SPB - Earnings call transcript Q2 2024 | Spectrum Brands Holdings, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Spectrum Brands' Second Quarter 2024 Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Joanne Chomiak, Senior Vice President of Tax and Treasury. ahead. go Please

Joanne Chomiak

have our today's Relations welcome presentation Conference and Vice Investor Brands on QX will a Holdings of Thank follow and to remain call. our of website Webcast. Calendar Earnings you moderate I and Call This placed and in there document our Event will page slide Senior To I'm we comments, XXXX the section help Tax you, Treasury, the Spectrum call. at Joanne www.spectrumbrands.com. President following Chomiak,

Starting X Slide of with the presentation.

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

Slides X. X to and Turning

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

Maura. Now I'll David David? the turn over call to

David Maura

with discussion joining operational want everyone more everybody. morning, quarter unit an detailed and on our strategic update second you, operating financial and today will our start I'm our earnings including provide initiatives. for update. morning. business and update, to performance I then results. Thank this call a to Jeremy a going to on the Joanne, Welcome thank specific us good

a I During to our call, last again. winning quarter's started shared you that journey back we've with

process, evidence supply materially This upgraded and XX factories from performance over This further fill they we improved capabilities months -- operations, the have and to growth the company. our working consumers. quarter commercial inventory delight this to and is from as and invest that performance confident rhythm to of past we and talent and across capital, sales operating in S&OP new to cadence our line and top our our rates, DCs improved our continue are in the continued management, marketing now our resulting chain, restore create our decision given our innovation have

leaning balance the into us opportunities sheet our ability to improving businesses. margins into team the Our to and provides the back invest is strong

on cautious. consistently we to our deliver stakeholders. we top and and line do Today, encouraging, is margin say commitments winning The remained quarter journey to EBITDA for that reporting all to and margin Our quarter another but of our expectations are our adjusted going delivered growth. gross playbook were momentum to do adding first by results we we're met what our significant

this doing advantages top competitive being the cost on by leaning by are We growth side. line into to and drive long-term judicious our

have sales this This this Net you step declined quarter I X performance. quarter financial along journey. and marks one could to more our turn Slide X.X%.

categories, -- areas demand some are in are many there of we last stabilizing stabilization but We seeing softness year. to compared still are seeing consumer

the Garden patterns delivered line business. last we're for our businesses in that Retailer pleased early sales Care & our Global season Pet the and Care year's expectations Home assessment Home are order encouraged by Personal sales with in early our confirm We that and orders seasonal aligned Early helped more levels point-of-sale inventory partners actions be that closely and our year's confidence will management regions to sales our left with healthier lower season. weather relatively in by our to also inventory start were year. improve and this favorable key retail retailer this &

We're garden our year the we but now encouraged to X/X also over POS second start that our XX% our units of brick-and-mortar occurs over mindful now, to the in in e-commerce the Across XX% growing net by growth season, X of of are lawn representing half early year. and and outpace the of business continues at sales. compared all channels last

up million, ago, business investment Including X strong our with year across was adjusted a units. EBITDA all income, improvement from million $XXX.X $XX

year. gross Our last XX.X% of points to compared profit margin basis increased XXX

The cost of inventory This lower year. benefited was end last the the of results the substantially balance sheet quarter last compared inventory by to from high-cost year. quarter's sale second our off

last the material will comparable So improvement. a such we quarter is this see

Our and plant line from margins we've efficiencies, in investments and improvements. bottom made the are delivering savings operational gross improving productivity cost

in cost with we fixed to of business We with our structure ensure costs the are out past. being disciplined the remain we took lean excess

supporting to strength, company's Our competitive our continues sheet a balance be growth.

a the We are down year ending net billion from with ago. position of a $XXX approximately $X debt almost million quarter

is with driving fuels growth. line top Our goal into our the a foundational back advantage of strong that sheet investments balance our businesses

we if can company. our review Now the to priorities turn strategic and X Slide of

margin million company and inventory our our businesses inventory third rates mid-XXs the fill efficiencies, the now the of million working amounts. Inventory relatively less million and below spite Garden $XXX cost 'XX low high While of of with of and less in been to 'XX. peak fiscal in are are seasonality all quarter than Home quarter capital, at our to preserving in $XXX teams levels & a costs, that the operating are business. flat XX% driving in all improved back approximately X levels across fill EBITDA reducing second the reducing compared the average as investment structures first and the have we contribute means with high in around our These quarters point improvements fiscal our $XXX This have invested gross rates. of come the inventory levels adjusted by that

investments We're our drive behind drive manufacturing systems spend to people our line making a our to and culture plants improve are reduce investing capital in We accountability. capabilities of and also and commercial cost, efficiencies, driving refocus on top also activities.

