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DATE

Feb. 5, 2026, 9 a.m. ET

CALL PARTICIPANTS

  • Chairman and Chief Executive Officer — David Maura
  • Chief Financial Officer — Faisal Cutter
  • Senior Vice President, Investor Relations — Jen Schultz

TAKEAWAYS

  • Net Sales -- $692.5 million, a 3.3% decline; organic sales decreased 6% after excluding $18.5 million in positive foreign-exchange impact.
  • Gross Profit -- $247.2 million, down $16.2 million; gross margin fell by 110 basis points to 35.7%, driven by volume declines, higher trade spending, and tariff costs.
  • Adjusted EBITDA -- $62.6 million, a decrease of $15.2 million, primarily from lower volume and margin compression.
  • GAAP Net Income and Diluted EPS -- Both increased due to a one-time tax benefit and a lower share count, partially offset by lower operating income.
  • Adjusted Diluted EPS -- $1.40, up versus last year, driven by the tax benefit and reduced shares, despite lower adjusted EBITDA.
  • Adjusted Free Cash Flow -- Nearly $660 million generated in the quarter, despite this quarter typically involving cash usage.
  • Share Repurchases -- 800,000 shares repurchased year-to-date for $42.3 million; almost 45% of total share count repurchased since the HHI transaction.
  • Balance Sheet -- Quarter-end cash of $126.6 million; undrawn $500 million revolver and net leverage at 1.65x.
  • Debt Composition -- Total debt of $578.9 million, consisting of $490.1 million in senior unsecured notes and $82.8 million in leases.
  • Board Authorization -- New $300 million share repurchase program approved.
  • Global Pet Care Net Sales -- Up 8.3% reported, 5.8% organic; companion animal sales grew high single digits, aquatics low double digits.
  • Global Pet Care Adjusted EBITDA -- $49 million, down $2.5 million; margin fell to 17.4% from 19.8%, impacted by tariffs, inflation, and increased trade spend.
  • Home and Garden Net Sales -- Dropped 19.8%, reflecting abnormal prior-year inventory build; this quarter in line with historical patterns.
  • Home and Garden Adjusted EBITDA -- $4.5 million versus $9.3 million prior year; margin decreased by 400 basis points to 6.1%, mainly due to lower volume.
  • Home and Personal Care Net Sales -- Declined 7.6% reported, 11.1% organic; both home appliances and personal care sales fell, with EMEA especially soft in mid-teens percent.
  • Home and Personal Care Adjusted EBITDA -- $20.7 million compared to $26.7 million last year; EBITDA margin was 6.4%, with performance pressured by tariffs and lower volume.
  • Capital Expenditure -- $8.1 million, $2.2 million higher than the previous year.
  • Outlook Reaffirmed -- Fiscal 2026 guidance unchanged: net sales expected flat to up single digits, adjusted EBITDA to grow low single digits, adjusted free cash flow conversion near 50% of adjusted EBITDA.
  • Segment Growth Expectations -- Global Pet Care and Home and Garden forecasted to deliver growth; Home and Personal Care expected to decline for the full year.
  • Inventory Build Timing -- Home and Garden sales anticipated to accelerate in the second half, following muted first-half results due to last year’s unusual timing.
  • SAP S4HANA Deployment -- Further platform rollouts progressing, with North America Global Pet Care and Home and Garden already implemented; appliance and other international regions underway.

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RISKS

  • Home and Personal Care faces ongoing "softness in global consumer demand," and tariffs continue to depress both volume and profitability in North America and EMEA.
  • Home and Garden net sales declined 19.8%, linked to abnormal prior-year customer inventory build and representing Q1 as the slowest seasonal quarter for the segment.
  • Adjusted EBITDA margins fell across all business units, with drivers including higher tariff costs, rising trade spend, and negative volume trends.
  • Faisal Cutter cited the loss of TSA income post-HHI transaction as a $20 million headwind, with only about half offset in 2026.

SUMMARY

Spectrum Brands (SPB +8.88%) posted results above management expectations despite an overall year-over-year decline in net sales and adjusted EBITDA across most business units, with the Global Pet Care segment returning to organic revenue growth and gaining market share in core brands. Operating cash flow was notably strong, supporting aggressive share repurchase activity and a newly authorized $300 million buyback program. Management reiterated fiscal 2026 financial guidance for flat to low single-digit growth in net sales and adjusted EBITDA, while emphasizing confidence in operational recovery and execution of cost action plans.

  • New product launches in Home and Garden and Global Pet Care are fueling expanded distribution, with management highlighting continuing investment in innovation pipelines.
  • The company exited the quarter with a robust liquidity profile—no borrowings on its primary revolver, net leverage well below targets, and substantial cash reserves.
  • Seasonal demand phasing is expected, with Home and Garden growth concentrated in the back half and Home and Personal Care anticipated to stabilize but remain soft for the full year.
  • Strategic priorities remain focused on maintaining a strong balance sheet, funding core brands, operational excellence via ERP investments, and disciplined M&A activity within targeted business segments.

INDUSTRY GLOSSARY

  • Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for non-recurring or non-core items, reflecting ongoing business performance.
  • Organic Net Sales: Revenue growth excluding the impact of foreign currency, acquisitions, and divestitures, representing underlying business trends.
  • TSA Income: Transition Services Agreement income, temporary revenue related to services provided to a divested business during a transition period.
  • SAP S4HANA: An advanced enterprise resource planning (ERP) platform implemented to streamline and integrate business operations.
  • POS: Point-of-Sale, referring to retail sales data and trends at the consumer purchase level.

