for earnings in our pet those a bit HPC I of with look, week, from getting this Yeah, And & just to Pet reasons. it just that more little that's Global issue, less think customers five reports I'd and net is positive better to I'd reported then and and takeaway as this through top an

overall, So pretty we're I with feeling decent. agree David,

second towards in of the it pulled POS more I inventories replenishment. think middle probably in [indiscernible] and normalized takes fiscal through the to retail to HPC, particular, quarter see

Bob Labick

Can of Okay. Great. of margin. normalized what the headwinds, these No, noise? further of not think profile that's And is the which be kind this I of once get you the implied past margin, EBITDA super you XX% math sense quick, helpful us a guidance, that. I color. will from did guess we is a taking kind give all step real margin given about the just If a

David Maura

I be just become businesses. trying businesses, start to two We're of & They should. EBITDA and Look, right. company. our with Home bigger a Both those businesses Garden let's -- XX% Pet Global think margin should

inflation. gone with I lags pricing And got from pandemic. turmoil the inventory. of backlash lot a high got lot we've so margins. our now through last this inflation, kind the through got it, you've of We've this, cost like you've then call a COVID-XX, And subduing the of gone And where which we've is bit a it's lot -- obviously, a the of

bucks. around to the move start you'll off got margin think But I in QX clarity some then to see real businesses. beyond just in those You improvement and

margin very structure the And and lawsuit forward think off winning obviously, I rebound. point terms there. we're durable DOJ going to that look, HHI, in in take that time business to more work in good mode looking we're it's and is just to and appliance of longer nature, see sell a Jeremy's on of, that was kind

Bob Labick

Okay. last jump guess queue. Super. back in for And I one I'll me,

Just obviously, near-term about of kind the stuff. lot we're a talking

the sense of introductions, price realization, Just market those you're focal share coming next more the terms and new wise of year. points give looking how year, things outlook us kind in for product your for of kind a traditional for

Jeremy Smeltser

start-up would I price. say, in Yeah.

I of heard have lower we certain broad-based in think will more capitalized remarks, year. level in we is as the So sheet fiscal a you the given incurred that prepared about actually the Most is all we've laser-focused our at QX think to versus the of F when timing and of really we that that in say expect we're in in the the little P&L, on of inflation, areas inflation 'XX that when inflation end because incurred balance 'XX.And we recognize and in actually it QX our right? of

a bit is still last the but GPC challenge. of a but challenge year-over-year here more significant Transaction Europe the for in FX from weeks, with the dollar, eased both couple strengthening is a translation, HPC real and a of it's headwind, So partly transaction. obviously, from

and additional have frankly. to additional So continue for costs, we there look get to price

that more I a though set we're continue. have key with new those. margin the the broader were where the we And have Our particularly new the across couple of markets, few I I them the I last real North strategy, pleased I've on price so but we And a on scaling the with In mentioned progress much with needle there, and that's nice around how of price in product think parts had part to the -- is will my new a we the do in markets to years, opportunity American product forward over introductions, prepared totally think up our introductions move businesses of agree do the of and we've introductions future, you. certainly. product take of remarks, that points

David Maura

Yeah.

got have it really to kind there. everything I'm and and as fixed capital we I R&D in great touch. QX thrilled portfolio, investment rather think going we of think, talking was met in And we've I've to structure good But working brand and to push Blacksburg a on. and recently to we're to cost the team I of to commercialized our you complementary I'd prefer just of different of traveling add there to Dave that then get that have coming. to just I recently facility, Look, share down. Gabriel to a with the doing lot things kind are S&OP the wildly a the just new there. stuff forward portfolio get existing look, But running -- a with lot but lot robust and to products very as and facilities try let being factories of look that community. them be closer been me able our into to I

Bob Labick

so you Thank right. All Super. much.

David Maura

Bob. Thanks,

Operator

from Chris question next Our Wells comes Fargo. with Carey

line open. Your is

Christopher Carey

Good Hi. morning.