Our and are investing leadership future of on the growth commitments teams into back and business company. their our delivering

adjusted margin our year was second X%. A EBITDA quarter ago,

investment income, this EBITDA margin adjusted Excluding our quarter XX.X%. is

from In take very fact, to quarter because made a lower-margin the a top the EBITDA Global decision Care year line business record delivered of we SKUs. adjusted Pet in ago part hit rationalizing a difficult

that cash flow seeing operations, now are the benefit in We decision of margin profile. our and

brands maps road and Our product stepped now accelerating. our investments are new up in

this to are for teams We innovation. advertising expect rest year brand activating investment investments plans marketing, their the increase throughout as of the and

merger solid first spin. HPC, were part I business very This in process to HPC had the was driven metrics. fact, accelerating of our performance separate decision its told call, During business. in quarter another HPC or a improved of underlying all you exceeding sale, the quarter, via by we the delivering or the key

business In digits, fact, been home our we've North grew Care declines the seeing now American the high sales single appliance in and tempering. are Personal business

quarterly and again e-commerce margins growth. now brand line in in innovation We investing our team to brick-and-mortar, are improving, marketing the winning new and we're and in increases is are sales. profitable HPC's seeing drive listings top material

Decker X-year an us for XX, This us secured, for term now Black us. brand get now we for XXXX. for brand our their subsequent this it with extend Decker through of before extended the Stanley would happy we've and back milestone calendar for same for today the Black this also the an Black will XXXX, Black signed of time. thanks the to December & renewal period business in Stanley are to because access categories continued We & name agreement brand partnership X-year license provides an of to certainty teams the that initial significant a under just continue this excited HPC use continued our With & with partnership as important growth. to with brand long-term like building to to announce the are Decker is rates, X which We ending end name with to providing & Decker, the for

is business results agreement and reinforced business. the improving that view HPC & new to the Decker the license right HPC's have time Black our separate

teams working readiness all nature. of prework X been doing we've the required transactions months, past internal with this our separation separation have been options. and to bankers the During focused And on for develop our advisers

a the dual both track an spin-off. initial HPC SEC process to M&A companies the opportunity truly separation that transaction, I and the allow for a registration continue either begin a will or believe for to intend separation over summer to We of forma. pro an registration file we statement

the a Garden a flourish Brands and of to each stand-alone Spectrum HPC business appliance by pure-play and is & business. on Home unique needs business focusing Pet

we to filed a for the year. One throughout HPC, will on favorable as had have update relates outcome regarding a pleased acquisition. under and positive you progress policy that to we claim I'm it our insurance the We TriStar additional warranty note report representation a

the to our to the million We insurers and the first received the with we the full second under million million remaining came $XX During $XX receive was quarter, the policy. an agreement April. quarter, $XX collected in in

programs. $XXX an I through share over update could $XXX now X we transaction, shareholders Slide close repurchase of if turn million attention our Since Now have HHI to to on the shares by our and approximately purchased compared your returned the discount million outstanding. have share to XX.X closing our value. and at count share programs, now repurchase trading we various reduced shares our million to We yesterday's those XX%

share approximately positively. our $XX share commitments, as react to price we believe, of $XXX continue on today. on our will million keep count, XXbX-X a repurchase we delivering remaining million earnings, our And We ultimately, shrink share grow and our as have plan

with peak Turning our season. last in last that soft, our growth geopolitical relatively year, Care continues. results is Consumer we we lawn macroeconomic our tempering are we encouraged are remain is the sequential to be and year and first our this framework. but declines relatively still and And kitchen EBITDA full cautious to digits. Personal assumes the but to double the flat summer's now in headwinds. We in sales garden see first retailer grow demand by in earnings results sales we now we what trends of the Page and small This We're and holds similar we to on updating expect businesses. appliances even half half consumer year currently the that improvements seeing adjusted experienced low during Based framework weather the net see to X. year behavior,

performance continued we over our confidence we winning. have past commitments our we that reinforces quarter quarters, our the on to belief are As improvements the journey in is growing. our Each operational on deliver

collective our like employees for global who one our Before thanks are to each roles Jeremy, I on in contributing of their call to to journey every extend my would to all success. over together the I turn this and

the to hear on you'll business you, unit Jeremy. more Now insights. from Jeremy Over and financials additional

Jeremy Smeltser

morning, David. Thanks, Good everybody.

attention Let's sales our turn operations. review your to decreased for QX results a X.X%. Net Slide of continuing XX from

to intangible sales acquisition, XX.X% impact of our Home decreased the of related charges by Care & in in our and reduced of in compared North were million offset favorable offset strategic & distribution million to sales factoring expenses to SKU representation cost from our tailwind small increased million settlement impairments decisions warranty advertising The gross margins activities, profit sales on Excluding framework our claims exchange, Global kitchen business. Gross primarily XXX mix of organic brands. offset net a largely partially generally in expenses and we 'XX within decline points, and the million the was with American $XX.X optimization businesses, of a line for Home of under $XXX.X aquatics bit last and due investment and reduced decreased and improvement for as of weather sales by favorable spend foreign our favorability, restructuring, in increased reinvest and trends, asset higher policy declines TriStar and by earnings transaction with favorable providing with inventory-related lower Personal $X.X made Care and lower Garden to year. cost controls impact expectations spend the softness along These in the fiscal lower products. impacts project marketing partially rationalization we year-over-year inventory appliances, by driven due volume. Operating Pet actions, cost insurance $XX XX% basis increased and X.X%,