Full Conference Call Transcript

David Maura, our Chairman and Chief Executive Officer, and Faisal Cutter, our Chief Financial Officer. After opening remarks, we will conduct the Q&A. Turning to slides three and four, our comments today include forward-looking statements, including statements about tariffs, which are based upon management's current expectations and assumptions, and are by nature uncertain. Actual results may differ materially. Due to that risk, Spectrum Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated 02/05/2026, our most recent SEC filings, and Spectrum Brands Holdings' most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking statements.

Also, please note that we will discuss certain non-GAAP financial measures in this call. Reconciliations on a GAAP basis for these measures are included in today's press release and slide presentation, which are both available on our website in the Investor Relations section. Now I'll turn the call over to David Maura. David?

David Maura: Morning. Thank you, Jen. Good morning, everybody. We would like to welcome you this morning to our first quarter earnings update for fiscal 2026. And again, thank you for joining us today. I'll start the call today with an update on the operating environment and its impact on our company, Spectrum Brands. I'll then talk about our operating performance, and then I'll talk about our strategic initiatives. Faisal will then provide a lot more color and detailed financial and operations updates, including discussions on the specific business unit results. But can now everybody turn to slide six. Our financial results for the first quarter demonstrate that our strategy is working.

Fiscal 2025 was a challenging year, and we took some tough but necessary actions that positioned us well for the future. We proactively and decisively addressed forces beyond our control, and we are already seeing the positive impact of those decisions within our results. While the hard work is not over, we are confident that we will continue to create a competitive advantage for our company. We are pleased that our first quarter net sales and adjusted EBITDA exceeded expectations despite continued headwinds. These results reinforce our belief that the most significant impacts from the tariff disruptions last year and the macroeconomic volatility we believe these issues are largely behind us due to our decisive mitigating activities.

As anticipated, we are seeing early signs of recovery in consumables, while durable products are taking longer to rebound. These external realities are disproportionately impacting our home and personal care business, where overall global consumer demand continues to be subdued. We are pleased to report that our most profitable and our largest adjusted EBITDA contributing business, our global pet care business, has returned to growth this quarter. And our brands continue to perform well in the marketplace. I'm particularly encouraged by our performance in North America, where we saw share gains across our companion animal categories. Fueled by our brand-building investments that we've been making over the past couple of months and quarters.

While these categories were modestly down for the quarter, our brands actually outpaced the category and delivered growth versus the prior year. I want to take a moment and thank Ori and our entire global pet care team for their efforts and, of course, these results. During the first quarter, we remain disciplined in maintaining a strong balance. While this period is usually characterized by cash usage, as we prepare for the home and garden season, I'm quite pleased to report that we generated nearly $660 million of adjusted free cash flow in the first quarter. We also repurchased approximately 600,000 shares this quarter, and we've continued to buy back our shares following the completion of the quarter.

Year to date through today, we have repurchased approximately 800,000 shares for roughly $42.3 million in total. Since the close of the HHI transaction, we've returned approximately $1.4 billion of capital to our shareholders through our various share repurchase programs. And we have repurchased almost 45% of our entire share count since the closing of that deal. We also recently have received board authorization for a brand new $300 million share repurchase program. Our strong financial position affords us meaningful flexibility to capitalize on market opportunities while continuing to invest in our businesses and return capital to our shareholders. I'll tell you about our strategic priorities for fiscal 2026.

Our priorities remain unchanged, and they provide a clear framework that will continue to guide our decision-making throughout this year. During the first quarter, we made meaningful progress on each of our initiatives. And these are positioning us well to capitalize on opportunities we see ahead and to also address challenges as they may arise. First, as you've heard me say before, maintaining a healthy balance sheet and remaining good financial stewards is and will continue to be a top priority for us. I'm proud of the progress we've made in optimizing our working capital and exercising diligence in our spending, which has strengthened our financial position.

We ended the first quarter with nearly $127 million of cash, zero drawn on our revolver, and our net leverage was 1.65 turns, well below our long-term targets. We did this despite returning $46 million to shareholders through buybacks and dividends in the quarter. As we look ahead, we will continue to invest in our brands, with a clear focus on generating meaningful returns. Our fewer, bigger, better approach is allowing us to concentrate our resources on higher impact initiatives, maximizing the effectiveness of our investments.

Later in the call, Faisal will provide insights into how our innovation pipeline is connecting with consumers, highlighted by significant share gains in several of our key categories, which actually underscores the effectiveness of our approach. Secondly, in regards to operational excellence, we continue to make steady progress for the remaining planned deployments of our S4HANA platform. As a reminder, we have already implemented S4 in our North America global pet care and our home and garden businesses. In the preparation for its deployment in our appliance business, and the remaining international regions is currently underway. Upgrading and rolling out our new global ERP system has been a significant undertaking.

And I would like to express my sincere appreciation to our teams around the world for their expertise, perseverance, and their diligence throughout this project. This now brings me to our third key priority, which is investing in our people. As you know, fiscal 2025 was a very difficult year for us. And it was marked by a number of hard decisions that directly affected our teammates. While these actions were necessary to position our company for long-term success, and to avoid a lot of tariff disruption, we recognize the impact that this has had on our people. We do not take that lightly.