David Maura

Chris. morning, Good

Christopher Carey

QX looking if with bit guidance Jeremy, and be looking business forward, business, there's based line perhaps that you just going can a at? even that that specific potentially EBITDA you're headwind I'm to more about getting which that but seasonality QX -- Yes, annualize just I know in I alone. in And on an the I your I'm delivery appliances. already the at that is guess

the other appreciate take a would going step to So like businesses the The I on full QX? but to well. be sort business specificity is year, of and back real as commentary helpful. is QX that any

Jeremy Smeltser

Yeah. Sure. Yeah.

the -- excess demurrage inflation, the QX, I as get of part, experiencing distribution should where and significant were causing and well So say, costs particularly our latter It most interesting around was situation really as first detention containers, around HPC space. business. our the with of overflow need part we to the of end QX

the the be through those company. significant, actually QX were some at costs, they so balance mostly, across And in X/XX, whole sheet and of most on they're they'll flushed in QX

in mentioned P&L, of that's the be unless in of grow changes will our QX because referenced And HPC It the I are the that of reduction $XX be variances EBITDA that good pattern. that in in I seasonal the capitalized that -- of bit XX% will sit I'm in million not QX. the would that remarks, it in actually We fully to balance David or HPC. typical behind us his excess sheet costs a probably that's businesses. think big inventory prepared about on in from in in HPC sequential about the fluster will in half And agree, and profitability second us. across expect perspective, year standard most sorry, why news macro our little behind current I be is that a is in of something QX. it The do

Christopher Carey

I Okay. understand.

to like appreciate then comment if are I again think for you you place? you're in could should just demand of continue visibility here. would David higher cost a the after drivers The be the where think it guidance you're at mentioned so frame inventories that, better Excuse reduce QX tighter And So retailers and The demand, just that just have through inventory. you that's by of higher clarify me. just you the post-pandemic, be the to lower in where inventory. facing And I I excess of in to that demand on QX, retailer outlook. And you visibility that obviously, retail? enough Do lower through. on selling cost visibility trying the just through can feel But I'm that, that context flows assess inventories post-pandemic, inventory, in your a place helpful. that,

David Maura

Let And base market business our while there, taking a here me also take down, we pet the it, Look, Jeremy is crack from that pandemic in as consumption-driven I sit today. to still we're the share. fill and then at see And adoption continue And installed can blanks. big. predominantly is business positive now. is Pet POS

tell can forma pro you Pet business. is what So our is biggest I

weighted through out fiscal consumption high-priced that to us grow definitely so got we next coming having happy should see storm as down. less expense to we manufacturing -- tanks base products the retailers, Garden had, those and store talk warehouses through new you lot quarter. But on aquarium, time And wreak I meet I While distribution second product year blaming know had say in in a footprint. to think, get kind that are we is I components Street just it to hates PO to drive walls that weather long, that us but really fish hearing in year. we've we'll the to of Garden for can We get down, long perfect four we Home & try shrink and a and tell require that this Home it expenses going It's the product the believe being full, gained very business. more right? H&G distribution like business. we a havoc mean also understatement, we're did exciting the that you think into we're demand things into to of durable lower a about third fiscal from of about places given of & to kind be challenge. -- try I an that -- 'XX worst and warehousing we of weather, can And I back that

trying growth demand costs fill meet our the some Jeremy, customers. there? those from about to bullish pretty you we to And fiscal some so margin as Garden And I'm actually shed that we & want getting all in the retail 'XX of structure rebounds obviously, in Home well. nice as incurred

Jeremy Smeltser

kind our have good Yeah. HPC, do overall, every and The day. with visibility European we economy. in And question inventory. think big We look, HPC, agree them with And or customers. I to mean mark with David's happens both these I think comments. are is I then work of retail in I what U.S. the

not I in going. war know forecasted to figured we landing. be a in where Ukraine is this we yet going so softer been the And fairly how have hard don't or topline. think But the We all out is we've whether cautious

happens on year progresses. what today this think is based and seeing what the we out we prudent, in retailer now and so we we're we'll put And see as see right can what what inventory,

David Maura

also let listen, me Also, you. Yeah. tell

grow back recession I think Home be tend actually resilient. businesses. pretty if Garden were look able to Pet you 'XX, to and to we these &

world's quite some trade And occurring do at see take And so frankly, down that. the in some we largest comfort we retailer.

as business that benefits appliance our actually think well. I

Christopher Carey

you, both. Okay. Thank

David Maura

Thank you.