excluding increased million $XX.X million $XXX.X operating improvements diluted driven net by investment reduction mentioned. GAAP EPS the the and margin and $X.XX gross EBITDA by Adjusted increased $X.XX, higher share per in income, and higher shares primarily and driven lower an was income, operating improved income earnings outstanding. I investment Adjusted Operating EBITDA $XX of $XXX.X investment adjusted income diluted EBITDA, million, both expenses share million. driven gross margins income count. Adjusted and was by XXX% the income by lower driven million. expense interest to of by lower by increase of improved $XX.X higher

During and the our X% share or X.X million reduced returned repurchase shares shares. outstanding quarter, to our shareholders we million second through $XX approximately by program

XX% Our transaction. current than approximately of was lower the share the count to prior is HHI closure it

were restructuring-related Let's last from debt Capital adjustments, to million million and compensation million from was balance. million of were due separately, continuing QX, interest $XX.X and during million higher higher $X.X expenditures turn expense payments lower last $XX.X now strategic decreased amortization projects and $XX.X $X.X Cash transactions, Slide $X year. QX down of $XX.X Depreciation was outstanding million million year. to XX. $XX.X share-based Cash unusual year. the quarter of $XX.X flat. other were in million million $XX.X than nonrecurring our million last than last versus year, taxes operations towards

Moving sheet. consisting million net $XXX to ended Total million was our million with billion billion balance debt available $X.X senior unsecured $X.X notes, quarter million, on a of of million the $XXX of quarter end and leases. had balance cash $XXX We $XXX of outstanding finance flow and investments the revolver. We $XXX in of short-term $XX cash approximately debt. million plus

is of Now on Care, XX. I'll to business let's review the decreased operational with of start performance net X.X%. underlying drivers Reported get our the provide sales into details Global which results. Pet each unit Slide

currency, American X%. Global North foreign animal decreased digits. organic companion last declined essentially to high sales year aquatics flat were favorable while single sales Excluding

were SKUs. exit sales quarter profit in and This our to adversely lower impacted decision 'XX by nonstrategic fiscal several categories

the We have of the SKU majority exits. anniversaried now

a As are nearly very reduced from and a actions item by turns X/X line perspective is a cash purposeful impact on flow. these North and having reminder, these active while activities the count inventory positive our impact headwind, American margins, a top

impacted American we American presence toward larger shift where a sales North and aquatics e-commerce to channels. and channel, specialty within traffic other sales be lower has consumer North foot the pet by continued the aquatics purchasing as see

sales almost mark XX% a percentage sales making In total quarter of of high a this e-commerce fact, GPC's of e-commerce for year-over-year grew as GPC. sales

stabilization In are we sign growing digits, that category. now low aquatics addition, seeing a in nutrition of single which is

strong a aquatics the the pond We season, is which to have also had to start contributing consumables recovery.

celebrating unveiled are Global the designed keep XXth we hobbyists and GloFish specifically ever the Starfire tanks. to more Red front, at larger is GloFish platform's offered we've largest year This anniversary innovation the who of appeal On Pet to was new Angelfish the fish GloFish this and broaden the Expo generally fish in March. the

secured under line that Tasty Our gain Good quarter. 'n' brands launched new Treats earlier Cat next continue We listings to traction. Meowee will the to that new ship begin several and

with and IAMS food we food and launch dry Treats in Good with Boy packaging. EMEA, optimized cat XinX both our In and launched Chews earlier in new of on dogs extensions all and QX built claims dry the success and for

SKUs GPC of offset consecutive GPC productivity low-margin This on and growth or the for investments delivered adjusted where XX.X% by and XXX inventory, year-over-year of million, for the quarter over million -- increase comparison our million. of operational due programming high by mix FX. exit $XX delivering This last cost EBITDA increased advertising favorable $XX.X quarter, of points to increased fifth Similar year's was in was first business comparison a EBITDA and driven favorable investments. quarter to and partially GPC favorable the to sales the Adjusted quarter. the record of higher primarily quarter's the business this fourth consecutive focus basis for is EBITDA volumes, adjusted a continued to $XX in lower by

new the higher-margin to commercial With drive share in business market investments launch consistently and are trade delivering results, gains. and promotions, increasing we advertising accelerate support brand growth innovation

levels lower adjusted growth. EBITDA We expect drive second innovation the but to as future with top on line investments focus growth of increasing we brand year, margin the in and half

the which category Although encouraging. consumables, is is recovery, signs of aquatics very in still showing challenged, particularly

