The Scotts Miracle-Gro (SMG) Q1 2025 earnings summary

Executive summary

• Q1 net sales grew 2% year-over-year to $416.8 million, with adjusted net loss improving to $51.0 million from $82.2 million and GAAP net loss improving to $69.5 million from $80.5 million; adjusted EBITDA turned positive at $3.8 million, a $30 million improvement year-over-year.

• U.S. Consumer net sales rose 11% year-over-year, driven by a strong fall campaign and early spring retailer load-in, while Hawthorne segment sales declined 35% due to a strategic exit from third-party distribution.

• Transformation efforts focus on optimizing the consumer franchise, cost structure, and innovation, with a new leadership team and board refresh.

• Strategic intent to separate Hawthorne cannabis business to improve gross margin and clarify equity value.

• Comprehensive loss was $67.0 million, compared to $89.4 million in the prior year period.

Financial highlights

• Gross margin increased to $94.8 million from $62.2 million year-over-year, with GAAP gross margin at 22.7% (up 750 bps) and adjusted gross margin at 24.0% (up 1,030 bps).

• SG&A expenses increased 9% to $124.8 million, reflecting higher investments in people, marketing, and innovation.

• Interest expense declined 21% to $33.7 million, attributed to lower debt balances.

• Adjusted EBITDA was $3.8 million, up from a loss of $25.8 million last year.

• Net cash used in operating activities was $445.3 million, up from $343.2 million in the prior year period.

Outlook and guidance

• Fiscal 2025 net sales expected to be flat, with U.S. Consumer up low single digits and Hawthorne down mid single digits; adjusted gross margin targeted near 30% for FY25.

• Adjusted EBITDA guidance reaffirmed at $570–$590 million and free cash flow projected at ~$250 million for FY25.

• Leverage ratio expected in low 4's by end of FY25, below 3.5x by FY27.

• Non-GAAP adjusted tax rate for the year expected at 27%-29%.

• Interest expense for the year expected to be $15–$20 million lower than prior year.