We are deeply appreciative of the resilience, the professionalism, and the commitment our employees have demonstrated during this period of volatility. Investing in our people goes way beyond hiring and development. It also means being honest about what's working and what isn't and making changes when needed. We are increasingly leveraging the expertise across the organization to address gaps, to redeploy talent, it can have the greatest impact, and frankly, to ensure that our teams are set up to execute at a high level. Our fourth priority, fiscal 2026, is centered around transformation. Last quarter, I shared our expectation that both Global Pet Care and our Home and Garden businesses would actually return to growth in fiscal 2026.

At that time, we indicated Pet would lead the way, with growth in the first fiscal quarter, which obviously it's done, while home and garden's growth would be weighted toward the second half of the year. We expected this first quarter for Home and Garden to be down, and that's due to some abnormal timing of some seasonal inventory build in the prior year's results. Our first quarter results confirm these expectations with significant momentum, frankly, heading into the balance of the year. I am confident we remain on track to achieve our growth objectives in both of these segments. We continue also to be optimistic about the evolving M&A landscape.

We will continue to be disciplined in our pursuit of acquisition opportunities in both our global pet care and our home and garden businesses. We are confident that we are well-positioned within this industry to be the consolidator of choice in both categories. Lastly, on our Home and Personal Care business, we are committed to being good stewards with a focus on maximizing the results of this business unit and improving its overall profitability in fiscal 2026. As the headwinds dissipate from 2025, we will continue to work towards a strategic solution for this business. Now if everyone could turn over to slide eight, please. Here, I'll give a review of our high-level fiscal 2026 earnings framework.

Today, we are reiterating our expectations for full-year net sales, adjusted EBITDA, and adjusted free cash flow. Thus far, this year is progressing as we planned and anticipated. With overall consumer sentiment consistent with our expectations. Before I turn the call over to Faisal, I'd like to thank each and every one of our global teammates. Their dedication, their hard work, has been instrumental in advancing our company's strategic objectives and putting us back on a path to sustained growth. Now I'll turn the call to Faisal, and you'll hear more about the financials, and the additional business unit insights. The call is yours, Faisal.

Faisal Cutter: Thank you, David. Let's turn to slide 10. And I will review our Q1 results from continuing operations beginning with net sales. Net sales decreased 3.3% excluding the impact of $18.5 million favorable foreign exchange, organic net sales decreased 6%. Primarily driven by continued category demand softness in home and personal care business, and the impact of an accelerated seasonal inventory build by some home and garden customers in the prior year. This was partially offset by our global pet care business returning to growth with our key companion animal brands outperforming the market while also benefiting from a softer prior year comparison. Gross profit decreased $16.2 million and gross margin of 35.7% decreased 110 basis points.

Largely driven by lower volume, higher trade spend, and higher tariff cost, partially offset by pricing, cost improvement actions, operational efficiencies, and favorable effects. Operating expenses of $214.5 million moderately increased by 0.7% with lower spend in advertising and marketing, partially offsetting unfavorable FX. Operating income of $27.1 million decreased by $17.6 million due to the decline in gross profit. Our GAAP net income and diluted earnings per share both increased primarily driven by a one-time tax benefit for the quarter resulting from a favorable settlement and lower share count. Partially offset by lower operating income. Adjusted EBITDA for the quarter was $62.6 million, a decrease of $15.2 million driven by lower volume and reduced gross margins.

Adjusted diluted EPS increased to $1.40 driven by a one-time tax benefit and the reduction in share outstanding partially offset by lower adjusted EBITDA. Now let's turn to slide 11. Q1 interest expense from continuing operations of $6.8 million increased $600,000. Cash taxes during the quarter decreased $4.2 million from the prior year. Depreciation and amortization of $25.8 million increased $1.3 million from last year. And separately, share-based compensation decreased $4.3 million from $4.7 million in the prior year. Capital expenditure were $8.1 million in the quarter, $2.2 million higher than last year. Cash payment towards restructuring transactions, strategic transactions, restructuring-related projects, and other unusual nonrecurring adjustments were $4.8 million versus $8.8 million last year. Moving to the balance sheet.

We had a quarter-end cash balance of $126.6 million, and $492.2 million available on our $500 million cash flow revolver. Total debt outstanding was approximately $578.9 million consisting of $490.1 million of senior unsecured notes and $82.8 million of finance leases. We ended the quarter with $452.3 million of net debt. Now let's get into the review of each business unit. Where I'll provide you details on the underlying performance drivers of our operational results. I'll start with global pet care, which is slide 12. Reported net sales increased 8.3% excluding favorable foreign currency exchange impact, organic net sales increased 5.8%. Sales in companion animal increased high single digit while sales in aquatics increased low double digits.

In North America, sales increased in both companion animal and aquatics. This was partially driven by the strategic shift of orders by retailers and the prior year of approximately $10 million in preparation for our S4HANA ERP implementation. After normalizing for the softer comparison, North American net sales increased mid-single digits. Including the impact from tariff-related pricing actions taken during the last fiscal year. In companion animal, our key brands continue to outperform the market. Good and Fun, Dream Bone, Nature's Miracle, and Furminator are gaining market share across chews, stain and odor, and grooming despite our premium positioning and the modest softness in the overall category.