POS Net weather with is controls key the driven saw trends Home drove regions retail sales & Slide view which we higher retail season the in second double-digit patterns to move Garden, in increased in support retailer growth compared started Let's X.X% healthier category. quarter, on controls reorder now inventory that the last in The to by the Favorable our XX. orders. and this quarter retailers levels in sales particularly category. year,

have also and off-shelf space promotional ahead of customers to Our year. retail last our allocated category

we business. Spectracide peak category as strong Our the the with grew into of quarter by ahead POS quarter demand head driven in the consumer brand for

While and season reorder seasonal cautious a than summer. manner Sales expect a retailers to brands, building this be space household promotional compared of to increased we and season in starts for weather, continue more the season the quarter the typical which slower we and early strength our repellents a were to of in encouraged later by that XXXX. inventory controls buildup to to insect typically last lower year, signals were in

cleaning, In sales low digits. double declined rejuvenate

have While sequentially, category sales demand subcategories of improved total continues some be consumer soft. to

Our to garden with much but with year. The throughout in XXXX been customers collaboration in season earnings very similar has the partnership retailer POS key with orders prebuild. and is than the assumes our line framework last lawn and more weather strong XXXX

media We superior are consumers. our product's and innovations results-driven communicate our investments, new supporting which value to products through increased

This at Spectracide for Hold is to Our line weeds The traction up X and shot Spectracide tagline, kills gaining X Power", months. longest-lasting is and retail. product with "You prevents the our

the spend media when We to product bottom high consumer we geotarget with advertising, see funnel top this for weather launch and focused are with regions our right demand. quickly supporting us allowing

invisible new mosquito Repellent category, of repellents Zone provides XX for our families. Eclipse protection Cutter the hours Mosquito In

online higher million costs initiatives we tagline inflation million. driven digital campaigns by sales, favorable sales by this both year's primarily EBITDA and continue and fiscal offset People. cost improvement basis Labor $XX.X XXX levels raw adjusted doubling EBITDA brand last Adjusted cost not year. nearly this product are material meaningful The lower-cost with increased with inventory and mix, of media Protect We have $XX.X supporting points experienced increased Your margins 'XX that from efficiencies, manufacturing our investments. to at was increase by

& sales Personal finally, Home XX. decreased And which Slide net is Reported Care, X%.

decreased decrease high sales global by offset X.X%. organic sales in double-digit in exchange, declines Personal foreign low single-digit home unfavorable net The driven appliances, Care. global net organic by Excluding growth was

We appliances, declines home consumer North continue to of category. slowed as see the sales the rate American has largest we demand this stabilizing in are but see North decline encouraged in and American

product sales, behaviors. sales pricing and men performance. EMEA decline year-over-year, mid-double-digit posted with after digits Our home markets. Commercially, partly grew promotional Balder sales the hair reacts shelf Remington in Remington for growth Shaver and Care in shift among styles. care performing consumer embrace by year's in to in to e-commerce Personal XX% Sales online top pricing appliance a as well is and purchasing Head and LatAm on our Care almost by driven a inflationary top from both activity delivered last bald line Pro quarter this Sales single driven strong offset in by bottom trends higher is in line low growth hair and home appliances, investments mix in and increased contributions. Global our improving, and has strong HPC region grew channel Personal in the

line, ONE seeing retailer product the in Remington EMEA, price consumer capitalize on particularly are excitement line. both the product for in to behind and investing Remington point and for the region are higher that We

brand-focused Hobbs our #X all-new of Hobbs by also Kettle, compared the market a offset related product the and EBITDA development the brand. cost was U.K. and EBITDA $X.X FX by fewer our was X.X%, and and and investments. product to driven launched million Russell cost quarter volume markets partially is low-margin lower events, the the blending innovative increased year. margin improvement the supported recently primarily design a promotional by launched initiatives. of in AI. Adjusted to certain expenses, of Adjusted and Kettle inventory million where The last $XX.X expertise We improved in Russell the This continued inventory experts pricing inflationary Comb in benefit loss lower

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

to exits. sales to and Garden, year. In now brands our SKU last our & in phasing second majority demand. Adjusted an growth have flat expect deliver to category Garden continued on Care, the to our higher consumer sales updating a growth HPC in small the demand in that anniversaried were that compared in Pet of expectation closer last low primarily defer are relatively consumer offset with is half We inventory expect of business, with the until do, the investments during From EBITDA, each tempering time. reducing by Care. inventory year, we growth demand expect in 'XX for lower we in We and however, Global to retailers increased declines our taking sales the grow second primarily double by net small appliance driven we kitchen to kitchen lower people. to now when income & growth investment net driven perspective, expect by cost now appliances, our large half year offset fiscal business we be digits, sales from compared to as customers inventory Home In expected and in retail excluding levels Personal expect Home the