Operator

next Our question Oppenheimer. comes from with Zaffino Ian

open. is line Your

Ian Zaffino

Hi. Great. you. Thank

inflation, versus what I'd in of is kind volumes can and maybe But touch or color Just talked would highest helpful. the of any talk of you you segments. guidance versus guide, that pricing HPC on pricing be -- because -- the maybe just like and imagine really pricing I about about up you but the absolute directionally maybe there is know can on Thank inflation. kind you. pricing

Jeremy Smeltser

right? Yeah. the and think of And contrast million, $XXX in year. and So price get the it that I kind let's of 'XX, mean compare the so neighborhood in years, two right? recognize about we were -- to we F able in had get to

targeted. are a as I said now. it's We in different environment And more earlier,

a have that a than in have pace activities back Ian? any would geopolitical commodity stabilized normalized the will and of continues range freight digits currency. that things So on single more with to expect years, much they I from in year. across And single digits actually last happen our pricing overall feel that what where of full I low barring operations to happen. perspective, for the least at depend help, really like couple low better a of Does continuing to change, be

Ian Zaffino

for it as to are And the the very going predicated thinking maybe proceed? and update have you getting you. that timeline on you HPC timeline, the on an give it us to to how you Thank that's How thinking this there? you relates we about close No, HHI helpful. spin? HPC Maybe are spin, can it? done? and it Is Thanks. then Are about deal to wait

David Maura

Yeah.

and We've to HPC got definitely focus that. and after close to we've deal HHI, then got with correct. You're

Ian Zaffino

Yeah.

Jeremy Smeltser

work We'll like job to on time ready David. internally HHI the to business as we've but go making, continue the we're business -- be the within I good We to priority. our done be separate agree first when prepared, The I focus business, and a comes. progress the there. with

Ian Zaffino

you very much. Okay. Thank

David Maura

Thanks, Ian.

Operator

from with GBS. Our Peter next question comes Grom

open. is line Your

Peter Grom

guys. morning, you Good doing Hey. are well? Hope

David Maura

Peter. Hi,

Peter Grom

Is in know update remain HHI situation. chance not thoughts you can around you here? any time. us you give this But what on -- really David, to deal just your then, not just that? maybe we're will going Just given sure just closing steps? maybe next any transaction? I the trial confident you I'm Can a on in there the an go to view can share, some thoughts that And for

So why that maybe given confident where just with just of understand on. help kind you remain is us and going so Thanks. are everything we

David Maura

in it HHI good my for is this opinion, American deal. Peter. a the Thanks, have the ASO deal is the consumer business. Look, run Yeah. deal, to original good And

the itself. view original so as deal being of not in anticompetitive I and And

and think just was I original the closed. have deal should fine

that based the my confidence law think this being offered remedies increase current construct in country. I in with the the are on that

DOJ. is I is. my give hey, June before. things But my And will date legal a when the that team we great very, you, drop-dead we so my can advisers, time, win and end I these it you get confident is by the against of believe very estimate can just take or closed and on that can't tell June, we

Peter Grom

question helpful. then, I I to earlier. guess, Got to of kind And Chris's it. That's wanted follow-up a ask

there. Just maybe embedded sort any conservatism the outlook. can on Is the us there confidence the frame outlook, help just of you in but

missing is quarters expectations. Just kind of was just alluding think what to visibility lack of the Chris because of of kind straight in I two

to will, to EBITDA the XXX XXX are kind of I kind trying this confidence, So just of you understand if think people in number?