We continue to be encouraged by improving POS trends across our core brands and top accounts within the category. The sales growth in aquatics was primarily driven by the pull forward in the prior year as overall demand in the category begins to stabilize. Our European sales were positively impacted by favorable foreign exchange rates as the US dollar weakened against the British pound and the euro compared to last year. Excluding the impact of foreign exchange, sales in EMEA decreased in the low single digits. Primarily due to a decline in dog and cat food sales following their refreshed portfolio launch within our Eucanuba brand in our fiscal fourth quarter.

The launch prompted some retailers to accelerate inventory purchase to support the reset adversely impacting this quarter's results. This was partially offset by the continued strength of our Good Boy brand, which once again gained market share in The UK. Successful Good Boy expansion across Continental Europe continues to gain track and new points of distribution. Aquatics organic sales increased with our global leading Tetra brand outperforming the market in a declining category and benefiting from a softer prior year comparison. On the commercial side, innovation continues to drive incremental growth. The investments we have made in Nature's Miracle are yielding results and have enhanced our position as the market leader in the stain and odor category.

We recently launched our Nature's Miracle outdoor stain and odor remover designed to address pet stains and odors on outdoor surfaces. In grooming, our firm propped with expanded distribution confirmed in the coming months. Our Good Boy brand, the number one brand in dog chews in The UK, continues to grow market share driven by consistent consumer-focused innovation. In fact, over the last quarter, Good Boy became the third largest brand in the overall UK pet market. The brand's expansion across Continental Europe continues to perform very well, and new launch is expected to drive further growth in the coming months.

Our Good and Fun and Dream Bond brands are winning distribution in key retailers and strengthened activation is fueling the brand's growth online. I'm advanced nutrition positioning is driving market share wins in The UK on both dog and cat. And the brand expansion in France is off to a good start. Tetra's Nutri Evolution launches driving strong market share wins in Germany. This quarter's adjusted EBITDA of $49 million is $2.5 million lower than the previous quarter, and adjusted EBITDA margin was 17.4% compared to 19.8% last year. The decline in adjusted EBITDA was primarily driven by higher tariff costs, inflation, and additional trade investment spend.

These headwinds were partially offset by higher sales volume, pricing, and cost improvement actions. We expect to see the first quarter's result sales trend continue for the balance of the year and deliver modest growth for fiscal 2026 in the GPC business. This quarter's results coupled with trends in overall POS support our belief that the macroeconomic conditions are stabilizing. Fiscal year we are excited about the strong innovation and brand activation coming to market later in the expected to drive top-line growth and market share gain. Despite this quarter's decline in adjusted EBITDA, we remain confident in our ability to deliver year-over-year growth for the fiscal year. Now moving to Home and Garden. Is slide 13.

Net sales decreased 19.8% in the quarter. You may recall in the prior year, certain customers accelerated their seasonal inventory build impacting all pest control categories. It's important to note that the prior year's results were not typical. And our net sales results for the quarter were in line with our expectations and historical averages. Our fiscal first quarter is typically H and G's slowest sales quarter and represents a small portion of the annual consumer activity for this business. During this time, our team is predominantly focused on preparation and staging for the upcoming season.

With that said, while our first quarter typically represents less than 15% of the total year's POS, our brand continued to perform well in the market. Gaining share across The US pest control category. E-commerce is also a bright spot where we delivered our best ever first quarter for the business. Based upon discussions with our customers, we continue to prepare for a normal weather pattern in fiscal 2026 and we remain confident that our sales will pick up as the season unfolds. With normal seasonal POS expected to materialize beginning in the latter half of our second quarter. In fact, early indications are strong as POS over the last two months has gained significant momentum.

While customer inventory levels are generally healthy, we expect that they will be disciplined in building inventory for the season. Heading into the season, we continue to launch and support new innovations into the market. In fiscal 2025, we launched the Spectracide Wasp Hornet and yellow jacket trap, which was a hit with consumers and quickly gained penetration within the category. Earning one of the highest penetration of any new items in overall pest control. POS performance was above expectations, and we built upon that to success in fiscal 2026 with expanded distribution continued market support, increased capacity.

Additionally, our Hotshot brand continues to gain shares supported by the flying insect trap that we launched last year and was subsequently awarded product of the year. We expect continued growth in fiscal 2026 with expanded distribution. Lastly, in repellents, Repel, our personal insect repellent brand, continues to outperform the market supported by recently refreshed graphics and strong marketing support. We will continue to support its growth with sustained marketing investment and expanded display presence in fiscal 2026. Adjusted EBITDA for the quarter was $4.5 million compared to $9.3 million last year, and the adjusted EBITDA margin was 6.1%. Which is 400 basis points lower than the prior year.

The decrease in adjusted EBITDA was primarily driven by lower sales volume partially offset by productivity improvements and operational efficiencies. The additional cost of tariffs was largely mitigated through a variety of actions, including pricing. As we look forward to the balance of the fiscal year, we are pleased with the continued support from our customers for both the category and our brands. Our big bets continue to resonate with confirmed distribution gains planned for our fiscal second quarter. Spring is expected to bring above-average temperatures across the Southern And Eastern United States. Which with precipitation levels projected to be average which are favorable conditions for our pest control category.

We will maintain our focus on consumer-centered innovation and continue to support our brands through targeted investments throughout the year. Based on these factors, we remain on track to deliver net sales growth in fiscal 2026 for the Home and Garden business. And finally, moving to Home and Personal Care, which is slide 14. Reported net sales decreased 7.6%. Excluding favorable foreign exchange organic net sales decreased 11.1%. Net sales in the personal care category were down mid-single digits this quarter, and sales in home appliances were down high single digits. Organic net sales in EMEA were down in the mid-teens with continued softness in both home appliances and personal care.