$XX Turning million to Cash and cash to $XXX are is $XX be depreciation Slide transaction XX, costs expenditures and be million approximately million, to $XX to $XX expected are $XX of are be to be in optimization, payments and expected $XX range of million. towards approximately expected the expected million. taxes to million. million, stock-based Capital to $XXX million between approximately restructuring, amortization compensation strategic including

tax EPS, of state XX%, a adjusted use including we taxes. rate For

of section, their global thank year. and so To hard I far David end echo this our work for my all want employees to

to back David. Now

David Maura

XX. couple here of Thanks, take Jeremy. everyone, minutes Thank you, key the Slide to just recap joining us a on for takeaways like today. to I'd

first to year. our this said the quarter journey. our our another a what performance of of on doing start, the mile going showing do, here good delivering to working, the that playbook results got we're and quarter with We've We we're in and strong winning commitments hitting is and our half markers off pleased are we

this ensure to confidence We results. step-by-step our are taking journey grounded remains that in

better Our and teams are focused innovations. on fewer, bigger,

growth importance and seeing of e-commerce that channels. on recognize in impressive our our the our of sales all are We of growth all across sales

Our strong balance us advantage, a which sheet our with fueling mindset providing a is in competitive company. growth is

to We having cash return back are shareholders bought to now continuing XX% of the company.

and During be of brand plans, we our the the our we top line investments as half sales second the year, operations. to long-term will commercial our ramping developed I'm in growth. marketing excited have the up activate preparing full accelerate and not. sustainable to businesses about making what important in step what on the to cautious nimble be we investments year, our the can through focusing we about we're this journey. We results and remain control of see do

weather business. within Garden sales heading while this & traffic early a specialty us. Inventory Home are some from our season dollar channel year still is of for been demand softness are have retailers. quarter yet into retail of and healthier at the biggest And we trends foot pet but lot seeing is ahead We favorable,

same We to quarter. last macroeconomic as and continuing geopolitical the are face headwinds

the year encouraged our we of on start remain So expectations. while we're by full year, cautious the

start needed return and growth. to sustained has am momentum about house to our costs, judicious revenue and inventory us the playbook Our our investments winning with rates to lean the and in keeping high excited continued order our operational making year. I fill on

Joanne Now any your we'll to call turn questions. to of the over take

Joanne Chomiak

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

Operator

first Our question Instructions] of UBS. from comes Grom [Operator Peter

Peter Grom

Two questions for me.

the kind of $XXX framework time. was get earnings hoping on for long-term discussed period maybe perspective updated Just to was first, number of a I some business. know the for million I a

be the in second, be? And step the this I the to question implied I just on in up earnings hear half that in delivered in love of somewhat then what context a of power could think, you some guidance. updated just David, think But you people. and views the I a pretty long-term what investment second where summer, and would environment, was I still get first just I guess to tough you half you mentioned brands on premature. business appears had the

sounds So improvement the a what even if would imply look spend you're top is year-on-year in year environment. versus better the it incremental line implied like ago, accounting the just a much I gap business after underlying for embedding at this any despite

am would I that thinking to understand so, cost? right? Just that second it So trying implied the Is just why case? conservative? If Is about be half it guide. freight the

David Maura

not So let's DOJ look, months XX XX and were comment, of with think, $XXX that, operating levered I and ago, was made million I we it's going comment. or company months mean, start Xx the the that a results to ago and satisfactory -- lawsuit any through us.

$XXX business million we was And so been in historically -- to do appliance EBITDA. hold has I able trying to illustrate, this look, we

did $XX know, have 'XX million we've that. months mean, you year, X already. fiscal all earned more I EBITDA already of Tim, Wright Tim and earned almost that team fell last 'XX the in we of and As the than

going So do but $XXX about million was but That that this to in to $XX getting we're we're $XXX EBITDA million a year, a appliance saying on business creating that framework. getting healthier back EBITDA much quarter, track, one much are the we stronger right? not was million but business, component. We a HPC pet talked healthier, back

$XX business front of to X/X us. And in So Home $XXX also the our almost then and million $XXX the a in back hold pet. million building they're EBITDA in been Garden from That fell fantastic business. from on million of POS up. at past moment. is million that run appliance good still EBITDA, & we've weather plus and have We been and And some need out $XXX

guidance and strides the can don't reference. Obviously, $XXX pet, & quarter there. a repairing So in EBITDA over you want EBITDA, to in million appliances, continue our But Home print power But to this the we make earnings with that's skis want get Garden. our this million see $XX way, want on back. Look, results, our building business and that don't brick-by-brick, of want we shape or our step-by-step, well in over to to form. we're be get out we journey We skis any to grounded in do way quarter-by-quarter.

because big house we've So earning we think this take flow and be want situation operations. look, teams really the order. think headline improve and operational should got better morning write I initially bit I We've don't the bit getting correctly, a recap, have raw make we S&OP put are months finished making material commercial are process. your be, goods our lines, to turning efficiently. We're sure raw this we invest earnings more mean, I XX worked I should also we to better rates. The little a Not think together only freight guidance more. thought. But more ago, in that want we got to taken structure efficiently. into margin we're we've that raw up material what an heavily judiciously freight cash improved if materials were than a we getting into little what correctly, you takeaway real

ago. more the We've low as turns rates mid-XXs, excess XX-something and million, are been in the years all come expenses We're inventory has percent of with another they capacities Fill rising. were functioning. storage couple just are a a DCs $XXX that rid company. much $XXX efficient as Our of million, Inventory gotten eliminated.

