Core Viewpoint - Scotts Miracle-Gro has shown a positive stock performance, increasing by approximately 6.8% since the last earnings report, outperforming the S&P 500 [1][2] Earnings Report Summary - For Q1 fiscal 2026, Scotts Miracle-Gro reported a loss of $125 million or $2.16 per share, compared to a loss of $69.5 million or $1.21 per share in the same quarter last year [3] - The adjusted loss from continuing operations was 77 cents per share, which is an improvement from 88 cents a year ago and better than the Zacks Consensus Estimate of a loss of $1.04 [3] - Net sales decreased by approximately 3% year over year to $354.4 million, surpassing the consensus estimate of $350.6 million [4] Segment Highlights - In the U.S. Consumer division, net sales fell by 4% year over year to $328.5 million, exceeding the estimate of $312 million, with a profit of $9 million, down 8% year over year [5] - The other segment saw a 1% year-over-year growth in net sales to $25.9 million, beating the estimate of $22.2 million, and reported a loss of $1.7 million, which is an improvement of 45% year over year [5] Financial Position - At the end of the quarter, the company had cash and cash equivalents of $8.3 million, an increase from $5.7 million a year ago [6] - Long-term debt was reported at $2,250.2 million, reflecting a decrease of approximately 14.7% year over year [6] Outlook - The company reaffirmed its full-year fiscal 2026 outlook, projecting low single-digit growth in U.S. Consumer net sales, an adjusted gross margin of at least 32%, and adjusted EBITDA growth in the mid-single digits [7] - Adjusted earnings per share are expected to be between $4.15 and $4.35, with free cash flow estimated at approximately $275 million [7] Estimate Trends - In the past month, there has been a flat trend in fresh estimates from investors [8] VGM Scores - Scotts Miracle-Gro currently has a poor Growth Score of F, a Momentum Score of B, and a Value Score of C, placing it in the middle 20% for the value investment strategy [9] Zacks Rank - The company holds a Zacks Rank of 3 (Hold), indicating an expectation of an in-line return from the stock in the upcoming months [10]

Financial Performance - U.S. Consumer net sales for the first quarter were $328.5 million, reflecting a 4% decrease compared to the prior year[22] - GAAP gross margin rate improved by 90 basis points to 25.0%, while non-GAAP adjusted gross margin rate also improved by 90 basis points to 25.4%[8] - GAAP net loss from continuing operations was $0.83 per share, an improvement of $0.32 per share compared to the prior year[8] - Non-GAAP adjusted EBITDA for the quarter was $3.0 million, an increase of $2.1 million over the prior year[8] - The U.S. Consumer segment reported a segment profit of $9.0 million, down 8% from the previous year[22] - The net loss from continuing operations for the three months ended December 27, 2025, was $47.8 million, compared to a net loss of $66.1 million in the same period of 2024[26] - Adjusted EBITDA for the three months ended December 27, 2025, was $3.0 million, up from $0.9 million in the same period of 2024[26] - The company reported a diluted net loss per common share from continuing operations of $0.83 for the three months ended December 27, 2025, compared to $1.15 in the same period of 2024[26] Guidance and Future Expectations - The company reaffirmed its fiscal 2026 guidance, including non-GAAP adjusted net income per share from continuing operations projected between $4.15 and $4.35[15] - The company anticipates free cash flow of $275 million, which will drive the leverage ratio down to the high 3's[15] Asset and Liability Management - Total assets decreased to $3,034.0 million in December 2025 from $3,170.2 million in December 2024, a decline of approximately 4.3%[24] - Total current assets increased to $1,257.2 million in December 2025, compared to $940.3 million in September 2025, reflecting a growth of approximately 33.7%[24] - Long-term debt decreased to $2,250.2 million in December 2025 from $2,636.9 million in December 2024, a reduction of approximately 14.7%[24] - The current portion of debt increased significantly to $278.3 million in December 2025 from $54.6 million in December 2024[24] - The total liabilities decreased to $3,534.6 million in December 2025 from $3,649.7 million in December 2024, a decline of approximately 3.1%[24] Discontinued Operations - The planned divestiture of the Hawthorne subsidiary is expected to close in the fiscal second quarter, with the business classified as a discontinued operation[2] - The Company has classified the Hawthorne business as held for sale, impacting its financial statements for all periods presented[43] - Effective in the first quarter of fiscal 2026, the results of operations for the Hawthorne business will be