Sales across both categories were impacted when one of our retailers was left with higher inventory levels following a weaker than anticipated holiday season. Resulting in lower replenishment orders within the quarter. However, outside of this retailer, we are encouraged by the performance in our core markets which are showing early signs of recovery. In contrast, organic sales in LatAm region increased in the high teens. The strong growth was driven largely by positive consumer reaction, to new product launches in both the personal care and home appliances categories. The introduction of these products resonated well with the consumers. With many of our strategic retail partners reporting double-digit growth and sell-through figures following successful holiday campaign.

North America sales decreased in the mid-teens driven by lower sales in both home appliances and personal care. Demand in both categories were adversely impacted by overall consumer softness in light of increased product costs from tariffs. You may recall that we were one of the first to pricing with our retail partners. And thus our products were among the first to see tariff-related price increases hit the shelves. With higher promotional activity during the holiday season, some of the price increases across industry were delayed. And we expect that this is still some that there is still some normalization to come in the next few months as all pricing goes into effect across the categories.

Despite overall demand erosion within personal care and home appliances, coffee, and espresso makers, saw positive POS and our brand performance and our brand performed well in this space. Partially offsetting weaker performance in the broader category. Sales were also lower from our SKU rationalization actions taken to address changes in trade policy to ensure overall profitability. On the commercial side, we are very excited about our recent multi-brand global ice cream maker launch. In The US, the product debuted under the Black and Decker brand during the holiday season. And received strong consumer response.

Leveraging a centralized global marketing framework for this launch has enabled us to drive greater efficiency and have facilitated the sharing of consumer insights across markets. On the personal care side, Remington was recently recognized as the number one flat iron in The US. And the recently launched Airweave line continues to resonate with consumers in international markets. Also, we previously shared the success of fiscal 2025 launch of the shop in The UK in response to the evolving consumer landscape. Advancing our DTC approach globally has been a priority for us. With plans in place to build upon success within The UK and take these best practices to other markets.

In our fiscal first quarter, we had rollouts in both Germany and The US modeled after UK's success. While in early stages of deployment, we are optimistic about the these new platforms bring. This quarter's adjusted EBITDA was $20.7 million compared to $26.7 million in the prior year. Adjusted EBITDA margin was 6.4%. The decline in adjusted EBITDA was driven by lower volume and higher tariff costs partially offset by pricing, reduced investment spend, cost improvement initiatives, and favorable foreign exchange. Looking forward to the second quarter, we continue to expect softness in global consumer demand within home appliances and personal care categories.

In North America, we expect tariff-related disruptions will continue to reduce sales with a smaller subset of product offering as we continue to prioritize overall profitability. We continue to expect a decline in full-year net sales for the HPC business as we navigate through category softness a reduced North American product portfolio. As we look ahead to the second quarter, we anticipate that our results will continue to be impacted by continued softness in consumer demand and ongoing headwinds. The second half of the year is expected to show sequential improvement as we lap softer prior year comparisons and benefits from the actions we have taken to strengthen our business.

Now let's turn to slide 15, and I'll talk about our expectations for fiscal 2026. Our earnings framework for fiscal 2026 remains unchanged from our prior update. We continue to expect net sales to be flat to up single digits compared to the prior year, we expect growth in both our personal care and our global pet care and home and garden businesses home and personal care is expected to decline. Adjusted EBITDA is expected to grow low single digits driven by the return to sales growth our global pet care and home and garden businesses. Continued expense management, continuous improvement initiatives, and FX favorability offering the lower volume offsetting the lower volumes in home and personal care.

Tariffs are expected to be largely offset through the various mitigation we have taken. Including pricing. From a phasing perspective, we expect the second quarter to be challenging year over year primarily due to the continued softness in consumer demand in our home and personal care business. We continue to expect POS in home and garden to materially pick up late in the second quarter, with retailers being disciplined in their buildup of inventory. A result, we expect net sales growth for our home and garden business will occur in the second half of the fiscal year. And lastly, adjusted free cash flow as a percentage of as a percentage of adjusted EBITDA is expected to be around 50%.

Now let's turn to slide 16. Depreciation and amortization is expected to be a 115 and a 125 million dollars including stock-based compensation of approximately $20 million to $25 million cash payment towards restructuring, optimization, and strategic transactions costs are expected to be between $25 million and $35 million. Capital expenditure are expected to be between 50 and $60 million. Cash taxes are expected to be between 40 million and $50 million. For adjusted EPS, we use an effective tax rate of 25% incorporating both discrete items and state taxes. To end my section, I want to echo David and thank all the global employees for their hard work in helping us regain our momentum. Now back to you, David.

David Maura: Thanks, Faisal, and thanks again everybody for joining us this morning for today's call. Look. I'll just take a few minutes right now. We'll recap the key takeaways of today's call. If you guys could turn with me to slide 18. First, look, although we experienced year-over-year declines in both net sales and adjusted EBITDA, we're actually pleased that first quarter financial results actually exceeded expectations. Our businesses continue to heal from the tariff torpedo that hit us in fiscal 2025. As we have restored our supply chains and have taken pricing actions. While the global macroeconomic condition and environment remain challenging, we're encouraged by the meaningful signs of improvement. Particularly in our consumables product portfolio.