David Maura

could Yeah. you. to here's could think ask, talk I would Look, tell if I I if shareholders, what I directly our

on not did higher-margin strategically, Home We stronger, we absolutely think create Garden. to right lawsuit. anticipate clearly called are a a & faster-growing, Pet, business the I track DOJ

softer you -- over you despite right pull look was we -- in The at all quarter relates. progression go actually, despite you quarters, talk originally up we almost because problems, and was fourth in earnings the a model quarterly quarter. -- the being quarter, in four comped now about little if fourth line thought of actually QX, you the when you that how terms If actually, stronger if of I some FX year-over-year your last the EBITDA our it our

QX fiscal and of at the quarter we The to shares reported the despite bullish claimed shares with is closest reason own I've should actually headwinds. all our we I'm why level QX, just goalpost at If and think QX, and QX buy super and today's 'XX, look I the because I've the you in seem going to that the I of year. market transparent you, reason, very cash unlikely $X.X close. HHI doesn't that in fact to close, event collect to tell over for the tried is guess billion some that to price to HHI But doesn't tried you going we're be this

in So that's than less to that guys, over collect $XX cash we're a XX share, here months. going in

that's collect that's to close down our is information So capital probability less. which don't that back I and horrible. $X we're the our I $X.X going or highest today, on is base based structure. the and gets leverage that And My think -- redo to case, HHI billion completely have

EBITDA X at somewhere a numerous catalysts buying EBITDA. market And $X and attractive billion And security, But around south take so shareholder. phase. if I very close the you as buy and are we cap we Pet But do HHI delever of show-me wildly have you the that's you a math deep it. we back the balance and of close in get times I HHI, you're a a and and Until horizon. we I think I'm sheet on value stock, think

in much 'XX excited profitable much and steer -- us put profitable rearview mirror And to so XXXX. a to really the I'm healthier actually and more

Jeremy Smeltser

think we my clearly, by costs the we are start my on That, Peter, expected. topline? $XXX balance I got for on at as at line? number. the you That's what just per inventory on on higher cost the And bottom of as I my of turn sheet means about I I've definition, were progressed versus experienced million million than that continuing significant variances think would a what mean, That are increased I add, I huge $XXX what expected. at Yeah. operations, X/XX. year thoughts the my we capitalized look variables 'XX, outlook always year, And fiscal enter as the variables And

feel very we enter differently. I As 'XX,

we are the obviously, what's Our were the are they balance current right exception, that more expected that for in on you lower experienced pounds again, topline. in and of the ago, selling year sheet than obviously, versus and a the the the euros. to buying stable and I with year. in now businesses Home started than costs declines talked are about Asia from topline I particular, as significant & currencies Then HPC, we what move mean, we Garden,

market started heard As from year, appliances, challenges in based the retail we what that we this our really, enter May, for in on customers. April,

In have what weather is XX out Home the of level team, plus to can a in experience, demand & see worst for so darker same as place We've that after the consumer customer the moderate for in a business been really a the of thing And recovery had. consumer go fairly and years a while, perspective done use on assuming they've figure and through consistent from we they've kind what ever year our we we're we the Garden, with demand of year. GPC. to essentially level based

always approach are exact quarter of we earnings. prudent with we've you, anything those to progress the each that as and And will update taken we changes start do, sciences, so I year, on none but think we a as

Peter Grom

Got it. so much. Thanks

Operator

the Thank time Qadir call for we for to remarks. the turn you. over to Faisal back all closing any have like questions. That's I'd

Faisal Qadir

hour. reached the we've that, the With top of

David behalf participation. call. on for our you, conclude Brands, Jeremy. Thank Spectrum conference we And your you So of will thank and all

Operator

the Thank you. program. This concludes

have now You Everyone, great may disconnect. day. a

Spectrum Brands (SPB) 18 Nov 222022 Q4 Earnings call transcript