reflected as a discontinued operation[43] - The Company incurred a loss from discontinued operations of $77.2 million for the three months ended December 27, 2025, compared to $3.4 million in the same period of 2024[42] - The decision to classify the Hawthorne business as held for sale was made during the three months ended December 27, 2025[43] Accounting and Reporting Practices - The Company does not provide a GAAP outlook due to the unpredictability of certain excluded items, which could significantly impact GAAP results[43] - Forward-looking non-GAAP measures are presented, but no reconciliation to GAAP measures is provided due to unreasonable efforts[43] - The reclassification of the Hawthorne business affects the Condensed Consolidated Balance Sheets for all periods presented[43] - Management does not forecast many of the excluded items for internal use, complicating the creation of a GAAP outlook[43] - The Company emphasizes that changes in excluded items are dependent on future events that are less predictable[43] - The classification of the Hawthorne business aligns with the criteria for being held for sale as per accounting standards[43] - The Company aims to ensure the accuracy of its financial reporting while navigating the complexities of non-GAAP measures[43] Shareholder Returns - A share repurchase program of up to $500 million has been approved, expected to commence in late 2026[3] Leverage and Financial Ratios - Net leverage improved to 4.03x, a reduction of 0.49x compared to the previous year[8]

Core Insights - Brazilian fintech AGI (NYSE: AGBK) is celebrating its IPO after raising $240 million [1] - The DOW is experiencing a positive trend, closing above 50,000 for three consecutive sessions [1] - The market is anticipating the delayed January Jobs Report [1] Company Highlights - AGI's IPO marks a significant milestone for the company, indicating strong investor interest and confidence in the fintech sector [1] - The successful fundraising of $240 million positions AGI for future growth and expansion in the competitive fintech landscape [1] Market Context - The overall market sentiment is positive, with traders reacting favorably to recent performance indicators [1] - The upcoming January Jobs Report is expected to provide further insights into the economic landscape, influencing market dynamics [1]

Financial Performance - Net sales for the three months ended December 27, 2025, were $354.4 million, a decrease of 3.3% from $366.6 million for the same period in 2024[120] - Loss from operations was $21.8 million for the three months ended December 27, 2025, a decrease of 52.4% compared to $45.8 million for the same period in 2024[132] - Net loss from continuing operations was $47.8 million, or $0.83 per diluted share, for the three months ended December 27, 2025, compared to a net loss of $66.1 million, or $1.15 per diluted share, for the same period in 2024[136] - U.S. Consumer segment net sales were $328.5 million, a decrease of 3.6% from $340.9 million in the first quarter of fiscal 2025, driven by a 5.4% decline in sales volume[142] - U.S. Consumer Segment Profit was $9.0 million for the first quarter of fiscal 2026, down from $9.8 million in the prior year, due to lower net sales[143] - Loss from discontinued operations associated with the Hawthorne business was $77.2 million for the three months ended December 27, 2025, compared to $3.4 million in the same period in 2024[138] Expenses and Margins - Gross margin rate increased to 25.0% for the three months ended December 27, 2025, compared to 24.1% for the same period in 2024[124] - Selling, general and administrative expenses decreased by $7.5 million, or 6.6%, to $106.0 million for the three months ended December 27, 2025, compared to $113.5 million in 2024[125] - Advertising expenses increased by $3.6 million, or 20.6%, due to higher media spending in the U.S. Consumer segment[125] - The decrease in net sales was primarily driven by a 5.2% decline in volume and mix, partially offset by a 1.8% increase in pricing[120] Cash Flow and Financing - Cash used in operating activities totaled $370.4 million for the three months ended December 27, 2025, a decrease of $74.9 million compared to $445.3 million for the same period in 2024[147] - Cash provided by financing activities was $366.8 million for the three months ended December 27, 2025, compared to $407.7 million in the prior year[149] - The company had net borrowings of $422.5 million on debt instruments during the three months ended December 27, 2025, due to seasonal working capital needs[149] - The company issued $250.0 million of 5.250% Senior Notes due December 15, 2026, and plans to repay them during fiscal 2026 using cash flow from operations and available borrowing capacity[159] Debt and Leverage - As of December 