Our global pet care business returned to growth this quarter representing a significant milestone for us. Beyond the broader category improvements, our key companion animal brands have continued to outperform and they're performing exceptionally well. Further strengthening our market share positions. In our home and garden business, we are seeing strong category POS trends currently and our brands are outperforming category. We are encouraged by the success of our new product launches in fiscal 2025, and we expect to build on that momentum with expanded distribution here in fiscal 2026. This year, we expect home and garden to be our fastest growing business. In our appliance business, overall category demand continues to be soft.

We expect that to continue into the fiscal second quarter. We will continue to prioritize maximizing the performance of this business unit through disciplined expense management as we navigate a challenged market. Secondly, as we look forward to the balance of the year, we continue to believe that our data-driven strategy of fewer, bigger, better initiatives will actually yield higher returns. The positive results we are seeing so far serve as clear evidence that this disciplined approach is actually driving and delivering the right outcomes. Our low leverage and strong balance sheet position us exceptionally well to navigate the current macroeconomic environment.

And I actually believe we are in a tremendous position of strength to capitalize on opportunities with the evolving M&A landscape. With respect to our global pet care and home and garden businesses, we continue to look for highly synergistic assets that will allow us to maintain our low leverage. In regards to our appliance businesses, we remain committed to finding a strategic solution for that business unit. Last but not least, I'd like to conclude my remarks by reiterating our fiscal 2026 earnings framework for flat to low single-digit growth in net sales, low single-digit growth in adjusted EBITDA, and approximately 50% conversion of our adjusted EBITDA to adjusted free cash flow.

Progress we made this quarter reflects the dedication of our team, and our focus on delivering sustainable growth. We appreciate the trust and the support of all of our stakeholders as we work together to achieve both our short and our long-term objectives. I'll turn the call now back to Jen we're gonna be happy to take any questions.

Jen Schultz: Thank you, David. Operator, we can go to the question queue now.

Operator: Thank you. Our first question comes from Brian McNamara with Genuity. Your line is open.

Madison Callinan: Hi. This is Madison Callinan. I'm on for Brian. Thanks for taking our questions. First, one of your competitors stated their belief that we've reached a bottom in Pet. I'm curious if you would agree with that assessment and provide any color around your view.

David Maura: Thanks. I've been humbled more than once in my life calling tops and bottoms. So I'm gonna pass on that. But we're significantly focused on what we can do and we're really pleased with, the new leadership in Pet. And the investments we're making there and the fact that we're taking market share with our main brands. So you know, I yeah. Pet's been through some tough turbulence. There's still a lot of soft pockets out there, so I just you know, I just don't have that kind of crystal ball to make that statement.

Madison Callinan: Fair. And you mentioned that retailers should be disciplined in inventory, but how committed are your retailers to the Garden category this upcoming season? And are you in position to chase if the weather cooperates? And demand is better than we've seen? The last few years?

David Maura: Yeah. Look. I'm I'm actually very bullish on our home and garden business. You know, Javier, who leads that unit, has done a great job kind of fixing the culture, restoring a lot of operational rhythm. And frankly our innovation there. You know, Faisal talked about the wasp and hornet trap, We've got a lot of new products, new innovation, and actually, it's not us. Consumers endorsing it. So know, we have we have some new SKUs launching and frankly, we see some of these small pockets see the business doubling and tripling in some of these new product launches.

So I would also tell you, you know, during times of macroeconomic volatility when the consumer is stretched, it's pretty nice to be the value price point brand. And so, honestly, as I look forward, I think we are the foot traffic driver to that category, and we see retailers leaning in with us because they get that joke too. So look, it's been cold. It's tough to look at weather forecast. It's it's gonna be warmer. It is a weather you know, business. It does influence it. Q1, we knew it was gonna be soft because we prebuilt a lot of inventory for one particular customer last year. We didn't do that this year.

But the POS trends, you know, that we see right now are very encouraging. And we're pretty bullish on what we can accomplish this season in Home and Garden, but proof's always in the pudding. And you know, Q I would tell you Q2 you know, I wouldn't get over your skis there as you model it. I think it'll be flat, slightly up. You know, year on year. But that's just that's just the phasing and then, you know, big back half. For Home and Garden if that helps you with your modeling.

Madison Callinan: Thanks so much.

David Maura: Thank you. Appreciate the questions.

Operator: One moment for our next question. Our next question comes from Olivia Tong with Raymond James. Your line is open.

Olivia Tong: Great. The comps get a fair bit easier after Q1. So can you talk about your views in terms of the arc of anticipated improvement as you get from the flat plus low single digits that you were looking for, for the year? There were obviously a couple of comp issues in Q1 that are now in the past. So just talking about the cadence of improvement for this year.

David Maura: Sounds like a tough question. I'm gonna give that to Faisal.

Faisal Cutter: Look. I think we talked about how our pet business is definitely back to growth. We expect that trend to continue. We expect that business to continue growing in the second quarter. I think David just mentioned on the home and garden side, that we don't expect a lot of growth in the second quarter because we think retailers are going to be more disciplined in how they build inventory versus last year. But we do expect a normal weather season, which means third and fourth quarter for us are going to be strong for H and G. So that makes it much more of a back half growth story for H and G.

