Welcome to Spectrum Brands Holdings' Q4 2025 earnings conference call and webcast. Secondly, we expect our two highest-value businesses, Global Pet Care and Home & Garden, to return to growth in 2026. Our adjusted free cash flow of $171 million, or approximately $7 per share, beat our own expectations in fiscal 2025, and our strong free cash flow generation will continue into fiscal 2026 and beyond. Trade policy uncertainty and volatility led to softening demand in the U.S.
We have also made significant progress in diversifying our supply chain to increase both its resiliency and its flexibility. One of the priorities when we pivoted our operating strategy was to maximize cash flow generation and deliver to you over $160 million of free cash flow in fiscal 2025. We delivered $170+ million in free cash flow through disciplined CapEx management and better working capital improvements. The volatile trade policy landscape not only impacted consumer demand, but it also led to a temporary pause in shipments from China into our U.S.
In fact, we paused all incoming and inbound traffic from China for about six to eight weeks, and that impacted our ability to fill orders throughout the second half of the fiscal year. Overall, fiscal 2025 net sales declined 5.2% compared with fiscal 2024, and this was after actually starting the year off with top-line growth, as you remember, in the first quarter of 2025. All these actions are mitigating some of the EBITDA declines from the various macroeconomic headwinds. We need to demand, and we will demand, better returns on our investments while continuing to reduce the overall complexity of our businesses.
| Metric | Period | Current guidance |
|---|---|---|
| Global Pet Care and Home & Garden | Fiscal 2026 | Expected to return to growth |
| Direct China spend (Global Pet Care and Home & Garden) | End of fiscal 2026 | Approximately $15-$20 million of direct China spend |
| Annualized tariff exposure | Annualized | ~$70-$80 million, with the vast majority mitigated |
| Metric | YoY | Note |
|---|---|---|
| Q4 net sales | -5.2% (organic -6.6%) | Supply constraints from the decision to pause China purchases for the U.S. market in Q3 and continued category softness in Global Pet Care and Home & Personal Care, partially offset by a delayed Home & Garden season start; $10.5 million favorable FX. |
| Q4 gross margin | -220 bps (to 35%) | Lower volume, unfavorable mix, inflation and higher tariffs, partially offset by pricing, cost improvement actions and favorable FX. |
| Q4 adjusted EBITDA | -$5.5 million (to $63.4 million) | Lower volume and reduced gross margins, partially offset by lower operating expenses. |
| Q4 operating income | +$7.5 million (to $29.4 million) | Lower operating expenses (down 14.6% on reduced advertising/marketing and restructuring spend), partially offset by a decline in gross profit. |
| Full-year adjusted EBITDA | -$30 million / -9.4% (to $289.1 million, excl. prior-year investment income) | Lower volume and a decline in gross profit, partially offset by reduced operating expenses. |
| Q4 Global Pet Care reported net sales | -1.5% (organic -3.3%) | Aquatics up high single digits offset by mid-single-digit decline in companion animals, a ~$10 million prior-year S/4HANA pull-forward headwind, and supply shortages from the China pause, partially offset by a favorable benefit from prior-quarter stop shipments shifting into Q4. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Tariff disruption | Peak annualized exposure of ~$450 million; paused China purchases | Worst believed to be behind the company; exposure cut to ~$70-$80 million and substantially offset | — |
| HPC appliance strategic solution | Robust process about a year ago derailed by trade policy; pivoted to maximize cash | Committed to finding a strategic solution; improving fiscal 2026 profitability expected to drive overdue industry consolidation with Spectrum as consolidator/partner of choice | — |
| Free cash flow priority | Pivoted operating strategy to maximize cash, targeting over $160 million | Over-delivered at $170.7 million; cash-generation discipline now embedded in company DNA | — |
| Supply chain diversification | ~$300 million of product sourced from China into the U.S. entering fiscal 2025 | Reduced nearly 50%; targeting ~$15-$20 million direct China spend for top two businesses by end of fiscal 2026 | — |
| M&A landscape | Looking for synergistic assets | Optimistic more assets become available at better price points; disciplined pursuit of synergistic assets while maintaining low leverage, with vision of $3 billion revenue / $500 million EBITDA in pet | — |