27, 2025, the company had $979.8 million of borrowing availability under the Seventh A&R Credit Agreement, with a weighted average interest rate of 7.0%[156] - The leverage ratio was 4.03 as of December 27, 2025, with a maximum permitted leverage ratio of 5.00[157] - The interest coverage ratio was 5.05 at December 27, 2025, exceeding the minimum required ratio of 3.00 for fiscal 2026[157] - Interest expense decreased to $27.2 million for the three months ended December 27, 2025, compared to $33.9 million in 2024[118] - Interest expense decreased by 19.8% to $27.2 million for the three months ended December 27, 2025, from $33.9 million in the prior year, driven by lower average borrowings and a decrease in the weighted average interest rate[134] - The company has a total of $450.0 million in interest rate swap agreements to hedge variable-rate debt[164] Assets and Liabilities - Current assets increased to $1,127.7 million as of December 27, 2025, compared to $831.9 million as of September 30, 2025[174] - The total non-current liabilities were $2,543.1 million as of December 27, 2025, up from $2,297.4 million as of September 30, 2025[174] Business Operations and Outlook - The U.S. Consumer segment's net sales are concentrated in the second and third fiscal quarters, with 42.7% and 35.6% of annual net sales occurring in these periods, respectively[114] - The company recorded a non-cash pre-tax charge of $104.8 million related to the valuation adjustment of the Hawthorne business classified as held for sale[115] - The company expects the sale of the Hawthorne business to occur within twelve months from the date it met the held for sale criteria[115] - The company is subject to various pending judicial and administrative proceedings, which may impact financial condition but are currently deemed adequately accrued[176] - The company believes cash flows from operations and borrowings will be sufficient to meet debt service and working capital needs for the foreseeable future[166] - The guarantees for the Senior Notes are "full and unconditional," but may be subject to certain conditions that could release the Guarantors[167]

Core Insights - Scotts Miracle-Gro is focused on strengthening its financial position while investing for growth, as highlighted during the annual shareholder meeting [2] - The company has successfully paid down over $1.5 billion in debt and expects to return to historical leverage norms later this fiscal year [3][5] Financial Position and Performance - The management emphasizes improvements in capital structure, free cash flow generation, margin enhancement, and solid EBITDA growth [3] - The company aims to achieve leverage in the "threes" range, indicating a significant reduction in debt levels [3][5] Investment Strategies - Scotts Miracle-Gro is investing in brand development, product innovation, and digital marketing to reach new customer segments [4] - The focus on e-commerce and digital channels is seen as a key growth driver, alongside efforts to enhance cost and supply-chain efficiencies through automation and AI [5] Shareholder Engagement - All four proposals presented at the annual general meeting were approved by shareholders, including director elections and executive compensation [2][5]

Core Insights - The cannabis sector is evolving, with ancillary companies better positioned than plant-touching operators due to lower regulatory risks and better resilience during market downturns [1][2] - Ancillary cannabis stocks can benefit from consistent demand for cultivation supplies, regardless of which operators gain market share [2] - Investors are focusing on improving margins and cost discipline as ancillary companies restructure and strengthen their balance sheets [3] Company Summaries GrowGeneration (GRWG) - GrowGeneration is a leading retailer of hydroponic and cultivation supplies, serving both commercial cultivators and home growers without operating cannabis dispensaries [5][9] - As of late 2025, GrowGeneration operated 24 locations across 11 states, offering a range of products through both physical and online channels [7] - Recent financial performance showed revenue growth, improved gross margins, and a narrowing of net losses, with management expecting continued revenue growth in 2026 [9][10] Hydrofarm Holdings Group (HYFM) - Hydrofarm manufactures and distributes hydroponic equipment and supplies, focusing on lighting and climate systems without operating dispensaries [11][13] - Recent financial results indicated a year-over-year revenue decline due to softer industry demand, but management is working on restructuring and improving supply chain efficiency [13][14] - Hydrofarm carries higher risk but also offers higher potential rewards, making it a speculative option for traders [15] The Scotts