For our home and personal care business, I think we'll continue to see some pressure in the second quarter. And our comps start to stabilize we go into third and fourth quarter. So, again, that's not a business we're expecting to grow this year, but I think our second half starts to stabilize versus our prior year a little bit more. Versus the kind of trend you're seeing in Q1. The trend you're seeing in Q1 on the top line probably continues in the second quarter, and then it stabilizes. So it's different by business, but hopefully that answers your question, Olivia.

Olivia Tong: Yep. Thank you.

Operator: One moment for our next question. Our next question comes from Bob Labick with CJS Securities. Your line is open.

Will: This is Will on for Bob. Just broadly speaking, are the levels of investment in brands where you want them? Might they increase or decrease? And same question at the corporate level.

Faisal Cutter: Yeah. So I think we I'll start with corporate. We talked about in the last quarter's earnings call, we talked about how we do have some headwind on the corporate side, on the cost side. That has to do with the exit of our ASSA ABLOY HHI transaction-related TSA income. That was a $20 million headwind that we said will roughly cover half of that cost this year. So that stays true. We were able to push some of our cost out of Q1 primarily because a lot of our S4 go live occur in the second to the third and fourth quarter. So a lot of our cost is pushed out of the first quarter.

So I think you'll see our overall full-year outlook on corporate remains roughly the same. On the other businesses, I think we're we're going to be careful about how we invest. I think we're at the right level of investment for our global pet care and home and garden businesses. I think on the home and personal care business, you'll see us pull back some of the investments just based on when we see the recovery and when we see our top line coming back. And so it's probably too early to say. I generally say given where the top line is, we have pulled back some investment on the HPC business prior compared to last year.

But if the second half comes back strong, we can certainly dial that back up. And it's a lot this year is gonna be a lot more about reconfiguring our investment dollars to be more productive. And we're just gonna continue to measure the return on our investment on our advertising investment, and try to put more dollars in areas where we see the return versus not. But on an overall basis, I would say for both home and garden and personal and Global Pet Care, we are at the right level of investment.

Will: Thank you. That's super helpful. And can you talk about, the innovation and your pipeline for FY '26 and beyond? Are you at the level of new product introduction you want to be at?

Faisal Cutter: Yeah. I think we've got a lot of good new exciting new products coming in. We talked about and on the home and garden business, we've got some more products coming in, but we actually had really successful launches last year. And once we're able to get the consumers excited about it, you'll see us expand the distribution on those products a lot more this year. So that's gonna be one of our growth drivers for home and garden business. On the global pet care business, we talked about new products that we launched last year. And I won't get ahead of myself, but you'll see more exciting things come over the next couple of quarters.

So I think we've got a very good pipeline in both those two businesses. That we'll continue to invest in. Thank you.

Operator: One moment for our next question. Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.

Chris Carey: Hey. Good morning, guys.

David Maura: Morning.

Chris Carey: You think about the process with the HPC business, how would you characterize the progress that you think, you know, has been made towards your or how things are have evolved and are evolving. You know, maybe what has gone against you, obviously, from the external environment. And, you know, what gives you confidence that you can still execute on these plans that you have. For the business? I have a follow-up.

David Maura: Yeah. Look. Let's take it in two pieces. Right? One is the operating piece, and the other is the strategic piece. And you know, when you look at we're sitting in February. Right? So a year ago, I mean, we were staring at a half $1,000,000,000 tariff problem. Like, $500,000,000 is a lot of tariffs for a company of our size to absorb. And we shut down buying for literally two months. Like, you know, that puts a lot of air in your pipeline, right, if you're trying to sell product. And we dealt with the harsh realities of that volatility, and we were up with our retailers, and we took pricing. Immediately.

And, you know, when you shut down buying product in your supply chain for two months, and you raise prices double digits, on these type of items, you're gonna run into something called the elasticity really fast. And for us to put $20,000,000 of EBITDA on the board, in the last ninety days in that business I'm pleased with it. So you know, again, I'm I'm I'm I'm, you know, do we wanna do better? Of course. But I can tell you managing that type of volatility you know, not to pat ourselves in the back, but I think we did it better than most.

If I look at that industry, there's really one big player that's making all the money, taking all the market share, and there's everybody else. And most of those other players are in a more difficult position than I am. Operationally and financially. Very few players have an unlevered balance sheet and an outlook that's gonna improve profitability. This company has both. So if you're looking at the neighborhood of small domestic appliances, I like where we play. And frankly, think given our outlook for improved profitability, in appliances in fiscal 2026, that is going to cause the consolidation I'm sick of talking about to finally occur. And we believe we will be the strategic merger partner choice.

So I think that's pretty crystal clear, but I'm pretty I'm pretty excited that we put $20,000,000 of EBIT on the board. I'm telling you it's still a very challenging environment. I'm telling you that most of my competitors got six to 12 times leverage sitting on their balance sheets. And good luck.

Chris Carey: Yeah. Yeah. A lot has certainly come at you guys. That's helpful. When it comes to EBITDA for the year, as we think about cadence, I think you gave some good perspective, which I interpreted as more top line. The outlook is more back half weighted from a profitability perspective as well? Just remind us of the anomalies at Q1 and the confidence as you know, get toward that full year objective.

