The Scotts Miracle-Gro (SMG) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales rose 7–7.5% year-over-year to $1.2 billion, led by an 11% increase in U.S. Consumer segment sales, while Hawthorne sales declined 27.5–28% but returned to profitability for the first time since Q3 2022.

• Adjusted net income doubled to $133.8 million, with GAAP net income at $132.1 million, and adjusted EBITDA up 86% to $236.8 million.

• Gross margin improved to 29.5% GAAP and 29.2% adjusted, driven by lower costs, favorable mix, and restructuring benefits.

• Free cash flow year-to-date approached $500 million, with at least $350 million in debt paydown targeted by year-end.

• Strategic focus remains on margin improvement, balance sheet strengthening, and Hawthorne's recovery.

Financial highlights

• Q3 adjusted EBITDA was $236.8 million, up 86% year-over-year; year-to-date adjusted EBITDA reached $607.4 million.

• Q3 adjusted diluted EPS was $2.31, nearly doubling year-over-year; Q3 GAAP net income was $132.1 million.

• Q3 SG&A increased 15% to $147.9 million, mainly due to higher marketing and incentive compensation.

• Interest expense declined 18% in Q3, reflecting lower debt levels.

• Year-to-date net sales reached $3.18 billion, with adjusted gross margin at 30.2%.

Outlook and guidance

• Fiscal 2024 guidance reaffirmed: U.S. Consumer net sales up 5–7%, Hawthorne down 35–40%.

• Adjusted EBITDA guidance of $530–$540 million; free cash flow target of $560 million.

• Leverage ratio targeted below 5x by year-end, with long-term target below 3.5x.

• Hawthorne segment expects break-even or better adjusted EBITDA for the full year.

• Management anticipates a strong Q4 and positive setup for fiscal 2025 growth.