Miracle-Gro Company (SMG) - Scotts Miracle-Gro is known for consumer lawn and garden products and has historically been involved in the cannabis supply chain through its Hawthorne Gardening business [16][18] - The company has shifted its strategy by selling its Hawthorne division, focusing on core consumer businesses while retaining some indirect cannabis exposure [18][19] - Financial results reflect this transition, with stable gross margins and a focus on generating steadier cash flow, making it a conservative option for investors [19] Final Thoughts - Ancillary cannabis stocks present unique opportunities, with GrowGeneration showing turnaround potential, Hydrofarm offering higher-beta exposure, and Scotts Miracle-Gro providing defensive positioning [20]

Core Insights - The Scotts Miracle-Gro Company (NYSE:SMG) is recognized as one of the best dividend stocks to buy in February [1] - UBS has raised its price target for Scotts Miracle-Gro from $61 to $66 while maintaining a Neutral rating, indicating ongoing pressures in the consumer staples sector but potential improvement in fundamentals by 2026 [2] Company Overview - Scotts Miracle-Gro specializes in lawn care products and sells directly to consumers, which benefited the company during the pandemic when demand for home projects surged [3] - The company's Hawthorne unit, linked to the cannabis market, has faced challenges as the cannabis sector has cooled off [3] Business Restructuring - Management is implementing a restructuring effort to streamline operations and eliminate lower-margin product lines, aiming for growth in 2024 with improved margins [4] - The U.S. consumer business reported a 6% increase in sales by the end of the year, with profits continuing to improve in 2025 despite overall sales flattening [4] Market Position - Scotts Miracle-Gro remains the leading brand in at-home lawn care, providing a solid foundation for long-term growth [5]

Core Insights - The cannabis industry is evolving with a focus on efficiency, margin recovery, and balance sheet strength as operators adapt to tighter capital markets and shifting regulations [2][19] - Ancillary cannabis stocks provide alternative exposure to the industry, supporting it without directly selling cannabis, thus avoiding many regulatory risks while benefiting from cultivation and retail improvements [1][19] Industry Trends - Growers are upgrading equipment, improving yields, and cutting costs instead of reckless expansion, favoring well-positioned ancillary suppliers [2] - Federal reform discussions create volatility, but the demand for essential products like nutrients and lighting remains consistent, offering attractive risk-reward setups for investors [3][19] Company Summaries GrowGeneration (GRWG) - GrowGeneration is a leading hydroponics and cultivation supply company, serving cannabis growers with essential products like lighting, nutrients, and climate control [5][7] - The company has shown signs of stabilization with sequential revenue improvement and expanded gross margins, marking a return to positive adjusted EBITDA [9][10] - Key focus for GRWG is on margin sustainability and potential earnings amplification with a modest rebound in cultivation spending [10] Hydrofarm Holdings Group (HYFM) - Hydrofarm is a distributor focused on controlled environment agriculture, providing essential tools for indoor cannabis cultivation [10][11] - The company has faced revenue declines and compressed gross margins due to reduced capital expenditures from growers, but it has made progress in reducing operating expenses [11] - Investors should monitor revenue stabilization, as even flat sales could improve cash flow if costs are controlled [12] The Scotts Miracle-Gro Company (SMG) - Scotts is known for lawn and garden products but has exposure to cannabis through its Hawthorne Gardening division, which supplies hydroponic equipment [14][16] - The decision to divest Hawthorne simplifies the business and reduces cannabis-related volatility, allowing a focus on its core consumer segment [16] - Financially, Scotts has shown improving margins and prioritized debt reduction, making it a lower-risk option for investors seeking stability [17][18] Investment Considerations - Ancillary stocks are critical to the cannabis ecosystem, as growers rely on supplies and systems [22] - Each highlighted company serves different investor profiles, with GrowGeneration focusing on recovery, Hydrofarm offering higher risk and leverage, and Scotts providing stability [20][21]