David Maura: Yeah. Again, there's just so much ball going on right now. It's it's it's look. We ran a process for the business. It attracted a lot of interest. Right? The tariff situation through cold water on that. Right now, the industry is trying to get back to you. Okay. What are my input costs? What's my new rate of sales? What's my margin structure? And can you underwrite these businesses? Right? So what I'm trying to describe is you know, when you encounter that much volatility and disruption, it's gonna take you more than a quarter or two to heal. So that business is in the process of healing.

Again, to put $20,000,000 of EBITDA on the board in Q1 appliances, I'm proud of that. What is occurring right now, to answer your question directly, is the North America market which took the biggest hit for us because of the tariffs coming into this country. Is healing and we're seeing things improve there. What is also occurring globally is because barriers went up here but not other places, keep Chinese product is hitting the rest of the globe. And it's being dumped into other markets. That is disruptive. It's causing issues for us right now in Europe. And so we've gotta wrestle that to the ground here in Q2.

Figure out a better go to market strategy, and get that humming again. But so we you know, Q2 is gonna continue to be a little messy you know, in this unit. With all the pricing in place and with all the supply chains fixed, and working on a better, more strategic go to market plan, we do anticipate kinda Q3 and Q4 resulting in such numbers that we actually report growth in EBITDA in the appliance unit in fiscal 2026. Does that help?

Chris Carey: It does. It does. Good luck. Thanks, guys.

David Maura: Thank you.

Operator: One moment for our next question. Our next question comes from Ian Zaffino with Oppenheimer. Your line is open.

Ian Zaffino: Great. I just wanted to drill down a little bit more on GPC here. When we think about kind of the growth for the year, is there an opportunity to maybe grow faster than low single digits? And I also understand the demand in aquatics. Is that just kind of a comp thing Or do you actually see, like, underlying demand improving?

David Maura: Hey, Ian. Good to hear from you. Thanks for the questions. I'll take the first piece and Faisal will fix it if I mess anything up. Look, companion animal, I've got a new leadership team in pet. I like what we're doing there. We spent a number of months here trying to get smarter strategically. And we're working on price pack architecture. We're doing some deep dives into some of the product portfolios. We're looking, as we've told you, fewer, bigger, better. So we're trying to concentrate resources on higher return opportunities. You know, we're really pleased with the early results, right, in companion animal you look at kind of the big drivers, that's good and fun. It's dream bone.

Exterminator, nature's miracle. To have four of these big brands back in growth feels good. More work to do. Somebody asked earlier, we have we how we happy with innovation, said yes. I'm never happy with it. We need more and more and more. I want more new products. I want more new excitement, and we want better margin mix. We're working on it. Aquatics. We see recovery in Europe right now. North America still needs some fix. But honestly, I'm bullish because I've got a team finally underwriting that with a lot more intelligence, and I think there's some price pack architecture stuff we can do there.

Within the next month, we're gonna go out and sit down with our retailers, and we're gonna talk about the new strategy new price points, new ways to manage the category. TETRA is the leader globally. It's time we start acting like it. Kids love aquariums. Taking care of pets is it's it's it's therapeutic. It teaches responsibility. It's phenomenal category. We gotta get our swagger back, but I'm determined to do it, and I've got a new leader who's gonna help me make that happen. Faisal?

Faisal Cutter: Yeah. I'll just quickly add. One, it Aquatics is less than a fourth of our business. Right? So we don't not a business we rely on for growth. Aquatics itself is a category is never really a growth driver. Recently, it's actually been the decline leader for us, but it the overall market seems to be stabilizing. As David said, we need to put more oomph behind our aquatic category and try to push that forward and act like leaders. And there's a lot of good ideas that we're going to execute against in the next few quarters.

But our growth will primarily come from the companion animal side, and we're very bullish about how we've performed in the first quarter. But to answer your question, we've performed well, and we're showing growth in one quarter. We need to continue doing that every quarter coming forward to just give ourselves more confidence. But we're pretty optimistic about our performance here.

Ian Zaffino: Okay. Great. Thank you very much for the color.

David Maura: Thank you.

Operator: One moment for our next question. Our next question comes from Carla Casella with JPMorgan. Your line is open.

Carla Casella: Just two quick ones. You talked a bit about some wins, on terms of shelf space. Can you quantify at all your kind of net wins or net wins and losses and how they should impact the coming quarter?

Faisal Cutter: I mean, I think I don't think we're gonna give you details on the call on exactly what those how those ones materialize into what kind of growth. But like I said in my earlier remarks, we're pretty jazzed about the growth we'll see on products that we launched last year. That I think will gain distribution in both home and garden and on the global pet care side. And I think we've got some good exciting products coming over the next couple of quarters as well.

Carla Casella: Okay. That's great. And then just I guess, given the movement with the as the tariff costs flow through, should we expect any unusual changes in working capital this year? Or kind of do you expect working capital to be a source or use of cash for the for the full year?

Faisal Cutter: I think you see in our performance in the first quarter, our working capital management has been really great. Overall, I don't think it'll be a use of cash in a meaningful way this year, but I would say at this point, working capital would remain stable for the year. And our cash flow free cash flow projections reflect that.

Carla Casella: Great. Thank you so much.

Faisal Cutter: Thank you. Thank you.

Operator: I'm not showing any further questions at this time. I'd like to turn the call back over to Jen for any further remarks.

Jen Schultz: Okay. Well, thank you. With that, we have reached the conclusion of our call. Thank you to David and Faisal. And on behalf of Spectrum Brands, thank you for your participation in this morning.

Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect, and have a wonderful day.