So we've in really got our order, house operational Peter.

a up bring full I've We while -- our excitement divisional to got We've build we're with pivot, market side. to the to customer. me want all got to lot Now next presidents, the got go bringing with in brand to is to invest unit near presidents our revenue. build bore sheet, aggressive. to of We debt-free order a I'm cost couple build and operations. major house operational over commercial the innovation. and being these that's to here play set to the want share. equity. retailers months. the business the the in judicious We of the meetings. We've we've very top-to-top That We want news balance keeping the all got on on and

there turn errors. in to correct any stop any or I'll fill and to Jeremy So blanks it

Jeremy Smeltser

Yes.

half to growth all EBITDA more details. The sequentially second said first to important in overly really is, the the question, to reality brands half. one to $XX top wanted might marketing $XX this million year. And are would happening, more going first back is we I but And we half, to odd earnings knowing advertising only million That Peter, we points, for everybody that $XX seem think in what And to or your in the million but what we that's million in of today. of second spend half and beginning spend the versus half to spend year, for half. million conservative I the spent think listening great half. shows those The framework is our expect $XX say actually a the half without delivered on David. line activities second $XX incremental sequentially just we I in implied the and declined that

second is I you half. that your if to that math we're earnings that you our to landing the So bridge, help will for think could -- framework add get where do --

before launching of we appliance the Global business. and and second start And in increased in about weekend. Day reason The going advertise that's you And have behind those. is starting to focused investments, hard season product true are investments our also that many Memorial half and There's to the that to is get -- we're all come and were that in building two, some because, in we garden actually particularly advertising here here now SKUs, those first focused really investing half have get the about they Care home our business, same results were May. talked the to outstanding where heard on in you midyear, mostly content that from no for one, I e-commerce, the the launching Pet launches, new real brick-and-mortar is

So that's really the driver.

There's there's second half. this organic to no half of importantly, healthy that units from more second the point year, but we're as which It's of about any in growth less investments, 'XX. fiscal X that first that the in are taking those growth of says the view year drive business experiencing we or we're next to drive the simply move to incremental anything some anything

Operator

question Bob Labick CJS And of Securities. our next from comes

Bob Labick

of particular. and lots around in positives HPC quarter Obviously, in the

kind balance with structure news. get of Obviously, separation the capital it, if of Can the kind So give you you there some go sheet to sense cash. a of wanted sell you incremental us HPC? potential of with of a and I outcomes

But So down out. figure that's JV capital go we capital sheet route spin post the into of or structure kind easy about balance to HPC? injecting should how if you you be route, would potentially? those think Or

Jeremy Smeltser

questions lot M&A a got is inherently there, fluid. of and You

I a if know don't business, capital put answer any. much I if into lot that. So the of whole intend don't can to We

performance on marketplace the the amazing new been the in think we got hires I that were we've business. We've made team. a We've improving financial an number tremendous America -- where North entirely materially weakest. of a recently management really focused of

just as and really years assets mean, getting our so multiple back we've And businesses. business focused & our said building Home and for we believe Garden healthy. But that we're Pet that, that on I it are do higher

a But believe go by platform M&A do a a not fluid do sheet very to will it it's intend out stand-alone balance because lever up synergies and in very it grow. if an spin-off -- for We of a the and And occurs, to a scale, as there's get with stand be that'd healthy can to intend a up. we out consolidator so and partner growth. If platform we to is that to that's -- spin will situation. giving We we out it ability we tons separating spin it what be great. HPC there find it

business. better that a do revenue do the And continue I continue the drive thing is can and we've the to under able hires to business, new be margin the of stewards leadership and best to Wright the of been think profile across platform. Tim EBITDA the that and of we of number

our going to and embedded we We company. which and earnings. because do where to that, come here. partly and see being why to holding we is the believe in float, best stock grow continue keep to out. undervalued everybody that's of value try the we'll way shrink create But HPC for buy the think our doing back be undervalued So it's shares, we continues to that we're

Bob Labick

as to easier, HPC, at improve make the continue Okay. results obviously, go. process And Great. the it's you going Yes. whichever to way

great. that's So

of kind Pet in last And material half, factoring, stuff. high-cost they've guide the spending give at swings, Pet but Home and & then without that around which that you start the margin transportation, us receivables is few operating settle years where view very out a last & Garden? perspective, Maybe with referring profile it. just all good a obviously, question, Garden been absence inventory, the going And sense back you those get of volatile, the of raw second fun putting to the incremental dollars of medium-term segment margins Home a should year, to this how do now to once is the from and that the

