The Scotts Miracle-Gro (SMG) Q4 2024 earnings summary

Executive summary

• Fiscal 2024 marked a pivotal turnaround, achieving all key objectives: improved margins, strong free cash flow, and strategic progress in Hawthorne, with a shift from crisis management to growth-focused strategy.

• U.S. Consumer segment net sales grew 6% year-over-year, driven by new listings, promotions, and expanded shelf space.

• Hawthorne segment loss improved 70% year-over-year, returning to positive EBITDA after two years of losses, with a focus on proprietary brands.

• Strategic investments in marketing and innovation supported sales and brand health, while cost-reduction initiatives and operational improvements continued.

• Maintained dividend without issuing new shares and established a foundation for a three-year growth plan.

Financial highlights

• Full-year net sales were $3.55–$3.6 billion, flat year-over-year; U.S. Consumer sales up 6%, Hawthorne down 37%.

• Adjusted EBITDA grew 20% to $539 million, with reported adjusted EBITDA at $510.1 million including $29 million in one-time charges.

• Adjusted net income for FY24 was $132.0 million ($2.29 per share), up from $68.1 million ($1.21 per share) last year.

• Free cash flow exceeded $1 billion over two years, with $580–$584 million generated in 2024 and inventories reduced below $600 million.

• Interest expense decreased to $158.8 million, and SG&A was $559.0 million, 15.7% of net sales.

Outlook and guidance

• Fiscal 2025 guidance: adjusted EBITDA of $570–$590 million (up 6–9%), U.S. consumer sales growth of 2%, and $20 million EBITDA from Hawthorne.

• Gross margin expected to approach 30% in 2025, with at least $40 million in incremental brand investments.

• Free cash flow projected at $250 million, CapEx at $100 million, and leverage targeted in the low 4x range by year-end.

• Three-year targets: 3% annual growth, $700 million EBITDA, mid-30s% gross margin, and leverage near 3x by 2027.

• Continued efforts to support an eventual separation of the Hawthorne business when timing is appropriate.