The Scotts Miracle-Gro Company — Fiscal 2026 Earnings Summary

Financial Performance:

• Full-year net sales reached $3.29 billion, a 1% increase year-over-year.
• GAAP gross margin rate was 32.3% and non-GAAP adjusted gross margin rate was 32.4%, both improving by 100 and 80 basis points respectively compared to the prior year.
• GAAP net income from continuing operations was $3.30 per diluted share, a 6% increase year-over-year.
• Non-GAAP adjusted earnings from continuing operations were $4.48 per diluted share, an 18% increase year-over-year.
• Free cash flow for the full year was $278.4 million.
• Net leverage ratio stood at 3.89x, improving 0.21x versus the prior year.
• Cash and cash equivalents at September 30, 2026, were $7.4 million, down from $32.8 million at the end of the prior year.
• Long-term debt was $1,992.0 million as of September 30, 2026, compared to $2,049.2 million in the prior year.

Guidance and Future Outlook:

• Fiscal 2027 net sales growth is projected between 2% and 4%.
• Non-GAAP adjusted earnings per share from continuing operations for fiscal 2027 are expected to be $4.70 to $4.90.
• Fiscal 2027 free cash flow is anticipated to be approximately $275 million.
• The company expects continued expansion of the non-GAAP adjusted gross margin rate.
• Leverage ratio is expected to decline year-over-year, with a target range of 3.0x to 3.5x by fiscal 2029.
• Future growth drivers include pricing, innovation, SG&A efficiencies, and supply chain savings supported by capital reinvestment.

Business Segments and Product Lines:

• The U.S. Consumer reportable segment generated $3.02 billion in net sales for the full year, a 1% increase year-over-year.
• The "Other" segment (primarily Canada) generated $271.3 million in net sales, a 4% increase year-over-year.
• Segment profit (Non-GAAP) for the U.S. Consumer segment was $601.4 million, up 5% from the prior year.
• Segment profit (Non-GAAP) for the "Other" segment was $19.3 million, up 47% from the prior year.
• Corporate expenses (Non-GAAP) were $146.2 million for the full year.
• The Hawthorne business was classified as a discontinued operation following its divestiture on April 8, 2026.
• The company is investing over $100 million in a multi-year IT infrastructure transformation project, expected to be substantially complete in fiscal 2028.

Market and Competitive Landscape:

• The company operates North America's leading consumer lawn and garden brands, including Scotts®, Miracle-Gro®, Ortho®, and Tomcat®.
• Growth in fiscal 2026 was driven by branded products and continued e-commerce expansion.
• The company navigated a challenging commodity and freight environment while expanding margins through pricing actions and favorable product mix.

Risks and Challenges:

• Forward-looking statements are subject to risks including economic downturns, cyber attacks, and highly competitive markets.
• Climate change and unfavorable weather conditions could adversely impact financial results.
• Reliance on a small number of retail customers poses a risk if orders are reduced or inventory levels drop.
• The company faces risks related to the successful development of new product lines and the retention of key personnel.
• Legal proceedings and regulatory compliance regarding environmental and public health regulations could increase costs.

Management Commentary and Tone:

• CEO Nate Baxter expressed pleasure with the performance and financial discipline, noting the strengthening of the balance sheet.
• Management described the fiscal 2027 plan as sound, relying on controllable factors to navigate a volatile macroeconomic environment.
• CFO Mark Scheiwer confirmed the company met or exceeded commitments for net sales, gross margin, EPS, free cash flow, and leverage ratio.
• Management emphasized a commitment to de-levering and advancing the "SMG 2.0 strategy" to transform the business into a modern lifestyle company.

Other Key Points:

• The company completed the divestiture of its Hawthorne business in North America on April 8, 2026.
• A pre-tax loss of $106.2 million was recorded related to the sale of the Hawthorne business for the twelve months ended September 30, 2026.
• The company paid dividends of $154.8 million during fiscal 2026.
• The company repurchased $37.7 million of common shares in fiscal 2026.
• The company repaid $250.0 million of 5.250% Senior Notes during fiscal 2026.
• IT transformation costs of $13.5 million were recorded in the full year, categorized as non-GAAP adjustments.
• The company recorded a loss on the sale of the business of $106.2 million in the cash flow statement adjustments.