Jeremy Smeltser

-- Yes. Bob. I thanks, mean

look, I last think where is performance Pet quarters. X think with X on I the pleased or we're margin really side, the the

team. certainly, think this watermark in QX high the I outstanding by result was

to business, and of we the growth I to our get do have couple that. need grounded of in of So business it's, think were I But needs Pet the pre-COVID about we fact driver we're first years COVID. biggest platform. grow. that It's happy It like grow at we growing this our the think, to in

that the So term. the investing brands back to grow -- into long into for that business

margins just that right quarters. experienced the the maintain over really it's the thing look at blended couple we've think level last I and of to

to level do in would up what we and not second half because in QX have I that have expect the investments share. we those we is we'll to experienced take So the ramp

on couple Bob. to new Garden a anything of customers I and in over last a roller going think be our been with consumers you've our & few want years, & don't very overall, those coaster the the including where What and X outstanding have in be obviously, last would the & some grow, been us, the years. Home say Home in We It's fundamentally, Garden challenged to behind products changed where categories. Garden, we to back are years is, get years retail Home aquatics. On ride has with categories

great and business to year. next and while in was are the teens peak think investing be Garden. We margin margins expectations of in that year and for in room it we our this at I perhaps improvement think it going brands, ahead normalize holding were grow the starting & investors. into our still outcome see there's years teens the continuing less it, we but years ultimately not line the ago high us in improve ultimately, that around top still it's the when I in maybe And a like to actually to that would to XX%, Home will have high

So targeting. that's where we're

Operator

Our Carey next question of Chris comes Wells Securities. from Fargo

Christopher Carey

One question about COGS.

down was So mid-teens cost the This sold to gross about best goods been over several of low has last the margin. quarters.

because on that going structural the done operational you've coming that Is are or you inventories long system? X think about going Are the to Just relative improved any the bit forward? a margin time. a this little in you be see X high-cost more this cost may exposure contextualize some what think of bit what's I the might have driving there? in I changes out there are finally cost years a you firming? more gross sort of of contextualizing commodity potentially cyclical with of And in Would forward? follow-up. being a Can that that going structure

Jeremy Smeltser

Chris. good Yes, to, Sure. question. happy It's a

to certainly cost no the think is that. the in half driver doubt compared about as I single the biggest lower year. last the first year of inventory There's

quarters half was the that first between year, the roughly split recall, you As last evenly. million of about in $XX

of last or would year-over-year having to years only that the million sold. The productivity $XX improvements seen the stronger cost earlier are goods think I is we're we've few I of plants, so a the improvements that thing call in comments. So than out benefit to much David's

and a surcharges, I and that's from lot a of our margins another incremental things not plants, of actually the hit in many half in QX, in the million to really to say new million is we Peter we talent the perspective see having very $XX second low probably that to Red in really, in decline a because would well will in there, first goes new out by That's earlier that our earlier second charges, variances first question a evenly. the QX, relatively likely QX year half of incremental, manufacturing of and P&L, costs team, other positive and that I watermark Sea that a driving perspective. And We in we should marked split P&L the particular, have is $XX thing gross back are driver in freight are to yet on then QX, called half start the think going QX the from half.

Christopher Carey

David, standpoint, can you front a quarters might share repurchases, stipulations cash here? some of been as Helpful. go potentially share before. some you repurchase covenants, in here, would the obviously constraints the and share talk repurchase specifically said footed your you any you be had from the have any of we've you've this talked where very over from with tied And would on But incremental Okay. your allocation -- on about and context capital next up bond several just about

David Maura

through a look very covenant asking call, out it's to this a capital debt the meetings have where remaining as be be bonds. for this gross And number. it soon to lot we're sale got we you left need we our Look, I of today's of an earlier going really our to Board asset and net debt, a think at as to thing question. get And clarify structure of a we company will to do will it. for and which room, addressing our at low out down week to go it. look going great optimization I get and we're because get thank That's want that great

robust can and think a business, can thing an And that from think look, we we is to more price that than don't that we to Garden believe worth to value cheapest we continue are stock at buy an we trade. any & build M&A assets a standpoint. frankly, Home our continue lot the We and probably the buy. or quite of attractive business see But we is pretty when Pet that attractive

in from efficiency continue So while we're of can float, the this really next couple we shrink over be and try to ops going to the great company, go operators commercial an of where standpoint, the see and years. earnings to grow investing really,

it fun be ride. think a I will

Jeremy Smeltser

I range thing on just it everybody right, one about question put was the X.X. think of to as add net And would leverage constraint, out to target your for X we have long-term Yes. as to a

the think be company I years. and based think in material so And of the on incremental bogey a the structure X coming about that share repurchases X gives what model possible how might of current is you current to earnings the to debt to