Core Insights - Scotts Miracle-Gro reported a revenue of $354.4 million for the quarter ended December 2025, reflecting a year-over-year decline of 15% [1] - The company's EPS was -$0.77, an improvement from -$0.89 a year ago, with a surprise of +25.68% compared to the consensus estimate of -$1.04 [1] - The revenue exceeded the Zacks Consensus Estimate of $350.63 million, resulting in a surprise of +1.08% [1] Financial Performance Metrics - Net Sales- Other reached $25.9 million, surpassing the four-analyst average estimate of $23.11 million, marking a year-over-year increase of +8.8% [4] - Net Sales- U.S. Consumer totaled $328.5 million, which is below the four-analyst average estimate of $293.75 million, indicating a year-over-year decline of -3.6% [4] - Segment Profit (Loss) (Non-GAAP) for U.S. Consumer was $9 million, slightly below the two-analyst average estimate of $10.02 million [4] - Segment Profit (Loss) (Non-GAAP) for Corporate was reported at -$25.3 million, better than the average estimate of -$31.21 million [4] - Segment Profit (Loss) (Non-GAAP) for Other was -$1.7 million, compared to the average estimate of -$2.08 million [4] Stock Performance - Scotts shares have returned +9.6% over the past month, outperforming the Zacks S&P 500 composite, which saw a change of +0.8% [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Financial Data and Key Metrics Changes - The company reported total net sales of $354.4 million for the quarter, with U.S. consumer sales at $328.5 million, exceeding expectations due to early season load-in activities [30] - Gross margin improved to 25%, up 90 basis points year-over-year, while non-GAAP adjusted gross margin was 25.4%, compared to 24.5% a year ago [34] - The GAAP net loss from continuing operations was $47.8 million, or $0.83 per share, an improvement from a loss of $66.1 million, or $1.15 per share, in the prior year [36] Business Line Data and Key Metrics Changes - The company is focusing on high-margin branded products, with a notable increase in e-commerce sales, which were up 12% in dollars and 17% in units [33] - Indoor gardening POS was up 7.7% in dollars and 9% in units, while Roundup saw a 24% increase in dollars and 27% in units [33] - The divestiture of the Hawthorne business is expected to contribute positively to gross margin and has already improved it by 40 basis points [12][28] Market Data and Key Metrics Changes - The company is experiencing a shift in consumer demographics, with a growing focus on engaging millennials and Gen Z consumers [18] - E-commerce sales represented 14% of overall POS in Q1, a 150 basis point increase over the prior year, indicating a strong growth area [33] - Retailer shipments in January were at a record pace, suggesting positive momentum heading into the spring and summer lawn and garden season [30] Company Strategy and Development Direction - The company is investing nearly $1 billion annually in marketing and innovation to drive sales of high-margin branded products [5] - A new multi-year, $500 million share repurchase program has been approved, aiming to reduce share count to around 40 million shares over time [6][10] - The company plans to achieve $1 billion in top-line sales growth and total EBITDA of $1 billion by 2030, with a focus on modest tuck-in M&A to fill gaps in the lawn and garden portfolio [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in outperforming fiscal 2026 guidance, driven by innovation and strong retail partnerships [9][43] - The company is focused on long-term growth and is not overly concerned with quarterly results, emphasizing milestone achievements instead [54] - Management highlighted the importance of engaging a broader consumer base and adapting marketing strategies to attract emerging consumers [18] Other Important Information - The company is implementing a comprehensive plan to enhance its digital presence, including a new website that consolidates all brands and offers AI-driven consumer guidance [23] - The company is also increasing investments in CapEx to support fertilizer innovation and supply chain automation [24] - The sale of Hawthorne is expected to close this quarter, allowing the company to focus on its core lawn and garden business [12] Q&A Session Questions and Answers Question: Can you discuss the confidence in outperforming guidance this year? - Management indicated that confidence stems from gross margin improvements and strong retail partnerships, with expectations to exceed the 32% gross margin target [40][41][43] Question: How has early retailer activity influenced your view on inventory loads? - Management noted that early activity has shown positive momentum, but emphasized the importance of not overreacting to short-term fluctuations due to weather impacts [55][56] Question: What is the potential size of the e-commerce business and its margin compared to brick-and-mortar? - Management believes the e-commerce business can be substantial, with a margin delta of less than five percentage points compared to traditional retail, indicating strong growth potential [78]