Operator

Deutsche Powers next Bank. comes of Steve from question Our

Stephen Robert Powers

going David, the able to quarter. highlights been to just make operational back the making were around improvements you you've this

You gave some good detail cetera. et around inventory fill improvement, rate management,

you alluded to initiatives efficiency have You additional underway. also

that. could expand improvements. operational declaring on just hoping mission I bit think little on accomplished a you you're So don't I'm maybe

the year, is gains a should those about make you about reinvested. this through it how think it in lot think next get going flowing of we seems as of like just because into stand near we term year So to incremental to the balance

sense us a much build of just give opportunity back the more if little on onion, you you've of to So you bit a will, to see how peeling what accomplished? already

David Maura

Look I'm -- sure today. to to want I quantify be not anything

why there'll and S&OP look, ops with now, up can't people Bob at see people. critical to I get and of you I'd is adopt look, I constantly you And get we've end we've if people, off this upgrade we've incremental sold advantageous gains and as this big running to revenue, we out And batteries We've all built a get. But made smaller. That's pretty made also to Ghabrial, got got me decision but Volmert, efficiently. ago care, costs agree process got a because and talent, hardware, people, Steve good to we've don't them, strides, be go team pretty today, credit but and company balance taking much conscious auto be you, start name lot goes in naming with -- again, we've Keller conscious got think, I company. of through sheet rigorous we've I say, Dave then XX we've mass, there's offended. months unabsorbed overhead. invest -- recently, this a just a right,

the want move we're throwing a kind flow, growing steer as getting where going an we make real months growth algorithm the twice XX to that's organic is rate, rate, continuing next of so where sales one operationally. get to And to a free off forward, really to -- to to long is time. while journey a into at this map quantifying here anything wants gains journey in Jeremy operationally starting earnings yes, lots but cash get company the is It's time, growing, one restoring returning going of we're a road to to strides. to But, to on step I don't to unless at back winning, to. some built quarter this make be incremental

Jeremy Smeltser

that No, all I makes think sense.

right? inflation I think inflation have year. the every We our other thing we're always of, conscious labor Steve, is in is coming,

Our that's and suppliers you're have going avoid. labor something year, to not their inflation in every

that we more so have target And some offsets can for that than improvement deliver shareholders. out that always so there to we a our have productivity

year which talk I David go think, what with achieve question, we year, and your about out with, is from to So each year. with we'll there's exactly you think agree we think can implying were I more there. runway what we And I as

Stephen Robert Powers

the I question. time, guess, If end but good. could -- one Very of Okay. we're more at know I I squeezing

revenue go as of stands companies heard environment, consumer a better about slowing demand, difficult Your talking for We've more lot call we from cetera. forward, out. a trends of sort et

just spend -- bit just I does confidence? And what seasonal somewhat gives got think I maybe little the But a unique coming from a the you're dynamics, which I you've So place also, and then understand. you bit is the seeing cautious that to over shift and a environment. demand what, influence more backdrop maybe generally how year think, I balance and incrementally you of broadly the stimulate a we're plan to

David Maura

all baseline with kind I the look, think mean, this business. I starts of Yes. where we

no to impact. And have wouldn't had pandemic of of in thing that then that back this on XX -- going at wouldn't of go look if was year. too for mortgage last have interest fact view the with my macro a had year, called there's its giant X% this some big right? out you problem inflation the got is X.X%, And that If from been And you experiments this my on kind of going market we there's X all kind today, the side trillion to rates I the on a to sort in two based just on, that shot. right? So other and money years. plus in that's got that dampening just X% not happy that outlook macro-wise. would And and coin, be November rates 'XX we cautious That's on to movements XXXX find be be somewhere, that, have these mail. with it stuck part logical $X way country an You money to assume And -- why free as it environment. was

think the more struggling credit today. we is And We delinquencies. look, delinquencies so up. We loans having consumer see see card auto

difficult that this sheet your what was DOJ, made balance And to on running by it massive you you a same was type we've platform, of inside HHI government and and so very it's have you time, convey that pressure think operationally. And But improvements to to the got better, if running the now and and the gives cautious be can a you've you're on of focus the that's distraction selling sued company. the At not if very were better I actually not being real. business efficient you're you the we right, this. business

balance our a that's to have mindset be so just of now years sheet And go the wasn't house ago. have the offensive. in order, we on here And can that that we and free have few growth operational and a

outlook the despite to our we so the and more for we're all we're to think, marketplace. going year, listings, of going And back and believe in the these I believe cautious despite win get headwinds half continued we

us. But in the has that a think unique November. so we more bit again, to to view I in took And anchored be it maybe is little

Joanne Chomiak

Well, Spectrum hour, to the And with conference you we for thank you your call. Jeremy. of all we Brands, behalf Thank our reached so thank of have the participation. David will conclude And you. that, top and on

Operator

today's now conference This Thank may for concludes disconnect. and participating, you call. you

Spectrum Brands (SPB) 9 May 242024 Q2 Earnings call transcript